16 Nov 2016

UNFOUNDED CONFUSION OVER CONSTRUCTION CONTRACTS ACT CHANGES

Much has been written about the proposed changes to WA’s Construction Contracts Act 2004.

In particular, many have complained that the proposed changes will allow construction contractors to “recycle” payment claims, or in other words, make the same claim over and over until finally, through sheer desperation, the principal gives in and approves the claim, or the contractor finds a sympathetic adjudicator to uphold it.

One commentator has gone as far as saying that contractors might exploit the changes by accumulating payment claims, then, perhaps on Christmas Eve, seeking to have many claims adjudicated in one hit.  Still worse, says this commentator, a principal will have only ten days to respond to the many payment claims that a contractor might accumulate over many months!

These complaints are well and good if you are a large developer or government principal.  But those are not the people that the Act is there to protect.  The Act is there to protect construction contractors. And all the proposed changes seek to do is to make the Act more effective in protecting construction contractors.

What some see as a right to “recycle” is really just a right that virtually all construction contractors already have under standard form contracts.  That is, the right to keep claiming progress payments on account of work already done under a construction contract at the end of each payment stage or interval.  Already, under most standard construction contracts, if a contractor misses out on part or all of a progress payment at one stage, they can pick that payment up again at the end of the next stage.  In that sense, construction contracts themselves typically allow “recycling” of payment claims.

This makes sense because, under a lump sum construction contract, until the works are practically completed, a contractor’s payment claims are just about keeping cash flowing down the chain of contractors so that contractors are not sent to the wall before they can finish their work and earn the lump sum contract price. For third and fourth tier subcontractors in particular, just one missed payment cycle can destroy them financially.

However, in some cases, the Act as it is now prevents contractors from seeking adjudication of a principal’s or superintendent’s decision to refuse a payment claim where it has been “recycled” in a way that the contract permits.  This means that the Act does, in some cases, take away payment rights from construction contractors that their own contracts give them. This is contrary to one of the main purposes of the Act: that is, to give contractors the means to enforce their payment rights under construction contracts.

There also appears to be some confusion about amendments to the maximum allowable time for payment.  Some say it is 30 days, whilst others say it is 30 business days.

The most recent amendment to the Bill provides for payment, neither within 30 days, nor within 30 business days, but within 42 days.  Until the Bill receives Royal Assent, all anyone can do is speculate about what the amendments will finally say.

Some transitional provisions are proposed. These are provisions that will only apply for a short period to help people caught up in the changes to make the transition from the old to the new regime. They may help preserve, or even in some cases resurrect, some contractors’ payment rights under the current Act but this should not be taken for granted.  Until the Bill has been finally enacted into law, the safest approach for you as a construction contractor will be to exercise the rights you have under the Act as it is right now.

This is general information only, and does not constitute specific legal advice. If you would like further information in relation to this matter or other legal matters please contact our office on Freecall 1800 609 945 or email us now.

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