Construction Law and Common Practices in Australia

This report explains the relevant laws and common practices in Australia for construction projects. It advises on practical and legal risks arising from the tender process, performance security, insurance, variations, liquidated damages and defects. The report also highlights the importance of the National Construction Code (NCC) and the need for insurance to protect against mishaps and mistakes during construction.

QUESTION 1
Contractor claiming three days for inclement weather
Delay in the construction work can be costly as well as frustrating. The longer it takes to
complete the project, the more it costs along with the wastage of essential resources. Delays
can sometime may result in purchase of additional materials which may be subjected to the
constructional work. Generally contractors want to complete their work on time but
sometimes they are inevitable due to certain conditions.
Here is one such case in which a contractor is demanding an extension for three days claiming
for inclement weather. Change in weather depends on the season and the location of the
construction site. The seasons can bring rain followed by scorching heat of summer. Winters
bring cooler temperatures along with snow and ice. These conditions are harmful for the
machineries as well as the materials and can have potential hazard to the workers working on
the site1. During rainy seasons it is very difficult to carry out outdoor works as rain makes it
difficult. It has been found that many contractors requesting additional time and money to be
allocated to them due to rainy or wet conditions. Rainy seasons can also cause potential
hazards to the workers working outside as continuous exposure to rain can cause myriad
problems to them. Driving to the site with mud can also be dangerous for the driver carrying
materials to the construction site2. As the rainy reason can have potential hazard to the
materials as well as to the workers, the summer season has also its own set of hazards.
Extreme hot and humid conditions can put the workers on risk of getting heat stroke. Many
workers try to relief them by removing their safety provisions like glasses, gloves and hats.
By doing this they get themselves more into the risk of getting heat stroke. Cold weather can
also negatively impact the construction site. Equipment’s needs to be lubricated by special
1 Xiang, Jianjun, Peng Bi, Dino Pisaniello, Alana Hansen, and Thomas Sullivan. "Association between
high temperature and work-related injuries in Adelaide, South Australia, 2001–2010."
2 Xiang, Jianjun, Peng Bi, Dino Pisaniello, and Alana Hansen. "The impact of heatwaves on workers׳
health and safety in Adelaide, South Australia."

oils to withstand low temperatures. Paints as well as water can freeze which makes curing
process slower. Mortars as well as grouts are also affected by cold weather.
After seeing all the above parameters it has been found that the weather has affected the
critical path of the contractor’s construction program which has been found accurate. As the
change in weather is not dependent on the contractor so the claim for extension for three days
will be granted to him.
Contractor claiming four days of industrial action
Strike by the workers can also cause substantial delays to the construction work which can
result in increased project cost for the owners and the contractors. As majority of the
construction works are needed to be completed on time, strikes can cause owners, contractors,
subcontractors and suppliers to miss contractual deadlines. The contractor could have
resolved the strike by mitigating the labor dispute before it erupted into a big strike. The
contractor should have established an efficient, straightforward and cooperative management
relationship with the workers3. During investigation it has also been found that the contractor
employed some unskilled workers in place of skilled ones. The skilled workers demanded
higher wages which the contractor refused to pay to them and the skilled workers were not
ready to work at lower wages that is provided by the contractor. Finally the unskilled workers
were unable to finish the job on time as they have no experience about the job and have
substantially lower output than the skilled ones. Due to this the contractor refused to pay them
their full wages. These are some of the major causes of the strike that has been discovered
during the investigation.
In case of a potential deferral because of a strike, it is the responsibility of the contractor to
inform all other relevant parties before time.
3 Dinakar, Aditi. "Delay analysis in construction project." International Journal of Emerging Technology
and Advanced Engineering 4.

Strike by the labors are lawful protests rather than unfair practices. The strike can have many
reasons which may include protest for bonus increase, wage increase, diverse benefit
programs and provision of different colored hard hats4. The strike has been organized by the
workers rather than the owner. If the strike was caused by the owner the contractor can claim
for time extension as well as time related compensations. As the strike happened due to
provisions and benefits that are not provided by the contractor to the workers the claim for
four day industrial action will not be granted to the contractor and the contractor will be
penalized for the delay in the construction work.
Contractor claiming sixty days for a substantial variation
Variations in the scope of work can cause substantial delays in the construction project. After
investigation it has been found that the variations are on the design errors. A design error
basically means that there is wrong and insufficient information that has been provided to the
contractor. The wrong information led to improper application of the techniques to achieve
the desired results5. As the design errors are discovered during the actual execution phase of
the project and the attempt to correct it will lead to delay in the project delivery time along
with cost overruns. Design errors can lead to cost overruns as the estimations that were
presented earlier were based on the designs that were produced earlier. So the errors in design
in the form of omission will mean that extra work is needed to be done which means that the
estimation will include project cost along with the omission costs thereby resulting cost
overruns and delays. The errors in the design has led to additional work along with revising
the scope of the work. All these faults are out of the radar to the contractor, so the contractors
cannot be held responsible for it.
4 Bailey, Janis, and David Peetz. "Australian unions and collective bargaining in 2013." Journal of
Industrial Relations56, no. 3 (2014)
5 . Sears, Construction project management. John Wiley & Sons, 2015.

After proper and thorough investigation it has been found that the claim for sixty days for a
substantial variation by the contractor is valid as it is not in the hands of the contractor. It has
also been found that the variation affected the critical path of the contractor’s construction
program which was totally not in the hands of the contractor and the contractor can do
nothing about it. So the contractor will be entitled to proper benefits and compensations as per
the rules and regulations.
QUESTION 2
Report should explain the relevant laws and common practices in Australia. Advising
principle on areas such as practical and legal risks arising from the tender process,
performance security, insurance, variations, liquidated damages and defects.
Laws and common practices in Australia
Every country as well as every state inside a country has their own set of construction laws
and practices and so even Australia has. The group of laws that applies to any existing or
future building project is called construction law. Whether there is a plan to build office,
residence, shopping malls or whatever it is, it is important to be aware of the laws and
regulations that specifically applies to any kind of construction in Australia. The National
Construction Code (NCC) is a code which is issued by the Australian Building Codes Board
(ABCB)6. The national construction code has diagramed the base prerequisites for the outline
and construction of new buildings. The national construction code has also emphasized on the
safety, health and sustainability of the designed buildings. NCC has three volumes. Volume 1
and Volume 2 contains Building Code of Australia (BCA) and volume 3 contains Plumbing
6 Thomas, Reginald William, and Mark Wright. Construction contract claims. Palgrave Macmillan, 2016.

Code of Australia (PCA) in it. The latest NCC version which is used today is the NCC 2016.
Each and every state and territory in Australia have adopted the new NCC 20167. Even after
the NCC each and every state and territory has their own set of rule and regulation in place
which directs the construction industry. These law and regulations mainly cover areas such as
registration, licensing, insurance and so on. For example Victoria has Building and
Construction Industry Security of Payment Act 2002, Western Australia has Construction
Industry Act 2004, and New South Wales has Building and Construction Industry Security of
Payment Act 1999 and the Contractors Debts Act 19978. Similarly many other states and
territories are there in Australia which has these kinds of rules and regulations to control the
construction industry and making sure that all sets of construction work are done following
the rules and regulations set by the governing body.
Practical and legal risks that can arise during tendering process
Tendering process is one of the most important activities in construction industry. In order to
find who is going to finally execute the project, competitive tendering is done with detailed
assessment of the bidders like their experience, past scale of projects and all. As the given
project is of very large scale with a budget allocation of around AU$50 million, it is very
important to find a suitable contractor having vast experience to execute projects of this scale.
But unluckily there is no contractor who can work on the project of this nature9. As this
project wants to establish a reputation in Australia, it is very important to source a capable
contractor from outside of Australia. Other risks that can arise during tendering process can
7 Bailey, Julian. Construction Law. Crc Press, 2014.
8 Udawatta, Nilupa, Jian Zuo, Keri Chiveralls, and George Zillante. "Attitudinal and behavioural approaches to
improving waste management on construction projects in Australia: benefits and limitations."
9 Hackett, Mark. The aqua group guide to procurement, tendering and contract administration. John Wiley &
Sons, 2016.

be selecting wrong and incapable contractor, design risks, contract risks, potential conflicts
that can arise afterwards and many more.
Risk arising from performance security
As the project is a high valued and reputed project of Australia, so it is very important to
maintain the performance of the structure. In order to maintain the performance of the
structure it is very important that the contractor use proper material and employs skilled
workers so that every work can be finished on time and the structure gains its desired look
and strength. In order to secure all these aspects it is important to have performance bonds.
These bonds are the guarantees of performance of the third party from which the contractor
will be sourcing the materials and labors. Any proof of breach can be treated as crime and the
responsible body can be penalized under the laws or under the agreements signed during
tendering process.
Advice on insurance
Mishaps and mistakes during construction are general and can happen at any certain moment.
Owners should save themselves by having insurance of the ongoing project. Insurance
providers are the third party company which protects individuals and firms from risks.
Insurances can be done on materials, collateral damages as well as on the whole structure. It
would be better to have insurance of the complete building, as this will save the complete
structure from the advent of any mishaps. Time delays can also ruin the construction process
by draining unnecessarily useful resources10. Having an insurance will protect cost overruns
that has been faced due to the missed deadline. Damage to the building work, machines, tools,
plants should also be covered under insurance to be at a safe side in advent of a mishap.
10 Liu, Tingting, Yan Wang, and Suzanne Wilkinson. "Identifying critical factors affecting the effectiveness and
efficiency of tendering processes in Public–Private Partnerships (PPPs): a comparative analysis of Australia and
China."

Risks due to variations
Variations in constructional project can completely make the project off tracked. Variation is
the alteration to the scope of work or omission of the original scope of work. Alteration can
be in the design, can be in the quality, and can be in quantity, working condition as well as to
the sequence of work. In order to get rid of this kind of situations it is very important to award
the contract to an organization which as vast experience in handling project of this scale. As
the organization with experience will be having a vast set of experienced workforce along
with necessary equipment and machineries to handle project of this scale. There is less chance
of variation in the scope of work if an organization having vast experience handles such
projects.
Risks due to liquidated damages
Failing to complete the work on time can lead to liquidated damages. Reduce in liquidated
damage can be averted to a certain amount by awarding the contract to an experienced
organization. It is important at the time of signing contract to mention that losses suffered due
to the delay in the completion of the constructional activities have to be bared by the
organization tasked with the execution of the project11. There should be special clauses related
to the liquidated damages in the agreements.
Risks due to defects
Defect can arise during the execution of the project, but it is important to have that defect in
permissible limits. The job of executing the project should be given to an experienced
institution to reduce the amount of defects as they have substantial amount of experience with
them. Offering the job to an unexperienced organization may not able to bring the amount of
11 Marsh, Peter. Contracting for engineering and construction projects. Routledge, 2017.

defects under permissible limits which can afterwards create risk to the beauty as well as to
the strength of the structure. Defects can range from design till the completion of the project.
Defects in designs can reduce the strength of the structure after a certain period of time. Other
defects such as electrical defects, plumbing defects, insulation defects, and door and window
defects, improper drainage can cause unnecessary problems to the people as well as creating a
bad impression of the structure which ultimately can harm the purpose of establishing its
reputation of the building12.
12 Hughes, Will, Ronan Champion, and John Murdoch. Construction contracts: law and management.
Routledge, 2015.

References
1. Xiang, Jianjun, Peng Bi, Dino Pisaniello, Alana Hansen, and Thomas Sullivan. "Association
between high temperature and work-related injuries in Adelaide, South Australia, 2001–
2010." Occup Environ Med 71, no. 4 (2014): 246-252.
2. Xiang, Jianjun, Peng Bi, Dino Pisaniello, and Alana Hansen. "The impact of heatwaves on
workers׳ health and safety in Adelaide, South Australia." Environmental research 133 (2014):
90-95.
3. Dinakar, Aditi. "Delay analysis in construction project." International Journal of Emerging
Technology and Advanced Engineering 4, no. 5 (2014): 784-788.
4. Bailey, Janis, and David Peetz. "Australian unions and collective bargaining in 2013." Journal
of Industrial Relations56, no. 3 (2014): 415-432.
5. Sears, S. Keoki, Glenn A. Sears, Richard H. Clough, Jerald L. Rounds, and Robert O.
Segner. Construction project management. John Wiley & Sons, 2015.
6. Thomas, Reginald William, and Mark Wright. Construction contract claims. Palgrave
Macmillan, 2016.
7. Bailey, Julian. Construction Law. Crc Press, 2014.
8. Udawatta, Nilupa, Jian Zuo, Keri Chiveralls, and George Zillante. "Attitudinal and behavioural
approaches to improving waste management on construction projects in Australia: benefits
and limitations." International Journal of Construction Management 15, no. 2 (2015): 137-147.
9. Hackett, Mark. The aqua group guide to procurement, tendering and contract administration.
John Wiley & Sons, 2016.
10. Liu, Tingting, Yan Wang, and Suzanne Wilkinson. "Identifying critical factors affecting the
effectiveness and efficiency of tendering processes in Public–Private Partnerships (PPPs): a
comparative analysis of Australia and China." International Journal of Project Management 34,
no. 4 (2016): 701-716.
11. Marsh, Peter. Contracting for engineering and construction projects. Routledge, 2017.
12. Hughes, Will, Ronan Champion, and John Murdoch. Construction contracts: law and
management. Routledge, 2015.