We set out below the critical legal developments expected in 2018 that are likely to impact the construction industry.
Construction Act consultation
In October the government published its public consultation to support its review of the 2011 changes to Part 2 of the Housing Grants, Construction and Regeneration Act 1996 (the ‘Construction Act’).
Over the course of 51 questions, the consultation seeks to establish how effective the 2011 changes have been in achieving their objectives on the existing payment and dispute resolution framework and the right to suspend.
The affordability, misuse and continuing relevance of adjudication is also covered.
In parallel with the Construction Act consultation, the government also launched a consultation on the practice of cash retention under construction contracts.
Government-commissioned independent research from Pye Tait was published alongside this consultation, illustrating the “extent to which this practice has a negative impact and what solutions would be effective and proportionate”.
The aim of both consultations is to assess the extent to which progress has been made towards best practice and whether or not further statutory intervention is necessary. The consultations close on 19 January 2018 and an analysis will be published in April 2018.
Building Regs and fire safety review
Following the Grenfell Tower tragedy, the government instigated an urgent independent review of the UK’s building and fire safety regulations.
The review was announced following large-scale fire tests carried out by Building Research Establishment, which demonstrated that certain types of cladding used on high-rise building did not comply with current regulations.
The cladding has been blamed for the quick spread of the fire in which 71 people were killed, although the ultimate causes of the fire and its spread are yet to be determined.
The government states that the purpose of the review is “to make recommendations that will ensure we have a sufficiently robust regulatory system for the future and to provide further assurance to residents that the complete system is working to ensure the buildings they live in are safe and remain so”.
The review is due to submit its final report in spring 2018.
Insolvency is likely to be a major talking point in 2018. A quick glance at recent media coverage reveals a depressingly large number of household-name contractors reporting significant financial losses.
“Many in the industry will be reviewing what protection they have against supply chain insolvency”
For example, one of the UK’s biggest contractors and an employer of approximately 50,000 people worldwide, Carillion, is fighting to recover after a fall in its shares eradicated nearly three-quarters of the company’s value in three days. However, it is not alone.
Sadly, this is likely to have a considerable impact on the industry supply chain, including subcontractors dependent on those main contractors. Many in the industry will be reviewing what protection they have against supply chain insolvency and keeping a close eye on the areas where they identify risk.
New FIDIC suite 2017
Following the recent releases by the JCT and NEC of updated versions of their suites, December 2017 saw the launch of the Second Edition 2017 FIDIC 1999 Suite of Contracts (Red Book, Yellow Book and Silver Book).
Officially launching at the FIDIC International Users’ conference on 5 December 2017, FIDIC said this represented “a defining moment for the global construction industry”.
The Second Editions contain significant amendments, particularly in relation to claims and dispute resolution provisions. These include additional deeming provisions and time-bar clauses to try to ensure disputes are addressed without delay, and will be particularly important for those involved in international construction projects.
Matthew Taylor is a partner and Rebecca Rous is an associate at CMS