What is the Scheme for Construction Contracts?

The Scheme for Construction Contracts (England and Wales) Regulations 1998 is a set of default terms. It applies when a construction contract does not give the payment or adjudication rights that the Housing Grants, Construction and Regeneration Act 1996 requires.

Where that happens, the Scheme's terms apply in place of the missing ones. Part I covers adjudication and Part II covers payment. Scotland has its own Scheme, and Northern Ireland its own rules.

You do not choose the Scheme. It applies by law, gap by gap.

If your contract has no adjudication clause, or one that falls short of the Act, the whole of Part I replaces it. If your contract leaves out a payment term the Act requires, the matching part of Part II fills that gap. The rest of your contract stays as it is.

Oral and part-written contracts can also fall within the Act. The missing or non-compliant terms determine which Scheme provisions apply. See understanding your agreement.

Where Part II applies, it sets the valuation rules and payment dates.

Under paragraph 2, the sum due is the value of work done and materials supplied, together with other sums due and less amounts already paid.

An interim payment falls due 7 days after the payment period ends, or when you claim if later, under paragraph 4. The period is 28 days where the contract sets none. For the final-payment balance addressed by paragraph 5, the due date is 30 days after completion or the claim date, whichever is later. Other types of payment have their own provisions.

The final date for payment is 17 days after the due date under paragraph 8. The payer must send its payment notice within 5 days of the due date under paragraph 9. Its pay less notice must arrive at least 7 days before the final date for payment under paragraph 10.

So on a Scheme cycle, the payment notice is due by day 5 after the due date. Any pay less notice is due by day 10, and payment by day 17.

Your own dates come from your contract first. For a way to organise the documents and milestones, read your payment cycle and notices.

Where Part I applies, it sets how an adjudication runs:

You begin by sending a notice of adjudication to every other party to the contract. The adjudicator is either the person named in the contract or someone chosen by a nominating body. Your referral notice, containing the full case, must reach the adjudicator within 7 days of the notice.

The adjudicator decides within 28 days of the referral, or 42 days if you agree, or longer if both sides agree. The adjudicator can also decide who pays the adjudicator’s fees.

Part I of the Scheme sets out each step. For how adjudication fits with the other ways to settle a dispute, see Construction disputes: your options.

Many contracts are amended to push the final date out or shorten your notice periods. The Scheme does not undo those changes if the contract still meets the Act. It steps in only where a required term is missing or does not work.

An unsigned contract can still contain agreed or incorporated payment terms. Establish the agreement first, then identify the particular gaps that the Scheme fills before putting dates in your diary.

Whether the Scheme applies to a term in your contract is a question of law on your documents. If a lot of money turns on it, ask your solicitor.

A Signed contract review and action plan can help turn the applicable payment provisions into a working record of obligations and dates.