Do the payment mechanism requirements in the Construction Act apply to all payments under a hybrid contract ??

FEED+DD+P&CC contracts being managed in a short span with different payment mechanisms or contract types is not uncommon these days, where the main contractor or joint venture (consultant + contractor) is engaged for a range of services, some construction operations some aren’t.

Does knowing the end product give away the assumption that the whole project operate in a predictive environment??Definitely not!!

The scope definition, execution strategies, work packs etc. evolve with time, new actions piled up following AIPSM screening, design, HAZOP reviews and so does the man-hours pouring into the job.

The above was just an intro! My topic is just to address a situation whether or not the payment mechanism requirements in the Construction Act apply to all payments under a hybrid contract.

A case study from the year 2019 - C Spencer limited (CSL) v/s MW High tech projects UK shed some light on the grey area - application of construction act to hybrid contracts.

In this case CSL issued a payment application splitting the amounts owed to construction and non-construction operations separately, anyway the main contractor MW did not agree to this and never separated b/w the two amounts in their payment notice.

However CSL challenged the payment notice, whereas MW argued over its payment notice contending that it had complied with the requirements of construction act.

Final Act – The judgment was made in favor of MW, stating that a contractual payment mechanism that is compliant with the Construction Act will apply to all payments under a "hybrid" contract, this including payments related to both construction works and works excluded from the definition of construction operations under the Construction Act.

Moral of the story – If you are in construction contract – knowingly or unknowingly working in a hybrid environment, make sure your contract clearly depicts Construction act compliant payment mechanisms.