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Lord Berkeley: My Lords, I wish to speak to Amendments Nos. 122 to 124 and 140. My noble friend Lord Williams has lucidly explained some of the background to my drafting of the amendments which initially came from the Constructors Liaison Group. The amendments reflect something which we discussed at previous stages: the serious concern from subcontractors, sub-subcontractors and the many suppliers involved in the industry. It confirms my long-held view that it does not matter whether you are building a block of flats, a process plant or a bridge, when it gets down to the subcontractor or supplier level, the problems and challenges are the same. Therefore, the protection required for the smaller people--if we may lump them in that inelegant phrase--is extremely important.

I started by looking at the problems of the process industry. Then I received further information from the people who make steelwork. I was convinced that the answer was to have a much more general amendment to subsection (2) of Clause 103 which at present allows everyone who wants to be part of the scheme to be part of it unless both parties to the contract have agreed to contract out.

I wish to give one or two examples because it is important to understand the problems and concerns of the small suppliers. I suspect that nowadays things are different from when the noble Lord, Lord Howie, and I were young engineers and most of the work seemed to be done by the main contractor employing thousands of people. Now most of it is done by subcontract. The Constructors Liaison Group said that the supply side of the industry, the little people, confirm that the Utopia described by PILG does not exist in the relationship between the principal

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contractor and the specialist subcontractors. All the specialist subcontractors are fighting hard in competition with others to obtain a small or large part of the order.

We are in danger of splitting the Bill's provisions into the haves and the have-nots. Whatever the type of contract, I believe that the activity remains the same. Therefore, it is important that the same contractual protection on a building project, process plant or whatever should exist. Sadly for the industry generally, at subcontract level it is normal--and there is no prohibition on it--to have the rather frightening "pay-when-paid" clause, no defined payment terms, discharge period or adequate mechanism and, of course, no adjudication. Suspension can happen just like that, for no apparent reason. There was the comment that the form G90 was frequently used in the water industry, which I believe is still part of the definition of the process industry. It contains no adjudication provisions, payment terms are defined and a suspension right exists for non-certification and payment. There is no compatible subcontract.

To round the point off, the subcontract documents are frequently one-off documents on the contractor's own terms. They were probably written five or 10 years ago with little typed or handwritten changes. It is that kind of problem that the building industry seeks to redress. We must consider carefully the comments from smaller suppliers and manufacturers in this instance.

I turn to a comment from the steelwork manufacturers, fabricators or whatever we like to call them. It is reasonable to point out that, unlike the suppliers of brick or cement who are obviously not covered in the provisions anyway, steel is specifically cut, burned, drilled, welded or whatever it is for a specific construction task. It is usually the first thing to be ordered. The shape of the building is known, one orders the steelwork and, as we have seen in many construction projects around the country, it comes first and is put up pretty quickly. Perhaps we should say that it is the first substantial expense on a project. It is usually subject to onerous terms and conditions--perhaps lateness in payment--but it is off-site until 90 per cent. of the value has been spent, which means that it is less easy to get paid. Therefore, that kind of steelwork needs the full protection of the construction Bill, in whatever form.

I have spoken about process plants. We discussed them at length in previous stages of the Bill and I do not intend to speak about blinds, signwriting, security systems or anything else because the amendments that I have drafted will enable, or, I hope, require, anyone who is a party to a construction contract anywhere in the industry either to agree with the other party that they do not need the provisions of this Bill because the terms are already included or, if they are not, that the Bill's provisions should apply.

As my noble friend Lord Williams mentioned, this is a satisfactory and fairly open way of sorting out some difficult definitions with which many noble Lords have been struggling in subsection (2). I hope that other noble Lords will find them acceptable.

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3.30 p.m.

Lord Howie of Troon: My Lords, I support my noble friends Lord Williams and Lord Berkeley. Unusually for me, I start by complaining. We went through a lengthy, detailed and extremely constructive debate at Committee stage. It was enlivened by a number of contributions, from this side of the House as well as from the other side, from people who knew about the construction industry. Encouraged by the general tenor of the debate and the kindliness with which the Government listened, I wrote a lengthy letter to the noble Earl, Lord Ferrers, in which I drew attention to the comments which he and his colleagues had made on matters which were raised during the debate. I received a spartan reply.

Looking at the Marshalled List, noble Lords will see that the Government's response has been to produce a trivial number of marginal amendments. In other words, they have paid virtually no attention to the serious points which were raised during the debate. That may have been because they did not understand them or that they ignored them. It is not a happy way to deal with a measure which is not partisan but technical. It is not as complex as the Government make out; it is quite simple. The Government's response was to say: "Here we are and here we stand". That is not the correct way to treat what is thought in the textbooks and in the minds of many of the more naive among us to be a revising Chamber. A revising Chamber revises; it does not put up proposals which the Government ignore.

That is my ill-tempered beginning. I wish it to remain on the record because I believe it to be correct. But I am not an ill-tempered fellow--though I could and might yet be, who can tell? But I want to support my noble friends.

What is the purpose of the Bill? That question underlines the amendment that my noble friends have tabled. The Bill's objective, as I understand it, was to produce cheaper and more reliable construction. One of the ways in which that was to be done--the route adopted by the Government and included in the Bill--was to regularise the body of dispute that arises between contractors, clients, subcontractors and everybody else involved. The process is very time-consuming and expensive. It keeps the lawyers happy but does not produce the kind of inexpensive building that we want.

That was the whole aim of the Latham Report. Sir Michael Latham thought that the cost of construction might be reduced by as much as 30 per cent. He may be right or he may be wrong. I have my own views on that. A large part of the reduction in cost that Latham sought lay in minimising the conflict between client, contractor and subcontractor. Design may produce cheapness, but the major area where cheapness could be produced is that area of conflict. That is what Part II of the Bill is mainly about.

My remarks are based on very lengthy experience in the construction industry--even longer experience than that of my noble friend Lord Berkeley, who is a mere youngster in these matters. I have seen this whole business of conflict, claims and counter-claims going on

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and on to no great effect in the end. These are fairly general remarks, and I hope to be more brief in the course of today's proceedings.

I turn to PILG, as it was termed by my noble friend Lord Williams. PILG represents the process industries' desire to be excluded from the Bill. The Government have acceded to that demand. I can see why PILG wants to be excluded; the industries would not have to bother with these matters. My noble friend Lord Berkeley put his finger on the problem. He remarked that PILG represented the "big boys" in the process business. We know perfectly well that in the process industries, as in any other area of the construction industry, there is a long chain of contractual obligations. It extends from the main contractor to the subcontractor, to the sub-subcontractor, and ends up who knows where?

It is not true that the constrictions of Institution of Chemical Engineers' contracts apply to the subcontractors and the sub-subcontractors. That is not so. In so far as PILG says that these contracts apply to the main contractors, it is correct; but they do not go on down the line. And on down the line is where construction contracts come into play--and where the construction subcontractor comes into the Bill.

In Committee, I drew attention to such matters as the foundation for a chemical plant or a power station. That foundation might well be totally, completely and utterly a piece of civil engineering construction. I shall not irritate the House, as I did in Committee, by drawing on my own experience. However, I could mention power stations that have been floated upon civil engineering rafts--constructions like boats, on which the power station sits. The power station might be a process plant--although I am prepared to argue the matter--but the foundation is wholly a civil engineering conception. The fact that it is on the site of a process plant is totally and utterly immaterial. I find it extremely odd that people as intelligent as Ministers and the whole of Whitehall cannot grasp such a simple concept. I imagine it is not that they are unable to grasp it, but merely that they do not want to.

In another context the noble Lord, Lord Ezra, referring to coal-mines, said that such contracts would be treated as civil contracts. If they are treated as civil contracts, with all the ramifications involved in the chain (contractor, subcontractor, sub-subcontractor and so on), why should they be excluded en bloc as though they were somehow extraordinary? They are not. They are extraordinary only in the sense that the Government say they are extraordinary because they appear on a particular site. They are not extraordinary because of their engineering complexity or because of contractual arrangements. In fact, some may well be done under civil contracts, which would nullify the exclusion. We could have an extraordinary situation in which a foundation might be done under a civil engineering contract and will in some magical way be excluded from the Bill, which would throw doubt on elements in the contract itself. I have no doubt that a lawyer would sort that matter out, but that is not my business.

Obviously, the way round this is for the parties involved to agree that this work should be done under normal civil engineering contracts. That is the natural

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way for it to be done, and it would be the sensible way. Under the Bill, it need not be done. The contracts for those elements of work in the process industries--however they are described (and to my mind the description is quite extraordinary)--and in so far as these sites can be described as process sites, can be wholly excluded from the Bill.

I suppose this is a revolutionary concept. The Government are not urging people to exclude their work from the normal contracts that have applied for a very long time. However, they are saying: if you do exclude your work from the normal civil engineering contract, you come under the Bill and then, hunky-dory, you can do more or less what you like. It will not do.

Frankly, the Government misconstrued the construction industry. They did so by referring back to a tax Bill for a definition. They were then got at by some big, powerful, important interests in what are called the process industries. They yielded to those pressures and in so doing lost sight of the aim of the Bill. We must not forget that the aim of the Bill is to ensure that the subcontractors and the sub-subcontractors down that enormous chain are properly paid when they complete the work on time and that they have the protection to which they are entitled.

I entirely support my noble friends and I hope that the Minister--a very nice young man--can give me a better reply than he gave me in the charming letter which he wrote to me a few weeks ago.


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