We have a quorum and are in public session. I welcome the Minister of State, Deputy Brian Hayes, and his officials. The purpose of the meeting is to resume consideration of the Construction Contracts Bill 2010 from the Seanad. The Bill was referred to the select sub-committee by Dáil Éireann on 20 June 2012. Is it agreed to conclude consideration of the Bill today? Agreed.
Construction Contracts Bill 2010: Committee Stage (Resumed)
SECTION 4
Amendments Nos. 23 and 24 are related and may be discussed together by agreement.
I move amendment No. 23:
In page 8, subsection (4), line 14, to delete “or otherwise”.
I propose the deletion of the words "or otherwise". My second amendment proposes to insert a new formula of words. The rationale for tabling them is that the Bill does not deal with an instance whereby a payer fails to respond to a payment claim. The amount to be paid should be the amount claimed and, therefore, would incentivise the main contractor to respond.
I thank the Deputy for tabling both amendments. Are we dealing with them together?
Yes. Deputy McDonald can speak about both of them, if she wishes. I shall ask her to move amendment No. 24 later.
I think she did. I shall deal with both amendments and I shall first deal with amendment No. 23. As Deputy McDonald has stated, the deletion of the words "or otherwise" would narrow the possibility of a contractor to take into consideration costs that could arise from obligations linked to a contract, but not contained in the contract. For example, a subcontractor may damage something on the site while carrying out work which could give rise to a legitimate cost for the contractor. That is a consideration for us when not accepting amendment No. 23.
Amendment No. 24 deals with enforcement in the event of a non-response to a payment claim. The matter was raised on Second Stage in Dáil Éireann. I have been advised that an obligation under the contract to make an interim payment is a contractual matter that can be enforced in the courts. In the context of the current Bill, if a payment has not been made the contractor, or the subcontractor, is entitled to sue because the contract must cover staged payments. The Bill also provides the contractor, or subcontractor, with another mechanism to take action by suspending work if they so choose. For that reason we do not believe that the amendments are necessary and also given the fact that the contract is already in place and provides for obligations on all parties.
I thank the Minister of State for his response. The value of the legislative framework is to make explicitly plain the parameters for the parties. I accept that people have recourse to the courts and can sue. Part of the logic behind this initiative is to minimise recourse to that type of procedure for time and expense concerns and to give comfort and certainty to contractors that moneys will be paid. My view differs from the Minister. I believe that it is necessary to insert in the legislation an explicit provision that the party must pay the amount in full. Such a provision would strengthen the legislation and goes to the heart of the reason and rationale for introducing the Bill.
At the heart of the new departure that we are trying to put into the Bill is the argument that if one does not get paid then one suspends the work and goes to adjudication. That is the ultimate power that we are creating here. Hitherto, that power was not in place for people or only in an unenforceable way.
In the circumstances to which the Deputy refers, everyone agrees the whole objective is to make sure that person gets paid. The section under discussion at present, section 4, is all about making sure in respect of payment claim notices. In the aforementioned circumstance, a person who has not been paid is entitled to suspend the work and go into adjudication mode, which would produce the result everyone seeks. Consequently, the Government does not believe it necessary to be as explicit as Deputy McDonald has outlined; the view is that it would complicate the existing provisions set out under section 4. However, I agree with the Deputy, in that we are all at one about how we are obtaining this objective. This is the reason this new departure, as I described the adjudication process, is the means through which these disputes will be resolved. We will deal with the threat of going to adjudication in a later section but in itself it provides the incentive for contractors and subcontractors to sort out this issue, which hitherto has not been in place.
The Minister of State will be aware that the UK legislation dealing with this matter generally has a similar clause and has operated with great success for the past 15 years. Has the Minister of State given consideration to looking at it?
The advice to the Government is that it is not necessary in our circumstances. The Deputy is correct, in that the Government has learned a lot from the UK legislation in the original first draft, the second draft and now effectively the third draft. However, the Government's legal opinion is it is not necessary. Consideration can be given to whether, in the context of a more detailed statutory instrument, one would make that more clear. I have given that commitment in my contributions thus far. However, our clear legal advice is that in respect of primary legislation, this provision is not necessary.
It is clear the Minister of State is not accepting the amendments. However, where there is a failure to respond to the payment claim, there is a strong case for using every lever one can to incentivise the honouring of that amount and that is the purpose of this proposal. While the Minister of State has not said this, it in no way compromises any of the other procedures or processes envisaged in the Bill. It in no way undermines the spirit of the legislation and I believe it strengthens it. While I have listened to the Minister of State's response, I do not consider it to be a compelling argument not to accept the amendments.
I will consider it again between now and Report Stage.
How stands the amendment?
At the Minister will consider these matters between now and Report Stage, I will not press them at this stage. However, I give notice of their reintroduction on Report Stage.
SECTION 5
Amendment, by leave, withdrawn.
Amendment No. 24 not moved.
Section 4 agreed to.
Amendments Nos. 25 to 27, inclusive, are related. Amendment No. 27 is an alternative to amendment No. 26 and amendments Nos. 25 to 27, inclusive, may be discussed together by agreement.
I move amendment No. 25:
In page 8, subsection (1), line 27, to delete “work” and substitute “any or all of its obligations”.
First, restricting the right to suspend work for non-payment to two weeks does not act as a sufficiently robust deterrent under the law. Unless this suspension limit is withdrawn, it could undermine fundamentally the driving purpose of the legislation, as instructing subcontractors to go back on site to continue working for a main contractor who is withholding payment for work already completed does not make any sense. It could be perceived as a sort of capitulation to rogue operators, the very people who made this legislation necessary in the first place. In the event that work has been completed, this allows for the option of withdrawing the obligation to provide operations and maintenance manuals or commissioning certificates. If the job has been completed but a payment dispute arises, the phrase "any or all of its obligations" could cover the withholding of operations and maintenance manuals or certificates.
Three amendments are under discussion, namely, amendments Nos. 25 to 27, inclusive. While amendment No. 27 is in my name, I understand members will deal with all three together. I might first deal with amendment No. 25 and then members can discuss the other two amendments because I am accepting the premise of amendment No. 26 tabled by Deputy McDonald. However, as I am proposing my own amendment No. 27, I might set out to the sub-committee the reason the Government is opting for its own amendment and not that tabled by Deputy McDonald. I accept precisely what she is suggesting because it was a key point to emerge from the discussions by Members over the last number of years. In the original legislation, the provision was for 14 days and everyone has accepted that limit was unacceptable. I gave a commitment on Second Stage that I would respond on this subject, which has resulted in amendment No. 27. However, this does not take away from amendment No. 26, as tabled by Deputy McDonald. I will go through the reason the Government is tabling its own amendment later.
Amendment No. 25 is a proposal by Deputy McDonald to delete the phrase "work" and substitute "any or all of its obligations". The scope provided in the legislation for suspension of work was examined carefully in the context of developing the legislation. It is important that the right to suspension is limited to the individual payment dispute to avoid the possibility of a contractor being able to suspend work on other sites on which the contractor has been paid. The power to suspend any or all of its obligations would have health and safety implications, which could pose a serious risk for fellow contractors working on a site. It is for this reason that the right to suspend work is limited to the phrase "work". If I may, I will give the Deputy an example. When I asked earlier what was the reason the Government could not accept this amendment, I was given an example. A scaffolder erects scaffolding on a construction site and then goes into dispute with the main contractor. While that dispute is going through the adjudication process and is being tested and argued out, the scaffolder still has obligations. They are not so much work obligations as obligations under health and safety regulations to make sure the scaffolding is in a good condition or is maintained because it exists on the site. As for limiting this to the question of work, there is a wider application on sites and such an application will exist as one goes through the process of adjudication or is contesting what that adjudication is about. This is the reason the Government cannot accept amendment No. 25.
In respect of amendments Nos. 26 and 27, I will propose amendment No. 27, which is a substitute for amendment No. 26 tabled by Deputy McDonald. The current provisions, which require the unpaid subcontractor to return to work after two weeks, even though he or she may not be in receipt of payment for work carried out, favours the main contractor. There is no doubt about this and I made that clear on Second Stage. I am amending this provision to provide for suspension, following notification in writing giving seven days' notice of the intention to suspend work. This suspension can continue until referral of the payment dispute for adjudication and following an adjudicator's award where the award has not been paid. The amendment provides for a more balanced solution, while not prejudging the outcome of a payment dispute.
This was a key issue in the original Bill to which many Deputies referred in the Chamber and which was most unsatisfactory. Effectively, people would have been obliged to go back on site without the dispute having been resolved. Having listened to the industry and having listened to the points Deputies on all sides made about this issue, the Government amendment No. 27 deals with a key outstanding issue that was contained in the original assessment of the Bill by the industry itself. I hope it meets with the favour of colleagues today.
I thank the Minister of State for his response. He has acknowledged the problem posed by the 14-day proposition and as his proposal meets that concern, I welcome his amendment.
I accept what the Minister of State said about health and safety concerns. He offered the example of scaffolding. Does he have any other scenarios in which the removal of the reference to work in order to introduce a broader obligation might also be problematic?
As regards other sites, if one had a contractual relationship with one contractor for a number of a sites at the same time, the concern is that if one precluded the work issue there would be multiple responsibilities. It is not just on one site. It would be quite frequent to have a number of ongoing contracts with one main contractor.
The proposal moves beyond the labour part of the construction site into services. One could be talking about generators, latrines and other contractors that do not involve skills or work associated with tradesmen.
Yes, exactly. If one has the contract for putting toilets on site, one is responsible for maintaining the toilets while one is in dispute.
I thank you, a Chathaoirligh.
The Chairman is doing a better job than I am.
The objective of the amendments I have tabled is an effort to strengthen the hand of the little guy. I will not press the amendment. I take the remarks of the Minister of State and the Cathaoirleach on board.
Amendment, by leave, withdrawn.
Amendment No. 26 not moved.
I move amendment No. 27:
In page 8, subsection (3), lines 37 and 38, to delete paragraph (b) and substitute the following:
“(b) after notice has been served by a party to the construction contract under section 6(3) in relation to a dispute relating to payment of the amount concerned.”.
Amendment agreed to.
Amendment No. 28 not moved.
Section 5, as amended, agreed to.
SECTION 6
I move amendment No. 29:
In page 9, lines 26 to 28, to delete section 6(2).
This is a technical amendment to remove the provision of section 1(1) that is already provided for in section 2(5)(b). Section 2(5)(b) states that the Act applies to a construction contract, whether or not the parties to the construction contract purport to limit or exclude its application. That was mistakenly repeated in section 6(1) and for that reason we propose its deletion.
Amendment agreed to.
Amendments Nos. 30 and 33 are related and may be discussed together by agreement.
I move amendment No. 30:
In page 10, lines 15 to 21, to delete subsections (11) and (12) and substitute the following:
“(11) The decision of the adjudicator shall be binding until the payment dispute is finally settled by the parties or a different decision is reached on the reference of the payment dispute to arbitration or in proceedings initiated in a court in relation to the adjudicator’s decision.
(12) The decision of the adjudicator, if binding, shall be enforceable either by action or, by leave of the High Court, in the same manner as a judgment or order of that Court with the same effect and, where leave is given, judgment may be entered in the terms of the decision.
(13) The decision of the adjudicator, if binding, shall, unless otherwise agreed by the parties, be treated as binding on them for all purposes and may accordingly be relied on by any of them, by way of defence, set-off or otherwise, in any legal proceedings.”.
At the start of the Second Stage debate on the Bill in the Dáil I highlighted the very helpful contributions of both main Opposition spokespersons, Deputies Fleming and Deputy McDonald, in respect of the regulatory impact assessment, RIA, which took place nearly 18 months ago. This consultation highlighted a number of matters relating to the Bill that required further clarification. Chief among those concerns was the provision in the Bill that limited the effectiveness of the adjudication process by making the adjudicator’s award binding, providing the award is not appealed. This provision was included to provide protection to the State in the event of insolvency of the payee.
During the Second Stage debate a number of speakers also asked for the provisions to make the adjudicator’s award binding, that is, payable even if the award is appealed to arbitration. I have taken on board the concerns and the amendments I table today will mean that adjudication will be binding and apply equally to private and State contracts. The adjudication provisions contained in the Bill are vital to the proper functioning of the legislation. In a sense, they give the legislation the necessary teeth to provide a swift and cost effective means of dispute resolution.
Four big issues emerged from the Second Stage process and this was one of them. I did give an indication at the time that we would do this and that is why we are moving on this grouping of amendments which I hope will meet the support of colleagues.
Section 6, as amended, agreed to.
SECTION 7
Amendment agreed to.
Amendments Nos. 31 and 32 not moved.
I move amendment No. 33:
In page 11, lines 5 and 6, to delete subsection (3).
Amendment agreed to.
Amendment No. 34 not moved.
Section 7, as amended, agreed to.
NEW SECTION
I move amendment No. 35:
In page 11, before section 8, to insert the following new section:
“8.—(1) The Minister shall from time to time select bodies to be included on a published list of adjudicator nominating bodies.
(2) The Minister shall issue a code of practice governing the conduct of adjudicator nominating bodies.
(3) The Minister may amend the list of approved adjudicator nominating bodies to remove a body from the list where he or she considers such a body to be in breach of the code of practice.”.
Fortunately, the amendment does not represent a charge on the Exchequer and could be accepted. The arrangements in place in respect of amendments of this kind are ludicrous, but parliamentary reform is another day’s work.
It is nothing to do with us. It is the Bills Office that makes decisions on amendments.
This amendment is motivated by concerns that have been raised on a conflict of interest if the Minister appoints a panel of adjudicators and subsequently appoints a chairman to the panel to make selections when disputes are referred to the Minister. I propose the wording the Minister has before him to remove the concern. Furthermore, the chairman could be an officer within a Department procuring construction operations and that could lead to a further conflict of interest.
It is important to make clear that under the current draft of the Bill, it is already possible for appropriately qualified persons to offer adjudication services even where they are not on a panel of adjudicators set up by the Minister. The purpose of the panel of adjudicators is to offer parties who cannot agree on an adjudicator the possibility of having an adjudicator appointed to resolve the dispute. This is an important provision as it provides a level and open playing field for both parties to a payment dispute and prevents either party from using the selection of an adjudicator as a means of delaying the adjudication process.
The Bill already provides the Minister with power to issue a code of practice on the required experience, role and functions of adjudicators and the adjudication process itself. Section 6(4) on page 9 states that the parties may, within five days, beginning with the day on which notice under section 6(4) is served, agree to the appointment of an adjudicator of their own choice or from the panel appointed. I understand Deputy McDonald’s point that concern exists. I have heard it said by existing panels of adjudicators. They are concerned that they might not be used or be open for use. There is nothing to prevent people agreeing to have their own adjudicator appointed. In the same way, section 6(18), which I highlighted previously, states that the parties to a dispute may at any time agree to revoke the appointment of an adjudicator and the parties shall be jointly liable.
If the parties agree to an adjudicator, they do not need to come near us for panels of adjudicators. We think the legislation is flexible enough to provide for that.
On the argument about a code of conduct, there are already powers for the Minister to do that. The Deputy's thinking is more appropriate to a statutory instrument, where we would set out all of the obligations for the adjudicators and how they are to be selected. The concern has been raised by some professional bodies, which I suspect is the motivation behind the amendment, that in some way they will be shut out of the new process. That is not the case, we need their experience and know how. They know the dispute resolution process and have the experience. In no way will they be shut out of the process.
Why is it preferable that the Minister make the appointment, rather than him identifying the appropriate appointing bodies to establish these panels? The Minister of State is right in that the professional bodies are concerned about being shut out of the process but more to the point, these are the expert groups.
The Minister will not make the appointment. Subsection (5) states that failing agreement between the parties under subsection (4), the adjudicator shall be appointed by the chair of the panel selected by the Minister. The Minister is not selecting the adjudicators, he is selecting the chairman of the panel. It is then a matter for the chairman to appoint the adjudicators. The Minister would not be appointing individual adjudicators.
If we go back to section 8, it states that the Minister shall from time to time select persons to be members of a panel to act as adjudicators in regard to payment disputes and shall select one of those persons to chair the panel.
That covers the chairman and gives the Minister the power to devolve. It is not the intention and if that was set out in the legislation, we could look at it but as I understand it, it was never the intention of the Minister to appoint individual adjudicators, it is simply to appoint the chair, who will then appoint adjudicators. That subsection gives the devolving power to the Minister to appoint the chairmen. If the Deputy thinks we should look at this again, I will do so.
The Minister of State should look at section 8(1) again. Subsection (3) for instance states further that the Minister may for good and sufficient reason remove a member of the panel.
That is the chairman.
That is not what the wording says, although I accept that is the intention.
The Deputy has raised a fair issue relating to subsections (5) and (6) and I will look to see if this can be tightened up.
Amendment, by leave, withdrawn.
Section 8 agreed to.
Section 9 agreed to.
SECTION 10
I move amendment No. 36:
In page 12, between lines 16 and 17, to insert the following subsection:
“(3) Where under this Act a notice is required to be delivered not later than a specified number of days after a particular date and the last of those days is a day which is a Saturday or Sunday or a public holiday (within the meaning of the Organisation of Working Time Act 1997), the notice shall be taken to be validly delivered if delivered on the next day which is not such a day.”.
This is a technical amendment to provide for a standard definition of the "days" based on that included in the Organisation of Working Time Act 1997. The term "days" is used throughout the legislation and it was important this aspect did not generate any confusion on the application of legislation.
Some years ago, difficulties arose in the planning process because a person could submit a planning application on Christmas Eve. The days when it was to be considered started on 25 December and there would not be any public officials working for up to two weeks even though the clock had started ticking. We are setting out that "days" means days when people are working in the context of the seven day rule we are trying to invoke. That is the purpose of the amendment.
Amendment agreed to
Section 10, as amended, agreed to.
NEW SECTIONS
I move amendment No. 37:
In page 12, before section 11, to insert the following new section:
11.—The expenses incurred by the Minister in the administration of this Act shall be paid out of moneys provided by the Oireachtas.”.
This is a technical amendment that allows expenses incurred by the Minister to be paid out of monies provided by the Oireachtas. It is a standard provision that was not in the original legislation but should have been; that is why we are introducing it now.
Would this sort of expenditure fall into the voted or non-voted category during the Estimates process?
It would be a new subhead in the Department's annual budgetary statement to the Houses. Many of the bodies that would fall under the remit of the Department are set out in the annual budget so I presume it would be a new subhead.
Within the voted bloc?
Yes.
Amendment agreed to.
I move amendment No. 38:
In page 12, before section 11, to insert the following new section:
11.—Every public procurement capital project to the value of €1,000,000 or over shall include a social clause containing the following provisions—
(a) main contracts to include a requirement that the main contractor recruits one long-term unemployed person, either directly or through the supply chain, for each €1,000,000 of project value,
(b) main contracts to include a requirement that the main contractor recruits one apprentice directly or through the supply chain, for each €1,000,000 of project value,
(c) main contractors comply with the application of fair employment, equality and anti-discrimination legislation,
(d) main contractors shall use their best endeavours to ensure that in their employment policies and practices and in the delivery of the services required under the contract they have due regard to the need to promote equality of treatment and opportunity,
(e) government construction clients to co-operate with other Government departments in discharging their statutory duty to act in a manner which they consider best contributes to sustainable development to include—
(i) taking account of any Department of the Environment, Community and Local Government strategy or guidance on sustainable development,
and
(ii) compliance with the Green Public Procurement National Action Plan,
(f) main contracts to include requirement that—
(i) at least 10 per cent of the material value of the project be derived from recycled/reuse, and
(ii) main Contractors report on the recycled/reuse content achieved using suitable standard industry tools.".
We had a long discussion at the last meeting about the whole issue of social clauses. My amendment refers to public procurement in capital projects to the value of €1 million or more. The Minister of State knows that in other jurisdictions, social clauses have been deployed. They might be legally tricky and must be balanced against EU legal requirements in procurement directives but I will press the amendment to underline the importance of addressing the issue of social clauses.
Amendment put and declared lost.
Section 11 agreed to.
Schedule agreed to.
Title agreed to.
We would like to get an idea of when Report Stage might happen. I am conscious that we will go into recess towards the end of July and it would be ideal if we could have this business concluded before them.
I gave a commitment during the last session on Committee Stage of this Bill that our officials will meet with colleagues from the committee on a key outstanding issue on suppliers. Our officials will be in contact next week or, at the latest, early the week after. I hope, subject to the agreement of the Whips, to start Report Stage in the House as soon as possible, certainly no later than the end of June, but I cannot control that.
As the Deputy is aware, the legislation must then return to the Seanad where Senator Feargal Quinn will take up the matter as it is essentially a Private Members' Bill. It is the intention of the Government to complete all Stages by the time the House rises. The obligation on this House is to complete Report Stage as soon as possible, and it is our intention to meet that obligation.
I thank the Minister of State, his officials and members of the select sub-committee for completing consideration of Committee Stage. We hope and expect the legislation to be completed before the summer recess. It would be remiss of me to fail to acknowledge the presence of Senator Feargal Quinn who has been in attendance in the Visitors' Gallery throughout Committee Stage as he tracks the progress of the legislation he initiated some time ago. Completion of the Bill appears to be on the horizon. As the Minister of State indicated, it will return to the Seanad in due course.
Bill reported with amendments.