Friday 15th December saw a panel of leading construction luminaries provide their insight to invited guests at Wright Hassall’s annual pre-Christmas construction networking event.

The theme was the “one thing I would address in the construction industry” and the answers were varied covering the reform of retentions, the concept of “good faith” in construction contracts, the abolition of the “exceptions” in s105(2) of the Construction Act and reforming the payment system to crackdown on poor or non-payment. These were clearly topics that resonated with the audience on the day.

But, how close are we to seeing these ideas become reality and can we count on 2018 to usher in a brave new world?

Retention is potentially highest on the agenda with a Private Member’s Bill on the table and an ongoing consultation. The Consultation was begun by Department for Business, Energy, and Industrial Strategy in October 2017 and closes on 19 January 2018.  There appears at last to be a recognition at government level that the current system is flawed and that if policies related to increased home building and strong sector growth are to be achieved, something must change.

Changes to the Construction Act are also under consultation, closing on the same date. The stated aim of the consultation is to seek information to help establish how effective the 2011 Construction Act changes have been in securing their objectives. The consultation also asks some more general questions on the existing construction payment and adjudication framework and a set of questions on the affordability of adjudication, its misuse and its continuing relevance.  Whilst the question of the exemptions to the Act is not specifically on the table, enough comments from consultees do have the potential to lead government in that direction.

Reform of payment behaviours has more in common with the concept of good faith in contracting than might at first sight seem the case.  There are strong and clear arguments in favour of the use of project bank accounts or the holding of money on trust by the contract administrator in advance of payment obligations arising.  These will only be successful if the concepts of good faith and transparency become embedded across the industry.  Lobbying and fear have so far precluded trust based payment accounts from becoming a requirement.  The consultation on the Construction Act provides the perfect opportunity to raise the issues again – the concept dovetails with the real concerns over misuse of retention arrangements and a statutory doctrine of good faith would reinforce the position yet further.  The number of other jurisdictions where this is the norm, illustrates that it is possible to work in this way and stay competitive.

As ever, these changes will not come about by chance or wishful thinking.  Fear and the inherent risk-averse nature of post-recession banking mean things will not change without effort. Those who feel strongly will need to fight their corner and those of us without the immediate ear of government, can make our voices heard through consultations and discussions with our MPs and industry figures.  To paraphrase Ghandi; in 2018,  be the change you want to see.

Retention payments in the Construction Industry. A consultation on the practice of cash retention under construction contracts: https://beisgovuk.citizenspace.com/im/retention-payments-in-the-construction-industry/

A consultation to support a Post Implementation Review of the 2011 Changes to Part 2 of the Housing Grants, Construction and Regeneration Act 1996: https://beisgovuk.citizenspace.com/im/2011-changes-to-part-2-of-the-housing/

About the author

Nichola Vine Partner

Nichola is a partner in the construction team specialising in all aspects of construction and engineering contracts and disputes.