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oPInIon

The West Australian mining industry must properly

prepare for the introduction of the new Security of

Payments Act (SOPA) on August 1...

he first stage of the new SOPA regime
Twill have a big impact upon construction-
related activity in the mining and energy sec-
tors. Its introduction is the most significant Richard Edwards is a Perth-
change to WA’s security of payments regime based partner and co-head
in its 18-year history. of international law firm DLA
It is the WA Government’s main initiative Piper’s Global Construction
to safeguard the security of payments in the Disputes. Corey Steel is
construction industry. It is crucial that any- DLA Piper Perth’s disputes
one who is planning construction work after partner
August 1 is familiar with the new regime to
avoid problems on their projects.
The real issue for the mining industry is ject, to protect parties who are owed money • The rights of head contractors and
that up until now it has been largely exempt for goods or services they have supplied. subcontractors to pursue recovery
from the security of payments regime due to 5. The building industry regulator will be when they are not paid their claimed
the wide definition of the ‘mining exclusion’. empowered to take action against industry entitlements are substantially
Under the new regime, the ‘mining exclusion’ participants who engage in bad contracting increased. In addition to debt recovery
has been significantly curtailed. and financial behaviour. action or making an adjudication
For example, the construction of process- The Act will be rolled out across three stag- application, they can suspend work or
ing plant and equipment will now be squarely es from August 1 to February 2024. suspend supplying their goods or
within the ambit of the new regime. So will Stage 1 makes major changes to the way services.
maintenance and repair work that is under- construction contracts in WA will operate: • ‘Unfair’ notice-based contractual time
taken for the purpose of keeping processing bars will have no effect. Where a con-
facilities operating. • More types of construction work are tractual time bar is raised to reject a
Over the course of its three-stage imple- captured by the new regime. Offshore claim under the contract, the time bar
mentation between August 2022 and Febru- work is now captured. The ‘mining ex may be declared to be unfair so that it
ary 2024 the new regime will fundamentally emption’ is narrowed; fabricating cannot be used as the basis to deny
change when and how contractors can be or assembling items of plant used for the claimed entitlement.
paid for their work. mining or hydrocarbon extraction
Stage 1 governs all contracts entered into are now covered. Only the actual • The adjudication process for pay-
for construction work in WA on or after Au- extraction of product is exempt, ment disputes is almost brand new
gust 1. along with drilling, digging or and is designed to: speed up the
This raises another issue for principles quarrying for one of those purposes. adjudication process so that adjudic-
in that they may have to deal with contracts • A payment schedule regime is used tions must be made within 20 business
being governed by the existing Construction for contract payments, which takes days (rather than 90 business days
Contracts Act for those entered into up to 31 priority over the construction contract’s under the existing regime); and con-
July, and then under SOPA for those entered terms. This gives head contractors strain the adjudication to the issues
into from 1 August. It is possible that some and subcontractors the statutory raised at the time the payment sched-
projects will have contracts and subcon- right to invoice monthly for the work ule was issued to minimise ‘sneak
tracts governed by the two regimes, leading they have done. It also requires those attacks’
to possible management and compliance is- monthly claims to be assessed. If the It will be important for everyone involved
sues, at least for the short to medium term. claims are not assessed then they are in construction to master the new regime
deemed to be accepted in full and before the first payment claims arrive at the
The new SOPA regime is intended to without deduction. end of August 2022. This is particularly so
achieve five important aims: • The timeframes for payment claims for the mining industry where these claims
and payment disputes are much have, so far, only occurred in limited circum-
1. Payment times on construction projects stances under the current regime.
will be sped up. Payment times of six weeks shorter than the current regime. A Owners, contractors and subcontractors
or more will be a thing of the past. head contractor’s payment claim to a should all be reviewing their standard con-
2. The payments dispute process (statutory principal must be assessed within 15 tractual terms and contract administration
adjudication) will be more demanding; time business days and paid in 20 procedures so that they are ready for Au-
frames are much shorter, and the process business days. A subcontractor’s pay- gust 1. Otherwise, project participants may
will place a heavier burden on principals ment claim must be assessed within find themselves caught short because they
who dispute claims. 15 business days and paid within failed to comply with the new regime.
3. It will rebalance contractual risk alloca- 25 days. The trade-off for these short Companies that spend the time now to
tion to empower and ensure a ‘fair go’ for timeframes is a bar against making prepare will be better placed to handle the
subcontractors. payment claims for work that was new system of payment claims and any
4. It will quarantine money within the pro- done more than six months before potential payment disputes.
the payment claim was made.

Page 10 JULY 2022 aUSTRaLIa’S PaYDIRT