20 July 2022
15 min read
#Government, #Construction, Infrastructure & Projects
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A boiling hot economy presents many challenges. For those seeking to negotiate a fixed price in relation to something that might take many months or years to build, where it is not practical to buy everything needed at commencement, there is pressure on the seller to price in the risk of rapidly escalating prices of labour and materials. For the buyer, whilst a fixed price is desirable, no one really wants to pay more for something than they have to.
Whilst that tension is ever present in an industry almost entirely based upon competitive lump sum pricing, sudden inflation off the back of the supply chain and labour constraints brought on by the pandemic has increased the tension dramatically.
Recently, the situation has prompted requests by contractors for “rise and fall” clauses in building contracts. To the uninitiated, this might sound suspiciously like a “cost plus” pricing arrangement (or “managed contract” for those not willing to admit to their own management that they are eschewing a fixed lump sum). From an enforcement perspective, there is no issue with not having an agreed fixed price in a contract, clarity and certainty of how the price and adjustments are calculated.
Like many terms used in the construction industry, one should not assume to know what “rise and fall” means. One course is to find someone born before the moon landings to demystify what hitherto was regarded by many as a funny little clause that no one is crazy enough to agree to anymore.
Rise and fall clauses traditionally utilised a reference price index and provided for adjustment of an agreed portion of the contract sum, for example, labour or materials components, based on a formula. Edition 2 of GC21 sets out a comprehensive example framework for rise and fall in Schedule 7, which applies if selected in the contract details. It provides a useful guide for the matters parties should consider when agreeing to rise and fall such as:
Depending on the project and components of the contract price, it may be that a preferable approach is to treat specific trades more sensitive to price escalation as a provisional sum with some rigour around the verification of the ultimate price for that trade. Parties should openly discuss where the risks are and tailor the approach accordingly. Too much price uncertainty and principals will delay projects or walk away from them entirely.
From a drafting perspective, simply inserting a rise and fall provision into an existing contract will likely conflict with common drafting to the effect that the contract price is not subject to rise and fall. Therefore, contracts must be checked for provisions contrary to any rise and fall provision that may be included.
Finally, note that some jurisdictions currently prohibit rise and fall clauses in contracts, such as some home building work in WA and Victoria (subject to some exceptions for changes in taxes or legislation).
The key consideration for project owners confronted with a request for rise and fall is what it will apply to and how it is calculated. Once that is identified, it should be tested by considering if there is any other more suitable mechanism for addressing the issue.
Contractors should not expect project owners to unquestioningly agree to requests for rise and fall in contracts. A nuanced request that is referenced to the particular pricing risk in a project is far more likely to gain traction.
Whichever side of the negotiating table you find yourself on, we can all probably agree that at least in the near term everyone can drop the “and fall” from the title of the clause.
Author: Helena Golovanoff
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Commonwealth
AAT Bulletin Issue No.14/2022
The AAT Bulletin is a fortnightly publication containing information about recently published decisions and appeals against decisions in the AAT’s General, Freedom of Information, National Disability Insurance Scheme, Security, Small Business Taxation, Taxation & Commercial and Veterans’ Appeals Divisions (11 July 2022). Read more here.
Law Council Update
In this edition, the Law Council of Australia is pleased to announce the appointment of Dr James Popple as its new Chief Executive Officer. Dr Popple will begin his new role on 25 July 2022 (15 July 2022). Read more here.
NSW
Supreme Court of NSW Decisions Reserved as at 15 July 2022. Read more here.
Supreme Court of NSW Decisions Reserved as at 8 July 2022. Read more here.
NSW Civil & Administrative Tribunal - Changes to consumer laws
From 18 July 2022, changes to the Fair Trading Act 1987 allow NCAT to decide consumer complaints up to the value of $100,000. This includes consumer claims about motor vehicles and the supply of goods or services in NSW (18 July 2022). Read more here.
Record investment in scholarships for early learning educators
More than 400 aspiring early childhood teachers across NSW are set to receive a cash boost to complete their studies thanks to a NSW Government investment (15 July 2022). Read more here.
Home Building Compensation reform
The State Insurance Regulatory Authority has released a discussion paper to help shape reforms to improve the compulsory home building compensation insurance scheme for homeowners and builders (14 July 2022). Read the discussion paper here.
EPA launches another FCNSW prosecution for alleged forestry breaches
The NSW Environment Protection Authority (EPA) has launched its second prosecution this year against Forestry Corporation of NSW (FCNSW) for allegedly failing to retain habitat for local wildlife, by felling giant and hollow-bearing trees in Wild Cattle Creek State Forest, near Coffs Harbour (12 July 2022). Read more here.
IOF Custodian Pty Limited atf the 105 Miller Street North Sydney Trust v Special Minister of State [2022] NSWLEC 86
JUDICIAL REVIEW – challenge to Special Minister for State’s direction to list MLC Building on State Heritage Register – ss 32 and 34 of Heritage Act 1977 (NSW) – whether Minister failed to consider mandatory considerations pursuant to ss 32(1)(c) and 32(1)(d) of Heritage Act 1977 (NSW) – consideration of reasons provided by Minister – whether inference can be drawn from documentary material that Minister considered mandatory considerations – Minister failed to consider mandatory relevant considerations – decision of Minister set aside and invalid and/or of no effect – Heritage Council to remove listing of the MLC Building from State Heritage Register.
Heritage Act 1977 (NSW).
Eric Anthony Foster v Department of Planning and Environment [2022] NSWCATAD 235
ADMINISTRATIVE LAW – Administrative review – Access to government information – Personal information – Secrecy provision – Effective exercise of agency’s functions – Whether overriding public interest against disclosure.
Government Information (Public Access) Act 2009 (NSW); Privacy and Personal Information Protection Act 1998 (NSW); Administrative Decisions Review Act 1997 (Cth); Housing Act 2001 (NSW).
Wojciechowska v Secretary, Department of Communities and Justice [2022] NSWCATAP 226
Appeal – question of law – whether Tribunal has jurisdiction to determine an application under the Government Information (Public Access) Act 2009 – same issue raised in other proceedings before the Tribunal – appellant instituting Supreme Court proceedings seeking determination of the question of law – stay granted of appeal pending determination of judgement in the Supreme Court proceedings.
Government Information (Public Access) Act 2009.
Giblin v Department of Planning and Environment [2022] NSWCATAD 232
ADMINISTRATIVE LAW – access to government information – access application – public interest considerations in favour of disclosure – public interest considerations against disclosure – whether overriding public interest against disclosure.
Administrative Decision Review Act 1997 (NSW), ss 9, 63; Civil and Administrative Tribunal Act 2013 (NSW), ss 30, 64, Sch 3, cl 9(4); Government Information (Public Access) Act 2009 (NSW), ss 5, 9, 12, 13, 14, 80, 100, 104, 105, 107.
Mehieddine v Commissioner for Fair Trading [2022] NSWCATAD 230
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Administrative Decisions Review Act 1997; Home Building Act 1989; Licensing and Regulation (Uniform Procedures) Act 2002.
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Industrial Relations Act 1996 ss 84, 88.
Martin v Commissioner of Police [2022] NSWCATAD 228
LICENSING – firearms – licence revocation – public interest – certificate under s 128 of the Evidence Act.
Administrative Decisions Review Act 1997 (NSW); Civil and Administrative Tribunal Act 2013 (NSW); Evidence Act 1995 (NSW); Firearms Act 1996 (NSW); Firearms Regulation 2017 (NSW).
Commonwealth
Act compilation
National Consumer Credit Protection Act 2009 18/07/2022 – Act No. 134 of 2009 as amended
Veterans’ Entitlements Act 1986 14/07/2022 – Act No. 27 of 1986 as amended
Australian Securities and Investments Commission Act 2001 14/07/2022 – Act No. 51 of 2001 as amended
Broadcasting Legislation Amendment (2021 Measures No. 1) Act 2001 13/07/2022 – Act No. 62 of 2021 as amended
National Disability Insurance Scheme Act 2013 12/07/2022 – Act No. 20 of 2013 as amended
National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 12/07/2022 – Act No. 135 of 2009 as amended
Social Security (Administration) Act 1999 11/07/2022 – Act No. 191 of 1999 as amended
International Tax Agreements Act 1953 11/07/2022 – Act No. 83 of 1953 as amended
Personal Property Securities Act 2009 11/07/2022 – Act No. 130 of 2009 as amended
Superannuation Industry (Supervision) Act 1993 11/07/2022 – Act No. 78 of 1993 as amended
Income Tax Assessment Act 1997 10/07/2022 – Act No. 38 of 1997 as amended
Privacy Act 1988 10/07/2022 – Act No. 119 of 1988 as amended
National Health Act 1953 09/07/2022 – Act No. 95 of 1953 as amended
Social Security Act 1991 08/07/2022 – Act No. 46 of 1991 as amended
Business Names Registration Act 2011 07/07/2022 – Act No. 126 of 2011 as amended
Administrative Appeals Tribunal Act 1975 06/07/2022 – Act No. 91 of 1975 as amended
Business Names Registration (Transitional and Consequential Provisions) Act 2011 06/07/2022 – Act No. 127 of 2011 as amended
A New Tax System (Goods and Services Tax) Act 1999 06/07/2022 – Act No. 55 of 1999 as amended
NSW
Proclamations commencing Acts
Stronger Communities Legislation Amendment (Children) Act 2021 No 45 – published LW 15 July 2022
Regulations and other miscellaneous instruments
Child Protection (Working with Children) Amendment (Miscellaneous) Regulation (No 2) 2022 — published LW 15 July 2022
Children and Young Persons (Care and Protection) Amendment (Authorised Residential Care Workers) Regulation 2022 — published LW 15 July 2022
Children's Guardian Amendment Regulation 2022 – published LW 15 July 2022
Civil Liability Amendment (Authorised Carers) Regulation 2022 – published LW 15 July 2022
Criminal Assets Recovery Amendment (ACT Unexplained Wealth Orders) Regulation 2022 – published LW 15 July 2022
Electricity Infrastructure Investment Amendment (Revenue Determinations) Regulation 2022 – published LW 15 July 2022
Essential Services Proclamation (No 3) 2022 – published LW 15 July 2022
Essential Services Regulation (No 3) 2022 – published LW 15 July 2022
Fair Trading Amendment (Monetary Limit on Orders) Regulation 2022 – published LW 15 July 2022
Electricity Infrastructure Investment Amendment (Miscellaneous) Regulation 2022 – published LW 8 July 2022
Order regarding volunteers taking part in emergency operations – published LW 8 July 2022 at 12:35pm
Protection of the Environment Operations (General) Amendment (Thermal Energy from Waste) Regulation 2022 –published LW 8 July 2022
Roads Amendment (Evidentiary Certificates) Regulation 2022 – published LW 8 July 2022
Legal Profession Uniform General Amendment (Conditional Costs Agreements) Rule 2022 – published LW 4 July 2022
Environmental Planning Instruments
Bega Valley Local Environmental Plan 2013 (Amendment No 39) – published LW 15 July 2022
Blayney Local Environmental Plan 2012 (Amendment No 11) – published LW 15 July 2022
Byron Local Environmental Plan 2014 (Amendment No 34) – published LW 15 July 2022
Clarence Valley Local Environmental Plan 2011 (Map Amendment No 4) – published LW 15 July 2022
Dubbo Regional Local Environmental Plan 2022 (Amendment No 2) – published LW 15 July 2022
Glen Innes Severn Local Environmental Plan 2012 (Amendment No 5) – published LW 15 July 2022
Goulburn Mulwaree Local Environmental Plan 2009 (Map Amendment No 7) – published LW 15 July 2022
Kiama Local Environmental Plan 2011 (Map Amendment No 1) – published LW 14 July 2022
Kiama Local Environmental Plan 2011 (Map Amendment No 2) – published LW 15 July 2022
Ku-ring-gai Local Environmental Plan 2015 (Map Amendment No 3) – published LW 15 July 2022
Liverpool Local Environmental Plan 2008 (Map Amendment No 4) – published LW 15 July 2022
Muswellbrook Local Environmental Plan 2009 (Map Amendment No 2) – published LW 15 July 2022
Sutherland Shire Local Environmental Plan 2015 (Amendment No 24) – published LW 15 July 2022
Wagga Wagga Local Environmental Plan 2010 (Map Amendment No 7) – published LW 15 July 2022
Dubbo Regional Local Environmental Plan 2022 (Amendment No 1) – published LW 8 July 2022
Newcastle Local Environmental Plan 2012 (Map Amendment No 2) – published LW 8 July 2022
Shoalhaven Local Environmental Plan 2014 (Amendment No 45) – published LW 8 July 2022
State Environmental Planning Policy (Precincts—Central River City) Amendment (Sydney Olympic Park) 2022 –published LW 8 July 2022
State Environmental Planning Policy (Transport and Infrastructure) Amendment (Three Ports) 2022 – published LW 8 July 2022
Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.
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