Code compliance is now critical for contractors and sub-contractors carrying out building work on Commonwealth funded projects and for non Commonwealth entities which receive Commonwealth project funding (eg universities, State Governments and State Owned Corporations). Code compliance obligations extend beyond Commonwealth funded projects and the Code's impact will consequently be felt throughout the construction sector.

When the Federal Government re-established the Australian Building and Construction Commission (ABCC) in December 2016, the Minister for Employment issued a new code of practice to directly regulate building work funded by the Commonwealth and to indirectly improve the industrial relations climate on construction sites across the industry. Six months later, it was reported in Senate Estimates on 30 May 2017 that there are currently 97 expressions of interest or tender processes to which the Code for the Tendering and Performance of Building Work 2016 (the Code) is likely to apply.

One contractor has already been prevented from tendering for Commonwealth building work for three months due to Code violations. Failure to comply with the Code may see contractors and their related entities issued with an exclusion sanction by the Minister on the ABCC's recommendation, banning them from submitting expressions of interest or tenders for or being awarded Commonwealth funded building work for up to 12 months. The ABCC Commissioner confirmed during Senate Estimates last month that three contractors have already been issued with show cause notices over suspected Code breaches in recent weeks, including one allegation relating to security of payment. Two of those entities were described as Tier 1 contractors.

This recent enforcement activity is a warning that Code violations will be treated seriously. Construction contractors which wish to, or have already, bid for Commonwealth funded projects should urgently review their contracts, industrial relations agreements and dispute resolution policies to ensure they are Code compliant.

This Alert is essential reading for anyone who is involved in or keen to tender for Commonwealth funded construction work, including contractors, building industry participants, Commonwealth agencies and State or Territory government entities. This Alert will take you approximately four minutes to read in full.

What is the Code?

The Code is a legislative instrument created under section 34 of the Building and Construction Industry (Improving Productivity) Act 2016 (Cth). The Code has applied to all new tenders and expressions of interest for Commonwealth funded building work since 2 December 2016. Transitional provisions apply for expressions of interest and tenders entered into under the previous Building Code 2013. The meaning of "Building work" is defined by schedule 1 of the Code.

Once a contractor or building industry participant tenders for Commonwealth funded building work, it automatically becomes a "Code Covered Entity". From then on, it must comply with the Code on all building work undertaken, including unrelated projects that are privately funded. A Code Covered Entity's related entities also become subject to the Code at the same time. A contractor or building industry participant cannot be awarded Commonwealth funded building work unless it complies with the Code.

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