BREAKING NEWS: RELEASE OF NSW GOVERNMENT GUIDELINES FOR “CLOSURE OF CONSTRUCTION SITES” ON 20 JULY 2021
By David Glinatsis and Matthew Singh
On Tuesday afternoon 20 July 2021, the NSW Government released Guidelines to support NSW Government Agencies with resolving the impacts of the “Closure of Construction Sites” on NSW Government projects from 19 July 2021 to 30 July 2021 under the current Public Health Order (Guidelines).¹
The Guidelines can be accessed on the Infrastructure NSW website.²
Underpinning the Guidelines are the Government’s objectives to reopen construction sites safely after the “Closure of Construction Sites” ends on 30 July 2021 and to ensure cashflow confidence and certainty of payment for contractors, subcontractors, suppliers and employees during and arising from the closure.
These objectives are incorporated in the guiding principles for negotiation.
The Guidelines contain key principles that deal with:
a) the key objectives for Contractors and agencies which include to ensure recommencement of works by 31 July 2021; the expectation to have fully developed operating plans and training to avoid losses and also to ensure supply chain stability and solvency and public confidence that payments to the industry are valid, related to costs and verifiable;
b) the expected behaviours of parties which require a collaborative approach, transparent and open book dealings, a fair, reasonable and appropriate approach to claims with escalation recourse to the Agency as well as to Infrastructure NSW and NSW Treasury if clients, contractors, subcontractors and suppliers have not agreed on an approach that meets the principles;
c) the need for contractors to mitigate impacts on cost and time in a manner consistent with the objectives and based on the assumption that construction work will be permitted to recommence on 31 July 2021;
d) the assessing and paying of claims with NSW Government clients to consider claims based on reasonable and necessary costs that reflect the implementation of the Public Health Order and which is to be supported by open book practices by contractors, subcontractors and suppliers to verify those costs (with the same approach being applied for an extension of time claims);
e) Cash flows noting that the Security of Payment Act applies during the closure of construction sites and opportunities should be implemented to accelerate cash flows, including advance payment on account by clients with prepayments being offset against future claims;
f) Terms for contractual relief:
- to flow through entire supply chain
- liquidated damages affected by closure of construction sites to be dealt with through extension of time provisions and any settlement of claims
- head contractors to pass these terms of relief to sub-contractors and suppliers
- agencies to issue a contractual notice to waive notices of delay and intention to claim under this event to encourage “without prejudice” discussions regarding next steps
- the period for claims under this event is the lesser of 12 months or completion from 19 July 2021
WHAT ABOUT NON-NSW GOVERNMENT PROJECTS?
The Guidelines do not apply to private clients.
To address the impact of time and cost as a result of Closure of Construction Sites for non-NSW Government projects; private clients will still need to take steps under their contract to:
a) issue upstream delay notices, EOT claims and delay cost claims (if permitted the contract) and potentially variation claims; and
b) properly respond and address claims for costs and time from downstream contractors and suppliers.
Although the Guidelines have no application to private clients; the Guidelines may assist parties on non-NSW Government Projects regarding how to negotiate fair and reasonable settlements for cost and time related claims based upon the closure and on a collaborative and open book basis.
Although the Guidelines do not replace contractual obligations of the parties, the requirement for Agencies to issue waiver notices under the contract should provide some comfort to contractors, subcontractors and suppliers for collaborative solutions of claims for additional costs and time that arise from the Closure of Construction Sites.
Importantly, there may potentially be an extended period for contractors, subcontractors and suppliers to make those claims, presumably because the impact of the Closure of Construction Sites will not be known until some time after, as certain projects may require works to be accelerated.
However, contractors should seek advice in relation to how the Guidelines impact upon their existing contractual obligations to give notices regarding cost and time related claims.
These Guidelines appear only to cover NSW Government Agencies and do not extend presently to State Owned Corporations or Local or Federal Government.
Please contact us on (02) 8239 6500 or at firstname.lastname@example.org if you have any queries or need any assistance regarding, the Guidelines or how the Guidelines may impact your contractual rights and obligations given the Public Health Order.
This communication is sent by Kreisson Legal Pty Limited (ACN 113 986 824). This communication has been prepared for the general information of clients and professional associates of Kreisson Legal. You should not rely on the contents. It is not legal advice and should not be regarded as a substitute for legal advice. The contents may contain copyright.