Construction Contracts Bill

There has been a lot of talk emanating from the CIF, the Irish Concrete Federation and also some TD's and Senators in relation to the new construction contracts bill. This talk is along the lines that if this bill was currently in place then some recent problems on sites would not occur.

Random statements are coming into the public domain without any real substance or backup to justify why this pending piece of legislation would somehow magically save sub-contractors.

The latest on this is to do with the Brian McCarthy Ltd Pepsi site in Cork where sub-contractors are owed money and are threatening to blockade the site.

Any new legislation that will improve matters is certainly helpful but for people to be effectively saying that the new Bill will stop main contractors going bust and stop any non-payments going down the supply chain is simply untrue.

It would be best if the CIF and other's would advise sub-contractors to simply arrange a contractual link to the client on such projects by way of a collateral agreement. This is the simple solution rather than moaning and groaning about a Bill that may not even work or function correctly. For example, if conciliator here were a plastering subbie for a project for Pespi then the wise thing to do would be to ensure that if the Main Contractor goes belly up I can run to Pepsi to get money due, it is not that difficult to get this agreement in place at the outset.


Links to recent developments as follows;

Irish Examiner

Irish Construction

CIF News Pepsi

CIF News Kilfinane

p.s. Rather than been guilty of random statements myself  I will do another blog separately on the Construction Bill in the near future outlining it's potential flaws. Link below to something I blogged on the topic a few years back.....

Conciliators previous discussion on the Bill

Another Victim of the Industry

According to the Irish Examiner Newspaper Brian McCarthy Contractors Ltd became the latest victim of the building crash after confirming that it has ceased trading.

In place for the past 36 years this builder employed over 220 during the boom and the decision to cease trading will result in the loss of the 20 direct jobs that remained at the firm. 

A spokesman for the company confirmed a receiver was appointed and stated: “It is a sad time. We have long-serving employees who have been very loyal. It will be as orderly a wind-down as possible.” 

The spokesman said that the company decided to close “due to the unavailability of profitable work”. 

He said: “It was not viable to continue and there was insufficient workload to cover overheads. It was an extremely difficult decision to cease trading, but it was also a prudent commercial decision as it was not feasible to continue.” 

The spokesman said that the Government awarding contracts to below-cost tenders for public works “made it very difficult to continue”. 

The spokesman said: “We have a pessimistic view of the market in Ireland. The public sector is the main market for contracts and the new form of government contract is so loaded against the contractor, it would have been bordering on reckless trading if we had tried to enter into these contracts.” 

The company said that the last 18 months “have been quite stressful when you are doing everything possible to generate new sources of work".

Road Projects for 2012

It looks like 3 road projects are certain for 2012. These are, the N11 Arklow - Rathnew, Newlands Cross and the Ballaghaderreen bypass.

The N11 is the section between Arklow and Rathnew. Newlands Cross is the final set of traffic lights on the M7 heading east. Ballaghaderreen will be a 14km standard single carriageway project carried out on a design and build basis. Pre-Qualification tenders for the Ballaghaderreen Project are advertised and are due in on the 9th Jan '12.

In relation to the Motorway Projects the Minister for Transport, Mr Varadkar said: "I am delighted to be able to announce the upgrading of Newlands Cross, and of the N11 between Rathnew and Arklow. Both projects will make a real difference to the travelling public and to businesses. Each one covers a critical section of road, and is among a handful of stretches which were never resolved during the boom years.

"Thanks to this new arrangement, the work can finally be initiated.

"It’s particularly welcome to be able to remove the last traffic light between Dundalk and Cork, on one of Ireland’s most important and busiest national routes. The construction process will also create employment for hundreds of people.”

Given the timeframe experienced on the procurement of these types of projects in the past and as they are design and build projects one presumes it will be late 2012 rather than mid 2012 before a sod is turned on these jobs?

Public Works Contracts - Important Changes

A number of amendments have been made at the end of July 2011 to the PW-CF's.

These include the following:

• The definition of ‘lands made available’ has changed;
• A requirement for records included;
• Changes to Programme Contingency;
• Disputing an ER’s decision has a finite period;
• Tighter provisions included in regard to time to submit final statement in order to comply with original intention;
• Employer liability and insurance provisions revised;

A new clause 1.10 has been added in relation to 'background information'-

"1.10 Background Information

1.10.1 In this sub-clause 1.10 Background Information means any information made available on, before or after the Contract Date to the Contractor or to anyone on the Contractor’s behalf by the Employer or by anyone acting on the Employer’s behalf in connection with the Contractor’s tender for the Contract, which information is not included in this Contract. Background Information also includes any information stated to be ‘Background Information’.

1.10.2 The Contractor acknowledges and agrees as follows:

(1) The Employer has no liability whatsoever to the Contractor in contract, tort, under statute, or on any other basis whatsoever (including negligence and breach of statutory or other duty) in connection with Background Information.

(2) The Employer has not made and does not make any warranty, representation, or undertaking in connection with Background Information.

(3) The Employer has not authorised anyone to make any warranty, representation, or undertaking on the Employer's behalf in connection with Background Information.

(4) Without limiting anything in this sub-clause 1.10, the Contractor irrevocably and forever waives any liability that the Employer may have to the Contractor in connection with Background Information regardless of any of the following circumstances, and the Contractor acknowledges that the Employer makes no warranty, representation, or undertaking in regard to those circumstances:

a) whether or not the Background Information is correct

b) whether or not Background Information is complete

c) whether or not any testing, investigation, surveys, or other work to prepare Background Information was done negligently or in breach of statutory or other duties

d) whether or not those who carried out any testing, investigation, surveys, or other work to prepare Background Information were properly selected or supervised

e) whether or not Background Information was suitable for the purposes for which the Contractor or anyone on the Contractor's behalf might use it

f) whether or not any errors or omissions in Background Information are major or numerous or both

g) whether or not Background Information represents all the information available to the Employer

h) whether or not any works described in Background Information are done as described in Background Information or at all

i) whether or not the Employer had or has other information that might render Background Information misleading

j) the manner in which Background Information was made available

k) whether or not the Contractor had adequate opportunity to carry out any testing, investigations, surveys, or other work or otherwise to verify Background Information.

(5) The Contractor has included in the Contract Sum for the risks that the Contractor has agreed to bear under this sub-clause 1.10"

I'm not fully sure why this new clause is deemed necessary? If the client is bearing no liability for the correctness of the background information then any uncharted or miss-charted services are remediable under the contract in any event.

Another change is that the contract form is attempting to contract out or nullify the contra proferentem rule with the addition of the following sub-clause:

"1.2.4 No rule of legal interpretation applies to the disadvantage of a party on the basis that the party provided the Contract or any of it that a term of the Contract is for the party's benefit."

The doctrine of contra proferentem would possibly come into play in relation to this actual condition itself - this is certainly one for the lawyers and barristers which brings us nicely on to the new Form of Tender and the new Arbitration Act 2010, Section 21.

"We also agree that should a dispute arise under any contract formed by acceptance of this Tender that is referred to Arbitration, to the extent permitted by law, under the Arbitration Act 2010 and a sealed offer has not been made or where a sealed offer has been made and the Contractor's award is greater than the sealed offer, then each party will bear it's own costs in relation to the arbitration proceedings".

Of course it also states in a footnote that if the award is less than or equal to the sealed offer then the Contractor is liable for the costs of both parties.

Unfortunately this is a change to the law by virtue of the Arbitration Act 2010 and it has effectively removed any incentive that the employer had to resolve the dispute before it went to arbitration by making a realistic sealed offer to the Contractor. Now employers can hold off, delay or thwart proceedings on the basis that the worst case scenario for them is a share of the costs, barring extra ordinary circumstances.

The Contract sets out new time provisions on the Employer side which is helpful, prior to this there were no clear or concise time provisions towards the route to dispute resolution. This new clause clearly defines this and encourages the Employers Representative to Act in a Concise Manner:

"10.5.3 If the Employer’s Representative fails to take any of the actions in sub-clause 10.5.1 within the time stated, the Employer’s Representative will be taken to have made a determination under sub-clause 10.5.1(3) that there be no adjustment to the Contract Sum, no use of programme contingency referred to in sub-clause 9.4, and no extension to any Date for Substantial Completion. The determination will be taken to have been made on the last day of the time provided for in sub-clause 10.5.1.

10.5.4 A determination of the Employer’s Representative notified to the Contractor and the Employer under sub-clause 10.5.1(3) or 10.5.2 shall be final and binding on the parties unless, within 28 days after receiving notice of determination (or, if sub-clause 10.5.3 applies, within 28 days after the determination is taken to have been made), the Contractor or the Employer gives notice to the other under sub-clause 13.1.1 disputing the determination and referring the dispute to conciliation.

10.5.5 Notice of an agreement under sub-clause 10.5.1(2) shall be final and binding on the parties unless, within 28 days after receiving the notice, either:

(1) the Contractor both (a) notifies the Employer’s Representative and the Employer that the Contractor disagrees that the notice correctly records agreed terms and (b) gives notice to the Employer under sub-clause 13.1.1 referring the dispute to conciliation or

(2) the Employer both (a) notifies the Employer’s Representative and the Contractor that the Employer does not agree with the terms notified by the Employer's Representative and

(b) gives notice to the Contractor under sub-clause 13.1.1 referring the dispute to conciliation"

The general synopsis on this is the Employer has 20 days to make his determination (like old engineers decision under the IEI form) and this is final and binding unless it is disputed within the 28 day time frame set out.

Finally a most important change is clause 11.5 - final account. This has now become a condition precedent.

If no final statement is given within the time required, the Employer shall be released from all liability to the Contractor under or in connection with the Contract.

All of these changes can be viewed on line and it is remarkable that the Department of Public Expenditure and Reform have only noted these changes as been minor amendments on the news part of the website.

That's That Then

No major new road projects are scheduled to commence in 2012 to 2014.

Maybe an email to the Department of Transport should be considered to ask them for thier definition of 'major'?

http://www.transport.ie/pressRelease.aspx?Id=383

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.........

Message to the Irish Department of Finance

The feedback I'm getting from consultant colleagues in relation to the hoops they have to go through to certify money in interim accounts is interesting. Basically the Engineers working on behalf of the Local Authorities must have every item accounted for when only producing an Interim Certificate. This sounds ridiculous to a certain degree. For example the other day I could not get a 'sum on account' certified on an interim certificate for Engineer's phone calls (payable under the contract and I estimated a reasonable gross value on the job to date at€500.00). The Interim Certificate or Payment wouldn't be made until such time as the phone bills were produced. Fair enough policy when you think about it......

This attention to detail is not the fault of the Engineer but was due to the audit's going on within the DOF ever since the GCCC forms were produced (over 3 years now). In the old days sums on account would be paid for such an item. In general we would gather the phone bills on a quarterly basis for submission or even wait until final account stage and then submit the full documentation.

This leads me to a Message / Question to the Department of Finance:
Why the hell didn't you guys take as much care with everything else you were supposedly in control of over the last 5 years?

It's a pity the other ills that fell on this Country weren't kept in check in such a similar fashion as our Construction Industry.

Oh wait a minute .........Then again it doesn't surprise me why such focus was on the Construction Industry (Public Sector Area of the Market) as we were the ones getting bad press for the last 10 years or so (project overruns, wrong initial cost projections...... blah de blah).

This Government was led more by what the papers and media were saying rather than what the country's real citizens and real honest to goodness workforce were saying. As long as the Fianna Fail machine was keeping the press happy they were happy and nothing else really mattered.