HEAD CONTRACT (HC-1 2003)
CONTRACT MANUAL
VOLUME 3:
CLAUSE BY CLAUSE GUIDANCE
[LAST AMENDED: 16 AUGUST 2011]
DISCLAIMER:
This Manual has been prepared solely for the purpose of providing internal guidance to Defence personnel. Any
use by non-Defence personnel is unauthorised. No responsibility will be taken by the Commonwealth of
Australia or the advisers assisting in the preparation of the Manual, for any such use, including any purported
reliance on the guidance provided by the Manual. The Manual is not intended to be a substitute for legal advice,
and unless expressly agreed in writing by the Commonwealth of Australia, nothing in the Manual will alter or
affect the respective rights, obligations and liabilities of the parties under any contract.
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Table of Contents
SECTION 1 - INTRODUCTION .................................................................................................. 1
1.
GENERAL INFORMATION ABOUT THE MANUAL .................................................. 1
2.
BACKGROUND TO THE CLAUSE BY CLAUSE GUIDANCE ................................... 1
SECTION 2 - CLAUSE BY CLAUSE GUIDANCE ..................................................................... 3
CLAUSE 1 - GLOSSARY OF TERMS, INTERPRETATION AND
MISCELLANEOUS ..................................................................................................... 3
Clause 1.1 - Glossary of Terms ..................................................................................................................................... 3
Clause 1.2 - Interpretation ............................................................................................................................................. 3
Clause 1.3 - Miscellaneous ........................................................................................................................................... 3
CLAUSE 2 - COMMENCEMENT ............................................................................................... 4
Clause 2.1 - Contractor's Obligations ............................................................................................................................ 4
Clause 2.2 - Commonwealth's Obligations ................................................................................................................... 4
Clause 2.3 - Delayed Access ......................................................................................................................................... 5
CLAUSE 3 - PERSONNEL ........................................................................................................ 5
Clause 3.1 - Contract Administrator ............................................................................................................................. 5
Clause 3.2 - Replacement of Contract Administrator ................................................................................................... 7
Clause 3.3 - Parties' Conduct ........................................................................................................................................ 8
Clause 3.4 - Contract Administrator's Representative ................................................................................................... 8
Clause 3.5 - Contractor's Representative....................................................................................................................... 8
Clause 3.6 - Key People ................................................................................................................................................ 8
Clause 3.7 - Removal of Persons .................................................................................................................................. 8
Clause 3.8 - Industrial Relations ................................................................................................................................... 9
Clause 3.9 - Project Review .......................................................................................................................................... 9
CLAUSE 4 - SECURITY .......................................................................................................... 10
Clause 4.1 - Form ........................................................................................................................................................ 10
Clause 4.2 - Release .................................................................................................................................................... 11
Clause 4.3 - Interest .................................................................................................................................................... 11
Clause 4.4 - Related Company Guarantee .................................................................................................................. 12
CLAUSE 5 - RISKS AND INSURANCE ................................................................................... 12
Clause 5.1 - Risk of Works ......................................................................................................................................... 13
Clause 5.2 - Other Risks ............................................................................................................................................. 13
Clause 5.3 - Reinstatement .......................................................................................................................................... 13
Clause 5.4 - Contractor Insurance Obligations ........................................................................................................... 13
Clause 5.5 - Failure to Insure ...................................................................................................................................... 18
Clause 5.6 - Period of Insurance ................................................................................................................................. 19
Clause 5.7 - Notice of Potential Claim ........................................................................................................................ 19
Clause 5.8 - Procedure upon Loss or Damage ............................................................................................................ 19
Clause 5.9 - Cross Liability ......................................................................................................................................... 20
CLAUSE 6 - DESIGN AND DOCUMENTATION ...................................................................... 20
Clause 6.1 - Commonwealth's Documents .................................................................................................................. 20
Clause 6.2 - Contractor's Design ................................................................................................................................. 21
Clause 6.3 - Contract Administrator may Review Design Documentation ................................................................. 21
Clause 6.4 - No Obligation to Review ........................................................................................................................ 21
Clause 6.5 - Copies of Design Documentation ........................................................................................................... 21
Clause 6.6 - Fitness For Purpose ................................................................................................................................. 21
Clause 6.7 - Availability ............................................................................................................................................. 22
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Clause 6.8 - Licence over Project Documents ............................................................................................................ 22
Clause 6.9 - Intellectual Property Warranties ............................................................................................................. 22
Clause 6.10 - Intellectual Property Rights .................................................................................................................. 22
Clause 6.11 - Resolution of Ambiguities .................................................................................................................... 22
Clause 6.12 - Access to Premises and Project Documents .......................................................................................... 23
Clause 6.13 - Commonwealth's Novated Design Consultants .................................................................................... 23
Clause 6.14 - Warranties Unaffected .......................................................................................................................... 23
Clause 6.15 - Design Certification .............................................................................................................................. 23
Clause 6.16 - Samples ................................................................................................................................................. 24
CLAUSE 7 - THE SITE ............................................................................................................ 24
Clause 7.1 - Contractor to Inform Itself ...................................................................................................................... 24
Clause 7.2 - Site Information ...................................................................................................................................... 25
Clause 7.3 - Notice of Latent Conditions .................................................................................................................... 25
Clause 7.4 - Contractor's Entitlement .......................................................................................................................... 26
Clause 7.5 - Site Access .............................................................................................................................................. 26
Clause 7.6 - Contractor's Obligation to Provide Access ............................................................................................. 27
Clause 7.7 - Non-Reliance .......................................................................................................................................... 27
CLAUSE 8 - CONSTRUCTION ................................................................................................ 27
Clause 8.1 - Description of Works .............................................................................................................................. 27
Clause 8.2 - All Work Included .................................................................................................................................. 27
Clause 8.3 - Statutory Requirements ........................................................................................................................... 27
Clause 8.4 - Change in Statutory Requirements or Variance with Contract ............................................................... 28
Clause 8.5 - Subcontracting ........................................................................................................................................ 28
Clause 8.6 - Subcontractor Warranties ........................................................................................................................ 30
Clause 8.7 - Provisional Sum Work ............................................................................................................................ 31
Clause 8.8 - Design for Provisional Sum Work to be Prepared by either the Commonwealth or the
Contractor (Option 1 and Option 2) ......................................................................................................... 31
Clause 8.9 - Tendering Provisional Sum Work ........................................................................................................... 32
Clause 8.10 - Price Adjustment for Tendered Provisional Sum Work ........................................................................ 32
Clause 8.11 - Price Adjustment for Other Provisional Sum Work.............................................................................. 32
Clause 8.12 - Further Allowance for Provisional Sum Work ..................................................................................... 32
Clause 8.13 - Co-operation with Other Contractors .................................................................................................... 32
Clause 8.14 - Setting Out ............................................................................................................................................ 32
Clause 8.15 - Survey ................................................................................................................................................... 33
Clause 8.16 - Safety .................................................................................................................................................... 33
Clause 8.17 - Occupational Health, Safety and Rehabilitation Management .............................................................. 33
Clause 8.18 - Plant, Equipment and Work .................................................................................................................. 33
Clause 8.19 - Cleaning Up .......................................................................................................................................... 33
Clause 8.20 - The Environment .................................................................................................................................. 34
Clause 8.21 - Urgent Protection .................................................................................................................................. 38
Clause 8.22 - Valuable Objects Found on Site ............................................................................................................ 38
Clause 8.23 - The Commonwealth May Act ............................................................................................................... 38
Clause 8.24 - Access Hours ........................................................................................................................................ 39
Clause 8.25 - Imported Items ...................................................................................................................................... 39
Clause 8.26 - Salvaged Materials ................................................................................................................................ 39
Clause 8.27 - Contract Administrator's Office ............................................................................................................ 40
Clause 8.28 - Project Signboards ................................................................................................................................ 40
Clause 8.29 - Measurements and Dimensions............................................................................................................. 40
CLAUSE 9 - QUALITY ............................................................................................................. 40
Clause 9.1 - Construction ............................................................................................................................................ 40
Clause 9.2 - Project Plans ........................................................................................................................................... 41
Clause 9.3 - Contract Administrator's Right to Inspect ............................................................................................... 41
Clause 9.4 - Testing .................................................................................................................................................... 42
Clause 9.5 - Costs of Testing ...................................................................................................................................... 42
Clause 9.6 - Defects .................................................................................................................................................... 42
Clause 9.7 - Correction of Defect or Variation ........................................................................................................... 42
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Clause 9.8 - Claim for Correction of Defect; Clause 9.9 - Claim for Variation; Clause 9.10 Acceptance of Work; Clause 9.11 - Extension of Defects Liability Period ............................................. 43
Clause 9.12 - Common Law Rights not Affected ....................................................................................................... 43
Clause 9.13 - Commissioning and Handover .............................................................................................................. 43
Clause 9.14 - Maintenance during Defects Liability Period ....................................................................................... 44
Clause 9.15 - Defects Liability Period Review and Report ......................................................................................... 44
CLAUSE 10 - TIME .................................................................................................................. 44
Clause 10.1 - Progress and Time for Completion ....................................................................................................... 44
Clause 10.2 - Programming; Clause 10.3 - Contractor Not Relieved ......................................................................... 44
Clause 10.4 - Acceleration by Contractor ................................................................................................................... 47
Clause 10.5 - Delays Entitling Claim; Clause 10.6 - Claim; Clause 10.7 - Conditions Precedent to
Extension ................................................................................................................................................. 47
Clause 10.8 - Extension of Time ................................................................................................................................. 49
Clause 10.9 - Reduction in Extension of Time ........................................................................................................... 50
Clause 10.10 - Unilateral Extensions .......................................................................................................................... 50
Clause 10.11 - Agreed Damages ................................................................................................................................. 50
Clause 10.12 - Suspension .......................................................................................................................................... 51
Clause 10.13 - Instruction to Accelerate ..................................................................................................................... 51
Clause 10.14 - Partial Acceleration ............................................................................................................................. 51
Clause 10.15 - Acceleration ........................................................................................................................................ 51
Clause 10.16 - Commonwealth's Right to Liquidated Damages not Affected ............................................................ 51
CLAUSE 11 - VARIATIONS..................................................................................................... 51
Clause 11.1 - Variation Price Request ........................................................................................................................ 53
Clause 11.2 - Variation Order ..................................................................................................................................... 53
Clause 11.3 - Cost of Variation ................................................................................................................................... 53
Clause 11.4 - Omissions.............................................................................................................................................. 54
Clause 11.5 - Daywork................................................................................................................................................ 54
Clause 11.6 - Valuation of Daywork ........................................................................................................................... 55
Clause 11.7 - Variations Requested by the Contractor................................................................................................ 55
Clause 11.8 - Contract Administrator's Determination ............................................................................................... 55
Clause 11.9 - Variation Approved by Contract Administrator .................................................................................... 55
CLAUSE 12 - PAYMENT ......................................................................................................... 55
Clause 12.1 - Payment Obligation .............................................................................................................................. 57
Clause 12.2 - Payment Claims .................................................................................................................................... 57
Clause 12.3 - Conditions Precedent ............................................................................................................................ 58
Clause 12.4 - Payment Statements .............................................................................................................................. 58
Clause 12.5 - Payment ................................................................................................................................................ 59
Clause 12.6 - Payment on Account ............................................................................................................................. 59
Clause 12.7 - Unfixed Goods and Materials ............................................................................................................... 60
Clause 12.8 - Release of Additional Approved Security ............................................................................................. 60
Clause 12.9 - Completion Payment Claim and Notice; Clause 12.10 - Release after Completion
Payment Claim and Notice ...................................................................................................................... 60
Clause 12.11 - Final Payment Claim and Notice; Clause 12.12 - Release after Final Payment
Claim and Notice ..................................................................................................................................... 60
Clause 12.13 - Interest ................................................................................................................................................ 60
Clause 12.14 - Correction of Payment Statements ...................................................................................................... 61
Clause 12.15 - Right of Set-Off .................................................................................................................................. 61
Clause 12.16 - Payment of Workers and Subcontractors ............................................................................................ 61
Clause 12.17 - GST ..................................................................................................................................................... 62
Clause 12.18 - Quantities in Schedule of Rates; Clause 12.19 - Limits of Accuracy ................................................. 62
Clause 12.20 - Security of Payment Legislation ......................................................................................................... 62
Clause 12.21 - Accounting Records ............................................................................................................................ 67
Clause 12.22 - Cost Allocation Advice ....................................................................................................................... 67
Clause 12.23 - Facilities and Infrastructure Accounting ............................................................................................. 67
Clause 12.24 - DEMS and GFIS ................................................................................................................................. 67
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CLAUSE 13 - COMPLETION ................................................................................................... 68
Clause 13.1 - Contractor to Notify .............................................................................................................................. 68
Clause 13.2 - Contract Administrator to Inspect ......................................................................................................... 68
Clause 13.3 - Unilateral Issue of Completion Notice .................................................................................................. 68
Clause 13.4 - Take Over Upon Completion ................................................................................................................ 69
Clause 13.5 - Part of the Works or a Stage ................................................................................................................. 69
Clause 13.6 - Effect of Notice of Completion ............................................................................................................. 69
Clause 13.7 - Liquidated Damages ............................................................................................................................. 69
Clause 13.8 - Incentive................................................................................................................................................ 70
CLAUSE 14 - TERMINATION .................................................................................................. 70
Clause 14.1 - Preservation of Rights ........................................................................................................................... 71
Clause 14.2 - Contractor Default; Clause 14.3 - Contents of Notice of Default ......................................................... 71
Clause 14.4 - Termination for Insolvency or Breach .................................................................................................. 71
Clause 14.5 - Commonwealth's Entitlements after Termination ................................................................................. 71
Clause 14.6 - Contractor's Entitlements after Termination ......................................................................................... 71
Clause 14.7 - Termination for Convenience; Clause 14.8 - Costs .............................................................................. 71
CLAUSE 15 - DISPUTES ......................................................................................................... 72
Clause 15.1 - Notice of Dispute .................................................................................................................................. 72
Clause 15.2 - Expert Determination ............................................................................................................................ 72
Clause 15.3 - The Expert; Clause 15.4 - Not Arbitration; Clause 15.5 - Procedure for
Determination; Clause 15.6 - Disclosure of Interest; Clause 15.7 - Costs; Clause 15.8 Conclusion of Expert Determination; Clause 15.9 - Agreement with Expert .......................................... 74
Clause 15.10 - Determination of Expert...................................................................................................................... 74
Clause 15.11 - Executive Negotiation ......................................................................................................................... 74
Clause 15.12 - Arbitration Agreement ........................................................................................................................ 74
Clause 15.13 - Arbitration ........................................................................................................................................... 74
Clause 15.14 - Proportional Liability .......................................................................................................................... 74
Clause 15.15 - Continuation of Contractor's Activities ............................................................................................... 75
CLAUSE 16 - NOTICES........................................................................................................... 75
Clause 16.1 - Notice of Variation................................................................................................................................ 76
Clause 16.2 - Notices of Other Claims ........................................................................................................................ 76
Clause 16.3 - Prescribed Notices ................................................................................................................................ 76
Clause 16.4 - Continuing Events ................................................................................................................................. 76
Clause 16.5 - Time Bar ............................................................................................................................................... 77
Clause 16.6 - Other Provisions Unaffected ................................................................................................................. 77
Clause 16.7 - Address for Service ............................................................................................................................... 77
Clause 16.8 - Receipt of Notices ................................................................................................................................. 77
CLAUSE 17 - WOL .................................................................................................................. 77
Clause 17.1 - Design and Construction ....................................................................................................................... 77
Clause 17.2 - Consultation .......................................................................................................................................... 77
Clause 17.3 - WOL Proposals ..................................................................................................................................... 78
Clause 17.4 - Reporting .............................................................................................................................................. 78
Clause 17.5 - Post Occupancy Evaluation .................................................................................................................. 78
Clause 17.6 - Rights and Obligations Not Affected .................................................................................................... 78
CLAUSE 18 - GENERAL ......................................................................................................... 78
Clause 18.1 - Equal Opportunity for Women.............................................................................................................. 78
Clause 18.2 - Indigenous Opportunities ...................................................................................................................... 78
Clause 18.3 - Safe Base Alert State System ................................................................................................................ 78
Clause 18.4 - IT Equipment ........................................................................................................................................ 79
Clause 18.5 - Protection of Personal Information ....................................................................................................... 79
Clause 18.6 - Moral Rights ......................................................................................................................................... 79
Clause 18.7 - Freedom of Information ........................................................................................................................ 80
Clause 18.8 - Long Service Leave .............................................................................................................................. 80
Clause 18.9 - Assignment ........................................................................................................................................... 80
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Clause 18.10 - Publicity .............................................................................................................................................. 80
Clause 18.11 - Classified Information......................................................................................................................... 80
Clause 18.12 - Manual of Fire Protection Engineering and Building Code of Australia Certification ....................... 81
CLAUSE 19 - NATIONAL CODE OF PRACTICE FOR THE CONSTRUCTION
INDUSTRY ............................................................................................................... 81
Clause 19.1 - General .................................................................................................................................................. 81
Clause 19.2 - Responsibility not Affected .................................................................................................................. 81
Clause 19.3 - Notice of Effect on Compliance with National Code and Guidelines ................................................... 82
Clause 19.4 - Records ................................................................................................................................................. 82
Clause 19.5 - Access and Documents ......................................................................................................................... 82
Clause 19.6 - Project Agreements ............................................................................................................................... 82
CLAUSE 20 - COMMERCIAL-IN-CONFIDENCE INFORMATION ........................................... 82
Clause 20.1 - General .................................................................................................................................................. 82
Clause 20.2 - Commercial-in-Confidence Information ............................................................................................... 83
CLAUSE 21 - FAIR WORK PRINCIPLES ................................................................................ 83
Clause 21.1 - General .................................................................................................................................................. 83
Clause 21.2 - Responsibility not Affected .................................................................................................................. 83
ANNEXURE A - CONTRACT ADMINISTRATOR'S FUNCTIONS ........................................... 84
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SECTION 1 - INTRODUCTION
1.
GENERAL INFORMATION ABOUT THE MANUAL
1.1
General
The Department of Defence Head Contract (HC-1 2003) Contract Manual (Manual) comprises six volumes
being:
(a)
Volume 1: Introduction to HC-1 2003;
(b)
Volume 2: Completing the Tender and Contract Documents;
(c)
Volume 3: Clause-by-clause Guidance (for the Conditions of Contract);
(d)
Volume 4: Flowcharts (for the Conditions of Contract);
(e)
Volume 5: Proforma Notices (for the Conditions of Contract); and
(f)
Volume 6: Clause-by-clause Guidance for the Special Conditions.
This Volume 3 provides clause-by-clause guidance on the Conditions of Contract.
This Manual has been prepared solely for the purpose of providing internal guidance to Defence
personnel. Any use by non-Defence personnel is unauthorised. No responsibility will be taken by the
Commonwealth of Australia or the advisers assisting in the preparation of the Manual, for any such use,
including any purported reliance on the guidance provided by the Manual. The Manual is not intended to
be a substitute for legal advice, and unless expressly agreed in writing by the Commonwealth of Australia,
nothing in the Manual will alter or affect the respective rights, obligations and liabilities of the parties
under any contract.
This Manual is structured as an on-line reference tool located on the Defence Infrastructure Management website
(see www.defence.gov.au/im/). A printable version of each volume of the Manual is also available on the
Defence Infrastructure Management website. However, it is anticipated that the Manual will be updated and
supplemented from time to time. For this reason, if personnel have printed a version of the Manual, they should
refer regularly to the Defence Infrastructure Management website to ensure that they are referring to the latest
release. The release reference is printed on the front page of each volume of the Manual. Personnel should also
be aware that legal and policy changes will impact on the content of this Manual from time to time. Personnel
are responsible for ensuring that they understand how such changes may impact on their project.
The Contract identifies defined terms (generally, these are defined in clause 1.1 of the Conditions of Contract) by
using a capital letter – e.g. "Completion", "Commonwealth Risks" etc. The Manual follows this convention.
1.2
No substitute for reading the Contract
The Manual does not attempt to discuss all aspects of tender and contract administration in detail, so it is no
substitute for reading the Contract and – if necessary – obtaining policy, legal or other specialist guidance.
Further, the Manual does not provide detailed advice in relation to matters not expected to arise in the day-to-day
administration of the Contract, such as termination of the Contract or dealing with disputes. The need to seek
specialist advice in extraordinary circumstances such as these is flagged throughout the Manual. If such
circumstances arise, Defence and the Contract Administrator will need to seek specialist advice. If in doubt,
contact the Directorate of Construction Contracts.
2.
BACKGROUND TO THE CLAUSE BY CLAUSE GUIDANCE
This Volume 3 provides guidance on each clause of the Conditions of Contract, explaining the purpose of the
clause within the Contract and matters of which personnel should be aware in relation to it. Interspersed
throughout the clause-by-clause guidance is general advice about issues likely to be encountered in the
administration of the Contract, such as:
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(a)
communication and meetings with Contractor personnel; and
(b)
dealing with claims made by the Contractor, including those in respect of the primary risk areas of
time, cost (including variations) and quality.
It also provides a general discussion of the major themes within the Contract, including quality and defects, time
and progress, variations and payment procedures.
Note that guidance on each clause in the Invitation to Register Interest and the Tender Documents is set out in
Volume 2 and that guidance on each clause of the Special Conditions is set out in Volume 6.
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SECTION 2 - CLAUSE BY CLAUSE GUIDANCE
CLAUSE 1 - GLOSSARY OF TERMS, INTERPRETATION AND MISCELLANEOUS
Clause 1.1 - Glossary of Terms
This clause contains definitions of important terms used throughout the Contract. All defined terms are
identifiable as their first letter is in uppercase.
Clause 1.2 - Interpretation
This clause contains a number of provisions relating to how the Contract should be read and interpreted.
Of particular relevance to the Contract Administrator will be the provisions in paragraphs (k), (l), (m) and (n) of
clause 1.2 of the Conditions of Contract which define "day" in relation to particular clauses of the Conditions of
Contract.
Clause 1.3 - Miscellaneous
(a)
Governing Law: The governing law of the Contract is set out in the Contract Particulars. This is
usually the law of the State or Territory in which the Site is located. If the Site is located in one or
more States or Territories, a decision needs to be made by Defence about the appropriate governing
law for the Contract. As different jurisdictions’ laws may impact differently upon the Contractor’s
Activities, if there is any doubt as to which jurisdiction is to apply, legal advice should be sought.
(b)
Waiver: None of the terms of the Contract can be varied, waived, discharged or released unless, to
the extent that the term involves a request of one party seeking to waive a term or one party seeking
to waive an obligation of the other party, there is written notice to the other party or, otherwise, both
parties agree in writing. However, certain statutory obligations and equitable principles cannot be
contracted out of and therefore the parties need to remain very careful that they do not act in a way
that is inconsistent with the terms of the Contract.
(c)
Contract is entire agreement: Both parties acknowledge that the Contract constitutes the entire
agreement between them and supersedes all communications, negotiations, arrangements and
agreements made between the parties before the Award Date. Only those matters which are
contained in the Contract (as defined in clause 1.1 of the Conditions of Contract) constitute the
enforceable contract between the parties.
If a dispute arose in relation to the interpretation of the Contract, this clause 1.3(c) of the Conditions
of Contract would reinforce the principle that a court or arbitrator will not generally look outside of
the "four corners" of a written contract to find out what the parties intended their contract (i.e.
agreement) to mean.
Thus, any contract-specific matters which are at variance to, or beyond the scope of, the Contract
need to be incorporated within the wording of any one of the documents which comprise the
"Contract".
(d)
Joint and several liability: This clause is only relevant where a number of separate legal entities
make up the Contractor, such as where there is a consortium or joint venture. In such circumstances,
this clause seeks to preserve the right of Defence to take action against either or both of the separate
entities making up the Contractor. However, given new proportional liability legislation in a number
of jurisdictions that affects the traditional approach to joint and several liability, if the Contractor
will consist of more than one separate legal entity, legal advice should be obtained.
If proportional liability legislation applies (see commentary under clause 15.14 of the Conditions of
Contract), it may allow a person to reduce its liability, including liability under the Contract, to the
amount that a Court considers just having regard to the extent of its responsibility for the underlying
loss and damage (excluding personal injury), notwithstanding that it may have assumed
responsibility for the full amount of that loss and damage under the express terms of the Contract
(including by virtue of a 'joint and several liability' clause such as this clause).
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The proportional liability legislation is new and complex legislation which is not identical in each
State and Territory. As a result, advice concerning its potential or actual impact should be obtained
from the Directorate of Construction Contracts.
(e)
Severability of invalid terms: This clause provides that any provisions of the Contract which are
illegal, void or unenforceable are severable (i.e. removable) to the extent of the illegality,
unenforceability or other reason causing the provision to be void and that they will not invalidate any
other provisions of the Contract.
(f)
Confidentiality: The Contractor must not disclose the Contract or the Project Documents without the
prior written consent of Defence, except to the extent that the disclosure is necessary for the
Contractor to carry out its obligations under the Contract. Further, the Contractor must ensure that
any subcontractor entering into a subcontract in connection with the Contract enters into terms
requiring the subcontractor to comply with the Contractor's obligations of confidentiality as if the
subcontractor was the Contractor.
(g)
Indemnity: The Contractor provides under this clause an indemnity in favour of Defence for breach
of the Contract by the Contractor. The purpose of the indemnity is to make it easier for Defence to
recover amounts which it claims from the Contractor under the Contract. Legal advice should be
sought before taking any action in respect of the indemnity. See also commentary above in respect
of the potential impact of proportional liability legislation.
(h)
Survival of indemnities: All indemnities provided survive termination of the Contract and may be
relied upon and enforced by Defence in the event that the Contract has been terminated.
CLAUSE 2 - COMMENCEMENT
Clause 2.1 - Contractor's Obligations
This clause sets out some basic obligations regarding when the Contractor's Activities and construction of the
Works must begin.
The Contractor's Activities, being the entirety of the Contractor's obligations under the Contract (including
designing (if applicable) and preparing to construct the Works), must commence on the Award Date. This is to
be distinguished from the construction of the Works on Site (which is part of the Contractor's Activities), which
must be commenced by the later date set out in the Contract Particulars.
This clause also provides that the Contractor bears the cost of carrying out the Contractor's Activities unless it
states otherwise in the Contract.
Clause 2.2 - Commonwealth's Obligations
Clause 2.2(a) of the Conditions of Contract establishes the Contractor's right to access the Site and also contains
the limitations on that right. The Contractor is not given sole possession of the Site as it is in some building
contracts rather the Contractor is given sufficient access to carry out the Works.
Defence is not contractually obliged to provide access to the Site until the later of the conditions precedent
having been satisfied and the date specified in the Contract Particulars. The standard conditions precedent are:
(a)
that the Contractor has provided the Contract Administrator with the Approved Security (discussed
below);
(b)
that the Contractor has provided the Contract Administrator with evidence satisfactory to the
Contract Administrator that the insurances required in accordance with clause 5.4(c) of the
Conditions of Contract have been effected; and
(c)
that the Site Management Plan and the Occupational Health and Safety Plan have been finalised
under clause 9.2 of the Conditions of Contract.
The Contract Particulars may also specify further conditions precedent to access, such as completion of site
induction (if not covered in the Site Management Plan) or certain security clearances having been obtained.
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The Approved Security referred to in clause 2.2(a)(i)A1) of the Conditions of Contract is an unconditional
undertaking (see further guidance relating to security at commentary on clause 4 of the Conditions of Contract
below).
It is important that the Contractor has the relevant insurances in place prior to gaining access to the Site. The
insurance policies which the Contractor is required to provide under clause 5.4 of the Conditions of Contract are
construction risks insurance, public liability insurance and workers' compensation insurance. Additional forms
of insurance such as professional indemnity or errors and omissions insurance may also be required (refer to the
Contract Particulars). (See further guidance relating to insurance at commentary on clause 5 of the Conditions of
Contract below).
Other provisions of the Contract affecting access (as referred to in clause 2.2(b) of the Conditions of Contract),
are clauses 7.5 (Site Access), 7.6 (Contractor's Obligation to Provide Access) and 13.5 (Part of the Works or a
Stage) of the Conditions of Contract.
Clause 2.3 - Delayed Access
A breach of contract is any failure by Defence to perform or observe an obligation under the Contract. The
Contractor will usually be entitled to be paid agreed damages under clause 10.11 of the Conditions of Contract
(provided that clause 10.11 applies) if it is granted an extension of time due to a breach of contract by Defence.
Therefore, this clause makes it clear that a failure by Defence to grant access to the Site by the contractual date is
not a breach of the Contract.
The reason for this is that, as the Contractor is unlikely to have incurred significant delay or disruption costs as a
result of any delay to commencing work on Site, the agreed damages available under clause 10.11 of the
Conditions of Contract (which, if they apply, are intended to compensate the Contractor for delays arising from a
breach of contract by Defence once the Contractor has established a presence on Site) are likely to be greater
than the actual costs incurred.
Accordingly, clause 2.3 of the Conditions of Contract ensures that the Contractor's only entitlement is to the
actual costs reasonably incurred from delayed access and to an extension of time to any relevant Date for
Completion, where it is otherwise so entitled under clause 10.7 of the Conditions of Contract.
CLAUSE 3 - PERSONNEL
Clause 3.1 - Contract Administrator
The requirement that the Contract Administrator act as agent of Defence and not as a certifier when exercising
the Contract Administrator's functions under the Contract ensures that the Contract Administrator can act on
Defence's instructions and does not have to exercise its functions independently of these instructions. This is
appropriate given that the Contract Administrator will usually be a consultant to Defence.
Defence will generally engage the Contract Administrator from the Defence Infrastructure Panel (DIP). The
relevant agreement setting out the Contract Administrator's responsibilities in respect of a particular project will
be the "Terms of Engagement" under the DIP.
Regardless of the terms of the agreement between Defence and the Contract Administrator, as between the
Contractor and the Contract Administrator, the Contractor will be entitled to rely on the actions of the Contract
Administrator under the Contract. Defence will be bound by those actions of the Contract Administrator, as
against the Contractor, because the Contract Administrator is the agent of Defence. The Contractor must not
comply with any direction of Defence other than those expressly stated in the Contract.
To afford the Contractor a measure of comfort, disputes arising out of any direction of the Contract
Administrator which would ordinarily be classed as a certifying function (one in which the Contract
Administrator would have been required to act independently) may be referred to expert determination under
clause 15.2 of the Conditions of Contract. Clause 15.2 of the Conditions of Contract (by reference to the
Contract Particulars) specifies each of the clauses in respect of which disputes are to be dealt with in this way.
See the commentary below for clause 15.2 of the Conditions of Contract for a further explanation of those
clauses.
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A "direction" of the Contract Administrator is defined widely in clause 1.1 of the Conditions of Contract. That
wide definition is then adopted throughout the Contract including for the purposes of the following clauses:
(a)
clause 3.1 of the Conditions of Contract, under which the Contractor must comply with a direction
by the Contract Administrator given under the Contract;
(b)
clause 3.5 of the Conditions of Contract, under which a direction given to the Contractor's
Representative is deemed to have been given to the Contractor;
(c)
clause 5.3 of the Conditions of Contract, under which an instruction to the Contractor to reinstate
any loss or damage will be treated as if it were a Variation the subject of a direction by the Contract
Administrator in certain circumstances;
(d)
clause 6.4(b) of the Conditions of Contract, under which the Contractor is not relieved of any of its
Contract obligations because of a direction by the Contract Administrator in relation to the Design
Documentation;
(e)
clause 8.1(c) of the Conditions of Contract, under which the Contractor is required to construct the
Works in accordance with any direction of the Contract Administrator;
(f)
clause 16.1 of the Conditions of Contract, under which the Contractor must give a notice if it
believes a direction constitutes a Variation; and
(g)
the Contract Particulars, which lists the directions in respect of which disputes must be resolved by
an expert determination.
Set out below is guidance on the various ways in which the Contract Administrator may have contact with the
Contractor and a list of the specific functions of the Contract Administrator under the Contract:
(h)
Directions
Before issuing a direction (the scope of which is widely defined under clause 1.1 of the Conditions
of Contract), the Contract Administrator must ensure that it has the authority to issue the direction
under the specific terms of the Contract. The Contract Administrator must also be aware that if a
direction changes the obligations of the Contractor, the Contractor may have subsequent entitlements
under the Contract against Defence. The Contract Administrator must always confirm such
directions with Defence before issuing them. The Contract Administrator should also note that it has
certain obligations to Defence under the terms of its agreement with Defence.
Whilst directions may be given orally, they should always be confirmed in writing so that written
evidence exists if ever required to be called upon; this is, in any case, required by clause 3.1 of the
Conditions of Contract. Therefore, if an oral notice is given, it should be followed by the relevant
completed proforma notice within 24 hours or otherwise as soon as practicable. A suite of proforma
notices is set out in Volume 5.
The Contract Administrator must ensure that it gives all directions in a timely manner, and in any
event within the timeframes required by the Contract. If it does not do so, the Contractor may be
entitled to an extension of time (and possibly Agreed Damages).
(i)
Notices under the Contract
As noted above, the Contract imposes obligations on the Contractor and the Contract Administrator
to give a notice to the other party in various circumstances. From the Contractor's perspective, its
notices must be given to preserve various entitlements under the Contract. From Defence's
perspective, the object of the notice requirements is to ensure that it is kept fully informed of
relevant developments and any circumstances in which it may be liable to pay extra money to the
Contractor.
All notices must be given in accordance with the particular requirements of the relevant Contract
provision (in particular, in terms of timing, content and signing).
(j)
Correspondence
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Correspondence with the Contractor should be treated in the same manner as detailed for directions
above.
Originals of correspondence from the Contractor should not be annotated with comments as these
may need to be disclosed to a Court or during an arbitration; many a court case and arbitration have
changed course because of ill-conceived comments.
Facsimile transmission slips must be retained to resolve any question as to date of receipt under
clause 16.8 of the Conditions of Contract.
Electronic mail (e-mail) is both an efficient and common form of communication in business today.
While email does constitute "writing" and may be used for the purposes of providing directions
under the Contract:
(i)
e-mail can at times be unreliable so that questions as to whether (and, if so, at what time)
a direction was given or communicated may arise; and
(ii)
e-mail is not an acceptable method for the delivery or receipt of formal notices under the
Contract. See further guidance relating to the delivery of notices at clause 16.7 of the
Conditions of Contract below.
There are certain security issues associated with the use of project document management software
systems such as Aconex or equivalents. Advice from the Directorate of Construction Contracts
should be sought before incorporating software and such systems in the Contract. A special
condition may be required.
(k)
Specific functions of the Contract Administrator
The Contract Administrator must operate in accordance with the express provisions of the Contract.
This will include compulsory functions (many of which must be completed within a specified
timeframe) and some discretionary powers (e.g. ordering a Variation) which the Contract
Administrator will typically exercise at its discretion (subject to first having obtained Defence's
agreement).
Whilst there is no express obligation that the Contract Administrator act in any particular way when
exercising its functions, the general expectation is that it will apply the terms of the Contract. For
this reason, the Manual repeatedly emphasises the need for contract administration personnel to be
aware of - and apply - the terms of the Contract entered into by Defence. In other words, the
Contract Administrator should carefully consider its role under the Contract and the relevant
circumstances when exercising its functions. The Contract Administrator should also keep in mind
that many of its decisions which are made on a "certifier" basis are appealable. These decisions are
listed in the Contract Particulars (see the detailed discussion on clause 15.2 of the Conditions of
Contract).
The table set out in Annexure A of this Volume 3 lists all of the specific functions/duties of the
Contract Administrator under the Contract.
In addition to these specific functions, the Contract Administrator may also be required to carry out
additional functions which are implicit or otherwise necessary to enable the persons involved with
the project to carry out their respective activities.
Once the relevant function is identified in the table set out in Annexure A of this Volume 3, it is
necessary to go to the corresponding clause/s of the Contract to determine the exact circumstances in
which the function must, should or may be exercised and any further constraints or instructions as to
the exercise or discharge of that particular function. Commentary on each of these clauses is
provided in the relevant part of the Manual.
Clause 3.2 - Replacement of Contract Administrator
Defence is entitled to change the Contract Administrator at any time.
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A proforma notice informing the Contractor that the Contract Administrator has been replaced titled
'Replacement of Contract Administrator' is provided in Volume 5 [insert link].
Clause 3.3 - Parties' Conduct
This clause places a general obligation on the parties to co-operate with each other. It reflects the general law
position.
Clause 3.4 - Contract Administrator's Representative
As the Contract Administrator's functions under the Contract are broad, it will often be necessary for the
Contract Administrator to delegate certain functions to others. These representatives will be set out in the
Contract Particulars, and will carry out the functions as set out in the Contract Particulars. The Contractor must
comply with any instructions or directions issued by a representative of the Contract Administrator (CARs).
As at the Award Date, one or a number of CARs may be listed in the Contract Particulars, together with their
respective functions. See Volume 2 for further guidance.
CARs may also be appointed after the Award Date by the Contract Administrator. The Contractor must also
comply with any instructions or directions issued by CARs appointed after the Award Date as long as the
Contract Administrator has provided written notice to the Contractor that the person has been appointed as its
representative in respect of the described functions.
A proforma notice titled 'Appointment of Contract Administrator's Representative' is provided in Volume 5
[insert link].
The Contract Administrator must also provide written notice to the Contractor of any revocation of authority to a
representative under clause 3.4(c) of the Conditions of Contract. A proforma notice titled 'Revocation of
appointment of Contract Administrator's Representative' is provided in Volume 5 [insert link].
Clause 3.5 - Contractor's Representative
The Contractor must nominate a person as the Contractor's Representative. This person must be named in the
Contract Particulars. The Contractor's Representative may be replaced from time to time by the Contractor in
accordance with the procedures set out in clause 3.6 of the Conditions of Contract.
The Contractor's Representative must be present on Site at all times reasonably necessary to ensure that the
Contractor is complying with its obligations under the Contract.
Clause 3.6 - Key People
The primary purpose of this clause is to ensure that the Contractor retains the people on the project whom it
represented would be put on the project in its tender.
The Contractor must obtain the written approval of the Contract Administrator if it wishes to replace any of these
Key People (as specified in the Contract Particulars). Proforma notices titled 'Request to replace Key Person'
and 'Response to request to replace Key Person' (respectively) are provided in Volume 5 [insert links].
The Contract Administrator has an absolute discretion as to whether to approve a replacement and is not required
to give reasons for any rejection or approval.
Clause 3.7 - Removal of Persons
This clause allows the Contract Administrator to remove any persons from the Site who, in its reasonable
opinion, are guilty of misconduct, incompetence or negligence. The Contract Administrator must issue a written
notice to the Contractor directing the Contractor to remove the person from the Site. The Contractor must ensure
that this person is not again employed in the Contractor's Activities.
A proforma notice titled 'Removal of Person' is provided in Volume 5 [insert link].
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Misconduct generally means wrongful, improper, or unlawful conduct, motivated by a premeditated or
intentional purpose or by obstinate indifference to the consequences of one’s acts. Misconduct may involve
either gross negligence or a deliberate departure from accepted standards so as to portray indifference and an
abuse of privileges.
Incompetent does not have a strict legal meaning. This term generally means a lack of ability or skill to do
something successfully or as it should be done.
Negligence is a term with a complex legal meaning. For the purposes of clause 3.7 of the Conditions of
Contract, negligent conduct would be conduct which is characterised by a lack of care or attention to things
which are that person's responsibility (which may or may not result in loss, injury or damage).
There is no requirement that the Contract Administrator prove that the individual is guilty of the conduct alleged,
but the Contract Administrator should be careful to ensure that there are reasonable grounds for its belief and
should maintain records where possible, especially because the removal of a person from Site may cause
industrial unrest. If the Contract Administrator is in any doubt as to the acceptability of conduct of persons on
the Site, it should seek advice from the Directorate of Construction Contracts and, potentially, legal advice from
a member of the Defence Legal Panel.
Clause 3.8 - Industrial Relations
This clause expressly provides that it is the Contractor's responsibility to ensure that the relevant industrial
regulations, conditions and other requirements are complied with. The Contractor is also required to assume sole
responsibility for managing all aspects of industrial relations.
However, industrial relations issues, unrest or disputes can cause significant problems on a project. Thus, it is
important that the Contractor keep the Contract Administrator fully and promptly informed of industrial relations
issues or problems which affect or are likely to affect the carrying out of the Contractor's Activities.
Clause 3.9 - Project Review
The purpose of this clause is to ensure that there are regular meetings between the parties involved in the project.
This is a common feature of construction projects and is aimed at maintaining good communication and
information flow.
The Contractor is required to attend every monthly meeting or such other meetings as the Contract Administrator
requires. The Contract Administrator can also nominate other persons to attend the meetings. More than mere
attendance at the meeting by the Contractor is required and the obligations of the Contractor at each meeting are
set out in the clause. The Contract Administrator is responsible for preparing agendas for the meeting, preparing
minutes of the meeting and distributing the minutes to each attendee at the relevant meeting after such meeting
concludes.
Set out below is a discussion on both meetings under clause 3.9 of the Conditions of Contract and reporting
generally, along with a note on the effect of informal contact and collaboration:
(a)
Reports and Meetings
Reports and meetings are a vital part of contract administration and are valuable for agreeing facts,
committing people to objectives, and problem identification and solving.
Meetings must be planned and managed. Minutes should be accurately recorded by the Contract
Administrator of meetings and agreed and signed by both the Contract Administrator and the
Contractor (or their relevant representatives). Accurate minutes will provide a written record of the
discussion and instructions in such circumstances.
Notwithstanding clause 1.3(b) of the Conditions of Contract, which provides that Contract terms
cannot be waived except in certain circumstances, the Contract Administrator should ensure that
there are no representations made at the meetings which might subsequently be argued to be a
waiver of Defence's strict contractual rights.
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Care also needs to be taken to ensure that matters discussed at meetings which constitute "directions"
are followed up with a written direction.
(b)
Informal Contact and Collaboration
Under the Contract, it is to be expected that informal discussions and meetings will take place during
the course of the Works. These informal interactions are important. However, it is imperative that
the Contract Administrator (and the CARs) at all times takes utmost care during any such
discussions or meetings not to deal with, by implication or directly, any matters that should be dealt
with formally.
Should matters requiring notification be discussed in a preliminary manner, the Contract
Administrator must ensure that formal notification (in writing) is issued promptly.
If there are any matters in doubt following informal contact, the Contract Administrator should take
steps to clarify those matters and inform the Contractor.
At all times it is important to record such contact in a log or diary kept as a formal record of contact
with the Contractor. This is particularly so in the case of telephone conversations which, if
necessary, should be confirmed in writing if the subject matter impacts on the Contract or the
Contractor's Activities.
CLAUSE 4 - SECURITY
Clause 4.1 - Form
The Contract provides for only one type of security to be provided, namely, the form of Approved Security
(which is an unconditional bank undertaking, that is, a "bank guarantee"). The Approved Security must be given
to Defence within 14 days of the Award Date.
Defence will have determined the appropriate amount that the unconditional undertaking must be for and this
will be set out in the Contract Particulars (see Volume 2 for further guidance). The total amount of security for
head contracts, and construction contracts generally, is usually between 5% and 10% of the Contract Price. To
the extent that any part of the Contractor's Activities is carried out in Queensland, a warning has been inserted
(in the Contract Particulars) about the effect of section 67K(2) of the Queensland Building Services Authority
Act 1991 (Qld). If the amount of security exceeds 5% of the Contract Price and any part of the Contractor's
Activities is conducted in Queensland, this warning needs to be executed by the Contractor and by Defence.
Defence's expectation is that the financial institution issuing the guarantee will be an Australian trading bank. If
the Contractor seeks to provide a form of security from another type of institution (such as an insurance
company)- or not strictly in accordance with the form set out in the Schedule of Collateral Documents (such as
an insurance bond or retention money) - specialist advice should be sought.
The Contract Administrator should check that the Approved Security has been completed as follows:
(a)
the name of the bank should be inserted in the description of the parties;
(b)
Recital A of the proforma Approved Security should be completed with:
(c)
(i)
the date of the Contract between Defence and the Contractor;
(ii)
the name and address of the Contractor; and
(iii)
the location of the Site; and
clause 1 of the proforma Approved Security should be completed with the amount of security
required.
If the Contractor asserts that its bank wishes to use its own form of unconditional undertaking rather than the
form in the Schedule of Collateral Documents, this may be acceptable to Defence, but only if all of the
requirements in the Defence proforma appear in substance in the alternative version. In all such circumstances,
legal advice should be sought.
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It is acceptable and not uncommon for Contractors to lodge two or more bank undertakings, each for half (or
another amount representing part of) the amount of the total security required. For example, this enables release
of one undertaking under clause 4.2(a) of the Conditions of Contract upon issue of a Notice of Completion of the
Works, while still retaining the other until the expiration of the last Defects Liability Period.
Lodgement of the Approved Security is a condition precedent to access of the Site (see clause 2.2 of the
Conditions of Contract) and is also a condition precedent to making a payment claim (see clauses 12.3(a)(i) of
the Conditions of Contract). If not provided, the Commonwealth may also issue a notice of default under clause
14.2(c) of the Conditions of Contract.
There are no limitations expressly set out in the Contract on when Defence can have recourse to the security.
However, urgent legal advice must be obtained if recourse is proposed. Failure to do so will almost certainly
result in proceedings for an injunction being issued by the Contractor, and potentially significant exposure to
Defence.
Additional Approved Security may also be provided by the Contractor under clause 12.7 of the Conditions of
Contract when payment claims are made in respect of unfixed goods and materials. This type of Approved
Security is different (in terms of what it secures) from that provided under clause 4 of the Conditions of Contract
and should be dealt with separately and in accordance with clauses 12.7 and 12.8 of the Conditions of Contract.
Clause 4.2 - Release
The general intent of this clause is to provide for the Contract Administrator to release 50% of the security upon
Completion and the remaining 50% at the end of the last Defects Liability Period.
Release of part of a bank undertaking is a simple task, achieved by the Contract Administrator simply notifying
the issuing bank that the bank's liability to Defence under the particular undertaking is to be reduced by the
relevant amount as determined by the Contract Administrator to a stated revised maximum aggregate sum. A
copy of that instruction should be forwarded to the Contractor for its information.
Banks throughout Australia are accustomed to this action and should simply confirm to Defence that the
reduction has occurred.
At no time should the original bank undertaking be returned to the Contractor or its bank until a replacement
undertaking is physically held, except when finally released as required under the Contract.
The actual guarantee should in reality only ever be forwarded to the issuing bank (and not the Contractor) as it is
an undertaking by the bank to Defence and is available without reference to the Contractor. However, the
Contractor should be advised where this occurs.
As mentioned above, the Approved Security should be released in three stages. Half of the security should be
released within 14 days of the issue of a Notice of Completion for the Works or for each and every Stage. A
further amount, as the Contract Administrator considers to be reasonable to ensure Defence's interests are not
prejudiced having regard to the remaining defective work, is released within 14 days of the last Defects Liability
Period (excluding any extended Defects Liability Period).
The remainder of the security must be held until the later of the end of the last extended Defects Liability Period
and when the Contractor has complied with all of its obligations under the Contract (clause 4.2(c) of the
Conditions of Contract).
The unconditional undertaking is to be retained by Defence and treated as cash. In this regard, the unconditional
undertaking is to be retained by the Collector of Public Moneys. Do not keep the unconditional undertaking
on file. Please refer to the relevant policy at [insert link].
Clause 4.3 - Interest
This clause limits the amount of interest that Defence will be liable to pay to the Contractor if it makes a call on
any security and obtains an amount of cash greater than required. The interest is to be simple interest with the
applicable interest rate being that set out in the item of the Contract Particulars applicable to clause 12.13 of the
Conditions of Contract.
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Clause 4.4 - Related Company Guarantee
Defence may issue a written notice to the Contractor requiring the Contractor to provide a related company
guarantee in the form set out in the Schedule of Collateral Documents. A proforma notice titled 'Request to
provide Deed of Guarantee, Undertaking and Substitution' is provided in Volume 5 [insert link].
Where required, the Contractor must provide the Deed of Guarantee, Undertaking and Substitution on the date
set out in the request and as a condition precedent to making a payment claim under clause 12.3(a)(i) of the
Conditions of Contract.
The purpose of the related company guarantee is to give additional comfort to Defence that the Contractor's
obligations are backed by the funds of a related company, usually its parent company.
The decision as to whether or not to require a related company guarantee will be based upon considerations that
may include:
(a)
the financial status of the Contractor (i.e. is it a $2 company with no substantial assets?);
(b)
the Contractor's asset base within Australia (if it is a member of a foreign group); and
(c)
the value of the project.
The deed is between Defence, the Contractor and a third party, the Guarantor, which is to be a related body
corporate (generally, the Contractor's parent company) of the Contractor. The Guarantor promises four primary
things under this deed:
(d)
it guarantees the Contractor's performance under the Contract;
(e)
it promises to undertake and complete the Contractor's Activities if the Contractor has failed to do
so;
(f)
it agrees to indemnify Defence against loss, damage and expenses caused by the Contractor's actions;
and
(g)
it makes certain representations and warranties about the execution of the deed itself.
CLAUSE 5 - RISKS AND INSURANCE
General issues
A number of issues commonly arise in relation to questions of risk and insurance, including:
(a)
the nature and amount of insurance required for each project; and
(b)
the applicability of limitations on liability to Defence contracts.
A general discussion of each of the above issues is set out below.
(c)
Amount and nature of insurance required
The amount of insurance required will depend on an assessment of the relevant risks and this may
differ from project to project. If required, assistance can be obtained from the Directorate of
Construction Contracts.
An essential distinction needs to be kept in mind between "direct loss" policies, which provide cover
against loss or damage to the insured's own property or property for which it is responsible and
"liability" policies which, as the name suggests, provide cover against legal liabilities either toward
third parties, for personal injury or property damage, or towards the Commonwealth for other
conduct, such as negligence.
In all cases, a basic principle is that insurance follows the risk, never the other way around.
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This means that the risk allocation provisions in the Contract are inextricably linked to the insurance
requirements and the Contractor will only be required to provide insurance (either for its own benefit
or the benefit of Defence), to the extent that it bears the risk of loss of or damage to property or bears
legal liability in connection with the Contractor's Activities.
(d)
Limitations on liability
As with the "expert" standard of care issue, a number of contractors and consultants to Defence have
requested that the Contract include a limitation on the amount of the Contractor's liability under the
Contract. However, while it is a matter of commercial judgment to be carefully considered in each
case in light of the risks involved, it is not general Defence policy to agree to a limitation of liability,
in respect of risks or obligations which the Contract places on the Contractor. Rather, liability is to
be assessed in accordance with general law and it is a matter for the Contractor to insure, pass
through or otherwise manage this liability. Any departure from this policy may only occur in special
commercial circumstances, subject to certain Delegate approvals.
The relevant policy on this matter can be found at [insert link]. Further assistance can be obtained
from the Directorate of Construction Contracts.
Clause 5.1 - Risk of Works
Until the issue of a Notice of Completion for the whole of the Works, the Contractor bears the risk of and
indemnifies the Commonwealth against all loss or damage to the Works, Plant, Equipment, Work and any
unfixed goods or materials unless it arises from a "Commonwealth Risk".
Commonwealth Risks are set out in clause 1.1 of the Conditions of Contract. They are risks which are generally
recognised as being uninsurable.
After the issue of a Notice of Completion for the whole Works, the Contractor's risk is substantially reduced. It
is limited to any loss or damage to the Works which results from something that the Contractor does (or does not
do) while it is rectifying defects or from something which occurred before the issue of the Notice of Completion.
Once again, the Contractor's risk does not include a Commonwealth Risk.
Clause 5.2 - Other Risks
Apart from the risk of loss of or damage to the Works, the Contractor also has to compensate Defence for the
loss of or damage to any other Defence property which arises out of the Contractor's Activities. Further, the
Contractor indemnifies Defence against third party claims for loss of or damage to property or personal injury or
death of persons. Once again, the Contractor is not liable if the loss, damage or injury arises from a
Commonwealth Risk. The Contractor's liability will be reduced to the extent that an act or omission of Defence,
the Contract Administrator or an Other Contractor may have contributed to the loss, damage, injury or death.
Clause 5.3 - Reinstatement
During the period in which the Contractor bears the risk of loss or damage under clause 5.1 of the Conditions of
Contract, it must promptly make good any loss of, or repair the damage to, the relevant materials or Works. This
clause operates so that, although the Contractor may ultimately be able to recover for any of those losses or
damages under its insurance policy, the Contractor is not entitled to hold off on reinstating the materials or
Works to their previous state whilst any insurance claim is finally determined.
Where the loss or damage arises from a Commonwealth Risk, the Contractor must replace, or otherwise make
good any loss of or repair the damage to the relevant materials or works as directed by the Contract
Administrator. Such replacement, making good or repair is treated as a Variation the subject of a direction by
the Contract Administrator.
Clause 5.4 - Contractor Insurance Obligations
This is the primary clause of the Contract requiring the Contractor to effect different types of insurance. There
are a number of different types of insurance listed in the clause itself and additional types of insurance may be
specified in the Contract Particulars. The precise nature and extent of the insurances required will differ
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according to the nature and circumstances of the Contract although some, such as statutory Workers
Compensation Insurance, will almost always be required.
The Contract Particulars set out the detailed requirements of the insurance required by the Contractor.
The policy limit amounts will vary according to the "Probable Maximum Loss" associated with the risk, which is
calculated on a project-by-project basis. An important consideration will be whether or not, in each case,
Defence requires the policy limit to be based on an "each and every claim/occurrence" basis (that is, subject to
automatic reinstatement after each paid loss) or is satisfied with an annual aggregate policy limit. Further
information on this distinction is available from the Directorate of Construction Contracts.
In short, policy limits and the basis of those limits is a complex commercial question, which will depend on
factors such as the relative cost and availability of one or more reinstatements and the likelihood of losses
amounting to more than the policy limit in a single policy year. Where a Contractor has arranged insurance
under a worldwide program, the possibility that the policy limit may be eroded by claims made outside Australia
will also need to be considered.
Regardless of the existence of the terms of the insurance policies put in place by the Contractor, it must be
remembered that it is the Contractor's responsibility to bear the risk of and indemnify Defence against the
liabilities set out in the Contract (clauses 5.1 and 5.2 and also clause 1.3(g) of the Conditions of Contract). As a
consequence, caution must be exercised in directing the Contractor in relation to the insurance provisions under
the Contract so that these liabilities are not shifted to Defence.
Further assistance with respect to insurance is available from the Directorate of Construction Contracts.
Generally the Contractor bears, apart from the things defined as "Commonwealth Risks" (see clause 1.1 of the
Conditions of Contract), the risk of:
(a)
any loss of or damage to the Works or a Stage, Plant, Equipment and Work, and any unfixed goods
and materials until the issue of the relevant Notice of Completion (clause 5.1(a) of the Conditions of
Contract);
(b)
after the issue of a Notice of Completion, any loss of or damage to the Works or the Stage arising
from any act or omission of the Contractor during the Defects Liability Period or prior to the issue of
the Notice of Completion (clause 5.1(b) of the Conditions of Contract); and
(c)
damage to Defence property or liability for a claim by a third party in respect of personal injury or
property damage for the entire Contractor's Activities (clause 5.2 of the Conditions of Contract).
The insurance policies which the Contractor must have in place (clause 5.4(a) of the Conditions of Contract) are:
(d)
Construction Risks Insurance and Public Liability Insurance;
(e)
Workers Compensation Insurance (and Employees Liability Insurance, if applicable) in each State
and Territory in which Contractor's Activities are performed/Contractor's employees are
employed/reside;
(f)
if an amount is included in the Contract Particulars for such insurance - Errors and Omissions
Insurance or Professional Indemnity Insurance. When the delivery method is design and construct or
document and construct, this Contract Particular should always be completed; and
(g)
other insurance on such terms as set out in the Contract Particulars.
The above insurances must be in place from the Award Date and before any of the Contractor's Activities are
commenced. The provision to the Contract Administrator of evidence (which is satisfactory to the Contract
Administrator) that the policies are current is also a condition precedent to making a payment claim under clause
12.2 of the Conditions of Contract. The Contract Administrator must also be satisfied that the policies have been
taken out before Defence is required to give the Contractor access to the Site.
As stated above, the Contractor must provide the Contract Administrator with evidence which is satisfactory to
the Contract Administrator of the insurance arrangements as required under clause 5.4(c) of the Conditions of
Contract. The determination as to requisite evidence of the arrangements and of currency is for the Contract
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Administrator to make. However, receipts or certificates from the insurer (or a major reputable insurance
broker) indicating the policy number, expiry date, parties' names etc. could satisfy the currency requirement,
although it would be sensible (bearing in mind the provisions of the Contract) for copies of all schedules and
endorsements to be obtained in full showing the limits of cover available together with cross liability clauses,
any variation and notice provisions and exclusions in the policy to make sure the arrangements are satisfactory.
A proforma notice for the Contract Administrator to request this from the Contractor titled 'Request to produce
evidence of currency' is provided in Volume 5 [insert link].
The insurance arrangements should be carefully examined for compliance and, where necessary, the Contract
Administrator should seek specialist advice regarding insurance details provided by Tenderers at the tender
stage.
It is relatively common for a Contractor to state that confidentiality provisions prevent the Contractor from
complying with the Contract Administrator's requests for details of coverage and supporting evidence. This is
unacceptable, as confirmation that the insurance is in place and on the required terms is fundamental to the
Contract. However, where there are sufficient commercial reasons to do so, the Contract Administrator may be
prepared to accept confirmation from an international insurance broker that the terms of insurance accord with
the requirements of the Contract. Further advice should be sought from the Directorate of Construction
Contracts.
Diary entries should be made by the Contract Administrator to follow up and ensure appropriate
renewals/extensions to policies occur as necessary during the performance of the Contractor's Activities, the
Defects Liability Period and (for the purpose of the Professional Indemnity Insurance and Errors and Omissions
Insurance) following the end of the Defects Liability Period.
The Contractor should notify the Contract Administrator if it is given a notice of expiry, cancellation or
rescission of any required insurance policy. Proforma notices titled 'Notice of expiry, cancellation or rescission
of insurance policy', 'Response to notice of expiry, cancellation or rescission of insurance policy', 'Notice of
replacement insurer' and 'Request to produce evidence that replacement insurance complies with the Contract'
are provided in Volume 5 [insert links].
Proforma notices titled 'Request to [cancel an insurance policy/allow an insurance policy to lapse]' and
'Response to request to [cancel an insurance policy/allow an insurance policy to lapse]' are also provided in
Volume 5 [insert links] for the Contractor to request permission to cancel an insurance policy or allow an
insurance policy to lapse as required under clause 5.4(e)(iv) of the Conditions of Contract and the Contract
Administrator to respond to any such request.
Further, a proforma notice titled 'Notice of event in relation to insurance policy' is also provided in Volume 5
[insert link] for the Contractor to notify the Contract Administrator of an event that may result in the lapsing,
cancellation or rescission of an insurance policy as required under clause 5.4(e)(v) of the Conditions of Contract.
When reviewing policy documents, Defence must ensure that the policy covers all activities required in
performance of the Works and does not exclude (if applicable):
(h)
removal of asbestos;
(i)
tunnelling; and
(j)
activities near to air fields,
as this cover may be specifically required for the purposes of a particular project
The insurance may exclude risks detailed below for which Defence is responsible (see the definition of
"Commonwealth Risks" in clause 1.1 of the Conditions of Contract). For example, risks commonly excluded
from Construction Risks Insurance and Public Liability Insurance Policies include:
(k)
war;
(l)
invasion;
(m)
act of foreign enemies;
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(n)
hostilities (whether war has been declared or not);
(o)
civil war;
(p)
rebellion;
(q)
revolution;
(r)
application of military or usurped power or martial law or confiscation by order of any government
or public authority; and
(s)
ionising radiations or contaminations by radioactivity from any nuclear fuel or waste.
It should be noted that Defence does not accept liability for the design and construction of the Works even in the
event that the Commonwealth's Novated Design Consultants prepare part or all of the design work under clauses
6.13 and 6.14 of the Conditions of Contract.
There are some specific matters relating to each type of insurance. Some aspects to consider when reviewing
policy documents are:
(t)
Construction Risks Insurance:
This is an occurrence based direct loss insurance (see guidance on clause 5.6 of the Conditions of
Contract below) which may also include a liability insurance extension covering liabilities for
personal injury and property damage arising out of the Contractor's Activities. It is defined in clause
1.1 of the Conditions of Contract as a policy of insurance:
(i)
covering Defence, the Contractor and all subcontractors for loss of or damage to and
sometimes for liabilities arising out of or in connection with the works in progress; and
(ii)
insuring at minimum all the matters referred to in clause 5.1 of the Conditions of
Contract for which the Contractor bears the risk of loss or damage resulting from any
insurable event. This should include at least the following:
A.
temporary works and structures;
B.
construction plant and equipment;
C.
components of the Works stored on site;
D.
components of the Works during transit or whilst being fabricated or stored
off site;
E.
materials or equipment provided to the Contractor by Defence for
incorporation into the Works;
F.
removal of debris;
G.
escalation costs;
H.
expediting costs such as overtime wages, express freight etc. necessary to
expedite repair of damage; and
I.
cost of mitigating further damage or loss including fees to any government,
local government or statutory authority.
Further:
(iii)
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the policy should cover all activities required in the performance of the Works and
should not (if they are applicable to the Contract) exclude removal of asbestos,
tunnelling activities, activities near to air fields etc.;
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(u)
(iv)
the cover provided by this policy must extend to the issue of the last Notice of
Completion for the Works or a Stage unless any loss or damage to the Works or the
Stage arises from any act or omission of the Contractor during the Defects Liability
Period or from an event which occurred prior to the issue of the Notice of Completion
for the Works or the Stage;
(v)
the minimum coverage level must be set out in the Contract Particulars; and
(vi)
if the Contract requires it, demolition-related losses and liabilities also need to be
covered. This is important to check, as they are often excluded.
Public Liability Insurance:
This is liability based insurance (see below). It may be purchased as a stand-alone policy, in respect
of static risks, or as an extension of a Construction Risks Insurance policy in respect of Works in
progress.
This policy must cover Defence, the Contractor, the Contract Administrator and all subcontractors
(including Subcontractors) for their respective liabilities:
(i)
to third parties; and
(ii)
to each other,
for loss of or damage to property or the death of or injury to any person arising out of, or in any way
in connection with the Contractor's Activities. A pure Public Liability Insurance policy is not
required to cover liabilities insured under Construction Risks Insurance, Worker's Compensation
Insurance, Employees Liability Insurance, Professional Indemnity Insurance or Errors and
Omissions Insurance.
The level of cover must be not less than the amount per occurrence and in the aggregate specified in
the Contract Particulars. It would not be unusual to have a level of at least $20 million and up to
$150 million. However, the amount depends on a number of factors, including the risk of loss or
damage to persons or property or the death or injury of any person and the "Probable Maximum
Loss" amount. For example, the risks in respect of a Site located in a rural or sparsely populated
area may be less than those risks in respect of a Site located in a metropolitan area or on a highlypopulated Base.
As stated above, in addition to bodily injury and damage to property of third parties, the policy must
cover liability for loss and damage to other existing property of Defence (not the Works), for
example, an existing building in which alterations/renovations are being undertaken.
The policy should provide cover, preferably in addition to the limit of liability (although it will often
be subject to a cap) for:
(iii)
defence (as in, legal and related) costs;
(iv)
costs of immediate medical/surgery and/or temporary repair/mitigation of further
damage;
(v)
all incidental expenses incurred in the investigation, negotiation, presentation and/or
defence of all claims; and
(vi)
all costs awarded against or agreed to be paid by the insured with the consent of the
insurer in connection with any liability covered by the policy.
The period of cover must extend to the end of the last Defects Liability Period, the rectification of all
Defects or the date upon which the Contractor ceases to carry out the Contractor's Activities
(whichever is the later).
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(v)
Workers' Compensation Insurance and Employees Liability Insurance
Again, this is liability based insurance (see below).
Where permitted by law, the policy should be extended to provide indemnity to Defence for its
statutory liability to the Contractor's employees.
The Contractor must ensure that each of its subcontractors legally required to do so has similar
insurance covering its statutory liability to employees.
This insurance must be held in accordance with the laws applicable in the relevant State or Territory
in the minimum amount required by law.
(w)
Professional Indemnity Insurance or Errors and Omissions Insurance:
These are "claims made" liability insurances and will respond only if the policy is current at the time
when a claim is made against the insured, as opposed to when the negligent or defective work was
performed. See further guidance under clause 5.6 of the Conditions of Contract below.
Professional Indemnity Insurance covers claims of civil liability made during the relevant policy
period against the Contractor for breach of professional duty on the part of the Contractor or its
subcontractors. This type of insurance will generally be required only where the Contractor is
undertaking design or design and supervision work under the Contract. It covers the Contractor's
duty to ensure that in performing such work it exercises the requisite professional skill and care. A
related form of this insurance is Errors and Omissions Insurance, which does not require professional
negligence as the basis of the insured's liability.
The insurance must be maintained for the whole of the period in which a person may make a claim
against Defence or the Contractor for faulty or negligent design or supervision i.e., the relevant
limitation periods.
The specified amount of cover ideally should be maintained for at least 7 years (or, if any part of the
Site is located in the Australian Capital Territory, New South Wales, South Australia, Northern
Territory, Tasmania or Victoria, the period is 11 years as the result of "long-stop" limitation periods
with respect to defective building work) after the latest of Completion or the date upon which the
Contractor ceases to carry out the Contractor's Activities. This is so that the policy is in place to
respond to any claim for breach of professional duty or professional negligence (e.g. faulty design
work) brought after the Works have been completed.
There may be some resistance with respect to the period of "run-off" coverage. In principle, if a
Contractor can afford to purchase ongoing professional indemnity cover in respect of its future
activities, it can reasonably be expected to buy run-off cover to meet its contractual obligations.
The level of cover must be as stated in the Contract Particulars. This is specified at the time of
tendering for the Contract. Contractors' offers will therefore be based upon that specified level. It
would not be unusual to have a level of at least $5 million in cover. However, that amount will
depend on the risks, circumstances and "Probable Maximum Loss" involved with the particular
project.
A further important point to note, in relation to Professional Indemnity Insurance, particularly in the
design and construct context, is that it often covers only consequential damage resulting from breach
of professional duty and excludes the cost of rectifying the negligent performance itself. If this
comes to light before any resultant damage has been suffered, the only claim against the Contractor
may be to have it properly perform the original task and the cost of this may be excluded from the
insurance.
Clause 5.5 - Failure to Insure
Clause 5.5 of the Conditions of Contract gives Defence the right to take out the insurance required under clause
5.4 of the Conditions of Contract if the Contractor fails to provide evidence of currency of the policy, or if the
insurance procured by the Contractor is not on terms satisfactory to the Contract Administrator. The costs of
such insurance are treated as a debt due by the Contractor to Defence. If the Contractor fails to procure the
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required insurance or fails to provide sufficient evidence of currency to the Contract Administrator or where the
Contract Administrator is not satisfied that the insurance is satisfactory, legal advice should be sought from a
member of the Defence Legal Panel before exercising the powers conferred by this clause.
Notwithstanding the above, clause 14.2 of the Conditions of Contract (see guidance below) provides that if the
Contractor fails to procure, maintain and provide evidence of the currency of the policies when requested as
required by clause 5.4 of the Conditions of Contract, Defence is entitled to issue a notice of default under clause
14.2(d) of the Conditions of Contract. If the Contractor then fails to procure, maintain or provide evidence of (as
the case may be) the relevant insurance within the required timeframe, Defence is then entitled to terminate the
Contract by written notice under clause 14.4(b) of the Conditions of Contract.
Clause 5.6 - Period of Insurance
This clause sets out the different requirements in relation to the period of time for which the Contractor must
maintain the various insurances required under the Contract. The period of cover required will differ depending
on the risk assumed by the Contractor under the Contract (i.e. whether the Contractor is responsible for design)
and whether the insurance is "claims made" or "occurrence based".
"Occurrence based" insurance will respond if it is current at the time that the damage was done regardless of
whether it is still current at the time when the actual claim is made against the insured. Construction Risks
Insurance, Public Liability Insurance, Workers' Compensation Insurance and Employees Liability Insurance are
all occurrence based insurances.
In contrast, Professional Indemnity Insurance and Errors and Omissions Insurance are "claims made" insurances
and so respond only if the policy is current at the time when the claim is made against the insured by a third
party. See further guidance under commentary on Professional Indemnity Insurance and Errors and Omissions
Insurance at clause 5.4 of the Conditions of Contract, above. This insurance must be maintained for the whole of
the period in which a person may make a claim against Defence or the Contractor for faulty or negligent design.
Where the Contract is terminated or completed prior to the expiration of the period for which the insurance is
required, it is the responsibility of the Contract Administrator (subject to the terms of its engagement) to ensure
that the relevant "run-off" insurances are nevertheless maintained for the periods required under the Contract.
Clause 5.7 - Notice of Potential Claim
This clause sets out the requirements for the Contractor to notify Defence in writing of any occurrence that may
give rise to a claim under any insurance policy, although slightly different obligations apply if the claim is in
respect of Professional Indemnity Insurance (on the basis that such policies often include circumstance or
notification provisions). This must be done "as soon as possible" after the Contractor becomes aware of the
occurrence or potential claim. A proforma notice titled 'Notice of potential claim under insurance policy' is
provided in Volume 5 [insert link] for the Contractor to complete when such an event has occurred.
The Contractor must also keep Defence informed of significant developments. A proforma notice titled 'Notice
of significant developments concerning claim' is provided in Volume 5 [insert link].
The Contractor is also required to ensure that its subcontractors similarly inform the Contractor and Defence in
respect of an occurrence which may give rise to claims by them.
Finally, the Contractor must notify the Commonwealth if the estimated total combined value of claims made
against the Contractor and claims which may arise from circumstances reported by the Contractor to its insurer
in a policy year would potentially reduce the available limit of policy indemnity for that year below the amount
required by the Contract. A proforma notice titled 'Notice of reduction of professional indemnity insurance
indemnity' is provided in Volume 5 [insert link].
Clause 5.8 - Procedure upon Loss or Damage
This clause sets out the procedure that the Contractor must follow if there is any damage to or loss of any part of
the Works or a Stage whilst the Contractor is responsible under clause 5.1 of the Conditions of Contract.
This procedure does not need to be followed for loss or damage to Plant, Equipment and Work or unfixed goods
and materials.
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If loss of or damage occurs to any part of the Works or a Stage, legal advice should be sought as soon as possible
from a member of the Defence Legal Panel.
Clause 5.9 - Cross Liability
This clause sets out the specific requirements for liability insurance policies which are required to cover the
interest of Defence as well as that of the Contractor and its subcontractors. This clause does not apply to Errors
and Omissions Insurance, Professional Indemnity Insurance or Workers Compensation Insurance since
additional interests are not covered under these policies. Nor does it apply to direct loss policies. Please see
further additional guidance on clause 5.4 of the Conditions of Contract above.
CLAUSE 6 - DESIGN AND DOCUMENTATION
General
HC-1 2003 can be used for three delivery methods, each of which reflects the different ways of allocating the
design responsibility under the Contract. These are:
(a)
Traditional/Construct Only
This is where Defence provides the design and the Contractor is engaged to construct the project in
accordance with the design. A construct only contract is predicated on the Contractor being
provided with a fully documented design at the time of tender with no further design work needed
except for shop drawings, the documentation of any variations and any design for Provisional Sum
Work. There is no provision in HC-1 2003 (construct only) for the review of shop drawings by the
Commonwealth (and its designers). If required, advice should be sought from a member of the
Defence Legal Panel.
(b)
Design and Construct
This is where Defence engages the Contractor to design and construct the project so as to meet the
needs of Defence (however they are specified). Defence's Works Description may include some
basic or incomplete designs and specifications which the Contractor will be required to complete.
(c)
Document and Construct
This is where Defence has commenced (and possibly advanced) the design of the project, usually by
engaging design consultants. The Contractor takes over that design (and, usually, has Defence's
design consultants novated to it) and so bears single line responsibility to Defence for design in a
similar manner to a design and construct contractor.
There is nothing that needs to be done to HC-1 2003 to determine which delivery method is being used, other
than the selection of the document and construct clauses in clauses 6.13 and 6.14 of the Conditions of Contract.
The choice of delivery method will be implicit in the contents of the Works Description, which sets out the
requirements for the Works (e.g. drawings, specifications).
Defence personnel should refer to "Infrastructure Division: Suite of Contracts - An Introduction" for more
information on the advantages and disadvantages of each of these delivery methods. Further information is also
available from the Directorate of Construction Contracts.
Clause 6.1 - Commonwealth's Documents
The documents and number of copies to be provided by Defence to the Contractor are to be specified in the
Contract Particulars. Depending on the type of project, documents provided by Defence to the Contractor might
include documents relating to the condition of the Site, documents relating to Defence's requirements for the
project, and any design documents prepared by Defence or its consultants.
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Clause 6.2 - Contractor's Design
The Contract will need to specify the design obligations (if any) of the Contractor and this will identify the
nature and extent of any "Design Documentation" to be produced by the Contractor. It should be noted that
"Design Documentation" is broadly defined in clause 1.1 of the Conditions of Contract.
The "Contract" includes the Works Description, and it is this document which more fully determines the nature
and extent of the Contractor's design obligations. For example, a "construct only" Works Description will
contain the fully documented and specified design for the Works. In a "design and construct" Works
Description, there may be concept drawings and performance-based specifications.
As part of its programming obligations, the Contractor must prepare a documentation program for approval by
the Contract Administrator as part of the program required under clause 10.2 of the Conditions of Contract.
When considering a program submitted by a Contractor, the Contract Administrator will need to allow sufficient
time for any review under clause 6.3(a)(ii) of the Conditions of Contract. The program should also take into
account the fact that the Contract Administrator may, upon review, reject any of the Design Documentation
submitted by the Contractor.
A flowchart titled 'Flowchart 1: Design' provided in Volume 4 [insert link] indicates the process for developing
the Design Documentation.
Clause 6.3 - Contract Administrator may Review Design Documentation
This clause deliberately provides that the Contract Administrator "may review" the design rather than, for
example, "approve" or "allow use of" the design. This seeks to avoid the argument that the Contract
Administrator has participated in the design process and in that way affected the Contractor's warranty under
clause 6.6 of the Conditions of Contract that the design is fit for its intended purpose.
The Contract Administrator may reject all or part of any submitted Design Documentation. There is no express
limit on the number of times that the Contract Administrator may reject a design. However, if it reasonably
believes that the design is not in accordance with the Contract, such rejection must be made within the number of
days set out in the Contract Particulars. The Contract Administrator should provide reasons as to why the
Design Documentation is being rejected.
A proforma notice titled 'Rejection of Design Documentation' is provided in Volume 5 [insert link] in the event
that the Contract Administrator rejects the submitted Design Documentation.
Clause 6.4 - No Obligation to Review
This clause anticipates the argument that warranties provided by the Contractor might be undermined or
derogated by Defence's participation in the design process.
This clause ties in with clause 6.3 of the Conditions of Contract and seeks to ensure that the Contractor's
warranty that the design is fit for its intended purpose (under clause 6.6(a) of the Conditions of Contract) is not
affected by any comments, review, rejection or permission to use that design by the Contract Administrator.
Despite this clause, the Contract Administrator should endeavour not to unduly interfere with the Contractor's
design. To do otherwise may lead to the Contractor being relieved of sole responsibility for design problems,
notwithstanding the existence of clause 6.4 of the Conditions of Contract.
Clause 6.5 - Copies of Design Documentation
The Contract Particulars will describe how many copies of the Design Documentation the Contractor is required
to provide on the particular project. The Contractor must submit to the Contract Administrator the number of
copies specified (in both hard and electronic copies) and in the format stated in the Contract Particulars. Further
guidance is provided in Volume 2.
Clause 6.6 - Fitness For Purpose
This clause sets out the overriding obligation of the Contractor that the Works be designed in such a way that
they will be fit for their intended purpose/s. This is the fundamental design and construct warranty.
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It is important that the Works Description clearly identifies and communicates the intended purpose of the
Works. However, over-prescription may limit the fitness for purpose warranty. Therefore, if there is any doubt
about whether this balance has been achieved, the Works Description should be referred to a specialist for
review.
Clause 6.7 - Availability
This clause is designed to ensure that the relevant documentation is available for review at any time. Other than
the documents specifically referred to in this clause, the Contract Administrator may direct that any other
"Project Documents" (as defined in clause 1.1 of the Conditions of Contract) be made available in accordance
with this clause.
Clause 6.8 - Licence over Project Documents
This clause is designed to ensure that Defence is able to exercise the rights held by the actual owner of the
Intellectual Property in the Project Documents. This includes the Design Documentation and any other material
created by the Contractor or subcontractors for the purpose of the project.
Whilst the clause does not purport to make Defence the owner of the Intellectual Property, its intent is to confer
all of the rights of the owner via a perpetual licence which arises immediately upon the creation of any Project
Documents or upon the provision of any Project Documents to Defence or the Contract Administrator, and
which survives the termination of the Contract on any basis.
Clause 6.9 - Intellectual Property Warranties
This clause is intended to ensure that the Contractor is able to grant the licences referred to in clause 6.8 of the
Conditions of Contract. This gives a separate right in Defence to take action against the Contractor if these
warranties are not complied with.
Clause 6.10 - Intellectual Property Rights
This clause requires the Contractor to ensure that the Contractor's Activities do not infringe any intellectual
property rights of any third party, and requires the Contractor to indemnify Defence against any claims should
any third party's intellectual property rights be infringed.
Clause 6.11 - Resolution of Ambiguities
This clause provides assistance to the Contract Administrator in determining how to resolve inconsistencies,
discrepancies or ambiguities within the documents comprising the Contract (as defined in clause 1.1 of the
Conditions of Contract), or between the Contract and the Design Documentation or any other Project Document.
The Contract Particulars set out the order of precedence for the standard Contract documents. Where additional
documents are stated to form part of the Contract in the relevant item in the Contract Particulars under clause 1.1
of the Conditions of Contract, such documents must also be included in the order of precedence list.
Clause 6.11(c) of the Conditions of Contract requires the Contractor and Contract Administrator to notify the
other party if it discovers an ambiguity, discrepancy or inconsistency.
Separate proforma notices are provided in Volume 5 [insert links] for either the Contractor or the Contract
Administrator to notify the other of an ambiguity, discrepancy, or inconsistency in documents which make up
the Contract and between the Contract and Design Documentation or any other Project Document titled 'Notice
of [ambiguities/discrepancies/inconsistencies] in documents which make up the Contract', and 'Notice of
[ambiguities/discrepancies/inconsistencies] between the Contract and Design Documentation or other Project
Documents' (respectively).
The Contract Administrator has 14 days after a notice describing the ambiguity, discrepancy or inconsistency has
been issued (by itself or by the Contractor) in which to instruct the Contractor as to the course it must adopt. A
proforma notice for such an instruction titled 'Response to notice regarding
[ambiguities/discrepancies/inconsistencies]' is provided in Volume 5 [insert link].
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Clause 6.12 - Access to Premises and Project Documents
The Australian National Audit Office (ANAO) requires particular rights to access the Contractor's premises and
to review certain project documents on Defence projects. This clause therefore provides a general right for
Defence (and any nominated person, which may include the ANAO) to access the Contractor's premises and the
Project Documents and makes the provision of installed software a condition precedent to Completion of each
Stage or the Works.
A proforma notice for the issuing of a request by the Contract Administrator titled 'Request for access to
premises and Project Documents' is provided in Volume 5 [insert link].
The Contractor must also ensure all subcontracts impose obligations on the subcontractor equivalent to the
Contractor's obligations arising out of clause 6.12 of the Conditions of Contract as if the subcontractor were the
Contractor.
Clause 6.13 - Commonwealth's Novated Design Consultants
This is an optional clause which does not apply unless the Contract Particulars state that it applies. This decision
will be made at the strategic level. If clause 6.13 of the Conditions of Contract applies, clause 6.14 of the
Conditions of Contract will also apply. The mechanisms in these clauses are borrowed from the delivery method
commonly known as "document and construct".
If this clause does apply, it enables Defence to engage design consultants prior to the Award Date (or even prior
to the tender) of the Contract. This method of procurement may enable Defence to both have some control over
the choice of designers and/or enable the design process to begin well prior to the engagement of the Contractor.
This second consideration is often critically important where project timeframes are extremely tight.
Consistent with the underlying risk allocation of this Contract, the Contractor is to be responsible for all design
risks for the project. Accordingly, this provision then effects a novation of the design agreements to the
Contractor, thereby passing the rights that Defence obtained under such agreements to the Contractor. Following
on from the novation, the Commonwealth's Novated Design Consultants become subcontractors to the
Contractor. The form of Consultant Deed of Novation is set out in the Schedule of Collateral Documents. The
deed should be executed by the Commonwealth's Novated Design Consultant and the other parties to the deed,
upon which the novation of the consultant from Defence to the Contractor will be effected.
If required, an executed deed of novation is a condition precedent to making a payment claim.
Clause 6.14 - Warranties Unaffected
This clause goes hand in hand with clause 6.13 of the Conditions of Contract (i.e. it only applies if clause 6.13 of
the Conditions of Contract applies).
The Contractor acknowledges that substantial work has been performed on the design of the Works by the
Commonwealth's Novated Design Consultants. The Contractor is required to warrant that it has checked and
considered the design work carried out by the Commonwealth's Novated Design Consultants and the design
work is proper, adequate and suitable for the purpose the Works are intended.
This clause is critically important to ensure that the design risk arising out of the Commonwealth's Novated
Design Consultants (which are novated across to the Contractor) is fully passed to the Contractor, and further,
that any warranties given by the Contractor in relation to design (e.g. fitness for purpose etc.) are not affected or
limited in any way because the design consultants were originally engaged by Defence. That is, it reiterates that
the Contractor is completely responsible for all design and construction risks (vis-à-vis Defence).
Clause 6.15 - Design Certification
This clause requires the Contractor to provide the Contract Administrator with Contractor Design Certificates
and (as applicable) Consultant Design Certificates and/or Subcontractor Design Certificates.
Such certificates are to be provided:
(a)
as a condition precedent to each payment claim under clause 12.2 of the Conditions of Contract; and
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(b)
as a condition precedent to Completion.
Contractor Design Certificate
(c)
The form of the Contractor Design Certificate is set out in the Schedule of Collateral Documents.
By issuing the Contractor Design Certificate, the Contractor certifies that:
(i)
the Design Documentation complies with the requirements of the Contract and, subject
to clause 8.3(a) of the Conditions of Contract, all Statutory Requirements; and
(ii)
the Works comply or the Stage complies (as the case may be) with the Design
Documentation which the Contactor is entitled to use (i.e. it has not been rejected by
Contract Administrator) under clause 6.3(c) of the Conditions of Contract),
except to the extent set out in the certificate.
Consultant Design Certificate/Subcontractor Design Certificate
The form of the Consultant Design Certificate and the Subcontractor Design Certificate are set out in the
Schedule of Collateral Documents.
The Contractor must procure a Consultant Design Certificate/Subcontractor Design Certificate from each
subcontractor that performs design work forming part of the Contractor's Activities certifying that:
(d)
all design carried out by the subcontractor giving the certificate complies with the requirements of
the subcontract and (subject to the terms of the subcontract) all Statutory Requirements; and
(e)
the Works comply or the Stage complies (as the case may be) with the design carried out by that
subcontractor,
except to the extent set out in the certificate.
Clause 6.16 - Samples
This clause obliges the Contractor to obtain and submit to the Contract Administrator for approval each sample
or range of samples required by the Contract in accordance with the approved program. The nature and extent of
samples will usually be specified in the Works Description.
The Contract Administrator has the discretion to review (and if necessary reject) samples or range of samples
submitted by the Contractor. A proforma notice titled 'Rejection of Samples' is provided in Volume 5 [insert
link]. If the Contract Administrator rejects any samples or range of samples), the Contractor must resubmit
samples (or a range of samples) to the Contract Administrator. There is no limit to the number of times the
Contract Administrator may review and reject samples or ranges of samples.
The Contract Particulars specify the time period within which the Contract Administrator may reject such
samples. Unless the Contract Administrator rejects the samples or range of samples within that period, at the end
of that period the Contractor may commence construction of the Works to which the sample or range of samples
applies.
Similar provisions to these in clause 6.4 are also included to ensure the Contractor remains responsible for the
samples, despite the Contract Administrator's review.
CLAUSE 7 - THE SITE
Clause 7.1 - Contractor to Inform Itself
This clause seeks to prevent Defence from being liable to the Contractor for any information it provides to the
Contractor (in the Tender Documents, the Information Documents, the Contract documents or otherwise) in
relation to the Works or the Site or any other information. It is also intended to prevent Defence from being
liable for failing to provide information.
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Although the clause has been carefully drafted to minimise the legal liability of Defence in relation to the
accuracy or otherwise of information provided by it, there is some risk that liability may still exist, if information
provided is inaccurate or misleading. Defence might also be held liable for providing incorrect or misleading
information where that information was prepared by consultants engaged by Defence. In view of this, all
possible steps must be taken to ensure that any information given to the Contractor is accurate and free from
errors and that the relevant procedures under the proforma Tender Documents and the Conditions of Contract are
followed.
Clause 7.2 - Site Information
This clause follows directly on from the provisions of clause 7.1 of the Conditions of Contract and specifically
aims to protect Defence from any liability to the Contractor for inaccurate or misleading information provided
before the contract Award Date in relation to the state of the Site. This generally relates to information provided
in the Tender Documents or Information Documents which does not form part of the Contract, but upon which
the Contractor may seek to rely.
During the tender process, there is a procedure for handing over information to the tenderers which ensures that
Defence's liability is minimised to the extent possible.
The Contractor is given information in the form of "Information Documents". Each of these must only be
provided by Defence once it has received a Disclaimer and Confidentiality Agreement (in the form set out in
Appendix 1 of the Tender Conditions) signed by the Contractor. By signing, the Contractor acknowledges that it
did not rely on any of the information provided to it in preparing its tender and subsequently in performing the
Contractor's Activities. See further guidance in Volume 2.
The Contract also contains a disclaimer of liability for the accuracy or sufficiency of the information provided to
the Contractor by Defence.
Furthermore, under the Contract, site information is expressly stated not to form part of the Contract (clause 7.2
of the Conditions of Contract). In respect of site information provided by Defence to the Contractor, the
Contract expressly provides that Defence does not "warrant, guarantee or make any representation about the
accuracy or adequacy of" site information. The Contractor also expressly warrants (under clause 7.7 of the
Conditions of Contract) that it did not in any way rely upon any site information provided by Defence nor upon
the accuracy or adequacy of any such information for the purposes of entering into the Contract and that it
entered into the Contract based upon its own investigations, interpretations and information.
This clause, like clause 7.1 of the Conditions of Contract, is intended to protect Defence from liability.
However, even though this disclaimer should be effective to exclude a negligence claim, Defence should be
aware of the risk that a statutory claim may still be open under the Commonwealth Trade Practices Act 1974
(Cth) and similar State legislation.
Therefore, despite the protections which the Contract seeks to provide to Defence, the Contract Administrator
should exercise the utmost care when giving the Contractor information about the Site.
Clause 7.3 - Notice of Latent Conditions
Clauses 7.3 and 7.4 of the Conditions of Contract apply unless the Contract Particulars state they do not apply.
These clauses are to be included if Defence considers it appropriate to allow the Contractor to claim an extension
of time and its extra costs under the Contract where it encounters a "Latent Condition". Generally, it is more
appropriate to apply these clauses when the project is being delivered as a "construct only" or "document and
construct", where the Contractor is likely to have less control over design and less access to the Site during the
tender process for the purposes of conducting the relevant investigations to price this risk, with therefore less
ability to effectively manage this risk.
The exclusions of liability for information supplied or not supplied (as the case may be) in clauses 7.1 and 7.2 of
the Conditions of Contract are therefore subject to any claim the Contractor brings under clause 7.3 of the
Conditions of Contract where this clause is part of the Contract. If the Contractor proves a Latent Condition,
then (pursuant to clause 7.4 of the Conditions of Contract) it will be entitled to an extension of time and any
extra costs (as determined by the Contract Administrator) following the issue of a clause 7.3 of the Conditions of
Contract notice.
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Clause 7.3 of the Conditions of Contract requires the Contractor to give notice to the Contract Administrator
immediately after it considers it has encountered a Latent Condition. A Latent Condition is defined in clause 1.1
of the Conditions of Contract as:
"Any ground conditions at the Site, excluding ground conditions resulting from inclement weather wherever
occurring, which differ materially from those which should have been anticipated by a prudent, competent and
experienced contractor if it had done those things which the Contractor is deemed to have done under clause
7.1."
A proforma notice titled 'Notice of Latent Condition' is provided in Volume 5 [insert link] for the Contractor to
notify the Contract Administrator of a Latent Condition.
Although the content of the notice is not prescribed by clause 7.3 of the Conditions of Contract, the Contract
Administrator should expect a notice of a Latent Condition to include a sufficient description of the location and
nature of the condition to direct the Contract Administrator to the Latent Condition for the purposes of further
examination/investigation.
The Contract Administrator then has 21 days in which to issue a notice to the Contractor and Defence stating
whether or not a Latent Condition has been found. A proforma notice titled 'Response to notice regarding Latent
Condition' is provided in Volume 5 [insert link]. When making such a determination the Contract
Administrator should consider:
(a)
any information provided to the Contractor regarding the Site conditions; and
(b)
what investigations a prudent, competent and experienced contractor would have undertaken in light
of clause 7.1 of the Conditions of Contract, and whether those investigations would have resulted
(either directly or indirectly) in the discovery or exposure of the particular site conditions.
Clause 7.4 - Contractor's Entitlement
This clause goes hand-in-hand with clause 7.3 of the Conditions of Contract (i.e. it will only apply if clause 7.3
of the Conditions of Contract applies).
Where the Contract Administrator determines that a Latent Condition has been encountered, the Contractor will
be entitled to an extension of time to the Date for Completion where the conditions in clause 10.7 of the
Conditions of Contract have been satisfied. There will be no entitlement to an extension of time unless the
Contract Particulars state that Latent Conditions are an "additional cause of delay" for the purpose of clauses
10.5(a) and 10.7(c)(i) of the Conditions of Contract.
Defence will also be required to increase the Contract Price by the amount determined by the Contract
Administrator as representing any extra costs reasonably incurred by the Contractor after the giving of the
Notice of a Latent Condition. The Contractor will not become entitled to these costs until any additional work is
performed or costs are incurred. The Contractor will then need to include the relevant amounts in a payment
claim submitted under clause 12 of the Conditions of Contract. The Contractor has no entitlement to costs
incurred before the giving of the notice.
Clause 7.5 - Site Access
This clause, in addition to clause 2.2 of the Conditions of Contract, sets out Defence's obligations in relation to
providing Site access to the Contractor and, in particular, makes it clear that the Contractor does not have sole or
exclusive access to the Site.
Clause 7.5(b) of the Conditions of Contract dovetails the provisions of clause 8.13 of the Conditions of Contract
in relation to Other Contractors of Defence who also work on the Site.
Clause 7.5(c) of the Conditions of Contract provides that the Commonwealth must use reasonable endeavours to
ensure that any Other Contractors engaged by the Commonwealth comply with the reasonable requirements of
the Contractor as to matters concerning industrial relations, site safety, noise levels, insurance and hours of
working.
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Clause 7.6 - Contractor's Obligation to Provide Access
The purpose of this clause is to protect Defence from any unreasonable disruption to its activities on or uses of
the Site during the project.
It also makes it clear that the Contractor is obliged to ensure that Defence, the Contract Administrator or any
person authorised by Defence or the Contract Administrator, has access to all of the Works (whether on Site or
off). This is often critical, not simply for the purposes of Site inspections but also to ensure that the relevant Site
is available to Defence for operational or other purposes.
Clause 7.7 - Non-Reliance
This clause is related to the Contractor's responsibilities regarding site information set out in clauses 7.1 and 7.2
of the Conditions of Contract. It is intended to minimise Defence's liability for information provided or
representations made in relation to the project. The terms of the warranty provided are quite broad and are
intended to cover both common law and statutory liabilities which can arise.
However, as stated above, Defence needs to maintain a high level of care and control over information provided
to the Contractor before and after the Contract is executed.
CLAUSE 8 - CONSTRUCTION
Clause 8.1 - Description of Works
This clause imposes the primary obligation upon the Contractor to construct the Works in accordance with the
Works Description, the Design Documentation and the other requirements of the Contract. This clause also
imposes the obligation upon the Contractor to construct the Works in accordance with any direction of the
Contract Administrator. A Variation Order is included in the definition of 'direction' under clause 1.1 of the
Conditions of Contract but is also expressly referred in this clause for the avoidance of doubt.
Clause 8.2 - All Work Included
Often during a project it will become apparent that additional or different materials, equipment or other
machinery are required which the Contractor may not have considered at the time it tendered for the project, or
when the contract was being negotiated.
This clause is intended to reinforce the common-law "doctrine of inclusive price" and thereby limit any claim
that the Contractor might try to make for additional costs. It expressly provides that the Contractor has allowed
for all of these contingencies in the Contract Price (whether tendered by way of a lump sum or schedule of rates)
unless a right to make a Claim arises elsewhere in the Contract (for example, if a Latent Condition has been
encountered, or where the work for which the additional costs are incurred is outside the scope of the Contract
and is thus a Variation).
Clause 8.3 - Statutory Requirements
This clause confirms that, unless otherwise specified, the Contractor bears the risk of, including the cost of
obtaining and maintaining all necessary Approvals and compliance with any Statutory Requirements.
The Contract Particulars may set out Approvals which exist at the Award Date on which the Commonwealth will
obtain after the Award Date and any Statutory Requirements with which the Contractor does not need to comply.
See further guidance in Volume 2.
The definition of Statutory Requirements is set out in clause 1.1 of the Conditions of Contract.
Statutory Requirements are also defined to include "Defence Requirements" (also defined in clause 1.1 of the
Conditions of Contract). Defence Requirements include all policies, plans, manuals etc. and other
Commonwealth or Defence requirements which may be applicable to the Site, the Works or the Contractor's
Activities. Further, this definition states that to the extent that any of the requirements (e.g. Defence policies)
require or suggest the insertion of provisions into this Contract, then those provisions will be incorporated by
reference (i.e. it will be deemed that those provisions are in fact included in this Contract even if they are not
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physically stated or reproduced in this Contract). This means that Defence must be aware of all changes to
Defence policies etc. which may include such clauses.
The definition of "Defence Requirements" states that, if there is any ambiguity, discrepancy or inconsistency
arising out of the incorporation of such provisions, it will be resolved by the Contract Administrator. It would be
good practice to liaise with the Contractor as soon as the requirement is introduced to avoid this.
The Contractor must also promptly give the Contract Administrator copies of all documents (which includes
Approvals and other notices), that any authority, body or organisation having jurisdiction over the Works or the
carrying out of the Contractor's Activities issues to the Contractor.
Clause 8.4 - Change in Statutory Requirements or Variance with Contract
Under this clause, Defence accepts the risk of any change in Statutory Requirement or a Statutory Requirement
being at variance with the Contract (sometimes referred to as a "change in law") after the Award Date. What
constitutes a Statutory Requirement is defined in clause 1.1 of the Conditions of Contract.
If there is a change in a Statutory Requirement or if a Statutory Requirement is at variance with the Contract,
then the party discovering the change or variance must promptly notify the other party.
A proforma notice to be used by either Defence or the Contractor to advise the other party of a change or
variance titled 'Notice of change in Statutory Requirement' is provided in Volume 5 [insert link].
Defence is not liable to pay the costs associated with the change or variance which are incurred before the
Contractor or the Contract Administrator submits the notice required under clause 8.4(c) of the Conditions of
Contract. This provides incentive for the Contractor to issue its notice promptly.
Under clause 8.4(d) of the Conditions of Contract the Contract Administrator will issue instructions to the
Contractor as to how to proceed with the Contractor's Activities in light of the change or variance. A proforma
notice titled 'Instruction in response to change in Statutory Requirement' is provided in Volume 5 [insert link].
The Contractor will be entitled to an increase in the Contract Price to cover any extra costs reasonably incurred
directly as a result of the change or variance and any instructions issued in relation to such change or variance.
The relevant increase in the Contract Price is to be determined by the Contract Administrator by reference to
clause 8.4(e)(i) of the Conditions of Contract.
Conversely, Defence will be entitled to a decrease in the Contract Price if any savings are made by the
Contractor as a result of the change or variance and any instructions issued in relation to such change or
variance. The relevant decrease in the Contract Price is to be determined by the Contract Administrator by
reference to clause 8.4(e)(ii) of the Conditions of Contract.
Clause 8.5 - Subcontracting
This clause sets out the conditions the Contractor must satisfy before a subcontractor may be validly engaged to
perform work in relation to the Contract. If the Contractor wishes to engage a subcontractor in respect of work
which is described in the Contract Particulars and that subcontractor is not named in the Contract Particulars, it
must get written approval from the Contract Administrator. Therefore, where Defence is concerned about
particular work or subcontractors, it should specify these in the Contract Particulars.
A proforma notice titled 'Request to subcontract' is provided in Volume 5 [insert link] for the purpose of the
Contractor requesting approval to engage a subcontractor other than one named in the Contract Particulars. A
proforma notice for the Contract Administrator to accept or reject the proposed subcontractor titled 'Response to
notice regarding request to subcontract', is also provided in Volume 5 [insert link]. A proforma notice titled
'Request for [Subcontractor Deed of Covenant/Consultant Deed of Covenant]' is provided in Volume 5 [insert
link].
Under clause 8.5 of the Conditions of Contract, the Contractor remains responsible for all of the Contractor's
Activities regardless of whether they are ultimately subcontracted to a third party. Similarly, the Contractor will
be vicariously liable to Defence for all acts, omissions and defaults of the subcontractors.
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Clause 8.5(d) of the Conditions of Contract requires that any subcontract must contain provisions which bind the
subcontractor to participate in any novation required by Defence in the event that Defence terminates the
Contract. This enables the subcontractor to continue performing the contracted work on the project (under a new
head contractor or directly contracted to Defence) despite the termination if Defence thinks this would be
beneficial in the circumstances. This clause also requires that the subcontract contain provisions as otherwise
required by the Contract. For example, provisions with respect to the National Code are to be included in
subcontracts, as required by clause 19.1(d) of the Conditions of Contract.
Clause 8.5(f) of the Conditions of Contract also requires that where any Statutory Requirement in the State or
Territory where the Works are situated requires a person to be registered or licensed to carry out that part of the
work, the Contractor must ensure that such registration or licence is obtained. This clause also requires that the
Contractor not 'direct or allow' a person to perform 'high risk work' for the purposes of the Occupational Health
and Safety (Safety Standards) Regulations 1994 (Cth), unless they hold a relevant licence or are undergoing
training in accordance with that regulation. The licence holders performing such 'high risk work' must be
provided with additional training, instruction and information on the equipment operation, hazards, risks and
control measures relevant to the workplace. Where requested, the Contractor must provide evidence to the
satisfaction of the Contract Administrator that the proposed subcontractor is so registered or licensed prior to the
subcontractor commencing work. A proforma notice titled 'Request for evidence of [registration/licensing]' is
provided in Volume 5 [insert link].
Subcontractor Deeds of Covenant/Consultant Deed of Covenant
Clause 8.5(e) of the Conditions of Contract requires, where requested to do so by the Contract Administrator, the
Contractor to ensure that both the Contractor and the subcontractor execute a Subcontractor Deed of
Covenant/Consultant Deed of Covenant (as the case may be) and provide this to the Contract Administrator as a
condition precedent to seeking approval to subcontract the work under paragraph (a) or, if no such approval is
required, within the time required by the Contract Administrator and in any event prior to the commencement of
the work by the relevant subcontractor.
A proforma notice titled 'Request for [Subcontractor Deed of Covenant/Consultant Deed of Covenant]' is
provided in Volume 5 [insert link].
A copy of the deed which is to be filled out and executed is attached in the Schedule of Collateral Documents.
A Subcontractor Deed of Covenant or a Consultant Deed of Covenant (as the case may be) is a deed entered into
by Defence, the Contractor and the subcontractor. As there is no direct contractual relationship between Defence
and the subcontractor, the purpose of the deed is to provide a direct relationship between each of the parties so
that all parties may enforce rights against one another.
A common question is whether or not a Subcontractor Deed of Covenant/Consultant Deed of Covenant will be
required for all subcontracts. While Defence could insist that all subcontractors provide such deeds, in practice
(because of the administrative burden of obtaining and properly executing such deeds for all subcontract
packages on large projects) it is a matter for the Contract Administrator to determine. Factors to consider will
include:
(a)
the risks (such as time, cost, quality and other political pressures) inherent in the subcontract (i.e. the
greater the risk, the greater the need for a Subcontractor Deed of Covenant/Consultant Deed of
Covenant);
(b)
the value of the subcontract (i.e. other than in particularly high risk subcontracts, it would not be
necessary to obtain such deeds in relatively minor subcontracts);
(c)
the timeframe for commencement of the work;
(d)
the term/length of time required to carry out the work (i.e. the longer the time, the greater the
likelihood that problems could arise, and hence the greater need for such a deed);
(e)
the technical complexity of both the subcontract and the project generally (i.e. the greater the
complexity, the greater the need for such a deed, as there may be fewer replacement subcontractors);
and
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(f)
the financial stability of the Contractor (i.e. if the Contractor becomes insolvent, then Defence may
wish to novate into the subcontract).
There are two Deeds of Covenant provided in the Schedule of Collateral Documents:
(g)
Subcontractor Deed of Covenant - to be used for design and construct or construct-only
subcontractors;
(h)
Consultant Deed of Covenant - to be used where the subconsultant is a design consultant only (i.e. it
has no construction obligations).
The terms of these deeds of covenant differ significantly in their complexity.
In respect of the Subcontractor Deed of Covenant:
(i)
the subcontractor undertakes to Defence to complete the design (if any) and construction of the
Subcontract Works in a thorough manner, with proper skill and care, so that they are fit for their
purpose etc;
(j)
the Contractor and subcontractor acknowledge that they will duly and punctually perform their
respective obligations, notify Defence of any disputes and defaults etc;
(k)
the subcontractor will ensure that Defence's interests are noted on insurance policies and that neither
the Contractor nor the subcontractor will prejudice any such policy;
(l)
any security provided by the subcontractor to the Contractor will be assignable to Defence;
(m)
Defence may require the subcontractor to complete the subcontract works in the event that Defence
terminates its agreement with the Contractor;
(n)
certain provisions are included in relation to the payment for unfixed goods; and
(o)
Defence is appointed as the Contractor's agent for the purposes of ensuring that the subcontract is
enforced and performed.
The Consultant Deed of Covenant, on the other hand, provides that:
(p)
the parties will novate the subcontract to Defence (or its nominee) if the Contract (i.e. HC-1 2003) is
terminated; and
(q)
the Consultant will exercise a duty of care in the performance of the services to be provided under
the subcontract such that (amongst other things) it will exercise the standard of care of an expert
professional provider of the services and will ensure that the Design Documentation complies with
the requirements of the subcontract.
It should be noted that these deeds cannot be construed in any way to modify or limit the Commonwealth's rights
against the Contractor.
If they are required, the provision of such deeds is a condition precedent to making a payment claim.
Clause 8.6 - Subcontractor Warranties
The Contractor must, as a condition precedent to the Completion of the Works or any Stage specified in the
Contract Particulars, provide Defence with the warranties described in the Contract Particulars from the relevant
subcontractor in the form of the Collateral Warranty. Like the deeds referred to above, a Collateral Warranty
will not be construed in any way to modify or limit the Commonwealth's rights against the Contractor.
The Collateral Warranty is a deed entered into between Defence and the supplier of equipment or performer of
work (Warrantor) where the Contractor (or a subcontractor) has entered into a contract with the Warrantor.
Again, Defence has no direct contractual relationship with the Warrantor. The purpose of this deed (which is in
the form of a 'deed poll' so that it need only be executed by the Warrantor for it to be enforceable) is to provide
certain warranties from the Warrantor in favour of Defence that goods/work etc. will be of merchantable quality
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and fit for purpose. Further, the Warrantor agrees to replace and/or make good to the satisfaction of Defence any
of the equipment/work which is found to be of a lower quality or standard than that required.
Clause 8.6(a) of the Conditions of Contract allows Defence to require particular warranties where appropriate
(for example, Defence might consider that a direct warranty from a roofing supplier as to the water-tightness of
the roof is appropriate). These are to be described in the Contract Particulars. Such warranties are to be in the
form of a Collateral Warranty, the form of which is set out in the Schedule of Collateral Documents.
Without a detailed warranty of this type, Defence's only direct contractual rights would be against the
Contractor.
The table set out in Annexure 1 also provides some guidance as to the types of warranties which might be
required for a particular project. See also guidance in Volume 2.
It should be noted that if a Contractor is unable to or fails to obtain the warranties required by the Contract, the
Contractor is deemed to have given the warranty itself and the Commonwealth will be entitled to an assignment
of rights against the subcontractor.
Generally, if proportional liability legislation applies (see commentary under clause 15.14 of the Conditions of
Contract), it may allow a person to reduce its liability, including liability under contract, to the amount that a
court considers just having regard to the extent of its responsibility for the underlying loss and damage
(excluding personal injury), notwithstanding that it may have assumed responsibility for the full amount of that
loss and damage under the express terms of a deed of covenant (like those described above) or a collateral
warranty. The proportional liability legislation is new and complex legislation which is not identical in each
State and Territory. As a result, advice concerning its potential or actual impact should be obtained from the
Directorate of Construction Contracts.
Clause 8.7 - Provisional Sum Work
Provisional Sum Work is, typically, an element of work for which it is not possible to obtain a firm price at
tender time (say, because Defence has not finalised its requirements for the work). Clauses 8.7-8.12 of the
Conditions of Contract seek to crystallise the specifications for such work, and any adjustments to the Contract
Price, during the progress of the Works. Alternatively, items of Provisional Sum Work may be deleted from the
Works.
The first step is for the items of Provisional Sum Work, and provisional sums for these items (which form part of
the Contract Price), to be described in as much detail as possible in the Contract Particulars.
Before Provisional Sum Work can be let out to a subcontractor, the Contract Administrator must give the
Contractor an instruction either deleting that item of Provisional Sum Work or requiring the Contractor to
proceed with the relevant work. A proforma notice titled 'Provisional Sum Work' for the relevant instructions
under this clause is provided in Volume 5 [insert link].
If an item of Provisional Sum Work is deleted from the Contract, Defence is free to engage another contractor to
provide that work or those services.
Clause 8.8 - Design for Provisional Sum Work to be Prepared by either the
Commonwealth or the Contractor (Option 1 and Option 2)
Clauses 8.8 to 8.12 of the Conditions of Contract establish the procedures for crystallising an item of Provisional
Sum Work under the Contract.
Clause 8.8 contains two separate options for the preparation of design for Provisional Sum Work. Defence needs
to indicate, through the Contract Particulars, which of the options applies in the particular Contract.
Generally, Option 1 will apply where the Contract is being used on a construct-only basis, whereas Option 2 will
apply where the Contract is being used on a design and construct (or document and construct) basis.
Under Option 1, Defence must provide the Contractor with Design Documentation for that work. This can be
done progressively, but must be completed before the item of Provisional Sum Work can be put out to tender
under clause 8.9(a) of the Conditions of Contract.
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Under Option 2, the Contractor is instructed to progressively prepare the Design Documentation for the item of
Provisional Sum Work. No timetable for the provision of the Design Documentation is stipulated by the
Contract under Option 2 but this will be set out in the program. The Contractor is required to inform the
Contract Administrator when the Design Documentation is being discussed at meetings so that the Contract
Administrator may attend those meetings.
Clause 8.9 - Tendering Provisional Sum Work
The default position under this clause is that the Contractor must subcontract out all items of Provisional Sum
Work which it is instructed to proceed with. However, in some circumstances, the Contract Administrator may
not want the Contractor to let out the particular item of Provisional Sum Work to a subcontractor. For example,
it may be that the Contractor has agreed to do the work at a cheaper price than is likely to be tendered by any
subcontractors.
Therefore, a proforma notice titled ' Provisional Sum Work not to be put out to tender' is provided in Volume 5
[insert link] to be used if the Contract Administrator wishes to instruct the Contractor not to tender out an item
of Provisional Sum Work.
If the item is to be put out to tender, clause 8.9 of the Conditions of Contract provides the procedure for this.
Under clause 8.9(b) of the Conditions of Contract, the Contract Administrator may require the Contractor to
provide details of each or any tender. Clause 8.9(c) of the Conditions of Contract requires the Contractor to
recommend a tenderer to the Contract Administrator. A proforma notice for this recommendation titled
'Recommendation of Provisional Sum Work subcontractor' is provided in Volume 5 [insert link]. Under clause
8.9(d) of the Conditions of Contract, the Contract Administrator must instruct the Contractor to enter into a
subcontract with one of the tenderers. A proforma notice titled 'Instruction to enter into subcontract for
Provisional Sum Work' is provided in Volume 5 [insert link]. The Contract Administrator has an absolute
discretion in relation to which tenderer it directs the Contractor to engage. Any variance between the accepted
tender price and the relevant provisional sum set out in the Contract Particulars will be passed on to Defence via
the adjustment of the Contract Price provided for in clause 8.10 of the Conditions of Contract.
Clause 8.10 - Price Adjustment for Tendered Provisional Sum Work
As foreshadowed above, this provides for an adjustment to the Contract Price for items of Provisional Sum Work
which are to be tendered.
Clause 8.11 - Price Adjustment for Other Provisional Sum Work
Where the Contract Administrator issues a notice under clause 8.9 of the Conditions of Contract that a particular
item of Provisional Sum Work is not to be tendered out to a subcontractor, it may be necessary to adjust the
Contract Price to take into account any difference in the amount allowed for the work in the Contract Particulars
and the amount agreed or determined by the Contract Administrator under clause 8.11(b)(ii) of the Conditions of
Contract. This clause allows for such an adjustment.
Clause 8.12 - Further Allowance for Provisional Sum Work
This clause allows for the Contract Price to be increased by an agreed percentage (set out in the Contract
Particulars) where the total net increase to the Contract Price after all adjustments for Provisional Sum Work
exceeds the total amount specified in the Contract Particulars for Provisional Sum Work by a set amount.
Clause 8.13 - Co-operation with Other Contractors
This clause imposes obligations on the Contractor to cooperate and coordinate with Other Contractors (as
defined in clause 1.1 of the Conditions of Contract) which Defence has engaged on the Site, regardless of
whether such Other Contractors are engaged either on the same project or on a different project.
Clause 8.14 - Setting Out
This clause generally deals with setting out the Works and cross-refers the requirements for setting out, to any
documents forming part of the Contract, such as the Works Description.
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Clause 8.15 - Survey
Under this clause, the Contractor is responsible for ensuring, as a condition precedent to Completion of the
Works or of any Stage, that the Works or the Stage (as the case may be) has been surveyed. The Contractor
must also forward a certificate by a licensed surveyor certifying the matters set out in clauses 8.15(a) and 8.15(b)
of the Conditions of Contract.
Clause 8.16 - Safety
This clause specifies key responsibilities of the Contractor in relation to safety on the Site. It also empowers the
Contract Administrator to direct the Contractor to change its manner of working or to cease working if the
Contract Administrator reasonably considers there is a risk of injury to people or damage to property arising out
of the Contractor's Activities (this includes any work being done by subcontractors).
A proforma notice for directing the Contractor to change its manner of working or cease working for safety
reasons titled 'Direction as to Safety' is provided in Volume 5 [insert link].
Clause 8.17 - Occupational Health, Safety and Rehabilitation Management
This clause makes it clear that the Contractor is responsible for ensuring that it and all subcontractors comply
with all Statutory Requirements and other requirements of the Contract in relation to occupational health, safety
and rehabilitation management.
The clause also requires the Contractor to notify the Contract Administrator immediately (and in any event
within 12 hours of such matters arising) of any such matters. This might include training programs, accidents on
the Site, the discovery of unsafe machinery or practices, the conducting and results of any investigations or
reports into such matters by the Contractor, the subcontractor or a third party, and complaints.
Where applicable, the Contractor must comply with all requirements of and maintain accreditation under the
OHS Accreditation Scheme, as established under the Building and Construction Industry Improvement Act 2005
(Cth).
A proforma notice titled 'Notice of Occupational Health and Safety matters' is provided in Volume 5 [insert
link] for the Contractor to inform the Contract Administrator of any relevant matters arising out of the
Contractor's Activities.
It should be noted that there are specific occupational health and safety requirements for each jurisdiction which
need to be included in the Contract. These are identified (by jurisdiction) in Defence's proforma Special
Conditions and described in Volume 6.
Clause 8.18 - Plant, Equipment and Work
This clause prevents the Contractor from removing any Plant, Equipment or Work from the Site without the
prior written approval of the Contract Administrator. "Plant, Equipment and Work" is defined in clause 1.1 of
the Conditions of Contract.
A proforma notice for the Contractor to request the removal of Plant, Equipment and Work and a proforma
notice response for the Contract Administrator to reject or accept the request titled 'Request for removal of Plant,
Equipment and Work' and 'Response to request for removal of Plant, Equipment and Work' (respectively) are
provided in Volume 5 [insert links].
Clause 8.19 - Cleaning Up
Under this clause, the Contractor is responsible for keeping the Site clean and tidy. This is important for the
safety and health of all who work on the Site. Note in particular that removal of all rubbish, materials and Plant
Equipment and Work, is a condition precedent to Completion of each Stage and of the Works under clause
8.19(b) of the Conditions of Contract.
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Clause 8.20 - The Environment
Environmental concerns carry significance on all Defence projects, the management of which is considered of
utmost importance by Defence. The Contract therefore contains considerable detail in relation to the
requirements and considerations necessary for the protection of the Environment. These are predominantly set
out in clause 8.20 of the Conditions of Contract and referenced to the definition of Environmental Requirements
in clause 1.1 of the Conditions of Contract.
Set out below is guidance on the following:
(a)
the primary environmental obligations under clause 8.20 of the Conditions of Contract;
(b)
matters to be covered by the Environmental Management Plan and Site Management Plan;
(c)
ESD Principles;
(d)
the Contract Administrator's role in relation to the Environment; and
(e)
the ability to suspend the Contractor's Activities due to environmental concerns.
Each of these are discussed in turn below.
(f)
Primary environmental obligations under clause 8.20 of the Conditions of Contract
Quite apart from and in addition to the general requirement to comply with all Statutory
Requirements (unless otherwise specified under clause 8.3(a) of the Conditions of Contract), clause
8.20 of the Conditions of Contract sets out the Environmental Requirements the Contractor must
comply with in carrying out the Contractor's Activities.
Clause 8.20 of the Conditions of Contract requires the Contractor to comply with all Statutory
Requirements (that is all requirements under the Commonwealth, State or Territory or local laws)
and any other requirements contained in the Contract for the protection of the Environment. This
includes:
(i)
obtaining any necessary Approvals and complying with any condition or requirement
under them;
(ii)
giving appropriate notices and paying requisite fees and other amounts in relation to the
Contractor's Activities required for the protection of the Environment;
(iii)
complying with the Environmental Clearance Certificate;
(iv)
complying with the Defence Environmental Management System and Defence
Environmental Plan which relate to the Site, the Works or the Contractor's Activities;
and
(v)
complying with all policies, plans, manuals, guidelines, instructions and other
Commonwealth or Defence which are applicable to the Site, the Works or the
Contractor's Activities.
The Contractor is obliged to ensure that in carrying out the Contractor's Activities it does not cause
any Environmental Incidents or cause or contribute to any Contamination, either of the Site or
elsewhere. The Contractor must comply with any notices, orders or communications from
authorities for the protection of the Environment and is required to immediately inform the Contract
Administrator of:
(vi)
any non-compliance with clause 8.20 of the Conditions of Contract;
(vii)
any breach of Statutory Requirement for the protection of the Environment;
(viii)
any Environmental Incident; or
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(ix)
receipt of any notice, order or communication received from any authority for the
protection of the Environment.
A proforma notice for such notification titled 'Notice regarding the Environment' is provided in
Volume 5 [insert link].
Following the carrying out of the Contractor's Activities, the Contractor will be responsible for
cleaning up and restoring the Environment to the condition it was in before commencement of the
Contractor's Activities. This includes cleaning up any Contamination or Environmental Harm that
may be caused by the Contractor or its subcontractors whilst carrying out the Contractor's Activities.
If the Contractor fails to take any action necessary to protect the Works, other property, the
Environment or people, the Commonwealth is entitled under clause 8.21 of the Conditions of
Contract to step in and take any action necessary.
(g)
Environmental Management Plan and Site Management Plan
The Contractor is required by clause 9.2 of the Conditions of Contract to implement, and carry out
the Contractor's Activities in accordance with, the Project Plans. These include the Environmental
Management Plan, Site Management Plan (which, if applicable, includes a Method of Work Plan for
Airfield Activities) Commissioning and Handover Plan, Occupational Health and Safety Plan and
any additional plans referred to in the Contract Particulars. See guidance under commentary on
clause 9.2 of the Conditions of Contract below for procedure in relation to Project Plans.
The specific matters to be included in the Environmental Management Plan will differ from project
to project, however, it must set out in adequate detail how the Contractor proposes to ensure the
Contractor's Activities will be performed consistently with:
(i)
the Environmental Requirements;
(ii)
the Statutory Requirements;
(iii)
the Contractor's environmental commitments;
(iv)
the Energy Policy for Commonwealth Agencies, Commonwealth Procurement
Guidelines and Defence Green Procurement Policy;
(v)
the ESD Principles; and
(vi)
the Environmental Objectives.
Without limiting the above, generally the Environmental Management Plan will be expected to cover
how the Contractor proposes to:
(vii)
encourage best practice environmental management through planning, commitment and
continuous improvement;
(viii)
prevent and minimise adverse impacts on the Environment;
(ix)
identify the potential for, and respond to, Environmental Incidents, accidents and
emergency situations and take corrective action;
(x)
identify and control possible environmental hazards associated with the Contractor's
Activities;
(xi)
establish procedures to ensure that no hazardous substance is stored on Commonwealth
land without approval;
(xii)
recognise and protect any special environmental characteristics of the Site (including
cultural heritage significance);
(xiii)
define roles and responsibilities for personnel;
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(xiv)
ensure environmental training and awareness programmes are provided to employees
and subcontractors;
(xv)
ensure subcontractors implement the Environmental Management Plan;
(xvi)
define how the management of the Environment during the Contractor's Activities is
reported and performance evaluated;
(xvii)
describe all monitoring procedures required to identify impacts on the Environment as a
result of the Works or the Contractor's Activities;
(xviii)
implement complaint reporting procedures and maintain records of complaints and
response to complaints; and
(xix)
establish and maintain programs and procedures for periodic Environmental
Management Plan audits to be carried out.
The Site Management Plan must address the procedures the Contractor will implement to manage
the Contractor's Activities on or near the Site as set out in the Contract, including:
(h)
(xx)
security procedures;
(xxi)
access to the Site by visitors, pedestrians and vehicles;
(xxii)
Site induction procedures;
(xxiii)
safety procedures;
(xxiv)
emergency procedures;
(xxv)
waste management procedures;
(xxvi)
Site maintenance and cleaning procedures;
(xxvii)
Site establishment procedures;
(xxviii)
dangerous, prohibited and hazardous materials and goods procedures;
(xxix)
Approval procedures;
(xxx)
user group and stakeholder procedures;
(xxxi)
noise management procedures;
(xxxii)
military expeditions and military exercises procedures;
(xxxiii)
vehicle and traffic management procedures;
(xxxiv)
a Method of Work Plan for Aircraft Activities (if in the vicinity of aircraft movements);
and
(xxxv)
any other matters required by the Contract Administrator.
Ecologically sustainable development (ESD)
ESD is defined by the National Strategy for Ecologically Sustainable Development (1992) as
"development which aims to meet the needs of Australians today, while conserving our ecosystems
for the benefit of future generations".
Performance of the Contract is required to be consistent with the ESD Principles (set out in clause
1.1 of the Conditions of Contract). The Environmental Management Plan must set out in adequate
detail how the Contractor proposes to ensure this will occur.
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ESD Principles are also a relevant factor to consider in determining the WOL Objectives which must
be achieved by the Contractor in performing the Contractor's Activities. See guidance under
commentary on clause 17 of the Conditions of Contract in relation to WOL.
(i)
The Contract Administrator's role in relation to the Environment
As noted in the commentary for clause 3.1 of the Conditions of Contract, the Contract Administrator
is an agent of the Commonwealth nominated in the Contract Particulars or by the Commonwealth
from time to time, and is responsible for overseeing and administering the operation of the Contract.
Defence expects that the Contract Administrator will have trained environmental personnel to
address environmental issues that may arise in relation to the Contractor's Activities.
Amongst other things, the Contract requires the Contract Administrator to:
(i)
review and approve draft Project Plans and amendments thereto submitted by the
Contractor;
(ii)
inspect the Contractor's Activities from time to time;
(iii)
provide instructions to the Contractor in relation to matters concerning the Environment;
and
(iv)
suspend the Contractor's Activities if necessary.
Any notifications required to be made by the Contractor under the Contract must be made to the
Contract Administrator. The Contract Administrator is responsible for determining what action
needs to be taken if any as a result of such notifications or otherwise under the Contract. The
Contractor must comply with any directions or instructions given by the Contract Administrator
where required by the Contract.
In making any determination, the Contract Administrator may be advised by, or may seek advice
from the Commonwealth's Regional Environmental Officer (REO) in relation to environmental
issues.
(j)
Suspension of the Contractor's Activities due to environmental concerns
The Contract Administrator has broad power to suspend the Contractor's Activities under clause
10.12 of the Conditions of Contract. This power may be exercised at any time and for any reason,
and may be exercised expeditiously to ensure environmental protection is a priority. Although not
explicitly stated in the Contract, the Contract Administrator may act on the request of the REO or
another person to instruct the Contractor to suspend its activities.
Where the Contract Administrator's power is exercised for reasons other than the Contractor's failure
to carry out its obligations in accordance with the Contract, the Contractor may be entitled to make a
Claim against the Commonwealth arising out of the suspension. The Contractor will not be entitled
to make any Claim against the Commonwealth where it has been instructed to suspend the
Contractor's Activities where:
(i)
the Contractor has not complied with all Statutory Requirements and/or other
requirements of the Contract for the protection of the Environment;
(ii)
the Contractor has caused an Environmental Incident;
(iii)
the Contractor has caused or contributed to Contamination of the Site or any other land,
air or water, or caused or contributed to Contamination emanating from the Site;
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the Contractor has not immediately notified the Contract Administrator of:
B.
any non-compliance with the requirements of clause 8.20 of the Conditions
of Contract;
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(iv)
C.
a breach of any Statutory Requirement for the protection of the
Environment;
D.
any Environmental Incident; or
E.
the receipt of any notice, order or communication received from any
authority for the protection of the Environment; or
the Contractor's subcontractors have not complied with the requirements under clause
8.20 of the Conditions of Contract.
Unlike the Contract Administrator, the Contractor is not entitled to suspend the Contractor's
Activities unless it is ordered to do so by the Contract Administrator.
Clause 8.21 - Urgent Protection
This clause provides Defence with the right to step in and take any steps necessary to protect the Works, other
property, the Environment or people which the Contractor is obliged to take but has not taken.
Details of the costs should be kept for the purpose of Defence seeking reimbursement of these costs from the
Contractor (under clause 8.23 of the Conditions of Contract).
Clause 8.22 - Valuable Objects Found on Site
This clause states that any objects of value or archaeological or special interest found on the Site will, as between
the parties, be the property of Defence. This does not mean, however, that a third party may not ultimately have
a claim superior to that of Defence to ownership of the object.
The Contractor must notify the Contract Administrator of the discovery of any such objects immediately. A
proforma notice to be completed by the Contractor notifying the Contract Administrator of the discovery of a
valuable object titled 'Notice of valuable object found on Site' is provided in Volume 5 [insert link].
The Contract Administrator should give instructions to the Contractor as to how to proceed so as best to protect
and preserve the object. Depending on the circumstances, the Contract Administrator may need to seek external
advice or consult within Defence before issuing any such instructions. A proforma notice titled 'Instruction as to
valuable object found on Site' is provided in Volume 5 [insert link].
When issuing instructions, the Contract Administrator should consider that Defence is potentially liable for any
extra costs incurred by the Contractor in complying with those instructions and that the Contract Administrator
will be required to assess the reasonable costs and adjust the Contract Price accordingly under clause 8.22 of the
Conditions of Contract.
Clause 8.23 - The Commonwealth May Act
This clause gives Defence the right to carry out any of the Contractor's obligations under the Contract which the
Contractor was obliged to carry out but which it failed to carry out within the time required under the Contract.
Many clauses of the Contract contain obligations which the Contractor must carry out, but which do not specify
an exact time. These clauses often require the Contractor to do the thing "immediately", "promptly" or do not set
out a time frame at all. In these circumstances, the Contract Administrator will have to consider all the facts of
the case and the purpose of the clause/obligation to determine when the Contractor should have acted. Where
there is no time frame expressed at all, it may be possible to infer from the purpose of the clause and the nature
of the obligation when the parties intended the Contractor to act; such a time period would then be implied into
the clause.
As this clause provides that any costs, expenses or damages suffered or incurred by Defence in so carrying out
the obligation are payable by the Contractor as a debt to Defence, it is very important that Defence is satisfied
that:
(a)
the Contractor was obliged to do the thing contemplated under the terms of the Contract;
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(b)
the Contractor has not responded in an alternative way which satisfies its contractual obligations;
and
(c)
the time (either express or implied) has expired in which the Contractor was obliged to have acted
under the Contract,
before any action is taken by Defence or third parties acting on behalf of Defence under this clause.
If in any doubt about whether Defence can or should exercise the powers conferred under this clause in a
particular situation, Defence should seek specialist advice, including legal advice from a member of the Defence
Legal Panel, before taking any action.
Clause 8.24 - Access Hours
This clause sets out the times outside of which the Contractor cannot (without agreement in writing) carry out
the Contractor's Activities on the Site. The hours of access will also apply to any subcontractors engaged by the
Contractor. The times will be set by Defence for each contract, taking into account such matters as:
(a)
security requirements on the Site;
(b)
environmental considerations;
(c)
operational requirements;
(d)
restrictions on access to the Site;
(e)
adjoining properties; and
(f)
planning restrictions.
The access hours are stated in the Contract Particulars. A proforma notice to request to change to the hours of
access and a proforma notice in response titled 'Request to change access hours' and 'Response to request to
change access hours' (respectively) are provided in Volume 5 [insert links].
Clause 8.25 - Imported Items
This is an optional clause. It does not apply unless the Contract Particulars state that it applies. See Volume 2
for guidance on when this clause should apply.
Generally, where the Contractor has provided information to Defence in relation to imported items required for
the Works (in accordance with item 2 - Adjustment for Imported Items of Tender Schedule H - Contract Price)
during the tender process and there has been an exchange rate fluctuation between the rate submitted in Tender
Schedule H and the rate upon which the Contractor has stated in Tender Schedule H that it would pay for such
imported item, the Contract Price will be adjusted accordingly.
This is a foreign exchange rate protection mechanism, such that neither party benefits or suffers detriment from
fluctuations in foreign exchange rates.
This clause does not allow for adjustments in the rise and fall of costs of the imported item.
Clause 8.26 - Salvaged Materials
This clause states that other than:
(a)
valuable objects found on Site (as per clause 8.22 of the Conditions of Contract); or
(b)
where expressly stated in the Contract otherwise; or
(c)
as directed by the Contract Administrator,
all materials, plant, equipment, fixtures and other things salvaged from the Site or from the Works will become
the property of the Contractor.
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Clause 8.27 - Contract Administrator's Office
This clause requires the Contractor to, where directed by the Contract Administrator, provide and erect a
temporary office and any associated facilities and services as stated in the Contract Particulars (the Contract
Administrator's Office).
The Contract Administrator's Office will be for the sole use of the Contract Administrator and the Contract
Administrator's Representatives. It shall however, remain the property of the Contractor.
Clause 8.27(c) of the Conditions of Contract set out additional specific obligations that the Contractor has,
including with respect to the costs of certain elements of the Contract Administrator's Office, providing a
dedicated telephone line and removal of the Contract Administrator's Office within 7 days of the last Date of
Completion.
Clause 8.28 - Project Signboards
This clause requires the Contractor to supply and erect project signboards for the project. The dimensions,
number of and any additional information required but not set out in clause 8.28(a)(ii) of the Conditions of
Contract is specified in the Contract Particulars.
The project signboards will set out (at least):
(a)
Project name;
(b)
Contractor, Contract Administrator and Defence;
(c)
a general description of the Works;
(d)
contact name and phone number for the Contractor; and
(e)
Date for Completion.
The Contractor must within 14 days of commencement of the Contractor's Activities on Site submit for the
approval of the Contract Administrator the proposed layout of the project signboards. Proforma notices for the
submission by the Contractor and approval/rejection by the Contract Administrator titled 'Request for approval
of layout of project signboards' and 'Response to request for approval of layout of project signboards'
(respectively) are provided in Volume 5 [insert links].
Once approval is provided, the Contractor is required to set out project signboards as approved, maintain them
until the last Date for Completion and then dismantle and remove them within 7 days after the last Date of
Completion.
Clause 8.29 - Measurements and Dimensions
This clause requires the Contractor to check all relevant dimensions of the Site before proceeding with the
Contractor's Activities. Further the Contractor is required to obtain and check any measurement information it
requires to carry out the Contractor's Activities itself.
This clause specifically states that the layout of plant, equipment, ductwork, pipe work and cabling shown in the
Works Description is to be taken as diagrammatic only. Additionally, the Commonwealth will not be liable
upon any claim for an increase in the Contract Price or payment of money (including damages) resulting from
the Contractor's failure to obtain and check measurements and other information concerning dimensions of the
Site and the layout of items discussed above.
CLAUSE 9 - QUALITY
Clause 9.1 - Construction
The purpose of this clause is to ensure that the Works and any of the other Contractor's Activities are:
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(a)
carried out with the standard prescribed in the Contract or the standard of workmanship which is
consistent with the best industry standards (unless otherwise prescribed in the Contract, either
expressly or impliedly) and which are at least to the same standard as that found in the development
referred to in the Contract Particulars;
(b)
fit for their purpose;
(c)
constructed with quality materials which comply with the requirements of the Contract or are
consistent with best industry standards, and which are at least to the same standard as that found in
the development referred to in the Contract Particulars and are also fit for their purpose, are of
merchantable quality and consistent with the nature and character of the Works,
and that the Contractor's Activities comply with the requirements of the MFPE, the Building Code of Australia
and all relevant standards of Standards Australia.
In clauses 9.1(a)(i)B and 9.1(b)(i)B of the Conditions of Contract, there is provision for a reference development
in relation to quality standards. A reference development should be considered where there is a previous,
comparable project of a desired standard. The previous development is then prescribed as a benchmark for
quality, thereby assisting to define the required standards where they are not fully set out in the Contract.
Clause 9.2 - Project Plans
This clause provides the procedure for dealing with Project Plans. The areas in which the Contractor is
requested (during the tender period) and required (after the Award Date) to provide Project Plans are detailed in
Tender Schedule B - Plans [and Preliminary Design Solution - if design and construct method only] and the
Contract Particulars. These areas will have been determined by Defence at the time of tender. The Project Plans
include the Environmental Management Plan, Site Management Plan, Commissioning and Handover Plan and
Occupational Health and Safety Plan. See guidance under commentary on clause 8.20 of the Conditions of
Contract above for matters to be covered by the Environmental Management Plan and the Site Management
Plan. The Site Management Plan also includes a Method of Work Plan for Airfield Activities, if this is relevant.
The Contractor's obligations in relation to Project Plans are further described in clause 9.2(a)(ii) of the
Conditions of Contract. The Contractor's Activities include the preparation of draft Project Plans (based on the
outline Project Plans submitted in the Contractor's tender) by the date set out in the Contract Particulars, so as to
ensure no delay or disruption to the Contractor's Activities. The Contractor must re-submit any rejected Project
Plans until such time as the Contract Administrator does not reject the Project Plans in the time provided under
the Contract. The Contractor must document and maintain detailed records of inspections and audits undertaken
as part of any Project Plans.
A proforma notice for the Contractor to submit the Project Plans, titled 'Project Plans' is provided in Volume 5,
as is a proforma notice for the Contract Administrator to reject the Project Plans, titled 'Rejection of
[draft/resubmitted] Project Plans' Volume 5 [insert links].
This clause also makes it clear that compliance with submitted Project Plans does not relieve the Contractor of
its other obligations under the Contract or otherwise according to law.
Clause 9.2(b) of the Conditions of Contract further provides that the Contractor will not be relieved of its
obligations under the Contract or otherwise according to law where the Contract Administrator or other relevant
person fails (due to negligence or otherwise) to detect a defect or omission in the Project Plans.
Clause 9.3 - Contract Administrator's Right to Inspect
This clause establishes the Contract Administrator's general right to inspect the Contractor's Activities at any
time for any reason, but clarifies that there is no obligation to do so, nor any responsibility assumed by Defence
as a result of any inspection. This is a useful power for the Contract Administrator to enable the Contract
Administrator to supervise the Contractor's performance of its activities on the Site.
Clause 9.3(b) of the Conditions of Contract makes it clear that where the Contract Administrator inspects the
Contractor's Activities, this in no way lessens or otherwise affects the Contractor's obligations under the Contract
or at law nor does it lessen or otherwise affect Defence's rights against the Contractor under the Contract or
according to law.
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Clause 9.4 - Testing
In addition to requiring the Contractor to carry out the tests required under the Contract, this clause also reserves
a general right in the Contract Administrator to direct the Contractor to carry out tests in addition to those
otherwise specified in the Contract. The Contract Administrator needs this power where it believes that work is
defective and wants to test that work, but the Contract does not otherwise provide for such a test.
A proforma notice directing the Contractor to carry out a test or tests titled 'Direction to carry out tests' is
provided in Volume 5 [insert link].
Clause 9.5 - Costs of Testing
This clause establishes that the Contractor bears the primary responsibility for testing the Works under the
Contract.
The Contractor will only be able to recover the costs of the test if:
(a)
the test ordered was not otherwise required by the Contract or did not relate to a Defect in respect of
which the Contract Administrator has given an instruction under clause 9.6 of the Conditions of
Contract; and
(b)
the results of the test show that the Contractor's work was in accordance with the Contract.
In such circumstances, the value of the reasonable costs incurred by the Contractor will be determined by the
Contract Administrator and added to the Contract Price.
If the Contractor is not able to satisfy both of these requirements for each test carried out, it will have to pay for
the cost of the test, regardless of how much the test costs or how frequently testing has been carried out.
Clause 9.6 - Defects
A Defect is defined in clause 1.1 of the Conditions of Contract as any defect, shrinkage, fault or omission in the
Works, including any aspect of the Works which is not in accordance with the requirements of the Contract
(including the Works Description).
The starting point is that the Contractor has primary responsibility for correcting all Defects, unless otherwise
directed, regardless of whether the Defect is in work done by the Contractor or done by subcontractors engaged
by the Contractor.
The Contract Administrator also has the power to direct the Contractor to respond to the Defect in one of three
ways:
(a)
to correct the Defect within a specified time;
(b)
to carry out a Variation to overcome a Defect or part of it within a specified time; or
(c)
to leave the Defect as is, in which case Defence "accepts" the Defect and the amount representing the
cost of correcting the Defect is a debt due to the Commonwealth.
Any instructions issued by the Contract Administrator during a Defects Liability Period may result in an
extension of the Defects Liability Period (under clause 9.11 of the Conditions of Contract) in respect of the work
where the instructions are to correct the Defect or carry out a Variation to overcome the Defect.
A proforma notice for the Contract Administrator to notify the Contractor of Defects, and issue instructions in
relation to such Defects titled 'Instruction regarding Defects' is provided in Volume 5 [insert link].
Clause 9.7 - Correction of Defect or Variation
This clause requires the Contractor to carry out rectification or a Variation instructed under clause 9.6 of the
Conditions of Contract within the time specified by the Contract Administrator and in a convenient manner
where reasonably possible.
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Clause 9.8 - Claim for Correction of Defect; Clause 9.9 - Claim for Variation; Clause
9.10 - Acceptance of Work; Clause 9.11 - Extension of Defects Liability Period
If the Contract Administrator orders the Contractor to demolish or correct the defective workmanship, or replace
the faulty materials under clause 9.6(a) of the Conditions of Contract, to the extent that the Contractor is
responsible for the Defect this is to be done at the Contractor's expense and it will have no claim against the
Defence in relation to the correction of the Defect.
Sometimes the most appropriate way to deal with a Defect will be to order a Variation under clause 9.6(b) of the
Conditions of Contract, thereby accommodating the Defect. Whilst this may be the most cost effective option, in
the absence of contractual provisions or an ad hoc agreement for the Variation to be carried out at the expense of
the Contractor whose defective work has necessitated the Variation, Defence would have to pay for the Variation
pursuant to the variation clause which would, of course, enable the Contractor to profit from its wrong. Under
the Contract, the Contractor will be responsible for such Variations.
Accordingly, if the Contractor is instructed to carry out a Variation to overcome a Defect for which the
Contractor is responsible, the Contractor will only be entitled to additional payment if the value of the Variation
exceeds the cost it would otherwise have incurred in correcting the Defect (or the relevant part). The Contractor
will have no entitlement to an extension of time. If the value of the Variation is less than the cost of correcting
the Defect (or the relevant part), the difference will be a debt due from the Contractor to Defence.
Alternatively, the Contract Administrator may opt to simply accept the defective work, with the amount to
correct the Defect (as determined by the Contract Administrator) being a debt due from the Contractor to
Defence.
The flowchart titled 'Flowchart 2: Defects' provided in Volume 4 [insert link] shows the different consequences
and entitlements under clauses 9.6 to 9.11 of the Conditions of Contract for each of the possible instructions
given by the Contract Administrator in response to a Defect, and the differences depending on whether or not the
Contractor is responsible for the Defect.
For example, the flowchart shows that in some instances the Defects Liability Period will be extended in respect
of the particular work. Thus, the Defects Liability Periods in respect of some parts of the Works may expire
some time after the expiration of the general period set out in the Contract Particulars. This impacts, for example,
on the time when security is to be released under clause 4.2 of the Conditions of Contract (see discussion above).
It should be noted that, unlike other forms of construction contracts in common use in Australia, the Contract
does not require the issue of any form of certificate by Defence or the Contract Administrator after the end of the
Defects Liability Period. There is no concept of a "final certificate" in Defence contracts.
Clause 9.12 - Common Law Rights not Affected
This clause seeks to preserve the common law rights of Defence in relation to defective work under the Contract,
including seeking to overcome any argument that, by exercising any rights given to it under clause 9 of the
Conditions of Contract, it is precluded from exercising rights at common law in respect of the defective work.
Clause 9.13 - Commissioning and Handover
This clause dovetails with the commissioning and handover requirements under the Defence maintenance
contracts (being either the Comprehensive Maintenance Contract (CMC) or Comprehensive Maintenance
Services Contract (CMS) depending on when the contract was entered into).
It requires the Contractor to co-operate with Other Contractors (including those engaged by Defence) and
otherwise to ensure a smooth commissioning and handover of the Works to Defence. In doing so, the Contractor
must comply with the Commissioning and Handover Plan and Commissioning, Handover and Takeover
Guidelines, and must also provide such other assistance as may be required by the Contract Administrator under
this clause. All Project Documents which are required for the use, operation and maintenance of the Works or
relevant Stage must be handed over before Completion is achieved. See also the requirements in Annexure 1
with respect to documentation and training which are intended to facilitate commissioning and handover of the
Works.
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Clause 9.13(d) of the Conditions of Contract also requires the Contractor to meet with the Contract
Administrator and such Other Contractors or other persons nominated by the Contract Administrator at a time
reasonably required by the Contract Administrator to ensure that the Commonwealth, the nominated Other
Contractors and other relevant persons have sufficient information to operate the Works and maintain the Works.
This meeting is not limited in terms of time, but rather is to continue until the relevant information has been
imparted and understood. As this is one of the Contractor's Activities under the Contract, the cost of it is
included in the Contract Price and the Contractor is not entitled to additional payment for the meeting(s).
Clause 9.14 - Maintenance during Defects Liability Period
The Contractor is only required to carry out the type of maintenance during the Defects Liability Period
specifically stated in the Contract Particulars. See also Volume 2.
If maintenance work is required, this clause requires the Contractor to ensure that during the Defects Liability
Period maintenance must be carried out as per the Commissioning and Handover Plan, or as otherwise necessary
to ensure the Works are, or each Stage is, throughout the Defects Liability Period and at the end of the Defects
Liability Period, fit for their intended purpose.
Clause 9.15 - Defects Liability Period Review and Report
This clause requires the Contractor to maintain adequate records of all calls, attendances, recommendations and
actions taken in respect of all Defects.
"Adequate" records would at least require names of persons involved, dates, summary of calls and attendances
and any agreements, promises, reports made and action taken.
The Contractor is also required to, within 14 days of the end of the Defects Liability Period for a Stage or the
Works, provide a report to the Contract Administrator setting out:
(a)
adequate records of all calls, attendances, recommendations and actions taken in respect of all
Defects;
(b)
recommendations for the future maintenance of the Works; and
(c)
any other matters specified in the Contract Particulars or required by the Contract Administrator.
CLAUSE 10 - TIME
Clause 10.1 - Progress and Time for Completion
This clause sets out the primary obligations of the Contractor to complete on time. Essentially, the Contractor
must regularly and diligently progress the Contractor's Activities and achieve Completion of the Works or each
Stage by the relevant Date for Completion.
The Date for Completion will be the time specified in the Contract Particulars, as adjusted under the Contract.
Clauses of the Conditions of Contract which may result in the Date for Completion being adjusted include:
(a)
clause 2.3 - delayed access;
(b)
clause 7.4 - Latent Conditions (if applicable) and set out as an additional cause of delay in the
Contract Particulars;
(c)
clause 9.9(a) - Variations instructed in response to Defect;
(d)
clause 10.7 - general clause relating to entitlement to extension of Date for Completion; and
(e)
clause 10.12(b) - suspension.
Clause 10.2 - Programming; Clause 10.3 - Contractor Not Relieved
Clause 10.2 of the Conditions of Contract requires the Contractor to provide the Contract Administrator with a
program within 14 days of the Award Date. Construction programs are used as a management tool to assist the
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parties and the Contract Administrator. The Contractor is also required to periodically (at specific intervals
specified in the Contract Particulars) update the program to take account of any changes to the program or delays
which may have occurred or extensions of time which may have been granted under the Contract.
Unlike some other construction standard form contracts where the program forms part of the Contract, under
clause 10.2 of the Conditions of Contract the program is not part of the Contract. This is to overcome the
potentially inconsistent obligations which may arise if the Contractor has to comply with both the Conditions of
Contract and the program.
The Contractor is also required to ensure that the subcontractors adhere to the program. This clause reflects that
the Contractor relies heavily on the performance of work by subcontractors.
Further, clause 10.3 of the Conditions of Contract provides that no approval of, review, or suggested amendment
to the program by the Contract Administrator will alter the Contractor's primary responsibility under the
Contract.
The program is to contain "the details required by the Contract or which the Contract Administrator otherwise
reasonably directs". Apart from being a general indication of projected sequencing and durations, a simple
program will be of limited use to a Contract Administrator. A program therefore should take the form of a more
detailed critical path network, set out to a time scale of working days stated in the Contract.
The program must be provided in a format compatible with the software described in the Contract Particulars.
Further guidance is provided in Volume 2.
To be useful, a program should be to a large scale and:
(a)
include sufficient detail to describe the major elements of work within each area, zone or level and
indicate the flow of work throughout;
(b)
include allowance for usual construction details/events;
(c)
identify key activities by others, such as:
(i)
supply of documentation or information by the Contract Administrator;
(ii)
approval processes by both the Contract Administrator or Defence and other authorities;
and
(iii)
dates for Defence-dependent milestones;
(d)
include supply of essential materials and off-site activities;
(e)
provide estimated duration of activities and key precedence relationships between critical or near
critical activities;
(f)
provide the sequence of activities which constitute the critical path at the time of inception of the
program and its logic;
(g)
provide information on the manning and equipment requirements and productivity rates for each
activity/element and stage of construction of the Works together with the logical progression of
trades/crews through the Works. This may be more appropriately shown in some cases on separate
schedules, tables or charts that are directly linked and derived from the logic and resourcing of the
program; and
(h)
provide the levels of administrative, management and supervisory staff required over the duration of
the Contract.
In reviewing the program during the course of the Works, the Contract Administrator should have regard to
matters such as:
(i)
Is the base program set out to the time scale required by the Contract (i.e. to the Date/s for
Completion of the Works or Stages as appropriate)?
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This is particularly relevant as, even if the Contractor chooses to accelerate progress to achieve
Completion prior to the due Date for Completion, neither the Contract Administrator, Defence nor
any other person is expressly obliged to do (or not do) anything to enable the Contractor to reach
Completion prior to the due date, nor is failure to do (or not do) anything as grounds for an extension
of time.
In addition, the Contract Administrator may require an unaccelerated program against which to
assess the impact of purported delaying events against the accelerated program, to ascertain the
answer to the threshold question of whether the Contractor is or will be delayed in reaching
Completion by the due Date for Completion.
(j)
Does the program sufficiently detail activities and elements and provide key precedence
relationships and the sequence of activities representing critical path?
This will be particularly relevant when assessing the impact of events on particular activities
including concurrency of events and criticality of activity. It may be that an extension of time in
respect of a delaying event to one activity is such that a subsequent separate delaying event on
another activity has no effect upon reaching Completion of the Works by the due Date for
Completion.
(k)
Is the resourcing (labour and plant) of each activity clearly detailed and able to be monitored and
compared on a daily basis?
Without proper resourcing information, a program is not truly useful, as this major constraining
element on progress is not able to be clearly identified and compared with actual resourcing and
progress.
As a consequence, the true effect of an event upon the question as to any entitlement to an extension
(i.e. whether the Contractor is or will be delayed in reaching Completion by the due Date for
Completion), and the length of any such extension may be distorted.
By way of a simplistic illustration, a critical activity programmed for 6 days duration is disrupted by
having to carry out the work differently due to an Act of Prevention. Actual records indicate that the
activity took 10 days to complete. Assuming other entitlement and threshold constraints are met, on
the face of the events, the Contractor appears entitled to claim for 4 days extension.
However, if the programmed activity, properly resourced, required 6 workers per day to carry it out
within the 6 day duration and actual records indicated the Contractor only ever had 4 workers
undertaking that activity, then the true delay of the event is less than first appears.
In a simplistic assessment assuming rate of progress was directly related and proportional to
resourcing, it could be argued that the Contractor’s resourcing was only 66% of that required to carry
out the activity and that as a consequence in the original 6 days duration those workers could only
have produced 4 days of programmed work.
6
That is to say, at that level of resource, the Contractor would have taken 0.66 days (i.e. 9 days) to
undertake the work as originally required, a delay of 3 days attributable to the resource constraint.
Therefore, it is arguable that the Act of Prevention was only responsible for 1 day of the delay to the
activity, with the other 3 days being attributable to the Contractor’s default in not providing the
requisite resources to progress the Works at a satisfactory rate.
In addition to the program, as demonstrated in the illustration above, the Contract Administrator may consider it
appropriate to require the Contractor to submit regular short term field schedules and reports covering:
(l)
a daily workforce report listing staff and labour by category of employment and hours worked, hours
lost (to rain, industrial issues, public holidays, RDOs, other causes);
(m)
a weekly equipment report showing the number and type of construction equipment utilised for the
work and hours working and idle on each day of the week; and
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(n)
a weekly man-hour and quantity report detailing man-hours expended, quantities of work measured
against activities/elements of work programmed.
Clause 10.4 - Acceleration by Contractor
This clause allows the Contractor to accelerate its progress. However, Defence and the Contract Administrator
are not obliged to take any action to assist in such acceleration.
If the Contractor chooses to accelerate progress so that it can finish early, then it does so at its own risk and will
not be entitled to the payment of any extra money. This recognises, for example, that for many projects Defence
may only have limited funds available and therefore any early completion of the project may not be of benefit if
it means that it has to pay more than the anticipated Contract Price.
Clause 10.5 - Delays Entitling Claim; Clause 10.6 - Claim; Clause 10.7 - Conditions
Precedent to Extension
Claims for extensions of time need to be assessed with care. In particular, the Contract Administrator should be
mindful that the Contractor has no entitlement to an extension of time under the Contract unless it satisfies a
number of requirements. These requirements are set out in clauses 10.5-10.7 of the Conditions of Contract and
can be categorised as follows:
(a)
the substantive requirements, being:
(i)
(ii)
(b)
firstly, whether the event complained of by the Contractor is:
A.
beyond the reasonable control of the Contractor; and
B.
recognised by the Contract as a qualifying event of delay in the
circumstances; and
if the event satisfies these requirements, whether it has caused the Contractor to be
delayed in a manner which entitles a claim in the circumstances; and
that the procedural requirements set out in clause 10.6 of the Conditions of Contract have been
strictly followed by the Contractor.
In addition, to dovetail with the Contract Administrator’s power to instruct the Contractor to accelerate through a
delay under clause 10.13 of the Conditions of Contract, the Contractor is not entitled to an extension of time if it
has received such an instruction (see clause 10.7(d) of the Conditions of Contract).
Each of the matters above are discussed in turn as follows:
(c)
Substantive Requirements
Event is beyond the control of the Contractor
This requirement is self-explanatory but should not be overlooked. Likewise, as noted below (see
commentary on clause 10.9 of the Conditions of Contract, below), the Contractor will be disentitled
to the extent that it has contributed to the delay or failed to take all necessary steps to preclude the
cause of the delay and to avoid or minimise the consequences of the delay.
Qualifying events of delay
The qualifying events applicable in the circumstances depend upon whether the event is claimed to
have delayed the Contractor before or after the relevant Date for Completion.
If the Contractor is delayed before a Date for Completion, the qualifying events are:
(i)
"Acts of Prevention", being:
A.
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(ii)
B.
any other act or omission of the Commonwealth, the Contract Administrator
or an Other Contractor engaged by the Commonwealth (note that the act or
omission need not be wrongful); or
C.
a Variation which has been directed by the Contract Administrator
(excluding Variations directed under clause 9.9(b) of the Conditions of
Contract to overcome a Defect for which the Contractor is responsible); and
any other events set out in the Contract Particulars. The standard proforma events are:
A.
statewide industrial disputation or other industrial disputation caused by the
Commonwealth, which in neither case is caused or contributed to by the
Contractor or any subcontractor of the Contractor;
B.
a change in a Statutory Requirement after the Award Date;
C.
Commonwealth Risks; and
D.
if clauses 7.3 and 7.4 apply, "Latent Conditions".
Unless Defence and the Contractor agree to specify other “neutral” events (i.e. those beyond either
party's control, such an inclement weather, community protests etc) in the Contract Particulars, the
Contractor will have no entitlement to claim an extension of time for such events under the Contract.
Conversely, if the parties do agree to allow an extension of time for such events (subject to the
Contractor complying with the other requirements of clauses 10.5-10.7 of the Conditions of
Contract), the relevant events need to be described clearly and specifically in the Contract
Particulars.
Legal or policy advice should be obtained before agreeing to specify any such events in the Contract
Particulars, especially as agreeing to certain events on one project may be seen as creating a
precedent for future projects. There is no legal reason why Defence must accept the risk of neutral
events of delay. Generally, Defence will be more likely to do so under construct only rather than
design and construct delivery as the Contractor has less control over the program and the project.
After the Date for Completion has passed, the only qualifying events are “Acts of Prevention”.
Manner of delay
If the relevant event is beyond the control of the Contractor and recognised by the Contract as being
a qualifying event of delay in the circumstances, the next requirement (under clauses 10.5 and
10.7(c) of the Conditions of Contract) is that the Contractor show that it has been delayed by the
event in a manner which will delay it:
(i)
where the delay is claimed to have occurred before the relevant Date for Completion –
in achieving Completion of the Works or the Stage (as the case may be) by the relevant
Date for Completion; and
(ii)
where the delay is claimed to have occurred after the relevant Date for Completion - in
achieving Completion of the Works or the Stage (as the Date for Completion has passed
by this stage, it is no longer sensible to refer to the Contractor being delayed in achieving
it).
A detailed analysis of techniques for assessing claims for extensions of time is beyond the scope of
the Manual.
Generally, contract administration personnel need to be aware – at the very least – that:
(iii)
the grounds for claiming an extension of time are quite different under the HC-1 2003 to
other forms of construction contract in common use in Australia; and
(iv)
in particular, because of the tests referred to above, the Contractor will not automatically
be entitled to an extension of time on grounds which might entitle it to an extension
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under such other forms – for example, where it is delayed in achieving Completion by an
earlier date programmed by the Contractor, but not the Date for Completion.
(d)
Procedural Requirements
The purpose of clause 10.6 of the Conditions of Contract is to ensure that the Contractor promptly
informs the Contract Administrator of any event which it considers will entitle it to an extension of
time, rather than bundling together a series of claims near the end of the project if the Contractor
realises it is running out of time.
The procedural requirements for claiming an extension of time for delay must be strictly adhered to
by the Contractor if it is to be entitled to an extension of time under the Contract.
Therefore, to claim an extension of time, the Contractor must:
(i)
(ii)
within 14 days of the commencement of the occurrence causing the delay submit a
written claim to the Contract Administrator which:
A.
gives detailed particulars of the delay and the occurrence causing the delay;
and
B.
states the number of days extension of time claimed together with the basis
of calculating the period, including evidence that it will be delayed in
achieving Completion in the manner set out in clause 10.7(c) of the
Conditions of Contract (as discussed above); and
if the effects of the delay continue beyond the period of 14 days after the commencement
of the occurrence causing the delay, and the Contractor wishes to claim an extension of
time in respect of the further delay, submit a further written claim to the Contract
Administrator:
A.
every 14 days after the first written claim until 7 days after the end of the
effects of the delay; and
B.
containing the information required by subparagraph (i).
A written claim for an extension of time must include evidence that the Contractor is able to comply
with the substantive requirements referred to above - i.e. it will be delayed in achieving Completion
by the Date for Completion of the Works or the Stage (if the delay was caused prior to the Date for
Completion of the Works or Stage), or simply in achieving Completion of the Works or Stage (if the
delay occurred after the Date for Completion for the Works or Stage).
Such evidence would be expected to include a detailed program and accompanying explanation and
such other details as the Contract Administrator requires in the circumstances.
Proforma notices for claiming an initial extension of time and for submitting further written claims
titled 'Initial claim for an Extension of Time' and 'Claim for a further Extension of Time'
(respectively) are provided in Volume 5 [insert links].
Clause 10.8 - Extension of Time
If the substantive and procedural requirements set out in clauses 10.6 and 10.7 of the Conditions of Contract
have been satisfied, the Contract Administrator will be required to extend the relevant Date for Completion by a
reasonable period. What is reasonable will depend on the situation, however, it will not necessarily be the period
of time claimed by the Contractor. It is worth noting here that as agent and under the DIP Terms of Engagement
the Contract Administrator has certain obligations under the DIP Terms of Engagement to consult with Defence
with respect to numerous matters, which would include proposed extensions of time.
The Contract Administrator must notify Defence and the Contractor of the length of the extension, if any, within
21 days of receiving the Contractor's written claim under clause 10.6(a) or (if the effects of the delay continue
beyond 14 days) under clause 10.6(b) of the Conditions of Contract.
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A proforma notice for the Contract Administrator to notify whether or not an extension has been granted and for
how long, titled 'Determination of Extension of Time claim', is provided in Volume 5 [insert link]. Further, a
flowchart titled 'Flowchart 3: Extensions of Time' provided in Volume 4 [insert link] sets out the procedure for
granting an extension of time for Completion and the factors that should be considered in making a
determination on extending time for Completion of the Works or a Stage.
Please also note that under clause 10.13 of the Conditions of Contract, the Contract Administrator has the
alternative option to instruct the Contractor to accelerate through the delay. See further guidance at commentary
on clause 10.13 of the Conditions of Contract below.
Clause 10.9 - Reduction in Extension of Time
This clause provides that the Contractor is not entitled to an extension of time where it has contributed to the
delay or failed to take all necessary steps to preclude the cause of the delay and to avoid or minimise the
consequences of the delay. Thus, the Contractor's responsibility under this clause complements and extends the
condition precedent in clause 10.7(b) of the Conditions of Contract, which requires the cause of the delay to have
been beyond the reasonable control of the Contractor.
If the Contract Administrator believes that the Contractor contributed to the delay or failed to take necessary
steps to preclude, avoid or minimise the consequences of the delay, it is to reduce the amount of any extension of
time to which the Contractor would otherwise be entitled. Clause 10.9 of the Conditions of Contract should be
expressly referred to, and the reasons explained in the Contract Administrator's response under clause 10.8 of the
Conditions of Contract, if the extension is to be reduced under clause 10.9 of the Conditions of Contract.
Clause 10.10 - Unilateral Extensions
The Commonwealth needs to have the power to unilaterally extend time, in order to preserve Defence's right to
insist upon the Contractor completing the Contract by the Date for Completion, and therefore its right to claim
liquidated damages under clause 13.7 of the Conditions of Contract.
The Commonwealth should only exercise this right where the Contractor fails to lodge a claim for an extension
of time and where some or all of the delay has been caused by an "Act of Prevention" (as discussed above).
A proforma notice titled 'Unilateral Extension of Time' is provided for the Commonwealth to notify the
Contractor and the Contract Administrator of an unilateral extension of time in Volume 5 [insert link].
Clause 10.11 - Agreed Damages
This clause is an optional clause - however is an 'opt out' clause in that it will apply unless it is specially stated
not to apply in the Contract Particulars.
Agreed damages are the damages for delay and disruption which are payable by Defence to the Contractor for a
breach of contract which delays the Contractor and for which the Contractor receives an extension of time. Note
that there is no right to agreed damages for a neutral event or for "Acts of Prevention" other than breaches of
contract.
Agreeing to a rate for such damages before the Contract is entered into provides certainty to Defence about the
cost consequences of Defence delaying the Contractor by a breach of contract. These agreed damages are a limit
on Defence's liability in these circumstances and are therefore similar to the liquidated damages which apply in
the reverse situation, where the Contractor delays and it fails to achieve Completion by the Date for Completion
(provided for in clause 13.7 of the Conditions of Contract). However, there is not (and should not be) any direct
correlation between the amount payable as agreed damages (by Defence) and the amount payable as liquidated
damages (to Defence) - this is because the two amounts represent completely different types of loss and damage
which are likely to be suffered by the Commonwealth (liquidated damages) and the Contractor (agreed
damages). See guidance in Volume 2.
If clause 10.11 of the Conditions of Contract is not included, then Defence will be liable to general delay
damages, where its breach of contract delays the Contractor. The disadvantage to Defence is that there is no
contractual limitation on its liability. However, the onus is on the Contractor to prove the damages it has
suffered as a result of the breach of contract. Defence should not agree to make any payment on account of such
damages without satisfactory proof having been adduced.
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Clause 10.12 - Suspension
The Contractor has no right to suspend work under the Contract unless it is ordered to do so by the Contract
Administrator under clause 10.12 of the Conditions of Contract. However, in certain limited circumstances the
Contractor may have a right to suspend the work by operation of the Security of Payment Legislation, if such
legislation applies. See commentary on clause 12 of the Conditions of Contract for further guidance.
The Contract Administrator may order the Contractor to suspend work at its absolute discretion; such a power
might need to be exercised in various circumstances, for example where the Commonwealth requires sole access
to the Site for a specific purpose. The Contractor will be entitled to claim an extension of time and payment for
its extra costs provided that the suspension is not the result of the Contractor's failure to perform its Contract
obligations. The entitlement to payment for those extra costs is the Contractor's only entitlement to money in
these circumstances. The Contractor will not be entitled to costs which could have reasonably been avoided (i.e.
it must mitigate the extra costs incurred).
A proforma notice instructing the Contractor to suspend work titled 'Instruction to suspend' is provided in
Volume 5 [insert link].
A proforma notice titled 'Instruction to re-commence' is also provided in Volume 5 [insert link] for the purpose
of instructing the Contractor to re-commence work.
Clause 10.13 - Instruction to Accelerate
When the Contractor submits a claim for an extension of time, the Contract Administrator can either process the
request for an extension of time or order the Contractor to accelerate through the delay. This latter option may
be useful in certain circumstances where it is critical that Completion be achieved by the current Date for
Completion. However, the Contract Administrator needs to be aware that the Contractor may be entitled to extra
costs under clause 10.13 of the Conditions of Contract if Defence requires it to accelerate.
The Contract Administrator is not entitled to instruct the Contractor to accelerate in the absence of a claim for an
extension of time under clause 10.6 of the Conditions of Contract. Indeed, in those circumstances such a power
is generally unnecessary, as the Contractor bears the risk of accelerating through delays for which it is not
entitled to an extension of time, so as to achieve Completion by the Date for Completion.
A proforma notice titled 'Instruction to accelerate' is provided in Volume 5 [insert link] for notifying the
Contractor that it is to accelerate its activities.
Clause 10.14 - Partial Acceleration
Where the instruction to accelerate does not apply to the whole of the delay claimed by the Contractor, the
Contract Administrator is to reduce the Contractor's entitlement to an extension of time to the extent that the
instruction to accelerate requires the Contractor to accelerate to overcome the delay. The power to order a partial
acceleration should be considered where it may not be physically possible for the Contractor to accelerate
through the full period of delay.
Clause 10.15 - Acceleration
If the Contractor would otherwise have been entitled to an extension of time for the cause of the delay in
accordance with the Contract, the Contractor will be entitled to the extra costs reasonably incurred by it which
are directly attributable to the acceleration. In addition, the Contractor is entitled to a percentage of that amount
as set out in the Contract Particulars. The percentage will usually have been tendered by the Contractor under
Tender Schedule F - Miscellaneous Contract Particulars.
Clause 10.16 - Commonwealth's Right to Liquidated Damages not Affected
This clause makes it clear that, where the Contract Administrator gives an instruction to accelerate under clause
10.13 of the Conditions of Contract in response to a claim for an extension of time, Defence is still entitled to
claim liquidated damages if the Contractor does not successfully accelerate through the delay for which it
submitted its claim.
CLAUSE 11 - VARIATIONS
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General
Valuation of Variations is an area of contract administration which is often not accorded the appropriate timely
action by all or some involved in the process. It is also often an area of high disputation relative to value in
accordance with the terms of the Contract.
Whilst the Contract does not expressly state any time constraint as to when valuation of a Variation is to occur, it
is preferable, if possible, to wrap up all implications of a Variation (that is, both time and cost) at the time of its
instruction.
A Variation is defined in clause 1.1 of the Conditions of Contract as being (unless otherwise stated) any change
to the Works including any addition, increase, decrease, omission, deletion, demolition or removal to or from the
Works. Note that the definition is in relation to a change in the work scope. Thus, a Variation will not
necessarily involve a change to the Contract Price. It should also be noted that other types of changes e.g. to
Stages of the Works, to the timing for certain aspects of the Works and other requirements of the Contract not
impacting on work scope may need to be dealt with in another way e.g. deed of amendment, rather than by using
the variation power. Further information is available from the Directorate of Construction Contracts.
At any time prior to the Date of Completion of the Works or a Stage (except in certain circumstances
concerning, for example, Defects), the Contract Administrator may issue a Variation Price Request to the
Contractor detailing a proposed Variation. It is a strategic decision whether or not to issue a Variation Price
Request and specialist consultation should be sought if a significant change is contemplated. As agent of
Defence, the Contract Administrator should only issue a Variation Price Request if so directed by Defence.
The Contractor must respond to any Variation Price Request providing details of the adjustments to and effect of
the proposed Variation would have on the program and the effect on the Contract Price (if any).
A Variation is the primary means by which Defence can change the work scope under the Contract. It is critical
that the Contract Administrator follow the procedure set out in clause 11 of the Conditions of Contract when
issuing a Variation.
Clause 9.6(b) of the Conditions of Contract empowers the Contract Administrator to direct the Contractor to
carry out a Variation after the date of Completion and prior to the expiration of the Defects Liability Period in
circumstances where it is necessary to overcome a Defect.
In the first instance, a Variation is usually priced by the Contractor and submitted to the Contract Administrator
for agreement. As a consequence, the onus will generally be on the Contractor to present adequate detail and
substantiation of the amounts and quantities included in its response.
Records will be essential, from both the Contract Administrator's and the Contractor's viewpoint, particularly if
the payment method is not agreed and, even if agreed, in the case of a dispute arising. Records covering not only
manpower resources and equipment on Site, but what they were doing, when, and where must be kept.
Direct costs of material, hired plant etc. should be supported as necessary by the Contractor by delivery docket
and invoice and other materials as appropriate. This is expressly required (under clause 11.5 of the Conditions
of Contract) in respect of daywork.
It is also important to remember that:
(a)
in directing and assessing Variations, the Contract Administrator is acting as Defence's agent and
must therefore act in Defence's best interests. Accordingly, the Contract Administrator is not under
a duty to act independently or fairly. See guidance above in relation to clause 3.1 of the Conditions
of Contract;
(b)
when directing Variations or otherwise acting in a manner which will constitute a Variation, Defence
personnel (including the Contract Administrator) must ensure that the value of the relevant Defence
internal purchase order will meet the liability incurred as a result of carrying out the Variation. This
confirmation must occur prior to directing a Variation. If the value of the Variation will not fall
within the value of the purchase order, then Defence must ensure that the value of the purchase order
is increased.
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Clause 11 of the Conditions of Contract also needs to be read in light of clause 16.1 of the Conditions of
Contract, which provides a mechanism for the Contractor to assert that a direction of the Contract Administrator
constitutes a Variation even if the Contract Administrator did not issue the direction by way of a Variation
Order. See further guidance below in relation to clause 16.1 of the Conditions of Contract. [insert link].
A flowchart titled 'Flowchart 4: Variations' has been provided in Volume 4 [insert link] detailing the procedures
to be taken where Variations are requested by the Contractor or directed by the Contract Administrator/Defence.
Clause 11.1 - Variation Price Request
All Variations ordered by the Contract Administrator should be issued using the proforma notice titled 'Variation
Price Request' in Volume 5 [insert link] or by issuing a Variation Order under clause 11.2 of the Conditions of
Contract (in which case any adjustment to the Contract Price will be determined later).
Variations can only be ordered after the Date of Completion of the Works or a Stage if they relate to a Defect or
to the reinstatement of damaged or lost Works.
The Contractor must respond to a Variation Price Request within 14 days of receipt. A proforma response to a
Variation Price Request titled 'Response to Variation Price Request' is provided in Volume 5 [insert link].
If the Contract Administrator agrees with the Contractor's response, it can issue a Variation Order confirming
this. However, if the Contractor fails to provide a compliant response within 14 days, or the Contract
Administrator does not agree with the response, the Contract Administrator is entitled to issue a Variation Order
and determine any adjustment to the Contract Price and Date for Completion in accordance with clause 11.2 of
the Conditions of Contract.
Clause 11.2 - Variation Order
Once Defence is ready to order a Variation, the proforma notice titled 'Variation Order' provided in Volume 5
[insert link] should be used. Verbal instructions which could involve a Variation should be avoided.
A Variation Order may be issued without the need for a prior Variation Price Request. However, it is always
preferable to first issue a Variation Price Request, to maximise the likelihood of the parties agreeing the time and
cost consequences of the Variation.
There are three different options for how the Variation can be priced under clause 11.2 of the Conditions of
Contract (assuming that the Variation will have a cost impact on the Contractor in carrying it out).
Clause 11.2(a) should be selected when the Contract Administrator has issued a Variation Price Request and is
satisfied with the proposed adjustment to the Contract Price set out in the Contractor's response under clause
11.1 of the Conditions of Contract. Clause 11.2(b) and 11.2(c) are available where no Variation Price Request
was issued, when the Contract Administrator does not accept the Contractor's proposed adjustment to the
Contract Price, or where there has been no response to a Variation Price Request.
Clause 11.3 - Cost of Variation
The valuation of a Variation under clause 11.3 of the Conditions of Contract represents the Contractor's total
entitlement to payment for that Variation, including for any costs of delay. The Contractor is not entitled to
delay damages as such (whether agreed damages under clause 10.11 of the Conditions of Contract or general
damages) but is entitled to the reasonable costs of any delay as agreed or determined by the Contract
Administrator.
Where the Contractor has issued a response to a Variation Price Request which has been accepted in the Contract
Administrator's Variation Order, the Contract Price will be adjusted as agreed.
Where the Contract Administrator has not issued a Variation Price Request or has not accepted the Contractor's
written notice in response to a Variation Price Request, or where the Contractor did not issue a written response
to a Variation Price Request, the cost of the Variation will be determined in accordance with clauses 11.3(b),
11.3(c) and 11.3(d) of the Conditions of Contract.
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Under clause 11.3(b) of the Conditions of Contract, the Contract Administrator determines the cost of the
Variation by reference to any relevant rates or prices set out in the Table of Variation Rates and Prices of the
Contract. It is important to note that the question of applicability of rates or prices as a means of valuing a
Variation requires careful consideration by the Contract Administrator. Generally, if the Contractor contends
that other rates and prices are to apply, it is up to the Contractor to clearly demonstrate to the Contract
Administrator's satisfaction that such rates or prices are not applicable against the background of the surrounding
circumstances.
Some factors which may be relevant in determining whether a scheduled rate or price is or is not applicable to
particular work are:
(a)
the stage of the project at which the work is directed which may make that work either more difficult
and expensive, or alternatively simpler and less expensive, than the work contemplated in the
schedule item; and
(b)
the quantity of work to be done where an increase (or decrease) may add to the complexity (or
simplicity) if there is a difference.
Generally, it would not be unreasonable to apply the test: "Is the work of a similar character and executed under
similar conditions?"
Where the Table of Variation Rates and Prices does not apply, the parties may agree the cost of the Variation or,
if they cannot agree, the Contract Administrator will determine a reasonable amount under clause 11.3(c) of the
Conditions of Contract. The Contract Administrator should take into account the factors that could go to make
up a reasonable rate and whether each particular factor should be applied in a specific instance.
The Contract Administrator will then add to the amount agreed or determined the percentage of that amount
which is set out in the Contract Particulars. Note that the relevant percentage will differ depending on whether
the Variation involves an increase or a decrease in the Contract Price. Where it involves an increase, the
additional percentage is intended to include an additional amount on account of the Contractor's non-time related
overheads and preliminaries and off-site overheads and profit, and will therefore be higher. Where the Variation
involves a saving and therefore a decrease in the Contract Price, the further decrease in Contract Price,
representing a pre-determined reduction of the Contractor's entitlement on account of off-site overheads and
profit (but not non-time related overheads and preliminaries), will be calculated using a lower percentage.
Where the Contract Administrator has directed the Contractor to carry out a Variation to overcome a Defect
before or during the Defects Liability Period (under clause 9.6 of the Conditions of Contract), the Contractor will
only be entitled to be paid for the Variation in accordance with clause 11.3 of the Conditions of Contract where it
is not responsible for the Defects (see flowchart titled 'Flowchart 4: Variations' in Volume 4 [insert link]).
There is no express requirement under the Contract that the Contract Administrator notify the Contractor of the
amount of an adjustment under clause 11.3 of the Conditions of Contract, nevertheless, it would be good practice
to ensure that this is done.
Clause 11.4 - Omissions
Under this clause, the Contract Administrator is entitled to issue a Variation which omits any part of the Works
or a Stage. Defence may then elect to carry out the omitted work itself or by engaging Other Contractors.
This clause is very important, as otherwise at common law, the handing over of work in this manner could
constitute a repudiation of the Contract. Nonetheless, given the common law restrictions on exercising such a
power, the Contract Administrator should not attempt to exercise its power without seeking specialist advice.
Clause 11.5 - Daywork
Where the Contract Administrator instructs the Contractor to carry out a Variation (under clause 11.2(c) of the
Conditions of Contract), or complete items of work or quantities of work outside the limits of accuracy stated in
the Contract Particulars (under clause 12.3(d) of the Conditions of Contract - see below), the Contract
Administrator may direct that the work be carried out as "daywork"; effectively, the extra work will be valued
based on the Contractor's daily costs and expenses. This provides the option for Defence to order the Contractor
to work at an agreed price per day. This may be useful where the Contractor is doing work outside the scope of
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the Contract and where the parties have not agreed to a lump sum value for the work, but should not be used for
substantial work or protracted periods without first seeking appropriate advice.
Given the costing basis, the Contractor is required to provide a written report after each day of daywork.
A proforma notice for such a report titled 'Daywork report' is provided in Volume 5 [insert link], however
additional information may need to be specified if (as is provided for in clause 11.5 of the Conditions of
Contract) the Contract Administrator has directed that additional matters are to be reported.
Clause 11.6 - Valuation of Daywork
Clauses 11.6(a) to 11.6(e) of the Conditions of Contract sets out the factors that the Contract Administrator must
take into account when determining the value of daywork. The Contract Administrator must then add to the
determined amount the percentage of the amount, set out in the Contract Particulars, representing the
Contractor's non-time related on-site overheads and preliminaries and off-site overheads and profit. Finally, the
Contract Administrator must also add to the value of the daywork any reasonable costs and expenses incurred by
the Contractor as a result of the Variation delaying the Contractor.
Clause 11.7 - Variations Requested by the Contractor
The Contractor may, for its convenience, request the Contract Administrator in writing to direct a Variation.
Defence is under no obligation to proceed with a Variation requested by the Contractor. Usually, Defence would
only agree if the Contractor can demonstrate a cost saving or some other benefit which it will pass onto or share
with Defence.
A proforma notice titled 'Request for Variation' is provided in Volume 5 [insert link].
Clause 11.8 - Contract Administrator's Determination
The Contract Administrator must respond to a Variation Request under clause 11.7 of the Conditions of Contract
in writing. As foreshadowed above, the Contract Administrator may, in its absolute discretion, accept either part
or all of the request, or may reject it. If the Contract Administrator accepts part or all of a Variation Request, it
should expressly provide in its response whether it agrees to an adjustment of the Contract Price, and if so, the
amount of that adjustment.
A proforma notice titled 'Determination of request for Variation' is provided in Volume 5 [insert link].
Clause 11.9 - Variation Approved by Contract Administrator
The Contractor will not be entitled to make a Claim against Defence for a Variation requested under clause 11.7
of the Conditions of Contract unless the Contract Administrator has agreed to the adjustment. This should be
indicated in the Contract Administrator's response under clause 11.8 of the Conditions of Contract.
Clause 11.3 of the Conditions of Contract represents the agreement between Defence and the Contractor that the
Contractor will be entitled to an adjustment to the Contract Price where a Variation is the subject of a direction.
Where the Contract Administrator's response to the Contractor's Variation Request accepts the request, this
constitutes a direction and therefore gives rise to the Contractor's entitlement to payment. The Contract
Administrator's response under clause 11.8 of the Conditions of Contract should therefore precisely state the
Contractor's entitlement to payment to avoid any subsequent claim under clause 11.3 of the Conditions of
Contract.
CLAUSE 12 - PAYMENT
General
This clause sets up the contractual mechanisms for assessing the amounts due to the Contractor and other
amounts under the Contract. Assessment of such amounts is to be carried out in accordance with clauses 12.2
and 12.4 of the Conditions of Contract.
The procedure for assessing payments is outlined in the flowchart titled 'Flowchart 5: Payment' set out in
Volume 4 [insert link].
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It is for the Contract Administrator to determine the value of the work completed in accordance with the
Contract, notwithstanding the Contractor's claim. The Contract Administrator must not merely acquiesce to
demands of the Contractor in respect of payment.
It is important for both Contractors and Contract Administrators/CARs to remember that Defence is neither
obligated, nor in the position, to compensate a Contractor for an inadequate tender. A Contract Administrator
legally cannot disburse Defence money without a clear and substantiated legal basis for the claim. If there is any
doubt as to the legal or factual basis for a claim, expert professional advice (be it legal, engineering, accounting
or otherwise) should be sought.
Whilst the Contract Administrator may probe and test the veracity and validity of the claim, it is to be
remembered that the onus of proof (on the balance of probability) lies with the Contractor as claimant and the
Contract Administrator should not attempt to "make the claim" for the Contractor.
In essence, the Contractor should provide the claims in a format, and with such backup detail as is necessary, to
allow the Contract Administrator to readily establish the progress and value of the work done under the Contract
during the relevant claim period. Ideally, there should be some discussion and agreement at the commencement
of the project about the nature and extent of information to be submitted by the Contractor with each payment
claim. Clause 12.3 of the Conditions of Contract establishes a number of conditions precedent to the entitlement
of the Contractor to submit payment claims, but the requirements of each project will dictate the other details
that a Contract Administrator requires to assess the claim. These details should be communicated to a
Contractor by written notice (see clause 12.2(f) of the Conditions of Contract) as early on in the project as
possible to minimise delays and potential problems occurring later.
Security of Payment Legislation
In addition to the contractual entitlement to progress payments contained in clause 12 of the Conditions of
Contract, security of payment legislation in place in all States and Territories creates a statutory entitlement to
progress payments as long as the requirements of the legislation giving rise to the relevant entitlement are
satisfied.
The New South Wales, Victorian, Queensland, Tasmanian, Australian Capital Territory and South Australian
legislation goes further by also establishing a statutory procedure for a Contractor to claim and recover progress
payments to which it is entitled. That statutory procedure exists independently of, and in addition to, any
contractual procedure for claiming progress payments.
Although use of the statutory procedure is required to be "opted into" by a Contractor, Defence has elected to
require (so far as it is able) all progress payment claims submitted under the Contract to also be claims under the
relevant statutory procedure where New South Wales, Victorian, Queensland, Tasmanian, Australian Capital
Territory or South Australian security of payment legislation applies. If the proforma payment claim included in
the Schedule of Collateral Documents is used and completed properly by a Contractor, the claim will be both a
claim under the contract and under the relevant statutory procedure.
Where a claim has been made under the relevant statutory procedure in New South Wales, Victoria, Queensland,
Tasmania, the Australian Capital Territory or South Australia, there are quite serious implications for Defence if
the Contract Administrator fails to adequately respond to the claim within the time required by the Contract and
the security of payment legislation. These implications are explained in more detail below under the heading
"Clause 12.20 - Security of Payment Legislation".
Clause 12 of the Conditions of Contract has been drafted so that the requirements of the statutory procedure, in
terms of documents and timeframes, are also reflected in the Contract.
Therefore, if the parties meet the requirements of clause 12, they should also satisfy the requirements of the
relevant statutory procedures applicable in New South Wales, Victoria, Queensland, Tasmania, the Australian
Capital Territory or South Australia.
On the other hand, the Western Australian and Northern Territory security of payment legislation implies terms
for making claims for progress payments and responding to such claims, unless the contract makes express
written provision about such matters.
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Clause 12 of the Conditions of Contract has been drafted so that it contains those express written provisions.
The result is that the terms about such matters set out in the security of payment legislation are not implied.
Although clause 12 has been drafted to align with the security of payment legislation around Australia, each
security of payment legislation regime imposes additional rights and responsibilities on the respective parties
which cannot (and should not) be included in the Contract or contracted out of by the parties.
For this reason, it is essential that Defence personnel and the Contract Administrator (as agent of Defence) are
familiar with the requirements of the relevant security of payment legislation. In accordance with the "expert"
standard required of its Contract Administrators, members of Defence's DIP Panel are expected to train their
personnel on the nature and effect of security of payment legislation. Further information is available from the
Directorate of Construction Contracts.
Clause 12.1 - Payment Obligation
Defence is obliged to pay the Contractor the Contract Price and any other amounts which are payable to the
Contractor under the Contract. This payment obligation is subject to Defence's right to set-off which is set out in
clause 12.15 of the Conditions of Contract. That right entitles Defence to deduct from moneys which it would
otherwise be paying to the Contractor:
(a)
any debt or other moneys due from the Contractor to Defence;
(b)
any claim to money which the Commonwealth may have against the Contractor whether for
damages (including liquidated damages) or otherwise and whether under the Contract or otherwise at
law relating to the Works or the Contractor's Activities; and
(c)
to deduct any debt or claim referred to in paragraphs (a) or (b) from any moneys which may be or
thereafter become payable to the Contractor by Defence in respect of any Variation the subject of a
"Variation Order" under clause 11.2 of the Conditions of Contract.
Clause 12.2 - Payment Claims
This clause requires the Contractor to issue payment claims at certain times and in a certain format.
This clause provides that each payment claim:
(a)
is subject to certain "conditions precedent" being satisfied, as set out in clause 12.3 of the Conditions
of Contract;
(b)
must show certain amounts separately;
(c)
must contain a summary of all Claims notified to the Contract Administrator in accordance with the
Contract; and
(d)
must attach sufficient details, calculations and other supporting documentation to enable the Contract
Administrator to fully and accurately determine the amounts then payable.
A proforma payment claim is provided in the Schedule of Collateral Documents. The proforma payment claim
provides that the payment claim is made under the Contract.
The Contract Administrator can request (in writing) at any time for information/documentation to be provided by
the Contractor in relation to any payment claim. A proforma notice titled 'Request for documentation or
information' is provided in Volume 5 [insert link].
If a payment claim is not issued in a form that matches the proforma payment claim (or such other form as the
Contract Administrator requires) the requirements of clause 12.2 of the Conditions of Contract or the conditions
precedent to making the claim set out in or clause 12.3 of the Conditions of Contract have not been satisfied, it
will not be a valid claim under the Contract. However, the Contract Administrator must nonetheless issue a
payment statement under clause 12.4 of the Conditions of Contract in response to the payment claim.
The payment statement should set out the non-conforming circumstances and include a statement that the
amount claimed is therefore not due under the terms of the Contract. However, before issuing such a payment
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statement, advice should be obtained from the Directorate of Construction Contracts. In doing so, Defence
personnel and the Contract Administrator must bear in mind that the Contract Administrator must issue the
payment statement within the timeframe specified in clause 12.4 of the Conditions of Contract.
Clause 12.3 - Conditions Precedent
Unless all of the conditions set out in clause 12.3 of the Conditions of Contract are satisfied at the time the
payment claim is issued, the Contractor has no entitlement to submit a payment claim under clause 12.2 of the
Conditions of Contract.
Of particular note is the requirement for the Contractor to provide the Contract Administrator with executed
copies of any Subcontractor Deed of Covenant or Consultant Deed of Covenant or Collateral Warranty that the
Contractor is required to obtain. Other requirements relate to the Contractor's obligations in respect of security,
insurance, programming and statutory declarations as to payments to workers and subcontractors and deeds of
novation. The Contractor is also obliged to assist the Commonwealth with cost allocation advice, facilities and
infrastructure accounting and the Commonwealth's compliance with Defence Estate Management System
obligations and Geographical Facilities Information System obligations as a condition precedent to the
entitlement to submit a payment claim.
The conditions precedent provide Defence with a mechanism for ensuring that certain obligations under the
Contract are met. Denying payment (on the basis that the Contractor is not entitled to serve a payment claim by
reason of its failure to fulfil the required conditions precedent) may offer a more compelling remedy than
exercising other contractual remedies.
If the Contractor submits a payment claim which includes one or more amounts in respect of which the
Contractor has failed to comply with the requirements of clause 12.2(f) of the Conditions of Contract, the
Contractor is not entitled to payment of, and Defence is not liable to pay, the or those amounts claimed with
deficient documentation/information, unless the Contract Administrator (in its absolute sole discretion) notifies
the Contractor of documentation/information required and the Contractor subsequently provides the requested
documentation/information to the Contract Administrator within the time nominated by the Contract
Administrator. A proforma notice titled 'Identification of particular information or documentation not provided
pursuant to clause 12.2(f)', is provided in Volume 5 [insert link].
It is important to note though, that clause 12.4 of the Conditions of Contract provides that the Contract
Administrator must issue a payment statement in response to the payment claim, notwithstanding that the
conditions precedent have not been satisfied. As discussed in the commentary on clause 12.4 and under the
heading "Clause 12.20 - Security of Payment Legislation", the Contract Administrator should identify in the
payment statement the reasons why the Contractor is not entitled to the progress payment under the terms of the
Contract, citing the specific conditions that have not been satisfied.
Clause 12.4 - Payment Statements
The Contract Administrator must provide to the Contractor a payment statement in the form set out in the
Schedule of Collateral Documents within 10 business days of receiving a payment claim.
A payment statement must set out all the details required under clause 12.4 of the Conditions of Contract. The
proforma payment statement in the Schedule of Collateral Documents facilitates this.
It is important to ensure that all reasons for reducing the value claimed, withholding payment (such as a right of
set off) or refusing payment claimed (such as where the payment claim has not been issued in accordance with
the requirements of clauses 12.2 and 12.3 of the Conditions of Contract) are set out in full in the payment
statement - see the further discussion of this issue under the heading "Clause 12.20 - Security of Payment
Legislation".
As noted with respect to clause 12.3 of the Conditions of Contract, a payment claim will not be validly issued
under the Contract unless the conditions precedent set out in clause 12.3 of the Conditions of Contract have been
satisfied. However, the Contract Administrator must nonetheless issue a payment statement within 10 business
days. The Contract Administrator should identify in the payment statement the reasons why the Contractor is
not entitled to the progress payment under the terms of the Contract, citing the specific conditions that have not
been satisfied. However, before issuing such a payment statement, advice should be obtained from the
Directorate of Construction Contracts. In doing so, Defence personnel and the Contract Administrator must bear
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in mind that the Contract Administrator must issue the payment statement within the timeframe specified in
clause 12.4 of the Conditions of Contract.
Issuing a payment schedule within the relevant timeframe ensures that the requirements of the Contract are
satisfied and, where the New South Wales, Victorian, Queensland, Tasmanian, Australian Capital Territory or
South Australian legislation applies, to avoid Defence becoming liable under that legislation to pay the whole of
the claimed amount - see the further discussion of this issue below under the heading "Clause 12.20 - Security of
Payment Legislation". Because there are serious consequences if a payment statement is not issued within the
relevant period, specialist legal advice should be sought immediately from a member of the Defence Legal Panel
if there is a failure to do this. A failure by the Contract Administrator to issue a payment statement in
accordance with the provisions of clause 12.4 of the Conditions of Contract, including providing a copy to
Defence on the same day as issuing the statement to the Contractor, may also constitute a breach of the Contract
Administrator's obligations to Defence.
If the Contract Administrator makes an error or otherwise wishes to amend something in a payment statement
after it has been issued, it can, for the purpose of the Contract, correct or modify the payment statement in a
subsequent payment statement (see clause 12.14 of the Conditions of Contract). However, insofar as the
payment statement is a response to a claim made under the security of payment legislation in New South Wales,
Victoria, Queensland, Tasmania, the Australian Capital Territory or South Australia, the payment statement
cannot be corrected or modified by any subsequent payment statement.
For the purposes of clauses 12.4 and 12.5 of the Conditions of Contract, a "business day" is defined in clause 1.2
of the Conditions of Contract. The relevant period within which the payment statement is to be issued should be
calculated carefully in each State and Territory.
In Victoria, service of a payment statement by facsimile must be completed by 4pm, or service will be taken to
have been received on the next business day. This is important to keep in mind if the payment statement is being
finalised on the last day for its service.
Clause 12.5 - Payment
Defence must, within the number of business days set out in the Contract Particulars of receiving the copy of the
payment statement under clause 12.4 of the Conditions of Contract from the Contract Administrator, pay the
Contractor the amount set out as then payable in the payment statement.
Specific limitations on the period of time for payment are imposed by security of payment legislation around
Australia. These must be kept in mind when completing the Contract Particulars. The proforma Contract
Particulars have been drafted to reflect these limitations.
In Queensland, where the contract is a head contract which involves any building work within the meaning of
that term in the Queensland Building Services Authority Act 1991 (Qld), the Contract can only provide for a
maximum of 15 business days between the date of the payment claim and the date of payment. If the Contract
provides for a longer period, the clause is void and payment is due 10 business days after a progress claim under
the statutory regime is made. The limitation does not apply to contracts for work that is not building work. The
proforma Contract Particular for Queensland is therefore 5 business days.
In Western Australia, the Contract can only provide for a maximum of 50 days between the date of the payment
claim and the date of payment. If the Contract provides for a longer period, the clause is read as requiring
payment to be made within 50 days of the payment claim. The proforma Contract Particular for Western
Australia is 10 business days.
In the Northern Territory, the Contract can only provide for a maximum of 50 days between the date of the
payment claim and the date of payment. If the Contract provides for a longer period, the clause is read as
requiring payment to be made within 28 days of the payment claim. The proforma Contract Particular for the
Northern Territory is 10 business days.
In all other jurisdictions, the proforma Contract Particular is 10 business days.
Clause 12.6 - Payment on Account
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Clause 12.6 of the Conditions of Contract (and the final part of clause 12.4 of the Conditions of Contract) seeks
to preserve Defence's right to subsequently make claims in respect of work (such as where it contains Defects)
even if the relevant amounts have been included in a payment statement or paid for by Defence.
Clause 12.7 - Unfixed Goods and Materials
A payment claim is not to include a value for unfixed goods or materials unless the Contractor gives Defence
additional Approved Security (as discussed above in relation to clause 4) and otherwise satisfies the
requirements of clause 12.7 of the Conditions of Contract. Any claim for payment in respect of unfixed goods
and materials should always be carefully considered. No payment should be agreed to unless Defence can be
satisfied that it will obtain title to the goods and materials immediately upon payment.
Clause 12.8 - Release of Additional Approved Security
This clause provides that the additional Approved Security provided under clause 12.7 of the Conditions of
Contract will be released once those goods and materials are incorporated into the Works.
Clause 12.9 - Completion Payment Claim and Notice; Clause 12.10 - Release after
Completion Payment Claim and Notice
Clause 12.9 of the Conditions of Contract requires the Contractor to issue a payment claim including all amounts
which the Contractor claims from Defence under the Contract and notice of any other amounts which the
Contractor claims from Defence (outside the Contract) in respect of anything that occurred in relation to the
Works or a Stage within 28 days (or longer period if agreed in writing) after the issue of a Notice of Completion
for the Works or Stage.
The proforma payment claim provided in the Schedule of Collateral Documents can be used for the Completion
payment claim. See commentary above in respect of clause 12.2 of the Conditions of Contract.
The payment claim and notice required under this clause are in addition to any other notice which the Contractor
is required to issue in order to protect its entitlements under the Contract. In turn, clause 12.10 of the Conditions
of Contract provides a release to Defence in respect of matters which occurred prior to the Date of Completion
which are not set out in a claim under clause 12.9 of the Conditions of Contract.
Payment claims that are issued in relation to a completion payment claim or a final payment claim are also
considered to be "progress claims" under the terms of the security of payment legislation.
Clause 12.11 - Final Payment Claim and Notice; Clause 12.12 - Release after Final
Payment Claim and Notice
As for clause 12.9 of the Conditions of Contract, clause 12.11 of the Conditions of Contract requires the
Contractor to submit a final claim setting out all claims which the Contractor may have against Defence, within
28 days (or longer if agreed in writing) after the end of the last Defects Liability Period (including any
extensions under clause 9.11 of the Conditions of Contract).
To preserve its entitlements, the Contractor must comply with all other notice requirements in the Contract (such
as under clause 16.1 of the Conditions of Contract) in addition to giving this final payment claim.
The proforma payment claim provided in the Schedule of Collateral Documents can be used for the final
payment claim. See commentary above in respect of clause 12.2 of the Conditions of Contract.
In turn, clause 12.12 of the Conditions of Contract provides that, after the date for submitting the payment claim
and notice under clause 12.11 of the Conditions of Contract, the Contractor releases Defence in respect of any
matters which occurred during the Defects Liability Period for the Works or the Stage other than any Claim
included in a payment claim or notice submitted under clause 12.11 of the Conditions of Contract.
Clause 12.13 - Interest
Except where the New South Wales, Victorian, Queensland, Tasmanian, Australian Capital Territory or South
Australian security of payment legislation applies, this clause limits Defence's liability to pay interest on late
payments and damages to the rate stated in the Contract Particulars. The rate payable will depend on whether
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the interest payment is in respect of late payments or damages. The applicable rate is set out in the Contract
Particulars.
By stating that this will "be the Contractor's sole entitlement to interest including damages for loss of use of, or
the cost of, borrowing, money" this clause is intended to limit Defence's liability for what are sometimes referred
to as Hungerfords v Walker damages for loss of the use of the overdue money.
Unless otherwise specified, the rate in respect of damages will be the Australian Taxation Office-sourced
General Interest Charge rate at the due date for payment. This rate can be found on the Australian Taxation
Office web site: www.ato.gov.au.
Where the New South Wales, Victorian, Queensland, Tasmanian, Australian Capital Territory or South
Australian security of payment legislation applies, the Contractor will be entitled to statutory interest on late
payments at the higher of the rate for late payments which is stated in the Contract or the rate which is identified
in the applicable security of payment legislation.
For example, where a project is located in Queensland and the Contract involves the performance of building
work (as defined in the Queensland Building Services Authority Act 1991 (Qld)), the Contractor will be entitled
to interest under the Queensland security of payment legislation at the higher of the rate provided for in the
Contract, or the rate which is the sum of 10% plus the rate comprising the annual rate as published from time to
time by the Reserve Bank for 90 day bills.
Clause 12.14 - Correction of Payment Statements
Under this clause, the Contract Administrator may correct or modify anything written in a previous payment
statement in a subsequent payment statement.
Clause 12.15 - Right of Set-Off
As noted above, this clause makes it clear that Defence may deduct debts or other moneys due from the
Contractor to the Commonwealth from any moneys otherwise due to the Contractor.
To avoid arguments about the scope of the right to set off, the Contract's set-off provisions expressly state that
the payment obligation (under clause 12.1 of the Conditions of Contract) is subject to the set-off right. Within
the actual set-off clause, it is stated that the debt, moneys due or claim to money which Defence wishes to set-off
against the moneys otherwise due to the Contractor, may arise under the Contract or otherwise at law relating to
the Works or the Contractor's Activities. Further, the Commonwealth may deduct any debt or claim from
moneys which may be or thereafter become payable to the Contractor in respect of any Variation the subject of a
'Variation Order' under clause 11.2 of the Conditions of Contract.
The amount of any such deduction should always be contained in the payment statement issued in response to
the Contractor's payment claim. Failure to do so may mean that Defence has to pay the full amount of the
payment statement, without any further right of set off, by virtue of the security of payment legislation.
Clause 12.16 - Payment of Workers and Subcontractors
The purpose of this clause is to ensure that the Contractor pays its workers, subcontractors, suppliers and
consultants and that subcontractors, suppliers and consultants also pay their workers. It does this by requiring
the Contractor to provide, with each payment claim:
(a)
a statutory declaration, together with supporting evidence reasonably required by the Contract
Administrator, that, except to the extent disclosed in the statutory declaration (such disclosure to
specify all relevant amounts, workers and subcontractors):
(i)
all workers have been paid all moneys due and payable to them in respect of their
employment on the Contractor's Activities at the date of the payment claim; and
(ii)
all subcontractors have been paid all moneys due and payable to them in respect of the
Contractor's Activities; and
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(b)
documentary evidence that, except to the extent otherwise disclosed, all workers who have been
employed by a subcontractor of the Contractor have been paid all moneys due and payable to them
in respect of their employment on the Contractor's Activities as at the date of the payment claim.
A proforma standard statutory declaration titled 'Statutory Declaration in relation to payment of workers and
subcontractors' is provided in Volume 5 [insert link].
Compliance with this clause is a condition precedent to the entitlement to make a payment claim under clause
12.2 of the Conditions of Contract.
Defence is entitled to withhold from any payment otherwise due to the Contractor any amounts disclosed as
unpaid under this clause. If required, the withholding must be done in the payment statement issued in response
to the relevant payment claim. If that has not occurred, then Defence should not withhold the payment, and
should pay the full amount stated as payable in the payment statement.
Clause 12.17 - GST
Generally, rates and prices under the Contract are to be tendered on a GST-exclusive basis and grossed-up for
any applicable GST under clause 12.17 of the Conditions of Contract.
For details of the administration of this clause and GST generally, please refer to the GST manual on the
Defence intranet at http://defweb.cbr.defence.gov.au/home/documents/departmental/manuals/gstman.htm.
Clause 12.18 - Quantities in Schedule of Rates; Clause 12.19 - Limits of Accuracy
Where the Contract contains a Schedule of Rates, these clauses deal with how to adjust the set rates for items
where the quantities are outside the limits of accuracy set out in the Contract Particulars.
By way of example, it might be that the Contractor is required, as part of its site preparation obligations, to
construct a fence around an establishment, and payment for this aspect of the Works is based on a Schedule of
Rates. Suppose further the relevant rate for fencing - $100/m - was agreed on the basis that 10,000 metres of
fencing were required. In fact, 12,000 metres of fencing are required. If the default limits of accuracy (+/- 15%)
apply under the Contract Particulars then the $100/m rate would apply to the first 11,500 metres but, under
clause 12.19 of the Conditions of Contract, the remaining 500 metres will either be valued as daywork (see
guidance on clause 11.6 of the Conditions of Contract above) or otherwise agreed or determined.
Having said that, because clause 12.18 of the Conditions of Contract makes it clear that the Contractor is
responsible for estimating the quantities of items set out in any Schedule of Rates and - as noted above - the
Contractor is deemed generally under clauses 7.1 and 7.7 of the Conditions of Contract to bear the risk of
assessing the cost of carrying out the Works, the Contract Administrator should consider carefully whether the
Contractor is able to justify any claim that it is entitled to an adjusted rate where quantities are outside the stated
range.
Clause 12.20 - Security of Payment Legislation
The provisions in this clause are intended to assist in the administration of the processes under, and compliance
with, the relevant security of payment legislation.
For instance, the security of payment legislation requires the person who is liable to pay the payment claim to
issue the payment statement. Clause 12.20 of the Conditions of Contract provides that, for the purposes of the
legislation, the Contract Administrator issues payment statements as agent of Defence. Defence may revoke the
appointment of the Contract Administrator as Defence's agent for the above stated purposes at any time. It must
give notice of such revocation to the Contractor for the revocation to have effect with regards to the Contractor.
A proforma notice titled 'Revocation of appointment of Contract Administrator as the Commonwealth's agent
under Security of Payment Legislation' is provided in Volume 5 [insert link].
Similarly, in Victoria, Defence is entitled to provide security rather than payment for adjudicated amounts if it
institutes dispute resolution proceedings in relation to the claim.
In addition, clause 12.20(e) of the Conditions of Contract contains provisions intended to ensure confidentiality
of Defence information in the event that an adjudication application is made and Defence provides information
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in response to that application. A proforma notice from the Contractor requesting Defence's consent to divulge
information in relation to a Security of Payment Legislation adjudication application and a proforma notice from
Defence to the Contractor in response to this request titled 'Request for consent to divulge information in relation
to a Security of Payment Legislation adjudication application' and 'Response to request for consent to divulge
information in relation to a Security of Payment Legislation adjudication application' (respectively) is provided
in Volume 5 [insert link].
Defence personnel and agents of Defence such as the Contract Administrator must ensure that they are familiar
with the requirements of the security of payment legislation (if any) which applies to the contracts they are
administering. To assist with that familiarisation, the following discussion provides an overview of the
legislation.
Security of Payment Legislation
In response to decades of lobbying by subcontractor groups seeking security for the payment of subcontractors,
legislation has been enacted in all States and Territories directed at securing progress payments for contractors,
subcontractors and suppliers in the building and construction industry.
The current security of payment legislation is as follows:
(a)
Building and Construction Industry Security of Payment Act 1999 (NSW), which applies to contracts
entered into after 26 March 2000;
(b)
Building and Construction Industry Security of Payment Act 2002 (Vic), which applies to contracts
entered into after 31 January 2003;
(c)
Building and Construction Industry Payments Act 2004 (Qld), which applies to contracts entered
into after 1 October 2004;
(d)
Construction Contracts Act 2004 (WA), which applies to contracts entered into after 1 January 2005;
(e)
Construction Contracts (Security of Payment) Act 2004 (NT), which applies to contracts entered into
after 1 July 2005;
(f)
Building and Construction Industry Security of Payment Act 2009 (Tas), which applies to contracts
entered into after 17 December 2009;
(g)
Building and Construction Industry (Security of Payment) Act 2009 (ACT), which applies to
contracts entered into after 1 July 2010; and
(h)
Building and Construction Industry Security of Payment Act 2009 (SA), which applies to contracts
entered into after the commencement date of this Act (although the legislation has not come into
operation as at 20 May 2011).
Apart from some very limited types of contracts which are excluded from the legislation, the legislation in each
jurisdiction applies to all contracts for the performance of construction work in that jurisdiction. That is, the
New South Wales legislation applies to all contracts for construction work performed in New South Wales, and
the Western Australian legislation applies to all contracts for construction work performed in Western Australia,
and so on. The definition of construction work in all the legislation is very wide in scope, although there are
some differences in the wording of the definition in each regime. Universally, the definition captures activities
such as the construction, alteration, repair, restoration, maintenance, extension or demolition of buildings and
structures, roadworks, power lines, aircraft runways, railways, pipelines, reservoirs and more. It also includes
the installation of heating, lighting, air conditioning, ventilation, power supply, drainage, sanitation, water
supply, security and communication systems, and fire protection, as well as the erection/dismantling of
scaffolding, prefabrication of components, and painting and decorating.
The legislative regimes also extend to the supply of related goods and services for construction work. This term
is also widely defined in each regime, and captures materials and components to form part of any building,
structure or work arising from construction work; plant or materials used in construction work, the provision of
labour, architectural, engineering, quantity surveying and design services. The wide definition has a number of
consequences. For instance, the New South Wales legislation will apply to a contract for a related good or
services if that good or service is to be used in construction work being performed in New South Wales, even
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though that good or service is being supplied or performed outside of New South Wales. The same
consequences arise in respect of the other jurisdictions with security of payment legislation.
If the security of payment legislation applies to the Contractor's Activities (or provision of any related goods and
services) under the Contract, it is likely that it will also apply to subcontracts which the Contractor lets. In such
circumstances, Defence will be required to comply with the relevant security of payment legislation in respect of
payments to the Contractor, and the Contractor will also be required to comply with the provisions of the
security of payment legislation in the administration of its subcontracts (to which the security of payment
legislation applies). Legislation in New South Wales and Victoria gives a subcontractor an entitlement to obtain
payment of adjudicated amounts out of money that is payable or becomes payable by Defence to the Contractor
in circumstances where:
(i)
an adjudicator has determined that an amount is payable by the Contractor to the subcontractor;
(j)
that adjudicated amount has not been paid;
(k)
the subcontractor has obtained judgment for the adjudicated amount and a debt certificate has been
issued;
(l)
a notice of claim is given to Defence (which notice operates as an assignment of the obligation of
Defence to pay money owed to the Contractor).
In New South Wales, the relevant legislation is the Contractor Debts Act 1997 (NSW), and in Victoria it is the
Building & Construction Industry Security of Payment Act 2002 (Vic).
Although the security of payment legislation is similar in intent and objectives, each State and Territory security
of payment legislation is different and has its own complexities. Advice on the impact of the security of
payment legislation on a particular contract should be sought from the Directorate of Construction Contracts, if
necessary. Given the short timeframes provided for under the security of payment legislation generally, this
advice should always be sought as a matter of utmost urgency.
Achieving the purpose of the legislation
The security of payment legislation in each jurisdiction is common in granting a statutory entitlement to progress
payments. The legislation is also common in providing a process of rapid adjudication of payment disputes with
the goal of obtaining a quick, interim, determination of those disputes and the payment of any amount which is
determined by the adjudicator as being payable. The determination does not finally decide the rights of the
parties. They may continue to pursue those rights through court, arbitration or any other dispute resolution
process. Significantly however, except in Victoria, or in very rare instances where a stay of the determination
might be obtained, where a claimant is determined by an adjudicator to be entitled to payment of an amount, that
amount must be paid now by the other party, despite the disputed entitlement being referred to court, arbitration
or other dispute resolution process. The Victorian legislation stands alone in permitting security to be given in
the form of a bank guarantee or payment into a designated trust account as an alternative to payment of a
determined amount to the claimant.
The security of payment legislation in New South Wales, Victoria, Queensland, Tasmania, the Australian Capital
Territory and South Australia also includes a statutory process for the making of progress payment claims and
responding to them. This statutory process exists alongside and is in addition to any contractual provisions
dealing with the making of progress claims and responding to them. The statutory process involves:
(a)
the claimant making a payment claim which is stated to be a claim under the relevant Act;
(b)
the respondent responding to the payment claim within a very limited timeframe (10 business days)
by way of a payment schedule.
If a claimant disputes the amount that the respondent proposes to pay in respect of the claim, it can refer the
dispute to the rapid adjudication process. Compliance with the statutory procedure is the only way for a claimant
to access the rapid adjudication process in those States and Territory. Enlivening the statutory process for
making progress payment claims and responding to them is at the sole discretion of a claimant, and it is only a
claimant who can refer a dispute to the rapid adjudication process.
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The security of payment legislation in Western Australia and the Northern Territory does not provide a similar
statutory process. The contract alone governs the process by which progress payments are claimed and
responses made, although the legislation implies terms about those matters into the contract if the written
contract is silent about them. If, as a result of that contractual claim and response process, there is a dispute
about payment, that payment dispute can be referred by either party to the rapid adjudication process for interim
determination. Disputes about the return of retention of money and security may also be referred by either party
to adjudication.
Where projects are to be undertaken in New South Wales, Victoria, Queensland, Tasmania, the Australian
Capital Territory and South Australia, it is extremely important that the Contract Administrator understands how
and when progress payments are to be claimed and responded to under the statutory process in those States and
Territory, and the timeframes involved. There are potentially serious implications to Defence under the security
of payment legislation in those States and Territory if the requirements and timeframes are not strictly followed.
Nonetheless, the following discussion is also important to projects in other jurisdictions because the statutory
process for making payment claims and responding which exists in New South Wales, Victoria, Queensland,
Tasmania, the Australian Capital Territory and South Australia has been incorporated into clause 12 and is
therefore reflected in contractual obligations.
Payment Claim
Under the New South Wales, Victorian, Queensland, Tasmanian, Australian Capital Territory and South
Australian legislation, a contractor is entitled to submit a payment claim under the statutory process from each
reference date. Relevantly, "reference date" means the date for submitting payment claims stated in the contract.
Clauses 12.2(a) and 12.2(b) of the Conditions of Contract prescribe the "reference dates" for the purposes of this
contract. It is very important that the Contract Particulars be completed because, in the absence of any stated
date, the reference date will be, for the purposes of the New South Wales, Queensland, Tasmanian, Australian
Capital Territory and South Australian legislation, the last day of each month in which work was performed or
related goods and services supplied, and under the Victorian legislation, it will be 20 business days after work
was performed or related goods and services supplied.
There are certain statutory requirements for a valid payment claim:
(a)
it is in writing and addressed to the respondent (i.e. Defence);
(b)
it clearly identifies or describes the construction work or related goods and services to which it
relates;
(c)
it states the amount claimed as payable; and
(d)
it states that it is made under the relevant legislation.
So far as possible, these requirements have been incorporated into clause 12 of the Conditions of Contract and in
the proforma payment claim set out in the Schedule of Collateral Documents. Whether the elements described in
(b) and (c) are satisfied depends on what detail the Contractor provides in its claim.
Statutory payment claims can only be served within a period prescribed under the construction contract, or
within 12 months (except in South Australia it is 6 months) after the construction work or supply of related
goods and services the subject of the payment claim were carried out or supplied, whichever is the later.
The Contract Administrator must carefully examine all documentation received by the claimant to identify
whether it is a valid payment claim under the Contract and, if the New South Wales, Victorian, Queensland,
Tasmanian, Australian Capital Territory or South Australian security of legislation applies, if it is a valid claim
under the relevant legislation. If the claim is not valid, that fact and the reason why the Contractor Administrator
says the claim is not valid (whether under the Contract or under the legislation) must be set out in the payment
statement which responds to the claim (discussed below).
Payment Statement
The most important feature of the progress claim regime set up by the New South Wales, Victorian, Queensland,
Tasmanian and Australian Capital Territory security of payment legislation is the need for a respondent to issue a
payment schedule within 10 business days of receiving a payment claim made under the relevant security of
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payment legislation. In South Australia, a payment schedule must be provided within the time required by the
relevant contract or within 15 business days after the payment claim is served, whichever is earlier. Clause 12.4
of the Conditions of Contract provides for the delivery of a payment schedule (called payment statement) within
10 business days of receipt of a payment claim. This reflects the time period within which a payment schedule
must be issued under the New South Wales, Victorian, Queensland, Tasmanian and Australian Capital Territory
legislation and in accordance with the South Australian legislation.
For contracts subject to the New South Wales, Victorian, Queensland, Tasmanian, Australian Capital Territory
or South Australian security of payment legislation, it is vital that a payment schedule is issued within that time
period. If a payment schedule is not served within that time period, Defence will become liable under the
legislation to pay the full amount of the claim (as a statutory debt) on the due date for the progress payment to
which the claim relates. The Contractor will be entitled to recover the unpaid portion of the claim as a debt in
summary proceedings, and Defence cannot bring any cross claim or raise any defence in relation to matters
arising under the Contract in those proceedings. The Contractor is also given a statutory right to suspend the
work under the Contract by giving written notice of suspension and is not liable for any loss or damage suffered
by Defence as a result of that suspension.
Regardless of whether or not a payment claim complies with the contractual or statutory requirements for a valid
payment claim, the Contractor Administrator must nonetheless issue a payment schedule in response to the
claim. A Contractor Administrator must not refuse to deal with the claim because in his or her view the payment
claim is invalid. The reason for that is because, on a strict interpretation of the New South Wales, Victorian,
Queensland, Tasmanian, Australian Capital Territory and South Australian security of payment legislation, if a
payment schedule is not issued, Defence becomes liable to pay the whole of the amount claimed. While that
liability may be able to be ultimately resisted if the payment claim is in fact invalid, it is clearly preferable to not
have to argue the issue in the first place, and this can be achieved by issuing a payment schedule within time.
This need to issue a payment schedule has been reinforced in the Defence contracts by including a contractual
requirement that a payment schedule be issued (clause 12.4 of the Conditions of Contract).
The New South Wales, Victorian, Queensland, Tasmanian, Australian Capital Territory and South Australian
legislation does not prescribe a format for a payment schedule, except that it must:
(a)
identify the payment claim to which it relates;
(b)
state the amount of the payment, if any, that the respondent proposes to make (this is known as the
'scheduled amount'); and
(c)
if the scheduled amount is less than the claimed amount, state the reasons why it is less.
As noted in the earlier discussion of clause 12.4, the Contractor Administrator must ensure that all reasons for
reducing the payment claimed, withholding payment or refusing the payment claimed are set out in the payment
statement. While setting out the reasons is a requirement of clause 12.4 of the Conditions of Contract and
reflects good practice in any event, it is critical where the New South Wales, Victorian, Queensland, Tasmanian,
Australian Capital Territory or South Australian security of payment legislation applies. In those jurisdictions, if
the Contractor subsequently disputes the payment schedule and refers the dispute to adjudication, Defence will
be limited to making submissions on the reasons for reduction that were included in the payment schedule.
If the Contract Administrator complies with clause 12.4 of the Conditions of Contract and uses the proforma
payment statement that is included in the Schedule of Collateral Documents, it should ensure that Defence meets
the requirements and timeframe of the legislation in relation to the delivery of payment schedules. Of course, as
with the Contractor's completion of the payment claim, much depends on the information that is inserted into the
proforma document.
Adjudication
Upon receipt of an adjudication application, the Contract Administrator must immediately notify the Directorate
of Construction Contracts and seek legal advice. Defence has only a very short timeframe within which to
respond to the adjudication application:
(a)
in New South Wales, Victoria, Queensland and South Australia, the time for submitting a response is
the later of 5 business days after receiving a copy of the application or 2 business days after
receiving notice of an adjudicator's acceptance of the application;
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(b)
in Western Australia, the time for submitting a response is 14 days after receipt of an adjudication
application;
(c)
in the Northern Territory, the time for submitting a response is 10 working days after receipt of an
adjudication application;
(d)
in Tasmania, the time for submitting a response is 10 business days after receipt of an adjudication
application or 5 business days after receiving notice of an adjudicator's acceptance of the application;
(e)
in the Australian Capital Territory, the time for submitting is 7 business days after receipt of an
adjudicator application or 5 business days after receiving notice of an adjudicator's acceptance of the
application.
Clause 12.21 - Accounting Records
This clause requires the Contractor to keep accurate and up-to-date accounting records in relation to Variations
and all other amounts payable to the Contractor (other than as specified for the original Contract Price). This is
required in order that the Contractor can substantiate any claims, and the Contract Administrator can be properly
and fully informed through the perusal of proper accounts, when considering any payment claims made by the
Contractor.
Clause 12.22 - Cost Allocation Advice
This clause obliges the Contractor to assist the Commonwealth to report on an accrual basis. Compliance with
this clause is a condition precedent to the entitlement to submit a payment claim under clause 12.2 of the
Conditions of Contract.
The Contractor must provide the Contract Administrator with accurate information which apportions monthly
costs against buildings, infrastructure and expenses for all work completed in the previous month. Such
information is to be provided in a format approved by the Contract Administrator.
Clause 12.23 - Facilities and Infrastructure Accounting
This clause obliges the Contractor to assist the Commonwealth in bringing all completed facilities and
infrastructure to account. Compliance with this clause is a condition precedent to the entitlement to submit a
payment claim under clause 12.2 of the Conditions of Contract, and a condition precedent to Completion of the
Works or a Stage to which it relates.
The Contractor must provide a cost report to the Contract Administrator setting out details of the portion of the
Contract Price paid in respect of the Works or the Stage, the matters specified in the Contract Particulars and any
other matters required by the Contract Administrator.
Clause 12.24 - DEMS and GFIS
This clause obliges the Contractor to assist the Commonwealth to comply with its Defence Estate Management
System (DEMS) obligations and its Geographical Facilities Information System (GFIS) obligations.
Compliance with this clause is a condition precedent to the entitlement to submit a payment claim under clause
12.2 of the Conditions of Contract.
The Contractor must provide to the Contract Administrator the following information:
(a)
DEMS Information - being information regarding the maintenance and operation of buildings, plant
and equipment (including costs for replacement, maintenance requirements, the design life of the
asset and warranties); and
(b)
GFIS Information - being information regarding the maintenance and operation of building, plant
and equipment (including Site plans for all DSG controlled properties showing the physical location
of all buildings, services, property details and topography),
in compliance with Commonwealth standards for the delivery of such information, at the following times:
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(c)
as a condition precedent to Completion of the Works or a Stage - representing incorporated work
supplied to the Commonwealth and being 80% complete and to the standard required by the
Commonwealth;
(d)
within 60 days after the Date of Completion of the Works or a Stage - representing incorporated
work supplied to the Commonwealth and being 100% complete and to the standard required by the
Commonwealth; and
(e)
within 30 days after the end of the Defects Liability Period for the Works or a Stage - representing
incorporated work supplied to the Commonwealth being 100% complete and to the standard required
by the Commonwealth.
CLAUSE 13 - COMPLETION
General
Completion is defined in clause 1.1 of the Conditions of Contract. Reference should also be made to those
matters included in Annexure 1.
Clause 13.1 - Contractor to Notify
The purpose of this clause is to ensure that the Contract Administrator is kept informed of when the Works or a
Stage are about to be reach Completion, so that it may make any necessary preparations.
The Contractor must give the Contract Administrator notice 28 days, then again 14 days, prior to when it
anticipates completing the Works or a Stage. With the receipt of the second notice, the Contract Administrator
has 14 days to inspect the Works or Stage and issue its response.
The procedure for the Contractor to notify the Contract Administrator about completion and the issuance of the
Notice of Completion by the Contract Administrator are outlined in the flowchart titled 'Flowchart 6:
Completion' set out in Volume 4 [insert link].
A proforma notice for notifying the Contract Administrator of anticipated completion titled 'Notice of anticipated
Completion' is provided in Volume 5 [insert link].
Clause 13.2 - Contract Administrator to Inspect
The purpose of the final inspection is to ascertain whether Completion (as defined) has been achieved. Proforma
notices for confirming Completion or notifying that Completion has not been achieved (and setting out the
reasons why) titled 'Notice of Completion' and 'Notice advising that Completion has not been achieved'
(respectively) are provided in Volume 5 [insert links]. A proforma notice titled 'Further notice of anticipated
Completion' is also provided in Volume 5 [insert link] for notifying the Contract Administrator of the
Contractor's further notice of Completion.
If the Contract Administrator issues a notice under 13.2(b)(ii) of the Conditions of Contract stating that it is not
satisfied that Completion has been achieved, the Contractor must proceed to bring the Works or Stage to
Completion. When it considers it has done so, it must provide further notification to that effect. Alternatively,
the Contractor could choose to dispute the direction, and refer it to expert determination.
A Notice of Completion should only be issued if Completion, as defined in clause 1.1 of the Conditions of
Contract, has been achieved. In particular, paragraph (d) of that definition provides that Completion has only
occurred if the Contractor has done everything which the Contract requires it to do before Completion. An
example of matters required under the Contract is the obligation to clean up the Site under clause 8.19(b) of the
Conditions of Contract. If Defence requires anything not already included in the Contract to be done as a
condition precedent to Completion, that should be made clear in the Contract Particulars or the Works
Description.
Clause 13.3 - Unilateral Issue of Completion Notice
This clause is a fall-back position to be exercised by the Contract Administrator if the Contractor fails to exercise
its rights. Specialist advice must be sought before exercising this power.
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Clause 13.4 - Take Over Upon Completion
Once the Contract Administrator has issued a Notice of Completion under clause 13.2 of the Conditions of
Contract, the Contractor must hand over the Works or the Stage to Defence. The Contractor is also under a duty
to correct all minor Defects listed in the Notice of Completion as soon as possible after the Date of Completion.
If the Notice of Completion is issued before the Date for Completion, the Contractor is nevertheless required to
hand over the Works or Stage on the Date of Completion noted in the Notice of Completion.
Clause 13.5 - Part of the Works or a Stage
This clause sets out the rights of Defence to occupy the Works or Stage before Completion. The Contract
Administrator must first issue a notice to the Contractor notifying it of Defence's intention to occupy or use the
Works or Stage. A proforma notice titled 'Notice of intention to occupy or use part of the Works or a Stage' is
provided in Volume 5 [insert link].
Defence is required to allow the Contractor reasonable access in order to bring the Works or Stage to
Completion.
Clause 13.6 - Effect of Notice of Completion
This clause preserves the rights of Defence despite the issue of a Notice of Completion.
The issue of a Notice of Completion does not constitute approval by Defence of the Contractor's performance of
its obligations under the Contract, will not serve as evidence or admission that the Works or the Stage comply
with the Contract, nor will its issue prejudice any rights or powers of Defence or the Contract Administrator.
Thus, under the Contract the Contractor continues to be liable for unfulfilled obligations or Defects despite the
issue of the Notice of Completion.
It should be noted that, unlike other forms of construction contracts in common use in Australia, the Contract
does not require the issue of any form of certificate by Defence or the Contract Administrator after the end of the
Defects Liability Period. There is no concept of a "final certificate" in Defence contracts.
Clause 13.7 - Liquidated Damages
The liquidated damages provision is intended to avoid disputes regarding the damages suffered by Defence as a
result of the Contractor not achieving Completion by the Date for Completion - in other words, being in breach
of its primary obligation under clause 10.1(b) of the Conditions of Contract.
It is important to note that a clause which sets an amount of liquidated damages may be struck down as a penalty
if those damages are not a genuine pre-estimate of the loss which will be caused by the delay. This pre-estimate
does not have to equate precisely with the loss which is actually suffered but it should reflect a genuine
endeavour to estimate that loss.
According to well-established principles of law, a Court will look to whether or not the estimate was genuine "at
the time of making the contract, not as at the time of breach."
In order to maximise Defence's prospect of successfully recovering liquidated damages should the Contractor
challenge this clause, Defence should ensure that:
(a)
the parties agree, prior to executing the Contract, an amount which is to be a genuine and reasonable
pre-estimate of the anticipated maximum loss and damage which Defence may suffer per day if
Completion does not occur by the Date for Completion. This amount will be stated in the Contract
Particulars; to assist Defence in substantiating the estimation process and in resisting any challenges
to the enforcement of these liquidated damages;
(b)
the pre-estimate should be undertaken carefully (including by taking advice as appropriate) and a
note setting out the basis for the calculations kept on the project file;
(c)
the estimate will vary from project to project. Relevant considerations should include:
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(i)
loss of return on the capital involved at a daily rate;
(ii)
prolongation costs such as supervisory staff costs and superintendence costs;
(iii)
the daily actual cost of making any alternative provision relating to relocation of
personnel and the like; and
(iv)
a sum for fluctuations or escalation.
(d)
if the estimate is vetted by a costs consultant, a report should be prepared and retained on the project
file. That consultant must be made aware that it may be called to give evidence if the rate is later
challenged and should conduct itself accordingly;
(e)
the liquidated damages amount should be stated in the contract as a rate per day, rather than as a
lump sum amount. Defence should also ensure that its estimate is also calculated on the basis of the
relevant "daily rate";
(f)
the estimate is checked against calculations carried out on an annual basis to ensure that it is not
"exorbitant" when calculated on this basis;
(g)
particular care is taken in preparation of the estimate for projects funded (in whole or in part) by
government agencies other than the Commonwealth, where the Commonwealth will be the party to
the Contract and have primary responsibility for enforcing any liquidated damages provision; and
(h)
the other party to the Contract has obtained legal advice. Although this is not determinative of the
issue, it may be particularly important where there is any perceived inequality in bargaining power
between the parties.
Defence is not entitled to claim any more than this amount under the Contract in the event of late Completion,
nor is the Contractor entitled to provide any less than the agreed amount.
Liquidated damages are payable until the Date of Completion or the Contract is terminated, whichever occurs
first.
Clause 13.8 - Incentive
This is an optional clause and does not apply unless the Contract Particulars state that it applies.
If the clause applies under the Contract, the Incentive Date (set out in the Contract Particulars) will be either a
date before the Date for Completion or the original Date for Completion. Unlike the Date for Completion,
however, it is not subject to extension under the Contract. The purpose of providing an Incentive Date is to
encourage the Contractor to complete the Works by the Incentive Date. The inclusion of this clause might be
appropriate for a time sensitive project where early Completion is in the interests of Defence and Defence is
willing to pay an incentive to have the project completed before a date that would normally be expected to be
achieved for similar projects. Where Completion of the Works or a Stage is achieved before the applicable
Incentive Date, Defence must pay the Contractor the amount stated in the Contract Particulars for every day after
the Date of Completion noted in the Notice of Completion up to and including the Incentive Date.
CLAUSE 14 - TERMINATION
General
This clause sets out the procedure which must be followed if Defence is contemplating terminating the Contract
before the Contractor's obligations have been fully discharged.
These rights are expressed to be exercised by Defence rather than the Contract Administrator. This is deliberate;
termination is a very serious matter and is not to be contemplated without appropriate strategic consideration
(including specialist legal and other advice). For this reason, a detailed analysis of this clause is beyond the
scope of the Manual.
Having said that, by way of summary, the Contract provides for three categories of circumstances in which
Defence may have the right to terminate the Contract:
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(a)
for default (clauses 14.2-14.3 of the Conditions of Contract);
(b)
for insolvency of the Contractor (clauses 14.4 - 14.5 of the Conditions of Contract); and
(c)
for the Commonwealth's "convenience" (clauses 14.7 - 14.8 of the Conditions of Contract).
Each of these categories has its own procedures and consequences. These are outlined below.
Clause 14.1 - Preservation of Rights
The purpose of this clause is to prevent the termination provisions in clause 14 of the Conditions of Contract
from being read or interpreted as a "code". That is, this clause seeks to ensure that, whilst the Contract creates a
right to terminate the Contract in accordance with clause 14 of the Conditions of Contract, both parties also have
access to any common law rights or remedies in the event of default (subject to the express terms of clause 14 of
the Conditions of Contract).
Clause 14.2 - Contractor Default; Clause 14.3 - Contents of Notice of Default
If the Contractor does any of the things listed in clauses 14.2(a)-14.2(h) of the Conditions of Contract (note the
catch-all reference in paragraph (h) to substantial breaches not otherwise set out in paragraphs (a) - (g)), Defence
is entitled to issue a written notice to the Contractor notifying it of its default under the Contract. Such a notice
should be prepared with appropriate legal advice and must be in accordance with clause 14.3 of the Conditions
of Contract.
Clause 14.4 - Termination for Insolvency or Breach
Defence has a right of immediate termination by written notice for both:
(a)
an unremedied breach the subject of a notice under clause 14.3 of the Conditions of Contract; and
(b)
the occurrence of an "Insolvency Event" (as defined in clause 1.1 of the Conditions of Contract).
Such a notice should be prepared with appropriate legal advice and must be in accordance with clause 14.4 of the
Conditions of Contract - as such there is no 'proforma notice' provided.
Clause 14.5 - Commonwealth's Entitlements after Termination
Where the Contract has been terminated under clause 14.4 of the Conditions of Contract, the Contractor must do
certain things to "hand over" the Contract. These are set out in clause 14.5 of the Conditions of Contract.
Defence should not make any further payments to the Contractor until it has satisfied all claims which it has
against the Contractor arising out of the termination. This could include the cost of re-tendering the project, and
any additional cost payable to the new contractor to complete this project.
Clause 14.6 - Contractor's Entitlements after Termination
If Defence has repudiated the Contract and the Contractor has validly terminated the contract in response, the
Contractor's entitlement to claim will be limited to an amount determined in accordance with clause 14.8 of the
Conditions of Contract (see below).
This clause expressly prevents the Contractor from claiming an amount in such circumstances via a quantum
meruit action. Under the general law, the Contractor could have the right to elect to recover on the basis of
either damages or a quantum meruit, and would naturally choose the basis which resulted in greater
compensation for the Contractor.
Again, if any allegation is made that Defence has repudiated the Contract (and, therefore, that clause 14.6 of the
Conditions of Contract applies), urgent legal advice should be sought.
Clause 14.7 - Termination for Convenience; Clause 14.8 - Costs
Exercising the power to terminate for "convenience" should, as stated above, not be considered without
appropriate strategic and legal advice. Should Defence wish to exercise its right then it must provide written
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notice to the Contractor stating its intention to do so. Such a notice should only be prepared with appropriate
legal advice and must be in accordance with clause 14.7 of the Conditions of Contract - as such there is no
'proforma notice' provided.
Users should note that the Contractor will be entitled to payment in accordance with clause 14.8 of the
Conditions of Contract if Defence exercises its right to terminate under clause 14.7 of the Conditions of
Contract. The amount of that payment, although a limitation on the compensation payable, could nevertheless be
significant.
CLAUSE 15 - DISPUTES
General
This clause sets out a procedure for the resolution of disputes. This procedure is outlined in the flowchart titled
'Flowchart 7: Disputes' set out in Volume 4 [insert link].
Essentially, there are 4 steps:
(a)
commencing the process (clause 15.1 of the Conditions of Contract);
(b)
expert determination (clauses 15.2-15.10 of the Conditions of Contract) - note this stage only applies
if the dispute or difference relates to a direction of the Contract Administrator under one of the
clauses specified in the Contract Particulars (essentially a certifying function); if not, the parties are
to proceed directly to executive negotiation;
(c)
executive negotiation (clauses 15.11-15.12 of the Conditions of Contract); and
(d)
arbitration (clauses 15.12 and 15.13 of the Conditions of Contract).
The intent of the provisions is that:
(e)
disputes be resolved at the earliest stage possible; and
(f)
to the extent possible, disputes not be the subject of court proceedings.
Clause 15.1 - Notice of Dispute
Where a dispute or difference arises, either Defence or the Contractor may give notice in writing to the Contract
Administrator and the other party specifying the dispute or difference, particulars of the party's reasons for being
dissatisfied and the position which the party believes is correct.
Clause 15.2 - Expert Determination
As noted above, the Contract Administrator is expressed (under clause 3.1 of the Conditions of Contract) to act
as agent of Defence (and not as a certifier) when exercising all its functions under the Contract. If this were not
the case, then the Contract Administrator would be required to exercise a number of those functions as a
certifier. This could mean that the Contract Administrator (who will typically be a Defence consultant) might
have to act independently of Defence when exercising those functions. As agent and under the DIP Terms of
Engagement the Contract Administrator has to act in accordance with Defence's directions.
To afford the Contractor a measure of comfort that the Contract Administrator is acting in accordance with the
Contract, disputes arising out of certain directions of the Contract Administrator must be referred to expert
determination, if the parties cannot otherwise resolve the dispute within 14 days. The functions to which the
procedure applies are those referred to in the Contract Particulars and listed below:
(a)
clause 2.3(b) of the Conditions of Contract - assessment of costs incurred as a result of delayed
access to Site;
(b)
clause 4.2(b) of the Conditions of Contract - determination of amount to release from security after
expiration of the last Defects Liability Period;
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(c)
clause 7.3(a) of the Conditions of Contract - determination as to whether a Latent Condition has
been encountered or found;
(d)
clause 7.4(b) of the Conditions of Contract - valuation of the increase to the Contract Price due to
extra costs incurred as a result of carrying out instructions in notice in relation to any Latent
Condition;
(e)
clause 8.4(e) of the Conditions of Contract - determination as to the increase / decrease in the
Contract Price arising directly from either a change in a Statutory Requirement after the Award Date
or a Statutory Requirement being at variance with the Contract;
(f)
clause 8.22 of the Conditions of Contract - valuation of the extra costs incurred as a result of
carrying out instructions in relation to valuable objects found on Site;
(g)
clause 9.5 of the Conditions of Contract - valuation of the reasonable costs incurred by the
Contractor in carrying out a test which the Contract Administrator directs the Contractor to carry out
under clause 9.5;
(h)
clause 9.9(b)(i) of the Conditions of Contract - determination of cost of correcting a Defect and value
of Variation ordered to overcome a Defect;
(i)
clause 9.10 of the Conditions of Contract - valuation of cost of correcting a Defect accepted by
Defence;
(j)
clause 10.8 of the Conditions of Contract - determination of reasonable time by which to extend the
Date for Completion;
(k)
clause 10.9 of the Conditions of Contract - assessment of whether the extension of time should be
reduced due to contribution to, or failure to mitigate, delay by the Contractor;
(l)
clause 10.12(b)(ii)A1) of the Conditions of Contract - determination of the increase in the Contract
Price due to the extra costs incurred as a result of suspension;
(m)
clause 11.3(b) of the Conditions of Contract - determination of adjustments to the Contract Price for
a Variation (where not agreed to between the parties) per the rates and prices set out in the Table of
Variation Rates and Prices are applicable;
(n)
clause 11.3(c)(ii) of the Conditions of Contract - determination of a reasonable amount for a
Variation where rates and prices in the Table of Variation Rates and Prices are inapplicable;
(o)
clause 11.3(d) of the Conditions of Contract - determination of a Variation valued as daywork;
(p)
clause 11.6 of the Conditions of Contract - valuation of daywork;
(q)
clause 12.4 of the Conditions of Contract - determination of the amount then payable by the
Commonwealth to the Contractor on account of all amounts payable in accordance with the Contract
and which the Commonwealth proposes to pay to the Contractor;
(r)
clause 12.19(e)(ii) of the Conditions of Contract - determination of reasonable rates for quantities
outside the limits of accuracy;
(s)
clause 13.2(b)(ii) of the Conditions of Contract - issue of notice of Completion certificate or issue of
notice that Completion has not been achieved;
(t)
clause 14.8(a) of the Conditions of Contract - assessment of amounts to be paid by Defence to
Contractor upon termination by Defence for "convenience" in accordance with clause 14.7 of the
Conditions of Contract; and
(u)
clause 18.3(e) of the Conditions of Contract - valuation of reasonable costs incurred as a result of
carrying out instructions in notice relating to altered level of SAFE BASE.
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Because this default list is designed to pick up most of the functions in which the Contract Administrator
performs a type of certifier role, it should not be altered without appropriate advice.
Clause 15.3 - The Expert; Clause 15.4 - Not Arbitration; Clause 15.5 - Procedure for
Determination; Clause 15.6 - Disclosure of Interest; Clause 15.7 - Costs; Clause 15.8 Conclusion of Expert Determination; Clause 15.9 - Agreement with Expert
These clauses set out the procedures to be followed in conducting the expert determination. These will be
supplemented by the agreement between Defence, the Contractor and the expert which is required to be executed
under clause 15.9 of the Conditions of Contract.
A detailed analysis of these provisions is beyond the scope of the Manual. Almost inevitably, complex factual
and legal issues must be considered by the parties before an expert determination. If any issues arise (including
a request by either party, or the expert, to alter these procedures), appropriate specialist advice should be sought.
Clause 15.10 - Determination of Expert
This clause provides that the parties agree to be bound by the determination of the expert unless either party
gives a notice of appeal to the other party within 21 days of the determination. Legal advice should be sought
with respect to the contents of any notice of appeal.
Clause 15.10(b) of the Conditions of Contract provides that the determination of the expert will be substituted
for the relevant direction of the Contract Administrator.
Clause 15.11 - Executive Negotiation
Before a dispute is submitted to arbitration, it must first be referred for executive negotiation (i.e. the process
described in clause 15.11 of the Conditions of Contract) in an attempt to resolve it. The Executive Negotiators
(being the Commonwealth and the Contractor's Executive Negotiators listed in the Contract Particulars) are
required to undertake "genuine and good faith negotiations" to resolve the dispute or, if the dispute or difference
cannot be resolved, to agree upon a procedure to resolve the dispute. Executive negotiation applies to:
(a)
appeals from determinations of experts; and
(b)
disputes which do not have to be first referred to expert determination (i.e. all disputes other than
those referred to in relation to clause 15.2 of the Conditions of Contract, above).
Clause 15.12 - Arbitration Agreement
This clause requires all disputes not resolved by Executive Negotiation to be referred to arbitration, by the giving
of written notice by either party. Legal advice must be obtained for the preparation of the arbitration notice.
Clause 15.13 - Arbitration
Arbitration is a method of dispute resolution which parties can agree to submit to. Unlike expert determination,
the process of arbitration is more formal, is partly governed by legislation and can produce final and binding
outcomes. The parties are also able to agree on the procedure which will govern the arbitration. Defence has
sought to do this in clause 15.13 of the Conditions of Contract, in order to provide a procedure focused on
achieving quality decisions both efficiently and cost effectively.
Because arbitrations result in formal and binding awards, appropriate and specific legal advice must be taken in
preparation for any arbitration. Accordingly, no further general guidance is provided here.
Clause 15.14 - Proportional Liability
A number of Australian jurisdictions have now implemented proportional liability legislation.
Such proportional liability legislation has the potential to disrupt and impact on the risk allocation set out in the
Contract, including provisions in respect of:
(a)
governing law of the Contract (clause 1.2(a) of the Conditions of Contract);
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(b)
joint and several liability (clause 1.2(d) of the Conditions of Contract); and
(c)
arbitration (clause 15.13 of the Conditions of Contract).
In essence, the proportional liability regime allows a party to reduce its liability, including liability under a
contract, to the amount that a court considers just having regard to the extent of its responsibility for the
underlying loss and damage (excluding personal injury), notwithstanding that it may have assumed responsibility
for the full amount of that loss and damage under the express terms of the relevant contract.
It is unclear whether or not, in calculating the proper amount in light of a person's responsibility for loss or
damage, a court will take the express provisions of the relevant contract into account.
Courts commonly make findings as to the degree to which plaintiffs and various defendants have contributed to
the loss and damage, especially in circumstances where there are "contribution proceedings" on foot between
various defendants.
The difference with proportional liability legislation is that the burden of:
(d)
locating and joining parties to the action which may have been responsible for the loss and damage;
and
(e)
the risk that such parties may be impecunious or otherwise inaccessible,
will usually rest with the plaintiff rather than the other defendants.
Under the wording of at least some proportional liability legislation, the obligations of financial guarantors,
performance bond issuers and insurers do not appear to fall within the ambit of the legislation and will not be
affected.
The proportional liability legislation is new and complex legislation which is not identical in each State and
Territory. As a result, legal advice concerning its potential or actual impact should be obtained from a member
of the Defence Legal Panel.
Clause 15.15 - Continuation of Contractor's Activities
This clause makes it clear that the Contractor is not entitled to suspend or cease its activities and other
obligations under the Contract on the grounds that the parties are in dispute in relation to a particular issue or
matter under the Contract. This would be subject to any suspension validly implemented under the Security of
Payment Legislation.
CLAUSE 16 - NOTICES
General
This clause aims to ensure that claims for extra money are dealt with promptly throughout the project and not
"banked up". It does this by barring, under clause 16.5 of the Conditions of Contract, any claims which have not
been made in accordance with the relevant provisions of clause 16.1 of the Conditions of Contract (in the case of
alleged Variations) or clauses 16.2-16.4 of the Conditions of Contract (in the case of other claims).
Contract administration staff who are in any doubt as to whether a claim has been made in accordance with
clause 16 of the Conditions of Contract (including as to the timeframes for submission of notices) should seek
appropriate advice immediately.
It should be noted that the actions of a Contract Administrator or Defence in respect of time bar/notification
provisions can affect the standing of a particular provision at law (i.e. through estoppel or waiver). Such action
may be as simple as proceeding to consider the merits of the claim notwithstanding non-compliance with time
bars.
That is, if by Defence's or the Contract Administrator's actions, it could be argued by the Contractor that Defence
or the Contract Administrator represented to the Contractor that it was not going to rely upon those provisions,
then Defence or the Contract Administrator may not be able to rely on them at a later date. In such
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circumstances, Defence may be no longer able to subsequently reject the claim in reliance on that clause or
clauses.
Accordingly, contract administration staff must carefully consider their actions upon receipt of a claim. It is
strongly suggested that - in the absence of exceptional circumstances which must, in any case, be the subject of
specialist advice - the express wording of the Contract be applied to protect Defence's position. This can be done
by using the proforma notices.
There are certain security issues associated with the use of project document management software systems such
as Aconex or equivalents. Advice from the Directorate of Construction Contracts should be sought before
incorporating software and such systems in the Contract. A special condition may be required.
Clause 16.1 - Notice of Variation
This clause deals with the situation where the Contractor claims that a direction, other than one framed as a
"Variation Order", constitutes a Variation (and therefore may entitle the Contractor to extra payment under
clause 11 of the Conditions of Contract). This may arise because the Contract Administrator, in issuing a
direction, has not appreciated that it represents a change in the Contractor's Activities and therefore a Variation.
Clause 16.1(a) of the Conditions of Contract requires the Contractor to notify the Contract Administrator within
7 days of receiving a direction, if it believes the direction constitutes a Variation and no Variation Order notice
has been issued. A proforma notice titled 'Notice of Variation' is provided in Volume 5 [insert link].
The Contractor must also provide a written claim under clause 16.1(b) of the Conditions of Contract within 21
days of submitting its written notice under clause 16.1(a) of the Conditions of Contract. This claim must include
the details required under clause 16.3(b) of the Conditions of Contract. A proforma notice titled 'Claim for
Variation' is provided in Volume 5 [insert link].
Clause 16.2 - Notices of Other Claims
Where the Contractor wishes to make a Claim against Defence in respect of any direction by the Contract
Administrator or in respect of any other fact, matter or thing (including a breach of the Contract by Defence)
under or in connection with the Contract or the Contractor's Activities, other than those which involve:
(a)
an extension of time under clause 10.6 of the Conditions of Contract;
(b)
payment under clause 12.2 of the Conditions of Contract of the original Contract Price specified in
the Contract Particulars; or
(c)
a Variation instructed in accordance with clause 11.2 of the Conditions of Contract or to which
clause 16.1 of the Conditions of Contract applies,
it must submit notices as required by clause 16.3 of the Conditions of Contract.
Note that where the Claim is alleged to arise in connection with a provision of the Contract, the Contractor is
required to submit a Claim under clause 16 of the Conditions of Contract in addition to any notice or other
document required under the relevant provision (see also clause 16.6 of the Conditions of Contract).
Clause 16.3 - Prescribed Notices
Under clause 16.3(a) of the Conditions of Contract, the Contractor must issue an initial written notice containing
certain details within 21 days of the first occurrence of the thing upon which the Claim is based. A proforma
notice titled 'Initial Notice of Claim' is provided in Volume 5 [insert link].
Clause 16.3(b) of the Conditions of Contract sets out the provisions relating to a further notice which must be
issued within 21 days of giving the notice under clause 16.3(a) of the Conditions of Contract. A proforma notice
titled ' Notice of Claim' is provided in Volume 5 [insert link].
Clause 16.4 - Continuing Events
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The Contractor is to submit a notice of continuing events every 28 days after the written Claim under clauses
16.1(b) or 16.3(b) of the Conditions of Contract was submitted, if the direction or fact, matter or thing upon
which the Claim is based (or the consequences thereof) are continuing.
Although this document contains the same information as a Claim under clause 16.3(b) of the Conditions of
Contract, a separate proforma notice titled 'Notice of continuing events' is provided in Volume 5 [insert link] for
clarity. Please refer to the paragraph below for notice requirements.
Clause 16.5 - Time Bar
As stated above, the purpose of this clause is to ensure that the Contractor complies with the notice provisions.
Failure to do so will bar the Contractor from making any claim against Defence in relation to that direction, fact,
matter or thing, or the consequences.
Again, if contract administration staff are in any doubt about whether an alleged claim has been barred by clause
16.5 of the Conditions of Contract, appropriate advice should be sought immediately.
Clause 16.6 - Other Provisions Unaffected
As noted above in relation to clause 16.2 of the Conditions of Contract, where the Contractor seeks to make a
Claim in respect of an alleged entitlement under the Contract, it has to submit a separate notice under clause 16
of the Conditions of Contract in addition to any notice required under the relevant provision. This is made clear
in clause 16.6 of the Conditions of Contract.
Clause 16.7 - Address for Service
This clause requires that any notice to be given under the Contract must be in writing and must be delivered to
the address set out in the Contract Particulars or last notified in writing to the party giving the notice. This can
be by way of personal delivery, by prepaid post or fax (not email). A notice must be signed by one of the
persons identified in this clause.
Clause 16.8 - Receipt of Notices
This clause sets out the dates upon which a notice will be deemed to have been given and received depending on
the form of service chosen. This is especially important given the importance (noted above) of time in relation
to notices under clause 16 of the Conditions of Contract and elsewhere.
CLAUSE 17 - WOL
Clause 17.1 - Design and Construction
The whole of life (WOL) provisions are designed to encourage the Contractor to take on some responsibility for
ensuring that the Works are designed and constructed in such a way as to maximise their WOL potential and
value for Defence. WOL obligations should be addressed in the Works Description. Clearly, the extent to
which the Contractor can do so will be directly proportional to the level of its design obligations.
The WOL Plan is defined in clause 1.1 of the Conditions of Contract and further described in the Contract
Particulars. It is tendered by the Contractor, and may be the subject of negotiation prior to award. The WOL
Objectives are defined in clause 1.1 of the Conditions of Contract.
Clause 17.2 - Consultation
This clause obliges the Contractor to attend meetings with Other Contractors for consultation and discussion
regarding the progress of the Works against the WOL Plan and the WOL Objectives. Primarily, the Other
Contractors will involve Defence's maintenance contractors (i.e. the CMC Contractors).
The Contract Administrator must notify the Contractor of any such meetings it is to attend. There is no express
limit under the Contract on the number of meetings which the Contract Administrator may schedule and require
attendance at. The Contractor is not entitled to any additional money for preparing for and attending meetings.
The WOL obligations are deemed to be included in the Contract Price.
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Clause 17.3 - WOL Proposals
Defence is entitled to make proposals regarding WOL issues. The Contractor is also obliged under clause
17.3(a) of the Conditions of Contract to use its best endeavours to identify and recommend proposals for
maximising the achievement of WOL Objectives.
Clause 17.4 - Reporting
The Contractor is required to submit a report at each meeting in accordance with clause 3.9(a) of the Conditions
of Contract. These meetings will be held monthly as provided under clause 3.9 of the Conditions of Contract.
In addition, the Contract Administrator may require the Contractor to submit additional reports in such form and
containing such information as the Contract Administrator directs from time to time.
Clause 17.5 - Post Occupancy Evaluation
A post occupancy evaluation is to be carried out by the Contract Administrator (or the CMC Contractor or
another person on Defence's behalf) to ensure (to the extent possible at this early stage in the life of the relevant
facility) that the Contractor has complied with the WOL Plan and otherwise maximised the achievement of
WOL Objectives in the design and construction of the Works.
The Contract Administrator is to then issue a report to Defence and the Contractor evaluating the extent of
compliance with the WOL Plan and WOL Objectives. This report should contain sufficient detail to enable
Defence to evaluate the performance of the Contractor so as to inform any subsequent tenders.
Clause 17.6 - Rights and Obligations Not Affected
The purpose of this clause is to make it clear that the rights and obligations of the parties under the Contract
generally are not altered or affected by the WOL obligations in clause 17 of the Conditions of Contract. This is
particularly relevant in the context of design and construct delivery, where the Contractor assumes responsibility
for fitness for purpose of the Works.
CLAUSE 18 - GENERAL
Clause 18.1 - Equal Opportunity for Women
As required under the Commonwealth Procurement Guidelines, under clause 18.1 of the Conditions of Contract
the Contractor is expressly required to comply with the obligations under the Equal Opportunity for Women in
the Workplace Act 1999 (Cth) (EOWW Act). Generally, the EOWW Act requires certain employers (which
may or may not include the Contractor) to develop and implement equal opportunity for women in their
workplace programs and to issue public reports on the outcomes of such programs.
Clause 18.1(a) of the Conditions of Contract restricts the subcontractors which the Contractor may engage under
the Contract to those who have not been named by the Director of Equal Opportunity for Women in the
Workplace Agency as an employer who does not comply with the EOWW Act.
Clause 18.2 - Indigenous Opportunities
This clause is an optional clause which does not apply unless the Contract Particulars state that it does apply.
The applicability of this clause will generally be determined at the time of tendering for the Contract. See
further guidance in Volume 2.
The Contractor is required to maintain and comply with its current, approved Indigenous Training, Employment
and Supplier Plan (ITES Plan). The Contractor is also required to report annually on its ITES Plan and to cooperate with the Commonwealth (including the Department of Education, Employment and Workplace
Relations) in relation to the Indigenous Opportunities Policy (IOP) and the Contractor's ITES Plan.
This clause also allows the Commonwealth or any person authorised by it to report on the Contractor's
compliance with its ITES Plan and publish any information contained in the ITES Plan.
Clause 18.3 - Safe Base Alert State System
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The Contractor and subcontractors are required to comply with the level of SAFE BASE Alert State System set
out in the Contract Particulars (i.e. notified at time of tender or subsequently negotiated). However, compliance
with a higher or lower level of SAFE BASE for any particular period of time in order to reflect the applicable
SAFE BASE levels (or individual measures, such as restrictions which may apply to a particular category of
personnel) at the relevant establishment, may be required.
Clause 18.3(c) of the Conditions of Contract requires the Contractor and any subcontractors to attend any
security briefings at which their presence is requested by the Contract Administrator.
The Contractor will be entitled to an increase in the Contract Price for any extra costs reasonably incurred as a
result of such a direction. The Contract Administrator's determination of the increase to the Contract Price under
clause 18.3(e) of the Conditions of Contract is the only amount to which the Contractor is entitled.
Clause 18.4 - IT Equipment
This clause outlines the obligations of the Contractor to ensure that no viruses will be introduced into Defence's
system as a result of the Contractor's Activities. Additionally, the Contractor assigns the benefits of any
warranties, given with the IT Equipment, to Defence.
Clause 18.5 - Protection of Personal Information
This clause contains detailed provisions relating to the handling of personal information as defined in the
Privacy Act 1988 (Cth). Personal information is any information about a person whose identity is apparent or
ascertainable from the information. The clause essentially requires the Contractor to handle personal
information according to the same rules which Defence must observe under the Privacy Act.
In addition, the Contractor must obtain the Contract Administrator's written consent prior to disclosing any
personal information or using personal information for a purpose other than meeting the Contractor's obligations
under the Contract.
The Contract Administrator should exercise caution in considering any such request under clause 18.5(a)(iii) of
the Conditions of Contract and must obtain legal advice from a member of the Defence Legal Panel before
approving a request. As such there is no proforma response to such request.
Clause 18.5(a)(x) of the Conditions of Contract requires the Contractor to ensure that any subcontractor is bound
by substantially similar terms as those outlined in clause 18.5 of the Conditions of Contract. The Contract
Administrator should bear this in mind in reviewing any subcontracting arrangements proposed by the
Contractor.
Under clause 18.5(a)(xiii) of the Conditions of Contract, the Contractor indemnifies Defence for any loss,
liability or expense suffered or incurred by Defence arising out of any breach by the Contractor or subcontractors
of the obligations under clause 18.5 of the Conditions of Contract. In relation to this, the Contractor has
considerable notification obligations under clause 18.5(c) of the Conditions of Contract. A proforma notice
titled 'Notice of breach of Privacy Principles' is provided in Volume 5 [insert link]. The Contract Administrator
should obtain legal advice from a member of the Defence Legal Panel if it receives a notification from the
Contractor under clause 18.5(c) of the Conditions of Contract.
Clause 18.6 - Moral Rights
Certain works which attract copyright protection are also protected by Moral Rights. These are rights under the
Copyright Act 1968 (Cth) and are additional to traditional copyright. Unlike copyright, Moral Rights cannot be
assigned, licensed or waived. Moral Rights attach to individual authors and not organisations such as
companies.
An author's Moral Rights in respect of a work are:
(a)
the right to be identified as author of that work;
(b)
the right to prevent authorship of the work being falsely attributed to someone else; and
(c)
the right not to have the work subjected to derogatory treatment.
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In an extreme case, an author may exercise the third right in the list above to limit how Defence could use
material created by that author. As an example, an architect who prepared a design for a building may claim that
changes to the design subsequently required by Defence amount to a derogatory treatment of the original design.
This risk exists despite the broad licence which the Contractor grants to Defence under clause 6.8 of the
Conditions of Contract, as Moral Rights cannot be licensed.
This clause is aimed at protecting Defence and other parties engaged on the project against any liability to the
Contractor (or to individuals who are authors of works under the agreement) for breach of a person's Moral
Rights in respect of any Project Documents by releasing Defence and other parties engaged on the project (as
listed in clause 18.6(a)(i) of the Conditions of Contract) from liability for certain acts which may otherwise be in
breach of an individual's Moral Rights. The clause also puts in place a mechanism which requires the Contractor
to obtain Moral Rights Consent documents on behalf of Defence. These consents must follow the proforma
documents set out in the Schedule of Collateral Documents titled 'Moral Rights Consent' and 'Moral Rights
Consent (for multiple authors)' (respectively).
It is critical that this procedure is followed in relation to each and every individual who may create Project
Documents, regardless of whether those individuals are employed by the Contractor.
Clause 18.7 - Freedom of Information
This clause is required under the Commonwealth Procurement Guidelines. Further guidance is provided at
www.defence.gov.au.
Clause 18.8 - Long Service Leave
This clause only applies if any relevant Long Service Leave Legislation applies to the Contractor's Activities.
It provides that the Contractor:
(a)
must comply with any relevant Long Service Leave Legislation;
(b)
must pay any levy, charge, contribution or associated amount in respect of the Contractor's Activities
required by any relevant Long Service Leave Legislation; and
(c)
such amounts paid are deemed to be included in the Contract Price.
The relevant Long Service Leave Legislation is set out in clause 18.8 of the Conditions of Contract.
Clause 18.9 - Assignment
This clause prevents the Contractor from assigning, in any way, any part of the Contract without the approval of
Defence.
This clause also incorporates a broad definition of assignment to include a change of control of the Contractor.
Clause 18.10 - Publicity
The effect of this clause is to prevent the Contractor from disclosing any matters about the Contract to the media,
without the prior written approval of the Contract Administrator.
Proforma notices for the Contractor's request and the Contract Administrator's response titled 'Request to
[furnish information/issue document or other material]' and 'Response to request to [furnish information/issue
document or other material]' (respectively) are provided in Volume 5 [insert links] for these purposes.
Clause 18.11 - Classified Information
This clause allows the Commonwealth to request, and where so requested, the Contractor to comply with the
Commonwealth's security clearance process including obtaining the level of security clearance requested by the
Commonwealth and complying with all security policies and procedures notified by the Commonwealth from
time to time.
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This clause dovetails with the confidentiality terms stated in clause 1.3(f) of the Conditions of Contract and
reiterates the prohibition on the Contractor of disclosing any Classified Information unless disclosure is strictly
in accordance with the Defence Security Manual and first approved in writing by the Contract Administrator, on
such terms or conditions as the Contract Administrator thinks fit.
Such conditions could include requiring any recipient of Classified Information to obtain a level of security
clearance and enter into a deed in a form acceptable to the Commonwealth. Proforma notices titled 'Request for
approval to disclose Classified Information' and '[Approval/Rejection] of disclosure of Classified Information'
are provided in Volume 5 [insert links] for these purposes.
Classified Information is defined in this clause as any Commonwealth document marked with a national security
classification and any information or document that the Contractor knows or ought to know is subject to, or
ought to be treated in accordance with, the provisions of the Defence Security Manual.
The Contractor must handle and store Classified Information in its possession or control strictly in accordance
with the provisions of the Defence Security Manual.
Clause 18.12 - Manual of Fire Protection Engineering and Building Code of Australia
Certification
This clause requires the Contractor to obtain certifications from an Accredited Building Surveyor. See the
definition of "Accredited Building Surveyor" in clause 1.1 of the Conditions of Contract.
The Contractor is required to provide the Contract Administrator with written certification from an Accredited
Building Surveyor:
(a)
that the design complies with the MFPE and the Building Code of Australia - such certification is to
be provided at the time it submits any Design Documentation to the Contract Administrator under
clause 6.2 of the Conditions of Contract; and
(b)
that the Works or a Stage complies (as the case may be) with the MFPE and the Building Code of
Australia - as a condition precedent to Completion of the Works or such Stage,
except to the extent of any dispensation which is granted by the Assistant Secretary Estate Policy and
Environment (ASEPE), and identified in the certificate. If there is an inconsistency between the MFPE and the
Building Code of Australia, the MFPE prevails.
CLAUSE 19 - NATIONAL CODE OF PRACTICE FOR THE CONSTRUCTION INDUSTRY
General
Refer to National Code of Practice for the Construction Industry and the Guidelines at
www.deewr.gov.au/building.
Clause 19.1 - General
This clause requires the Contractor to ensure that it complies with the National Code and the 2009 Guidelines in
the performance of the Contractor's Activities.
The Contractor must ensure compliance with the National Code and the 2009 Guidelines by its Related Entities
and all subcontractors engaged in the Works. Further, the Contractor must ensure all subcontracts impose
obligations on subcontractors equivalent to the obligations set out in clause 19 of the Conditions of Contract, and
in the form set out in the Proforma National Code Subcontract Provisions set out in the Schedule of Collateral
Documents.
Clause 19.2 - Responsibility not Affected
This clause makes it clear that compliance with the National Code and the Guidelines shall not relieve the
Contractor of its other obligations or liabilities under the Contract or otherwise arising out of or in connection
with the Contractor's Activities or the Works.
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Clause 19.3 - Notice of Effect on Compliance with National Code and Guidelines
This clause requires the Contractor to immediately give the Commonwealth a report in writing if any proposed
changes to the Contract affect the Contractor's compliance with the National Code and the Guidelines, setting
out the extent to which the Contractor's compliance with the National Code and the Guidelines will be affected.
A proforma notice titled 'Notice of effect on compliance with National Code and Guidelines' is provided in
Volume 5 [insert link].
The Commonwealth can respond to the Contractor as to the course it must adopt using a proforma notice titled
'Response to notice of effect on compliance with National Code and Guidelines' which is provided in Volume 5
[insert link]. Advice from the Directorate of Construction Contracts must be sought prior to issuing such a
notice.
Clause 19.4 - Records
This clause requires the Contractor to maintain adequate records of compliance with the National Code and the
2009 Guidelines by the Contractor, its Related Entities and its subcontractors.
Clause 19.5 - Access and Documents
This clause requires that the Contractor must (and must ensure that its Related Entities and subcontractors)
provide the Commonwealth or any person authorised by the Commonwealth (including a workplace inspector
under the Fair Work Act 2009 (Cth) or a person occupying a position in the Office of the Australian Building
and Construction Commissioner) with access to:
(a)
inspect any work, material, machinery, appliance, article or facility;
(b)
inspect and copy any record relevant to the project, the Contractor's Activities or the Works the
subject of the Contract; and
(c)
interview any person,
as is necessary to demonstrate compliance with the National Code and the Guidelines.
The clause also requires the Contractor to produce (and ensure that its Related Entities and subcontractors
produce) any document requested by the Commonwealth or any person authorised by the Commonwealth
(including a workplace inspector under the Fair Work Act 2009 (Cth) or a person occupying a position in the
Office of the Australian Building and Construction Commissioner) within the specified period in person, by fax
or by post.
Clause 19.6 - Project Agreements
This clause reiterates Defence's standard approach to the adoption of "project agreements" to any contract.
Project agreements are industrial agreements that apply to multiple employers engaged on a project and which
are usually intended to apply uniform, above award conditions, to or for the benefit of all employees engaged to
work on a project.
That is, the Contractor is required to acknowledge and agree that it cannot enter into any project agreements in
respect of the Contractor's Activities or the Works.
Further, the Contractor must not seek to have any subcontractor comply with, or apply the terms of, any project
agreement or unregistered written agreement (an agreement which is not an award or certified agreement binding
on the subcontractor) entered into by the Contractor.
CLAUSE 20 - COMMERCIAL-IN-CONFIDENCE INFORMATION
Clause 20.1 - General
Defence is and will be subject to a number of requirements and policies concerning internal and external scrutiny
of its tendering and contracting processes to ensure transparency, accountability and value-for-money.
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This clause provides that the Contractor acknowledges certain publications and disclosure requirements.
Clause 20.2 - Commercial-in-Confidence Information
This clause is an optional clause and therefore does not apply unless the Contract Particulars state that it applies.
"Commercial-in-Confidence Information" is information provided by a Contractor before or after the Award
Date, where the Contractor has requested that Defence keep the specific information confidential. The
Contractor must make such request in writing to Defence in its tender and must have set out the justification for
keeping such information confidential. If Defence agrees to such request, such information will be designated
'Commercial-in-Confidence' information and kept confidential, subject to the types of disclosure referred to in
clause 20.2(b) of the Conditions of Contract.
Further guidance is provided in the Tender Documents.
CLAUSE 21 - FAIR WORK PRINCIPLES
General
This clause is an optional clause which applies unless the Contract Particulars state that it does not apply. The
applicability of this clause will generally be determined at the time of tendering for the Contract. See further
guidance in Volume 2.
The provisions of the Fair Work Act 2009 (Cth) (Fair Work Act) establish a balanced framework for
cooperative and productive workplace relations. The Fair Work Principles, which came into effect 1 January
2010, support the creation of quality jobs by ensuring that Australian Government procurement decisions are
consistent with the Fair Work Act and its aims. The requirements of the Fair Work Principles are also intended
to operate "in addition to and in parallel with" the existing Commonwealth Procurement Guidelines and other
procurement related policies of the Commonwealth.
Further information is provided in the Invitation to Register Interest and Tender Documents.
Clause 21.1 - General
This clause requires the Contractor to ensure that it complies with the Fair Work Principles in the performance of
the Contractor's Activities. Further, the Contractor is required to ensure, as far as practicable, that all
subcontractors comply with the Fair Work Principles.
Clause 21.2 - Responsibility not Affected
This clause makes it clear that compliance with the Fair Work Principles shall not relieve the Contractor of its
other obligations or liabilities under the Contract or otherwise arising out of or in connection with the
Contractor's Activities or the Works.
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ANNEXURE A - CONTRACT ADMINISTRATOR'S FUNCTIONS
CLAUSE
CONTRACT ADMINISTRATOR'S FUNCTIONS
1.1
For the purposes of the definition of "Completion", ensure that it receives all documents and
other information referred to in the Contract, including all Approvals, which are required for
the use, operation and maintenance of the Works or Stage.
1.1
For the purposes of the definition of "Design Documentation", determine the forms of all
design documentation necessary for the Contractor to establish the scope of the Works.
1.1
For the purposes of the definition of "Project Plans", determine whether to consent to the
Contractor's proposed amendments (if any) to the Project Plans.
1.1
For the purposes of the definition of "Site Management Plan", determine any other matters
required.
1.2(s)
Notify the Contractor in writing that a reference to "Standards Australia" standards, overseas
standards or other similar reference documents in the Works Description is not a reference to
the edition last published prior to the closing date and time of tenders. Request the Contractor
to make available copies of all such documents.
2.2(i)A
Prior to Defence giving the Contractor access to the Site, the Contract Administrator must
ensure that it receives from the Contractor: the Approved Security required under clause 4.1 of
the Conditions of Contract and evidence that the insurance policies required to be taken out by
the Contractor under clause 5.4 of the Conditions of Contract have been effected. The Site
Management Plan must also have been finalised and any other conditions in the Contract
Particulars satisfied.
2.3(b)
Determine the amount the Contract Price is to be increased as a result of a failure by Defence
to give access to the Contractor as required by clause 2.2(a) of the Conditions of Contract.
3.1
Give directions and carry out all other functions of the Contract Administrator as agent of the
Commonwealth (and not as independent certifier, assessor or valuer). Confirm oral directions
in writing.
3.2
Comply, if it is a substitute Contract Administrator, with anything done by the former Contract
Administrator to the extent that it would have been bound.
3.4
Make/revoke appointments of the Contract Administrator's representatives and notify the
Contractor in writing.
3.6(b) and
3.6(c)
Determine whether to approve any proposed replacements for the Contractor's Key People,
including the Contractor's Representative.
3.7
Instruct the Contractor to remove any person from the Site or the Contractor's Activities whom
the Contract Administrator considers is guilty of misconduct, is incompetent or is negligent.
3.8(c)
Ensure that it receives from the Contractor information regarding industrial relations problems
and issues which affect or are likely to affect the carrying out of the Contractor's Activities.
3.9(a)
Establish a schedule for project review meetings with the Contractor, nominate any other
persons who are to attend such meetings and meet with the Contractor.
3.9(b)
Discuss reports prepared under clause 17.4 of the Conditions of Contract (in relation to "whole
of life" (WOL) issues) and determine any other matters for discussion with the Contractor.
3.9(c)
Propose and provide questions (if any) to the Contractor in relation to any report.
3.9(e)
Prepare an agenda for each project review meeting.
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3.9(f)
Prepare minutes of each project review meeting and distribute them to all attendees of the
meeting.
4.2(b)
Within 14 days of the expiration of the last Defects Liability Period (other than any extended
Defects Liability Period) determine a reasonable amount of the security then held to be
released, having regard to the work to which the remaining Defects Liability Periods apply to
ensure Defence's interests are not prejudiced.
5.3(b)
Give directions to the Contractor as to what extent the Contractor is required to replace or
otherwise make good any loss of or damage to the materials listed in clause 5.3(a) of the
Conditions of Contract where some or all of the damage arises from a Commonwealth Risk.
5.4(a), 5.4(c)
and 5.5(a)
Receive and review evidence of insurance policies procured by the Contractor and their
currency and provide confirmation that terms satisfactory (which must not be unreasonably
withheld).
5.4(d)(i)
Where an insurer gives the Contractor notice of expiry, cancellation or rescission of any
required insurance policy, determine whether replacement insurances are on acceptable terms
and subject to acceptable limits (such acceptance not to be unreasonably withheld).
5.4(d)(ii)
Where the Contractor cancels, rescinds or fails to renew any required insurance policy,
determine, on the basis of reasonably required evidence, whether replacement insurances
comply in all relevant aspects with the Contract.
5.4(e)(iv)
and 5.4(e)(v)
Determine whether to grant consent to the Contractor to allow an insurance policy to be
cancelled or to lapse. Ensure that it receives notice of any event which may result in an
insurance policy lapsing, being cancelled or being rescinded.
5.8(a)(iii)
Consult with the Contractor regarding steps to be taken when there is damage to, or loss of part
of the Works or a Stage whilst the Contractor bears the risk of such occurring, to comply with
its obligations under clause 5.3 of the Conditions of Contract and ensure that, to the greatest
extent possible, the Contractor continues to comply with its other obligations under the
Contract.
6.2(b)
Ensure that it receives and reviews/approves a documentation program from the Contractor to
facilitate the review of Design Documentation by the Contract Administrator.
6.2(c)
Ensure that it receives the Design Documentation prepared by the Contractor in accordance
with the documentation program approved by the Contract Administrator under clause 6.2(b)
of the Conditions of Contract.
6.3
Review any Design Documentation submitted/resubmitted by the Contractor and reject the
Design Documentation where, in the Contract Administrators reasonable opinion, the Design
Documentation does not comply with the requirements of the Contract. Where the Design
Documentation is rejected, ensure it receives amended Design Documentation resubmitted by
the Contractor
6.5
Ensure that it receives from the Contractor the number of copies specified in the Contract
Particulars of any Design Documentation in the format specified in the Contract Particulars.
6.11(c)
Notify the Contractor of any ambiguity, discrepancy or inconsistency it discovers in the
Contract, Design Documentation or any other Project Document.
6.11(d)
Instruct the Contractor as to the course it must adopt if there is an ambiguity, discrepancy or
inconsistency in the documents described in clause 6.11(c) of the Conditions of Contract
within 14 days of receiving or issuing a notice under clause 6.11(c) of the Conditions of
Contract.
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6.12(a)
If necessary, request at any time during the execution of the Contractor's Activities and for a
period of 10 years following the issue of a Notice of Completion for the Works that the
Contractor:
(i)
make the Project Documents available for inspection and copying by the Contract
Administrator or any other person nominated by the Contract Administrator;
(ii)
provide the Contract Administrator with copies of the Project Documents as the
Contract Administrator may require;
(iii)
provide all such facilities and assistance and answer all questions which may be
required to enable the Contract Administrator to identify the amounts being or
proposed to be incurred or expended by the Contract in performing the Contractor's
Activities; and
(iv)
make available any the officers, employees, agents or subcontractors for interviews
with the Contract Administrator or any nominated persons.
6.12(b)
Ensure it receives, as a condition precedent to Completion of each Stage or Works, a copy of
the installed version of each item of software comprising the IT Equipment incorporated in that
Stage or the Works and ensure that it receives a copy of all documentation, including licence
terms, warranty terms and operating manuals associated with each of such software.
6.12(c)
Direct the Contractor to ensure that its subcontractors comply with the requirements of clauses
6.12(a) and 6.12(b) of the Conditions of Contract.
6.15(a)
Ensure it receives, with each payment and as a condition precedent to Completion of the
Works or a Stage, from the Contactor a Contractor Design Certificate.
6.15(b)
Ensure it receives with each payment claim and as a condition precedent to Completion of the
Works or a Stage, from the Contractor, Consultant Design Certificate(s) or Subcontractor
Design Certificate(s) (as the case may be).
6.16(a)
Ensure that it receives samples or ranges of samples in accordance with the program approved
under clause 10.2 of the Conditions of Contract.
6.16(b) and
6.16(c)
Review the sample or range of samples, or any resubmitted sample or range of samples, and
determine whether to reject them (within the number of days set out in the Contract
Particulars).
7.3
If clause 7.3 of the Conditions of Contract applies, receive notice of a Latent Condition and
notify the Contractor and Defence of its determination within 21 days of the notice as to
whether a Latent Condition has in fact been encountered.
7.4(b)
If clause 7.3 of the Conditions of Contract applies, determine the amount (if any) to be added
to the Contract Price for a Latent Condition.
8.3(c)
Ensure it receives from the Contractor copies of all documents issued by authorities or other
bodies having jurisdiction over the Works or the carrying out of the Contractor's Activities.
8.4(d)
Instruct the Contractor how to proceed when the Contractor's Activities are affected by a
change in a Statutory Requirement or variance between a Statutory Requirement and the
Contract.
8.4(e)
Determine whether the Contract Price is to be adjusted as a result of such change or variance,
or arising directly from the Contract Administrator's instruction under clause 8.4(d) of the
Conditions of Contract.
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8.5(a)
Determine whether to grant approval to the Contractor to appoint a subcontractor not named in
the Contract Particulars.
8.5(e)
Determine whether to require the Contractor to provide it with a duly executed Subcontractor
Deed of Covenant or Consultant Deed of Covenant (as applicable).
8.5(f)
Determine whether evidence of registration, licensing or training required and ensure the
Contractor provides such information.
8.7
Instruct the Contractor whether to delete or proceed with each item of Provisional Sum Work.
8.8 (Option
1)
Determine whether to require the Contractor to attend any design or other meetings to assist
Defence's designers in preparing Design Documentation.
8.8 (Option
2)
Attend all design and other meetings at which the Design Documentation is being discussed.
8.9(a)
Approve the terms or form of subcontract to be provided by the Contractor to tenderers in
relation to Provisional Sum Work.
8.9(b)
Ensure details of each tender for Provisional Sum Work are received from the Contractor as it
requires.
8.9(c)
Ensure it receives the Contractor's recommendation as to which tenderer should be accepted
and where the recommended tenderer is not the lowest priced, the Contractor's reasons for not
selecting the lowest priced tenderer.
8.9(d)
Instruct the Contractor which tenderer to engage under a subcontract for Provisional Sum
Work.
8.11
Direct that Provisional Sum Work is not to be put out to tender. If so, determine the amount by
of adjustment to the Contract Price if no agreement can be reached.
8.15
Ensure receipt from the Contractor of a signed surveyor's certificate as a condition precedent to
Completion of the Works or of any Stage specified in the Contract Particulars.
8.16(b)
Direct the Contractor to change its manner of working or cease working, where it reasonably
considers there is a risk of injury to people or damage to property arising from the Contractor's
Activities.
8.17
Ensure it is immediately notified by the Contractor of all occupational health, safety and
rehabilitation matters arising out of, or in anyway in connection with, the Contractor's
Activities.
8.18
Determine whether to approve the removal of any Plant, Equipment and Work from the Site by
the Contractor.
8.20
Determine whether to exempt any Statutory or other requirements for the protection of the
environment. Ensure it receives notification from the Contractor of: non-compliance with the
requirements for the protection of the Environment set out in clause 8.20 of the Conditions of
Contract; an Environmental Incident; a breach of any Statutory Requirement for the protection
of the Environment; or receipt of any notice, order or communication received from any
relevant Authority for the protection of the Environment.
8.22
Ensure that it receives information from the Contractor regarding valuable objects found on
Site, it gives instructions in relation to such objects and determines how much, if at all, the
Contract Price is to be increased to allow for extra costs incurred in following the instructions.
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8.24
Agree/disagree to change the access hours applicable to the Contractor's Activities to be carried
out on Site.
8.26
Where necessary, direct which materials, plant, equipment, fixtures and other things salvaged
from the Site or from the Works will not become the property of the Contractor.
8.27
Direct the Contractor to provide a Contract Administrator's Office, and other directions
associated with such office.
8.27(a)
Direct the Contractor where to provide and erect on Site a temporary Contract Administrator's
Office. Direct the installation of lighting, heaters and air conditioning in the Contract
Administrator's office. Pay for telephone calls from the Contract Administrator's office.
8.28(b) and
8.28(c)(i)
Ensure that it receives and determine whether to approve the proposed layout of project
signboards and direct the location of project signboards.
9.2(a)
Ensure it receives draft Project Plans (and where rejected, an amended plan) from the
Contractor. Review/reject the Project Plans within the number of days from receipt set out in
the Contract Particulars.
9.2(a)(ii)D
and
9.2(a)(ii)E
Give directions concerning finalising Project Plans, or the Contractor's compliance or noncompliance with a Project Plan, as appropriate.
9.3
Inspect any aspect of the Contractor's Activities at any time.
9.4
Determine whether to direct the Contractor to carry out tests. Where a test is to be carried out
and no procedure is set out in the Contract, direct the Contractor as to the appropriate
procedure to follow.
9.5
Determine the reasonable costs of carrying out tests where results show work is in accordance
with the Contract, the tests are not required by the Contract or do not involve work relating to a
direction under clause 9.6 of the Conditions of Contract.
9.6(a) and
9.6(b)
Determine whether to notify the Contractor of the Defect and direct the Contractor to correct
the Defect or carry out a Variation within the specified time to overcome it (or any part of it).
9.6(c)
Determine and then advise the Contractor Defence will accept the work, or any part of it,
despite the Defect.
9.9(b)
Where the Contractor is responsible for a Defect, determine the value of a Variation ordered to
overcome it and the cost of correcting the Defect and then calculate any adjustment to the
Contract Price accordingly.
9.10
Notify the Contractor that Defence will accept the defective work, and value the cost of
remedying it.
9.13(b)(ii)
Consult with the Contractor and issue any necessary instructions to the Contractor to facilitate
commissioning and handover.
9.13(c)
Ensure that it receives all Project Documents required for the use, operation and maintenance
of the Works or the relevant Stage or nominate other persons (including Other Contractors) to
receive such documents.
9.13(d)
Schedule any meetings necessary between the Contract Administrator, the Contractor and any
other persons nominated by the Contract Administrator for communication of information
necessary for operating or maintaining the Works or performing other activities as required by
Defence.
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9.15
Ensure it received a report within 14 days of the end of the relevant Defects Liability Period
and determine whether its content is satisfactory.
10.2
Direct the Contractor to include any reasonable details in the program and ensure that the
Contract Administrator receives the program of the Contractor's Activities within 14 days of
the Award Date.
10.2(c)
Ensure that it receives, and determine whether to approve, copies of all programs required to be
provided by the Contractor.
10.6(a)
Ensure it receives any claims for an extension of time (within 14 days of commencement of an
occurrence).
10.6(b)
Ensure it receives additional claims for extension of time every 14 days after the first written
claim if the effects of the delay continue beyond 14 days.
10.8
Determine the amount of time, if any, by which to extend any relevant Date for Completion
and notify the Contractor and Defence within 21 days of receiving the Contractor's written
claim.
10.9
Reduce any extension to any Date for Completion it would otherwise grant under clause 10.8
of the Conditions of Contract to the extent the Contractor contributed to the delay or failed to
take all necessary steps to preclude the cause of the delay and avoid or minimise the
consequences of the delay.
10.12(a)
Instruct the Contractor to suspend/recommence the carrying out of all or part of the
Contractor's Activities.
10.12(b)
Determine the amount to be paid by Defence to the Contractor as a result of a suspension in
certain circumstances.
10.13
Instruct the Contractor to accelerate the Contractor's Activities in certain circumstances.
11.1
Where necessary, issue a Variation Price Request setting out details of a proposed Variation
and ensure it receives written notice from the Contractor in response to the Variation Price
Request within 21 days of receipt of the Variation Price Request.
11.2
Instruct the Contractor to carry out a Variation by issuing a Variation Order.
11.3
Determine the cost of a Variation in accordance with clause 11.3 of the Conditions of Contract.
11.5
Instruct the Contractor to carry out work as daywork under clauses 11.2(c) or 12.19(d) of the
Conditions of Contract. If daywork ordered, Contract Administrator to receive a written report
each day from the Contractor and may direct the manner in which matters listed in clause
11.5(b) of the Conditions of Contract are to be recorded.
11.6
Determine the value of work which the Contract Administrator has instructed to be carried out
as daywork.
11.7 and 11.8
Receive and determine whether to approve (conditionally or unconditionally) or reject a
request from the Contractor to issue a Variation.
12.2
Receive claims for payment from the Contractor. Determine the format of such claims and
whether evidence attached to the claims is satisfactory (including determining any supporting
documentation or information to be provided and notifying the Contractor to set out or attach
such documentation or information in each a payment claim).
12.3(a) (viii)
Receive prior to the Contractor submitting a payment claim, duly executed copies of any
Subcontractor Deed of Covenant or Consultant Deed of Covenant that the Contractor is
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required to obtain, a Consultant Deed of Novation (if any is required under clause 6.13) and
certificates (if any) required under clause 16.15.
12.3(c)(vi)
and
12.3(c)(vii)
Issue written notice to the Contractor identifying documentation or information which the
Contractor has failed to provide with a payment claim under clause 12.2(f) of the Conditions of
Contract, specify a time required for provision of that documentation and if it is received
within the time required, include the amount in the relevant payment statement.
12.4
Issue a payment statement within 10 business days of receiving a payment claim or, where the
Contractor has failed to submit a claim at any time, stating the matters set out in clause 12.4(c)
- 12.4(g) of the Conditions of Contract, including a determination of the amount then payable.
12.7(2)
For the purpose of determining whether unfixed goods or materials are to be included in the
value of work in the payment statement, determine whether the unfixed goods and materials
have been prematurely ordered and are necessary.
12.7(b)
Ensure it receives additional Approved Security equal to the payment claimed for the unfixed
goods and materials and evidence that title will vest in Defence upon payment.
12.7(d)
Determine whether to approve the place of storage of the unfixed goods and materials.
12.9
Determine whether to extend the submission period for the Completion payment claim and
ensure that it is received within 28 days of receiving the Notice of Completion for the Works or
a Stage.
12.11
Determine whether to extend the submission period for the final payment claim and ensure that
it is received within 28 days of the end of the Defects Liability Period for the Works or a Stage.
12.14
Correct any errors in, or otherwise modify, any previous payment statement where necessary.
12.16
Consider whether to require, and where required, request and ensure that it receives with each
payment claim a duly signed statutory declaration regarding payment of workers,
subcontractors and employees of subcontractors.
12.19
Where a Schedule of Rates exists and there are quantities outside the limits of accuracy stated
in the Contract Particulars, provide directions as to whether certain work under the Contractor's
Activities is to be carried out as daywork, or determine with the Contractor a valuation of such
work, or failing to reach agreement with the Contractor, determine alone using reasonable
rates.
12.20(a)(ii)
Unless Defence notifies the Contractor otherwise, give payment statements and carry out all
other functions of Defence under the relevant Security of Payment Legislation as the agent of
Defence.
12.22
Ensure it receives with each payment claim accurate information which apportions monthly
costs against buildings, infrastructure and expenses for all work completed in the previous
month. Approve the format in which this information is provided.
12.23
Ensure it receives (as a condition precedent to Completion of the Works or a Stage) a cost
report setting out details of the portion of the Contract Price paid in respect of the Works or the
Stage, the matters specified in the Contract Particulars and any other required matters.
12.24
Ensure the Contractor provides adequate DEMS Information and GFIS Information at the
intervals set out in clause 12.24 of the Conditions of Contract.
13.1(b)
Ensure it receives notice from the Contractor of anticipated Completion for the Works or a
Stage at 28 days, and again at 14 days, before it anticipates Completion.
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13.2(a)
Inspect the Works or Stage promptly, and in any event within 14 days of receiving the
Contractor's second written notice under clause 13.1(b) of the Conditions of Contract or a
notice under clause 13.2(d) of the Conditions of Contract (as the case may be).
13.2(b) and
13.2(c)
After inspection, if satisfied Completion has been achieved, issue a Notice of Completion to
the Contractor and Defence stating the date upon which Completion was achieved and
containing a list of any minor Defects; if not satisfied, issue a notice advising the Contractor
and Defence that Completion has not been achieved.
13.3
Issue a Notice of Completion unilaterally where the Contractor Administrator is of the opinion
that the Works or a Stage have reached Completion but the Contractor has not submitted the
required notices.
13.5(a)
Notify the Contractor when Defence will occupy or use any part of the Works or a Stage
notwithstanding that the whole of the Works or the Stage has not reached Completion.
14.8
Determine the cost for work carried out prior to termination of the Contract in relation to which
the Contractor would otherwise have been entitled to payment, and the cost of goods or
materials reasonably ordered by the Contractor for the Works, and the reasonable cost of
removing from the Site all labour, Plant, Equipment and Work and other things used in the
Contractor's Activities.
15.1
Ensure it receives notice of a dispute.
16.1
Ensure it receives notice from the Contractor considers a direction given by the Contract
Administrator constitutes or involves a Variation and wishes to make a claim. Ensure such
notices are valid - i.e. submitted within 7 days of receiving the direction and before
commencing the work.
16.1(b)
Ensure it receives a written claim from the Contractor setting out the details required by clause
16.3(b) of the Conditions of Contract within 21 days of receiving a notice under clause 16.1(a)
of the Conditions of Contract.
16.2
Ensure it receives notices required under clause 16.3 of the Conditions of Contract where the
Contractor wishes to make a claim against Defence in respect of any direction of the Contract
Administrator or any other fact, matter or thing arising out of or in any way in connection with,
the Contractor's Activities or the Contract.
16.4
Ensure it receives ongoing notices of the information required under clause 16.3(b) of the
Conditions of Contract every 28 days after the submission of a written claim under clause
16.1(b) or 16.3(b) of the Conditions of Contract until after the direction or fact, matter or thing
upon which the Claim is based, or the consequences thereof, have ceased.
17.2
Schedule meetings as and when it requires, with the Contractor and Other Contractors to
review the progress of the design and construction of the Works against WOL Objectives and
consult with the Contractor as to any design, materials or methods of construction which might
maximise the achievements of the WOL Objectives.
17.3
Ensure it receives from the Contractor recommendations regarding WOL considerations and
consults with the Contractor about any proposals.
17.4
Ensure that it receives from the Contractor written reports at each project review meeting and
issues any necessary requirements as to form and content of report.
17.5(a)
Prior to the expiry of the last Defects Liability Period ensure it carries out a post occupancy
evaluation of the Works.
17.5(b)(i)
Inspect and review the Works to determine the extent of the Contractor's compliance with the
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WOL Plan and its achievement of the WOL Objectives.
17.5(b)(ii)
Issue a WOL report to Defence and the Contractor meeting the content requirements under this
subparagraph.
18.2
When clause 18.2 of the Conditions of Contract applies, ensure it consults with the Contractor
about the steps which it has taken for the purposes of complying with clause 18.2(a) of the
Conditions of Contract.
18.3(c)
Require the Contractor and its subcontractors to attend security briefings whenever necessary.
18.3(e)
Determine the extent to which, if at all, the Contract Price is to be increased to account for
extra costs incurred as a result of a direction under clause 18.3(d) of the Conditions of
Contract.
18.3(g)
Direct the Contractor and its subcontractors to participate in rehearsals of SAFE BASE.
18.5(a)(iii)
Determine whether to approve disclosure of Personal Information by the Contractor.
18.5(a)(iv)
Determine whether or not to approve the Contractor transferring Personal Information outside
Australia or allowing parties outside Australia to have access to it.
18.5(a)(v)
If necessary, make demands or inquiries of the Contractor in relation to the management of
Personal Information and ensure that the Contractor cooperates with these.
18.5(a)(viii)
Determine whether records containing Personal Information received, created or held by the
Contractor are to be returned to Defence or are to be deleted or destroyed at the expiration or
earlier termination of the Contract and authorise any person to oversee the deletion or
destruction.
18.5(a)(xi)
Direct the Contractor as is necessary to ensure any subcontract contains enforceable
obligations requiring the subcontractor to comply with the obligations under clause 18.5 of the
Conditions of Contract as if it were the Contractor.
18.6(b)(v)
Ensure it receives any Moral Rights Consent executed in accordance with clause 18.6 of the
Conditions of Contract within 7 days of execution.
18.6(b)(vi)
Ensure it receives from the Contractor a copy of an up-to-date record of the details of each
author of any Project Document or part of the Works.
18.11(b)
Determine whether to approve (in writing) the disclosure of any Classified Information.
Where approved, impose such conditions as it thinks fit, including conditions requiring any
recipient of Classified Information to obtain a level of security clearance and to enter into a
deed in a form acceptable to the Commonwealth.
18.12
Ensure receipt from the Contractor of written certification from an Accredited Building
Surveyor at the time the Contractor submits Design Documentation for the Works or a Stage.
Before commencing construction of the Works or that Stage ensure the Works or the Stage
complies with the Defence Manual of Fire Protection Engineering.
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