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(This note is not part of the Order)
Part 2 of the Housing Grants, Construction and Regeneration Act 1996 (“the Act”) makes provision as regards the terms of construction contracts. Section 106A confers power to exclude descriptions of contracts from the operation of any or all of the provisions of Part 2 and this Order excludes a type of contract from the operation of one such provision.
The provision is section 110(1A) of the Act, pursuant to which the requirement that contracts provide an adequate mechanism for establishing what payments become due and when under the contract is not met if payment is conditional on obligations being performed under another contract. The type of contract excluded is what is known as a “first tier pfi sub-contract”. This is a contract whereby the non-public body party to an agreement entered into under the private finance initiative sub-contracts, to a third party, obligations under that agreement relating to the carrying out of construction work. Agreements entered into under the private finance initiative are themselves already excluded from the operation of the entirety of Part 2.
This Order will therefore mean that provisions in first tier pfi sub-contracts which make payments in such contracts conditional upon obligations being performed in other contracts (obligations such as providing certificates) will be effective. (Obligations in other contracts in this context do not include obligations to pay money: a provision in a first tier pfi sub-contract to the effect that the party carrying out work will not be paid until the other party to the sub-contract has under the other contact, will, generally speaking, continue to be ineffective by virtue of section 113 of the Act.)
A full regulatory impact assessment of the effect that this instrument will have on the costs of business and the voluntary sector is available from the Construction Sector Unit, Department for Business, Innovation and Skills, 1 Victoria Street, London SW1H 0ET, and is annexed to the Explanatory Memorandum which is available alongside the instrument on www.legislation.gov.uk.
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