In recent months, two principals have been issued with Federal Court injunctions denying them the ability to select tendering contractors or subcontractors because the contractor or subcontractor has not complied with the Code and Guidelines regulating the Victorian building and construction industry.

The current situation has highlighted the uncertainty over whether Enterprise Agreement clauses in breach of the Code and Guidelines can be a reason to preclude a contractor from successfully tendering for Victorian Government work. Until this issue is resolved by the Federal Court, industry players should be aware of, and take steps to comply with their obligations under the Code and Guidelines in order to be considered for Victorian Government building and construction work.

On the one hand, compliance with the Code is a condition of tender for Victorian Government construction projects, and tenderers must ensure that they and their related entities and any contractors they hire comply with the Code.  On the other hand, the interim success of the Federal Court applications means that a principal or contractor who chooses not to select a contractor on the basis of non-compliance with the Code could face an adverse action claim.

The Code and Guidelines

Any party undertaking a public or private construction project in Victoria must be aware of their obligations under The Victorian Code of Practice for the Building and Construction Industry 1999 (Code) and the Code’s implementation Guidelines, The Victorian Implementation Guidelines to the Code of Practice for the Building and Construction Industry –December 2012 (Guidelines).

The Victorian Code and Guidelines supplement the National Code and Guidelines and are to be interpreted so that they do not contravene the National Code and Guidelines. Projects that are jointly funded by the Victorian and Federal governments will be subject to both the Victorian and National Code and Guidelines.

The Code and Guidelines apply to all public building and construction work that is the subject of an Expression of Interest or Request for Tender on or after 1 July 2012. They also apply to private building and construction work if the builder undertakes or proposes to undertake public work in the future. To reflect this, any EoI or RfT response must include an undertaking to apply the Code and Guidelines to the project and to all future public and private construction work.

A project will involve public building and construction work if it is undertaken by or on behalf of a Victorian Government department or public sector body.

The Code and Guidelines are binding on contractors, including principal contractors and subcontractors, as well as their related entities. Importantly, these related entities include holding companies, subsidiaries, and subsidiaries of a contractor’s holding company. This has been designed to prevent contractors setting up ‘shelf companies’ to tender for public construction.

A contractor must also ensure that any consultant it engages agrees to comply with the Code and Guidelines, any applicable Health and Safety Management Plan, the Workplace Relations Management Plan, and to cooperate with the CCCU during the tender process and during the project.

How do the Code and Guidelines impact Contractors?

The Code and Guidelines are designed to affect a contractor’s workplace arrangements as well as its on-site workplace practices. Below are three of the most important consequences of the implementation of the Code and Guidelines for contractors.

Workplace Relations Management Plan

You must submit a Workplace Relations Management Plan (WRMP) if you are tendering for a project where the Victorian Government is contributing $10 million or more, or where the Victorian Government is contributing $5 million or more and this amount is at least 50% of the total project value.

A WRMP must address specific issues including the following:

  • labour requirements and the engagement of labour, including selection procedures (eg reference checks and inductions)
  • how workplace arrangements will be regulated (ie enterprise agreements)
  • how disputes will be resolved; and
  • an approach to developing and maintaining a productive workforce, ensuring the optimal use of labour requirements (eg an approach to managing inclement weather, RDOs).

WRMPs will be reviewed by the Department of Treasury and Finance through its Construction Code Compliance Unit (CCCU). The CCCU has published a model WRMP to assist contractors with preparing this document, though use of the model WRMP is not compulsory. The CCCU is the primary body for monitoring and sanctioning parties under the Code and the Guidelines.

Construction Code Compliance Unit

The CCCU monitors compliance with the Code and Guidelines at the tender stage and during the project. You must agree to cooperate with the CCCU during the tender process and must ensure that all of your related entities, subcontractors, and consultants also agree to cooperate with the CCCU.

This includes allowing the CCCU to inspect a range of items during a site visit, inspect and copy any record relevant to the project, interview any person, and access sites and documents.

In particular, the CCCU is concerned with reviewing provisions in project contracts and tender documentation, reviewing industrial instruments such as enterprise agreements, investigating your current workplace compliance as well as the compliance of your related entities and subcontractors. 

The CCCU has powers to issues sanctions against contractors who are not complying with the Code and/or Guidelines. These sanctions include:

  • a formal warning;
  • referral of the contractor to a relevant industry association or statutory body for assessment (eg the ASX);
  • publication of the breach and the identity of the non-complying contractor; and
  • exclusion of a non-compliant contractor from tendering for Victorian Government projects for a specified time.

You must notify the CCCU and your client of an alleged breach of the Guidelines, and of any voluntary remedial action you are taking, within 24 hours of becoming aware of the allegation. In addition, a principal contractor must report to the CCCU and the client within 24 hours of becoming aware of any grievance or dispute relating to workplace relations or occupational health and safety matters that may impact on project costs, related contracts or timelines.

Industrial Instruments

Enterprise agreements entered into prior to 1 July 2012 are deemed to be compliant with the Code and Guidelines. This means that any action, eg displaying union flags or logos, conducted pursuant to an enterprise agreement entered into prior to this date is legitimate. However, when renegotiating enterprise agreements or negotiating new agreements, the Government expects contractors to commit to excluding the items prohibited by the Code and Guidelines. 

The following are examples of clauses that should be excluded from future agreements:

  • Clauses requiring employers display a union or any other logo or indicia
  • Clauses prescribing the number of temporary, casual or permanent employees on any particular site/area/within a company
  • Clauses that ignore an employer’s operational requirements, eg last on first off, or redundancy by seniority
  • Restrictions on an employer’s labour requirements, both short and long term
  • Terms and conditions of labour for any person not party to the instrument
  • Clauses that require an employer to consult or seek the approval of a union over the number, source, type (eg casual/contract) or payment of labour.

The aim of these restrictions is to ensure that parties do not negotiate or implement arrangements that restrict the efficient performance of work or improvements in productivity.

Key Action Points for Contractors

If you are a contractor or a related entity of a contractor who wants to be considered for public sector work, you should consider taking the following action:

  • Audit existing enterprise agreements for compliance with the Code and Guidelines to identify any potential areas of concern.
  • Negotiate future enterprise agreements with a view to ensuring compliance with the Code and Guidelines.
  • Prepare a WRMP as part of your tender and seek legal advice and assistance if needed.
  • Ensure that you impose obligations on all of your hired contractors, related entities and consultants to be compliant with the Code and Guidelines.