The Construction Contracts (Wales) Exclusion Order 2011

Explanatory Note

(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 on the Welsh Ministers to exclude any description of construction contracts relating to the carrying out of construction operations in Wales from the operation of any or all of the provisions of Part 2 of the Act. This Order excludes a type of contract from the operation of one such provision.

The provision is section 110(1A) of the Act. Section 110(1) of the Act requires that contracts provide an adequate mechanism for establishing what payments become due and when they become due. Section 110(1A) provides that this requirement is not satisfied if payment is conditional on obligations being performed under another contract.

The type of contract excluded by this Order from the provisions of section 110(1A) 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. Such provisions would otherwise be ineffective because they would not satisfy the requirement imposed by section 110(1A).

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 Department for Environment, Sustainability and Housing, Welsh Government, Merthyr Tydfil Office, Rhydycar, Merthyr Tydfil, CF48 1UZ, and is annexed to the Explanatory Memorandum which is available alongside the instrument on www.legislation.gov.uk.