How does security of payment legislation apply to a construction project?

The legislation exists because construction historically pushed payment risk down the chain, where the parties least able to carry it sat.

Its effect on a project is procedural, and the procedure is unforgiving about dates.

How it works

**A payment claim is served,** identifying the work and the amount claimed, referencing the Act.

**The respondent serves a payment schedule** within the statutory period, stating what it proposes to pay and, where that is less than claimed, the reasons.

**If no schedule is served in time,** the respondent can become liable for the full claimed amount. This is the provision that catches parties who treat a claim as ordinary correspondence.

**An unresolved amount goes to adjudication,** which is a fast determination by an appointed adjudicator, on the papers, within a short timetable.

**The determination is enforceable,** and it stands until the underlying dispute is finally resolved elsewhere. It is an interim answer that moves money now.

What it means in practice on a project

**Dates are tracked, not assumed.** Every claim received and every claim served has a response date, diarised, owned by a named person.

**Reasons are stated in the schedule.** A reason not raised in the payment schedule generally cannot be raised later in the adjudication, so a schedule that says only "amount not agreed" is a weak position.

**Records support the claim.** The same site records that support a [variation](/answers/how-variations-are-managed) or a delay claim support a payment claim, which is another reason they are kept as the work happens.

**Retention and set-off follow the contract,** and a set-off has to be identified in the schedule rather than applied silently.

Down the chain

A head contractor receiving claims from subcontractors has the same obligations toward them, with the same timetable.

Which means the administration has to work in both directions. A head contractor who responds to its own client on time but lets subcontractor claims lapse has created a set of enforceable debts against itself.

There are also statutory declaration and reporting obligations on government work about whether subcontractors have been paid, and those are checked. How [subcontractors are engaged and managed](/answers/how-subcontractors-are-engaged-and-managed) includes their payment position for exactly this reason.

Why it rarely gets used on a well-run project

Because adjudication is a symptom rather than a tool. Projects reach it when variations were not instructed, records were not kept, or claims were not assessed on time.

A project where scope changes are instructed in writing, valued as they happen, and claimed against a clear schedule does not generate the disputes the Act exists to resolve.

The legislation is still worth understanding in detail, because the party that does not understand the timetable is the party that loses on it.