28.4.1 This Order (the "Order") came into force on 1 June 1999 and affects Contracts with construction-type obligations (including maintenance). It gives Construction Sub-Contractors certain rights e.g. to receive staged payments according to work completed and sets out a fast track dispute resolution procedure.
28.4.2 It is not possible to contract out of the Order so its effect should be considered in relation to each contract in a PFI project. PFI contracts are specifically excluded, however, from the Order's application by virtue of Regulation 3 of the Construction Contracts Exclusion Order (Northern Ireland) 1999 provided that they fulfil the conditions set out in that Regulation. For example, the Contract must state that it is entered into under the PFI (or, as the case may be, under a project applying similar principles). It may also be useful for the Contract to clarify which other conditions it fulfils to qualify as being excluded from the application of the Order.
28.4.3 This exclusion is not generally considered to extend to PFI Sub-Contracts. The result of this is that there is a risk that the Sub-Contractors are entitled to rights as against the Contractor (under the Order) (e.g. to receive a staged payment) to which the Contractor is not entitled as against the Authority (as the Order does not apply).520 The Contract should not be amended simply to conform with the Project Documents which are governed by the Order.
28.4.4 To the extent the Order applies to a PFI Sub-Contract,521 the Authority may be asked to accommodate reasonable approaches that are designed to deal with the effects of the Order, recognising that different Contractors and advisers will take different approaches to the issue. The Authority should, however, ensure that its position is commercially the same as it would be were the Order not to apply to the PFI Sub-Contract concerned.
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520 Contractors will be aware that "pay when paid" provisions (in relevant "construction contracts" under the Order) are rendered unenforceable by the Order. A well-managed Contractor should in any event be able to structure and run its Sub-Contracting arrangements to as to avoid payment mismatches occurring. Mismatches with the Contract on payments of construction price to the builder should not arise, since these are funded by the Senior Lenders (and equity) and are not funded through the Contract. There are some areas however where equivalent payments may be made under the Contract as under the subcontracts; these may cover payments for Compensation Events, payments for variations, termination payments, and payments of Unitary Charge relating to hard services. For these matters the Contractor will need to ensure that its notice periods are such that it can give notices and receive relevant confirmations or certificates or payments under the Contract in sufficient time for it to give its own confirmations or certificates or payments under its Sub-Contracts. It may also agree with its Sub-Contractors to pursue, if required, the equivalent issues under its head contract or allow the Sub-Contractor to do so as its agent or, in the event of a common dispute, it may agree that the written joinder provisions of Clause 28(q) should apply.
521 See Article 3 of the Order for the definition of a "construction contract" to assess the extent to which the Order applies to a PFI Sub-Contract.