Local Democracy, Economic Development and Construction Bill [HL]

The noble Lord, in moving his amendment, referred to the 1996 Act, from which these proposals arise as a review. He also pointed out the Specialist Engineering Contractors’ Group, described it and said that it was the motivator behind the amendments. It has to be said, both in 1996 and since, that there has continued to be widespread consultation within the construction industry. While it is true that the amendments have the support of one of the organisations in that industry, it is equally true that when the review commenced there were a number of organisations that thought that an amendment was not required, and they were rather larger in number. Equally, others have made their view known subsequently, having seen how far the Government have got in their review, that they do not wish the issue to be taken further. They have indicated reluctance to see the Government take matters further as set out in the amendments. I offer that not as a representative view of government policy, but simply to point out that we move on the basis of consultation and responses, and there has been quite widespread consultation. The responses are not universal, as noble Lords might expect, but there is substantial support for some parts of the Government’s proposals rather than others. The noble Lord is concerned that the Government’s proposals to revise the adjudication provisions of 1996 do not go far enough. He would like to see the introduction of a single statutory scheme that applies to all the commercial arrangements covered by the 1996 Act. That Act intentionally covers a wide range of contracts between a number of organisations in the construction supply chain. It applies to the main contractor’s contract with the subcontractor—that is the one we tend to hear about a lot, and we have heard something about it today. It equally applies to a construction client’s contract with the main contractor or with his architect, just as it can apply to a sub-contractor’s contract with a further sub-contractor to that body. Whatever we introduce must work in a fairly broad range of commercial relationships. Therefore, it will have to command the respect of a wide part of the industry. Following extensive consultation, we have introduced provisions elsewhere to deal with the key issues that have come to light in the decade or so since the operation of the 1996 Act—the application of the Act to oral and partly oral contracts being precisely such a point. Given that, I continue to believe that the flexible approach is the right approach; it strikes a sensible balance and is the approach most able to cope with a broad range of commercial relationships. SMEs exist in large numbers throughout the construction supply industry as the noble Lord indicated. ONS data show that some 99.9 per cent of firms in the construction contracting sector are SMEs. The Bill directly addresses the interest of the broad range of SMEs in the construction supply chain. We will be moving on to payment issues, but in terms of adjudication we are taking specific measures to address the key issues which have been raised with us by the industry during our review. The first is the ability of a party with greater clout to use the costs of the adjudication process as a barrier by, for example, requiring that the weaker party pays all the costs of the adjudication, irrespective of where they arise. We have prevented the use of such clauses. The second concerns the problems caused by the current requirement that all the non-trivial terms of the contract have to be in writing for the 1996 Act to be in place. We are removing that restriction. Given those changes, Introducing a single statutory adjudication scheme would be something of a legislative sledgehammer to crack a nut. Having said that, there is support—and it is perhaps wider than we have heard it voiced today, but not universal—for the introduction of a single scheme for adjudication. That would not be unreasonable. Therefore, we have made an offer to the industry that we will conduct a thorough review of the existing adjudication scheme set out in secondary legislation when we make amendments to this secondary legislation as a consequence of the changes we are making to the 1996 Act. The Construction Umbrella Bodies Adjudication Task Group, comprising representatives from all the key sectors of the industry, is meeting this month to decide whether or how to take forward this approach. That shows the Government’s desire to meet the broad wishes of the industry to be flexible and not to set our face against the proposal, but on this occasion to seek to ensure that that proposal carries rather greater support than it has in the discussions so far. Therefore, we must resist the amendment.