CPD Security of Payment 2012-13 – ENTITLEMENT – Part 3 The QBSA Act

ENTITLEMENT – Part 3 The QBSA Act

Most contractors think of the QBSA Act as the licencing rules for contractors and subcontractors, complete with penalties for poor performance.

However, the QBSA Act protects contractors in a number of ways, including your rights to payment. All the important contractual protections of the QBSA (part 4A) are included in the Payment’s Act. However, it is a double edged sword, because it can be used against you if you do not meet your obligations.

It is important to know that the Payment’s Act will not protect your payment if you are not properly licenced for the work. If you are not licenced you will not be entitled to be paid for your own work or your margin. it is a very serious penalty.

The key payment protections are:

67I – Directions given under building contracts

If you give a direction orally you MUST confirm it in writing within 3 business days. Furthermore a subcontractor can refuse to do the work until it has a written instruction. I encourage all contractors to ensure that they record instructions, initially in a notebook or a recorder, followed up with confirmation in writing. This is especially important if you are on the receiving end, since you must be able to prove your entitlement to extras that result from directions on the job. It’s simple, but it’s not easy, because you have to do it.

67J – Set-offs under building contracts,

A client or head contractor may reduce an amount payable, BUT there are strict notice requirements and time frames before you are entitled to do it. If you do not comply with this clause, you run a very serious risk of losing your rights for deducting money for defects. A contractor or subcontractor can defend a defects claim if you do not give notices properly under this clause.

67K-M – Limits of retention amounts

These clauses strictly control amounts that can be retained for retentions and securities and how and when it is to be released.

67P – Late progress payments

The penalty for late progress payments is severe. Creditors are entitled to interest on late payments at the RBA 90 day bank bill rate PLUS 10%. It is a penalty that is substantially more than bank interest. In order to get interest on late payment, creditors must claim it. It should always be claimed in the next payment claim after the late paid claim, no matter how small. It is much better to forgive an interest bill later (if you want to) than to attempt to win it in an adjudication or litigation. It also lets your client know that you are serious and if you do decide to forgive an interest bill, it will help build, rather then destroy, a business relationship.

67Q Pay when paid clauses

Pay when paid clauses are outlawed by the QBSA Act and the BCIPA (Payment’s Act). Don’t even think about it.

67U,W – Implied conditions for prompt payment (payment terms).

This clause establishes that a contractor is entitled to make a payment claim monthly. It also sets maximum payment terms for contractors and subcontractors (15 and 25 business days, respectively). These are longer terms than the default conditions under the Payment’s Act. You can contract out of the QBSA payment terms, but the conditions are very strict.

It is very important to fulfill your responsibilities under the QBSA to protect your position under the Payment’s Act.

The Payment’s Act is the final piece of the puzzle. It sets up a legislated cash management process for the construction industry to guarantee prompt payment, if you elect to use it. It includes adjudication, a powerful method for quickly deciding disputed progress payments. It is very dangerous to ignore this Act.

The next column will begin to examine the Building and Construction Industry Payment’s Act 2004 (The Payment’s Act)

John Lowry is a director of AIQSANA, a Queensland Authorised Nominating Authority under the BCIPA, backed by the Australian Institute of Quantity Surveyors.

If you would like regular information and advice on trends in payment in the construction industry, subscribe to Payment (Really) Matters.

 

 

 

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