It can be risky to speculate too much about what’s going to happen tomorrow, let alone over the next 12 months.
At best, you can get the occasional “I told you so” and at worst you look like a fool.
That said, when you work day to day inside a regulated industry like construction, and talk with the players in various capacities, you can’t help but get a flavour for what’s on people’s minds as they consider their strategies for 2018.
Here are our top picks on areas that you should be paying attention to in 2018 – ignore them at your peril.
The BIF legislation and Project Bank Accounts
This is probably the main headline for 2017 and its impact will be felt into 2018 and beyond.
With the Labor government holding onto power, we anticipate the Building Industry Fairness (security of payment) (BIF) legislation will be proclaimed into force shortly.
There’s no question that it’s going to substantially change how contracts need to be administered, how payment claims should be handled, and require training of staff and key personnel about its impact.
The key areas you should consider going forward that arise out of the BIF legislation are:
- Does your work require project bank accounts, and if so when? Government work kicks in earlier than other categories, but ultimately you need to gear up to have a trust accounting system in place, together with the training to know when, and how, amounts are to be distributed out of the PBA on your particular job.
- The “second chance notice” for security of payment legislation in Queensland will be removed. This means you’re going to need to look at your procedures about how you respond to BCIPA payment claims, and when. Again, ensuring that your staff are properly trained about the effect of this could avoid some mess during the transition. Without a second chance notice, if a payment claim falls by the wayside you might find yourself facing an adverse adjudication decision and/ or court judgment for the amount claimed.
- Similarly, bear in mind that payment claims no longer require a notation saying that they are payment claims under BCIPA. The result is that you’ll need a system to deal with all payment claims you receive, not just those with the notation on them. Given the point we made just above, this should factor in to your new processes.
Non Comforming Products and Chain of Responsibility
In response to the Melbourne fires, the Non Conforming Products – Chain of Responsibility legislation has been introduced. This legislation will have a ripple effect throughout the construction industry.
In effect, anyone who participates in the process of acquiring or installing a product is potentially liable should that product fail to meet the necessary “standards”.
Unhelpfully, standard is not defined and there is no “standard” for what it takes for something to be a “standard”.
The legislation introduces new duties which are imposed on each person in the chain of responsibility for a product.
First and foremost, each must ensure that the product is not a non-conforming product (ie they must ensure it doesn’t fail to meet the standard, whatever that standard might be).
After that, different industry participants have a raft of secondary duties which cascade off the first, depending on the nature and extent of their role.
If you are in any way involved in the installation of products, then you need to become familiar with how this legislation might affect your risk profile and who you choose to contract with in the future.
This might mean a discussion with your insurer, or an alteration to your supplier approval process if you are involved in selecting products for a particular job.
Unfair Contract Terms Legislation
The unfair contract terms legislation is designed in some way to protect small business.
Although it has been around for some time (in particular since November 2016) it hasn’t received a lot of attention in the construction space.
However, the legislation can apply to many types of construction contract. Specifically, contracts between contractors and sub-contractors are likely candidates. These are more likely to meet the requirements of being with a contracting party of less than 20 employees, and for a maximum of $300,000 (for contract periods less than 12 months) or $1,000,000 (for more than 12 months).
Some potential candidates for scrutiny here are:
- Liquidated damages clauses;
- Time bars;
- Conversion of security provisions;
- Termination for convenience clauses; and
- Set-off provisions.
Some suggest that the unfair contract legislation could even be applied by adjudicators under the relevant security for payment legislation. The result would be that adjudicators could attempt to exercise powers to declare a clause void because it is “unfair”.
However, others are more sceptical about the impact the legislation will have. Andrew Mewing covers these fairly held concerns here.
Time will tell. Be prepared. Check your terms, and know your risks in this area.
Electronic Document Management
If we were to pick one thing that most often caused an otherwise good claim to fail, it’s a lack of proper documentation.
Document keeping in a complex build can be very difficult. The sheer volume of communications, forms and claims that need to be kept and organised is enough to drive anyone crazy.
However, in an expanding world of digitisation, there are any number of options that builders could utilise to do the heavy lifting in document management.
Australian construction firms adopt new technologies as they create a path to boosting domestic competitiveness and generating international opportunities. Plantminer.com.au
Now may be the time to start investigating how you can decrease risk and increase recoveries with digital improvements.
What will 2018 Hold?
Governments change, budgets change, financial situations change – these things are beyond the control of any single player in the industry.
What we hope for each of you is that 2018 will hold great prosperity in the areas that matter most to you.
If you can cover off on the matters we’ve mentioned above, then that might give you a leg up along the way.