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TRANSCRIPT
11 December 2017
GC21 Workshop
Agenda – GC21 Workshop December 2017
• Introduction (HI Delivery & HI Legal)
• Rundown of the HI’s GC21 contract suite
• Key elements of GC21 and HI’s Special Conditions
• Recent GC21 updates and changes
• Key learnings, messaging and tips
• Questions & answers
Introduction: HI Legal
• What can HI Legal do for you?
1. Steven Kouris – General Counsel: [email protected]
2. Weiping Lu – Legal Counsel: [email protected]
• When does HI Legal get involved with your Project?
– Procurement stages
– Contract finalisation and execution
– Ongoing contract issues and queries
– Disputes
We are here to help &
facilitate you achieving
Project deliverables &
outcomes
GC21 contracts – just another standard government contract?
• HI’s GC21 contract suite
– Preliminaries
– General Conditions
– HI Special Conditions
• With or without Full Payment Trust Account model
– GC21 Construction Management (incorporating HI Special Conditions)
• With or without fit-out mechanism
• Do I need to attach the Special Conditions to the GC21 CM contract? No
HI’s GC21 is significantly developed
and tailored for HI’s operations –
apart from populating, don’t change
without consulting with senior PDs
and Delivery executive
GC21 CM contract incorporates the HI
Special Conditions (You do not need to
attach the Special Conditions to the CM)
GC21 contracts – where is it?
• Where can you find GC21 contracts? The Portal
Obtain your GC21 contract
templates from the Portal
GC21 contracts – CAPM
• Contract Administration & Procedures Manual
• Did you know …. ? A GC21 Contract
Administration and Procedures Manual
(CAPM) is available on the Portal.
• Includes flowcharts, notes & template
notices.
• The CAPM can be used for the Project
Team’s information – however it should
always be subject to:
• Being tailored to suit the circumstances;
and
• Obtaining advice (as necessary) from
your Project Director, Director /
Executive Director, HI Legal etc.
Key GC21 elements – what makes up the Contract?
• Clause 7.1 The Contract
The Contract is made up solely of the Contract Documents which supersede all
understandings, representations and communications made between the parties
before the Date of Contract in relation to the subject matter of the Contract.
The Contract Documents are…
– these GC21 General Conditions of Contract;
– the Contract Information;
– the annexed Schedules;
– the Principal’s Documents as at the Date of Contract; and
– the other Contract Documents listed in Contract Information item 26.
Key GC21 elements – what makes up the Contract?
• Clause 7.1 The Contract (continued)
– Contract Information – Why it is
important to get this right?
Tips for completing the Contract
Information:
– Are you being clear enough in
your responses so that there is no
ambiguity?
– Are you changing a default
position? Have you consulted with
anyone?
– Have you read the internal hidden
notes in the Contract (shown by
using button)?
– “Principal’s Document
Register” / Allocation of
development consent
conditions
Always provide enough detail in
referencing your Contract
Documents e.g. versions, dates,
author etc.
Key GC21 elements – LOA (and LOI)
• The Letter of Award (“LOA”) is a key contract document in awarding and
forming the Contract.
– The Contract is formed by and when the LOA is issued. The Date of
Contract is dependent on Contract Information item 12 and defaulted to the
date of the Letter of Award.
– The LOA has flexibility in confirming additional Contract Documents.
– If a parent guarantee deed is required, a version of the LOA is available on
the Portal.
i.e. where a Company Performance Guarantee deed is required for
guaranteeing the Contractor’s performance by the parent company.
• HI has a Letter of Intent (“LOI”) – used for instructing on Initial Works ahead of
award of the Contract (i.e. in the event of awaiting planning approval – remember
to consult and speak to your PD and HI Legal).
Key GC21 elements – LOA
• Contractor submits its Contract Program
within 14 days after Date of Contract
(unless HI instructs that the tender program
will be the Contract Program).
• Contractor (before starting work) effects
insurance under the Contract and gives proof
of all insurances policies required under the
Contract.
• Contractor gives its security (completion undertaking and post-completion
undertaking) within 14 days after the Date of Contract.
i. Must be in the form specified in Schedule 2.
ii. The amount of the security must be in accordance with Contract
Information Item 33 (security percentages are fixed and not to be changed
unless approved from the Executive Director Delivery).
So you just issued your LOA …
Key GC21 elements – Principal Arranged Insurances
• Unique to Government - Principal arranges [Contract] Works and Public / Product
liability cover
• Through NSW Self Insurance Corporation / icare
• Agreed terms – attached at Schedule 10
• Covers Principal and contractors
• Unless Principal otherwise instructs, Contractor obliged to make and manage all
insurance claims – what if the Contractor is responsible? Principal may need to step
in and closely engage with icare – HI legal has a good relationship with icare, and
can manage this
• The Contractor must meet the costs of all excesses or deductibles
• Note Public Liability now has environmental cover
• Procurement triggers PAI (Project) insurance cover – so please liaise with them
Key GC21 elements – the clause 1.3 instruction
The Principal may give instructions to the Contractor concerning the Works and
anything connected with the Works, and the Contractor must comply at its own
cost unless the Contract expressly provides otherwise
This is one of the strongest mechanisms in GC21 allowing the Principal to proactively
manage the Contractor’s performance; however, this cannot cut across other parts of
the Contract dealing with specific issues, such as EOTs / delay costs and site conditions
Key GC21 elements – principal contractor
• Principal Contractor “PC”
– Clause 16 / Contract Information Item 17
– Unless otherwise stated, the Contractor is appointed and engaged as PC for the
construction project.
• construction project means project involving construction work with cost of
$250,000 or more.
– The Contractor is authorised to have:
• management and control of the workplace;
• discharge the duties of the PC (under the WHS regulations).
HI cannot and must not be the principal contractor
Key GC21 elements – principal contractor
• Principal Contractor “PC” (continued)
– A construction project can only have one PC at any specific time. [However, there
may be cases where the project has early and main works components, or is
carried out in stages, with the relevant contractor being the PC.]
• Special Condition 8 (the Separate Contractor)
– The Contractor’s engagement as the PC extends to Separate Contractors.
– Separate Contractor undertaking Separate Contractor Work must execute the
Separate Contractor Deed Poll at Schedule 1 of the Special Conditions (to cover
the risk of the Separate Contractor not being subject to the PC’s control).
• Special Condition 15 (Occupier & Management or Control)
– HI is a specialist procurement agency, and does not occupy, manage, or control the
Site in any capacity. Fundamental and needs to keep being reinforced, esp to
regulators.
– From the Date of Contract - Only the Contractor occupies and has
management or control over the Site
GC21 updates – what you need to know
• Site Conditions
Contract Information Item 36
– What to include?
• e.g. geotechnical / hazardous
material reports
– Why is this important? Address
Adverse Site Conditions risk –
being conditions differing materially
from those that should reasonably
have been expected at close of
tenders
Contract Information Item 37
– ‘Yes’: the Contractor bears the full
risk in dealing with adverse Site
Conditions
– “‘No’ and further wording”: only
on approval from Director Delivery /
Executive Director Delivery.
However the Contractor bears this risk
to the extent identified or reasonably
inferable from the Site Information
documents, or expected at close of
tender
Key GC21 elements – the Site
Key GC21 elements – the Site
• Site Access (clause 34)
– The Principal must give Contractor sufficient access to the Site to allow
the Contractor to comply with Contract requirements and in accordance
with Contract Information item 13.
e.g. Site Access isn’t given and the Contractor makes a claim ....
– Item 49A1 – NIL delay costs for initial Site access.
– EOT (under clause 50) can be granted.
Key GC21 elements – EOTs
• Extensions of time “EOT” clause 50:
– Extensions of time to Contractual Completion Date (for delay in achieving
Completion by a cause “beyond the Contractor’s control” & if delaying a critical
path activity) – only for delays occurring on days on which the Contractor usually
carries out work
– Note impact of Contractor concurrency, as a disentitling event.
The Contractor is also required to provide
1. Initial notice – within 7 days after start of delay, setting out cause, relevant facts
and expected effect on Contractual Completion Date. [Note key impact of this
notice – if issued more than 7 days after the start of the delay, EOT entitlement
arises 7 days before the date of issue – good leverage tool for Principal.]
2. Claim (i.e. formal notice) – within 28 days after start of delay, setting out
extension sought and other relevant information, updated every subsequent 28
days while delay continues.Clause 50.8
The Principal may, in its
absolute discretion extend any
Contractual Completion Date at
any time and for any reason.
Clause 50.2
The Contractor must take all
reasonable steps to avoid delay
and its effects. Contractor
cannot sit back and wait for the
Principal to do something.
Key GC21 elements – Scheduled Progress
Key time management tool (clause 22)
What is it? The rate of progress consistent with carrying out the work required by the
Contract expeditiously and without undue delay, so that Works and all Milestones
will be completed by their respective Contractual Completion Dates.
• The Contract Program must reflect Scheduled Progress.
• The Contractor must carry out all work in connection with the Contract to achieve
Scheduled Progress.
• Whenever requested, the Contractor must demonstrate to the Principal that it is
achieving Scheduled Progress.
• If the Contractor does not demonstrate this, the Principal may instruct the Contractor to
take all reasonable steps to achieve Scheduled Progress at its own cost. This is not
an Acceleration Notice.
• Principal should use this provision proactively.
Key GC21 elements – Delay Costs
• The Contractor’s entitlement to delay costs is set out at clause 51.1 – only for delay
or disruption caused by e.g. adverse Site Conditions that differ materially from what
the Contractor should have reasonably expected at close of tender or Variations (other
than for the Contractor’s convenience)
• Delay costs are calculated at the number of
days by which achieving Completion is
extended, and only for days on which the
Contractor usually carries out work
• Given the default rate for delay for sufficient
Contractor initial site access is NIL (Contract
Information item 49A1) – delay costs will be
calculated at the rate in Contract
Information item 49A2.
“reasonable additional costs incurred
by the Contractor as a direct result of
the delay up to a maximum of: …”
Key GC21 elements – liquidated damages
• The Contractor will be liable to pay the Principal liquidated damages at the rate stated
in Contract Information item 49B, for every day after the Contractual Completion Date,
up to and including the Actual Completion Date
• LDs must genuinely estimate the Principal’s loss for late Completion, and be supported
by credible and bona-fide material and calculations, such as impact on LHDs (as HI
procures projects on behalf of LHDs)
• Note Contractors usually default to claiming EOTs when faced with LDs exposure
Key GC21 elements – Variations
• Variation - any change to the Works
• Is a variation warranted? Is the scope of the proposed variation already part of the
scope of work? See for instance clause 8.2 - all work and items necessary to carry
out and complete the Works properly, and all work and items reasonably inferred
from the Contract Documents – these are already part of scope of the Works. Also
note clause 39.4 - design or design development does not cause a Variation and
Special Condition 5 - [Alternative 1: Design development (or design finalisation)
& construct] – where the Contractor assumes risk for Contract Documents and
has no entitlement to a Variation
• Agreement on variation price and time should be the objective. If no agreement, and
variation instructed (to accommodate project timeframes), Contractor will have the right
claim not only variation cost, but an EOT and delay costs [No delay costs for
convenience variations]
• Note other circumstances where a Variation may arise – main contractor making good
early works defects (Special Condition 9.4) or dealing with adverse Site Conditions
(Special Condition 20) – which have limited compensation rights – generally additional
direct costs, EOTs but no delay costs
Key GC21 elements – payment claims
• While HI encourages Contractors to issue draft payment claims for review and
agreement before final issue [by the 25th day of the relevant month, and for final
Payment Claims, at least one calendar month before the final Payment Claim is
submitted], HI needs to proactively manage payment risks.
• The key payment risk arises from the Building and Construction Industry Security of
Payment Act, which states that a respondent [Principal] may reply to the payment
claim by payment schedule within 10 business days of the claim being served, indicate
what amount the Principal proposes paying and if less than the amount claimed, the
reasons why.
• If the payment schedule is not provided by this time, the Principal becomes liable to
pay the amount claimed in its entirety by the due date (being 15 business days from
the date the claim is made)
• HI must issue payment schedules even if the claim is agreed. If there is any
disagreement with the amount claimed, or form of payment claim (eg not made at end
of month, and no supporting statement as to subcontractor payments), the payment
schedule must clearly articulate the reasons, including contractual provisions.
Key GC21 elements – payment claims
• Note payment claims do not presently need to state they are made under the Act;
however, this is expected to shortly change and revert to what was previously the case
– that there be such a statement.
• GC21 requires the Contractor’s Final Payment Claim to be submitted within 13 weeks
after Completion of the whole of the Works has been achieved.
• The Final Payment Claim must include any Claim not previously included in a Payment
Claim.
• Any Claim not submitted before or with the Final Payment Claim is barred.
• However, while the Contract may say this, this does not mean the Contractor is barred
from proceeding under the Security of Payment Act.
Key GC21 elements – early use
• Before the Contractor achieves Completion, the Principal, or anyone authorised by the
Principal, may use or occupy all or any part of the Works that are sufficiently
complete
• Early use is not Completion
• At least 21 days’ notice must be given
• Contractor must assist and cooperate with those using or occupying the Works.
• Sometimes pursued to facilitate LHDs commencing operating a new or redeveloped
facility
• While Contractor’s obligations remain unchanged, the entity having early use also
assumes risk of early occupation. [Note – need for appropriate interface between
Contractor and this entity, especially as C is still the PC.]
• We have developed early use template notices, including where less than 21 days’
notice needs to be given, which can also manage any required interface
Key GC21 elements – Completion
• Completion (Special Condition 18 / clause 65 in GC21 Construction
Management)
– Completion means defect-free and applies to any Milestone as well as
whole of the Works. Unlike Practical Completion that other industry
standard form contracts adopt
– But what about defects liability period? No such period. Completion means
defect-free.
• Clause 67 Defects after Completion “At any time after Completion
Principal may, in its absolute discretion, instruct others to rectify
defects”, subject to statutory limitation period, meaning longer than a
traditional DLP
• Defect Notice
• If the Contractor fails to make good, the Defects can be made good by
others (debt due from Contractor)
• Note defects arising from early works referenced in the Main Works
Contract – Main Works Contractor (given on site) responsible for
rectifying unless Principal otherwise instructs
GC21 updates – what you need to know
• Completion validation period
Special Condition 18 / Clause 65 GC21 CM Actual Completion
Date – following
this validation
period, if parties
acting reasonably
agree Completion
has been achieved
Commences after the later of:
i. expiry of Contractor’s
notice period; or
ii. Contractor achieving
Substantial Completion
• Special Condition 18.7 and 18.8
• Clause 65.6 and 65.7 GC21 CM
Select one Alternative (1, 2 or 3) at
Special Condition 18.8 / clause 65.7
GC21 CM for your Completion
Validation Period
Contractor gives the Contractor’s
Notice at least 14 days’ notice when
it anticipates demonstrating
Substantial Completion of the
Works or Milestone.
Substantial Completion includes
Contractor demonstrating:
• Special Condition 18.4 (eg only
minor defects or omissions)
• Clause 65.3 GC21 CM.
Completion Validation Period
Key GC21 elements – Completion
Key GC21 elements – Security ... i.e. bank guarantees (BGs)
• HI requests from its Contractors, 2 securities (unconditional undertakings) for the
Contract:
– Completion Undertaking
– Post-Completion Undertaking
• Clause 33.3 – release of the security – automatic unless Principal takes positive
steps to stop
“Unless the Principal has made or intends to make a demand against an Undertaking, the
Principal must return the Undertakings ….”
“…no outstanding Defects or unresolved Issues”
The Undertaking serves to protect the
HI’s interests and position under the
Contract
GC21 updates – what you need to know
• GC21 is updated periodically, as part of the continuing project experience
• There will be cases where GC21 tender versions do not include the
updates
• Ideally we want all updates captured, say by tender addenda; however,
there may be times when this is not possible.
• We suggest any such circumstances discussed with the senior project
directors so they escalate to the Delivery executives for consideration
• HI legal will also consider and advise on this issue as part of legal
contractual reviews
GC21 updates – what you need to know
• Site Conditions (continued)
Special Condition 20 / clause
37A in GC21 Construction
Management
– When does this come into
play? Refer to Contract
Information Item 37.
– Contractor’s entitlements
being only:
• Reasonable direct costs
(additional works)
• Variation if instructed by
the Principal
• Extension of time
GC21 updates – what you need to know
• Site Conditions (continued)
Provision Sums (Adverse Site
Conditions)
– Special Condition 20(d) / clause
37A (CM based GC21 contracts)
– Preliminaries 3.5 Provisional Sum
(adverse site conditions)
– Contractor’s entitlement to
compensation through Provisional
Sum by reference to:
• Total quantity allowed and
corresponding rate specified
in the Contract.
GC21 updates – what you need to know
• Trigger Action Response Plan (TARP)
Preliminaries section 5.20
– Addresses asbestos risks and control
measures through a traffic light approach
• Asbestos Management Plan
• Asbestos Removal Licence
– Non-compliance can result in the Principal
withholding payment to Contractor.
– Contractor is to provide updates of TARP
compliance through monthly project
reporting.
Key learnings – takeaways
HI Legal: We are here to help
manage Project risks and facilitate
you achieving project outcomes.
Legal sign off provides an extra layer
of comfort to the executive
Obtain your GC21 contract
templates from the Portal –
as they are updated regularly
for our Projects – this
includes updating GC21
tender versions that do not
include updates
HI cannot and must not be the
principal contractor (this is
significant to the operation of HI
as a procuring and service
delivery agency)
HI’s GC21 contract suite is
significantly developed and tailored
for HI’s operation and business –
apart from populating, don’t change
unilaterally without consulting snior
PDs and Delivery executive
GC21 CM contract already
incorporates HI Special Conditions
– there is no need to attach the
Special Conditions.
Key learnings – takeaways
HI requires Completion to be
defect-free – don’t get confused
with DLP or Post-Completion
Undertaking period.
Only the Contractor has
management or control over
the Site – HI’s does have
any control over the site in
any capacity.
The Contractor’s unconditional
undertaking serves to protect
HI’s interests and position in
the Contract – do not release
unless appropriate and in
accordance with the Contract.
Always provide enough
detail in referencing your
Contract Documents e.g.
versions, dates, author etc.
– avoid any ambiguity and
make reference to
document registers where
appropriate.
.
Questions?