Guide to Ministerial Direction No 2 Contractual provisions for public construction

Guide to Ministerial Direction No 2 – Contractual provisions for public construction

Issued by the Secretary, Department of Treasury and Finance

Effective 1 December 2016

The Secretary

Department of Treasury and Finance

1 Treasury Place

Melbourne Victoria 3002

Australia

Telephone: [phone]

Facsimile: [phone]

dtf.vic.gov.au
Authorised by the Victorian Government

1 Treasury Place, Melbourne, 3002

© State of Victoria 2016

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ISBN 978-1-925551-24-2 (pdf/online)

Published November 2016

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Contents

Guide to Ministerial Direction No 2 – Contractual provisions for public construction 4

1.Introduction 4

1.1Authority 4

1.2Effectiveness 4

1.3Application 4

1.4Order of precedence 4

1.5Definitions and interpretation 4

2.Approved forms of contract 5

2.1Minor Works Contracts 5

2.2Major form of contract 6

2.3Forms of subcontracts 6

2.4Special conditions of contract 7

2.5Contracts consistent with Victorian government policies 7

3.Alternative forms of contract 7

3.1Use of alternative contracts for exceptional projects 7

4.Delegation 8

5.Construction Contracts Advisory Panel 9

5.1Establishment of the CCAP 9

5.2Terms of Reference 9

5.3Membership 9

5.4Administration 10

Guide to Ministerial Direction No 2 – Contractual provisions for public construction

1.Introduction

1.1Authority

This Guide is issued by the Secretary under the delegation of the Minister for Finance in Ministerial Direction No 2 issued pursuant to the Act.

1.2Effectiveness

This issue no. 5 of the Guide is effective from 1 December 2016 and supersedes issue no 4, effective from 1 June 2000, which is repealed and replaced from the effective date of this Direction.

1.3Application

This Guide applies to public construction as defined in the Act.

1.4Order of precedence

This Guide is incorporated into and must be read in conjunction with Ministerial Direction No 2 issued by the Minister under the Act.

1.5Definitions and interpretation

(a)In this Guide, terms defined in Ministerial Direction No 2 shall have the same meaning in this Guide, and

Term	Definition
CCAP	means the Construction Contracts Advisory Panel established under paragraph 5 of this Guide.
Director	means the person occupying the position nominated by the Secretary as having the responsibilities under paragraph 5 of this Guide.
Guide	means this Guide to Ministerial Direction No 2.
Ministerial Direction No 1	means Ministerial Direction No 1: Tendering Provisions for Public Construction issued under the Act.
Ministerial Direction No 2	means Ministerial Direction No 2: Contractual Provisions for Public Construction issued under the Act.
Victorian Alliancing Policy	means the Victorian government policy with respect to alliance contracting, as amended, restated or replaced from time to time, being, as at the date of this Guide, the National Alliance Contracting Policy Principles (September 2015).
Victorian PPP Policy	means the Victorian government policy with respect to public private partnerships, as amended, restated or replaced from time to time, being, as at the date of this Guide, the Partnerships Victoria Requirements 2016.
relevant Accountable Officer	means the Accountable Officer of the Agency undertaking the building and construction works or related construction services or on whose behalf such works or services are undertaken.

(b)For the purposes of this Guide, a reference to an Act or subordinate instrument is a reference to that Act or subordinate instrument as amended from time to time.

2.Approved forms of contract

2.1Minor Works Contracts

Minor works contracts should be used for works valued between $15,000 and $200,000 (including GST). A minor works contract may also be used:

(a)for works valued up to $15,000 (including GST) instead of a purchase order or works order; and

(b)for works valued above $200,000 (including GST) if:

(i)the work is of a simple nature, for example a single trade

(ii)the work is the supply and installation of equipment only

(iii)the use of a major contract would be onerous

(iv)the person responsible for the project is satisfied that a minor works form of contract is appropriate.

The following forms of minor works contracts are approved for use by Agencies:

1. 
   Royal Australian Institute of Architects Minor Works Contract MWC-2 1994;
   

(c)Victorian Public Sector Minor Works Contract (Long Form);

(d)General Conditions of Contract for Minor Works (VPS MWC);

(e)VicRoads General Conditions of Contract Quotation Contracts CS-GCC-12;

(f)Standards Australia Minor Works Contract Conditions AS4305-1996;

(g)Office of Housing General Conditions of Contract for Minor Works, and

(h)Other forms of minor works contract as may be approved by the CCAP from time to time.

2.2Major form of contract

A major form of contract should be used for works valued above $200,000 (including GST) unless a minor works contract is determined to be more appropriate in accordance with paragraph 2.1.1.1(b).

The following forms of major works contract are approved for use:

(a)for building and construction works:

(i)Standards Australia General Conditions of Contract AS2124 -1992

(ii)Standards Australia General Conditions of Contract for Design and Construct AS4300-1995

(iii)VicRoads General Conditions of Contract for Design and Construct AS4300-1995-VR

(b)for the supply of related consultancy services –

(i)Standards Australia General Conditions of Contract for Engagement of Consultants AS4122 (Int) – 1997

(ii)VicRoads Consultancy Agreement

(iii)VicRoads Short Form Consultancy Agreement (for consultancies under $15,000)

(iv)Department of Health and Human Services Consultancy Agreement

(v)Office of Housing Conditions of Engagement for External Consultancies

(vi)Education Victoria School Council Consultant Agreement

(c)Other forms of major works contracts as may be approved by the CCAP from time to time.

2.3Forms of subcontracts

Where a subcontract value exceeds $50,000 (including GST), the form of subcontract must be either:

(a)the relevant Australian Standard form of sub-contract (AS2545-1993 in the case of AS2124-1992, or AS4303-1995 in the case of AS4300-1995) unamended, except to match conditions in the head contract; or

(b)an alternative form of subcontract that is compatible with the conditions of the head contract and consistent with the principles of risk allocation and security of payment set out in Ministerial Direction 2.

2.4Special conditions of contract

Special conditions of contract approved for use include –

(a)Victorian Public Sector Annexure Part B to AS2124-1992;

(b)Victorian Public Sector Annexure Part B to AS4300-1995;

(c)Other special conditions as approved by the CCAP from time to time for use generally in the public sector or by a particular Agency.

2.5Contracts consistent with Victorian government policies

Forms of contract consistent with the requirements the Victorian PPP Policy or the Victorian Alliancing Policy are approved forms of contract for the purposes of this Guide, provided that the relevant Agency has complied with the requirements of the applicable policy, including obtaining all necessary approvals.

3.Alternative forms of contract

3.1Use of alternative contracts for exceptional projects

(a)On exceptional projects, as identified and agreed between the Secretary and the relevant Accountable Officer the use of alternative forms of contract or amended approved forms of contract is acceptable provided:

(i)approved forms of contract are inappropriate for the project;

(ii)in the case of amendments to an approved form of contract, the amendments are limited to those necessary to address the inappropriateness of the approved form;

(iii)the alternative or amended form of contract is consistent with the principles of risk allocation and security of payment raised in Ministerial Direction 2; and

(iv)the Agency has received appropriate legal advice in respect of the proposed alternative or amended form of contract, including that it complies with the requirements of this paragraph (a).

(b)The relevant Accountable Officer may approve the use of an alternative form of contract or amended form of an approved contract without agreement of the Secretary where special circumstances exist, provided:

(i)the relevant Accountable Officer certifies in writing that the special circumstances exist;

(ii)in the case of amendments to an approved form of contract, the amendments are limited to those necessary to address the special circumstances;

(iii)the Accountable Officer is satisfied that the alternative or amended form of contract is consistent with the requirements in paragraphs (a)(iii) and (iv) above; and

(iv)details of the special circumstances and a copy of the form of contract approved by the Accountable Officer are provided to the Secretary or his/her delegate promptly following contract award.

(c)For the purposes of this Direction, special circumstances means:

(i)a contract for works to be carried out in or services related to leased premises or third party property where the form of contract is required to be approved by the lessor or such third party, for example, relocation of utilities;

(ii)the forms of contract approved under this Guide are not appropriate for the type of works being procured, including building maintenance, landscaping, or dredging; or

(iii)amendments are required to the approved forms of contract to address interface issues where there are multiple contractors working on a site or where the works are undertaken on a live site, for example rail infrastructure works.

(d)To avoid doubt, where a contract approved by the relevant Accountable Officer pursuant to paragraph (b) includes amendments beyond what is necessary to address the ‘special circumstances’, approval should be sought as set out in paragraph (a).

4.Delegation

The relevant Accountable Officer may delegate a power or responsibility under this Direction, in which case:

(a)the Accountable Officer must:

(i)retain accountability for the requirement;

(ii)oversee the relevant actions of their delegates;

(iii)ensure that the delegation is appropriate for the efficient and effective conduct of the business of the Agency;

(iv)ensure that the delegation is assigned to a position and that position is appropriate in relation to the powers and responsibility being delegated;

(v)keep a record of the delegation;

(vi)ensure that the delegation is kept current and appropriate and regularly reviewed and updated as required, and

(b)the delegate must:

(i)be an appropriate senior Executive Officer or equivalent employed by the Victorian government;

(ii)use the delegation for the purpose intended, and

(iii)act within the limits of the delegation.

5.Construction Contracts Advisory Panel

5.1Establishment of the CCAP

(a)The Director is responsible for managing the processes of the CCAP and for ensuring that Agency and project processes are not unduly delayed.

(b)The CCAP is established to advise on standard contract conditions as part of the ongoing implementation of Ministerial Directions No 1 and 2.

5.2Terms of Reference

The CCAP is to undertake the functions contemplated in this Guide, and to provide advice and make recommendations to the Secretary or his/her delegate on the following matters –

(a)the general conditions of contract that should be approved for use in the Victorian public sector;

(b)special conditions of contract that are approved for use by individual agencies;

(c)appropriate minimum notice periods to be given for the withdrawal of approval to use existing forms of contract;

(d) ‘project specific’ conditions of contract which may be exempted from the approval process;

(e)special circumstances and projects where alternative forms of contract may be acceptable;

(f)identification of financial ranges within which particular forms of contract are to be used;

(g)types of related consultancy services covered by Ministerial Direction No 2;

(h)identification of best practice opportunities;

(i)the matters specified in Ministerial Direction No 1 and its Guide, and

(j)any other relevant matter.

5.3Membership

The CCAP will be chaired by the Director or his/her delegate and will be drawn from the following:

1. 
   Department of Economic Development, Jobs, Transport, Energy and Natural Resources
   

(a)Department of Justice and Regulation

(b)Department of Health and Human Services

(c)Department of Education and Training

(d)Department of Environment, Land, Water and Planning

(e)Department of Premier and Cabinet

(f)Department of Treasury and Finance

(g)Major Projects Victoria

(h)VicRoads

(i)PTV

(j)Places Victoria

(k)Any other person, agency or entity approved by the Director.

5.4Administration

The CCAP will be administered on the following basis:

(a)executive support will be provided by the Department

(b)the CCAP will operate by consensus

(c)frequency of meetings will be determined by the CCAP

(d)in relation to specific matters or projects requiring urgent consideration a subset of the CCAP may be established and would include a representative from each of the affected Agency, the Department, and another Agency represented on the CCAP.