The construction industry involves a wide array of client/vendor relationships. As an industry with a large number of overheads, it is also dependent on cash flow to achieve its goals.
This environment results in a number of disputes between parties, with many vendors claiming that clients have not paid them on time or to schedule for their work undertaken. This is well recognised by regulators which is why the Building and Construction Industry Security of Payment Act exists – to create ground rules for claims.
‘Claim’ here is used in the sense of a demand or request for something considered one’s due – payment for services or goods provided.
What is claims management in the construction sector?
The Australian building and construction sector is governed by the Building and Construction Industry Security of Payment Act. This act is designed to ensure that those who supply construction work or goods and services successfully receive due payments for their work, goods or services.
It protects contractors, subcontractors, suppliers of materials, plant and equipment, and the varied other service providers who may be involved such as architects, surveyors, and engineers, landscapers, and project managers.
The Building and Construction Industry Security of Payment Act may also allow for the claiming of progress payments even if the contract does not drill down into the requirement for progress payments. The Act relates not just to payments made at completion but for progress payments. The claimant may even be able to claim interest on overdue progress payments.
As noted, there are many relationships between clients and vendors in the construction sector. Sometimes a claim is made by the contractor against the client; other times by a subcontractor against the contractor; and other times again, by the suppliers of building materials to whoever purchased them.
How are claims determined?
The Act outlines the requirements by which claims must be delivered and served, with the party that has the claim made against them being known as the respondent. Once served, the respondent has a set period of days to respond and this may be regardless of what the contract stipulates, unless the contract stipulates less days than the required maximum.
They may pay the amount indicated on the claim or submit a payment schedule which outlines how they will pay the money that is owed over time. This payment schedule will outline a timetable of payments to pay off the debt. If the payment claim is not responded to or rejected, then the claimant has recourse to a few additional courses of action.
They may also be able to take action in court to recover the money that they believe is owed to them. However, because of the adjudication process, this can often be avoided.
They can work with Authorised Nominating Authorities to use the adjudication process to recover the money they are owed. These authorities are authorised to undertake certain actions, including receiving and reviewing adjudication applications from claimants, assisting during adjudication, and nominating adjudicators. Their role is to assist in the resolution of the payment claim.
It is the role of the Authorised Nominating Authority to appoint an independent adjudicator who meets certain requirements and standards, and who is suitably independent, including from the two parties involved, both claimant and respondent.
It is then over to the adjudicator to make their adjudication which can then be legally compelling if it is not respected by the respondent.
Where to find a claims management expert
If you are looking for a claims management expert in the construction and building sector, you may wish to consult Guardian PC. We can support you with the following services:
- Preparation and response to adjudication applications for Security of Payment Claims in all states of Australia and New Zealand.
- Measurement of contract works
- Variation entitlement and quantification
- Calculation and advice regarding contentious items such as disruption, loss of productivity, head office overheads, loss of profit, finance charges and interest
- Timing and content of notifications to head and subcontracts
- Advice and guidance on possible heads of claims
- Detailed evaluation and presentation of the claim document
- Negotiation advice in order to obtain settlement
- Advice on extension of time submissions and validity of deduction of liquidated and ascertained damages
- Advice on problems of payment, withholding certificates, set-off, contra charges and counter claims
We can also provide support with Security of Payment Act and adjudication, construction contract reviews, subcontractor disputes, construction and engineering business advisory, and virtual safety walks and diaries.
Contact our team on (02) 8316 7510 or info@guardianpc.com.au. For more information on our services, browse our website.
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