Contract Documentation, Delegation and Risk

Relevant Treasurer's Instruction(s)

Introduction

Contract Documentation

Contract Administration

Managing Contractual Risk

Delegations

Resolution of Contractual Disputes

Crown Contracts Confidentiality Policy

Relevant Treasurer's Instruction(s)

The Treasurer's Instructions 1206, 1207, 1215, 1216, 1229 and 1401.

Introduction

Following 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 the 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.

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 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.

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 is appropriate, it is mandatory to use AS 2124-1992, General Conditions of Contract and the Request for Tender (building and construction version) pro forma documentation approved 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 Australian Government Implementation Guidelines for the National Code of Practice for the Construction Industry and the Australian Government Building and Construction OHS Accreditation Scheme.

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 building construction 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, please contact Treasury at purchasing@treasury.tas.gov.au.

Standards Australia has produced the 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 and 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 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 to the advice above.

Specification

The specification contains the technical requirements for the project.

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 DIER.

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; and
• 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 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 the Treasurer's Instructions 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 www.wst.tas.gov.au/industries/building/securityofpayment/resources. This website provides information on the Act, step-by-step guides for claimants and respondents, sample forms and lists the Nominating Authorities.

Crown Contracts Confidentiality Policy

All contracts arising from a procurement must comply with the requirements of the Crown Contracts Confidentiality Policy.