Tools down – What happens to construction projects during the holiday period?
With the festive season upon us, members of the construction industry are looking forward to – and preparing for – a well-deserved break. For most projects, late December and early January means ‘tools down’ for an extended period (Shutdown Period), as many of us enjoy the festive season. So, what happens to the project during the Shutdown Period? In this article, we set out some of the key considerations for projects during the festive season.
One of the largest headaches for principals, superintendents and contractors alike when planning for, or retrospectively accounting for, the Shutdown Period is the counting of days. You will need to count days for a variety of reasons including, among other things:
- arranging works to be completed in accordance with the program;
- arranging subcontractors and suitable personnel for works as well as securing the site;
- submitting payment claims and invoices, and schedules in response; and
- extension requests and calculating delays.
If you’re drafting a contract for a project that will run over the festive season you should ensure that you account for the Shutdown Period, as well as any extra time it may take to secure the site before, and re-open the site after, the Shutdown Period.
Below, we outline some of the different legislative requirements, as well as common contractual arrangements, to be conscious of when preparing for the Shutdown Period.
Security of Payment
The festive season has historically been a time when parties have been ‘ambushed’ by statutory payment claims, or applications for adjudication under the Security of Payment legislation that exists in each State or Territory in Australia. A party may miss a due date to respond because of an office or site closure. Key personnel may be away and systems may fail with respect to responding to claims. This is a problem when the due dates for responding under the Security of Payment regime are strict and inflexible. Parties served in the lead-up to the Shutdown Period should carefully review the due dates to respond to any correspondence, notices, invoices or progress claims.
Some jurisdictions have periods of time, known as ‘blackout’ periods, which are excluded for the purposes of calculating the due date to respond. However, as the following table summarises, these periods differ between the States and Territories:
|State or Territory||Blackout period||Period of time to provide a payment schedule|
|QLD||22 December 2021 to 10 January 2022||The shorter of the period prescribed by the construction contract or 15 business days after receipt of the payment claim.|
|SA||25 December 2021 to 3 January 2022|
|NSW||25 December 2021 to 3 January 2022||The shorter of the period prescribed by the construction contract or 10 business days after receipt of the payment claim.|
|VIC||A Saturday, Sunday, or public holiday in Victoria.|
|ACT||25 December 2021 to 3 January 2022|
|TAS||25 December 2021 to 3 January 2022||Before the end of the period in which payment is to be made under the construction contract or 10 business days after receipt of the payment claim, whichever period expires earlier.|
|NT||25 December 2021 to 9 January 2022||A notice of dispute is due within the time required by the contract or 10 working days of receiving a payment claim, if no time is stated in the contract.|
Under the Western Australia Construction Contracts Act 2004 (WA), ‘Business Day’ is a defined term that means a day other than a Saturday, Sunday, or public holiday, or a day in the period beginning on 25 December in a year and ending on 7 January in the following year. The Western Australian Act contains time limitations that exclude days that are not a Business Day for the service of certain documents, for instance making an adjudication application. However, in the absence of a time period stated in a contract, a notice of dispute in response to a payment claim is due within 14 days, which is not subject to extension based on the number of non-Business Days falling within the period for service of a notice. Parties operating in Western Australia will need to be mindful of this if their contract does not contain a time period for responding to claims.
Separate timeframes apply for responding to applications for adjudication. Failing to respond to either payment claims or applications for adjudication, can have significant consequences for a respondent. In some jurisdictions, the consequence of missing the due date for serving a payment schedule could mean that a party is liable to pay the whole of the payment claim as a statutory debt (which is enforceable in the Courts). By failing to comply with the due date for serving an adjudication response, a respondent is not able to present submissions in support of a payment schedule before an appointed adjudicator.
Risks are more acute in Queensland, as a valid statutory payment claim does not need to be endorsed as a payment claim under the relevant legislation. This means that a document that does not expressly state that it is made under the Act – but nevertheless meets the statutory requirements of constituting a payment claim – may still give rise to a statutory debt if no payment schedule is served.
It is equally important for contractors to be aware of the relevant statutory timeframes so as to avoid losing the opportunity to apply for adjudication or other relief. Given the effective extension of the statutory time periods over the Shutdown Period, it may also be useful to consider how this may provide strategic benefit, or increased risk, in regards to your relevant obligations.
Steps to minimise risk
In light of these risks, steps your team can put in place to minimise the risk of missing a statutory Security of Payment due date include:
(a) monitoring email inboxes, service of notices on registered offices, site offices, addresses for service of notices under the contract, fax machines (if applicable), and online document portals in the lead-up to the Shutdown Period;
(b) ensuring the responsibility for responding to contractual notices and Security of Payment claims or adjudications are allocated to an individual over the Shutdown Period (so they can be actioned accordingly);
(c) calculating the due dates for payment schedules or adjudication responses, acknowledging the due date for payment of any amount that is payable and when calculating dates, taking into account the ‘blackout’ period in your State or Territory; and
(d) having systems in place to monitor whether a payment claim or application for adjudication is served early in the New Year, particularly if key project personnel will still be on leave.
End of year invoices
Another important point to consider is when progress claims can be made and are required to be paid contractually. While the security of payment legislation dictates some of the payment requirements, it should also be read in conjunction with the contract (with the legislation taking precedence in most circumstances).
Regarding the timing for submission, many contracts use language similar to ’on the last day of every month the contractor will submit a payment claim’. Without further qualification, these clauses can be problematic over the Shutdown Period. Where this date falls during the Shutdown Period, it will be a matter of contractual interpretation as to when the payment claim may be made. This will involve considering:
(a) whether the time for payment refers to days or defined ‘business days’ (e.g. ten Business Days from the end of the month). Note that the contractual definition of ‘business days’ would apply here rather than the definition in the Security of Payment legislation;
(b) if ‘business days’ is used, whether the definition excludes public holidays or the Shutdown Period; and
(c) if ‘days’ is used, whether there is a term in the contract which provides that if something is required to be completed on a day that is not a ‘business day’, it must be completed on the next ‘business day’.
As an example, the unamended AS 2124-1992 includes a placeholder in Annexure Part A, to set out the time for issuing payment claims. Notably, the unamended AS 2124-1992 does not utilise the concept of ‘business days’ and, as such, the notice period and other ‘clocks’ in the contract (including timing for payment and for making claims), will continue to run during the Shutdown Period.
From this perspective, it is important that the contract is read (and drafted) carefully to ensure all timeframes are fully understood.
Contractual shutdown periods
Care of works
Another important consideration is security, and care of the works, during any Shutdown Period when individuals may not be regularly accessing the site. Each contract should be reviewed ahead of the Shutdown Period to confirm which party is responsible for the care of the works (noting that in the AS 2124-1992 this risk sits with the contractor). Given the risks which may materialise where a site is not properly secured, it is important that the parties are clear as to who should be making the appropriate arrangements.
Inclement weather and other natural disasters are a part of life in Australia, particularly in summer (including with the recent formation of La Nina). Accordingly, preparation for the Shutdown Period should also include appropriate efforts to secure the site against significant weather events. Doing so may minimise future insurance claims, costs and delays, and reduce the chance of your site being the cause of damage to surrounding areas.
You can read more about site access and planning and environment considerations in our Renewable Energy Projects Development Guide.
Extensions of time
Generally, contractors are expected to account for the Shutdown Period in their program.
While a contract may allow for claims due to ‘a delay which is not reasonably foreseeable and is beyond the reasonable control of the contractor’ (or uses words to that effect), it is unlikely the Shutdown Period itself would fall into this category as the Shutdown Period comes around once a year, every year, at the same time. In saying this, if previous claimable delays push work into the Shutdown Period, the contract may permit the Shutdown Period to be taken into account for the purposes of determining the contractor’s entitlement to an extension of time.
Supply chain delays
Due to COVID-19, contractors and principals alike, are navigating a materials and skills shortage which is having significant time and cost impacts on the construction industry. Over the Shutdown Period, these impacts can be exacerbated as supply chain activity is temporarily wound back.
As part of your Shutdown Period checklist, you should ensure that you understand how your labour and supply arrangements may be impacted, that you have planned adequately, and have appropriate arrangements in place to deal with this.
You can read more about COVID-19’s impact on project delivery in our Emerging Issues for the Australian energy and resources industry. To hear more on the latest legal developments, risk allocation considerations and other industry insights, register for the Annual McCullough Robertson Construction Law Conference to be held on 18 February 2022 here.
Thank you also to Ben Quick for his assistance with putting this article together.
This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.