Construction professionals' work now subject to Construction Contracts Act

The Construction Contracts Act 2002, a statute designed to ensure a cash flow on building projects, now applies to building professionals (e.g. engineers, architects, quantity surveyors), carrying out work for construction projects.

The Act features a payment regime designed to enable parties to promptly resolve disputes in order to get paid. A party carrying out work issues a payment claim for that work to its principal; unless any dispute is raised in a payment schedule, the full amount of the claim becomes payable. Time frames are short. Parties dispute claims by adjudication, also featuring short time frames for resolving disputes. Other dispute resolution procedures are available, and can take precedence over a determination issued following an adjudication. The Act has worked well in ensuring a cash flow, the 'lifeblood' of the industry (Lord Denning).

From 1 September, the Act applies to work carried out by construction professionals. This potentially includes disputes arising from whether the professional has acted negligently in the performance of its role. Such claims can involve a claim under the professional's insurance, and complex issues of the appropriate standard of performance, which seem not suited to the short time frames and quick route to payment philosophy underlying the Act. As it is open to a party to pay the full amount of a payment claim and issue proceedings in another forum to resolve any disputed portion of that amount, disputes alleging negligent performance of the contract could be raised tactically, as a means to try to negotiate a reduced settlement of the payment claim. The Act has to date generally been effective in thwarting tactical raising of disputes; no doubt we will see if these tactics re-emerge as a result of the new work covered by the Act. These changes to the Act should be welcomed by construction professionals, but they will need to be aware of the requirements necessary to ensure they can use the Act's payment regime.