Construction Law Update: Review 2016
20 February 2017
Last year we experienced a strong recovery for the Irish construction industry and activity trends look set to maintain this positive momentum in 2017.
Key topics in 2016 included:
The return of private funding has brought with it a return to bespoke forms of contract. Given the level of international involvement, there has been an increase in the use of adaptations of the JCT and FIDIC contracts. In terms of publicly-funded works, amendments were introduced to the Public Works Contract (“PWC”) in April 2016.
The Construction Contracts Act 2013 (the “Act”) was finally commenced in April 2016 and adjudication is now available as a fast-track means of resolving payment disputes in all contracts, both public and private. The Act was commenced in April 2016 and applies to all contracts entered into after 25 July 2016. The most significant part of this legislation is the introduction to Ireland for the first time of a statutory form of adjudication for construction contracts with a value exceeding €10,000, but excluding most residential contracts. Contracts must set out a payment regime. If no payment regime is set out then the default regime in the Act will apply. If payment is not made in accordance with the regime, either party may refer a payment dispute to adjudication and may suspend the works until the matter is resolved. The adjudication process must be completed within 28 days, unless an extension is agreed by the parties. The process will result in a decision which will bind the parties unless and until it is overturned by an arbitrator or a court.
A panel of adjudicators was appointed and the chairman of the panel is Dr Nael Bunni. A code of practice for the conduct of adjudications was published by Minister of State for Employment and Small Business, Mr Pat Breen TD in July 2016 to supplement the legislation.
New court rules were introduced in August 2016 to provide for enforcement of adjudicators' decisions. The rules are similar to the existing court rules for the enforcement of arbitration awards, which is by way of originating notice of motion and affidavit. The intention was to provide a faster and more efficient method of enforcing adjudicators decisions. It remains to be seen whether the new rules achieve this aim.
The PWC was amended in June 2016 to satisfy the requirements set out in the legislation for a payment regime and to allow for suspension in circumstances of non-payment. The disputes procedure was amended to provide for the right of either party to refer a payment dispute to adjudication. The amended contract gives priority to adjudication over the dispute mechanisms in the contract where either party opts to refer a payment dispute to adjudication.
A review of the PWC was commenced in 2014. There was significant engagement with all the relevant stakeholders on the contracts. The issues identified as requiring change were grouped in order of priority as short, medium and long term. The amendments identified in the short-term took effect in April 2016 and are as follows:
1. The introduction of a mandatory bill of quantities as the pricing document
The bill is now a compensation event so that any discrepancies between it and the works requirements are dealt with as a compensation event. This was called for as a means of safeguarding against contractors having to take responsibility for incomplete or poor design documents. Early indications suggest that the amendment has had a positive effect in reducing disputes.
2. Direct tendering of specialists
Direct tendering of specialists is now permitted in circumstances where:
- the specialist works exceed 15% of the value of the overall works;
- certain elements of the works cannot be adequately defined;
- early engagement is necessary;
- the specialist works have a significant bearing on the outcome of the project; or
- the employer requires oversight of the appointment of specialists.
The contract is amended to provide for 'Named Specialists' who become either 'Novated Specialists' or 'Reserved Specialists'. The main contractor still remains responsible for the payment and performance of the specialist, regardless of which option is chosen. This was called for as a means of the employer having greater control over the appointment of specialists and early indications are that this change has been positive.
3. Introduction of dispute management procedure and a standing conciliator
A dispute management procedure was introduced to allow for the appointment of a project board. The board comprises of senior management individuals from both parties to the contract. The aim was to prevent disputes escalating by ensuring the involvement of senior management early on in a dispute and providing them with a mechanism for 'without prejudice' engagement. A standing conciliator was also introduced for projects with a value in excess of €10 million. A conciliator is appointed at the start of the project and all disputes arising during the contract are referred to that conciliator.
The PWC was further amended in June 2016 to provide for adjudication once the Act was commenced. The amendments give priority to adjudication where either party choses to refer a payment dispute to adjudication.
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.