CONSTRUCTION CONTRACTS BILL

The new government re-convened today. An item of interest from our industry that will be back on the table for discussion is the proposed Construction Contracts Bill.

The explanatory note on this bill (link attached) is as follows: http://www.oireachtas.ie/viewdoc.asp?fn=/documents/bills28/bills/2010/2110/b2110s.pdf

The main purpose of this Bill is to provide for a mechanism whereby prior notice of an intention to withhold sums from payments otherwise due must be given. Otherwise, payments must be made in full and/or the payee may suspend the provision of works and/or services under the construction contract until payment is made in full. This provision is proposed in ease of persons along the chain in the construction sector who may suffer unduly where an entity under a superior contract would find itself withholding payment unilaterally without cause. This would bear unfairly upon the payee or others dependent upon the payee.

The 'explanatory' note further goes on to say....

Ideally this measure would be linked to wider provision in respect of construction contracts including a more rapid and effective means of dispute settlement. However, that could be considered at a later point in time.

In layman's terms what I believe the Bill is attempting to do and is supposed to be set up to do is to protect the ordinary joe small subbie from the big time bully main contractor.

We already have provisions in the industry for this; these are called Forms of Sub-Contract. Obviously the provisions in these standard sub-contract forms are not deemed strong enough to protect the subbies ? The benefit of having an Act like this is that one cannot contract out of government policy or the law so the terms of the Act form the terms of the Contract which in turn will involve adjudication. Some of the committee stage amendments require further tweaking but all in all I would say this is beneficial for the industry and ensures that smaller subbies are paid fairly and reasonably.

Sub-Contractors would be advised to delete any arbitration clauses from their forms of sub-contract and agree to use adjudication per this new Bill as a form of dispute resolution for all disputes.

I would also have liked to see collateral agreements be made mandatory for sub-contracts over a certain value where the main contract is a state funded project. These contracts are deemed under this Act as not been 'Construction Contracts'

"Construction contracts: exceptions, etc.

2*.—(1) A contract is not a construction contract–

(a) if one or more than one of the parties to the contract is a state contracting entity and the value of the contract is not more than €50,000,

Mandatory collateral agreements for say sub-contracts over 50k in value on state funded projects would help to avoid situations that occurred on the Pierce Construction Schools Projects as the subbies would have a direct contractual link to the funder / state.http://www.rte.ie/news/2011/0304/schools.html

More on this later.........