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The Procurement Act 2023 now in effect

The Procurement Act 2023, effective from 24th February 2025, marks a significant overhaul of public sector procurement in the United Kingdom. This legislation aims to streamline procurement processes, enhance transparency, and create a more accessible environment for suppliers, particularly small and medium-sized enterprises (SMEs), start-ups, and social enterprises.

Key Reforms Introduced by the Procurement Act 2023

The Act introduces a new ‘competitive flexible’ procedure designed to simplify bidding, negotiation, and collaboration with the public sector. This change aims to reduce bureaucratic hurdles, making it easier for suppliers to participate in public procurement opportunities.

Previously, suppliers could be excluded from commercial frameworks for extended periods, limiting their access to public contracts. The new legislation opens up these frameworks, allowing more suppliers to compete and ensuring that they are not unjustly excluded from potential opportunities.

One of the Act’s primary objectives is to level the playing field for smaller businesses and voluntary, community, and social enterprises (VCSEs). By removing bureaucratic barriers, these entities can now compete more effectively for public contracts. Additionally, the Act strengthens provisions for prompt payment throughout the supply chain, mandating 30-day payment terms on a broader range of public sector contracts.

To foster continuous improvement and transparency, public bodies are now required to provide consistent feedback to suppliers. This includes detailed bid assessments for final tenders, enabling suppliers to understand their evaluation and identify areas for enhancement in future bids.

The Act launches the ‘Find a Tender’ service, a central digital platform that simplifies the contract bidding process. Suppliers can register and store their business details, facilitating their participation in multiple bids and increasing the visibility of procurement opportunities.

A significant innovation of the Act is the creation of the Procurement Review Unit. The PRU oversees public procurement, engaging with contracting authorities and suppliers to elevate standards across sectors. Building upon the existing Public Procurement Review Service (PPRS), the PRU addresses concerns related to procurement procedures and late payments.

The construction sector stands to benefit considerably from the reforms introduced by the Procurement Act 2023. The Act encourages main contractors to consider the ‘Most Advantageous Tender’ (MAT) rather than solely focusing on the ‘Most Economically Advantageous Tender’ (MEAT). This shift allows for factors such as project timelines and local engagement to be prioritized over mere cost considerations.

Furthermore, the Act introduces a debarment list to prevent underperforming subcontractors from securing future contracts, promoting higher standards and accountability within the industry.

To align with the Procurement Act 2023, suppliers should:

Familiarise Themselves with the Act: Understand the new procedures and requirements to ensure compliance and leverage new opportunities.
Register on the ‘Find a Tender’ Platform: This will streamline the bidding process and increase visibility to public sector contracts.
Engage with the Procurement Review Unit: Address any concerns or seek guidance to navigate the new procurement environment effectively.

The Procurement Act 2023 represents a pivotal shift in public sector procurement, fostering a more inclusive, transparent, and efficient system. By embracing these reforms, suppliers and contractors can position themselves to thrive in the evolving landscape of public procurement in the UK.

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HS2 Project undergoes comprehensive overhaul to cut costs

High Speed 2 (HS2), the UK’s ambitious high-speed rail project, is undergoing a significant transformation aimed at reducing construction costs and enhancing efficiency. Under the leadership of new Chief Executive Mark Wild, appointed in December 2024, HS2 Ltd is implementing a “fundamental reset” to address financial challenges and ensure the project’s successful completion.

Current Progress and Achievements

Despite financial hurdles, HS2 has made substantial progress in its construction phase:

Tunnel Excavation: Approximately 70% of the planned twin-bore tunnels have been excavated, equating to 38 out of 55 miles. This includes the completion of the 10-mile Chiltern Tunnel, the project’s longest and deepest section.
Earthworks: 58% of earthworks for the railway’s cuttings, embankments, stations, and landscaping have been completed, representing almost 92 million cubic meters of material moved.
Viaducts and Bridges: Construction has commenced on 158 out of 227 viaducts and bridges, with 13 already built.

Financial Challenges and Cost Overruns

Initially estimated at £37.5 billion in 2009 prices, HS2’s projected costs have escalated significantly over the years. Recent estimates suggest that the project’s cost has surged to nearly £100 billion, driven by factors such as rising land acquisition expenses, construction delays, and increased material costs.

In response to these financial challenges, the UK government has taken steps to oversee the project’s expenditures more closely. Ministers are now directly involved in overseeing the building of the HS2 rail line to manage rising costs effectively.

Leadership’s Commitment to Cost Reduction

Mark Wild has acknowledged the project’s serious financial situation and emphasized the necessity for a comprehensive reset to deliver the railway at the lowest feasible cost. He stated, “The programme is in a very serious situation that requires a fundamental reset to enable it to be delivered to the lowest feasible cost.”

This reset involves a thorough review of construction methodologies, procurement processes, and project management strategies to identify areas where efficiencies can be achieved without compromising the project’s integrity or objectives.

Future Outlook and Strategic Planning

The fundamental reset aims to establish a more sustainable financial framework for HS2, ensuring that the project can be completed within a realistic budget while delivering the intended benefits of improved connectivity and economic growth.

The UK government remains committed to the project’s success, with plans to reinvest savings from scaled-back sections into other rail projects, including Network North, to enhance regional connectivity.

HS2’s fundamental reset represents a pivotal moment in the project’s development, focusing on cost reduction and efficiency to deliver a high-speed rail network that meets the UK’s transportation needs. With continued commitment from leadership and strategic planning, HS2 aims to overcome financial challenges and achieve its goals of enhancing connectivity and stimulating economic growth across the country.

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Rising insolvencies among contractors and sub-contractors in the UK construction industry

The UK construction industry has been grappling with an alarming increase in the number of insolvencies amongst contractors and sub-contractors. Data released by the Government’s Insolvency Service reveals that there have been 2,514 cases of insolvency within the sector, underscoring significant financial pressures and operational challenges facing many firms.

Economic Headwinds and Market Pressures

The construction industry has been affected by a convergence of economic pressures in recent years. Rising material costs, supply chain disruptions, labour shortages, and inflationary pressures have all placed immense strain on contractors and sub-contractors. Many companies, already operating on thin profit margins, have been unable to absorb these increased costs. Additionally, late payments from clients and increasing project delays have compounded financial vulnerabilities, pushing many businesses into unsustainable debt.

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Impact of Rising Material and Labour Costs

The cost of materials has risen substantially since 2020, largely due to supply chain disruptions caused by Brexit, the COVID-19 pandemic, and the Russia-Ukraine conflict. The price of key materials, such as steel, cement, and timber, has surged, forcing contractors to bear escalating project expenses. Sub-contractors, who often operate on fixed-price contracts, are particularly affected, as they have little flexibility to adjust prices mid-project.

Labour shortages have also been a notable factor, with fewer skilled workers available in the market. Many contractors have had to offer higher wages to retain and attract workers, putting additional strain on project budgets. The resulting increases in operational costs have left many firms in precarious financial positions, unable to meet financial obligations as they arise.

Cash Flow Constraints and Late Payments

Cash flow remains one of the most pressing issues in the construction sector, with contractors frequently experiencing delayed payments from clients. This delay can trickle down through the supply chain, leaving sub-contractors without timely payments for completed work. A recent survey by the Federation of Master Builders (FMB) revealed that over 60% of construction businesses in the UK have reported issues with late payments from clients.

Late payments disrupt cash flow and limit the ability of companies to invest in necessary resources and manage day-to-day operational costs. For smaller contractors and sub-contractors, who often rely on steady cash flow to fund ongoing projects, these delays can be particularly debilitating. When cash flow becomes insufficient to cover rising costs, insolvency can quickly become a reality.

Energy Prices and Operational Costs

Rising energy costs have also contributed to the insolvency rates within the construction sector. With many projects requiring substantial energy consumption for machinery, lighting, and other operational necessities, increased energy prices have eaten into already-tight profit margins.

The government’s initiatives to reduce carbon emissions and promote sustainable construction practices, while essential for the long-term health of the industry, have in the short term introduced additional costs and regulatory requirements. Smaller firms, especially, struggle to adapt to these changing requirements due to the limited capital to invest in energy-efficient technologies.

The Broader Economic Environment

The broader economic environment has exacerbated these challenges. High inflation rates and rising interest rates have affected the availability of affordable financing, making it more challenging for contractors to access loans for growth or even to maintain liquidity. As a result, many firms have been forced to operate without sufficient financial cushioning, leaving them vulnerable to even minor cash flow disruptions.

Government Response and Industry Support

The government has introduced some initiatives to support struggling businesses, including the Construction Playbook, which encourages best practices in procurement, project management, and risk allocation. However, many industry leaders argue that more targeted financial support is necessary to address the root causes of insolvency. Measures to enforce timely payments, reduce the burden of compliance for smaller firms, and address material price volatility could be beneficial in stabilising the industry.

The Construction Leadership Council (CLC) has called for further action, urging the government to address supply chain issues and provide support for companies transitioning to greener construction practices. Increased awareness and understanding of construction sector challenges amongst policymakers could help improve the longevity and resilience of firms, particularly those that play vital roles in regional economies.

The high rate of insolvencies among contractors and sub-contractors in the UK construction industry reflects significant structural issues exacerbated by economic pressures. Addressing these challenges will require both government intervention and industry collaboration to mitigate risks, encourage prompt payments, and manage escalating costs. Without targeted support, the industry faces continued financial strain, potentially leading to more insolvencies and greater uncertainty for the construction sector’s future stability.

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Contractors should be careful before abandoning a project

In the construction industry, contractors are often faced with situations where payments are delayed or withheld. While it might seem like an obvious solution to abandon a contract when payment issues arise, contractors in the UK must be cautious before taking this step. The Housing Grants, Construction and Regeneration Act 1996, commonly referred to as the Construction Act, provides important legal frameworks that govern payment disputes. Section 112 of this Act, which deals with the contractor’s right to suspend work due to non-payment, plays a pivotal role in determining what a contractor can and cannot do when faced with payment issues.

Understanding Section 112 of the Construction Act

Section 112 gives contractors the right to suspend work if they have not been paid in accordance with the contract or within the statutory deadlines provided by the Act. The provision was introduced to provide contractors with a legal remedy when payments are delayed or withheld unjustly. However, this right comes with specific conditions and procedural requirements that must be carefully followed.

Notice Requirement: Before suspending work, the contractor is legally obligated to issue a written notice to the employer (or the party responsible for payment). This notice must specify the amount due, the period for which payment has not been made, and state the contractor’s intention to suspend work if payment is not received within a certain time. According to the Construction Act, the notice period must be at least seven days. Failure to provide adequate notice can result in the suspension being considered unlawful, exposing the contractor to potential liability for breach of contract.
Right to Partial Suspension: Under Section 112, contractors are also allowed to partially suspend their work if they prefer to continue with some elements of the contract while withholding other services. This flexibility can help maintain a working relationship with the employer and keep the project progressing to some extent, while also signalling that non-payment is being taken seriously.
Cost Recovery: Another significant aspect of Section 112 is that the contractor is entitled to recover reasonable costs and expenses incurred as a result of the suspension of works. This includes costs related to the delay or disruption caused by the suspension. However, these costs must be reasonable and directly attributable to the suspension in order to be recoverable.

Risks of Abandoning the Contract:

While the Construction Act grants the right to suspend work, abandoning the contract outright without adhering to the statutory requirements is a very different matter. Contractors must be aware of the potential consequences of abandoning a project due to non-payment, which include:
Breach of Contract: Abandoning a contract without following the proper legal procedures can lead to the contractor being found in breach of contract. This can result in the employer taking legal action for damages, which may include the cost of hiring replacement contractors and any financial losses incurred due to project delays. The contractor’s decision to walk away could also nullify their right to recover outstanding payments or even result in claims for penalties or compensation from the employer.
Loss of Retention: Many construction contracts in the UK include a retention clause, where a percentage of each payment is held back until the project is satisfactorily completed. If a contractor abandons a project, they risk losing the retention monies owed to them, further exacerbating the financial strain caused by non-payment.
Damage to Reputation: In an industry where reputation is key, abandoning a contract can have long-term negative impacts on a contractor’s standing within the sector. Employers, clients, and project managers may view a contractor who walks away from a project as unreliable, making it harder to secure future work. Furthermore, such actions could be flagged in future pre-qualification questionnaires (PQQs), which assess a contractor’s past performance before awarding contracts.
Forfeiture of the Right to Suspend: Section 112 of the Construction Act is designed to be a protective measure for contractors, but if a contractor opts to abandon the contract, they may forfeit their right to suspend work in accordance with the law. The suspension process provides legal safeguards, but these are only available if the contractor follows the proper steps. By abandoning the contract, a contractor removes the opportunity to use this statutory right as leverage.

Practical Considerations for Contractors:

Contractors should carefully consider their legal options before taking any drastic steps when faced with non-payment. The following practical steps can help mitigate risks and preserve legal rights:
Follow the Correct Procedures: Always issue a notice of intention to suspend work as required by Section 112. This formal process gives the employer an opportunity to rectify the situation and protects the contractor’s position.
Seek Legal Advice: If payment disputes persist, contractors should seek advice from legal professionals with expertise in construction law. Legal counsel can provide tailored guidance on the best course of action, whether that be suspending work or pursuing legal remedies such as adjudication or arbitration.
Consider Alternative Dispute Resolution (ADR): Rather than abandoning a project, contractors might consider using ADR mechanisms such as adjudication, which is a fast-track dispute resolution process commonly used in the UK construction industry. This can help resolve payment disputes while keeping the project on track.
Maintain Documentation: Contractors should ensure that all communications regarding payment issues are well documented. This includes issuing notices, keeping records of unpaid invoices, and maintaining correspondence with the employer. Such documentation can serve as vital evidence if the matter escalates to a formal dispute resolution process.

While non-payment is a serious issue that can cause significant financial stress for contractors, it is crucial to act cautiously before abandoning a contract. Section 112 of the Construction Act provides a legal framework for suspending work due to non-payment, but contractors must strictly follow the provisions of this section to avoid legal consequences.

By adhering to the notice requirements and considering alternative solutions such as dispute resolution, contractors can protect their legal rights and financial interests without jeopardising their future opportunities or risking breach of contract claims.

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AXA Insurance Mandates Body Cameras for Cladding Safety Contractors

In a significant move towards bolstering safety protocols within the construction industry, AXA Insurance has recently announced a new requirement for cladding safety contractors to wear body cameras during their operations. This proactive step is aimed at ensuring heightened security and transparency in the construction process, particularly concerning the installation and maintenance of cladding systems.

The decision to implement body cameras for cladding safety contractors aligns with AXA’s commitment to prioritizing safety and risk management. The use of this technology is expected to bring several benefits to both contractors and the insurance provider, ultimately creating a safer working environment and minimizing potential risks associated with cladding projects.

One of the primary advantages of employing body cameras is the ability to document and review on-site activities comprehensively. By recording real-time footage, contractors can provide a visual account of their work, offering a valuable resource for analysis in the event of disputes or incidents. This footage may prove crucial in determining the sequence of events leading up to any untoward occurrence, helping to establish accountability and contributing to a more transparent claims process.

Moreover, the presence of body cameras is anticipated to act as a deterrent against unsafe practices or negligence on the part of contractors. Knowing that their actions are being recorded can motivate workers to adhere to safety protocols rigorously, fostering a culture of responsibility and caution. This, in turn, may lead to a reduction in the number of accidents and incidents related to cladding installation and maintenance.

The decision to mandate body cameras for cladding safety contractors is also in line with the broader industry trend towards adopting advanced technologies to enhance safety measures. AXA Insurance recognizes the potential of such innovations to revolutionize risk management and improve overall safety standards. By embracing cutting-edge solutions, the company aims to set a precedent for the construction sector, encouraging other insurance providers and contractors to explore similar measures.

It’s important to note that the implementation of body cameras does raise considerations related to privacy and data protection. AXA has assured that the collected footage will be handled with the utmost confidentiality and will only be used for safety and claims-related purposes. Contractors are expected to be informed about the specifics of data usage and consent before being required to wear body cameras.

Dougie Barnett, AXA Commercial’s Director of Customer Risk Management said: “We decided to use this cutting-edge technology to record evidence of the remediation work and securely store it in the cloud for reference. Our Business Resilience Team has been capturing videos of commercial risks in this way for the past three years for underwriters to review, so it made sense to extend this practice to these building remediations.

“It means underwriters can clearly see what’s been done when they assess risk and provide a quote with confidence, both now and in the future.”

AXA Insurance’s decision to mandate body cameras for cladding safety contractors marks a commendable step towards elevating safety standards in the construction industry. By leveraging technology to enhance transparency and accountability, AXA is not only safeguarding the interests of its clients but also contributing to the overall improvement of safety practices within the sector. This move reflects a forward-thinking approach that may well serve as a model for other insurance providers and construction companies looking to prioritize safety in their operations.

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February construction output shows encouraging bounce back of 2.4%

At the start of 2023, the construction industry showed positive signs of growth, with February construction output bouncing back by 2.4%. This is a welcome relief after a sluggish end to 2022. According to recent data from the Office for National Statistics (ONS), the construction sector has been steadily improving since last year, despite the ongoing challenges posed by the pandemic.

Key Highlights

Construction output rose by 2.4% in February 2023, following a 1.8% fall in January.
The three-month on three-month growth rate was 1.9%, the highest level since July 2022.
The private housing sector saw the strongest growth, with a 5.2% increase in output.
The infrastructure sector also showed significant growth, with output rising by 3.8% in February.

The increase in construction output is a positive sign for the UK economy, and the industry as a whole. The strong growth in the private housing sector is particularly encouraging, as this is an area that has been struggling in recent years due to a lack of investment and high demand. The government’s recent efforts to boost housebuilding, through initiatives such as the Help to Buy scheme and the creation of a new Housing Infrastructure Fund, are starting to have a positive impact.

Meanwhile, the growth in infrastructure output is also good news for the industry. This is an area that has been neglected in recent years, with a lack of investment leading to significant delays in major projects. However, the government’s commitment to increasing infrastructure spending is starting to pay off, with projects such as HS2 and Crossrail showing signs of progress.

Road works — Image by Stefan Schweihofer from Pixabay

Mike Hedges, director at Beard Construction, said: “Like many other key sectors, construction has been unable to avoid the challenges of the last nine months or so. However, it is positive to see the landscape beginning to improve with an increase in output and the highest monthly value seen since January 2010.

“While it’s encouraging to see a marginal increase in new work, we shouldn’t be surprised to see repair and maintenance continuing to lead the recovery effort. This could in part reflect customers being wary about committing to large new-build construction projects but could also reflect the emerging direction of trying to maximise value from existing assets, reducing waste and preserving embodied carbon.

“Looking beyond February at the three-month picture though, infrastructure new work was a key contributor to growth. This certainly mirrors the broad portfolio of projects we’re working on and the tender opportunities we’re currently seeing at Beard.

“It’s further proof that firms need to remain agile and pivot toward more resilient sectors that will continue to provide opportunities, such as specialised infrastructure projects for local and central government. This is especially true for those firms reliant on residential building or housebuilding, which continues to be challenging with higher mortgage rates and borrowing costs stifling new-build demand. It will be encouraging to see the challenges on these sectors ease later this year with the slowing of interest rate increases.”

However, despite the positive signs, the construction industry still faces significant challenges. The ongoing impact of the pandemic continues to be felt, with supply chain disruptions and a shortage of skilled workers affecting many companies. In addition, rising material costs and inflation are putting pressure on margins, making it more difficult for companies to invest in new projects.

Overall, the increase in construction output in February 2023 is a positive sign for the industry and the wider economy. While challenges remain, the government’s commitment to boosting investment in housing and infrastructure is starting to have a positive impact. Companies that are able to navigate the current challenges and position themselves for growth in these key sectors are likely to see significant benefits in the coming years.

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Why choose us

Nationwide Sureties UK is a leading provider of surety bonds and guarantees, offering a range of services to businesses and individuals across various industries. Here are some reasons why you should choose Nationwide Sureties UK:

Expertise and experience: Nationwide Sureties UK has over 20 years of experience in providing surety bonds and guarantees. With a team of experienced professionals, they have the expertise to understand your specific needs and provide tailored solutions that meet your requirements.
Tailored solutions: Nationwide Sureties UK understands that every business or individual has unique requirements when it comes to surety bonds and guarantees. They offer a range of customized solutions to meet the specific needs of each client, ensuring that they have the right level of protection and security.
Competitive rates: Nationwide Sureties UK provides surety bonds and guarantees at competitive rates, ensuring that their services are accessible and affordable to businesses and individuals of all sizes.
Flexibility: Nationwide Sureties UK offers a range of surety bonds and guarantees, including performance bonds, payment bonds, advance payment bonds, and retention bonds. They can provide flexible solutions that meet the specific needs of each project or business.
Customer service: Nationwide Sureties UK places a high value on customer service, providing a dedicated team to support their clients throughout the process. They offer prompt and efficient service, ensuring that their clients have the support they need when they need it.
Compliance with regulations: Nationwide Sureties UK ensures that all their surety bonds and guarantees comply with legal and regulatory requirements. They provide peace of mind to their clients, ensuring that they are protected and fully compliant with regulations.

In summary, Nationwide Sureties UK is a leading provider of surety bonds and guarantees, offering tailored solutions, competitive rates, flexibility, excellent customer service, compliance with regulations, and a team of experienced professionals. Whether you are a contractor, supplier, or business owner, Nationwide Sureties UK can provide the surety bond or guarantee you need to protect your interests and ensure a successful project. Choosing Nationwide Sureties UK means that you are choosing a reliable and trusted partner for your surety bond and guarantee needs.

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Construction Bonds: What Are They and Why Do You Need Them?

Introduction: Construction projects can be risky ventures, with various factors such as weather, supply chain disruptions, and unforeseen events that can disrupt their completion. That’s why construction bonds are essential tools for managing risk and ensuring that projects are completed as planned. In this article, we’ll take a deep dive into construction bonds, their different types, and why they are crucial for project owners, contractors, and suppliers.

What are Construction Bonds?

Construction bonds are contractual agreements that ensure that parties involved in construction projects fulfil their obligations. They work to protect the interests of the project owner, contractor, and suppliers by providing financial security in case one of the parties fails to fulfil their contractual obligations.

Types of Construction Bonds: There are several types of construction bonds that are used in different stages of a construction project. These include:

Bid Bonds: These are required before a contractor is awarded a contract and serve as a guarantee that the contractor will enter into a contract and provide a performance bond.
Performance Bonds: These guarantee that the contractor will complete the project as per the terms of the contract.
Payment Bonds: These ensure that subcontractors, suppliers, and laborers are paid for their services and materials.
Maintenance Bonds: These guarantee that the contractor will rectify any defects in the project after its completion.

How do Construction Bonds Work?

Construction bonds work by transferring the risk of non-performance or non-payment from the project owner to the surety bond company. The surety bond company guarantees to pay a predetermined amount if the contractor fails to fulfil their obligations. In case of a claim, the surety bond company will investigate the claim and determine whether it is valid. If the claim is valid, the surety bond company will pay the claim, and the contractor will be required to reimburse the surety bond company.

Why are Construction Bonds Important?

Construction bonds are essential for construction projects because they provide financial security and peace of mind to project owners, contractors, and suppliers. They offer protection against non-performance, non-payment, and other risks that may arise during a construction project. Additionally, construction bonds help to ensure that contractors are qualified, experienced, and financially stable to handle the project.

FAQs:

Q: Who pays for construction bonds? A: Typically, the contractor is responsible for paying for construction bonds. However, the cost of the bond may be factored into the bid price.

Q: How much do construction bonds cost? A: The cost of construction bonds varies depending on the size and scope of the project, the contractor’s creditworthiness, and the type of bond required.

Q: Are construction bonds required for all construction projects? A: No, construction bonds are not required for all construction projects. However, they are mandatory for most public construction projects.

Conclusion:

Construction bonds are crucial tools for managing risk in construction projects. They provide financial security and peace of mind to project owners, contractors, and suppliers by ensuring that parties fulfill their contractual obligations. By understanding the different types of construction bonds and how they work, you can make informed decisions when it comes to managing risk in your construction projects.

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Restoration Bonds

Nationwide Sureties is a leading provider of restoration bonds for the construction industry. Restoration bonds, also known as environmental restoration bonds, are a type of construction bond that guarantee the completion of a project according to the terms of the contract, including the restoration of any environmental damage caused by the construction work.

Restoration bonds are typically required by local or state government agencies as a form of protection against contractor default. They ensure that if the contractor fails to restore the site to its original condition, the bond can be used to compensate the agency for any costs associated with restoring the site. This can include costs for removing debris, restoring natural habitats, and other measures to bring the site back to its original condition.

At Nationwide Sureties, we understand the importance of restoration bonds in the construction industry. Our experienced team will assess the contractor’s ability to restore the site and their financial stability before issuing a bond. We also typically require collateral, such as a letter of credit or cash deposit, to ensure that the contractor has the financial resources to restore the site.

Obtaining a restoration bond can be a straightforward process, but it is important to work with a surety bond company like Nationwide Sureties that has the experience and reputation to provide the bond that contractors need to secure their project and meet the requirements set by local or state government agencies. Our team of experts will guide you through the process of obtaining a restoration bond and answer any questions you may have.

In summary, restoration bonds are a critical aspect of the construction industry. They provide financial protection for both contractors and the government agencies, ensuring that the site will be restored to its original condition in case of default. Choosing the right surety bond company is important to ensure that you have the right bond in place to protect your construction project and meet the requirements set by government agencies. Nationwide Sureties, with our experienced team and financial stability, we are able to provide restoration bonds for the construction industry. Contact us today to learn more about our restoration bond services and how we can help you with your next construction project.

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Contracts

When is a construction agreement not an agreement?

Construction projects invariably do not remain the same as originally set out. A construction agreement is usually legally finite and unless there is a very clear deed signed to discharge or alter it, the contractual rights survive

It is generally held by the Courts that a construction agreement will be interpreted in laissez-faire or objective way so if one party denies an obligation which is clearly written in, there is no escape.

The Court will interpret the contract, subject to doctrines such as consideration, illegality, frustration, duress and overriding statutes such as the Unfair Contract Terms Act 1977, the Housing and Grants, Construction and Regeneration Act 1996 (“HGCR Act”) as examples, which may make the contract or terms within it void. A good example is where a “pay when paid” clause is in the contract, this is voided by section 113 of the HGCR Act 1996.

How to solve a contract dispute when problems arise

There can be problems with construction contracts being void and construction agreements can be invalid, thus careful drafting and checking is recommended. Problems then occur during the contract works or after the works are completed as changes take place and the final account is determined, leading to disputes.

A common problem is where one party will assert that certain variation items are agreed and cannot be opened again and an Adjudicator must decide. As an example, during the contract, in the interim, the paying party pays a lump sum of money of say £50,000 for wasted concrete.

This is done on account even though the net measurement has been agreed separately, but the payer realises that the job needs to be completed and the sum will probably be due one way or another in the final analysis.

To avoid upset the payer consents to and pays the sum of money, worse still the payment schedule has the word “agreed” next to the sum. At final account stage, the parties fall out and the sum is withdrawn; it is a considerable amount, but on the true interpretation of measurement under the Contract it is simply not due, there is no entitlement to it. But is it agreed so due under that heading?

What if there are variations in a construction agreement?

The answer may be in the contract; most standard subcontracts at least have a variation mechanism that defines how variations to the contract price are dealt with. If a pre-pricing mechanism exists and is clearly adopted there will be little chance that the paying party will be able to later reduce the agreed sum.

If no agreement is reached the variation is assessed based on a fair valuation. It is also generally accepted with standard contracts that there is an interim payment procedure and a final account procedure, with the latter often incorporating a term that states that “full and final settlement” will only be reached when certain conditions have been met or say a deed is signed with wording to that effect.

In such a case, the objective view normally taken by the Courts is that there can be no final agreement on any part of the account until that final deed is signed.

Why properly drafted contracts are important

So, subject to doctrines and statues, parties are able to engage in the “freedom of contract” without court interference, but what happens if there is no variation clause, interim payment or final account procedure that might define how “agreement” can be reached? Does the interim “agreement” for the extra concrete become a legally binding agreement? The answer is, possibly.

There is a risk that if a binding agreement exists or even a separate contract was formed, it is open to interpretation by a Court or Adjudicator. Implied terms could be argued on the custom but, at the end of the day, risk will be unnecessarily introduced through lack of certainty.

In conclusion, the importance of properly drafted contracts with a clear agreement procedure is essential to reduce the risk. Training should also be given to enable Quantity Surveyors to use words such as “agreed” appropriately in written exchanges. In the case of the Client’s Quantity Surveyor it is entirely possible that he may not have the power to agree anything on behalf of the Client, if the Client does not expressly provide them with that power.

Article source: pbctoday

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