Legal Q&A
Legal Q&A: The Construction Act and offshore wind farm projects
Karen Cossar, Senior Associate, CMS Cameron McKenna Nabarro Olswang LLP
THE Housing Grants, Construction and Regeneration Act 1996 (as amended by the Local Democracy, Economic Development and Construction Act 2009) (together known informally as the Construction Act) is an important piece of legislation within the construction industry. It is designed to bring fairness and clarity to payment processes and to ensure that adjudication is accessible to those whose contracts are governed by the Construction Act.
The act applies to ‘construction operations’. Therefore, wherever a contract relates to works or services within this definition, that contract must contain certain clauses which set rights and obligations relating to both payment and adjudication. If the contract does not contain such clauses, default mandatory clauses contained within the act will apply instead.
What are construction operations?
The term ‘constructions operations’, which governs whether or not the act will apply, is defined broadly within the act. The definition is deliberately wide in order to include construction, repair and maintenance operations. Construction operations are defined as operations of any of the following descriptions:
(a) Construction, alteration, repair, maintenance, extension, demolition or dismantling of buildings, or structures forming, or to form, part of the land (whether permanent or not).
(b) Construction, alteration, repair, maintenance, extension, demolition or dismantling of any works forming, or to form, part of the land, including (without prejudice to the foregoing) walls, roadworks, power-lines, electronic communications apparatus, aircraft runways, docks and harbours, railways, inland waterways, pipe-lines, reservoirs, water-mains, wells, sewers, industrial plant and installations for purposes of land drainage, coast protection or defence.
(c) Installation in any building or structure of fittings forming part of the land, including (without prejudice to the foregoing) systems of heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection, or security or communications systems.
(d) External or internal cleaning of buildings and structures, so far as carried out in the course of their construction, alteration, repair, extension or restoration.
(e) Operations which form an integral part of, or are preparatory to, or are for rendering complete, such operations as are previously described in this subsection, including site clearance, earth-moving, excavation, tunnelling and boring, laying of foundations, erection, maintenance or dismantling of scaffolding, site restoration, landscaping and the provision of roadways and other access works.
(f) Painting or decorating the internal or external surfaces of any building or structure.
As noted, this is a particularly wide definition. However, there are some activities which are specifically excluded from the definition and therefore from the act applying. Many of these exclusions relate to the energy sector and include (i) drilling for, or the extraction of, oil or natural gas; (ii) the assembly, installation or demolition of plant or machinery on a site where the primary activity is nuclear processing, power generation, water or effluent treatment or the production, transmission or processing of oil/gas; and (iii) the manufacture or delivery to site of building or engineering components, equipment, materials, plant or machinery (except under a contract which also provided for their installation).
How does this apply to my offshore wind project and is this different from onshore wind projects?
Establishing whether or not a contract relates to ‘construction operations’ is an important task, as it determines whether or not the act will apply (and the payment and adjudication consequences which follow).
The nature of these exclusions means that, while the site of an onshore wind farm project may be excluded from the definition, any offsite manufacture is likely to fall within the definition. This can cause confusion in a project, where the act therefore applies to some contracts and not others. However, when considering offshore wind farms, the approach may be different. This is not because of the exclusions contained within the act, but because of the actual definition of ‘construction operations’. As above, the first limb of the definition includes for:
“Construction, alteration, repair, maintenance, extension, demolition or dismantling of buildings, or structures forming, or to form, part of the land (whether permanent or not)”.
A structure which is fixed to the seabed (such as a fixed offshore wind farm) is on one view not a structure which forms or is to form part of the land. Therefore, construction operations relating to this structure arguably fall out with the scope of the act. (Even less so floating offshore wind farms, which are moored rather than fixed to the seabed.)
Conclusion
Establishing whether or not a contract relates to construction operations is an important task, as it determines whether or not the act will apply (and the payment and adjudication consequences which follow). There are a number of exclusions to the definition, which mean that some contracts relating to energy projects will fall within the scope of the act, and some outside of the scope.
However, the definition of ‘construction operations’ is limited by reference to operations which relate to ‘buildings or structures forming, or to form, part of the land’.
Accordingly, whilst every project will have its own circumstances, even before reaching any of the exclusions, contracts which relate to structures or buildings as part of an offshore wind farm project risk not being caught by the act.
In that case contracting parties may wish to (but do not have to), consider introducing rights and obligations in relation to payment and adjudication similar to the act on a contractual basis.
Karen Cossar, Senior Associate, CMS Cameron McKenna Nabarro Olswang LLP