Dáil Éireann Debate, Tuesday - 12 February 2013
327. Deputy Terence Flanagan asked the Minister for Public Expenditure and Reform if it will be possible to introduce a payment bond that would protect the supply chain of any construction contracts; and if he will make a statement on the matter. [6875/13]
View answerThe issue of payment bonds to provide protection to the supply chain under a construction contract was examined during the consultation and Regulatory Impact Assessment (RIA) of the Construction Contracts Bill.
The RIA found that requiring contractors 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.
Whilst it will not cut across the normal rules for company liquidation/receivership or Prompt Payment regulations, the Construction Contracts Bill includes two key provisions that will reduce the exposure of subcontractors to non-payment in the event of a business failure.
- A requirement for all construction contracts to include a payment schedule. In the event that a contract fails to provide a payment schedule then the terms set out in the Schedule to the Bill will apply.
- Pay when paid clauses will no longer be permitted meaning that sub-contractors are no longer dependent on the main contractor receiving payment before they in turn receive their own payment.
Therefore in the event of a sub-contractor failing to receive payment in the terms set out in the contract they will have the right to suspend work and, if the payment is disputed, to seek the matter to be resolved through adjudication.
