New laws took effect on 1 January 2013 requiring automatic fire sprinklers to be installed in all residential Aged-Care facilities in NSW.  Estimates are that 55% of existing residential Aged-Care facilities will need to undertake sprinkler system installation works.

Existing facilities will need to install a sprinkler system within 18 months although there is scope for providers to apply for an extension until 31 December 2015.  Those taking on the operation of an existing facility will be subject to even tighter time frames. 

The financial and administrative commitment required to install a sprinkler system that complies with the ‘Fire Sprinkler Standard’ is substantial.  In making it happen, Aged-Care facility providers will be exposed to many common construction procurement issues that if mishandled can become major headaches. 

This note highlights four to bear in mind;

A clear written Contract

It is imperative that the fire sprinkler installation work is undertaken pursuant to a clear, concise and appropriately worded contract.  Given the complexity of the work, the degree of disturbance and the amount involved, the provider needs to have its rights and obligations set out in a coherently drafted contract.  Not doing so puts the provider at a significant disadvantage, should issues or dispute arise, which they probably will!  It plays into the contractors hands.

There is really no instance where it will be in the provider’s interest to proceed on the basis of a quote without clear terms and conditions attached.  For smaller jobs, a minor works contract might be appropriate, but for substantial works, say in excess of $250,000, a more comprehensive document is justified. 

The contract must address issues such as:

  • the management of disturbance of the residents;
  • how the contractor is to claim payment (ie is it a lump sum or by way of fixed rates);
  • what happens if the job is not as straightforward as the contractor assured you at its commencement (i.e. latent conditions)?  Who is responsible for the additional cost?
  • the date by which the Contractor must complete the works, and liquidated damages for late completion;
  • the rectification of defective works and, most importantly;
  • retention sum sufficient to secure the performance of defect rectification obligation and the contractor’s performance of the contract more generally;
  • the warranty or defects rectification period, that is the period during which the Contractor can be called back on site to rectify problems or defects in its works. 

This is by no means a complete list and advice should be taken before the contract is signed.

Specialist Work

The installation of fire sprinkler systems is considered to be ‘specialist work’ under the laws relating to building regulation in New South Wales.  There is a particular form of license that must be held by the contractor that carries out this type of work.  This licence will confirm that the contractor has the training and experience necessary to install a fire sprinkler system that meets the standard and can be relied upon in case of a fire.  The category of license is titled ‘Water, Plumbing, Fire-Sprinkler Systems’ and it relates to water plumbing involved in the Fire Sprinkler System installed beyond the sprinkler valve assembly.  A contractor that does not have the necessary license is not entitled to do that work and not entitled to enforce payment for its works.

Providers should check with whom they are contracting to ensure they are authorised.

Respond to payment claims quickly

These days most payment claims will be endorsed in such a manner that the Building and Construction Industry Security of Payment Act will apply.  This is a real trap for young players. 

Where the contractor serves a payment claim endorsed under that act the provider will only have 10 business days in which to take issue with it.  If the provider thinks that the contractor has claimed too much, does not think the contractor is entitled to make a claim, seeks to retain some of the progress claim for defects or otherwise disputes the claim, it must do so in the manner prescribed by the act within 10 business days.  If it does not do so, the whole of the amount claimed is payable. 

If the provider has an issue with the progress claim, it must provide the contractor with ‘payment schedule’ which complies with the Building and Construction Industry Security of Payment Act.

Failure to provide a payment schedule that complies with the act, within 10 business days makes the provider liable to pay the full amount of the claim.  In many case this will be much less than ideal.  There is nothing like withholding payment to focus a contractor’s attention upon a provider’s issues with the work, but not serving a valid payment schedule may forgo that opportunity. 

If you are not familiar with the operation of the Building and Construction Industry Security of Payment Act you need to take legal advice before or immediately upon a payment claim being provided (unless you have no issue with it at all).

Tender Process Contract

When the fire sprinkler works are likely to involve hundreds of thousands of dollars or more, greater attention needs to be paid to ensuring an orderly tender process.  Clear tender process documents often make the difference between an orderly tender and one which the provider would prefer to forget. 

The rules of that process should be set out in a clear invitation to tender which;

  • results in tenders that can be compared (ie apples with apples);
  • sets out details of how site inspections are to be conducted and addresses responsibility for claims for personal injury or property damage that occur during such inspections;
  • establishes a transparent procedure for answering enquiries from tenderers;
  • includes warranties as to the absence of any collusion;
  • eliminates doubts as to what completed tender documents are required to be submitted;
  • addresses the possibility of alternative tenders, ie more than one tender from a given tenderer;
  • eliminates the possibility of claims against the Provider for not strictly complying with its own tender process;