Major projects & construction 5 Minute Fix 16

By the Major Project & Construction team

02 Aug 2018

Get your 5 Minute Fix of major projects and construction news. This issue: new decision-making principles, jump-starting the electric vehicle market, cladding removal, and 007: Licensed to drill.

Infrastructure Australia releases "Decision-making Principles"

On the eve of Philip Davies' departure as Chief Executive of Infrastructure Australia, the organisation has released a new set of 11 decision-making principles which it proposes "should act as a guide for governments and give the community a clear set of expectations with which to hold decision-makers to account".

The decision-making principles are aimed at increasing accountability in how major infrastructure projects are planned and assessed. In an article published in The Australian newspaper announcing the release of the decision-making principles, Davies wrote:

 “There are few more dangerous places to stand than between a politician and an infrastructure announcement… Too often we see commitments being made to projects before a business case has been prepared, a full set of options has been considered, and rigorous analysis of a potential project’s benefits and costs has been undertaken."

Reflecting this concern, the principles include recommendations that:

  • governments should quantify infrastructure problems as part of long-term planning processes, and proponents should identify potential infrastructure needs in response to quantified infrastructure problems;
  • proponents should invest in development studies to scope potential responses;
  • governments should undertake detailed analysis of a potential project through a full business case and should not announce a preferred option or cost profile before undertaking detailed analysis involving multiple options; and
  • project proposals should be independently assessed by an appropriate third party organisation.

The decision-making principles are also aimed at driving greater project transparency and include recommendations that:

  • governments and proponents should publicly release all information supporting their infrastructure decisions; and
  • governments should commit to, develop and release post-completion reviews.

Infrastructure Australia recommends that the principles should be applied by governments and project proponents across Australia and included as part of the National Partnership Agreement negotiations between the Australian Government and the states and territories.

If the principles are widely adopted, they present opportunities and challenges for government and project proponents. While many of the principles are already broadly reflected in governments' approach to planning and assessing major infrastructure projects, governments will need to reassess their planning and assessment processes to ensure that they can point to the information and analysis forming the basis of their funding decisions. Governments will also need to review their post-completion processes to ensure that they are extracting lessons from previous projects to feed into future infrastructure development and delivery processes.

New campaign to secure subcontractors' payments

Following the Review of Security of Payment Laws conducted in 2017, on 17 July 2018 the Australian Building and Construction Commission (ABCC) announced the launch of a new "campaign" to secure payments for subcontractors' in the Australian building and construction industry.

The ABCC has indicated that the campaign responds to the "widespread" issue of late or non-payment of subcontractors in the building and construction industry. The final report of the Review, which made 86 recommendations for aligning security of payment legislation across Australia to protect subcontractors, also showed a significant trend of late or non-payment of subcontractors, describing the Australian construction industry as "notorious for its payment issues along the whole supply chain".

As part of the campaign objective, the ABCC noted that it aims to make subcontractors aware of their existing rights under security of payment legislation, including how the ABCC can assist them. For instance, the ABCC's campaign launch announcement noted that contractors expose themselves to the risk of exclusion from tendering for Commonwealth-funded building work by breaching the ABCC-monitored Code for the Tendering and Performance of Building Work 2016, which applies to building contractors and building industry participants who have submitted an expression of interest or tender for Commonwealth funded building work on or after 2 December 2016.

Accordingly, the campaign will be focusing on contractors with security of payment obligations under the Code. The ABCC has suggested that it will contact approximately 1,300 contractors and subcontractors who have tendered for Commonwealth-funded building work.

Interestingly, the ABCC that indicated that, where possible, it would seek payment for subcontractors relating to Code breaches. 

Private building owners in Queensland must mobilise to comply with a new Regulation targeting cladding

In yet a further development in the intractable cladding predicament, the Building and Other Legislation (Cladding) Amendment Regulation 2018 (Qld) was made on 27 July 2018. The Regulation commences on 1 October 2018 and applies to buildings that were constructed, or that had their external wall assembly altered, after 1 January 1994.

In the first instance, owners of these "in scope" buildings will need to complete an online checklist so as to identify which buildings are affected by combustible cladding. This requirement needs to be actioned by 29 March 2019, unless an extension is granted by the Queensland Building and Construction Commission. Thereafter, depending on the type and extent of cladding disclosed, owners may be required to procure further reports from industry experts or to give fire safety notices to tenants and to future purchasers.

According to its explanatory note, the Regulation is designed to "determine the extent of the use of potentially combustible cladding on existing private buildings in Queensland and raise awareness with building owners of the risks associated with potentially combustible cladding."

In June 2017 the Queensland Government established a taskforce to audit the extent of combustible cladding in Queensland Government-owned buildings. In its report, the taskforce identified some 12,000 private buildings as being likely to require review, and estimated that around 10% of those would require detailed assessment. Given the formidable challenge of investigating so many buildings, the report indicated that owners would be tasked with undertaking the required assessments.

The Regulation now gives effect to this scheme by imposing a series of obligations on owners of "in-scope" buildings (relevantly, class 2-9 buildings of Type A or Type B construction) to identify and take prescribed action in respect of affected buildings. Specifically:

  • if the online checklist submitted by 29 March 2019 (unless otherwise extended) indicates that a building may be an "affected private building", the owner must provide a further checklist (part 2) accompanied by a "building industry professional statement" prepared by an industry professional engaged by the owner, by 29 May 2019; and 
  • depending on the data disclosed in the part 2 checklist, by 27 August 2019 the owner must engage a fire engineer and then provide a further checklist, building fire safety assessment and a fire engineer statement, by 3 May 2021 (the penalty for non-compliance being 165 penalty units). This obligation will require, among other things, "testing of the cladding to determine its composition" and an assessment of whether "existing fire safety measures" are sufficient to deal with the identified risk and whether "rectification is necessary".

The Regulation also imposes further obligations relating to the displaying of notices on affected buildings, the provision of information to new owners and addresses the obligations of building industry professionals involved in the assessment processes. 

As raised in the explanatory note, this transparency is imperative, not least to ensure that fire and emergency services are able to "operationalise resources" in order to appropriately respond to high risk buildings. The cost consequences of complying with the Regulation, however, will no doubt support considerable litigation.

Jump-starting the electric vehicle market

The expansion of publically available infrastructure for charging electric vehicles and the expansion of the electric vehicle market has proved to be the classic "chicken and egg" conundrum for some time now.

For whatever reason, private sector investors have been reluctant to commit to developing the necessary infrastructure to the point where some industry groups are calling for governments to intervene in the market. In June 2018, the NRMA and the Electric Vehicle Council issued a policy paper calling on the Federal Government to "prioritise the roll-out of charging infrastructure".

That policy paper coincided with the NRMA announcing the launch of a network of fast-charging stations across NSW and the ACT. Inadequate charging infrastructure is hindering uptake of electric vehicles: 65% of NRMA Members said access to charging infrastructure was stopping them from buying an electric vehicle; while 59% said "range anxiety", or anxiety over running out of power while travelling, halted their purchase decision.

It seems that Australians are not alone in looking to Government to provide solutions to the deficit over the short term. A recent call for proposals by the UK Government's Infrastructure and Projects Authority (IPA) may provide a model for accelerating the roll-out in Australia.

The UK Government’s stated ambition is for Britain to be a world leader in electric vehicle technology and uptake and it is acknowledged that this requires an infrastructure network that is easy for current and prospective drivers to locate and use, and affordable, efficient and reliable.

To address the infrastructure deficit in the short term, the UK Government proposes to invigorate private investment by establishing a "Charging Infrastructure Investment Fund" (CIIF) in partnership with the private sector.

The CIIF's purpose is to accelerate the roll-out of charging infrastructure by providing access to finance and encouraging a range of private sector participants to support the growth of the sector with a view to:

  • increasing competition and delivering the best outcome for the consumer;
  • enabling faster expansion of public charging networks; and
  • increasing the amount of capital invested in the sector.

The focus of the CIIF is on new capacity (as opposed to refinancing existing capacity) and it seeks diversification across technologies and applications. 

It will be interesting to see how the request for proposals is received by the UK market. While it is simplistic to assume that the Australian market would respond in the same way, a positive response to this model will no doubt be of interest to potential providers here.

You might have done the work … but were you licensed to drill?

Contractors take note: if you perform works for which you are not licensed, don't expect the Queensland security of payment legislation to respond.

In St Hilliers Property Pty Ltd v Pronto Solar Innovations Pty Ltd [2018] QSC 164, the respondents (Pronto Solar Innovations Pty Ltd and Pronto Projects Pty Ltd) entered into subcontracts with St Hilliers to perform subcontract works relating to the construction of solar farms in central Queensland. Those subcontract works included pile driving and pre-drilling activities.

During the course of the project the respondents:

Neither of the respondents, however, held a licence to perform "building work" as defined in the Queensland Building and Construction Commission Act 1991 (QBCCA).

In the circumstances, the Court held as follows:

  1. Despite argument to the contrary by the respondents, the subcontracts did require the performance of “building work” under the QBCCA. While there was quite some discussion as to what properly constitutes "building work", the Court had no difficulty in holding that the phrase "goes beyond the traditionally understood meaning" and included the piling and drilling works in issue. Relevantly, the Court pointed to the fact that, not only are such works omitted from the categories of excluded works under the Queensland Building and Construction Commission Regulation 2003; rather, they are of a class of "building work" specifically required to be performed by a licensed contractor (refer to Part 32 of Schedule 2 to the Regulation, which identifies “Foundation work (piling and anchors)”). 

  2. Section 42 of the QBCCA deprived the respondents of any entitlement to “monetary or other consideration” for the subcontract works performed. (Under section 42, a "person must not carry out, or undertake to carry out, building work unless the person holds a contractor’s licence of the appropriate class", further, a person who carries out work in contravention of that prohibition is not entitled to monetary or other consideration). 

  3. By reason of section 42, absent an entitlement to payment under the subcontracts there were no payments that could be secured by a charge under the SCA. 

  4. Similarly, an unlicensed contractor denied a payment entitlement under section 42 cannot be entitled to progress payments under the BCIPA. 

Accordingly, the charges claimed by the respondents under the SCA were cancelled and the purported payment claims under the BCIPA were declared invalid and of no effect. 

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.