27th January 2017 Journal Column

By Catriona Lingwood, Chief Executive of Constructing Excellence in the North East

Last year the Construction Industry Training Board (CITB) and the Department for Business, Innovation and Skills announced that firms with a payroll over £3m would need to pay both the CITB levy and the government’s new all-industry apprenticeship levy, which will come into effect from April. It’s fair to say the news did not go down well with the 900 large firms it’s set to impact.

But it seems our complaints have already been heard, as the CITB have just unveiled plans to cut its levy by almost a third. The training body is proposing cutting the levy paid by employers from 0.5per cent of total wage bills to 0.35 per cent and reforming the way it delivers training grants to provide better value for money.

It’s no surprise that the CITB are trying to get the larger firms back on their side, with the organisation set to face a fight for survival later in the year. The statutory levy is up for renewal in autumn, and firms, both big and small will be voting on whether to continue it. So, for them, the more firms on their side, the better. But with the double levy coming into effect this April, and the cut in the levy not starting until 2018, chances are most firms still won’t be their biggest supporters come autumn.

There are a lot of things up in the air this year, the majority being an impact of the Brexit result. The government is considering imposing a £1,000-a-year levy (yes, another levy!) on each skilled European Union worker hired by British companies. The decision would have a huge impact on the industry, an industry already so strained by a skills shortage. It’s estimated that nearly 12 per cent of the UK’s 2.1 million construction workers come from abroad, the majority of those coming from the EU. In an industry that is already struggling for workers and dealing with two apprenticeship levies, it makes no sense to add another skills levy on top, especially one that will impact so many workers and companies!

The housing minister said the levy on EU workers will help the British economy and British workers who feel they are overlooked when applying for new jobs, but what about the workers that we already have, those that have committed years of their lives to our industry? A cost of £1,000 per worker, per year is a massive hit to companies that employ a high percentage of EU workers, it puts jobs and companies at risk and the last thing we need is more companies going bust.

But nothing is set in stone yet, so I guess for now we sit back and wait for the levies to come into place. The government and the CITB seem confident it’s the right move for the industry but only time will tell.

CENE are holding an event on Apprenticeships, new Degree Apprenticeships, levies and how to gain funds towards a training grant at Northumbria University on 14 February. For more information or to register your interest, please contact Leanne on 0191 500 7880 or leanne@cene.org.uk.

20th January Journal Column

By Stephen Hamil, Director of Research and Innovation at NBS

The Government’s April 2016 Building Information Model (BIM) mandate has been and gone –and now nine months on, we’re all wondering how well BIM Level 2 is working in practice and if it was really worth it. Well, looking at what the UK has achieved since then and how we’re now viewed in an international arena against how much it cost us to do, then yes, I’d have to say it was worth it.

At NBS we are always working with people, companies and partner organisations to find and drive the science and technology innovations that will grow the UK economy, and if you compare the cost of BIM investment, to the contribution the industry makes to the UK economy, it’s not very large at all.

Funding spent on running the BIM Task Group for five years, developing standards and investing in technology through Innovate UK has returned a set of standards and tools that define a standard process focused around digital information exchanges. Without the BIM Level 2 mandate, this process would be much longer with fewer decisions being made. A project team would come together, made up of many organisations, and they would either (a) start without agreeing responsibilities and the process or (b) spend unnecessary time discussing what process to follow, potentially having to learn a new process for each new project – equalling a lot of wasted time, time that most projects just don’t have.

But there is of course, more work to be done. The launch of Digital Built Britain at last year’s Institute of Civil Engineers BIM Conference announced support for BIM Level 2 adoption. UK and International guidance will eventually be published on the official British Standards Institution website and in addition, the United Kingdom Accreditation Service have been appointed to establish a certification scheme for Level 2 BIM – all examples of more support for the industry to make this a success.

The Digital Built Britain strategy looks towards putting the foundations in for a ‘Level 3’ world which will see BIM and ‘smart cities’ coming together. A big part of the ‘smart cities’ idea is the internet of things. Learning from our built environment will help us to maintain it better and also design new assets better. Albert Einstein’s definition of insanity was doing the same thing again and again and expecting better results. We need to implement a ‘feedback loop’ so that actual performance of an asset feeds back into the process of the designing and constructing the next asset.

Digital is the key enabler to allow us to build a more sustainable built environment and deliver on our climate change targets. Unless it is possible to make informed decisions based around performance, it is not possible to deliver fully on sustainability.

The UK industry has made great strides forward with BIM Level 2 – this way of working must now be embedded into the majority of projects across the country and continue evolving in the future to build on the position that the UK finds itself in as a world leader in digital construction.

13th January Journal Column

By Graham Sutton, Associate Solicitor at Hay & Kilner

Adjudication is the process of resolving disputes without lengthy and expensive court procedures. Following changes to the Construction Act in 2011, specifically Section 108 A, it is generally accepted that in the absence of an effective agreement to the contrary, the parties involved in an adjudication cannot recover the costs of the adjudication process. However, given that those costs can be substantial, it’s no surprise that parties still try, and fail to recover them – trying various ways to get around the “no costs” rule.

One attempt to overcome the prohibition on costs can be seen in the recent case of WES Futures Limited (‘Futures’) v Allen Wilson Construction Limited (‘Wilson’). Futures started adjudication proceedings to recover payment of unpaid invoices. The proceedings stopped when the adjudicator resigned because he lacked jurisdiction. Futures then instructed their solicitors to issue court proceedings to recover the outstanding payments, but before doing so, the solicitors wrote to Wilson confirming that their letter was to be regarded as a “Without Prejudice Part 36 Offer” offering to accept a lesser sum than the full amount claimed in the full and final settlement of Futures’ invoices. The letter also said that Wilson had 21 days to accept the offer, and if acceptance occurred later, Wilson would be liable for all Futures’ legal costs incurred in the case.

Wilson made no payments and Futures started a second adjudication. This time the adjudicator was in favour of Futures and ordered Wilson to make the payment.  However, Wilson continued to refuse to pay and Futures began adjudication enforcement proceedings. Wilson then backtracked and decided to accept the Part 36 Offer of settlement that Futures had earlier offered.

Seeing an opportunity to recover costs, Futures argued that acceptance of the earlier offer meant that Wilson was liable to pay not only all the legal costs incurred in the legal proceedings, but also the costs of the two previous adjudications. The Judge rejected the argument and found that Futures was not entitled to claim any of the adjudication costs.

The Judge re-iterated the accepted rule that under the “Construction Act” adjudication costs are not recoverable. He found that if a successful party cannot recover its costs in the adjudication itself, it cannot recover those same costs in the enforcement proceedings either. However, the separate and distinct costs of the enforcement proceedings were recoverable. The Judge also pointed out that the Part 36 Offer letter referred to “the costs of proceedings” which included the court proceedings but could not embrace the costs of separate and stand-alone adjudication proceedings.

This case serves as a helpful reminder that if the parties to an adjudication wish to recover the costs of the process, they need to enter into an express agreement to that effect. In the absence of such an agreement we await with bated breath for the next attempt to straddle the “no costs” hurdle.

6th January Journal Column

By Catriona Lingwood, Chief Executive of Constructing Excellence in the North East

Happy New Year to you all – I hope you’ve all had a lovely Christmas break and are raring to get started. I cannot believe 2017 is here already, but I’m looking forward to seeing what the next 12 months have in store for us – I think it’s certainly going to be a busy one!

It might only be the first week back to work, but 2017 has definitely started off on the right foot. We had two major and very promising, housing announcements before lunchtime on Tuesday, which hopefully sets a precedent for the year ahead of us.

The government confirmed that they plan on building discounted starter homes for young, first-time buyers, this year- part of their project to build 400,000 new affordable homes. The starter homes will be sold at a 20 per cent discount to first-time buyers aged between 23 and 40 and will be capped at price of £250,000 outside of London.

The first starter homes will be built on brownfield sites across the country and the first wave of 30 local authority partnerships, including Northumberland County Council, were selected for their ability to get the scheme up and running quickly.  The partnerships will have access to the government’s £1.2bn Starter Homes Land Fund and will see councils will work closely with the Homes and Communities Agency to identify and take forward further land opportunities for the fund – let’s hope the councils show interest, step up and help the scheme live up to its full potential.

And for first-time buyers the good news continues. The government also announced this week that England’s first garden villages have been proposed for 14 sites across the country to deliver between 1,500 and 10,000 properties.

The garden villages are to be built to a high quality, be attractive and well designed and are being built purposely to meet the huge housing need. Although there are no plans to build the villages in the North East just yet (the closest is Cumbria as a proposed Ponteland site has been submitted but not approved yet) it will be interesting to see how well they work and if they serve their purpose.

It’s always good to start the year on a positive note, and it’s encouraging to see that the government is putting house building at the front of its plans for 2017. The government’s White Paper on housing supply is expected later this month, and will set out its plans for building new homes – come on prime minister, please don’t let us down!

We can achieve a lot in a year, and it would be great to look back this time next year, and say that we’ve achieved everything we needed to, so let’s get our heads down and give the industry exactly what it needs.

I have a feeling this could be our year, change is going to come so bring it on 2017, we’re ready for you!