Key Changes to the Public Works Contracts – Major or Minor??
“We want to protect small building sub contractors that have been denied payments from bigger companies” – Hayes
Posted on Thursday May 3rd, 2012
Mr Brian Hayes TD, Minister of State at the Department of Public Expenditure and Reform today introduced the Construction Contracts Bill into the Dáil. Speaking on the debate Minister Hayes stated “This Government is committed to protecting small building subcontractors that have been denied payments from bigger companies. This legislation is a key issue for the Government and I am pleased that we are progressing it. It is our intention that the new law be enacted as soon as possible. The purpose of the Bill is to help address the issue of non-payment to construction sector contractors, subcontractors and subsubcontractors who have completed work on construction projects. It is essential that a we reduce subcontractors exposure to non-payment and ensure these issues can be dealt with in a more timely manner.
I would like to extend my thanks to Senator Feargal Quinn who originally introduced the Construction Contracts Bill to the Seanad and has engaged positively with me and the Department of Public Expenditure and Reform to ensure the legislation reflects the outcomes of the Regulatory Impact Assessment (RIA) while providing workable solutions to this key issue.”
The Bill:
Provides new statutory arrangements for payments under construction contracts, including providing for interim payments. This will reduce sub-contractors’ exposure to non-payment; and
introduces a new mechanism for the swift resolution of payment disputes through adjudication. This will provide a route for sub-contractors to achieve redress in the event that non-payment occurs.
Notes to Editor
In order to address a number of issues that were raised during the consultation on the Bill a Regulatory Impact Assessment (RIA) was carried out. The RIA was completed and published last year. The RIA examined the main proposals to amend the Bill that were raised during the Seanad debate and subsequent consultation. It found that there were merits to considering amending the Bill in a number of respects e.g. to bring lower value contracts within its scope and to make the adjudicators award binding in payment dispute cases. Any such amendments shall be formulated in such a manner that would protect the taxpayer.
A copy of the Regulatory Impact Assessment can be found at:
The Construction Contracts Bill was initiated by Senator Feargal Quinn in May 2010 as a Private Members Bill. It passed Committee and remaining stages in the Seanad on 8 March 2011.
The purpose of the Bill is to help address the issue of non-payment to construction sector contractors, subcontractors and subsubcontractors who have completed work on construction projects.
A Regulatory Impact Assessment was undertaken to ensure that the legislation is balanced so as to avoid imposing regulatory or cost burdens on parties in dispute, the State or others.
A copy of the Bill and the Explanatory Memorandum can be found at:
http://www.oireachtas.ie/viewdoc.asp?fn=/documents/bills28/bills/2010/2110/b21a10s.pdf
How does the Bill improve the payment situation in the construction sector?
The Bill sets minimum standards for the payment provisions in construction contracts (whether the contracts are written or otherwise).
Under the Bill, construction contracts must include arrangements for interim payment over the period of the contract. This will reduce the non-payment exposure of contractors and sub-contractors.
The parties to the contract may either agree between themselves an interim payment arrangement or otherwise the default arrangement set out in the legislation arrangement will be deemed to apply.
This makes sure that the question of payment amount and timing is addressed by the parties at the outset.
In this way, parties should not unwittingly get themselves into situations where they are fully exposed to non-payment of a large accumulated bill for work carried out over a long period.
The arrangements should greatly reduce the amounts that are subject of dispute. However, if a payment dispute arises, then the Bill also provides for a swift (and cost effective) adjudication process.
Are public sector construction contracts covered by the Bill?
Yes. The Bill applies to both public and private sector contracts. This issue was considered very carefully and it was decided that, on balance, it would be appropriate to include public sector contracts within the scope of the Bill, provided that the interests of the taxpayer who pays for those contracts were sufficiently protected.
Karen Killoran is a Senior Associate in the Construction & Engineering Group at Arthur Cox.