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Construction Act plans slammed by all sectors as supply chain loses out

Government amendments to the payment provisions in the Construction Act have angered all quarters of the industry, with large and small contractors arguing they have been let down.

Construction minister Mark Prisk has laid before Parliament a draft order to the Scheme for Construction Contracts, a statutory instrument that helps interpret the act.

The move means the Joint Contracts Tribunal will publish the 2011 edition of its standard building contracts in September, ahead of the legislation coming into force on 1 October.

Major contractors have accused the government of double standards over fair payment provisions after it emerged that a PFI exemption will not be extended to the supply chain.

Under the draft order, while PFI contracts between special purpose vehicles and tier one contractors may be excluded from some fair payment rules, including the ban on ‘payment when certified’, agreements between tier one and its supply chain would not.

Herbert Smith professional support lawyer Michael Mendelblat said: “Subcontractors outside PFI will now have more protection but tier one contractors in PFI will now find that pay when certified is still permissible.”

Specialist Engineering Contractors Group chief executive Rudi Klein (pictured) said any problems could be solved by the introduction of project bank accounts on PFI projects.

But he said supply chain contractors were disappointed with payment provisions laid out in the scheme, arguing the government had failed to properly address vital concerns, including who issues the payment notice.

“We believe it is logical for the party that has done the work to issue the payment notice, but what the scheme is saying is that if there is no provision in the contract that identifies the issue then the payer will issue the notice.”