Construction Contracts Bill 2010: Committee and Remaining Stages

SECTION 1

I welcome the Minister of State, Deputy Dara Calleary, to the House to consider Committee Stage of the Construction Contracts Bill 2010.

Question proposed: "That section 1 be deleted."

I propose that this section be deleted.

I second that proposal.

I am supportive of that proposal.

Question put and agreed to.
NEW SECTION

I move amendment No. 1:

In page 3, before section 2, to insert the following new section:

"2.—(1) In this Act—

"construction contract" means (subject to subsection (2) and section 3) an agreement (whether or not in writing) between an executing party and another party, where the executing party is engaged for any one or more of the following activities:

(a) carrying out construction operations by the executing party;

(b) arranging for the carrying out of construction operations by one or more other persons, whether under subcontract to the executing party or otherwise;

(c) providing the executing party’s own labour, or the labour of others, for the carrying out of construction operations;

"construction operations" means, subject to subsections (3) and (4), any activity associated with construction, including operations of any one or more of the following descriptions:

(a) construction, alteration, repair, maintenance, extension, demolition or dismantling of buildings, or structures forming, or to form, part of the land (whether permanent or not);

(b) construction, alteration, repair, maintenance, extension, demolition or dismantling of works forming, or to form, part of the land, including (without prejudice to the foregoing) walls, roadworks, power-lines, telecommunications apparatus, aircraft runways, docks and harbours, railways, inland waterways, pipe-lines, reservoirs, water-mains, wells, sewers, industrial plant and installations for purposes of land drainage, coast protection or defence;

(c) installation in any building or structure of fittings forming part of the land, including (without prejudice to the foregoing) systems of heating, lighting, air-conditioning, thermal insulation, ventilation, power supply, drainage, sanitation, water supply or fire protection, or security or communications systems;

(d) external or internal cleaning of buildings and structures, so far as carried out in the course of their construction, alteration, repair, extension or restoration;

(e) operations which form an integral part of, or are preparatory to, or are for rendering complete, such operations as are previously described in this subsection, including site clearance, earth-moving, excavation, tunnelling and boring, laying of foundations, erection, maintenance or dismantling of scaffolding, site restoration, landscaping and the provision of roadways and other access works and traffic management;

(f) painting or decorating the internal or external surfaces of any building or structure;

(g) drilling for, or extraction of, oil or natural gas;

(h) making, installing or repairing sculptures, murals and other artistic works that are attached to real property;

"executing party", in relation to a construction contract, means—

(a) where the parties to the construction contract are a contractor and the person for whom the contractor is doing work under the contract, the contractor, or

(b) where the parties to the construction contract are a contractor and a subcontractor or are 2 subcontractors, the subcontractor or whichever of the subcontractors agrees to execute work under the contract;

"main contract" means a construction contract such as is referred to in paragraph (a) of the definition of “executing party”;

"Minister" means the Minister for Finance;

"other party", in relation to a construction contract, means the party to the construction contract who is not the executing party;

"payment claim" means a claim to be paid an amount under a construction contract;

"payment claim date", in relation to a construction contract, means the date when a payment claim in relation to an amount due under the construction contract is required to be made;

"payment claim notice" has the meaning assigned to it by section 7;

"payment dispute" has the meaning assigned to it by section 8;

"state contracting entity" means a contracting authority as defined by Article 1.9 of

Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts and includes any body listed for the time being in Annex III to that Directive;

"subcontract" means a construction contract such as is referred to in paragraph (b) of the definition of “executing party”;

"subcontractor" means a person to whom the execution of work under a construction contract is subcontracted by the contractor or another subcontractor;

"work", in relation to a construction contract, means any act done in furtherance of the construction contract under the terms of the construction contract.

(2) In this Act references to a construction contract include an agreement, in relation to construction operations, to do work or provide services ancillary to the construction contract such as—

(a) architectural, design, archaeological or surveying work,

(b) engineering or project management services, or

(c) advice on building, engineering, interior or exterior decoration or on the laying-out of landscape.

(3) Subject to subsection (4) references in this Act to construction operations do not include the manufacture or delivery to a construction site of—

(a) building or engineering components or equipment,

(b) materials, plant or machinery, or

(c) components for systems of heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection, or for security or communications systems.

(4) In this Act references to construction operations do include a case where the things referred to in subsection (3) are supplied under a contract which also provides for their installation.

This amendment proposes a new interpretation section for the Bill. It deals with interpretation matters and sets out definitions of various terms used in the Bill.

I second the amendment. Senator Quinn has been briefed extensively by senior members of the construction industry. I imagine that the amendment emerged from discussions subsequent to the satisfactory passage of earlier Stages of the Bill in this House. It is an important Bill and this is a significant amendment. It redefines a range of matters from the central matter of the construction contract. I understand the Bill is not being opposed so there is no need to make the argument for it. This is a comprehensive and detailed series of definitions and is welcome.

This Bill indicates the relevance of Seanad Éireann. The construction industry is in considerable difficulty and the fact that senior members of the construction industry chose to approach a Member of Seanad Éireann to assist in the production of this legislation shows that at the centre of our business enterprise, in one of the most significant engines of the economy, leading figures considered Seanad Éireann to be the appropriate place for this legislation to be discussed. That point does not need further underlining but I am pleased to speak in support of Senator Quinn's Bill. He has done the Seanad considerable service by introducing it. In the final days of this session of Seanad Éireann, it is important that the last act should be the passage of this significant Bill.

I wish to raise an objection at this point because it concerns section 2 even though it relates to section 5 of the Bill.

I can allow the Senator to speak on the section later if her contribution does not concern the amendment.

It concerns the amendment. Before we get carried away by what we are doing, we must realise that everyone is agreed on the concept. However, the details are flawed. The Bill purports to protect suppliers but it does not protect suppliers and subcontractors. If we are taking the opportunity to fix something, we should do it comprehensively. The objection I have to section 2 is that it continues to exclude materials from protection. I do not understand why. The exclusion of materials is referred to in the amendment which states:

(3) Subject to subsection (4) references in this Act to construction operations do not include the manufacture or delivery to a construction site of—

(a) building or engineering components or equipment,

(b) materials, plant or machinery, or

Some of the references to this Bill by Senator Quinn concerned companies that have gone to the wall because they were not paid by major construction companies. However, the Bill will not protect these people. The exclusion of people who supply materials, whether concrete or other materials, means they do not get protection. I will discuss this point again in section 5. I ask the Minister of State to consider removing this section because it weakens the legislation. I am interested in hearing the justification for leaving this section in the Bill.

I refer to the comments of Senator Norris. I thank him for his kind words but I must correct him on one point. This Bill did not come about because of the construction industry approaching me. It was not a great honour for the Seanad. Mr. Seán Gallagher was upset by an experience he had and he wrote to his local representative in Cavan-Monaghan, Deputy Margaret Conlon, and she circulated the concerns. This took place last April. When I saw this concern, I thought that it seemed wrong that subcontractors were not being paid by someone who was not short of money and had money to build his own home. I wondered if we could do something about this and I initiated the Bill. After I went public, the construction industry and others approached me and told me this was exactly what they wanted. I thank Senator Norris for his words.

That is an even stronger argument for the retention of the Seanad and an even greater degree of praise attaches to Senator Quinn.

In response to Senator O'Malley, I understand her concern. Materials were not included in this legislation. The reason is that there is sufficient legislation in this regard. If someone sells me a car and I do not pay, I owe money and the person can get that money from me through various methods. What we have included in the legislation makes the clarification in regard to that, such that the Bill will apply if the contract concerned also provides for the installation of the material and the equipment and supplies. If someone offers to supply materials, but has nothing to do with installation, this legislation does not apply because sufficient legislation exists in that regard. On the other hand, if one is a plumber, a tiler or an electrician and provides the pipes, tiles or wiring and installs them, this legislation applies and covers material on that basis. We are not trying to cover every item of legislation. If materials are provided and installed, they are governed by the legislation. I would like to cover more but I am more anxious to get this legislation passed rather than making it so widespread that it is difficult to enforce.

In section 2(2)(c), I propose inserting “unless the above items are individually designed and manufactured for the relevant construction operations”.

This amendment reflects the concern of contractors involved on the Dublin Airport Terminal 2 project. Bespoke components made for a specific project should come within the legislation. This is because many construction operations involve fabrication off-site. Such an amendment would also be supported by the professional bodies. This is landmark legislation. While it does not remedy the injustices done to the many thousands of subcontractors who have been left without payment, it will protect subcontractors in future from non-payment, late payment and underpayment.

I am here purely to endorse the points already made. I took an interest in this issue a long time ago and I was delighted when Senator Quinn initiated a Bill covering this area. I am reflecting many of the views of subcontractors who came to me and asked me to endorse this Bill. We discussed that it does not cover some aspects such as the payment of materials and that there is sufficient legislation covering that. I would like to know what that legislation is and how it can be incorporated in order that people would know where they stand and could be assured that all the conditions of a contract would be fulfilled when it comes to payment. It is important that a subcontractor who enters into a contract knows exactly where he or she stands before setting out to do the work and getting paid for it, whether that be with or without materials included. That aspect is a little vague and I would like further clarification on it.

I am not sure whether my query relates to the amendment of this section. I also pay tribute to Senator Quinn, Sean Gallagher and many people like him whose companies have suffered as a result of this gap in the legislation. I also pay tribute to the outgoing Government. When Senator Quinn first brought this before the House as a published Bill, he received a commitment from the outgoing Minister for Finance, Deputy Brian Lenihan, that within six months of the date of the passing of Second Stage it would be introduced back into this House. The timetable has slipped a little and Senator Quinn has indicated he is very pleased we have been brought back into the House today while still under the current Administration and as the hours slip away. That is not only relevant but also important and significant. It might be helpful to know where the Bill will go to after today.

I am curious about one aspect although I am sure it applies to the amendment of this section. There is great concern that this Bill will not apply retrospectively and is in a way closing the stable door after the horse has bolted. If passed, some flexibility must be built into it, therefore, to address the financial difficulties and disasters that befell subcontractors. Not all subcontractors are big companies. Some are small companies, sole traders or family businesses.

Section 2 in the legislation as initiated states that the term "relevant payment date" "shall have the meaning assigned to it in the European Communities (Late Payments in Commercial Transactions) Regulations, 2002". In regard to section 3——

The Senator should stick to this section.

It is in the context of——

Yes. It is in the context of the question. Section 3 states that the Bill shall apply only to construction contracts which are entered into after its commencement. I am curious to know the position in terms of the relevant payment date. For example, if Mr. Gallagher's company or a similar company submitted an invoice and it was subject to the normal trading conditions of payment within four weeks, two months or three months and the company was not paid, would the European Communities late payment regulations become relevant even though the Bill states they are not being applied retrospectively? I appreciate I am dancing on the head of a pin here but I am curious to know if there is any redress for such non-payment of a contract.

I reiterate this is an important day for the Seanad, even in its dying hours. I again pay tribute to Senator Quinn in that regard.

We all subscribe fully to Senator Quinn's intention in the purpose of this Bill, which unfortunately has been watered down, and we may be straying somewhat in not specifically addressing this section, to which the Senator has tried specifically to draw attention. I share Senator O'Malley's concern that the manufacture and delivery of building materials to site are not covered. I will deal with my principal concern in regard to securing cash flow being lost when we come to the more relevant section, which is section 8. I support Senator Quinn's amendment and I will have more to say about my disagreements as we progress.

What is covered in the Bill is exactly as Senator Coghlan has said. It is perhaps not what was intended at the beginning. The intention was to cover as much as we could. Senator O'Malley said she is disappointed that materials are not included in it. We recognised very early on that we could not do everything. What I set out to do was to have certainty of timing of payments, certainty of the amount of payments, certainty of the enforcement whereby one could ensure one would get paid rather than just know that someone owed one money and one was not able to get it, and certainty that the cash was secure. The other aspect I wanted included was that if a dispute arose, a solution could be found.

We have gone a long way towards dealing with most of those aspects but we have not yet managed to find a way to ensure the cash is secure — security of cash — although it is still possible that a way could be found to ensure that by the time the Bill gets through the Dáil. Officials in the Department of Finance and in the Attorney General's office have been working very hard to find a solution to that but it is not easy to find. Rather than delay the passage of the Bill any more, the fact that we are not achieving all four certainties but only part of them is still a better step forward. I was hoping for 100% and I have got something less than that, but even if it is only 80%, 70% or 40%, it is still a step in the right direction to help those subcontractors who have lost out on that basis. I understand the concerns of Senators Mooney and O'Malley in regard to those particular areas but this Bill aims at achieving as much as we can at this stage.

Senator Mary White raised the very understandable point about materials made specifically for a project. She referred to the Terminal 2 project and that people who did work on it are concerned. Parts of the materials used in that building were made specifically for it. They were not off-the-shelf equipment. One could understand on that basis the intention would be to have such materials included. The debate on that can continue but at present such provision has not been included in this legislation. What we have included is anything that is made and installed by the same maker. On that basis, that aspect will be included but materials that are what one could call off the shelf are not included.

Does Senator O'Malley wish to comment further?

Will I be able to come back once the Minister of State has replied to the question?

Yes, the Senator can do so.

I will wait until the Minister of State has replied.

We want to welcome Senator Quinn's Bill. The Department has worked hard with him in trying to reach some compromise on it. With regard to issues that have been raised, I am sure Senator Coghlan will bring them to the attention of his party members who will be in government this time tomorrow.

In regard to Senator O'Malley's substantive point, we acknowledge that there are some gaps. However, it is felt that to address those fully, we need a regulatory impact assessment because the impact of what she suggests may be broader than what she intends. It may add considerably to the regulatory impact. It would be possible to do such an assessment ahead of this Bill going to the Dáil in the next session and I understand it will be a priority for the incoming Government.

I thank the Minister of State for his response, but I do not accept what he has said. We are seeking to offer protection for people. A limited amount of protection is being offered. Rather than not having materials included, as Senator Quinn mentioned, they are expressly excluded. That is why I am seeking the removal of the express exclusion. It is a very simple amendment and just requires the removal of the reference to materials. As anybody in the construction industry knows, once one has poured concrete one cannot reverse the process. While I understand the Minister of State's point that labour cannot be recalled once delivered, I contend the same applies to materials. The legislation is deeply flawed in this regard. This can be addressed simply by removing the exclusion of materials, as in the proposed subsection (3)(b). I do not accept that removing the exclusion is impossible.

We all agree on the intention of the Bill. Nobody wants to see anybody who has delivered a service not getting paid. Suppliers of materials are equally entitled to the protection afforded to service providers. By removing the reference to materials from the list, we can offer materials suppliers comfort in this regard. We should do so.

I accept what the Minister of State said about a regulatory impact study but the purpose of the Bill is to offer protection. Therefore, I do not believe the regulatory impact assessment is justifiable in respect of materials alone.

Might a retention-of-title clause assist in the contract to surmount the problem?

Under general law, there is an option to pursue debts through the courts. It is intended to arrive at a mechanism to strengthen this provision. It was our intention in drafting the Bill that this would be dealt with within the Dáil process.

It is simply a matter of excluding the reference to materials.

It is not as simple as the Senator suggests; that is the difficulty. Often what we believe in the House to be simple leads to all sorts of issues. That is why we want to carry out a regulatory impact study and, I hope, introduce a mechanism that can be agreed by the Department, the Seanad and the Dáil in the context of the Dáil legislation.

Senator O'Malley has raised a significant point. This is a question of indebtedness and people who have provided materials or services losing money. There was a very interesting television programme on this precise point. A number of people who had incurred losses were interviewed. The principal person who contacted Senator Quinn to discuss this matter, which interaction led to the Bill, was certainly involved in the programme, but so also were those who had provided goods in addition to services.

I know what is involved from having been involved in businesses in Temple Bar. On one occasion, we had to install air conditioning. Air conditioning units are enormously expensive and can cost from €20,000 to €100,000 depending on the complexity and scale of the building in which they are to be installed. This matter really needs to be considered.

The political question concerns whether, by considering these matters now, we will hold the Bill back from a possible speedy passage that would rescue certain people in difficulty or people who are about to get into difficulty. Will the Bill be delayed by the Government in the other House? Perhaps we could have an indication of the attitude of the incoming Government towards the Bill and whether it will be regarded as a priority. These are decisions we have got to make.

Senator Quinn makes the valid point that this legislation is not perfect, but very little in this life is perfect. It may be as well to opt for legislation that does not cover every situation. That entails a political judgment and we should know the timescale if the corrections proposed are to be made. We need to know the attitude of the incoming Government thereto before these decisions are made.

I would feel a little aggrieved if I were the supplier of goods of very significant value, whose value had been added to the payment made to somebody. It would be wrong if one were allowed to hang onto the value that the supply of my goods or materials had contributed. Those concerned would have been paid for me and, therefore, should pass the value down the chain. That is the principle of the Bill. It is a good principle and it should be extended. I am not certain why there should be a specific exclusion. Not including a provision is one matter but specifically excluding it is another. I have not heard sufficient argument to justify a specific exclusion. Perhaps not including a measure is one argument. Senator Quinn has been closer to this matter than I have been and he has dealt with it in a most detailed and interesting way. Perhaps he will return to some of these questions in a subsequent contribution.

Considering that we will not carry this much farther today, we should just do what we can. A new Government will enter office tomorrow. I ask Senator Coghlan, who is taking this legislation on behalf of the other side of the House, to ensure tomorrow, when he is in a position to do so, that it will be put on the agenda for completion very quickly in the new Dáil in order to sort out the problem that has been highlighted. It will not go away. I will not reiterate the points that have been made.

The Senator is straying from the amendment before us.

I know that. We will not make much more progress today, that is for sure.

The real aim of this legislation was to achieve help for subcontractors. We did not try to achieve something that changes the law or introduces a new topic in law. Existing legislation stipulates that I owe one money if I buy something from one. The legislation stipulates how that money can be obtained. We require the legislation before us to cover circumstances where goods are bought and installed. It is a subcontractors Bill and does not attempt to cover all legislation concerning buying and selling. Regrettably, we did not cover such a wide range because we did not believe we would be able to keep the legislation concise and capable of being passed.

We copied some British legislation and examined what was done in New Zealand, Malaysia and certain states in Australia. We learned a great deal from what they have done. In many of those cases, a decision was made not to include materials unless they were installed as part of the subcontractor's contract. This legislation may not be as all-encompassing as it might have been but it is aimed at subcontractors who install materials. It does not include material that is not installed.

Amendment put and declared carried.
Section 2 deleted.
NEW SECTIONS

Amendments Nos. 2, 3 and 12 are related and are to be discussed together.

I move amendment No. 2:

In page 4, before section 3, to insert the following new section:

"3.—(1) A contract is not a construction contract—

(a) if one or more than one of the parties to the contract is a state contracting entity and the value of the contract is not more than €50,000,

(b) if the value of the contract is more than €200,000, and—

(i) the contract relates only to a dwelling, and

(ii) the dwelling has a floor area not greater than 200 square metres, and

(iii) one of the parties to the contract is a person who occupies, or intends to occupy, the dwelling as his or her residence,or

(c) in any other case, where the value of the contract is not more than €200,000.

(2) A contract of employment (within the meaning of the Organisation of Working Time Act 1997) is not a construction contract.

(3) A contract between a State authority and its partner in a public private partnership arrangement, as those terms are defined in the State Authorities (Public Private Partnership Arrangements) Act 2002, is not a construction contract.

(4) Where a contract contains provisions in relation to activities other than those referred to in the definition of construction contract and section 2(2), it is a construction contract only so far as it relates to those activities.

(5) This Act applies to a construction contract whether or not—

(a) the law of the State is otherwise the applicable law in relation to the construction contract, or

(b) the parties to the construction contract purport to limit or exclude its application.”.

Amendment No. 2 concerns the scope and application of the Bill. It excludes certain contracts from the definition of "construction contract". It ensures the Bill will not apply to contracts whose values are below certain thresholds. It also ensures that in the normal course the Bill would not apply to an ordinary individual who enters a contract for the building, extension or renovation of his or her home. He or she will not be required to comply with the new rules set out in the Bill. However, the amendment tries to ensure that contracts concerning so-called "trophy homes" come within the scope of the Bill. We must examine this to see how it applies.

Amendment No. 3 sets out new rules to govern payments under construction contracts and this is a core feature of the Bill. Under the amendment, all construction contracts will have to provide clearly for interim and final payments and for the sums due in each case. The contract will have to set out clearly when payments of these amounts will fall due. If a contract fails to specify these matters then the terms set out in amendment No. 12 will apply. The amendment also ensures — this is an important part of the Bill which I am very pleased to say will be enforced very successfully — that "pay when paid" clauses will no longer be acceptable in contracts. This means, for example, that subcontractors or sub-subcontractors will no longer be dependent on a main contractor getting paid before they are entitled to receive their payments. This has been a big problem whereby the main contractor states he or she will not pay until after he or she gets paid. We will outlaw this in the legislation.

Amendment No. 12 introduces a new schedule to the Bill and it works together with amendment No. 3. The schedule sets out default arrangements for contract payment terms. These will be minimum standards for subcontracts. This is a major innovation which should especially help subcontractors. These are the three amendments which have been banded together.

The proposed section 3(1)(c) states, “in any other case, where the value of the contract is not more than €200,000.” The sum of €50,000 would be a more relevant figure in this case because of the value of what is involved.

I can understand Senator Coghlan's view. There is concern about this. It has come about in a situation whereby it is rather difficult to ensure the correct amount is always the one that should apply. Certainly, on this basis it seems to me that €200,000 is far too high a figure. One of the areas we will have a chance to examine in this case is the regulatory impact analysis, RIA, to see the effect of this. As the Minister of State, Deputy Dara Calleary, stated the RIA will have an effect. The objective of the figure of €200,000 may not stand. It may be possible to adjust it. The case made by Senator Coghlan is very worthy of consideration. This could be considered either with the RIA or in the Dáil. However, at this stage the figure of €200,000 is the one that has been agreed.

I hope it will be reconsidered.

Amendment agreed to.

I move amendment No. 3:

In page 4, before section 3, to insert the following new section:

"3.—(1) A construction contract shall provide for—

(a) the amount of each interim payment to be made under the construction contract, and

(b) the amount of the final payment to be made under the construction contract, or for an adequate mechanism for determining those amounts.

(2) A construction contract shall provide for—

(a) the payment claim date, or an adequate mechanism for determining the payment claim date, for each amount due under the construction contract, and

(b) the period between the payment claim date for each such amount and the date on which the amount is so due.

(3) The Schedule shall apply to a main contract if and to the extent that it does not make provision for the matters specified in subsections (1) and (2).

(4) The Schedule shall apply to a subcontract except to the extent that it makes provision which is more favourable to the executing party than that which would otherwise be made by the Schedule.

(5) Except after the occurrence of the circumstances specified in subsection (6), a provision in a construction contract is ineffective to the extent that it provides that payment of an amount due under the construction contract, or the timing of such a payment, is conditional on an act of a person other than one of the parties to the construction contract.

(6) The circumstances referred to in subsection (5) are:

(a) where the other person is a company other than an unregistered company—

(i) the commencement of its winding up pursuant to section 251 of the Companies Act 1963 where no declaration of solvency has been made under section 256 of the Companies Act 1963,

(ii) the presentation of a petition to wind it up pursuant to section 213 of the Companies Act 1963,

(iii) the appointment of a receiver in respect of any of its property or assets,

or

(iv) the presentation of a petition for the appointment of an examiner under the Companies (Amendment) Act 1990 in relation to it;

(b) where the other person is an unregistered company, the commencement of its winding up pursuant to section 345 of the Companies Act 1963;

(c) where the other person is an individual or partnership, the making of an application for adjudication under the Bankruptcy Act 1988 in relation to it;

(d) the making of a winding up or similar order by a court in relation to the other person;

(e) the occurrence of any event corresponding to those specified in this subsection under the law of any state to which Council Regulation (EC) No. 1346/2000 of 29 May 2000on insolvency proceedings applies.”

Amendment agreed to.
Sections 3 to 6, inclusive, deleted.
NEW SECTION

I move amendment No. 4:

In page 6, before section 7, to insert the following new section:

"7.—(1) This section applies where, not later than 5 days after the payment claim date, an executing party to a construction contract delivers a payment claim notice relating to a payment claim to the other party or another person specified under the construction contract.

(2) A payment claim notice is a notice specifying—

(a) the amount claimed (even if the amount is zero),

(b) the period, stage of work or activity to which the payment claim relates,

(c) the subject matter of the payment claim, and

(d) the basis of the calculation of the amount claimed.

(3) If the other party or specified person referred to in subsection (1) contests that the amount is due and payable, then the other party or specified person—

(a) shall deliver a response to the payment claim notice to the executing party, not later than 21 days after the payment claim date, specifying—

(i) the amount proposed to be paid,

(ii) the reason or reasons for the difference between the amount in the payment claim notice and the amount referred to in subparagraph (i), and

(iii) the basis on which the amount referred to in subparagraph (i) is calculated,

and

(b) if the matter has not been settled by the day on which the amount is due, shall pay the amount referred to in paragraph (a) to the executing party not later than on that day.

(4) Where a reason for the different amount in the response is attributable to a claim for loss or damage arising from an alleged breach of any contractual or other obligation of the executing party (under the construction contract or otherwise), or any other claim that the other person alleges against the executing party, the response shall also specify—

(a) when the loss was incurred or the damage occurred, or how the other claim arose,

(b) the particulars of the loss, damage or claim, and

(c) the portion of the difference that is attributable to each such particular.

(5) The rights and obligations conferred or imposed by this section are additional to any conferred or imposed by the terms of the construction contract.".

This amendment concerns arrangements for a party to claim payments under construction contracts. It sets out detailed procedures for making a payment claim. In the event that the amount involved is disputed between the parties, the amendment works to ensure that each of the parties is clear about the amount in dispute and the basis on which the dispute arises. This provides an important clarification which is not readily available to contracting parties at present. It then forms the basis for seeking a resolution of any payment dispute through moving on to the adjudication process provided under the Bill.

The amendment states a payment claim notice is a notice specifying the amount claimed even if the amount is zero. I would like clarification. I do not see the point in making such a claim if the amount involved is zero.

The answer is that it may not be a dispute about payment as such. No money might be owed at that stage and this is the reason for ensuring that a claim can be made for something else.

Amendment agreed to.
SECTION 7
Question proposed: "That section 7 be deleted."

I propose that this section be deleted because the subject matter is dealt with in amendment No. 4.

I propose to delete subsections (4) and (5) and insert, "if the other party or specified person referred to in subsection (1) does not deliver a response in accordance with subsection (3) or any response delivered does not comply with the requirements of subsection (3) the other party or specified person shall pay the amount claimed in the payment claim notice issued in accordance with subsections (1) and (2)."

Is the Senator proposing an amendment to section 7?

On payment claim notices.

Are you proposing something, Senator White?

To delete the wording on the payment claim notices.

If that is in the original Bill I have proposed that we delete all of it.

Question put and agreed to.
NEW SECTIONS

I move amendment No. 5:

In page 6, before section 8, to insert the following new section:

"8.—(1) Where any amount due under a construction contract is not paid in full by the day on which the amount is due, the executing party may suspend work under the construction contract by giving notice in writing under subsection (2).

(2) Notice under this subsection shall specify the grounds on which it is intended to suspend work and shall be delivered to the other party—

(a) not earlier than the day after the day on which the amount concerned is due, and

(b) at least 7 days before the proposed suspension is to begin.

(3) Work may not be suspended under subsection (1)

(a) after payment by the other party of the amount due, or

(b) after the end of the period of 14 days beginning with the day on which the suspension begins.

(4) Where work is suspended under subsection (1) and the ability of the executing party to complete work within a contractual time limit is affected by the suspension of work, the period of suspension shall be disregarded for the purpose of computing the contractual time limit unless the suspension of work is unjustified in the circumstances.

(5) Where work is suspended under subsection (1) and the ability of a subcontractor to complete work within a contractual time limit is affected by the suspension of work, the period of suspension shall be disregarded for the purpose of computing the contractual time limit.

(6) A period of suspension of work under subsection (1) shall also be disregarded for the purpose of computing the time taken to complete the work under another construction contract where—

(a) the construction contract the work under which is suspended is a subcontract,

(b) the other construction contract is also a subcontract and the other party to that other subcontract is the same as the other party to the subcontract the work under which is suspended, and

(c) the ability of the executing party under that other subcontract to complete work within a contractual time limit is affected by the suspension of work.

(7) This section is without prejudice to the right of the other party to the construction contract under which work is suspended to claim for compensation or damages for any loss due to a suspension of work that is unjustified in the circumstances.".

This is to insert a new section on the right to suspend work for non-payment. The amendment confers a new statutory right for contracting parties. A party which has not been fully paid in accordance with the contract and terms of the Bill will now have the right to suspend work under the contract for a period of up to two weeks. This has been part of the problem in the past; somebody who has not been paid could not suspend work and had to continue, getting into more and more debt. The amendment sets out the rules under which the suspension of work can occur. The aim of the amendment is to help to balance the power between contracting parties without unduly hampering completion of the project. The existence of the right should help ensure that payments are made on time.

Where a payment claim is still unpaid following the period of suspension then the appropriate path is for the parties to move on to adjudication and to seek resolution of the matter through that process. This has been a problem for a long time whereby someone who has done work has not been paid but is still obliged to continue doing the work. This provides a new right for a non-paid party to suspend the work that would otherwise be required under the construction contract. This is an important section of the Bill.

Amendment agreed to.

Amendments Nos. 6 to 9, inclusive, are related and may be discussed together by agreement of the House. Is that agreed? Agreed.

I move amendment No. 6:

In page 6, before section 8, to insert the following new section:

"8.—(1) A party to a construction contract has the right to refer for adjudication in accordance with this section any dispute relating to payment arising under the construction contract (in this Act referred to as a "payment dispute").

(2) The right under subsection (1) applies in spite of any term of the construction contract which purports to exclude or limit its application or is otherwise inconsistent with it.

(3) The party may exercise the right by serving on the other person who is party to the construction contract at any time notice of intention to refer the payment dispute for adjudication.

(4) The parties may, within 5 days beginning with the day on which notice under subsection (3) is served, agree to appoint an adjudicator of their own choice or from the panel appointed by the Minister under section 9.

(5) Failing agreement between the parties under subsection (4), the adjudicator shall be appointed by the chair of the panel selected by the Minister under section 9.

(6) The party by whom the notice under subsection (3) was served—

(a) shall refer the payment dispute to the adjudicator within 7 days beginning with the day on which the appointment is made, and

(b) shall at the same time provide a copy of the referral and all accompanying documents to the person who is party to the construction contract.

(7) The adjudicator shall reach a decision within 28 days beginning with the day on which the referral is made or such longer period as is agreed by the parties after the payment dispute has been referred.

(8) The adjudicator may extend the period of 28 days by up to 14 days, with the consent of the party by whom the payment dispute was referred.

(9) The adjudicator shall act impartially in the conduct of the adjudication and shall comply with the code of practice published by the Minister under section 10, whether or not the adjudicator is a person who is a member of the panel selected by the Minister under section 9.

(10) The adjudicator may take the initiative in ascertaining the facts and the law in relation to the payment dispute and may deal at the same time with several payment disputes arising under the same construction contract or related construction contracts.

(11) Subject to subsection (12), the decision of the adjudicator shall be binding until the payment dispute is finally settled by the parties.

(12) The decision of the adjudicator shall not be binding if the payment dispute is referred to arbitration or proceedings are otherwise initiated in relation to the decision unless the parties agree to accept the decision as finally determining the payment dispute.

(13) The adjudicator may correct his or her decision so as to remove a clerical or typographical error arising by accident or omission but may not reconsider or reopen any aspect of the decision.

(14) The adjudicator is not liable for anything done or omitted in the discharge or purported discharge of his or her functions as adjudicator unless the act or omission is in bad faith, and any employee or agent of the adjudicator is similarly protected from liability.

(15) Each party shall bear his or her own legal and other costs incurred in connection with the adjudication.

(16) The parties shall pay the amount of the fees, costs and expenses of the adjudicator in accordance with the decision of the adjudicator.

(17) An adjudicator may resign at any time on giving notice in writing to the parties to the dispute and the parties shall be jointly and severally liable for the payment of the reasonable fees, costs and expenses incurred by the adjudicator up to the date of resignation.

(18) The parties to a dispute may at any time agree to revoke the appointment of the adjudicator and the parties shall be jointly and severally liable for the payment of the reasonable fees, costs and expenses incurred by the adjudicator up to the date of the revocation.".

These related amendments create a new process which is quite an important part of the Bill.

As I mentioned, of the four certainties which I hope to achieve, three would be achieved by this amendment, the certainty of timing, the certainty of the amount and the certainty of being able to stop work if not paid suspension. We are also looking for a solution to apply to disputes when they occur. These amendments would create a new process for the adjudication — note the word "adjudication" — of payment disputes and they set out arrangements for this new process. This is quite a critical aspect of the Bill. It creates an important mechanism by which unpaid parties to construction contracts can get a relatively quick and cost-effective resolution of their payment disputes. The amendments deal with the right to refer payment disputes to adjudication, the right to suspend work for failure to comply with the adjudicator's decision, the selection of a panel of adjudicators and the code of practice for adjudication.

Amendment No. 6 makes provision for a new system of adjudication and gives contracting parties the right to refer payment disputes to adjudication and it sets out the arrangements to be followed. It ensures that a construction contract cannot be drafted to try to negate or to reduce this right to adjudication.

Amendment No. 7 provides that if an adjudicator's award is not paid in full within seven days of the adjudication decision, the unpaid party has a right to suspend work under the construction contract. The amendment sets out the rules governing this arrangement.

Amendment No. 8 sets up arrangements for the creation of a panel from which an adjudicator can be appointed to deal with a payment dispute. Amendment No. 9 gives the Minister for Finance the power to prepare and publish a code of practice to govern the conduct of adjudicators. This is a crucial part of this legislation as it installs something which it is hoped will reduce considerably the number of disputes which are not settled quickly. It is a way of settling such disputes quickly and fairly.

I understand Senator Quinn's very good intentions but I must strongly oppose amendment No. 6 which proposes:

(12) The decision of the adjudicator shall not be binding if the payment dispute is referred to arbitration or proceedings are otherwise initiated in relation to the decision unless the parties agree to accept the decision as finally determining the payment dispute.

This is wrong. I know that Senator Quinn tried to copy best practice as prevails in Britain and this is certainly not what was intended there nor what was achieved there, as I understand it. This provision will starve subcontractors of cash flow by sending them into a two to three-year arbitration process and delay. It is contrary to what Senator Quinn intended. I oppose that section for those reasons as it cuts totally against Senator Quinn's intention, as I understand it. I ask Senator Quinn to elaborate or to comment further. I believe my interpretation is correct and if I am wrong I ask him to enlighten us further.

I support Senator Coghlan's view. If adjudication is to work is it possible to introduce the separate issues of arbitration and litigation? Once one renders the decision of the adjudicator non-binding, does one really attack the ability of subcontractors to achieve a speedy resolution of these matters? The Bill provides that the adjudicator shall reach a decision within 28 days and as Senator Coghlan has said, this is kicking the whole issue into the long grass — he may not have said those words but this is what it amounts to. I wonder what is the intention behind the change proposed here. Clearly it was not Senator Quinn's intention that the decision of the adjudicator should be rendered non-binding by the creation of the possibility of referring the dispute to arbitration or proceedings. This would be very unpopular in the industry and it strikes me that the decision of the adjudicator should be binding. I would like to hear the Minister of State's view.

I came to a similar conclusion. I was involved in the issue of the renovation of Eyre Square which dragged on significantly and caused great difficulty for the city of Galway. What is required is a quick and clear decision. I note Senator Quinn's proposal that the Minister should publish guidelines. A two-track process is not desirable but rather a firm and quick process of decision-making is required which would result in a final decision. If the process is to be dragged through adjudication and arbitration, this could lead to very long timescales in the case of public sector contracts. Without having the wording from the future Minister in front of us, it is difficult to say how this would work. As I would not like to see a two-track process, I support Senator Coghlan's views. There should be a binding arbitration process.

I agree with Senator Ó Brolcháin who has articulated the point very well. We need clarity and there needs to be just one process.

Much work was undertaken to provide a security of payment provision amenable to both parties. There is a difficulty about public contracts and having the right to appeal a decision through arbitration to ensure the best value for money is achieved for the taxpayer. We are still committed to achieving a security payment system which would avoid such situations in both the public and the private sector. We are committed to discussing this system with the Attorney General and with Senator Quinn in advance of the Bill going to the Dáil.

I have no doubt the Minister of State is correct. It is very difficult to go to an adjudicator and expect his or her decision to be completely binding at all times. The adjudicator could make a mistake in some cases and this must be allowed for. I agree with the point that the process should be quick and this would be the most attractive option but I do not think it can be done as simply as that. I refer to the question of public contracts and in-built arbitration options which will not be changed by this Bill. I remind the House that adjudicators can make mistakes and we must avoid being hide-bound and being unable to change a decision.

I suggest two actions that could be taken. The agreement to accept the decision of the adjudicator as binding could be the default position at the beginning of the process with parties being allowed to opt out. The second option is that a timeline should be imposed on the arbitration procedure in order for a speedy resolution. We cannot change what is the law in other places in this regard. We have to live with Senator Quinn's amendment. Everyone is agreed on the outcome and it is a case of finding a way to achieve it.

The new subsection (12) will kill adjudication. By the simple expedient of referring the dispute to arbitration or litigation the decision of the adjudicator would be rendered non-binding. This would be very unpopular in the industry. The decision of the adjudicator should be binding until there is either an arbitrator's award, a court judgment or until the parties have accepted the adjudicator's decision as the final decision. The whole industry is behind the adjudication provision. This introduction of arbitration makes the Bill meaningless.

As the intention is to provide a speedy resolution, if the matter is going to arbitration we should not scupper the cash flow. Could we get around this? Taking up what Senator O'Toole has said, perhaps the money could flow and we could shorten the arbitration period if it is going to go beyond adjudication. The intention in Britain and elsewhere is to provide a speedy resolution in order that the cash can flow. As this would seem to be hindering that, I must oppose it as it stands unless the Minister of State can propose a way around it.

I believe Senator O'Toole has provided two bases for us to pursue this and I will ask the officials to pursue the matter of timelines for arbitration in advance of the Bill coming to the Dáil.

Others have hit the nail on the head. The key is that a speedy decision be made. As it is, the arbitration process is very long-winded and I do not believe anyone wants to see things kicked into arbitration by right. That would be the wrong way to go. In common with most people, I would like to see a single process. Senator O'Toole made an important point in saying that mistakes can be made during adjudication. Mistakes can also be made during arbitration. Regardless of the process, there is no such thing as perfection. When the Bill is passed, it will be key to have a process that will provide speedy resolutions for the people for whom the Bill is intended.

Amendment No. 9 allows a code of practice to be drawn up by the Minister. That code of practice can be drawn up as vigorously as possible to reflect the views of the Senators.

My enthusiasm for adjudication came about when I learned of the British figures. In 1998 the United Kingdom introduced this form of adjudication. While my figures may be a few months out of date, more than 20,000 disputes in construction have occurred in the past 12 years with fewer than 400 going to court. They went to adjudication and the adjudicator's decision was accepted by all but 400 who ended up in court. That is a speedy resolution which seems to be accepted and which we sought. The intention would be to follow that same method of resolving disputes. Fewer than 2% of the 20,000 disputes ending up in court represents a great success. While that adjudication process did not stop anyone who was unhappy with it going to court and going to an arbitrator later to find some other solution afterwards, it meant they were paid there and then, which resolved the issue. People very quickly began to see that the adjudicators' views seemed to be accepted by the courts because they were seen to have done a competent job.

The rationale underpinning the arrangements is as follows. The decision of the adjudicator is not binding if the payment dispute is referred to arbitration or other legal proceedings. This has only come in very recently and is one that differs from the British system. The rationale underpinning the arrangements is connected with the position of the State on public sector contracts as the Minister of State said. For example, if the State were unhappy with the outcome of an adjudication and decided to refer the dispute onwards for resolution in arbitration or in the courts, it would not be a prudent use of Exchequer funds to pay over the adjudication award upfront, given the risk that it might not be possible to recover the amount at a later date should the arbitration or court proceedings find in favour of the State party. If the State had to pay out on the basis of an adjudicator's decision and was not able to get that money back when it turned out it won the case in court, the taxpayer would be at a loss. That is why the Department of Finance believes it is imperative this provision be included.

We would love to find a different way to be able to resolve this. Having adjudication only would be the solution were it not for that particular problem. That is why the Department of Finance believes it is necessary to have this provision. That sounds as though I am sheltering behind the Department of Finance — perhaps I am. I believe the adjudication system is a great system that has worked very well in Britain and other countries. There is a danger that because it is not binding, if the payment dispute is referred to arbitration, it could weaken it.

I hope the Bill will pass through the Seanad today. It will have two other stages to complete, one of which is the regulatory impact analysis and the other is to be passed by the Dáil. The cases Senators have made today will be considered in both those arenas. In the case of the Dáil it is worth making the case because there may be a better solution than that proposed in this legislation today.

In support of the points made by Senator Quinn, I take on board what others said earlier. The Irish are very litigious by nature and we tend to go right up the line if there is another option. If arbitration or court proceedings are options, we will go to the limit, but that is an option that runs out. I am well aware of the figures Senator Quinn just mentioned. Britain could teach us a lesson on non-judicial determination of matters. I am vice chairman of the Personal Injuries Assessment Board. When that was set up, we were in court every day of the week and people said that insurance claims for road accidents and work related accidents could never be determined without going to court, which would go on for years with a three-year delay before getting into courts and perhaps a seven-year delay overall before it was ever dealt with. After only three or four years, there is now more than 60% acceptance of the system without proceeding beyond it, and it is improving all the time.

In a different area, the same applied when the GAA set up the system of appealing against disciplinary decisions. Every day two years ago the newspapers reported cases going to the highest level of appeal and it was necessary to bring in lawyers to deal with appeals against decisions made by the disciplinary boards. While it is not the same, it is a determination process that is non-judicial by nature. Britain has also used this in cases of medical negligence. We have made a presentation to Government in recent years outlining how the State could save a considerable amount of money by having determination, conciliation or assessment of medical negligence issues without going through the courts, and it will eventually happen.

The clinching point in support of the issue brought forward by the Department of Finance and Senator Quinn is having a remedy — in this case the adjudication — that is done domestically and is seen to be done fairly. If that goes up the line through a process of arbitration, through the courts or whatever way it happens to go, it almost becomes a sine qua non that the person on the next level up must take into account what the adjudicator did. The more the process continues, the more that becomes the benchmark of norm for the decision maker of the higher body. While it takes time to bed in, if it goes to the courts and they see that a reasonable and fair domestic remedy was put in place, they will not be moved by further argument on the same issue.

A bedding-in process will need to take place. When this comes into play, the first thing that will happen is that the big guys will continue to challenge the decisions through the courts and string it out. While they will do that at the beginning, they will eventually conclude that it will lead to them incurring legal fees without getting them any further in the end. In the beginning matters will be somewhat stretched but this is fundamental. It is revolutionary as a way of doing business and will take a period to bed in but it will do so along the lines outlined by Senator Quinn. I support it on that basis.

Senators Quinn and O'Toole have made the case on why subsection (12) should not stand as it is. We should accept adjudication and cash should flow as a consequence pending arbitration. We should ensure that we do not scupper cash flow to the subcontractor who could be put out of business being a much smaller unit. As Senator O'Toole observed, the big fellows can play hell with this by going to arbitration which will take another two or three years going through the courts, or whatever. I would not mind that as long as the cash flow is not scuppered and can flow following adjudication. The points made by both Senators show the way we must go and therefore I oppose the subsection as it stands.

I agree with Senator Coghlan. In the Eyre Square case I saw a situation emerge where public money was used to vindicate what I would consider to be an indefensible position. These matters can drag on. If we are to allow this to go through as it stands we need to look at ways whereby public money can be best served and how we can cope with such cases without allowing people to vindicate their position by using public funding to justify mistakes made at an earlier stage. Arbitration processes can be lengthy and can cost the State a great deal of money. Measures must be brought in to ensure there is a limit to this process. The key point is to get a speedy resolution, one which will ensure that the taxpayer does not lose out as a result of a legal process being followed simply because somebody in an official capacity made a mistake.

The challenge we have is to protect public money. In the Senator's scenario if the State seeks to appeal or adjudicate a decision that money will be paid over regardless of the State's right to appeal. If the State wins that appeal it will be very difficult for it to get its money back. We will look at mechanisms to avoid this happening and to allow cash to flow as Senator Coghlan suggested — we have already done so. The aim was to try to give protection where the State is part of the contract to protect taxpayers' money. The way suggested by the Senator will take away that protection and allow a greater waste of such money.

I will repeat the Minister of State's words. Senator Coghlan's suggestion is worthy of consideration. Today's business, which we hope is the final Stages of the Bill in the Seanad, also acts in the manner of a Second Stage debate for the Dáil. I do not like to say that, but considering there might not be a Seanad in a couple of years' time perhaps people should get used to this and realise the benefit there is in having a Seanad. This debate is very useful and will be listened to. The arguments made, for this case in particular, are worthy of consideration. There is great benefit in adjudication which offers a speedy solution.

However, there is a threat to State finances and the Department of Finance has expressed its concern. Perhaps we can find a solution, perhaps one can be found in the coming months. If so, then today's work will have served a purpose. I urge the Minister of State to accept the amendment as it stands in the belief that it is being listened to and will receive consideration. I hope a solution will be found that will satisfy both arguments.

Amendment agreed to.

Amendment No. 7 was discussed with amendment No. 6.

I move amendment No. 7:

In page 6, before section 8, to insert the following new section:

"8.—(1) Where any amount due pursuant to the decision of the adjudicator is not paid in full before the end of the period of 7 days beginning with that on which the decision is made, the executing party may suspend work under the construction contract by giving notice in writing under subsection (2).

(2) Notice under this subsection shall specify the grounds on which it is intended to suspend work and shall be delivered to the other party not later than 7 days before the proposed suspension is to begin.

(3) Work may not be suspended under subsection (1) if the decision of the adjudicator is not binding.

(4) Work may not be suspended under subsection (1)

(a) after payment by the other party of the amount due, or

(b) after the decision of the adjudicator is referred to arbitration or proceedings are otherwise initiated in relation to the decision.

(5) Where work is suspended under subsection (1) and the ability of the executing party or a subcontractor to complete work within a contractual time limit is affected by the suspension of work, the period of suspension shall be disregarded for the purpose of computing the contractual time limit.

(6) A period of suspension of work under subsection (1) shall also be disregarded for the purpose of computing the time taken to complete the work under another construction contract where—

(a) the construction contract, the work under which is suspended, is a subcontract,

(b) the other construction contract is also a subcontract and the other party to that other subcontract is the same as the other party to the subcontract the work under which is suspended, and

(c) the ability of the executing party under that other subcontract to complete work within a contractual time limit is affected by the suspension of work.”.

Amendment agreed to.
SECTION 8
Question proposed: "That section 8 be deleted."

Section 8 is opposed by Senator Quinn. Does Senator Coghlan wish to speak to the proposal that section 8 be deleted from the Bill?

I oppose section 8.

Senator Coghlan opposes its deletion.

I oppose subsection (12) on page 9 of the Bill.

The Senator opposes amendment No. 8, not section 8.

I am sorry. I refer to amendment No. 8.

I will explain it. The House already agreed amendment No. 8 on section 8 and amendment No. 7 on section 8. There is now a proposal in the name of Senator Quinn to delete the original section.

Question put and agreed to.
NEW SECTION

Amendment No. 8 has already been discussed with amendment No. 6.

I move amendment No. 8:

In page 7, before section 9, to insert the following new section:

"9.—(1) The Minister shall from time to time select persons to be members of a panel (in this section referred to as the "panel") to act as adjudicators in relation to payment disputes and shall select one of those persons to chair the panel.

(2) Persons selected under subsection (1) shall be members of the panel for a period of 5 years commencing on the date of selection and shall be eligible for reselection at the end of the period of 5 years.

(3) The Minister may, for good and sufficient reason, remove a member of the panel.

(4) A member of the panel may at any time resign by giving notice in writing to the Minister.

(5) In selecting persons to be members of the panel, the Minister shall have regard to their experience and expertise in dispute resolution procedures under construction contracts; and a person may not be selected to be a member of the panel unless the person is a person of any of the descriptions specified in subsection (6).

(6) The descriptions of persons referred to in subsection (5) are as follows:

(a) a registered professional as defined in section 2 of the Building Control Act 2007;

(b) a chartered member of the Institution of Engineers of Ireland;

(c) a barrister;

(d) a solicitor;

(e) a fellow of the Chartered Institute of Arbitrators;

(f) a person with a qualification equivalent to any of those specified in paragraphs (a) to (e) duly obtained in any other Member State of the European Union.”.

Amendment put and declared carried.
Section 9 deleted.
NEW SECTIONS

Amendment No. 9 was discussed with amendment No. 6.

I move amendment No. 9:

In page 8, before section 10, to insert the following new section:

10.—The Minister may prepare and publish a code of practice governing the conduct of adjudications under section 8.”.

Amendment agreed to.

I move amendment No. 10:

In page 8, before section 10, to insert the following new section:

"10.—(1) The parties to a construction contract may agree on the manner by which notices under this Act shall be delivered.

(2) If or to the extent that there is no such agreement, a notice may be delivered by post or by any other effective means.".

This is a very simple amendment that deals with the delivery of notices and is a common feature of such legislation. The method would deliver any notices referred to in the Bill.

Amendment agreed to.

I move amendment No. 11:

In page 8, before section 10, to insert the following new section:

"10.—(1) This Act may be cited as the Construction Contracts Act 2011.

(2) This Act applies in relation to construction contracts entered into after such day as the Minister may by order appoint.".

This amendment provides for the Short Title and commencement arrangements for the Bill and provides that it may be cited as the Construction Contracts Act 2011 and that it will come into effect on such day as the Minister may by order appoint.

I come from a county where many people have suffered because of the collapse of construction. Many were small subcontractors and this has led to great personal difficulties for them, their employees and others associated with the construction industry in the county. That situation is replicated throughout the country. There is great urgency attached to the enactment of this Bill. Obviously, this Seanad is in its dying days but we should send a very strong message to the Lower House that this matter should be treated as a priority.

Since Senator Quinn initiated this Bill a number of very significant high-profile contractors have gone into receivership and liquidation, leaving a trail of woe among many people across the country, many being small business people who did not take risks but did their work, bought the various supplies to be able to undertake their part of the subcontract and were caught, not only for the income to cover their labour content but for the materials which they inputted into those contracts. That is unjust and not in the interest of the economy or the construction industry. We should clearly say this. I compliment Senator Quinn who has pioneered the Bill and done an enormous amount of work on it. It needs to be driven in the Lower House as a real priority.

It is a rare occasion on which I agree with Senator Walsh but we agree this time. I see the Minister of State's advisers smiling but I hate the phrase "on such a day as the Minister may so appoint." I am of the old school and believe an Act should come into operation when it is passed by the Oireachtas and signed by the President. A Minister should not have any further function in signing off other than indicating that it would start immediately. I have seen too many pieces of legislation that have not been initiated immediately on their passing.

In the Honohan report there are several pages dealing with a section of the Companies (Auditing and Accounting) Act 2003, which concerns directors' compliance statements. Honohan made the point that although this was a watered down measure, if it had been implemented it might have saved us much hardship. It was never implemented because the Minister decided not to pursue the point. I support completely the point made by Senator Walsh and I know that will also be the view of my colleague, Senator Quinn. The words are before us but there should be an absolute guarantee that as soon as the legislation is signed by the President, it should come into operation.

The phrase is "entered into after such day as the Minister may by order appoint". Does the ministerial order commence the entire Bill or does it relate to a section? Will a statutory instrument apply? What is the process by which the legislation will be applied? I know my colleague, Senator Quinn, will ask if the Bill will be operational when it is passed. Those in the world at large believe that when legislation is passed, it becomes law, but we know in here that this is not the case. Legislation is passed but we must wait for a Minister to fire the starting gun. We must be absolutely sure that this legislation will come into operation immediately.

I know Senator Quinn supports this point. We must consider how to know when the Bill becomes effective. Will it involve a ministerial order or statutory instrument? Will it involve a decision announced by the Minister and must it comply with certain regulations? One of the options is to bring the Houses into the process but what will happen to bring about commencement?

As the Senator is aware, this Bill will now move to the Lower House for debate and I would be happy to propose an amendment there that the Bill would commence on the signature of the President.

I wish the Government had been so amenable in the past five years.

I am sure Senator Coghlan will support that amendment.

I am no good that way.

I will comment on the contributions of Senator O'Toole and the Minister of State. I was fully behind the idea raised by Senator O'Toole and I have argued since entering the House that we should in passing legislation allow it to take effect immediately. Three students from Trinity College came to me a few weeks ago and told me they were doing a project on the Construction Contracts Bill. They raised concerns and gave a very interesting example. If a developer makes a contract with a major builder on 10 August and the Bill comes into being on 1 September, the Bill would not apply to the major contract but it would be relevant to the subcontractors. That would suggest that the major contractor could be relieved of any responsibility but those down the line would be affected.

The solution is to have a date far enough ahead — perhaps a couple of months is enough — so that when a developer goes to a major contractor he or she should have the same contract as the subcontractors. The developer would not have to sign the contract unless he or she was happy. There should be a little notice before the measures are introduced and I imagine a couple of months would be plenty of time. The measures should not come into effect on the day we pass the legislation.

I am delighted to hear the Minister of State's comments and I believe he will pursue this in the other House. I also believe the Government will pursue it because it is good legislation if we can get it right. It is not right yet and there are a number of areas which can be improved. Today's debate has shown us some of those areas and the Bill can and will be improved. There is enough commitment in the new Government to the new legislation and it will want good news to introduce in the first 100 days, I hope. This could be shown as something which has already gone through the Seanad and is ready for implementation if it goes through the Dáil very quickly. I hope that will happen, although the implementation should take a couple of months, which would be sufficient notice for everybody to be covered, including those at the top, rather than just those underneath. It is good legislation that should be passed.

I will reinforce what Senator Quinn said. This kind of debate should take place in this House and the Bill was initiated in the Seanad in order to tease out all the points. I became a listener at the tail end of this discussion and all we must do now is rely on the Minister of State to ensure that this goes to the Lower House as quickly as possible and that the points raised here will be implemented. I hope I will return to watch the progress we have begun in this House.

It is a shame that we are teasing out very important legislation but people want to abolish the Seanad. What better place is there than in here? We have had a fantastic afternoon discussing various points and I am delighted that Senator Quinn has brought us through this topic, on which we have had many discussions. I have reflected these views to contractors and subcontractors and they are waiting to see where we will go from here. I am not giving up on this issue and want to see it come to fruition.

Senator Coghlan will be in a major position to take this on board. It will be his Government that will deal with it and we will rely on the Senator to ensure we get a speedy solution in the Lower House where all contractors will be relieved of their problems.

I must be elected again first. I will cover again what has been said. I am glad to hear the Minister of State indicate that the officials will consider the Bill with a view to taking on board what has been said, with the Bill being improved. I am sure the Minister of State will also brief his successor with regard to this measure's importance and that it will be suitably dealt with. I hope it will come before the other House reasonably quickly once the Minister of State has consulted properly with his officials. They have done the work in taking on board what we have said. I am sure we will add to the effort by making representations. There is much interest in this Bill and it is very important for so many people throughout the economy.

There are still three amendments to be discussed. Will I put the question on this amendment?

We have covered the point.

Amendment agreed to.

Amendment No. 11a in the name of Senator O’Malley is out of order because it involves a potential charge on the Exchequer. Senator O’Malley may speak on the section.

Amendment No. 11a not moved.
SECTION 10
Question proposed: "That section 10 be deleted."

I accept the ruling of the Acting Chairman that my amendment would bring about a charge and has been ruled out of order. This is an opportunity to raise the matter and as the Bill progresses, the issue may be further considered. I am seeking a security payment to be written into the Bill. We have gone through the catalogue of companies which have gone to the wall and people are deprived of their livelihood as a result of there doing so, largely because there was no security established. An earlier draft of the Bill included a security of payment provision which I would like reinstated. Contracts must be given to companies which can afford to pay their bills.

Construction is a highly competitive market. Intel decided to build a new facility in Ireland largely because construction costs have declined by 40%. This shocking figure indicates the extent to which costs increased while the boom was in full swing. It is now possible to secure much better value for money, although contractors will argue that they are undercutting one another and the current position is not sustainable. We need to reach a happy medium in which customers, specifically the State, obtain value for money and companies are able to operate in a sustainable manner. Establishing a mechanism, effectively a bond, to ensure security of payment will protect subcontractors and suppliers. I acknowledge, however, that such a bond could result in slight increases in costs. My amendment proposed to guarantee the full value of the contract.

With the benefit of hindsight we would definitely have built security into legislation on the construction industry when it started to run away with itself ten years ago. The model I hope the Department will adopt in this legislation is the Miller Act in the United States. The US legislation is a perfectly good example of what could be done here and my research indicates it works very well. We do not need to reinvent the wheel. Let us instead examine good legislation in place elsewhere. The inclusion of a provision on security of payment would enhance the Bill.

I fully understand Senator O'Malley's motivation. All of us, including, I believe, the Minister of State, share her concerns. When I introduced the Bill in May 2010 I indicated I wanted certainty in four areas, namely, timing, amount, enforcement and security with regard to cash. While I accept that certainty has not been achieved in respect of the fourth area, I am aware that the Department is anxious to find a solution. When we attempted to address the issue by means of bonds a number of difficulties arose. As Senator O'Malley indicated, it is imperative that we find a solution and I will be disappointed if we do not find one in the months before the Bill becomes law.

Companies about to embark on work must have some proof that cash is available to pay for their work. There is a danger, however, that it could prove very expensive for smaller contractors to show they have cash available. Given that they will not easily obtain money from their banks, a provision on bonds could stifle development, jobs and entrepreneurship. This is a challenge we should be able to overcome and I will be disappointed if a way has not been found to ensure cash is secure before the legislation is enacted. Such a change will be essential if the legislation is to work. While a solution has not yet been found, I hope one will be found in the coming weeks or months.

Question put and agreed to.
NEW SCHEDULE

I move amendment No. 12:

In page 8, after line 28, to insert the following new schedule:

"SCHEDULE

PROVISIONS TO APPLY TO MATTERS REGARDING PAYMENTS

1. The payment claim dates under a construction contract shall (subject to paragraph 2) be as follows:

(a) 30 days after the commencement date of the construction contract;

(b) 30 days after the date referred to in clause (a) and every 30 days thereafter up to the date of substantial completion;

(c) 30 days after the date of final completion.

2. Where a construction contract provides, or the parties to a construction contract otherwise agree, that the duration of the work under the construction contract is or is estimated to be less than 45 consecutive days, the payment claim date shall be 14 days following completion of the work under the construction contract.

3. The date on which payment is due in relation to an amount claimed under a construction contract shall be no later than 30 days after the payment claim date.

4. The amount of an interim payment under a construction contract shall (subject to paragraph 5) be the difference between—

(a) the aggregate of the gross value (determined in accordance with the construction contract) of the work done under the construction contract at the payment claim date concerned together with any additional amounts in the interim payment under the construction contract, less any deductions from payment provided for by the construction contract, and

(b) the aggregate amount of interim payments that have already been made at that payment claim date.

5. The aggregate of payments made under a construction contract shall not exceed—

(a) the amount provided for in the construction contract as originally concluded, and

(b) amounts provided for by any amendments to that contract agreed between the parties.”.

Amendment agreed to.
TITLE

I move amendment No. 13:

In page 3, lines 5 and 6, to delete "PAYMENT AND CERTAIN OTHER MATTERS" and substitute "PAYMENTS".

This is a technical amendment to better align the Long Title with the Bill's purpose and contents.

Amendment agreed to.
Title, as amended, agreed to.
Bill reported with amendments and received for final consideration.
Question proposed: "That the Bill do now pass."

I pay tribute to Senator Quinn and the work he has done on the Bill. I am pleased to have played a small part along the way. It is crucial to view the passage of the Bill in this House as a recognition of how good work can be done. I also pay tribute to the Minister of State, Deputy Dara Calleary, and appreciate the commitment he has shown in coming to the House. He could have been doing better things on his final day in office.

While I do not wish to dwell on the role of the Seanad, I would like people to see this debate as an example of the House working at its best. The Bill is what I describe as greenfield legislation which is extraordinarily difficult to deal with because it is not consolidated but has been started from scratch. This means one hits obstacles and fences which are never easy to surmount. I compliment my colleague, Senator Quinn, on the work he has done to overcome these hurdles. I will make a small political point by stating that the Seanad is good at dealing with this type of legislation. I used to advise Ministers to commence greenfield legislation in this House because we would find its weak points. A debate such as this would not take place in the Dáil because the time provided in the other House would not be sufficient to reach section 12 or 13. It is important to consider this issue from that perspective. I do not propose to overstate my case in this regard.

The legislation shows people who are in difficulty that someone is listening to them, even if it is in the Seanad. I refer especially to small and medium-sized companies which have done their best and are often the last people involved in the construction phase. They often make a commitment in terms of labour, materials and machinery on which they subsequently incur losses. We need proper political processes in order that people can find a voice. Those who have been pushing this legislation should have a voice in this House. This is what the Seanad is meant to do. They are lucky to have a voice in Senator Quinn who has expertise and a background in business.

The legislation is a fine job of work. I compliment the Department on the support and assistance it provided to Senator Quinn. Dealing with Independent Senators is always something of a nuisance for Departments because we are an awkward crowd. It is important that the legislation has progressed and I congratulate Senator Quinn on his achievement.

I do not wish to sound like a broken record player. I thank Senator Quinn for processing the legislation and allowing those with concerns to have their views reflected in the Bill. This debate highlights the important role the Seanad plays in taking time to tease out legislation and listen to the views of members of the public. It would be a shame if the House were no longer able to continue to initiate and scrutinise legislation. In the dying days of this Seanad I remain committed to reforming the House. As a reformist, I want the House to continue to deal with legislation.

I thank the Minister of State for facilitating the House this afternoon and wish him good fortune in the Lower House. If he is appointed Fianna Fáil Party spokesperson on enterprise, trade and innovation, I hope he will ensure the good work the House has done today is soon reflected in an Act. Subcontractors need to be certain they will be paid when they enter into a contract. I also thank the Department of Finance for showing patience and providing advice to Senators on this matter.

I compliment Senator Quinn on all the work he has put into this Bill, as well as those who assisted him, especially in the Department of Finance. I regret that Senator O'Toole is bowing out because he has made some very pertinent and relevant points, not just in regard to the Bill but also on greenfield legislation and the value of the Seanad. It is a pity he is retiring from the House because he has huge experience and a lot more to contribute. I thank the Minister of State, Deputy Calleary, for the interest he has taken in this legislation. I look forward to him suitably briefing his successor because this important legislation has to go further. Well done all around.

I do not wish to repeat everything that has been said but I commend Senator Quinn on his work on this legislation. I hope it will have a speedy passage through the Dáil as early as possible. This Bill shows the value of the Seanad as well as the value of having a consensus approach to legislation which is necessary for society. There was not enough of such legislation going through the Seanad. I agree with other speakers that the Seanad should be about progressing legislation in a consensual fashion, although we also need to scrutinise much of the minutiae to get it right. The Seanad should be a consensus model to bring forward Bills speedily in the public interest. I agree with Senator Ormonde that Seanad reform is the way forward. It would be a great loss to the people if the Seanad were abolished because it can be used to bring forward legislation in the public interest using a consensual approach. It takes Independent Senators and those with a particular passion to drive such legislation forward. I congratulate Senator Quinn on the Bill.

I thank Senator Quinn for his work. I reiterate what Senator Bradford said earlier, that the Oireachtas should be introducing legislation rather than the Government doing so. We have long passed the stage in western Europe where parties should be fighting over ideological questions, rather than dealing with the empirical stuff that has to be done. It is there before us and there is a broad consensus involved. We should be getting down to the necessary words, sentences and paragraphs. Empiricism is the best way for democracy to move forward with the job that has to be done, rather than ideological posturing. Today was a good job of work.

It is estimated that in the past two years 200,000 jobs have been lost in the construction sector and related areas. A further 100,000 jobs could be at risk in future because of the reduced level of public and private investment. It is a devastating situation for individuals and families whose lives depend on the construction sector. The Bill before us is a great tribute to Senator Quinn. In addition, the legislation will give hope for the future to people in the construction industry, including their representatives in the Visitors Gallery.

I join in the tributes that have been paid to Senator Quinn, as well as to Seán Gallagher and former Deputy Margaret Conlon who have championed this legislation collectively. I also thank the officials in my Department who have worked with Senator Quinn in recent months to bring the Bill to its conclusion. I thank the Clerk of the Seanad and her officials for their co-operation and work. I acknowledge the contributions of all those who took part in today's debate. I intend to champion this Bill in a different capacity in the other House. I will be happy to brief anyone on it, but Senator Coghlan holds the aces in terms of prioritising this legislation for the new Government.

I have to get re-elected first.

That will be no bother to him. As I understand that this is the last sitting of the current Seanad, I wish all retiring Senators health and happiness. In addition, I wish success to those seeking re-election. I thank the Clerk and her officials for their co-operation in recent years. I also thank the outgoing Whips for their co-operation on ordering the Business of the House, including legislation. This Bill is a personal priority for me. I have an interest in it and I look forward to working with Senator Quinn in pursuing the legislation in the other House.

I appreciate everyone who has spoken in this debate, as well as those who were involved on the earlier Stages. This Bill is not perfect but I hope it can and will be improved. It falls quite far short of the aims, objectives and wishes of those of us who got together last May to work on it. I thank all who became involved in that endeavour, while knowing that this is only the first step. We have further to go and a lot more to do. There is a huge challenge for the construction industry, as Senator Mary White said.

I endorse what Senator Coghlan said about Senator O'Toole. When I needed help on how to go about this, I turned to Senator O'Toole who was very helpful, not just with this Bill but also in the past 18 years during which I have been a Member of the House. The Bill would not have come about but for Seán Gallagher having initiated it. He is in the Visitors Gallery. It may not have achieved everything he set out to do, including security of payment, but I hope that will be achieved later.

I thank both the small and big players in the industry. As soon as the Bill was announced, they approached me and I was stunned to discover the problems in the construction sector. For many years, I have worked in a fairly rough and tough business, but it is nothing compared with the stories I heard about in the construction industry.

In particular, I want to mention Professor Rudi Klein who lives in England but came over to Ireland and has kept in touch with us. He gave us advice on how the British system works and put us in touch with the Australians, New Zealanders and others. A lot of work was put into this Bill by the Minister for Finance, Deputy Brian Lenihan, and the Minister of State, Deputy Dara Calleary, and their officials. In addition, the Leader, Senator Cassidy, found time for the House to deal with this legislation. The Minister of State said this was the last session of the current Seanad, but I hope not. I think there is a lot of work to do in the next month or two before we break up.

A lot of work was also undertaken by the Seanad Office, the Bills Office, the Office of the Attorney General and the Parliamentary Counsel which helped the Bill to pass through the House. It will eventually be a better Bill and if it is amended by the Dáil, it will have to come back to this House. I look forward to seeing everyone back in the Seanad when the Bill returns to the House.

I thank Members for their co-operation and diligence in processing this Bill. I also thank the Minister of State and his officials for attending the House and for their assistance in bringing the legislation before the House. I especially thank Senator Quinn for his work in bringing a rare Private Members' Bill through all Stages in this House.

Question put and agreed to.

When is it proposed to sit again?

I hate to say it but at this stage the House must adjourn sine die.

The Seanad adjourned at 6.30 p.m. sine die.