On 16 August 2016 the Minister for Commerce tabled in the Legislative Council the long awaited ‘Report on the Operation and Effectiveness of the Construction Contracts Act 2004 (WA)’ (Report) and the State Government’s response to that Report.
The Report, affirming the principal objective of the Construction Contracts Act 2004 (WA) (Act) of improving security of payment by providing a rapid adjudication process for payment disputes arising under construction contracts, made 28 recommendations designed to improve the overall operation and effectiveness of the Act in achieving its objective.
Introducing measures to provide enhanced protection to subcontractors is a clear focus of the Report’s recommendations.
In its response to the Report, the State Government has signaled its intent to make the following amendments to the Act:
- increasing the application time for adjudication of payment disputes from 28 days to 90 business days;
- enabling ‘claims recycling’ (by which claims which have previously been rejected may be made again later in the life of a contract) to ensure that contracting parties have a greater time frame and increased flexibility in seeking rapid adjudication of payment disputes;
- reducing the maximum time a head contractor can take to pay a subcontractor from 50 days to 30 business days to ensure prompt payment and increase cash flow in the industry;
- making it an offence to intimidate, coerce or threaten a person or business in their access to remedies available under the Act; and
- developing express statutory trust arrangements for retention money on high-value construction projects, which will protect retention moneys during insolvency events and ensure they are not unreasonably withheld from subcontractors.
In addition, the State Government, through the Building Commission, has committed to launching a number of initiatives to give effect to the Report’s recommendations, including:
- developing and implementing better processes and procedures for lodging applications for adjudication (including an online lodgment facility and a fixed fee service for adjudicating low value payment disputes);
- improving industry awareness of the Act and the protections it affords, with emphasis on, among others, dedicated phone services to provide assistance with resolving payment disputes, advice on how to access solvency information, information on the Act and how to use the adjudication process properly to ensure that all participants (especially subcontractors) are better able to utilize the Act and have a better understanding of their rights and obligations as contracting parties; and
- increasing the use of the Building Services (Registration) Act 2011 (WA) as a means of investigating and disciplining registered building contractors who have engaged in unfair behaviour or systematic non-payment of subcontractors.
For further advice on the Report, the State Government’s response, the amendments to the Act (including the practical implications for your business) or the adjudication process in general, please contact Adam Spitz (firstname.lastname@example.org).