What will building contracts look like after Project Bank Accounts (PBAs) come into effect?

During a briefing to the Public Works and Utilities Committee reviewing the Building and Construction (Security of Payment) Bill 2017 (BIF Bill), Department officers were asked several questions that they had to take on notice and provide the committee with a written response.

In particular, one answer to a question caught my attention.

The question asked by the Committee was:

“With regard to mandatory and prohibited contracts clauses proposed in the Bill, insertion of section 67GA and 67B to theQueensland Building and Construction Commission Act 1991 (QBCC Act) — including mandatory and prohibited clauses into building contracts (which are not defined) while including fines for non-compliance leaves uncertainty. Could the department provide clarification on the type and wording of the proposed mandatory or prohibited clauses?”

The Response from the Department was:

  • Clause 276 provides for proposed new section 67GA prohibits a building contractor from entering into a building contract that does not include mandatory conditions prescribed by regulation.
  • Clause 276 also provides for proposed new section 67GB prohibits a building contractor from entering into a contract that includes a prohibited condition prescribed by regulation.
  • The proposed new powers to prescribe by regulation mandatory conditions and prohibited conditions for building contracts will create a fairer and more accountable industry.
  • The types of mandatory conditions intended to be prescribed by regulation include ‘best practice’ conditions contained in relevant Australian standards for contracts and conditions which will facilitate the implementation of PBAs
  • The types of prohibited conditions intended to be prescribed include certain unfair and unconscionable conditions in building contracts.
  • Including a power to address conditions such as this via a regulation provides the government with the flexibility to prescribe the technical detail in the regulation and to respond to rapid changes in Australian contract standards for the building and construction industry.

What this means

That answer sheds little light as to the specific contract conditions the government has in mind in this regard. However, we at Helix Legal expect that conditions like unreasonably short time bars, termination for convenience and recourse to security without notice would be the first raft of prohibited conditions.

If the implementation of PBA’s is conditional on the government having to produce regulations mandating and prohibiting contract provisions to “create a fairer and more accountable industry”, then it would appear that building contracts are about to be significantly changed and redefined by the government

If you would like any further information in regard to this or any other BIF Bill issue, please feel free to contact Michael Chesterman at michael@helix.legal or Earl Tan at earl@helix.legal.