Ian Munns and Daniel Kearney explained the continuing role of the Construction Contracts Act within the new Department of Mines, Industry Regulation and Safety.

1. Government of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and Petroleum
WA Determinative Forum
16 August 2017
CCA 2.0 - the Past, Present
and Future
Presented by
Ian Munns &
Dan Kearney

2. Government of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and Petroleum
May you live in
interesting times – Chinese Curse

3. Government of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and Petroleum
L2 Heading here
• DMIRS formed on 1 July 2017
- combining the Department
of Commerce and Mines &
Petroleum
• 3 Priority Service Areas:
– Industry Regulation & Consumer
Protection
– Resources Titles & Compliance
– Safety
• Entered Transition Phase II
• Building Commission part of
Industry Regulation &
Consumer Protection
DMIRS
Industry
Regulation
&
Consumer
Protection
Resources,
Titles &
Compliance
Safety
Department
of
Commerce
Department
of Mines &
Petroleum
Building
Commission
Present – Changing face of Govt.

4. Government of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and Petroleum
• Building Commission continues to
oversee the regulation of building,
painting, building surveying and
plumbing services in WA
• Importantly, the Building Commission
continues to administer the CCA and
perform the associated statutory
duties.
• One of the priorities of the new DMIRS
is to assist with delivering the
Government’s election commitments.
• New Government committed to
pursuing reforms to improve security
of payments to subcontractors in the
building industry.
• BC has a small team assisting in this
task. The team undertakes the policy
legislation work as well as performing
all the regulatory functions required
under the CCA.
DMIRS
Industry
Regulation
&
Consumer
Protection
Building Commission
Election
commitments
CCA/SoP
Reform
Team
Policy/Legislation
Adjudications/Registration

5. Government of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and Petroleum
L2 Heading here
• In Dec-16 and April-17, a number
of changes to the CCA
commenced operation.
• Changes followed a review of the
Act – completed in September
2015 by Phil Evans.
• Changes also reflected a desire by
the former Government to better
assist subcontractors:
– Collapse of Diploma, CPD, PCH
problems.
– Significant community pressure
Past – Changes to the CCA

6. Government of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and Petroleum
• In August-16, the former
Government’s plan was
announced.
• It included:
• Extending the use of Project
Bank Accounts to more State
Government- funded and
managed project;
• A new BCI Code; and
• Reforms to the CCA.
• Desire to move very swiftly on
CCA reforms.
• Bill introduced into the Parliament
in September 16.
• Passed by the Legislative Council
on the last day of the 39th
Parliament.
• All sections apart from sections 7
and 20 commenced on 15 Dec. 16
• Sections 7 and 20 commenced on
3 April 17.

7. Government of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and Petroleum
• Amendment Act contained a number of reforms.
• Key reforms:
– Section 3 – definition of a payment claim to align the Act
with the manner in which payment claims under a contract.
– Section 26(1) time for making an application extended
from 28 calendar days to 90 business days.
• Aim of the reforms = to make it easier and more
attractive to use adjudication

8. Government of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and Petroleum
L2 Heading here
• Possibly too early to tell – only
7 months.
• Statistics tell a story – Applications
down 26% from 15/16
Present – What has been the effect?
Adjudication applications
Quarter Month
Total
number of
applications
Total for
quarter
Total for
same quarter
in 2015/16
Difference
%
Change
Total payment
claims disputed
2016/17
1st
Jul-16 19
51 56 -5 -9% $89,592,898.41Aug-16 18
Sep-16 14
2nd
Oct-16 21
55 69 -14 -20% $78,984,882.46Nov-16 22
Dec-16 12
3rd
Jan-17 14
26 53 -23 -43% $3,977,945.24Feb-17 5
Mar-17 7
4th
Apr- 17 10
31 44 -12 -27% $14,249,126.79May-17 15
Jun-17 6
Total 163 222 54 -24% $186,804,852.90
Down 30% on
14/15

9. Government of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and Petroleum
?Reduction in payment disputes in the
construction industry?
Changes to the Act ineffective?

10. Government of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and Petroleum
• Reality – Anecdotal evidence suggests:
– Head contractors/Large contractors still using adjudication
– Less work, therefore subcontractors less likely to use adjudication to
resolve payment disputes. Focus on maintaining the commercial
relationship (even where owed substantial amounts of $$). Adjudication
seen as the ‘nuclear option’. Only thought about when there is a
problem.
– Despite prohibition on paid when paid clauses, in practice still occurring.
Underlying cause can be bad cash flow management.
– Many still unaware, or don’t understand enough to be confident using
adjudication process.
– Not fully understanding the contract, signing without reading, not
keeping on top of records (e.g. issuing claims, variations, requests for
EOTs). Problem occurs on both sides of the subcontractor-head
contractor relationship.
– Adjudication costs unknown, or too high for amount owed. Particularly
the case for suppliers and small subbies.
– Extended/long payment periods.

11. Government of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and Petroleum
Can’t
Pay
Dispute
Pay
Won’t
Pay
• Insolvent or
nearly insolvent
• Reduced cash
flow – project to
project
• Deliberately
withholding
payment
• Extended
payment
times
• Contractual
dispute (scope,
time, quality)
What may
be driving
non-
payment?

12. Government of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and Petroleum
What actions should be taken
by Regulators/Government?
• Legislate/Regulate
• Non-regulatory
• Inform and educate:
• Contract management
• Dispute resolution
• Business skills
• Make current dispute
resolution economically
attractive/improve operation

13. Government of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and Petroleum
L2 Heading here
• Evans Review found need for greater effort
toward raising awareness of the CCA.
• In the last 7 months have focused on raising
awareness through:
– Specific seminars on the CCA/Construction contracting;
– Seminars on changes to the CCA; and
– Attendance at industry forums or days to discuss CCA.
• Moderately successful, but identified a need for a
more holistic/structured approach.
• Commission is going to develop and launch a:
– 12 months calendar comprising seminars (3-to-4 each
quarter) focussed on two streams – contract literacy and
financial literacy. Delivered by the Building Commission,
but in partnership with field specialists.
– Enhanced web/online information (e.g. animated videos,
fact sheets access to recorded seminars)
• Educate and support to those most likely to
benefit
Future – Educate and Inform
Streams
Contractual
Literacy
Financial
Literacy
• Understanding
your contract
• Understanding
contractual
issues
• Understanding
dispute
resolution
• Business skills
• Cash/contract
management

14. Government of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and Petroleum
L2 Heading here
• Working with adjudicators and appointors to identify the interest
and availability of fixed fee or low fee adjudications for payment
disputes below certain amounts (e.g >$20,000 >$50,000
>$100,000).
• Purpose is to identify the service, how it should be operate and
then for the BC to really promote (both online and through other
education/information initiatives).
• Are aim is not a “race to the bottom” – adjudicators deserve to
compensated for their work. Work collegiately to identify
opportunity within the current regulatory framework.
• Anecdotal evidence suggests there is a lot of cases where
small businesses end up writing off debts. Feedback is
trepidation over the potential for large costs relative to the
amount in dispute.
Future – Low value disputes

15. Government of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and Petroleum
L2 Heading here
• Review of SoP laws part of the deal with
Xenephon to pass ABCC legislation
• John Murray appointed to conduct the review
and conclude with report by 31 December 2017.
• Difficult to predict likely outcome, but:
– Seems improbable the Cth will support use of
Corporations power to legislate
– More likely to be Model Laws; or
– Principles of harmonsation.
• Even if there is support, likely to take some time
(i.e. Commercial Arbitration Acts).
• Government does not have an official position
yet.
• Case for complete overhaul does not seem
compelling – particularly given manner in which
CCA was originally drafted.
Future – National Harmonisation
“Oh, East is East and
West is West, and
never the twain shall
meet.” - Kipling

16. Government of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and Petroleum
L2 Heading here
• In lead up last State Election, then
Opposition, announced a number of
policies it would pursue to assist
subcontractors.
• Having attained Government, there is
very much a desire to proceed with
working on those policies.
• Likely to be announcements in the
near future with significant periods of
consultation.
• Broad level –
– Providing greater protections for SC’s on Govt.
funded projects;
– Ensuring a more robust and responsive registration
framework for building contractors;
– Improving the allocation of contractual risk for SC’s
– Improving the operation and effectiveness of the
CCA, with a particular focus on accessibility for SC’s
– Providing more support (education) for SC’s
Future – State reforms

17. Government of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and PetroleumGovernment of Western Australia Department of Mines and Petroleum
Thank You
Questions?
Call:
Dan Kearney (6251 1043)
Graeme Cantello (6251 1365)
Email:
cca@dmirs.wa.gov.au