Brian Hayes (Dublin South West, Fine Gael) | Oireachtas source

This legislation was one of the very first where we put in place a regulatory impact assessment to which Deputy Fleming referred. The RIA in which both colleagues were also involved brought forward a number of the issues that arose out of the analysis undertaken during the process itself and the very productive stakeholder consultation to which many in the House also contributed.

It is worth taking a moment to reflect on the issues highlighted in the RIA before I turn to the substance of Deputy Fleming’s amendments. The RIA concluded that there are four main areas that should be examined and I gave a commitment to do so on Second Stage. The first of these areas concerns thresholds. On Committee Stage I introduced an amendment to reduce the thresholds across the board to €10,000. That applied to the contract value and not to the sum in dispute. The exclusion of a building contract between an owner-occupier of a private residence up to 200 sq. m and a main contractor has been retained.

Second, I gave a commitment to examine the question of suspensions. On Committee Stage we introduced an amendment to remove the 14-day limit on suspension in favour of suspension up to the point where a payment dispute is referred to adjudication. Third, on the question of the non-binding nature of an adjudicator’s award, the Government in a Committee Stage amendment made an adjudicator’s award binding until it may subsequently be resolved by agreement of the parties’ arbitration or litigation.

The fourth area, arising from the RIA, was, as Deputy Fleming and others indicated, related to supplies. General supplies to a construction project were not covered by the legislation examined as part of the RIA. Representations were made during the Seanad debate on the Bill and as part of the consultation stage of the RIA. The RIA concluded that general supplies should not come within the scope of the Bill for reasons I will set out later. However, the RIA did recommend that the issue of bespoke suppliers be considered further. That was the point to which I referred in the statement. Even though it was acknowledged that drafting a definition which would not give rise to significant legal challenge would be difficult, I undertook to do that on Second Stage.

In summary, the Government has introduced amendments on Committee Stage addressing three of the four substantive issues that were raised by way of the regulatory impact assessment. It appears from the amendments tabled by Deputy Fleming that he is seeking to include all materials supplied to a construction site, which was not envisaged in the Bill as passed by the Seanad. It was not considered that general supplies should be included in the scope of the legislation since it cut across other legislative and common law provisions and that separate, dedicated legislation would be required since supplies in one sector could not be treated uniquely.

The issue of bespoke supplies was examined in great detail prior to Committee Stage, but it was concluded that a sufficient, clear and precise definition that would not in itself give rise to a legal challenge could not be provided. Indeed, I gave Opposition Deputies the opportunity to provide such a definition on Committee Stage and I am advised that the amendment dealing with the issue of bespoke supplies, although ruled out of order by the Ceann Comhairle, would not have given sufficient clarity.

The necessity for this legislation relates largely to formal contracts, which do not exist for many transactions that occur in the sector. This legislation encourages parties to agree terms in advance of commencing work and provides minimum default terms, which are set out in the Schedule to the Bill, that apply where parties fail to agree their own terms or where terms are less advantageous than those in the Schedule. The scope of the Bill will covers the services of contractors and subcontractors. In addition, supplies that are combined with installation will fall under the scope of the legislation.

As I stated on Committee Stage, the design and install principle is enshrined in the Bill. I hope that, as a result of this legislation, there will be a fundamental change for suppliers. Those who argue that they create, design and install something will be covered by this legislation.

It is likely that contracting parties will alter to reflect this provision and ensure that certain bespoke supplies fall within the scope of the Bill. However, the treatment of supplies that are not combined with a contract for installation will remain unchanged. The reasons for this were outlined on Committee Stage. First, the legislation sets up a structure designed specifically to deal with construction contract payment disputes. This structure would not be appropriate to deal with non-payment disputes relating to supplies alone. Second, identifying a construction supply that is not directly linked to installation could be impossible to define with any legal clarity. Third, other legislative instruments apply rules to all supplies, including those that form part of a construction contract.

One such instrument is SI 580 of 2012 European Communities (Late Payment in Commercial Transactions) Regulations 2012. In order to protect European businesses, particularly small to medium-sized enterprises, SMEs, against late payments, the European Commission adopted a new directive known as the late payment directive on 16 February 2011. This directive is aimed at improving payment practices in commercial transactions between businesses and between businesses and public authorities. Its main provisions include the setting of a maximum period for the receipt of payment for goods and services, the simplification of procedures for pursuing late payments and the establishment of penalties for late payments. The directive was transposed into Irish law on 16 February and came into force on 16 March of this year.

It is also worth noting that the improvement in cash flow that will be brought about by this legislation will reduce the instances of delayed payment or non-payment to suppliers, given the fact that, in many cases, it was subcontractors who were denied payment legitimately owed and who could not afford to pay their suppliers.

The Bill does not purport to provide a response to all of the causes or manifestations of non-payment in the construction sector. This is a complex area and a comprehensive response to all of the causes of non-payment in the sector will not be provided for within a single enactment. With this in mind, I am unable to accept Deputy Sean Fleming's amendment. Deputy McDonald also raised this issue on Committee Stage. I assure the Deputies that, where I raised this in the regulatory impact assessment, RIA, it related to bespoke supplies. Suppliers who design, manufacture and install something are covered by this legislation. It is as close as we can possibly go in the context of the intent of the legislation.

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