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New construction contracts law to change behaviour

New construction contracts law will change behaviour

The establishment of a fast track adjudication process for resolving payment disputes in the construction industry will do a great deal to change behaviour within the sector.

This view was expressed today by the Chairman of the New Zealand Construction Industry Council, Mr John Pfahlert, when welcoming a Government announcement that it will pass the Construction Contracts Bill under urgency during this session of Parliament.

Mr Pfahlert said the additional protection afforded contractors and subcontractors under the legislation was eagerly awaited by a wide variety of trades and sub-trades within the building and construction industry.

"The bill establishes processes for payment of contractors that are a significant improvement on existing payment practices. Withholding of legitimate payments by principals, clients and developers to head contractors, and between head contractors and sub-trades, is stifling cash flow within the sector.

"In many cases it is the sub-trades and suppliers of goods and services to the industry who are bankrolling developments by extending their lines of credit to clients -- rather than the client financing the deal for themselves.

"The establishment of a fast track adjudication process for resolving payment disputes between parties to a contract is a welcome move that will do a great deal to change behaviour within the sector. Given the problem with leaky buildings, the broadening of the bill to include all disputes, rather than just payment disputes, is an excellent measure."

Mr Pfahlert said the Council planned a series of educational seminars for industry participants and had prepared considerable material, including standard forms for use by contractors to submit payments claims under the new law. It was looking to the Ministry of Economic Development for support with educational and information resources to assist contractors in understanding the new legislation.

"We believe, however, that further investigation is still required into the concept of requiring mandatory bonds from clients and developers to ensure the payment of contractors and subcontractors."

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