AND HERE IT COMES THE "IMPLEMENTATION OF THE SPIRIT OF SECURITY OF PAYMENT LEGISLATION IN PUBLIC WORKS CONTRACT" - DGA UK
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DGA GROUP
EBRIEFING JUNE 2021
AND HERE IT COMES…THE “IMPLEMENTATION OF THE SPIRIT OF
SECURITY OF PAYMENT LEGISLATION IN PUBLIC WORKS CONTRACT”
ANEL IDRIZ
Director, Hong Kong
BRIEF BACKGROUND
In 2011 the Hong Kong SAR Government (the “Government”)
and the Construction Industry Council (the “CIC”) conducted
an industry wide survey on payment practice in the local
Hong Kong construction industry. The survey revealed that
significant payment problems were being experienced by
main contractors, sub-contractors, consultants, and suppliers.
These problems included the provision and use of ‘pay when
paid’ clauses and payments being delayed by disputes.
On the 1 June 2015, the Government published a consultation document on Hong Kong’s
proposed ‘Security Of Payment Legislation’ (the “SOPL”) for the construction industry. Similar
to the legislation enacted in the UK in 1996, and subsequently adopted in other jurisdictions,
including Australia, New Zealand, Singapore, Malaysia and Ireland, where it has largely been
positive although it is worth noting there are differences in the scope of the legislation in each
jurisdiction.
The Governments logic was to tackle the substantial payment problems as identified within the joint
Government / CIC survey from 2011 and to improve cash flow pressure currently being experienced
by contractors, sub-contractors, suppliers and professional service consultants. However, despite
the consultation document and the subsequent report of the consultation, published in April 2016,
the SOPL Bill has yet to be tabled to the Legislative Council for consideration.
In March 2021, the Government released a draft Technical Circular titled “Implementation of the
Spirit of Security of Payment Legislation in Public Works Contract”. The draft Technical Circular
establishes a contractual arrangement to apply to Public Works Contracts and sub-contracts
for the timely processing of contract payments and the advanced interim resolution of payment
disputes by adjudication.
The Technical Circular is intended to head the way for the successive enactment of Security of
Payment legislation in Hong Kong, however it is not clear when the legislation will be enacted.
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DGA GROUP
EBRIEFING JUNE 2021
• Implementation
The 2015 consultation document addressed both public and private sector projects, however
the draft Technical Circular aims to restrict the implementation of the “spirit” of Security of
Payment Legislation (SOPL) to Public Works Contracts entered into after 1 July/August 2021
only.
• Benefit to the Construction Industry
To improve cash flow by providing a mechanism for speedy resolution of disputes via a
proposed interim dispute resolution method for public works contracts.
• Key Provisions
Some key provisions that will be included:
Imposing strict time periods for responses to and payments of payment claims (30
calendar days for responses and 60 calendar days for payment from the date of
payment claim).
“paid when paid” or similar clauses will be prohibited.
Adjudication of payment delays and disputes in a timely manner (appointment of an
Adjudicator within 5 working days and an adjudication decision within 55 working days
from the date of appointment) including assessment of EOT and time-related costs
arising therefrom. The adjudicated amount must be paid within 30 calendar days.
Rights to suspend or reduce progress of the Works where a party fails to make
payment, with an option for a subcontractor claimant to request Employer to make
direct payment of any unpaid adjudicated amount (therefore bypassing the head
contractor).
No limitation on the type or value of the Works under this proposal, however, any
subsequent legislation will likely apply to contracts / service or supply agreements
above a certain value.
Time-related costs forming part of payment disputes are binding and enforceable, a
party’s entitlement to Extension of Time (EoT) (is not binding, but the party will not be
liable to liquidated damages if the works have been completed within the EoT as the
adjudicator so decided).
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DGA GROUP
EBRIEFING JUNE 2021
Inevitably cashflow is the lifeblood of the construction industry. There is no doubt that the
implementation of the “spirit” of Security of Payment Legislation (SOPL) in Public Works
Contracts will be of benefit to the construction industry in Hong Kong but it will be a steep
learning curve for everyone involved from contractors and subcontractors to the Government,
with strict timelines and many steps to adhere to. Therefore all parties will need to ensure they
organize themselves so they are ready for the next step of the process, starting with 1 July/
August 2021.
If you would like any further information as to how your organisation can prepare its self, -please
contact anel.idriz@dga-group.com.
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DGA GROUP
EBRIEFING JUNE 2021
DGA TRAINING SERVICES
DGA PUBLIC COURSES
Webinars
NEC3 & 4 ENGINEERING & CONSTRUCTION CONTRACT (AND SUBCONTRACT)
The NEC Engineering and Construction Contract (and Subcontract) is one of the most frequently
used standard form contracts for building and civil engineering projects
This one-day course is presented by one of our experienced Directors who are frequently
called to provide contractual advice, expert evidence with regards to quantum or to be party
representative in Adjudication. The course considers the main pricing options, the frequently
used secondary options, the parties duties, co-operation, communications, early warning, risk
register, programme, providing the works/ Works Information, change control, compensation
events (and an introduction to the approach to assessment for the purpose of quotations for
a change to the Prices and/or key date or Completion), the schedule of cost components/
Defined Cost and payment with reference to Y(UK) 2 and the Housing Grants, Construction
and Regeneration Act 1996, as amended.
UNDERSTANDING AND USING THE JCT STANDARD BUILDING CONTRACT AND DESIGN
& BUILD CONTRACT 2016
Overview
The JCT Standard Building Contract and Design and Build Contract remain the two most
frequently used contracts in the United Kingdom. In 2016, a number of changes to the previous
editions of the JCT were published by the Joint Contracts Tribunal.
This one-day seminar is presented by experienced and dual qualified professionals. It will
provide the delegates with a comprehensive understanding of the key parts of both contracts
in order that they can understand each party’s liability and obligations. Reference is made to
case law as part of explaining some of the provisions of the previous editions (and how this
applies to the current editions) and operation of the contract.
OTHER TRAINING COURSES ON OFFER
For details of all our training courses please visit www.dga-group.com/training
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DGA GROUP
EBRIEFING JUNE 2021
ABOUT DGA PUBLIC COURSES (WEBINARS)
WHO SHOULD ATTEND?
The courses are suitable for:
Quantity Surveyors
Commercial Managers
Planners or Contracts Managers of Contractors or Subcontractors
Architects
Designers
Contract Administrators, of all levels that desire obtain a firmer
understanding of the terms of the contract and their practical
application.
Price of each course
Online £250 plus VAT per delegate
What’s included in the Price
The presentation, slide handout, CPD certificate
Dates and times
To be published shortly
WHAT TO DO NEXT?
If you are interested in hearing more about our forthcoming
public courses or wish to hold an in-house course, please email
dgagroup@dga-group.com . Further details will be sent once
dates have been confirmed.
Terms & Conditions apply
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DGA GROUP
EBRIEFING JUNE 2021
MORE INFORMATION
If you would like to find out more details about any of the subjects covered in this Ebriefing
please contact DGA Group through the contact details below or at DGAGroup@dga-group.
com
DGA GROUP HEADQUARTERS SINGAPORE HONG KONG
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Tel: +44 (0)203 961 5340 Tel: +65 62916208 Tel: +852 3127 5580
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Tel: +1(587) 586 5502 +27 (0)11 258 8703
6DGA GROUP
EBRIEFING JUNE 2021
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