Major changes to the Building Code

On 25 July 2022, the Australian Government registered a legislative instrument called the Code for the Tendering and Performance of Building Work Amendment Instrument 2022 (Amendment Instrument). The Amendment Instrument made changes to the Code for the Tendering and Performance of Building Work 2016 which took effect on 26 July 2022.

Following the amendments, the amended instrument is still called the Code for the Tendering and Performance of Building Work 2016 (Code), however there are substantial changes.

About the amended Code

The Amendment Instrument removed most substantive requirements from the Code. However, it leaves in place:

  • The obligation on code covered entities to undertake Labour Market Testing;
  • The obligation on Funding Entities to ensure that certain information is provided by the preferred tenderer before a contract is entered into in respect of Commonwealth funded building work;
  • The obligation on Funding Entities to only enter into a contract in respect of Commonwealth funded building work with a code covered entity that only uses products in building work that comply with the relevant Australian standards published by, or on behalf of, Standards Australia; and
  • Code exemptions.

All other substantive requirements are removed.

What you need to know

The Fair Work Act 2009 (Cth) (FWA) and the Building and Construction Industry (Improving Productivity) Act 2016 (BCIIP Act) continue to apply.  The Commissioner retains all his powers and functions under the BCIIP Act. The legislative remit of the ABCC continues until such time as the BCIIP Act is amended or repealed.

Determinations of Compliance

From 26 July 2022, the ABCC is no longer issuing Determinations of Compliance for enterprise agreements in respect of building work. Code covered contractors should no longer seek Determinations of Compliance from potential subcontractors.

Should contractors refuse to engage a subcontractor because the subcontractor is covered by an enterprise agreement that was not compliant with the former Code, the contractor risks contravening the adverse action provisions of the FWA, as the refusal to engage the subcontractor for this reason will not have the protection of the Code as a law of the Commonwealth under section 342(3) of the FWA.

WRMPs

The amended Code does not contain any requirements in relation to Workplace Relations Management Plans (WRMPs). For this reason, the ABCC will no longer assess WRMPs. The ABCC will not be accepting new WRMP submissions and any WRMPs previously submitted will not be assessed. Commonwealth WRMPs are no longer required on any building projects.

What obligations remain under the amended Code?

Application of this Code of Practice (section 6). This section sets out the mechanism by which contractors become code covered entities. It provides that building contractors or building industry participants (and their related entities) will be covered by the amended Code from the first time they express interest in or tender for Commonwealth funded building work.

Essential Services Exemptions (section 6A and 6B). Providers of Essential Services and Essential Services Infrastructure may apply to the Minister for an exemption from the amended Code.

Labour Market Testing (section 11F). The amended Code continues to require that a code covered entity must ensure that no person that is not an Australian citizen or Australian permanent resident (within the meaning of the Migration Act 1958) is employed to undertake building work for the code covered entity unless:

  • the position is first advertised in Australia; and
  • the advertising was targeted in such a way that a significant proportion of suitably qualified Australian citizens and Australian permanent residents would be likely to be informed about the position; and
  • any skills or experience requirements set out in the advertising were appropriate to the position; and
  • the employer demonstrates that no Australian citizen or Australian permanent resident is suitable for the job.

Funding Entity Requirements (25A and 26(2). Funding Entities must:

  • ensure that before a contract is entered into in respect of Commonwealth funded building work, the preferred tenderer provides the following information:
    • the extent to which domestically sourced and manufactured building materials will be used to undertake the building work;
    • whether the building materials to be used to undertake the building work comply with relevant Australian standards published by, or on behalf of, Standards Australia;
    • the preferred tenderer’s assessment of the whole-of-life costs of the project to which the building work relates;
    • the impact on jobs of the project to which the building work relates; and
    • whether the project to which the building work relates will contribute to skills growth.
  • only enter into a contract in respect of Commonwealth funded building work with a code covered entity that only uses products in building work that comply with the relevant Australian standards published by, or on behalf of, Standards Australia.

Next steps for Funding Entities

Due to the extent of the changes to the Code, existing template clauses (including the existing ABCC model clauses) will no longer be appropriate for new approach to market documentation or contracts. Clauses should be amended to reflect the amended Code.

What is removed?

All other Code obligations have been removed.

There is no longer a prohibition on being covered by a non-compliant enterprise agreement in respect of building work or contracting for Commonwealth funded building work while covered by a non-compliant enterprise agreement in respect of building work.

In addition, among other things, Code covered entities are no longer required to:

  • Comply with a WRMP (s7);
  • Provide certain information in tenders and expressions of interest (s8);
  • Require downstream code compliance from subcontractors (s8);
  • Comply with the security of payment provisions of the Code, including reporting disputed or delayed progress payments under State security of payment laws to the ABCC (s11D);
  • Maintain any policies with respect to freedom of association (s13);
  • Restrict the rights of entry of an officer of a building association to rights provided under the FWA and relevant work health and safety laws (s14);
  • Carry out any drug or alcohol testing under the Code or maintain a policy about drug and alcohol testing (s16(A) & 25);
  • Report actual or threatened industrial action to the ABCC (s16)
  • Report any code breaches to the ABCC (s17).

Removal of WRMP and enterprise agreement requirements – The Risk of Adverse Action

The Code for the Tendering and Performance of Building Work Amendment Instrument 2022 removed all requirements on contractors in relation to Workplace Relations Management Plans (WRMPs). Contractors are no longer required to have an approved WRMP in place, or to follow the requirements of WRMPs that were approved and in place on certain Commonwealth funded building projects.  

Previous WRMP requirements

Prior to 26 July 2022, the Code for the Tendering and Performance of Building Work 2016 (Code) required that on certain Commonwealth funded building projects that met a minimum financial threshold, a WRMP for the project must be approved by the ABCC, prior to the award of the head contract.

The approved WRMP would set out how the head contractor would comply with the requirements of the Code, including how it would comply with mandatory drug and alcohol testing requirements, how it would comply with freedom of association requirements and how it would meet the other substantive requirements of the building Code.

Importantly, WRMPs also set out how head contractors would ensure they only engage subcontractors that met two eligibility requirements.  That is, subcontractors that:

  • were not subject to an exclusion sanction; and
  • met the requirements of section 11 of the Code, by not being covered by an enterprise agreement in respect of building work containing certain prohibited clauses.   

The enterprise agreement eligibility requirement of the Code has now been removed.

Cascading eligibility requirements

Prior to 26 July 2022, the Code required head contractors to contractually require any subcontractors to comply with the Code. This included an obligation to contractually require subcontractors to ensure that any additional downstream subcontractors met the Code eligibility requirements.

These contractual terms could be drafted by contractors, or contractors were able to use the ABCC’s model contract clauses in their contracts to ensure the relevant Code obligations were cascaded down the contractual chain.

Now that the requirement to have a WRMP, and the enterprise agreement eligibility requirement have both been removed from the Code, contractors should carefully check their downstream contracts to ensure they do not impose any eligibility requirements regarding the content of enterprise agreements.        

From 26 July 2022 onwards, should contractors refuse to engage a subcontractor because the subcontractor is covered by an enterprise agreement in respect of building work that was not compliant with the former Code, the contractor risks contravening the adverse action provisions of the FWA, as the refusal to engage the subcontractor for this reason will not have the protection of the Code as a law of the Commonwealth under section 342(3) of the FWA.

Drug and alcohol testing

Prior to 26 July 2022, the Code required drug and alcohol testing for certain prescribed substances to be carried out on projects with an approved WRMP.

These legislative drug and alcohol testing requirements have been removed.

Notwithstanding, these requirements may still exist in contractors’ enterprise agreements, or under contract. Contractors are encouraged to maintain these testing practices to help protect safety on site.