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If you are in the construction industry and engage in work which involves Commonwealth funding, it is likely that the Code for the Tendering and Performance of Building Work 2016 (the Building Code) applies to you. If the Code covers you, you need to comply with certain mandatory requirements. It is essential that you are aware of and understand your obligations under the Code. This article will discuss the Building Code, how it may apply to you and your potential obligations under the Code.

What Is the Building Code?

The Building Code covers contractors or construction industry participants, also known as ‘code covered entities’. A building contractor or building industry participant becomes a code covered entity from the first time it submits an expression of interest or tender for Commonwealth funded building work.

Commonwealth funded building work includes:

  • building work that is being undertaken for, or on behalf of, a funding entity. A funding entity, otherwise known as a Commonwealth entity, could be a
    • Department of State;
    • parliamentary department;
    • listed entity; or
    • body corporate established by a Commonwealth law;
  • building work that is indirectly funded by the Commonwealth by a grant or other program where the building work is a component of the grant or program. In these cases, the funding from the Commonwealth body must be at least:
    • $5,000,000 and represents at least 50% of the total construction project value; or
    • $10,000,000 (irrespective of its proportion of the total construction project value).

For example, the Department of Education and Training (the Commonwealth entity) is undertaking to build a school. A grant, which the school is a key part of, is funding the building of the school.

If you submit a tender or expression of interest for any construction related work on projects that receive funding from a Commonwealth entity, you can become a code covered entity even if you do not win the relevant work.

There are some building projects which may be exempt from complying with the Building Code, including those involving essential services such as:

  • electricity;
  • natural gas;
  • water;
  • wastewater; and
  • telecommunications.

What if the Building Code 2016 Applies to Me?

If you are a code covered entity, the Building Code applies to you. This means you must comply with the Building Code’s requirements. It is important to note that once you become a code covered entity, you will always remain one.

The Building Code contains requirements with respect to the engagement of subcontractors and enterprise agreements. For all Commonwealth funded projects, you will need to ensure that the following people comply with the Building Code:

  • subcontractors, by ensuring that subcontractors’ agreements contain an obligation to act consistently with the Building Code; and
  • respondents to the expressions of interest you seek or tender.

In particular, you will also need to ensure that subcontractors under the Building Code:

  • are not subject to any exclusion sanctions;
  • do not enter into enterprise agreements which contain prohibited terms(for example, clauses which discriminate); and
  • take action to rectify behaviour that is non-compliant, as far as is reasonably practical.

Other Requirements in the Building Code

There are several provisions in the Building Code dealing with enterprise agreements. An enterprise agreement is an agreement which sets out the employment conditions under which an employee or group of employees will work for an employer. If you are the head contractor, you also need to ensure your subcontractors on Commonwealth funded projects comply with a relevant Workplace Relations Management Plan.

The Building Code 2016 prevents code covered entities and their subcontractors from entering into or operating under enterprise agreements which are not compliant with the Fair Work Act. However, it does not extend to operate in relation to common law employment agreements with individual employees. Common law employment agreements may be in the form of industry or modern awards that cover employees even where there is no enterprise agreement.

There are other employment-related provisions preventing code-covered entities and their subcontractors from engaging in sham contracting. Sham contracting is when an employer engages (or proposes to engage) an individual to perform work under a contract to carry out services where the true character of the (proposed) engagement is that of employment.

You should also be aware of your obligations under the Building Code when you are engaging workers who are not Australian citizens or permanent residents. In these circumstances, you need to be able to show particular requirements to comply with the Code. You should also ensure that your contracts with your subcontractors are compliant with your state’s security of payment legislation.

Key Takeaways

You may be a code covered entity that needs to comply with the Building Code 2016 if you are undertaking any work which is Commonwealth funded (partially or wholly), or if you have submitted a tender or expression of interest in relation to this type of work. You will also need to be careful to ensure your enterprise and subcontractors’ agreements you enter into comply with the Building Code. If you have questions about construction contracts, contact LegalVision’s construction lawyers on 1300 544 755 or fill out the form on this page.


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