The NSW Government has announced that the Building and Construction Industry Security of Payment Amendment Act 2013 (NSW) (the Act) will take effect on 21 April 2014.
Except for certain residential contracts which are excluded from the operation of the Act, the introduced changes to the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA) will apply to all construction contracts entered into after Easter Sunday.
The changes include:
- The removal of the requirement to include a statutory ‘endorsement’ referring to the SOPA. This means that all progress claims will be capable of being payment claims under the SOPA.
- New maximum payment cycle terms for principals and head contractors.
- Head Contractors will be required to include a ‘supporting statement’ confirming payments to subcontractors.
- New ‘cash-flow-cops’ with powers to investigate compliance.
The form of the ‘supporting statement’ is still to be promulgated.
Gadens predicts that the changes will result in an increase in litigation as stakeholders in the industry test the boundaries of the new laws. It will be interesting to see how courts reconcile earlier lines of authority (in particular, the requirement that only one payment claim may be served per reference date) with the new system where any progress claim may be capable of being a payment claim without having to announce itself as one.
It is essential that principals and head contractors implement contract administration practices to respond to all progress claims within the 10 business day timeframe. The new prompt payment cycle requirements are also likely cause headaches for accounts departments unless companies take steps now to implement new internal procedures.
For those businesses that are currently negotiating a contract for a new project you might have the luxury of being able to dictate whether the new laws will apply to the project by choosing whether to execute the contract before or after Easter Sunday.