As the Bill currently stands, with it due to be enacted in autumn 2009, the payment regime changes are monumental in the sense that all current payment regimes under Standard Forms will have to be overhauled. This is because the Bill allows only three methods in which payments may be made under construction contracts (works lasting longer than 44 days). These are as follows;
1) Payee or third party issues a Payment Notice as per the contract
2) Payee issues a payment Notice, the payer or third party having failed to issue one as per the contract
3) Payee issues a Payment Notice as per the contract;
The new provisions close the payment loop by allowing the payee to issue its own notice by default in the absence of a Payment Notice by the payer. Generally the payee should expect to receive the sum specified in the Payment Notice (PN) or, if there was one, the Witholding Notice (WN) by the final date for payment. If the payer does not pay the sum stated in the PN or the WN the payee would be entitled to commence proceedings for that sum (and the payer would have no defence to that claim), and/ or might suspend all or part of its performance. If the payee suspends, it is entitled to reasonable costs of suspending and remobilising and an extension of time for the suspension period (rather than just the suspension period as now). If the payer does not pay the sum stated in the PN or the WN, the payee might adjudicate for any extra sum it considers due. In the case where the payment application stands as the PN, this is the amount the payee can expect to receive, and in respect of which he can commence proceedings and/or suspend work, unless the payer has given a WN.
The Bill also aims to ban pay-when-certified and pay-what-certified clauses, which would also catch equivalent project relief provisions which are standard in PFI/PPP subcontracts unless an exemption for such contracts will follow.
The above are just the key features of the proposed Bill, and the full Bill (Local Democracy, Economic Development and Construction Bill [HL] 2008-9) can be found on the United Kingdom Parliament website at http://services.parliament.uk/bills/2008-09/localdemocracyeconomicdevelopmentandconstruction.html