Did you know that the reinstatement of the ABCC has dramatically changed contractual obligations and tendering requirements for Commonwealth funded projects?

Did you also know that it impacts on security of payment issues?

To date, there has been a great deal of attention placed upon the ABCC’s powers to crackdown on union officials, curb coercion and regulate the engagement of foreign workers. The other issues relating to security of payments, the terms required in construction contracts and affecting contract administration have largely passed without comment despite being extremely important.

The Building and Construction Industry (Improving Productivity) Act 2016 (Cth) (the Act), re-establishing the ABCC also established a Security of Payments Working Group (Group). The Group monitors compliance with security of payment laws at both State and Commonwealth levels and provides advice to the ABCC about improving security of payment.

The new Code for the Tendering and Performance of Building Work 2016 (the Code) imposes rigorous new requirements upon ‘code covered entities’. These include but are not limited to, building contractors, building industry participants and related entities that tender for Commonwealth funded building projects.

Security of Payments under the Code

Businesses subject to the Code are required to:

  1. Comply with all security of payment laws and requirements under state or territory based adjudication processes
  2. Not unreasonably withhold payments and must pay in a timely manner
  3. Have a documented dispute settlement process in contracts dealing with payments to subcontractors and the resolution of disputes
  4. Endeavour to resolve all payment disputes in a reasonable, timely and cooperative manner
  5. Comply with project bank account and trust arrangements that apply to the entity; and
  6. Report any disputes or delayed progress payments to the ABC Commissioner as soon as reasonably practicable after the date on which the payment falls due.
Documented dispute settlement process
Notably the Code requires a documented dispute settlement process to be included in contracts. The process must include an option for the dispute to be referred to an independent adjudicator for determination, if the parties are unable to settle the matter themselves. If referred to an independent adjudicator, the parties must comply with the process and any determination made.
Reporting of disputes or delayed progress payments
Code covered entities must report disputed or delayed progress payments to the ABC Commissioner and the relevant funding entity as soon as practicable after the due date for payment.
Failure to comply has serious consequences
A failure to comply with the requirements of the Code can result in an exclusion sanction applying to a division of an entity in a particular State or Territory or, it may ultimately result in the entire entity being excluded from tendering for, or being awarded, any Commonwealth funded building work for a period of up to one year.
How McKays can help you comply
McKays can ensure that your: 
  1. Contracts and subcontracts are compliant for projects which have any component of Commonwealth funding. For example, the inclusion of compliant clauses for the mandatory dispute resolution process.
  2. Internal procedures are updated to meet your new obligations. This includes procedures to ensure that the relevant notifications are given to the ABC Commissioner as and when required.
  3. Project Managers and other relevant staff understand the obligations imposed under the Code.
  4. Business complies with other obligations in the Act and Code, such as those relating to your EBA, subcontractor and other employment arrangements.
To avoid an “exclusion sanction” and ensure compliance with your new obligations, please contact us.