Contempt shown for Latham code

Early results of an independent survey of how the "Latham laws" governing construction contracts are working out in practice suggest that the new code of practice on tendering is being widely flouted.

There is evidence that subcontractor cash flow is being held up by a failure to enforce adjudication decisions. And pay-when-paid contract clauses are being replaced by equally onerous pay-when-certified provisions.

The survey is being carried out by the University of Northumbria on behalf of the specialist and subcontracting umbrella body, the Constructors Liaison Group. A pilot study is near completion. This will lead on to a full scale, two-year review of the practical impact of the Housing Grants Construction and Regeneration Act 1996.

"The feedback from the pilot study is rather disheartening," said Rudi Klein, legal adviser to the CLG. "The same old culture is prevailing. We need the Government to give a clear message that it is prepared to amend the legislation if it is shown to be ineffectual in practice."

The pilot study has largely dealt with tendering procedures and the tendering code of practice drawn up by the Construction Industry Board. It reflects the experience of some 50 companies.

Results indicate that the CIB code is being ignored or evaded in the following ways:

l Insufficient time is being given for preparing tenders.

l No information is being given on the number of tenderers.

l Information is not being given on the tender evaluation criteria.

l Bidders are not being told which tender has been accepted.

Also, results suggested there is insufficient evidence so far to indicate whether Dutch auctioning has been stamped out. But there is evidence that, where an adjudicator makes a money decision, it is not being enforced until main contract completion or the money is deposited in a separate stakeholder account.

Klein said: "The whole purpose of adjudication was to stimulate cash flow. These provisions are designed to halt it and allow people to hang on to money.

"We thought all sides were signed up to adjudication. It is quite shocking that there are companies who are just not interested in its purpose."

He added: "The broad message is that the CIB tendering code is being ignored and that there is widespread ignorance of its provisions and even of its existence. The findings reinforces our contention that we are not going to get any real impact on cash flow unless there is an effective means of enforcement.

"We will be seeking an amendment to the legislation to enforce adjudication and allow payment within seven days without any set- offs.

"The majority of responses suggest that the act is being flouted or provisions are being put in place to get around it. Six months on, the information coming back is not optimistic. It is a worrying message."

Klein said the CLG would be looking for Construction Minister Nick Raynsford to "put his head above the parapet" and state quite clearly that the Government will tighten the legislation if it is shown to be ineffectual. "I think we will be pushing on an open door," he concluded.