The Western Australian Government's long-awaited response to
review of the Construction Contracts Act 2004 (WA)
("CCA") was recently released amid further scrutiny on
government-managed construction projects and contractor
insolvencies. Professor Evans's report on the operation of the
CCA made 28 recommendations for the improvement of the CCA and the
adjudication process. A brief summary of the key recommendations
and the potential reforms to the security of payment regime in
Western Australia is below.
Project Bank Accounts:From 30
September 2016. The Government has indicated that it will
mandate the use of project bank accounts ("PBAs") on
public projects valued between $1.5 million and $100 million from
30 September 2016. The wider use of PBAs may introduce further
regulatory headaches for government contractors and their
Statutory Retention Trusts: To Be Evaluated. In
addition to the use of PBAs for WA government projects, the
Building Commission is evaluating the use of statutory retention
trusts for public and private projects following the trial of the
retention trust scheme in NSW.
Code of Conduct and Sanctions: To Be
Implemented. In light of recent issues on certain public
projects, the Government is developing a code of conduct for the
construction sector. The code will be used to assess a
contractor's eligibility to bid on government projects and may
contain sanctions for businesses that fail in their payment
obligations or seek to impose unfair contract terms on small
The 'Mining Exclusion': Here to Stay ... For
Now. Despite recommendations in the Evans Report to do so,
the Government is unwilling to repeal the 'mining and process
plant exclusions'. However, the Government has indicated that
it will clarify the scope of the exclusions, which could result in
a broader exclusion.
Maximum Payment Terms: 30 Business Days.
Although the Evans Report did not directly deal with prohibition on
payment terms exceeding 50 calendar days, the Government has
indicated that it will reduce the maximum permitted payment term of
50 calendar days to 30 business days.
Time Limit for Adjudication Applications:
Extended. Despite the Evans Report recommendations, the
Government has stated its intention to increase the time limit for
adjudication applications from 28 calendar days to 90 business
days. Surprisingly, the Government also flagged a removal of the
prohibition on 'recycled claims' which may see an end to
absolute time limits for adjudication applications altogether.
Other Time Limits: Minor Amendments. Despite
changes to the timing of adjudication applications, the current
time limits for adjudication responses and determinations look
likely to remain, other than for a welcome shift from calendar to
business days and a moratorium in the holiday season from 24
December to 7 January.
Offences and Penalty Provisions: Introduced.
The Government has indicated that it will consider imposing
penalties on businesses that include prohibited terms in
construction contracts. This could unwittingly affect a range of
principals and contractors given the present uncertainty as to the
scope of the mining and process plant exclusions.
Deeming Provisions: To Remain. No change to
implied terms in the CCA. Respondents to payment claims should
continue to be wary of the 'deeming provisions' and the
potentially significant consequences of failing to formally respond
to or dispute a payment claim within 14 days.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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