Dáil Éireann Debate, Tuesday - 12 February 2013
322. Deputy Terence Flanagan asked the Minister for Public Expenditure and Reform the protection in place in the Construction Contracts Bill to ensure that the end user/client is solvent and may execute the contract sum; and if he will make a statement on the matter. [6868/13]
View answer323. Deputy Terence Flanagan asked the Minister for Public Expenditure and Reform the protection that will be contained in the Construction Contracts Bill to ensure the main contractors appointed to carry out the works are solvent and may/will discharge their payment commitments to the sub-contract supply chain in a timely manner; and if he will make a statement on the matter. [6869/13]
View answer324. Deputy Terence Flanagan asked the Minister for Public Expenditure and Reform if he will ensure that the Construction Contracts Bill covers both public and private contracts; and if he will make a statement on the matter. [6870/13]
View answerI propose to take Questions Nos. 322 to 324, inclusive, together.
The Programme for Government contains a commitment to introduce new legislation to protect small building subcontractors that have been denied payments from bigger companies. In this regard, my colleague Minister of State Brian Hayes is working with Senator Feargal Quinn to develop the Senator’s private member’s Construction Contracts Bill into a robust piece of legislation. The Bill has passed Second Stage in the Dáil.
The issue of whether the Bill should require all construction contracts to ensure that the payer is solvent (i.e. through the purchase of a financial product such as a bond) was examined during the consultation and Regulatory Impact Assessment (RIA) of the Bill. The RIA found that requiring payer to purchase bonds would reduce competition in the sector as such financial products are not widely available in the current market and the costs associated with purchasing them would be a barrier to entry for smaller contractors. Therefore the provisions necessary to provide security of payment would increase the regulatory burden and costs associated with contracts between clients, contractors, subcontractors and the final consumer.
In addition, during the Second Stage reading of the Bill in the Dáil, Minister Hayes made a number of points that address the issues raised by the Deputy:
- In relation to payment difficulties that are linked to business failures, the Bill will not cut across the normal rules for company liquidation/receivership or Prompt Payment regulations. However, the Bill includes two key provisions that will reduce the exposure of subcontractors to non-payment in the event of a business failure.
- Firstly, “pay-when-paid” clauses will no longer be permitted in construction contracts. This means, for example, that sub-contractors or sub-sub-contractors will no longer be dependant on a main contractor getting paid before they are entitled to receive their own payments.
- Secondly, all construction contracts will have to contain a payments schedule that clearly sets out both interim payments and final payments, and the sums due in each case. The contract will have to set out clearly when payment of these amounts will fall due. If a contract fails to specify these matters, then the terms set out in the Schedule to the Bill will apply. The Schedule sets out default arrangements for contract payment terms. These will be minimum standards for sub-contracts. This is a major innovation which should reduce the exposure of sub-contractors to non-payment.
In relation to the Deputy’s proposal that the Bill should cover both public and private contracts, I assume the Deputy is referring to the issue of making adjudication awards binding for both the public and private sectors. This is a complex issue which makes it important to strike the right balance between giving this legislation the necessary enforcement provisions, whilst ensuring that the application of the legislation is equitable and the taxpayer is safeguarded.
These and a number of other issues have been examined; Minister Hayes will shortly bring proposals to Government in advance of Committee Stage. This is an important piece of legislation aimed at creating a more level playing field between contractor and subcontractor in the construction sector. Therefore it is essential that these complex issues are properly assessed so as to avoid imposing unnecessary regulatory or cost burdens on parties in dispute, the State or others.
