- It’s out of date.
- Nobody understands it.
- Subcontractors object to it.
- It’s clunky to assemble.
- It’s been written for another jurisdiction.
- You have to pay licence fees whenever you use it.
1. It’s out of date.
Legislation in Australia is constantly being updated. Not all changes will affect what goes in your subcontract, but some might.
Some of the Australian Standard forms of contract which are still commonly being used today were prepared over 15 years ago (AS 4000 was drafted in 1997). A range of new legislation has been introduced over the last 15 years, such as:
- GST legislation,
- security of payment legislation,
- the Personal Properties Securities Act,
- WHS, and
- proportionate liability legislation.
Contracts drafted before these legislative changes were introduced won’t address the above.
2. It’s difficult to understand.
A good contract is easy to read and easy to understand.
Complicated, convoluted and unnecessarily long contracts can often lead to your subcontractor pricing in a risk premium, to cover themselves against what they either don’t understand or don’t have time to read.
3. Subcontractors regularly object to the terms
If you regularly receive long lists of objections to your standard form of subcontract – it might be time to reassess whether it’s the right contract to be using.
Negotiations over contract terms take time, they use up resources and they can delay the start of your project.
If your standard form subcontract is not a document that your company would be willing to sign, then it’s likely your subcontractors will also not be willing to sign it in the form it is presented.
Adopting a more balanced risk profile can lead to contracts being entered into more quickly. And it doesn’t necessarily mean giving up all your cards or taking on more risk in areas that are important to your company.
There may be parts of your standard form contract that subcontractors regularly object to, that do not present a material risk to your company. By changing these terms in the base document, you will save your team the time of going through the process each time a subcontractor requests that same change.
Standard clauses that are worth examining in this context include:
- limitation on liability,
- consequential loss exclusion,
- latent conditions,
- back-to-back provisions,
- rise and fall clauses, and
- relief for delays and extensions of time.
4. It's difficult to complete and assemble
The more sections which your team are required to complete when preparing a subcontract, the more time it is going to take. When teams are issuing multiple subcontracts in a day or a week, this time can start to add up.
If your company has a policy about a variable in your subcontract, such as minimum levels of insurance, there is no need for your team to be entering these details into the particulars every time. Manually entering information every time can also lead to errors.
Similarly, there are automation systems available which can speed up the process for compiling and issuing documents to subcontractors. Over time, small improvements in efficiency can add up to valuable time which your team can be spending on other areas.
5. It's drafted for a different jurisdiction
Construction legislation in Australia is not uniform across all states and territories.
While some standard form subcontracts have been prepared to be used across jurisdictions, if a contract that was originally prepared to be used in one state is being implemented in others – it may be missing things.
For example, a subcontract drafted to be used in NSW may not satisfy the requirements for a subcontract under the ‘Queensland Building and Construction Commission Act’.
There are also differences between the security of payment legislation also in each state (such as different minimum payment terms) and the ability to contract out of the proportionate liability legislation.
6. The licensing is expensive
Most standard forms of subcontracts require you to pay a licensing fee each time you use it. If you don’t pay this fee, you are at risk of being fined.
To help companies avoid this ongoing cost, we have prepared our own form of subcontract that does not have any ongoing licensing fees. It can be tailored to suit your companies chosen risk profile. Learn about our subcontract template here.