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Construction Act and Retention Consultations – what do you need to do and by when?

November 2017 - Issue 99

2011 changes to the Construction Act

Following the changes to the Housing Grants, Construction and Regeneration Act 1996 that took place in 2011, the Government said that it would carry out a non-statutory post implementation review after 5 years to assess the effectiveness of the changes in achieving the objectives.

The objectives were:

  1. Increasing transparency in the exchange of information relating to payments.
  2. Encouraging adjudication as a form of dispute resolution, where appropriate.
  3. Strengthening the right to suspend performance.

The consultation was opened on 24 October 2017 and you have until 11:45 pm on 19 January 2018 to provide a response.

In addition to assessing the effectiveness of the 2011 changes, the consultation is also raising general questions regarding the existing construction payment and adjudication framework and questioning the affordability of adjudication, its misuse and its continuing relevance.

The consultation raises questions such as:

  1. “Do you believe that removing the ability of parties to construction contracts to enter into an agreement on costs in advance of the adjudication, has reduced or increased the average cost of an adjudication by parties to the dispute?”
  2. “How many adjudications have you been involved in over the last 5 years?”
  3. “To what extent do you feel that the revised payment notice framework since 2011 has increased or reduced clarity about the timing and amount of payment?”

The full list of questions can be accessed here. View Government Consultation

Retention Payments in the Construction industry

In parallel with the above, the Government is also running a consultation in relation to retention payments in the construction industry. The consultation has been issued following concerns raised that some payment practices used within the construction industry, such as cash retention, are actually a barrier to investment, growth and productivity improvements.

The concerns are also supported by a recent research paper commissioned by the Government entitled “BEIS Research Paper No.17 – Pye Tait Retentions in the Construction Industry October 2017”. The research found that retention monies being lost due to contractor insolvency has a widespread impact and that a large proportion of construction customers may be making payment of the retention conditional on the performance of obligations under another contract. Additionally, it has been found that unjustified late and non-payment of retention monies was a substantial issue for some contractors.

The consultation aims to investigate these issues and consider alternative payment practices applicable to the whole sector and the balance they can offer to ensure prompt and fair payment with the need to provide security against defects and costs.

The consultation also aims to receive feedback on the research conducted by Pye Tait, including whether a “cap” on the proportion of contract value that can be held in retention would be appropriate, and to consider the length of time it can be held. Views on the costs and benefits of holding retentions in a retention deposit scheme or trust account are also requested.

The closing date for the consultation is also the 19 January 2018.

For further information and to view the consultation questions, please visit Government Consultation.

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