In Principle Agreement In Construction Industry Review

Cabinet has agreed in principle to a set of recommendations aimed at redressing the imbalance of power between contracting parties in the construction industry, Associate Commerce Minister Laila Harré announced today.

Speaking at the Subcontractors Federation Annual General Meeting, Laila Harré said the government broadly agrees with legislative proposals put forward by an industry working party working on the construction industry review.

"The working party has strongly recommended that New Zealand adopt a fast-track adjudication process along the lines of legislation recently enacted in New South Wales and the United Kingdom," she said.

The new legislation will outlaw pay-if-paid and pay-when-paid clauses that have created cashflow blockages, and forced many subcontractors into bankruptcy.

"The problem is now at the point where even longstanding, large companies are being affected," Laila Harré said.

"These features prey on the imbalance of power between contracting parties and are at the heart of the current problems in the construction industry."

The present situation was brought about by the repeal of the Statutory Liens Act in 1986. The then government was not able to find common ground between the different industry sectors, leaving it in a kind of legal vacuum.

"The government also intends to consider the use of security of interests over land and chattels, including in the residential sector." Laila Harré said.

"This could ensure that money is coming in at the top of the contractual chain so that it can filter down to those at a lower level."

The new scheme will allow subcontractors to stop work if they haven not been paid, and it is envisaged that adjudicators will have a high level of flexibility to ensure all parties are treated fairly.

"Further work is being done on the finer details of the proposals I have announced. A limited consultation process will be carried out over the next six weeks, after which a final paper will be put to cabinet."

Laila Harré said if the legislation gains cross-party support in Parliament it could be before the house early next year.

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