This site last updated:
25 May 2007.

Exorcising construction

Anyone thinking of drafting new contracts to take advantage of loopholes in the Construction Act had better think again: the act reflects a political consensus to drive out the industry's devils.

That well-known MP John Gummer knows a thing or two about construction folk. He said in parliament recently that those at the top - "the Mowlems and the John Laings" - are "charming and nice". Well, we all knew that, didn't we? And, if Gummer had asked me about John Laing 20 years ago, I would have replied that it was true then, too. All that time ago I gave a paper at a conference and happened to mention Laing's creditworthy approach to site management. Unbeknown to me, a Laing boss was in the audience. Two weeks later I received an invitation to dinner and a thank-you note. Gummer is probably looking for a dinner invite, so look sharp you Mowlem and Laing folk. Get Gummer in.

But, when you folk at the top get Gummer to come, will you also invite some of your up-and-coming folk in the lower echelons. Why? Because Gummer thinks the up-and-coming lads and lasses have got stuck in a naughty but happy rut. He thinks that those who write and operate building contracts have bedevilled the industry and an adversarial culture has arisen. He said: "People wrote contracts on the basis that there would be disputes; that people took time to pay or would find a reason for not paying." Oh Gummer, my Gran would have washed your mouth out with soap. Gummer even said: Incubuses have plagued the industry." Incubuses! I bet not many subcontractors use that word when writing a letter to a contractor about an overdue account.

The reason Gummer was saying all this was that a handful of MPs had sat down in committee to consider the final piece of the jigsaw that makes up the Construction Act. It contains the payment and fast-track adjudication rules. It will soon be in force, getting in the way of the ducking and diving that goes on when outfit A doesn't want to pay outfit B.

Eleanor Laing, MP for Epping Forest, has had experience of building contracts and litigation. She said she had no connection with the company of the same name. But she did know how easy it is for small firms to get into difficulties because of the terms of the building contracts they have been obliged to accept to win tenders. So, what the committee wanted to know from construction minister Nick Raynsford was what the government would do when folk began to exploit the odd loophole in the new act.

Bernard Jenkin, MP for North Essex, put it this way: "Our main concern is for the small contractor's dealings with the big boys, because the big boys have legal advisers and know how the scheme will work. They will probably have pro-forma contracts, which they imply are in force or which they exchange with their subcontractors. Many subcontractors take them as read, and industry practice will doubtless build up and lead contractors to say: 'Oh, everyone does it this way. Everyone puts the contracts in this form, so take it or leave it. If you do not like it, we will give the job to someone else.' That is the adversarial climate in which contracts are likely to be offered."

Raynsford had the answer off pat: "If there is clear evidence of abuse, we shall stop it." He also said: 'We expect the provisions to be operated in good faith by all parties to ensure a speedy resolution through adjudication."

Do you see what has happened here? About two years ago, folk such as Tarmac and Birse detected a swing in public opinion, and started to take note of the international opposition. People began to realise that the nightmares that traditionally plagued UK construction firms were making them uncompetitive. Employers in the domestic construction market sent signals, too. They did not want their buildings constructed on a foundation of conflict between main contractors, subcontractors, architects, surveyors or engineers.

Raynsford, Gummer & Co got the message and did something about it. Do you twig that these parliamentarians are not going to let us lurch back into the rut? Do you see how Gummer has also twigged that it is not just up to the bigwigs in the big outfits to make it work? He has realised that the real engine-drivers are those in the middle.

So, if you are a contract placer - whether buyer, QS, engineer or lawyer - and you are looking for loopholes in the Construction Act, have dinner with Gummer ... and with the boss of your outfit at the same time. Why? Because Gummer and his fellow parliamentarians have made up their minds that fiddles are out. If the spirit of the new payment rules can be got around by a nod and a wink and an odd bit of fancy wording in your order, and if the spirit of new adjudication can be torn to shreds by some home-made, Humpty-dumpty wording, then we will all be back with those "incubuses" that go bump in the night. Have dinner with Gummer. He is "charming and nice", too.

CASE REPORTS

Readers are invited to forward recent judgments for reporting in this column (with full acknowledgement) to: Tony Bingham, 3 Paper Buildings, Temple, London EC4Y 7EU. DX:007I LDE