Instant Stop Victorian Building – Are You Ready?

On Monday evening, in response to rising rates of COVID-19, the Victorian government announced a two-week shutdown of the construction industry from September 21, 2021 to October 4, 2021 (Stop period) in the Melbourne metropolis, the city of Ballarat, the city of Greater Geelong, the Surf Coast Shire and the Mitchell Shire (Restricted areas).

The closure raises a number of issues for participants in the construction industry. Here are some of the immediate issues that require special attention:

• contractual extensions of deadlines, delay and disruption issues;
• suspension, force majeure and provisions relating to site security;
• engagement with stakeholders and supply chains;
• payment obligations, cash flow and solvency risks; and
• employment problems.

It is essential to have a strategy to get through the closure when it comes to these issues.

What would you like to know

• (Site shutdown) – From 12:01 am on September 20, 2021, all construction work in restricted areas must cease. Workers may only come to sites to respond to an emergency or perform urgent and essential work to protect health and safety.
• (Site / security) – arrangements should be made as soon as possible to ensure that all construction sites in restricted areas are secure, that personnel are informed and that deliveries are postponed, redirected or stopped.
• (Vaccination) – all construction workers present on the site after September 23, 2021 must have at least their first COVID-19 vaccination, except medical dispensation (for very limited reasons). Likewise, all construction workers returning to the site from October 5, 2021 must have received at least their first COVID-19 vaccination unless medically dispensed. Sites will have to demonstrate their compliance before reopening.
• (Contracts) – all construction industry participants working in restricted areas should immediately review their contracts and request appropriate time and cost relief (where permitted). Consideration should also be given to force majeure provisions, suspension and demobilization costs and existing payment obligations under the contract.
• (Workforce) – Directors and management of affected companies should consider seeking advice on how to manage their workforce. Options may include redeployment to other roles, paid or unpaid leave, negotiation of reduced hours, withdrawal instructions or termination of employment.
• (Advantages) – Affected businesses should request payment for COVID-19 disaster to help minimize the financial impact of the downtime.

Immediate site and vaccination problems

From 12:01 am on September 20, 2021, all construction work in restricted areas must end. The only authorized work is strictly limited to emergency response work or urgent and essential work to protect health and safety. No clear direction appears to have been given by the Victorian government as to what type of work will be included, but securing any site is important from a labor, health and safety perspective (especially if you are appointed “Main contractor” for the site).

It is important to note that as of September 23, 2021, any construction worker going to the site must have received at least their first COVID-19 vaccine, unless a medical exemption applies. Likewise, all construction workers returning to the site from October 5, 2021 must have received at least their first COVID-19 vaccination, unless there is a medical exemption.

The “operator” of a construction site will be responsible for on-site compliance. An operator is the “project manager” of the site determined in accordance with the 2017 Occupational Health and Safety Regulation (Vic). Industry participants will need to accurately identify the relevant construction site operator to understand their respective obligations.

In addition, in particular, participants in the construction industry will need to carefully manage the following issues:

• inform workers of COVID-19 vaccination requirements;
• verify that a worker has received at least one dose of a COVID-19 vaccine or is exempt from it;
• take “reasonable measures” to ensure that workers do not enter or remain on the site if they have not received at least one dose of vaccine; and
• keep records demonstrating that workers comply with the mandatory vaccination requirement for the first dose.

Participants in the construction industry will also need to appropriately engage with stakeholders and supply chains regarding site issues and works that need to be halted and those that may continue.

Contractual issues

The shutdown period gives rise to a number of contractual issues for all participants in the construction industry (including all contractors, sub-constructions, prime contractors, owners and project managers operating in the areas regulated). These questions are briefly explored below.

Time extensions and late fees

The downtime can give rise to time and cost issues in construction contracts. Contractors are to ensure that they claim any available extension of time (EOT) as well as any late charge authorized under their construction contract (s).

A party claiming an EOT or late charge under a construction contract must ensure that the notice complies with the time and notice requirements under the construction contract. This should be implemented as soon as possible, as some contracts include deadlines for the submission of notices regarding time and cost claims.

Principals should also ensure that they manage and assess reimbursement requests and reimbursement requests appropriately and in accordance with the terms of their contract (s).

Site suspension and security costs

The Shutdown Period may give rise to costs of suspension and demobilization / security of the site under the construction contract concerned.

Contractors will need to review their contract (s) to see if they have the right to suspend work due to the closure. Likewise, contractors and sub-contractors will need to determine whether they are able to claim site demobilization / security costs under the relevant construction contract (s).

Heads of establishment must appropriately manage any claim relating to the costs of suspension and demobilization / site security in accordance with the terms of their contract (s).

Provisions in case of force majeure

A force majeure clause in a construction contract will release the parties (whether temporarily or permanently) from their obligations to perform their contractual obligations when a specific event occurs which is generally not foreseeable and was beyond their control. of either party.

When the relevant construction contract contains a force majeure clause, principals and contractors will have to determine whether any of the force majeure events correspond to the current COVID-19 closure.

Payment, treasury and solvency

Despite the stoppage of construction in restricted areas, contractors and sub-contractors may still be able to submit payment claims for work completed prior to the stoppage period. In this case, principals and prime contractors will still have payment obligations under the contract and the Victorian Building and Construction Industry Security of Payment Act 2002 (SOPA).

Principals, prime contractors, sub-contractors and consultants should immediately review their contracts to ensure that they are aware of their payment obligations. This includes obligations relating to both the submission of payment requests and the response to payment requests. During the downtime, participants in the construction industry should ensure that there are sufficient staff to receive, pay and / or respond to payment requests.

Participants in the construction industry will also need to be extra vigilant about payment requests, as the shutdown may result in additional payment requests on projects. Separately, participants in the construction industry will also need to carefully manage any credit issues within their supply chain.

What to do next

In the future, participants in the construction industry will be required to perform the following tasks:

• the need to demobilize and adequately secure construction sites;
• ensure that work only takes place during the downtime on site, where it is urgent or for occupational health or safety purposes;
• in the case of contractors, review construction contracts for compliance and otherwise claim all appropriate EOT and delay charges;
• in the case of principals, respond appropriately to any complaints from contractors arising from the closure;
• be on the lookout for any payment requests under the SOPA;
• engage appropriately with stakeholders and supply chains; and
• you must carefully manage the vaccination problems.