Y(UK)2 was originally introduced by NEC in April 1998, applying to NEC2 contracts, in response to the Housing Grants Construction and Regeneration Act 1996 (HGCRA). As the name suggests, it is applicable to projects in the UK, that is a project which comes under the jurisdiction of the UK Parliament.
It is known as the 'Construction Act' by the construction industry, although in fact Y(UK)2 is only concerned with Part II of the Act, that is sections 104 to 117, although in essence the entire Act applies to 'construction' as it relates to repairs and improvements to property.
Part II of the Act is based upon the recommendations of the Sir Michael Latham report 'Constructing the Team' and seeks to implement the following principles to construction projects;
- use of adjudication as a mandatory process for dispute resolution,
- specific requirements for interim payments and remedies for non-compliance.
The Act defines what 'construction operations' are and if an applicable contract does not comply with the requirements of the Act then these procedures (payments and dispute resolution) are to be operated in accordance with the Scheme for Construction Contracts ('Scheme')instead.
The Local Democracy Economic Development and Construction Act 2009 made some amendments to the provisions, in Part 8 of the Act. A revised 'Scheme' was also issued with a separate 'Scheme' applicable to construction contracts in Scotland.
In NEC contracts the 'compliant' dispute resolution provisions are contained in Option W2, with Y(UK)2 implementing specific requirements to ensure that the payment provisions are compliant with the Act.
From a practical point of view, ensure that you comply with the provisions of the interim payment procedure, under both the contract with the Client and also under a contract with a Subcontractor. This will ensure that appropriate payments are made and also protecting your commercial interests with any right to 'withhold' payment where appropriate.