5.11 Recent action, and discussion, has necessarily worked within the existing system. The DOE has circulated guidance to Departments about amending the Standard Forms of Contract. The aim is to reinforce the payment arrangements relating to subcontractors which are set out in subcontract documents in normal use such DOM/1 or GW/S. The Constructors Liaison Group (CLG) and other subcontractor groups such as the Confederation of Construction Specialists strongly support this action. Indeed, they want the Government to go faster and further and introduce legislation to ban "pay when paid" clauses, and also to impose penal interest rates on late payments21. Conversely, the CIEC is very unhappy about the DOE guidance. It believes that the 17 day standard period under DOM/1, within which domestic subcontractors in building are supposed to be paid, is now too short. It argues that the client has up to 14 days after receiving the architect's certificate to pay one cheque to a main contractor, but the main contractor may have dozens of subcontractors to pay. The CIEC proposes instead in its final report that a 30 day payment period for subcontractors should be substituted, and adds that if that were to happen many larger contractors would be more willing to use forms such as DOM/1. It also advocates that clients should honour architects' certificates within 7 days. It accepts that:-
a If payment is delayed by the client due to some failure of the main contractor or some other subcontractor, the "innocent" subcontractors should be still paid by the main contractor.
b If the client becomes insolvent, the main contractor should still pay the domestic subcontractors in full, but nominated or named subcontractors would have to share some of the risks of the client's insolvency with the main contractor.
The CIEC argues that "pay when paid clauses" should continue. It states that if a 30 day payment period for subcontractors was introduced in domestic subcontracts, it would then consider supporting a contractual right to interest on late payments, as already exists in ICE Conditions, provided a similar right was also available under the main contract.
5.12 These proposed changes only affect contracts placed by Government Departments. They reflect a willingness to meet strongly held views of some participants in the construction process. I can entirely understand, and sympathise with, the Government's wish to reinforce the payment arrangements, which are supposed to be standard within the industry in any case. But such new clauses seek, in a real sense, damage limitation within a controversial system. They do not go to the core of the problem, which is the reluctance of many participants to abide by, or even use, current Standard Forms, without amendment. There are many alterations to such Standard Forms which have been suggested to the Review. I believe we need to step back from such proposals and ask a more fundamental question. Is it possible to create a new framework within which contracts will be more acceptable and thereby left unchanged? Endlessly refining the existing forms has taken place for decades, frequently to accommodate decisions of the Courts. Such refinements have not provided an acceptable outcome. They are still too easily deleted or amended, or an "in-house" contract substituted. All this activity detracts from the real business of construction and results in energies being focused on procedures rather than production.
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21 The White Paper "Competitiveness - Helping Business to Win", HMSO, May 1994, spells out new ditties of prompt payment for Government Departments and Agencies and proposes a further package of additional measures but without legislation. However, the White Paper adds that if there has not been a "significant improvement" in the next 2 years, the case for legislation will be reviewed.