Stop construction in NSW – what you need to know

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Due to increasing rates of infectious COVID-19 cases in the community, New South Wales (New South Wales) The government has announced the urgent closure of all construction sites in the Greater Sydney, Blue Mountains, Central Coast, Wollongong and Shellharbour areas (Stop zone) from Monday July 19, 2021 to July 30, 2021 at least (Stop period).

The shutdown raises a number of issues for participants in the construction industry. Some of the immediate issues that require attention include:

  • time extensions, 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 throughout the downtime in relation to these issues.

What would you like to know

  • (Site shutdown) – from July 19, 2021 at 12:01 am, all construction work in the stopping zone must “stop”. Only “urgent work” is authorized.
  • (Site / security) – arrangements should be made as soon as possible to ensure that all construction sites in the stopping area are secure, that personnel are informed and that deliveries are postponed, redirected or stopped.
  • (Authorized work) – work outside the stopping area is allowed to continue. All workers traveling 50 kilometers or more from the stopping zone to construction sites outside the stopping zone must undergo a COVID-19 surveillance test every seven (7) days. You don’t need to isolate yourself while waiting for the results of a surveillance test.
  • (Contracts) – all participants in the construction industry who work in the stoppage zone should immediately review their contracts and request appropriate redress (time and cost) when permitted. Consideration should also be given to force majeure arrangements, suspension and demobilization costs and payment obligations under the contract.
  • (Labor) – 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 time off, negotiation of reduced hours, or withdrawal instructions.
  • (Benefits) – Affected businesses should apply for NSW COVID-19 Disaster Relief Payment to help minimize the financial impact of the downtime. This payment can go up to $ 15,000 per week for eligible businesses.

Immediate Site Problems

From 12:01 am on July 19, 2021, all construction work in the stopping area must cease, except for “urgent work”.

The NSW government has indicated that the following are considered “urgent work”:

  • work to ensure the safety or security of the site;
  • works to deal with environmental risks;
  • work to maintain and ensure the integrity of critical equipment or assets, including partially completed work; and
  • work that would otherwise deteriorate or to receive delivery of supplies that would otherwise deteriorate.

Also, it is important to note that securing any site is important from a work, health and safety perspective (especially if you are appointed as a “prime contractor” for the site).

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 can continue.

Contractual issues

The downtime gives rise to a number of contractual issues for all participants in the construction industry (this includes contractors, sub-constructions, prime contractors, owners and project managers operating in the stopping area). These questions are briefly explored below.

Time extensions and late fees

The downtime gives rise to time and cost issues in construction contracts. Participants in the construction industry should ensure that they claim any extension of time (EOT) and late fees authorized under their construction contract (s). Notices must respect the deadlines set out in the construction contract concerned. It is important to do this as soon as possible, as some contracts include deadlines for the submission of notices relating to time and cost claims.

Managers will also need to ensure that they assess and manage EOT claims and all cost claims appropriately under 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. Participants in the construction industry will need to review their contract to see if they have the right to suspend work due to the closure and also if they are able to claim site demobilization / security charges in the future. part of the construction contract due to closure.

School leaders should also appropriately manage all claims relating to site suspension and demobilization / security costs in accordance with their contract (s).

Provisions in case of force majeure

A force majeure clause will release the parties (whether temporarily or permanently) from their obligations to perform their contractual obligations in the event of the occurrence of an unforeseeable disruptive event beyond the control of either party. parts.

When the contract contains a force majeure clause, principals and contractors will need to determine whether any of the force majeure events capture the current COVID-19 shutdown.

Payment, treasury and solvency

Although the construction industry is on a ‘pause’, payment obligations for contract construction industry participants and NSW Building and Construction Industry Payment Security Act 1999 (SOPA) for work completed before the shutdown period does not.

Principals, prime contractors, sub-contractors and consultants should 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 with 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 only “urgent work” is carried out during the downtime;
  • 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
  • carefully manage employment issues arising from the closure

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