The first amendments to the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act) came into effect on Monday 21 April 2014.

The Building and Construction Industry Security of Payment Act 1999 is the primary legislative instrument regulating payment practices in the industry.  The Act’s objective is to promote the flow of progress payments by providing a statutory right under a construction contract to receive and recover payments relating to the carrying out of work and the supplying of related goods and services.

The amendments to the Act, passed by the NSW Parliament in November 2013, commenced on 21 April 2014.The changes are:

•  introduce prompt or maximum payment terms for progress payments

•  require that payment claims made by a head contractor include a supporting statement declaring subcontractors it has engaged, have been paid what is due and payable

•  remove the requirement that a payment claim must state that it is being made under the Act

The amendments apply to contracts entered into from 21 April 2014.

Generally as someone employing sub-contractors – every claim (invoice) you receive should be treated as a live claim under the act as they no longer require the endorsement.
As a sub-contractor the default terms of payment seem to blown out from ten days to 30 so you need to be conscious of your position with your debtors.

When will the amendments apply?

The amendments will apply to construction contracts entered into on and from Monday 21 April 2014. Residential construction contracts largely are not affected by the changes.

What are the amendments?
In summary, on 21 April:
•    payment claims no longer need to state they are being made under the Act in order for the Act to apply,
•    head contractors will need to provide a supporting statement containing a declaration that subcontractors have been paid what is due and payable when submitting a payment claim to their principal. The Department of Finance and Services will have the authority to investigate compliance with these requirements, and this includes requiring head contractors to provide them with relevant information and documents,
•    head contractors must be paid within 15 business days of submitting a payment claim (or an earlier date provided for in the contract),
•    subcontractors must be paid within 30 business days of submitting a payment claim (or an earlier date provided for in the contract), and
•    there are significant penalties for failing to comply with some of the new requirements, in particular a fine of up to $22,000 or 3 months imprisonment (or both) for a head contractor who serves a payment claim without a supporting statement, or who serves a payment claim accompanied by a supporting statement which it knows to be false or misleading in a material particular. The supporting statement is required to be in the form prescribed by the Regulations.

What does this mean for you?
Commercial construction contracts entered into on or after 21 April 2014 will be subject to the amendments. Parties should move quickly to ensure that contracts likely to be entered into on or after that date have been amended to comply with the changes, and that payment and administrative processes have been updated. The short payment time frames, in particular, are likely to cause headaches if payment processes are not adjusted ahead of time.

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