Payment in the Construction Industry – where are we now?

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Rudi Klein

June 2019

A paper presented to the Society of Construction Law at meetings in Cambridge on 15th October 2018 and Edinburgh on 29th November 2018

This paper examines payment practices in the UK construction industry, following the collapse of Carillion in 2018, and the various initiatives that have attempted to resolve the issues over the years. It looks at how an effective framework for payment security should be established with certainties of timing, amount, enforcement and recovery and goes on to consider how continuing payment problems in the industry could be addressed. The author offers suggestions including: reform of the adjudication provisions; changes to the payment notices regime, the public contracts regulations and reporting requirements; the mandating of project bank accounts; and the protection of retentions.

Impact of poor payment practices– Establishing an effective framework for payment security in construction – Certainty of timing – Certainty of amount– Certainty of enforcement– Certainty of recovery– The Construction Act –What are the continuing payment problems and how should they be addressed?– The adjudication provisions – Payment notices– Project bank accounts (PBAs)– Public Contracts Regulations 2015 – Requirement to report on payment performance – Retentions – The way forward – Annex A (Draft Public Sector Supply Chains (Project Bank Accounts) Bill) – Annex B (Construction (Retentions Deposit Schemes) Bill) – Annex C (A statutory retention deposit scheme: how it could work)

The author: Rudi KleinLLB FCIOB FRSA is a barrister, CEO of the Specialist Engineering Contractors’ (SEC) Group and President of the NEC Users’ Group. He is an Honorary Member of the Society of Construction Law.

Text: 24 pages and 3 annexes

Paper number: 
June 2019, online, 5MB

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