Mandatory Payment Provisions Good News for the Quantity Surveyor
Payment terms on construction contracts will be required to meet the conditions set out in the Construction Contracts Act 2013, from 25th July this year.
The Minister for Business and Employment, Ged Nash, recently signed it into law and the legislation is set to give stability and clarity to those involved in the construction sector in Ireland and related businesses operating under Irish law.
The Act is applicable to a variety of entities including traditional builders, sub-contractors, professionals in the business such as quantity surveyor companies, architects, landscape gardeners and others.
The main goal of the Act, which is obligatory, is to make sure that payments processes are fair and timely across the construction sector, which was badly hit by the economic downturn. There are 3 elements that the Act addresses;
- Mandatory payment terms
- The right to cease work for non-payment
- Statutory adjudication where there is a dispute
In this article, Part 1 of 2, we look at the mandatory payment provisions and the key implications for those in the industry. In Part 2, next week, we will publish a summary on the right to cease work and the adjudication provisions.
Mandatory Payment Provisions
The main requirement of the Act is that it sets out the payment terms for contractors, for all relevant contracts except for those that are under €10,000 in value, in which case the provisions of the Act do not apply.
However for all construction contracts above this level, the agreement needs to set out the mechanism through which the amount paid to the contractor is to be determined, the period of payments and payment dates. For many operators and contractors in the industry, the standard contracts used will meet the requirements but where the contract does not address minimum payment provision, those outlined in the Act will be applicable. There is flexibility within the Act however, for example payment periods may be longer than those outlined in the legislation and where an employee or sub-contractor submits a claim that is contested, by the contractor or employer, they have 21 days to reply and document a justification for the difference between the intended payment and that claimed. This notice is also required to show the basis used to calculate the proposed payment. Where no agreement can be reached, the contractor or employer must pay what they proposed and the employee or sub-contractor can then go through the adjudication procedures set out in the Act. The Act also allows for basic protection for subcontractors so that they cannot be forced to wait for the contractor to be paid before they are paid i.e. it prohibits ‘pay when paid’ clauses, which was a common practice in the past. Main contractors will now be obliged to pay all sub-contractors even where they have not been paid for the work – unless the non-paying party is insolvent, in which case different rules apply.
MMP – A Safe Pair of Hands
As a highly experienced Quantity Surveyor, MMP has proven our expertise in managing projects governed by compliant, robust contracts. We are fully aware of our obligations under all pertaining legislation and clients can have every confidence in our ability in this respect.
If you have a requirement for a Quantity Surveyor or Project Manager, we’d be delighted to hear from you.