construction contracts act (wa) - the past, present and future

Government of Western Australia Department of Mines and Petroleum Government of Western Australia Department of Mines and Petroleum Government of Western Australia Department of Mines and Petroleum

WA Determinative Forum 16 August 2017

CCA 2.0 - the Past, Present

and Future

Presented by

Ian Munns & Dan Kearney


May you live in

interesting times – Chinese Curse


L2 Heading here

• DMIRS formed on 1 July 2017

- combining the Department

of Commerce and Mines &

Petroleum

• 3 Priority Service Areas:

– Industry Regulation & Consumer

Protection

– Resources Titles & Compliance

– Safety

• Entered Transition Phase II

• Building Commission part of

Industry Regulation &

Consumer Protection

DMIRS

Industry

Regulation

&

Consumer

Protection

Resources,

Titles &

Compliance

Safety

Department

of

Commerce

Department

of Mines &

Petroleum

Building

Commission

Present – Changing face of Govt.


• Building Commission continues to

oversee the regulation of building,

painting, building surveying and

plumbing services in WA

• Importantly, the Building Commission

continues to administer the CCA and

perform the associated statutory

duties.

• One of the priorities of the new DMIRS

is to assist with delivering the

Government’s election commitments.

• New Government committed to

pursuing reforms to improve security

of payments to subcontractors in the

building industry.

• BC has a small team assisting in this

task. The team undertakes the policy

legislation work as well as performing

all the regulatory functions required

under the CCA.

DMIRS

Industry

Regulation

&

Consumer

Protection

Building Commission

Election

commitments

CCA/SoP

Reform

Team

Policy/Legislation

Adjudications/Registration


L2 Heading here

• In Dec-16 and April-17, a number

of changes to the CCA

commenced operation.

• Changes followed a review of the

Act – completed in September

2015 by Phil Evans.

• Changes also reflected a desire by

the former Government to better

assist subcontractors:

– Collapse of Diploma, CPD, PCH

problems.

– Significant community pressure

Past – Changes to the CCA


• In August-16, the former

Government’s plan was

announced.

• It included:

• Extending the use of Project

Bank Accounts to more State

Government- funded and

managed project;

• A new BCI Code; and

• Reforms to the CCA.

• Desire to move very swiftly on

CCA reforms.

• Bill introduced into the Parliament

in September 16.

• Passed by the Legislative Council

on the last day of the 39th

Parliament.

• All sections apart from sections 7

and 20 commenced on 15 Dec. 16

• Sections 7 and 20 commenced on

3 April 17.


• Amendment Act contained a number of reforms.

• Key reforms:

– Section 3 – definition of a payment claim to align the Act

with the manner in which payment claims under a contract.

– Section 26(1) time for making an application extended

from 28 calendar days to 90 business days.

• Aim of the reforms = to make it easier and more

attractive to use adjudication


L2 Heading here

• Possibly too early to tell – only

7 months.

• Statistics tell a story – Applications

down 26% from 15/16

Present – What has been the effect?

Adjudication applications

Quarter Month

Total

number of

applications

Total for

quarter

Total for

same quarter

in 2015/16

Difference %

Change

Total payment

claims disputed

2016/17

1st

Jul-16 19

51 56 -5 -9% $89,592,898.41 Aug-16 18

Sep-16 14

2nd

Oct-16 21

55 69 -14 -20% $78,984,882.46 Nov-16 22

Dec-16 12

3rd

Jan-17 14

26 53 -23 -43% $3,977,945.24 Feb-17 5

Mar-17 7

4th

Apr- 17 10

31 44 -12 -27% $14,249,126.79 May-17 15

Jun-17 6

Total 163 222 54 -24% $186,804,852.90

Down 30% on

14/15


? Reduction in payment disputes in the

construction industry?

Changes to the Act ineffective?


• Reality – Anecdotal evidence suggests:

– Head contractors/Large contractors still using adjudication

– Less work, therefore subcontractors less likely to use adjudication to

resolve payment disputes. Focus on maintaining the commercial

relationship (even where owed substantial amounts of $$). Adjudication

seen as the ‘nuclear option’. Only thought about when there is a

problem.

– Despite prohibition on paid when paid clauses, in practice still occurring.

Underlying cause can be bad cash flow management.

– Many still unaware, or don’t understand enough to be confident using

adjudication process.

– Not fully understanding the contract, signing without reading, not

keeping on top of records (e.g. issuing claims, variations, requests for

EOTs). Problem occurs on both sides of the subcontractor-head

contractor relationship.

– Adjudication costs unknown, or too high for amount owed. Particularly

the case for suppliers and small subbies.

– Extended/long payment periods.


Can’t

Pay

Dispute

Pay Won’t

Pay

• Insolvent or

nearly insolvent

• Reduced cash

flow – project to

project

• Deliberately

withholding

payment

• Extended

payment

times • Contractual

dispute (scope,

time, quality)

What may

be driving

non-

payment?


What actions should be taken

by Regulators/Government?

• Legislate/Regulate

• Non-regulatory • Inform and educate:

• Contract management

• Dispute resolution

• Business skills

• Make current dispute

resolution economically

attractive/improve operation


L2 Heading here

• Evans Review found need for greater effort

toward raising awareness of the CCA.

• In the last 7 months have focused on raising

awareness through: – Specific seminars on the CCA/Construction contracting;

– Seminars on changes to the CCA; and

– Attendance at industry forums or days to discuss CCA.

• Moderately successful, but identified a need for a

more holistic/structured approach.

• Commission is going to develop and launch a: – 12 months calendar comprising seminars (3-to-4 each

quarter) focussed on two streams – contract literacy and

financial literacy. Delivered by the Building Commission,

but in partnership with field specialists.

– Enhanced web/online information (e.g. animated videos,

fact sheets access to recorded seminars)

• Educate and support to those most likely to

benefit

Future – Educate and Inform

Streams

Contractual

Literacy

Financial

Literacy

• Understanding

your contract

• Understanding

contractual

issues

• Understanding

dispute

resolution

• Business skills

• Cash/contract

management


L2 Heading here

• Working with adjudicators and appointors to identify the interest

and availability of fixed fee or low fee adjudications for payment

disputes below certain amounts (e.g >$20,000 >$50,000

>$100,000).

• Purpose is to identify the service, how it should be operate and

then for the BC to really promote (both online and through other

education/information initiatives).

• Are aim is not a “race to the bottom” – adjudicators deserve to

compensated for their work. Work collegiately to identify

opportunity within the current regulatory framework.

• Anecdotal evidence suggests there is a lot of cases where

small businesses end up writing off debts. Feedback is

trepidation over the potential for large costs relative to the

amount in dispute.

Future – Low value disputes


L2 Heading here

• Review of SoP laws part of the deal with

Xenephon to pass ABCC legislation

• John Murray appointed to conduct the review

and conclude with report by 31 December 2017.

• Difficult to predict likely outcome, but: – Seems improbable the Cth will support use of

Corporations power to legislate

– More likely to be Model Laws; or

– Principles of harmonsation.

• Even if there is support, likely to take some time

(i.e. Commercial Arbitration Acts).

• Government does not have an official position

yet.

• Case for complete overhaul does not seem

compelling – particularly given manner in which

CCA was originally drafted.

Future – National Harmonisation

“Oh, East is East and

West is West, and

never the twain shall

meet.” - Kipling


L2 Heading here

• In lead up last State Election, then

Opposition, announced a number of

policies it would pursue to assist

subcontractors.

• Having attained Government, there is

very much a desire to proceed with

working on those policies.

• Likely to be announcements in the

near future with significant periods of

consultation.

• Broad level – – Providing greater protections for SC’s on Govt.

funded projects;

– Ensuring a more robust and responsive registration

framework for building contractors;

– Improving the allocation of contractual risk for SC’s

– Improving the operation and effectiveness of the

CCA, with a particular focus on accessibility for SC’s

– Providing more support (education) for SC’s

Future – State reforms


Thank You

Questions?

Call:

Dan Kearney (6251 1043)

Graeme Cantello (6251 1365)

Email:

[email protected]

construction contracts act (wa) - the past, present and future

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