The GC21 Contract is a comprehensive and detailed document used by the NSW Government to govern construction projects in New South Wales, Australia.
This article summarises the key points of how the GC21 Contract operates for NSW contractors.
Overview of the GC21 Contract
The GC21 Contract is designed to provide a general framework for construction projects, outlining the responsibilities and obligations of both the Principal and the respective Contractor.
Importantly, the GC21 Contract is not a one-size-fits-all document.
There are likely to be numerous versions or revisions of the GC21 Contract (depending on the nature of the respective project), each with their own specific clauses and amendments.
This can be a potential pitfall for Contractors, who may assume that all GC21 Contracts are the same, and it is therefore crucial for Contractors to review the specific version of the GC21 Contract being used for their respective projects.
With this in mind, we provide a brief overview of the GC21 Contract and some of its key clauses below.
Contract Documents
What will typically form part of a GC21 Contract?
Clause 7 of the GC21 Contract outlines the documents and other information that form part of the Contract. This includes, specifically, the:
- GC21 General Conditions of Contract;
- Contract Information;
- annexed Schedules;
- Principal’s Documents, as at the Date of Contract; and
- other Contract Documents listed in Item 26 of the Contract Information.
Importantly, additional information might be provided to a prospective Contractor during or after the tender phase for a construction project.
If that happens, these documents may then be subsequently incorporated into the GC21 Contract by the Principal, and contain additional obligations on the Contractor.
Therefore while administering your Contract, pay close attention to what does, or doesn’t, form part of your actual Contract documents.
Scope of Works
The GC21 Contract includes several clauses that relate to the Contractor’s scope of works for the construction project.
Generally speaking these clauses attempt to shift the onus of responsibility on the Contractor to ensure that all necessary works are carried out in accordance with the Contract.
For example, clause 8 of the GC21 Contract describes the Works as including:
- all work specifically referred to in or contemplated by the Contract;
- all work and items necessary to achieve the effective and efficient use and operation of the Works; and
- all work and items necessary for the Works to be fit for the purposes required by the Contract.
Other work required in connection with the Contract may also include:
- all work and items, other than the Works, specifically referred to in or contemplated by the Contract;
- all work and items necessary to carry out and complete the Works properly; and
- all work and items reasonably inferred from the Contract Documents as necessary to properly perform the other obligations of the Contractor under the Contract.
These clauses can be broad and open to interpretation, which can lead to disputes between the Principal and Contractor.
Contractors should therefore be conscious of the possible scope of works under a GC21 Contract when pricing up a project, especially with these expansive definitions.
Design Obligations
The GC21 Contract includes a broad framework for a Contractor’s design responsibility, which can be particularly important for those Contractors contemplating a design and construct (D&C) contract.
However, even Contractors reviewing a “construct only” contract with the NSW Government need to be careful here, as there still may be, nevertheless, design responsibilities.
The preamble to the design section of the GC21 Contract provides (our emphasis) that:
“The Contractor always has some design, design coordination and design management responsibility no matter whether the nature of the Contract is described as fully documented; developed design; design, development and construct; design and construct, lump sum or some similar description is given to it. The extent of design by the Contractor may be as little as shop detailing, as much as the full design of the Works, or something in between.”
Clause 38 of the GC21 Contract also requires the Contractor to check the Contract Documents and notify the Principal of any faults, ambiguities, inconsistencies, or discrepancies. This obligation arises even if the Contractor does not have full design responsibility over a respective project, and a failure to comply may impact the Contractor’s ability to claim future time and costs.
It is therefore important for Contractors to remain aware of their design obligations under a proposed GC21 Contract, even if the respective project appears to be construct only.
Time & Costs
Clause 50 of the GC21 Contract allows the Contractor to claim an extension of time (EOT) if delayed by causes beyond their reasonable control, including acts or omissions of the Principal.
Some examples of delay beyond the reasonable control of the Contractor may include:
- breach of contract by the Principal or the Superintendent;
- any act, default, or omission of the Superintendent, Principal or consultants, agents or other contractors;
- variations;
- inclement weather;
- force majeure events;
- latent conditions;
- delayed or insufficient access to the site;
- changes in legislative requirements or industrial events;
- delays by statutory authorities in providing necessary approvals;
- delay to the supply of materials beyond the reasonable control of the Contractor; or
- COVID-19 or other pandemic events.
However, it is also important to note that Special Conditions may be included in a GC21 Contract which limit these causes of delay, and thereby limit the Contractor’s ability to claim an EOT under the Contract.
Contractors must also ensure that they understand and comply with all requirements for claiming an EOT, including providing timely notice and all necessary documentation to avoid technical reasons for rejection.
Contractors may also be entitled to delay costs if they are on-site longer due to events beyond their control. These costs can arise from variations, changes in legislative requirements or a failure to provide the Contractor with sufficient site access.
Without a delay cost clause Contractors rarely have an entitlement to additional payments for delay, which can lead significant financial losses due to ongoing costs that are unrecoverable. In this regard, the calculation of delay costs is typically listed as an applicable rate in the Contract Information of the GC21 Contract. Contractors should therefore ensure that a rate is provided in their respective GC21 Contract, and that they are comfortable with the proposed rate.
Variations
Variations are a common source of dispute in construction projects, and it is important for Contractors to clearly understand the process for submitting variations. Variations offer occur when the Principal directs the Contactor to implement a specific change in the scope of works for a respective project.
In this regard, a Variation is defined under the GC21 Contract to mean:
- any change to the Works including additions, increases, omissions and reductions to and from the Works; but
- not including such changes in respect of the development by the Contractor of the design for the Works in accordance with the requirements of the Contract.
This highlights particularly our comments above about the expansive definition that the GC21 Contract applies to the scope of works under the Contract.
Contractors should always be live to the possibility that any significant unexpected work under a construction contract may be a variation under the Contract (even if not listed as such by the Principal).
If this occurs (or sometimes even if it’s debatable either way), the Contractor should submit the required notices under the Contact (in this case, being clause 48 or 68 of the GC21 Contract), or risk bearing the costs of the additional works.
Payment & Setoffs
For the Contractor to claim payment under the GC21 Contract, the Contract Price must first be clearly defined (including whether it includes or excludes GST).
Contractors should therefore understand the basis of the Contract Price under clause 55 of the GC21 Contract, whether it is a lump-sum or Schedule of Rates contract, and ensure they are comfortable with any rise and fall provisions. This will help avoid any unexpected costs blowouts later that are not recoverable.
Once the works begin, clause 58 of the GC21 Contract provides that the Contactor must submit a Payment Claim at the end of each month for work carried out during that month (or as otherwise stipulated in the Contract Information). The Payment Claim must:
- be served on the person authorised under the GC21 Contract to deal with Payment Claims, at the specified address for service;
- include all the information required by Schedule 3 of the GC21 Contract, such as an identification of the works, the value of the work and materials, and the amount claimed; and
- be accompanied by supporting documents, including a completed and true Supporting Statement and a completed and true Subcontractor’s Statement in the form of Schedule 6.
Upon receipt of a Payment Claim, the Principal has 10 Business Days to provide a Payment Schedule, which must include reasons if the scheduled amount is less than the amount claimed. The Principal must then pay the scheduled amount (if any) within 15 Business Days after the Date the Payment Claim was served (i.e., 5 Business Days after the Payment Schedule).
The Principal may also include any applicable setoffs in its Payment Schedule against the Contractor. Specifically, clause 63 of the GC21 Contract allows the Principal to reduce the amount payable to the Contractor by setting off money owing in connection with the Contract, or any other contract between the parties.
So if the Contractor is working on multiple projects for the Principal, any issues or delays in one project may impact the Contractor’s entitlement to payment on another project. Additionally, if the applicable setoff exceeds the amount claimed in the Payment Claim, the Principal may call upon the Contractor’s undertaking, such as a bank guarantee, to recover the owed amount.
At the end of the project, the Contractor must submit a Final Payment Claim within 13 weeks of achieving Completion. The Contractor should include all possible claims arising under the GC21 Contract or otherwise related to the works in this Final Payment Claim, as any claims not submitted before or with the Final Payment Claim will be barred.
The Principal must then provide a Final Payment Schedule within 10 Business Days of receiving the Contractor’s Final Payment Claim. If the Contractor fails to submit a Final Payment Claim, the Principal may nevertheless provide a Final Payment Schedule within 15 weeks after the works reach Completion.
Termination
The GC21 Contract provides numerous circumstances under which the Contract may be terminated by the Principal.
In the event of the Contractor’s default, clause 73 of the GC21 Contract requires the Principal to issue a “notice to remedy” and give the Contractor seven days to address the fault.
If the Contractor fails to remedy the default, the Principal may terminate the Contract. However, in the case of the Contractor’s insolvency, clause 73 of the GC21 Contract also allows the Principal to terminate the Contract without issuing a “notice to remedy”.
Finally, as is common with Government contracts, clause 74 of the GC21 Contract includes a broad right for the Principal to terminate the Contract for convenience, without giving reasons. If this occurs, the Contractor typically receives payment for costs of materials, demobilization and the removal of temporary works, and the future lost earnings.
However, this is not necessarily guaranteed, and Contractors should ensure they review their entitlements under the proposed GC21 Contract in the event the Contract is terminated for the convivence of the Principal.
Conclusion
Overall, the GC21 Contract is a comprehensive and detailed document that provides a useful framework for the governance of construction projects in New South Wales, Australia.
It is important for Contractors to carefully review the specific version of the GC21 Contract being used for their respective projects, and ensure that they fully understand their obligations and responsibilities. In doing so, Contractors can better manage the associated risks ensure the successful delivery of their projects.
