Developing issues for 2020

In our final blog of this short mini-series looking at what's in store for the construction sector this year, we asses some less prominent but nevertheless significant developments and their likely impact on the industry. Industry consultations

With the uncertainty around HS2 now removed by the government's renewed commitment to the project, 2020 looks like being a busy year for the UK infrastructure sector. 

Mr Johnson has promised "billions" of infrastructure investment, with significant sums earmarked for the new Conservative heartlands of the North of England and Midlands.

The National Infrastructure Commission is also due to publish its final report following its review of the sector's resilience in response to the challenges of digital technologies, climate change and population growth.

On the topic of consultations, at the end of February the government finally published its summary of responses to consultations on:

1. Retention payments in the construction industry; and
2. The post-implementation review of the 2011 amendments to the Housing Grants, Construction and Regeneration Act 1996 (HGCRA).

Retention payments

The consultation on retention overwhelming found that existing measures are ineffective in securing the prompt release of retentions. 

The summary reports that, while the principle of retentions is sound, abuse of the process is rife at all levels of the industry – with cash flow the main driver for poor practice. 

Support for a retention deposit scheme is widespread, but some consider retentions should be banned rather than reformed.

The Department for Business, Energy & Industrial Strategy (BEIS) has refused to rule out the abolition of retentions, and confirms that phasing out retentions is one of "several policy options" under consideration. 

This suggests rumours that a revised Cash Retentions Bill will be put forward during 2020 – potentially incorporating aspects of the Public Sector Supply Chains (Project Bank Accounts) Bill –may be wide of the mark.

HGCRA

The consultation on the amendments to the HGCRA cited problems with the complexity of the payment processes – with some adjudicators worryingly suggesting they consider the Act unclear – and concerns that "one size doesn’t fit all", suggesting that the industry could benefit from different frameworks for contractors and consultants. 

The summary also reported that even when "the Act is understood, its provisions may not be used due to concerns (…) about maintaining commercial relationships and the threat of losing future work”.

The report also provided mixed views on whether adjudications had increased or decreased following the amendments to the HGCRA (from our perspective, we have seen more adjudication in the past 18 months than ever before). 

There were also references to the emergence (and potential decline) of smash and grab adjudications which, following recent case law, we still see deployed as an effective tactic in securing cash flow (at least on an interim basis) and altering the balance of settlement negotiations.

BEIS has said that it will continue to work with the construction sector this year to seek consensus on how to resolve the problems identified by the consultations, with a "post-implementation review" set to be published later in the year.

 
The TCC

We are now into the final year of the mandatory disclosure pilot scheme in the Business and Property Courts (B&PCs), and our understanding is that the reaction to date has been mixed.

The voluntary capped costs pilot scheme, which has been operating in the B&PCs in Leeds and Manchester, and the London Circuit Commercial Court, is also anticipated to continue into 2021.

In December 2019, the Witness Evidence Working Group published its final report on the use of factual witness evidence in trials before the B&PCs. 

While the report does not propose radical reform, it does identify ways it considers practice could be improved including:

• The formulation of a statement of best practice for the preparation of witness statements;
• Requirements for solicitors producing statements signing a certificate of compliance;
• A stricter approach to enforcing page limits for statements; and
• Applying costs sanctions and criticising non-compliance.

The judiciary has subsequently announced that it endorses all the report's recommendations in principle and further work will be carried out in 2020 to consider further the substance, form and timing of any changes.

It remains to be seen if 2020 will see a review of the Construction & Engineering Pre-action Protocol and/or the TCC Guide.
 
Standard form contracts

We are not anticipating widespread revisions of standard form contracts in 2020, although the NEC4 facilities management suite of contracts are expected imminently.

It seems unlikely that we will see standard form contracts and professional appointments amended (either as amendment sheets or as new editions) to reflect Brexit changes as negotiations continue during the transition period.

We have seen a recent shift to reflect the hardening of the professional indemnity market (and the unavailability of certain types of cover) and have fielded a number of queries about reliance on existing terms and drafting bespoke clauses to manage the potential impact of the Coronavirus (COVID-19) outbreak – both in international and domestic construction contracts.