Construction Law Update: 2014 Highlights
26 January 2015
2014 saw increased activity and confidence among our clients which was reflective of the recovery of the construction industry in Ireland. The outlook for 2015 is extremely positive. We highlight below some key developments in the construction sector during 2014.
The Building Control (Amendment) Regulations 2014 (the “Regulations”) came into effect on 1 March 2014. The Regulations apply to all commercial, industrial, office and retail projects and to residential projects involving a floor area in excess of 40 square metres.
The Regulations introduce a new form of commencement notice and three new types of certificates. Previously the Architect issued an opinion on compliance at completion whereas the new requirement is for certificates of compliance to be provided at commencement of construction and at completion (the Design Certificate and the Completion Certificate). In addition to the Architects certificates of compliance the builder will also be obliged to certify compliance and there is a requirement for a certificate from a new professional role which is that of Assigned Certifier.
The Regulations introduce a regime of increased mandatory inspection of the works by the professionals as well as a new online building control management system and a new public register. The Regulations prohibit the opening, occupation or use of a building until a Completion Certificate has been filed and registered by the Building Control Authority.
By establishing a clear chain of responsibility for building works, from commencement through to completion, the Regulations aim to prevent defective workmanship and restore consumer confidence in the construction industry.
A failure to comply with the requirements of the 2014 Regulations is an offence which may result in the imposition of a fine and/or a term of imprisonment.
For a more detailed analysis of the 2014 Regulations, you can read our recent articlehere.
On 11 December 2014, the Department of Public Expenditure and Reform published its Report on the Review of the Performance of the Public Works Contract (the “Report”).
Aimed at redressing the allocation of risk between the Employer and Contractor in public works contracts and thereby reducing the level of disputes arising on public works contracts, the Report proposes a series of interim changes to PWCs which include:
- making the bill of quantities the primary reference document for tender purposes on employer-designed contracts;
- Direct tendering of specialist works packages where the specialist works element exceeds 15% of the overall works;
- adopting a “most economically advantageous tender” ("MEAT") basis for awarding projects over €2m which takes into account quality criteria as well as pricing; and
- revised dispute resolution procedures which include the introduction of an informal dispute resolution procedure in advance of conciliation and the appointment of a single person dispute adjudication board ("DAB") to be appointed on projects with a value in excess of €10 million.
These interim changes are expected to be introduced in the next three months. The review process is ongoing with the next stage focusing on risk management, encouraging co-operative behaviour, performance evaluation and alternative forms of contract.
Despite having been enacted on 29 July 2013, the Construction Contracts Act 2013 (the “Act”) has yet to be effected by the Government.
The long awaited Act aims to provide certainty of payment to contractors and introduces adjudication as a swift and cost effective mechanism for resolving payment related disputes.
The Government has published a code of practice for Adjudication and is in the process of establishing the panel of Adjudicators. Responsibility for the Act recently transferred from the Department of Public Expenditure and Reform to the Department of Business and Employment and it is now expected that the Act will be brought into effect in March 2015.
For a more detailed analysis of the statutory adjudication procedures under the Act, you can read our recent article here.
The recovery of the Irish Construction Industry is well under way. Activity levels increased month on month throughout 2014 and this is expected to continue throughout 2015. It is hoped that the introduction of the Building Regulations 2014 will restore confidence in the construction industry and will result in a significant improvement in compliance with building control legislation.
The introduction of the Construction Contracts Acts will give contractors and sub-contractors more certainty in terms of payment and will provide all parties with a fast and cost effective means of dealing with disputes as they arise during a building project. It remains to be seen how adjudication will fit in with the current forms of dispute resolution in public works contracts namely conciliation. Both can be effective depending on the type of dispute.
The ongoing review of the public works contracts is very welcome as is the recognition by the review group that the contracts provide an unfair allocation of risk to contractors which has led to increased adversity between parties in the operation of public works contracts. The interim measures announced have been broadly welcomed and are expected to be implemented in early/ mid 2015.
For more information, please contact a member of our Construction team.
The content of this article is provided for information purposes only and does not constitute legal or other advice. Mason Hayes & Curran (www.mhc.ie) is a leading business law firm with offices in Dublin, London and New York.