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In 2013, the Western Australian Small Business Commissioner conducted an investigation into the non-payment of subcontractors on construction projects administered by Building Management and Works (BMW) between 2008 and 2012. The Final Report was presented to the Minister for Small Business in March 2013 with advice and recommendations.

Integra Legal played a crucial role in conducting this investigation, and the Final Report has been significant in driving a number improvements and changes in the construction industry, particularly in relation to the procedure for paying subcontractors.

Some of those important changes will soon come into effect. In November, the WA State Parliament passed amendments to the Construction Contracts Act 2004 (WA) which will come into effect on 15 December 2016. These amendments, along with the introduction of Project Bank Accounts and the WA Building and Construction Industry Code of Conduct 2016, are designed to increase protection for subcontractors working on Government funded projects and alleviate their payment concerns.

Amendments to Construction Contracts Act 2004 (WA) (The Act)

The amendments to the Act improves the adjudication process for parties in a payment dispute by increasing accessibility for subcontractors. The amendments do this by:

• Increasing the time limit by which an application for adjudication must be made, from 28 days to 90 days.
• Clarifying when a payment dispute is said to have commenced, making it easier for the parties to know when to apply for adjudication.
• Decreasing the maximum payment terms allowed in construction contracts from 50 days to 30 business days, meaning subcontractors can apply for adjudication sooner.
• Placing less onerous requirements on the form of adjudication applications and greater emphasis on the 'substance' of the application.
• Giving adjudicators the discretion to determine two payment disputes simultaneously, in the interests of improving the efficiency and speed at which disputes are resolved.
• Improving the process by which a party who is not paid an amount under a determination made by an adjudicator can seek enforcement of the determination.

Project Bank Accounts (PBA)

BMW projects will now operate using Project Bank Accounts as part of an initiative designed to alleviate the concerns of subcontractors working on Government-funded projects.

Project Bank Accounts involve establishing a trust arrangement whereby the head contractor, in an agreement with the principal and the bank, gives monthly instructions to the bank as to how the funds are to be disbursed and the instructions must be in accordance with the subcontract arrangements.

PBAs increase the accountability of head contractors and give subcontractors a stronger position in the event that the head contractor faces financial difficulty. PBAs are designed to increase certainty for subcontractors and prevent head contractors from mismanaging payments.

Introduction of a Code of Conduct

The WA Building and Construction Industry Code of Conduct 2016 (the Code) is set to apply from 1 January 2017 to State projects valued over $10 million. The purpose of the Code is to ensure the State of Western Australia contracts with Building Contractors that conduct themselves in a reputable, fair, safe and responsible manner in their dealings with the State and the building and construction industry more generally.

The Code is also to promote fair subcontracting practices and timely payment of subcontractors within the building and construction industry.

The introduction of the Code will complement the amendments to the Construction Contracts Act 2004 and in conjunction with the roll-out of Project Bank Accounts, will make for a fairer and improved framework for subcontractors contracting with the State Government on construction projects.

To access the final report, click here.

13 December 2016

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