Contract Documentation, Delegation and Risk

Set out below is a brief summary of important information in relation to contract documentation, delegation and risk for building and construction procurement.

The Procurement Practices Manual - Contract Documentation, Delegation and Risk sets out further guidance information in relation to these matters for agencies primarily using the Crown Solicitor's Building Construction Request for Tender documentation and AS 2124-1992 (as amended by the Guides to the Completion of Annexures to AS 2124-1992). However, it also provides general guidance information for agencies in preparation of other contract documentation as provided for under Treasurer's Instructions 1206 and 1207. 

Contract Documentation

A completed set of contractual documents should consist of four distinct and separate parts to satisfy the requirements of the tender process and adequately serve the administration of the contract.

These parts are:

  • the Conditions of Tender;
  • the Tender form;
  • the Conditions of Contract; and
  • the Specification.

These parts should be included in all Government building and construction contract documents and must contain all information necessary to enable potential suppliers to prepare appropriate submissions in response.

The specifications must be designed not to restrict competition, reflect bias to any brand, product or contractor, or act as a barrier to the consideration of any alternative.

Each procurement is to be allocated a specific closing time, date and place of lodgement, which is to be clearly stated in all tender documents and advertisements. The tender documentation should indicate to whom quotation enquiries are to be referred.

Request for Quotation and Request for Tender documents must contain, in the conditions of tender/quotation, certain clauses including information on the Government's policy position on confidentiality (Crown Contracts Confidentiality Policy and Treasurer's Instruction 1229) and provisions in relation to the Government's position on zero tolerance towards violence against women. Information is contained in the Guide To Inclusions in Building and Construction Tender Documentation.

Agencies must ensure that they use the up-to-date versions of approved documents, where these exist, when preparing contract documentation. The agency project manager should ensure that the project consultants access up-to-date documentation at the commencement of each project. 

The Treasurer's Instructions require specific documentation to be utilised by agencies as set out below.

Minor Works

For all minor works construction contracts valued at $50 000 and over, it is mandatory to use AS 4905-2002, Minor Works Contract Conditions

For minor works contracts valued below $50 000, it is highly recommended that AS 4905-2002, Minor Works Contract Conditions is used. AS 4905-2002 is available to download from the SAI Global website, www.sai-global.com.

For non-construction works, such as maintenance, agencies should use appropriate Australian Standards contracts and liaise with the Crown Solicitor to ensure the contracts are appropriately amended to reflect the Government's procurement, confidentiality and contractual policies.

Agencies must ensure that minor works contracts are awarded only to suppliers that have declared that they and their employees and/or sub-contractors hold all the appropriate certifications, accreditations, registrations or licences identified as necessary to undertake the work. Where an agency is awarding a contract that may be high risk or require specialised or additional clauses to those in the standard documentation, it is recommended that the Crown Solicitor be involved in the drawing up of the contract.

Major Works - Building and Construction

For all major works construction contracts, except those where the use of AS 4902-2000 or AS 4300-1995 (Design and Construct) is appropriate, it is a mandatory requirement to use AS 2124-1992 General Conditions of Contract and the Request for Tender (building and construction version) documentation prepared by the Crown Solicitor. For procurements that are impacted by Australian Government funding requirements, agencies must use the Commonwealth Government Funded Work Version RFT pro forma which contains all the necessary provisions of the Building Code 2016 and the Australian Government building and construction industry WHS Accreditation Scheme. Where the use of this documentation is not considered appropriate (eg where a delivery methodology other than a basic construct only methodology or for large value projects is used), an exemption from the requirement to use the mandatory documentation must be obtained.

For non-construction works, such as maintenance, agencies should use appropriate Australian Standard contracts and liaise with the Crown Solicitor to ensure the contracts are appropriately amended to reflect the Government's procurement, confidentiality and contractual policies.

Crown Solicitor's pro forma RFT documentation

When undertaking a tender for which the Crown Solicitor's RFT pro forma is being used, agencies should firstly check whether their agency has an appropriate licence to use and amend AS 2124-1992 from SAI Global. Agencies should then complete and amend Annexures Part A and Part B to AS 2124-1992 in accordance with the appropriate Guide to the Completion of Annexures to AS 2124-1992 and attach relevant AS 2124-1992 documentation to the RFT pro forma. Copies of the Guide for completing the Commonwealth Government Funded Work Version RFT and the Guide for completing the standard RFT have been distributed to all agencies and information on their use can be obtained by contacting the agency's Procurement Reference Group representative. If unsure of the name of the Procurement Reference Group representative for your agency, contact Treasury at purchasing@treasury.tas.gov.au.

Standards Australia has produced the AS 2124-1992 General Conditions of Contract AS 2124-1992 User Guide SAA HB 42-1992. All parties involved in the use of this contract, as well as agency project managers, should familiarise themselves with this document.

The User Guide, AS 2124-1992 and Annexures are available to download from the SAI Global website at www.sai-global.com.To obtain a licence for the amendment and use, reproduction and distribution of SAI Global material, contact SAI Global on (02) 8206 6355 or email copyright@saiglobal.com.

The Crown Solicitor's major works Request for Tender (building and construction version) document is made up of four parts -

Conditions of Tender

The Conditions of Tender reflect the requirements of the Treasurer's Instructions and AS 4120-1994, Code of Tendering. These conditions indicate the minimum requirements of Government from tenderers. This section should be included in any Request for Tender unaltered. The Commonwealth Government Funded Work Version RFT contains additional tender conditions imposed by Australian Government funding requirements. If amendments are to be made, the amended document must be approved by the Crown Solicitor.

Tender Form

The tender form is required to be completed by all tenderers. It contains the tenderer's declaration of compliance with the conditions and requirements, a schedule of specialist contractors (if required), a Declaration with respect to Licences and Registrations, a Government Building and Construction Training Authority Compliance Declaration and a Workplace Health and Safety Contractor Management System Questionnaire. The Commonwealth Government Funded Work Version RFT contains additional declarations of compliance with Australian Government funding requirements.

Conditions of Contract including Annexures

The Conditions of Contract are made up of -

  • Australian Standard General Conditions of Contract AS 2124-1992;
  • Annexure Part A - the details of the contract;
  • Annexure Part B - details of deletions, amendments or additions to AS 2124 -1992;
  • Annexure Part C - supplementary conditions of contract; and
  • Annexure Part D - confidentiality.

This section should be included in any Request for Tender unaltered. If amendments are to be made, the amended document must be approved by the Crown Solicitor.

Properly licensed and completed Annexures Part A and Part B to AS 2124-1992 must be attached to the Request for Tender prior to distributing to all prospective tenderers. For instruction on how to obtain licensed Annexures from SAI Global and how to complete the Annexures, refer above.

Specification

The specification contains the technical requirements for the project.

For non-construction works or where AS 4902-2000 or AS 4300-1995, General Conditions of Contract for Design and Construct   are used or the National Prequalification System for Non-residential Building applies, it is recommended that Crown Solicitor's advice be sought in relation to how this document should be amended to comply with Government procurement, confidentiality and contractual policies.

Any building and construction or roads and bridges procurement that is impacted by a free trade agreement (refer to Instruction 1202) must, in addition to the requirements above, comply with the requirements set out in the Free Trade Agreements Guideline. If a formal tender or quotation process is not undertaken (eg a supplier is engaged through direct or limited submissions sourcing), then during negotiations with the preferred supplier, the supplier must be advised, in writing, of the Government's policy position on confidentiality as contained in the Crown Contracts Confidentiality Policy and Treasurer's Instruction 1229.

Major Works - Roads and Bridges

For all major works construction contracts, except those where the use of AS 4902-2000 or AS 4300-1995 is appropriate, it is mandatory to use AS 2124-1992, General Conditions of Contract and the appropriate approved Preliminaries/Request for Tender document.

For non-construction works, such as maintenance, agencies should use appropriate Australian Standard contracts and liaise with the Crown Solicitor to ensure the contracts are appropriately amended to reflect the Government's procurement, confidentiality and contractual policies.

Further information on the appropriate documentation is available from Department of State Growth.

Consultancies

The contract to be applied to a consultant commission is AS 4122-2010 General Conditions of Contract for Consultants, unless a more appropriate contract is deemed suitable by the Crown Solicitor.

At the planning stage of engaging consultancy services for relevant projects, agencies must:

  • seek advice from the Office of the Crown Solicitor to:
    • ensure AS 4122-2010 is the appropriate contract to be used for the circumstances of the particular case; and if so
    • obtain a copy of the Schedules that have been drafted by the Crown Solicitor amending the Annexures of AS 4122-2010 for inclusion with the contract; an
    • advice on how to complete the Annexures to AS 4122-2010; and
  • ensure their agency has an appropriate licence from SAI Global to use and amend AS 4122-2010 before releasing any quotation or tender documentation.

The User Guide, AS 4122-2010 and its Annexures are available to download from the SAI Global website at www.sai-global.com. To obtain a licence for the amendment and use, reproduction and distribution of SAI Global material, contact SAI Global on (02) 8206 6355 or email copyright@saiglobal.com.

The design and preparation of works contract documentation requires the engagement of consultants to perform this task on behalf of the procuring agency. The consultants required for the procurement process vary depending on the project size, nature and complexity. The PPM-Best Practice for the Engagement of Consultants, published by Treasury as part of the Procurement Practices Manual, provides the best practice process for engaging consultants. Refer also to Treasurer's Instruction 1216.

Contract Administration

The contract is between the Principal and the contractor. It is the responsibility of the contractor to complete the works as specified in the contract documents. The Superintendent ensures that the conditions of contract are adhered to by the contractor and the Principal.

The Client Agency Project Manager (CAPM) is not recognised in the contract, but the role is to ensure (on behalf of the Principal) that both the Principal and the Superintendent are performing their respective duties under the contract. These duties include the Superintendent assessing the contractor's progress payments and the Principal making progress payments to the contractor based on the Superintendent's assessments.

To ensure that the conditions of contract are being followed the client agency is required to setup and manage internal contract administration systems and procedures (or, if they already exist, ensure that they function and are followed).

The Principal in the contract is the Crown in Right of Tasmania. As any contract will  require the Principal to perform some duties, a specific person must act on behalf of the Principal. This is usually the person who signs the contract and is the person who should be kept informed by the Superintendent and the CAPM of the condition and progress of the contract.

If the agency's Minister signs the contract, it is usual for the Head of Agency to keep the Minister informed and the CAPM and Superintendent report to the Head of Agency. These officers would also report to the Head of Agency when the Head of Agency acts on behalf of the Principal as the Principal's Representative.

A contract functions effectively with or without a Principal's Representative. When the Minister signs the contract and carries the responsibility for the role of the Principal, and the Head of Agency needs to keep the Minister informed of the contract, consideration should be given to formalising the role of the Head of Agency within the contract as the Principal's Representative. This enables the Head of Agency to perform most of the Principal's responsibilities. When the Head of Agency signs the contract and is responsible for the role of the Principal, a Principal's Representative may not be needed.

The duties of the Principal, the Superintendent and the contractor are generally set out in the contract. Information on delegation of duties from the Principal to the Principal's Representative and/or the Superintendent is set out in Section 3 of the PPM - Contract Documentation, Delegation and Risk.

Managing Contractual Risk

Risk management is an essential part of the corporate planning process. The Australian and New Zealand Risk Management Standard AS/NZS 4360-1995 sets out a structured approach to risk identification, classification, analysis and treatment and it is recommended that all asset managers become familiar with the code.

The PPM - Contract Documentation, Delegation and Risk is intended as a guide in identifying the commonly encountered major risks and their consequences. It also sets out to define the normally accepted responsibilities and delegations for managing these risks and gives guidance to agency managers in ensuring that these responsibilities are being met and the risks are being properly managed.

Delegations

The parties to the contract are the Principal and the contractor. The roles of the parties are set out in the PPM - Contract Documentation, Delegation and Risk.

Although a Principal may delegate his powers and functions under the contract, this does not prevent him from exercising these powers and functions in his own right. The Principal remains responsible for the actions, within the contract, of those to whom he/she has delegated functions. The contractor can bring charges of breach of contract to the Principal only.

The Principal in a building and construction contract is normally a Minister or a Head of Agency. Neither would exercise all the powers allocated to the Principal and would normally delegate some of these powers to the Principal's Representative and the Superintendent in the contract.

The agency is responsible for determining and implementing which contractual duties should be delegated, and to whom. What is delegated will depend on the person named as the Principal and his/her availability for involvement in the contract, as well as depending on agency policy, such as monetary delegations.

In delegating functions, the Principal must ensure that the persons undertaking the functions have the capability to fulfil the requirements of the functions and protect the Principal against a "breach of contract". In delegating functions, the Principal must ensure that both an audit trail and the integrity of the contractor payment process are maintained.

Generally, under the contract, the contractor must be notified, in writing, of the functions and powers delegated and to whom. This notification usually forms part of the tender documents.

It is expected that in Government contracts the Principal will delegate most functions.

Resolution of Contractual Disputes

When two parties enter into a contract, differences can occur that require dispute resolution procedures. It is preferable that a dispute is resolved by the contracting parties. However, when this fails, the dispute must be resolved with the assistance of third parties. There are various methods of dispute resolution set out in the PPM - Contract Documentation, Delegation and Risk. 

Some of the methods referred to in that document are:

  • expert appraisal;
  • mediation;
  • mini-trials; and
  • arbitration and litigation.

Security of Payment Act

The Building and Construction Industry Security of Payment Act 2009 creates a right of payment for people carrying out building and construction work or supplying related goods or services under a building and construction contract. Once a payment claim has been made in the manner required by the Act, unpaid parties can take advantage of a payment dispute resolution process called 'adjudication'.

For more information on the Security of Payment Act, go to the Department of Justice website.

Work Health and Safety (WHS)

The Work Health and Safety Act 2012 sets out mandatory work health and safety requirements relevant to a workplace.

The Work Health and Safety Regulations as well as various Codes of Practice and Interpretive Guidelines detail specific requirements for specific industries and/or risk areas and agencies should be aware of the obligations imposed by the Constructions Work Code of Practice on agencies as well as the obligations and requirements imposed on other parties such as consultants and contractors. Agencies should also be aware of the requirements of other codes of practice on specific hazards and control measures relevant to the construction industry including:

  • Demolition Work;
  • Excavation Work;
  • Managing the Risk of Falls at Workplaces;
  • Managing Noise and Preventing Hearing Loss at Work;
  • Preventing Falls in Housing Construction;
  • Confined Spaces;
  • Hazardous Manual Tasks;
  • How to Manage and Control Asbestos in the Workplace; and
  • How to Safely Remove Asbestos.

Detailed information on these requirements is available from the WorkSafe Tasmania website. If an agency is in doubt about its legal obligations under the Act, it should seek advice from Crown Law.