Australia: Does your next Council project have State or Commonwealth Government Funding?

WHO SHOULD READ THIS

  • Those involved in procurement for local government.

THINGS YOU NEED TO KNOW

  • State and Commonwealth funding agreements can include requirements and conditions on Council that are not addressed by Council's standard form project documents.

WHAT YOU NEED TO DO

  • Review your standard form project documentation (both for procurement and contracts), to ensure you are properly addressing requirements of State and Commonwealth Funding.

Sources of State and Commonwealth Funding

Following the recent devastation of cyclone Debbie and the associated rainfall and flooding, it is anticipated that some Councils may be eligible for grants from the Queensland Reconstruction Authority (including under the NDRRA, for the period of 28 March and 6 April). The area activation is available here.

In addition, back in February, the Queensland Government has launched a $130 million Jobs and Regional Growth Fund, as part of its $1 billion plan to create jobs outside the State's south-east, stating:

'The Jobs and Regional Growth Fund will provide one-off financial assistance from $100,000 to $10 million in either direct grants or relief of State charges to promote growth and job creation.'

The other packages forming part of the $1 billion plan include:

  • the Building Our Regions program, which is focused on regional infrastructure creating a program for local government projects, targeting critical infrastructure in regional areas ($375 million)
  • the Works for Queensland program designed to support local councils across the state undertaking job-creating, maintenance or minor infrastructure projects ($200 million), and
  • the Significant Regional Infrastructure Projects Program, part of the State Infrastructure Fund, which is fast-tracking key economic and social infrastructure projects in regional centres right across Queensland including transport, health and education infrastructure ($180 million).

The Commonwealth is also showing some willingness to invest, with the Northern Australia Infrastructure Facility Act 2016 (Cth) passed on 3 May 2016 and the headquarters being established in Cairns. That program alone, over five years, offers concessional finance to encourage and complement private sector investment in infrastructure that benefits Northern Australia. This may include developments in airports, communications, energy, ports, rail and water. No doubt this brings opportunity for Council involvement, whether directly or indirectly.

What are the State and Commonwealth Funding requirements?

When Council embarks on any project with State or Commonwealth funding, it needs to ensure that the requirements of the State or Commonwealth, as the case may be, are encapsulated in its downstream project documents (including conditions of tender and contracts). While the exact requirements will differ between funding arrangements and from project to project, there are several key areas that Councils should keep in mind when drafting their project contracts where State or Commonwealth funding is concerned.

Unfortunately it is not simply a case of making sure the payment milestones align with the project contracts and the funding arrangement. The issues identified below are not dealt with by many standard form documents in the industry (including Australian Standards for construction1).

  • The Codes & Guidelines: Councils should be aware that codes and guidelines may apply to works funded by the State or Commonwealth. Councils would need to include certain provisions in its project documents for building work where these codes and guidelines apply. For example, a documented dispute resolution process for payment disputes with subcontractors would be required if the Commonwealth Code for the Tendering and Performance of Building Work 2016 were to apply (note: this has replaced the 2013 Building Code – so documents referring to the old code need to be updated).
  • Conditions Precedent, Suspension & Termination Rights: The State or Commonwealth may make funding subject to certain conditions precedent being satisfied (e.g. obtaining particular approvals) or provide that funding can potentially be suspended or terminated. These risks need to be addressed in the project contracts, to ensure Council is insulated (e.g. not placed in a situation where it is obliged to pay the contractor without suitable funding available).
  • Provision of information to Council: Councils should be aware of legislation regarding privacy and access to information. Funding agreements may also require Councils to transfer to them any intellectual property rights from the project and collect relevant information on behalf of the State or the Commonwealth. The use of information contemplated in Council's project contracts (unless properly amended) is often not wide enough to cover the State or Commonwealth's own intended use of the information (which may include things like research and development), so appropriate amendments are often required to Council's project contracts to address this issue.
  • Council issuing information: Council, as a recipient of funding, would usually be obliged to ensure that confidential or personal information obtained from the State or Commonwealth is protected and only disclosed or used for the purposes of the project. Again, the risk allocation of these provisions needs to be 'back to back' with the funding agreements to ensure Council is not exposed.
  • Records & Audit Rights: It is not uncommon for records to be required to be retained by Council under a funding agreement for a period of six or seven years from the completion of the project. The State or Commonwealth may have audit rights, and in some instances, they may also require direct access to a project site and associated personnel. Council's project contracts need to make provision for these rights, or otherwise Council risks placing itself in breach of the funding agreement or triggering claims against it from its own contractors.

Summary

Ultimately Council's ability to deliver key projects to its particular constituents will often rest on access to funding from the State and Commonwealth, and such funding is nearly always delivered through a funding agreement. While Council may have special conditions for industry standard contracts, often the issues identified above are not addressed fully in those special conditions (or need to be brought up to date to cover the latest developments and requirements of funding agreements).

Footnote

1 Most of these issues are not addressed in either AS2124 or AS4000.

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