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Lord Howie of Troon: My Lords, I am not quite sure whether I should speak at this moment, because "food and drink" does not seem to be included in the amendment, but it seems to be near enough for me to have a go. I see that in line 21 not only food and drink and other things are mentioned, but steel is mentioned. In an earlier discussion we wondered whether we should delete "steelwork" from the same clause of the Bill. I am pretty sure that if we decide to delete "steelwork" it would be quite sensible to delete "steel" as the first word of line 21 as well. I throw that into the air in the hope that it will land somewhere fruitful.

Lord Lucas: My Lords, in this clause of the Bill we are trying to get as close as we feel able, at least in the days before we come to our new conclusions, whatever they may be, to the desire of the noble Lord, Lord Williams, to keep the definition of the processing industry quite close. Therefore, we have defined the major users of process engineering as being the industries which are excluded. They are, first, food and drink, which spent £1.7 billion on process plant last year; £1 billion of expenditure came from the chemicals industry, with petroleum, oil and gas production not far behind; and pharmaceuticals and steel production--not that there is a great deal of new steelwork building going on at the moment, but the building of steelworks involves heavy use of process engineering. That is, I hope your Lordships will agree, a narrow definition of the process engineering industry, but we hope that it includes the major users of process engineering. It is the best, most useful and finest--in the sense of smallest--definition of process engineering that we have been able to agree for the purposes of this Bill. I really do not believe that there is any justification in trying to take out what the noble Lord, Lord Williams, wishes to take out, which are key parts of the process engineering industry.

Lord Williams of Elvel: My Lords, I am grateful to the noble Lord. As I understand it, the Government say that there are certain selected industries which seem, according to government figures, to spend a lot of money on

Therefore, these are the items which are included seriatim. I understand the position of the Government. Obviously, I shall have to look at the government figures and see whether there are other industries which,

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in effect, spend more as a proportion of their total capital expenditure because, after all, that is what we are talking about.

I still see no reason why major industries should be singled out in this way if one is going to eliminate or exclude from the Bill the

    "construction, installation or demolition of plant, machinery ... on a site where the primary activity is ... the production, transmission, processing or bulk storage (other than warehousing)".
I see no reason why the Bill should not be left as such without all the rest of it, but I shall rely on the noble Lord to have another look at this, as I am sure he will. It will, no doubt, be a source of further debate as we go along or, indeed, as another place goes along. It seems to me to be incongruous as it stands. However, having said that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 132 and 133 not moved.]

Lord Williams of Elvel moved Amendment No. 134:

Page 59, line 24, at end insert ("unless undertaken by the contractor or if not specific to the agreement").

The noble Lord said: My Lords, Amendment No. 134 stands in my name and that of my noble friend Lord Dubs. It may be for the convenience of the House if I speak also to Amendment No. 135 in the name of my noble friend Lord Howie.

This is a rather more important amendment. It does not relate to a drafting matter. It was an amendment on which we had some discussion at Committee stage, but it seemed to us that the discussion at the end of the day was somewhat less than satisfactory. I am advised, again by those who know much more about this industry than I do, that there are frequent occasions when a contractor undertakes what is essentially manufacturing work, for instance off-site, and then is responsible for bringing it on-site and constructing it. All those are part of a construction activity. It is probably well summarised by advice that I have received that, after all, a building is essentially a construction activity and everything else that goes into a building, if it is off-site and if it is brought in, specific to an agreement, by a contractor, should be covered by the Bill.

We have to have a let-out here where an agreement may specify that what is manufactured is not to be covered by the Bill. My amendment does provide for that but, apart from that, this seems to us to be essential. Any give on the part of the Government on this issue would be welcome, because it is an important point in the understanding of the contracting industry. I hope very much, therefore, that the Government will look sympathetically at what I have said. I beg to move.

Lord Berkeley: My Lords, we have been through this matter before in previous stages of the Bill. For example, I recall discussing the manufacture of a precast concrete beam for a house or a bridge. In my opinion, whether it is done by the contractor or a subcontractor does not make much difference to the problem, because the problem is the same as the problem of the steelwork contractor. The order is placed early; he is producing something, possibly, which is specific to a contract, which he cannot use anywhere else and which he cannot

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sell anywhere else if the person who has ordered it--the main contractor or the subcontractor, if he is a sub-subcontractor--goes bust or changes his mind or whatever. He will then have a large asset of a large piece of concrete or similar on his hands or in his yard.

I believe that the amendment proposed by the noble Lord, Lord Williams, goes a good way to improving the clause. However, as I have mentioned before, I hope that the Government might consider introducing words to the effect that the manufacture of the building or engineering components or equipment is specific to the contract being ordered rather than being off the shelf. There is nothing particularly easy about that. If it is just bricks, one can always sell bricks to someone else. But if it is something specific for a contract--a bridge beam or a floor beam--or something that is unique and which the manufacturer off site, be he the contractor himself or the subcontractor, produces and subsequently cannot use, he is in just a kind of situation which the Bill is designed to avoid.

Viscount Ullswater: My Lords, these amendments, particularly Amendment No. 135, are worthy of consideration. At Second Reading I mentioned the difficulties with off-site manufacture of components, which is very much the modern method and the modern technology of a good deal of construction. In this instance I would particularly mention structural steelwork. During the course of today's discussions we have talked a good deal about structural steelwork and I indicated that I would wish to return to this item.

The noble Lord, Lord Howie, quoted a letter from a structural engineer saying that some 90 per cent. of the value of the steelwork is created in the engineer's workshop. If that is delivered to the site and then for some reason it is not used and is returned, the scrap value is minimal compared with the amount that has been invested. There is the difference in the price between the raw steel and the amount that has been invested in cutting it, burning it, drilling it, creating trusses, columns, frames or whatever it may be. Therefore, those who have written not only to me but to other noble Lords want to be included in the Bill not only for the adjudication but probably more particularly for the payment conditions to be followed later on.

The noble Lord, Lord Berkeley, was right in saying that we do not want to go further down the chain and deal with what might be called standard components--the industry is trying to work a little more towards using standard components--because that would be going down too far into the Sale of Goods Act area. However, I am informed that most buildings are one-offs. If a 30-foot beam is required, the client usually wants a 31-foot beam. By adopting Amendment No. 135 one would not overcome the Sale of Goods Act. The components, whatever they are, still have to be fit for the purpose for which they are supplied. Bricks that were specially manufactured--in a particular shape or with a particular architectural detail of a building--might fall

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into this because if they were created especially for that contract they would probably be almost worthless for any other purpose. Therefore, there are other components, apart from steelwork, which is an important component, to be covered by the Act.

As I read it, the Bill would exclude most of the warehouse construction where the steelwork has been fabricated off site. If I am wrong in my interpretation, I hope that my noble friend will put me right. Yet it is intended by government amendment that warehousing should be included in the contract side. So somehow we seem in one way to be excluding it all--if it has been made off site I cannot see that it can be included--yet it is the Government's intention that warehousing, although they refer particularly to the storage of various goods, should be included. At the moment there remains confusion. I hope that my noble friend can help me out of my dilemma.

6.15 p.m.

Lord Monkswell: My Lords, perhaps my mind works differently from those of other noble Lords but it strikes me that there will be a difficulty with this exception unless it is sorted out by government action, by the amendment of my noble friend Lord Williams or by the amendment of my noble friend Lord Howie of Troon. A builder might be contracted to knock down a brick wall, clean up the bricks and rebuild the wall elsewhere on the site. If he knocked down the wall and then took away the bricks to his own yard for the purpose of cleaning them up and, in effect, re-manufacturing them and making them suitable for rebuilding the wall, the process of taking the bricks off site to his yard would mean that he was not covered by the Bill. Therefore, the fall-back positions and the requirements that the contractor could normally use to ensure that the contract was carried on in a timely manner would be lost.

One of the main purposes of the Bill is to provide a fall-back position where one party or the other to a contract does not want to carry on and may have to be required to carry on. It may be my devious mind in thinking that someone may not want to carry on in order that he can take a better job elsewhere. If he shifts the bricks off site, will he fall outside the provisions of the Bill? That is another way of looking at the problem which has been mentioned by other noble Lords.

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