Explanatory note

These Regulations amend the Scheme for Construction Contracts (England and Wales) Regulations 1998 (S.I. 1998/649) (“the Scheme”), in part to reflect changes made to the relevant primary legislation, the Housing Grants, Construction and Regeneration Act 1996 (c. 53) (“the 1996 Act”), by the Local Democracy, Economic Development and Construction Act 2009 (c. 20) (“the 2009 Act”), and in part to reflect changes which the Construction Umbrella Bodies Adjudication Task Group has suggested would be desirable.

The amendments to the Scheme made by these Regulations apply in relation to construction contracts for construction operations in Wales.

The provisions of Part 1 of the Schedule to the Scheme have effect (as implied terms of the parties' contract) where the parties to a construction contract fail to make provision in their contract for one or more of various terms relating to “adjudication” (a dispute resolution procedure which the 1996 Act introduced as regards disputes under construction contracts).

Regulation 3(3) inserts a new provision into the Scheme to the effect that, upon a dispute being referred to an adjudicator, the adjudicator is to inform every party to the dispute of the date of the referral.

Provisions relating to the fees and expenses of an adjudicator are amended by regulation 3(4), (5) and (13). The effect of these amendments is to ensure that the adjudicator’s ability to look to both parties to the construction contract for the payment of the adjudicator’s fees and expenses is subject to any valid (express) contractual provision to the contrary (see section 108A of the 1996 Act which was inserted by section 141 of the 2009 Act and which is to be commenced on 1 October 2011).

Regulation 3(7) amends paragraph 19(1) of the Scheme to clarify that the period within which an adjudicator must reach a decision regarding a dispute begins when the adjudicator receives the referral.

Regulation 3(10) introduces a new provision into the Scheme to the effect that adjudicators have the power to correct minor errors in their decisions. Any such corrections must be made within five days of the relevant decision.

Regulation 3(11) and (12) repeal provisions which enabled adjudicators to make peremptory decisions.

Regulation 4 amends Part 2 of the Schedule to the Scheme which concerns “payments” and implies into the contract provisions relating to payments to the extent that express terms are absent or deficient.

Section 110A of the 1996 Act (which was substituted by section 143 of the 2009 Act and which is to be commenced on 1 October 2011) provides that a construction contract must contain a provision to the effect that a “payment notice” (setting out, in relation to every payment, the sum considered due) must be given by the person whom the parties have agreed — the payer, the payee or certain other persons. Where the parties have failed to make express provision in their contract as to who is to give such notices, regulation 4(3) substitutes a new paragraph 9 of Part 2 of the Schedule to the Scheme with the effect that this is the payer’s responsibility.

Section 111 of the 1996 Act (which was substituted by section 144 of the 2009 Act and which is to be commenced on 1 October 2011) introduces a requirement to pay the sum set out in a payment notice (whether given pursuant to express terms in the parties' contract or by virtue of new paragraph 9 of Part 2 of the Schedule to the Scheme). It also makes provision for the sum in such a notice to be challenged or revised by the giving of a type of counter-notice — a notice of intention to pay less than the notified sum. Regulation 4(4) substitutes a new paragraph 10 of Part 2 of the Schedule and thereby makes provision for the timing of such a counter-notice where the parties have failed to agree on this.

A full regulatory impact assessment of the effect that this instrument will have on the costs of business and the voluntary sector is available from the Department for Environment, Sustainability and Housing, Welsh Government, Merthyr Tydfil Office, Rhydycar, Merthyr Tydfil, CF48 1UZ, and is annexed to the Explanatory Memorandum which is available alongside the instrument on www.legislation.gov.uk.