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Specialists seek payment security
10:12 30 Jun 2005
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Procedures that establish security of payment to subcontractors and are simple, fair, and easy to understand can be achieved through an amendment of the Construction Act, according to the Specialist Engineering Contractors (SEC) Group.
The deadline for responses to a Department of Trade & Industry consultation document on amending the Act in order to improve payment procedures expires this week.
And, in a formal response to the consultation paper, the SEC Group claimed that a fundamental purpose of the Act – establishing payment certainty – is being frustrated.
It proposes there should now be a procedure in the Act that establishes that a certain amount is to be paid by a given time. It suggests:
There should be a statutory right to apply for payment at any time (showing how the amount is calculated).
The payer should have the right to respond within so many days (e.g. 15 days) from receipt of the application.
If the payer intends to pay a different amount from that applied for, it should also provide the necessary calculation and, if it is also seeking to recover loss or damage for breach of contract, it should set this out in detail (when the loss was incurred, the items comprising the loss, and the amounts allocated to each item).
The Act should state that the amount applied for must be paid (within so many days of the receipt of the application) if there is no response. If there is a response, then the amount in the response must be paid – provided that the response has the necessary details.
If the parties have to go to adjudication, the only issue would be whether the payer is justified in not paying the amount applied for.
The SEC Group also asserts that “the Act should outlaw all conditional payment provisions to ensure certainty of payment”. The specialists contend that “everyone in the industry knows that pay-when-certified provisions were introduced as a way of undermining the limited ban on pay-
when-paid”.
They argue that the Act should apply to all construction contracts regardless of the extent to which they happen to be in writing.
The deadline for responses to a Department of Trade & Industry consultation document on amending the Act in order to improve payment procedures expires this week.
And, in a formal response to the consultation paper, the SEC Group claimed that a fundamental purpose of the Act – establishing payment certainty – is being frustrated.
It proposes there should now be a procedure in the Act that establishes that a certain amount is to be paid by a given time. It suggests:
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There should be a statutory right to apply for payment at any time (showing how the amount is calculated).
The payer should have the right to respond within so many days (e.g. 15 days) from receipt of the application.
If the payer intends to pay a different amount from that applied for, it should also provide the necessary calculation and, if it is also seeking to recover loss or damage for breach of contract, it should set this out in detail (when the loss was incurred, the items comprising the loss, and the amounts allocated to each item).
The Act should state that the amount applied for must be paid (within so many days of the receipt of the application) if there is no response. If there is a response, then the amount in the response must be paid – provided that the response has the necessary details.
If the parties have to go to adjudication, the only issue would be whether the payer is justified in not paying the amount applied for.
The SEC Group also asserts that “the Act should outlaw all conditional payment provisions to ensure certainty of payment”. The specialists contend that “everyone in the industry knows that pay-when-certified provisions were introduced as a way of undermining the limited ban on pay-
when-paid”.
They argue that the Act should apply to all construction contracts regardless of the extent to which they happen to be in writing.
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