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This document provides an introduction and brief overview of Security of Payment legislation within the jurisdiction of the states of Queensland and New South Wales, Australia.
Adjudication? Security of Payment? BCIPA/BCISOPA? What is it?
- Security of Payment in Queensland involves an adjudication process which came into force in Queensland from October, 2004. The Queensland legislation derived from similar New South Wales legislation, which was originally tabled in 1999 and further amended in 2003.
- The process is encapsulated under the BCIPA legislation which stands for Building and Construction Industry Payments Act. Similar legislation exists in New South Wales, Victoria, Western Australia and the Northern Territory.
- The New South Wales security of payment process is defined within the Building and Construction Industry Security of Payment Act.
- This legislation allows participants involved in a construction payment dispute to have their dispute decided by a registered adjudicator as an alternative to lengthy and potentially expensive court process.
- It is a relatively inexpensive, fast and efficient method to have a dispute heard and decided.
Objectives of the Legislation
The relevant legislation in both Queensland and New South Wales have the following general objectives.
- To ensure that people can receive and recover progress payments for construction work or supply related goods and services under a construction contract.
- In relation to issues regarding payment-on-account throughout the construction industry, rapid adjudication enables interim resolution of such disputes.
Who does the Act apply to?
- Both BCIPA and BCISOPA apply to construction contracts for construction work or supply of related goods and services within their respective states. Queensland for BCIPA and New South Wales for BCISOPA. The contact may be written, oral, partly written and partly oral.
- Both Acts allow for the concept of an arrangement, which has wider connotations than a contract or agreement. Basically speaking, an “arrangement” encompasses transactions or relationships that are not legally enforceable agreements. An example arrangement may be similar to the following scenario – a principal forwarding payment to a subcontractor of a head contractor in order to keep a job going, despite having no formal agreement with the subcontractor. The subcontractor may be able to lodge payment claims on the principal that still come under the jurisdiction of the Act.
Meaning of ‘Construction Work’
Generally, ‘Construction Work’ applies to the following:
- Construction, renovation, repair, demolition of building or structure.
- Construction of infrastructure.
- Installation of fittings (electrical, air-conditioning, drainage, fire protection) to building or structure.
- Cleaning of building or structure.
- Preparatory work (excavating, foundations, landscaping etc).
- Painting of building or structure.
Expanded Definition of Construction Work
The precise meaning of “construction work” is defined in section 10 of the BCIPA and section 5 of the BCISOPA legislation as follows:
- The construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of buildings or structures, whether permanent or not, forming, or to form, part of land;
- The construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of any works forming, or to form, part of land, including walls, road works, power-lines, telecommunication apparatus, aircraft runways, docks and harbours, railways, inland waterways, pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for land drainage or coast protection;
- The installation in any building, structure or works of fittings forming, or to form, part of land, including heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply, fire protection, security and communications systems;
- The external or internal cleaning of buildings, structures and works, so far as it is carried out in the course of their construction, alteration, repair, restoration, maintenance or extension;
- Works of the nature of:
- Site clearance, earth-moving, excavation, tunnelling and boring.
- The laying of foundations.
- The erection, maintenance or dismantling of scaffolding.
- The prefabrication of components to form part of any building, structure or works, whether carried out on-site or off-site.
- Site restoration, landscaping and the provision of roadways and other access works.
- The painting or decoration of the internal or external surfaces of any building, structure or works.
- Carrying out the testing of soils and road making materials during the construction and maintenance of roads.
- Specifically for the Queensland Act: Construction work includes building work within the meaning of the Queensland Building Services Authority Act 1991
- However, the following are not included in the definition of construction work under the Act. For these purposes, they are therefore considered outside the Act’s jurisdiction: The drilling for, or extraction of, oil or natural gas;
- The extraction, whether by underground or surface working, of minerals, including tunnelling or boring, or construction underground works, for that purpose.
Furthermore, specifically in relation to the Queensland security of payment legislation, schedule 2 of BCIPA states in regard to meaning of to carry out of construction work. It means:
- Carry out construction work personally; or
- Directly or indirectly, cause construction work to be carried out; or
- Provide advisory, administrative, management or supervisory services for carrying out construction work.
Meaning ‘Supply of Related Goods and Services’
Similar to the definition of construction work, ‘Supply of Related Goods and Services’ applies to the following:
- Materials and components forming part of a building or structure.
- Plant or materials (sold or hired) for use in construction work.
- Labour hire.
- Consultant services (architects, design, surveying, soil testing, engineering, project management).
Expanded Definition of Related Goods and Services
Claimants who supply related goods and services under a construction contract are also covered by the BCIP and BCISOP Acts. Goods of the following kind are generally covered under this definition:
- Materials and components to form part of any building, structure or work arising from construction work.
- Plant or materials (whether supplied by sale, hire or otherwise) for use in connection with the carrying out of construction work.
Services of the following types are generally included in the definition:
- The provision of labour to carry out construction work.
- Architectural, design, surveying or quantity surveying services related to construction work.
- Building, engineering, interior or exterior decoration or landscape advisory services relating to construction work.
- Soil testing services relating to construction work.
Types of Contracts affected by the Act
Typically, contracts affected by the Act may include the following:
- Contractors against principals/developers
- Subcontractors against contractors
- Suppliers against subcontractors/contractors
- Plant and equipment hirers against subcontractors/contractors
- Consultants against clients
Excluded Contracts
The following types of contractual agreements are excluded:
Queensland / BCIPA
- Work outside Queensland.
- A claim for work or services which are the subject of a subcontractor’s charge under the Subcontractor’s Charges Act 1974.
- A contract which forms part of a loan agreement, guarantee or contract of insurance.
- Domestic building contracts where the owner is a resident owner. That is, the owner intends to reside in the building. However, in this situation, the Act may be applicable to subcontracts. Also, the Act is applicable to Owner Builders and those that possess an Owner Builder license, or should possess an Owner Builder license.
- A contract where the amount to be paid is not calculated based on the value of work done.
New South Wales / BCISOPA
- Work outside New South Wales.
- A contract which forms part of a loan agreement, guarantee or contract of insurance.
- A construction contract for carrying out residential building work (within the meaning of the Home Building Act 1989) on such part of any premises as the party for whom the work is carried out resides in or proposes to reside in.
- Domestic building contracts where the owner is a resident owner. That is, the owner intends to reside in the building. However, in this situation, the Act may be applicable to subcontracts. Also, the Act is applicable to Owner Builders and those that possess an Owner Builder license, or should possess an Owner Builder license.
- A contract where the amount to be paid is not calculated based on the value of work done.
Security of Payment Glossary
- A claimant is an entity, who is, or who claims to be, entitled to a progress payment.Generally speaking, in the event of a dispute over a progress payment, a claimant may be allowed to lodge an adjudication application to an Authorised Nominating Authority (see below) that, in turn, appoints an adjudicator who decides the dispute.For more information on Claimants please visit the relevant section of the knowledge base by clicking here.
- A respondent is an entity, who is, or may be, liable to make payment to a claimant. For more information on Respondents please visit the relevant section of the knowledge base by clicking here.
- An adjudicator is a person who has authority to decide an adjudication application. Both the BCIP and BCISOP Act outlines the powers adjudicators have to decide an adjudication application.
- Another function of an ANA is to issue an adjudication certificate, a formal statement of the adjudicator’s decision, upon request from a claimant. These certificates are equivalent to converting an adjudicator’s decision into a judgment which can be enforced by the appropriate court.The RICS DRS is a registered ANA in Queensland and New South Wales.
- The adjudication registrar is the administrative body in Queensland responsible for managing the administrative affairs of the adjudication registry. The registrar is part of the Building and Construction Industry Payments Agency (http://www.bcipa.qld.gov.au).The responsibilities of the registrar include:
- Registering and maintaining the details of all Authorised Nominating Authorities and adjudicators
- Recording and publishing adjudication decisions
- Collecting statistical data
Need more help?
Throughout the year, the RICS DRS run regular training courses for potential claimants, respondents and other interested parties.
These give detailed information on how the security of payment, the BCIP Act and the BCISOP Act operates and how it can be utilised effectively. Visit our training schedule for more information by clicking here.
Furthermore, the RICS DRS provides a number of publications which provide more detail on specific details of the Building and Construction Industry Payments Act. For information on these publications please click here
Alternatively, you can contact us directly.
