Dealing with the NSW Construction Industry shut down — managing existing works
On 17 July 2021, the NSW Government amended the Public Health (Covid-19 Temporary Movement and Gathering Restrictions) Order 2021 (the Orders) to deal with the ongoing outbreak of the Covid-19 Delta variant in the Greater Sydney area.
The net impact of the insertion of clauses 22(4A) and 24AB is that the construction industry has been brought to a standstill until 31 July 2021.
In regard to 22(4A), this clause prevents a person who is not authorised from visiting a place of residence in Sydney to engage in work that is:
- cleaning or carrying out repairs;
- additions; or
- performance of any other trades at the place of residence.
In respect to 24AB, the Minister has directed that work is not to be carried out on a construction site in Greater Sydney, unless the work is urgently required for the following purposes:
- to ensure the safety or security of the construction site;
- to deal with environmental risks;
- to maintain and ensure the integrity of critical plant, equipment or assets, including partially completed works, that would otherwise deteriorate;
- to receive deliveries of supplies that would otherwise deteriorate,
- to maintain public utilities;
- to ensure the safe operation of existing transport infrastructure;
- by or on behalf of NSW Health in response to the COVID-19 pandemic; or
- because of an emergency.
What does this mean?
All construction related works in the Greater Sydney Area that do not fall under the exemptions covered by clause 24AB (1) of the Orders set out above, must be halted until at least 31 July 2021, subject to further amendments by the Minister.
Given the severity of the Delta Variant of Covid-19 and the sheer scale of the construction industry along with its associated travel that accompanies this, the Minister’s position is that this is a necessary step to thwart the spread of the virus until proper systems and protocols can be put in place to manage the situation in those environments.
How do I know if my works are considered urgent and therefore exempt from restrictions?
If you are performing work on a ‘construction site’ and those works do not fall within the above exemptions, you should not be performing the works.
In considering ‘emergency works’, ask yourself:
Does this work need to be done now, or can it wait 2 weeks?
It is understandable that given the often-tight time frames that can be associated with construction works, many Principals, Head Contractors and Sub-Contractors will consider their work to be urgent. But, time frames dictated by a construction contract are not sufficient, unless they fall under the categories specified by clause 24AB (1).
Based on the drafting of clause 24AB (1), it is easy to see a certain amount of overlap between each exemption. We stress that when considering whether your situation falls within the exemptions, it must be determined on a case by case basis.
In summary, those works must be relative to:
- Ensuring the safety and security to other persons, plant, equipment and materials;
- Ensuring the safe management of work which may impact on the environment;
- Management of public utilities (including management of infrastructure), critical plant, equipment or assets (including those that would deteriorate or stop operating without proper maintenance);
- Maintaining and ensuring integrity of works that would otherwise deteriorate; and
- Emergency works.
In review of the above points (1) – (5) it is safe to say that points (1) – (3) are self-explanatory and that these works are relative to protection of the site/works, the environment and management of core utilities, plant and equipment.
If there is any risk that your site/works in the current state may be subject to theft, fire, breach of any Environmental Protection Laws or alternatively, a failure to properly maintain certain plant/equipment would cause a fault in said plant/equipment, you should take either immediate preventative action including continued maintenance cycles. However, emphasis should be placed on ‘preventative action’ and only minimal works should be considered.
However, it is points (4) and (5) where contractors may take certain liberties that fall outside the ambit of the exemptions under the Order.
‘Maintaining and ensuring integrity of works that would otherwise deteriorate’
Defining what falls under the category of “maintaining and ensuring integrity of works that would otherwise deteriorate” is again something that will need to be considered on a case by case basis.
We provide a few examples as follows:
On Friday 16 July 2021, Gladys’s Painting Contractors and Water Proofers applied Part A of a protective sealant on the roof parapet of their current project. Subject to the technical data sheet provided by the manufacturer, they must apply Part B within 4 days of the application of Part A otherwise Part A must be removed and re-applied. The building currently suffers from extensive water ingress and the application of membrane is to protect against further water ingress which may cause irreversible damage to the foundations of the building along with potential mould issues.
On Saturday 17 July 2021, Dan’s Earthworks and Civil took 48 cubic meters of soil from a site located off Crown Street in Surry Hills. Adjoining the site is a row of heritage townhouses. After removing the soil on Saturday, Dan’s Earthworks and Civil applied temporary shoring to the surrounding subsoil, but Gary’s Cement and Render are due to perform permanent shoring works on Tuesday 20 July 2021.
In both examples, there may be sufficient reason to suggest that works should continue in order to prevent any deterioration or damage to the existing structure or adjoining properties.
But note that in both examples, the initial part of works were performed prior to the current order being made and therefore this provides the basis upon which this part of the works can be performed despite the mandate.
However, based on the exemptions provided by 24AB (1) of the Orders, it is our opinion that only example 1 could be justified as emergency works, provided that there is no alternative method to protect the site or the works from further water ingress if those works were to start on or from 19 July 2021.
Alternatively, if the contractor in example 2 sought to commence its works on or from 19 July 2021 as a part of the works to be performed under a construction program, this is alone in our opinion, an insufficient reason for contractors to circumvent the Orders.
Further to example 2, we would suggest that prior to the works taking place by Gary’s Cement and Render, Gary first checks with the Head Contractor and/or the site Engineer to query whether those works need to be performed or whether the temporary shoring measures put in place could be utilised until the end of the mandated period.
In summary, “emergency works”, could be those defined as requiring immediate attention to protect the occupants or surrounding occupants of a property (whether residential or commercial) from injury or illness or in some way prevent the safe and proper use of the property for its intended purpose. It is possible to see from example 1 above, why it may also fit into this category.
It is safe to assume that under the basic definition of “emergency works”, a Contractor could not perform the installation of an outdoor speaker setting for patio area, but examples such as the unblocking of a drainage system in an apartment complex or dealing with a gas leak in an industrial kitchen would be justified “emergency works”.
It should also be noted that “emergency works” could be relative to Annual Fire Safety Audits to the extent that a Fire Safety Order has been issued on a Property. However, if the order is not to be enforced until sometime after the mandate period is over, then it is safe to say those works would not fall under the category of “emergency works”.
Grey Areas – Building Consultants and Manufacturers/Suppliers
Something that has not been addressed in the Orders is whether the closure to construction sites also impacts on the manufacturing side of the construction industry and further, whether it also applies to specialist building consultants conducting inspections.
Schedule 1 of the Orders provides a “reasonable excuse” for persons to leave their place of residence for work related reasons if it is not practicable for the employee to work at the employee’s place of residence.
In that regard, there are currently no restrictions on employees of manufacturers or suppliers in the construction industry from attending their place of work provided those persons are not located in an “affected area” and if they are in an “affected area”, have complied the mandatory Covid-19 testing requirements and are deemed to be “authorised worker” . Please note that if you do reside in an affected area, you should check the following link to identify whether you fall under the category of an “authorised worker” — https://www.nsw.gov.au/covid‑1…
For person residing outside of an “affected area” we would advise siding with caution as to whether a person who is not an employee or a regular subcontractor to an organisation should be attending a manufacturing plant to perform work during the shutdown period. While the Orders are not clear on this issue, it could be argued that it does not fall within the “spirit” of Orders and may ultimately result in tighter government restrictions being enforced if people seek to push the boundaries on the exemptions. In that regard, as these orders are largely untested, it is difficult to provide a clear-cut opinion on this issue.
With respect to specialist building consultants who may be conducting inspections, it does not appear that the restrictions extend to performance of their role or attendance at a private premise (i.e. premises which are not declared as ‘construction sites’). However, this exemption may only apply provided that the consultants are:
1. Not from, or traveling outside of, an “affected area”; and
2. The consultants are compliant with clause 22A and not performing any of the following works:
- carrying out repairs;
- additions; or
- performing works relative to other trades.
It is arguable that an “inspection” at a property (not being a construction site) are not “works” as defined above. However, this is of course still dependent upon whether a resident, may be willing to have the consultant conduct inspections in their home. It is also to be questioned, that if the inspections are not urgent, whether they should be performed. In that regard, we also advise proceeding with caution when determining whether inspections should continue during the shutdown period.
Managing your Contract
If you are affected by the Orders, you should consider the impact it may have on your existing construction contracts or agreements.
Most contracts contain time bars for performance of obligations with heavy penalties for delays to the works and it is undoubted that a number of projects will see extensive delays even as a result of a potential 2 week shut down. As a result, Head Contractors and Subcontractors will be looking to avoid the knock-on effects from delay to construction projects, namely liquidated damages and potential consequential loss claims. Similarly, Principals will be concerned regarding blow outs to time deadlines, especially those relative to the sale of residential housing developments.
As a result, the shutdown will more than likely cause significant pressure up and down the contractor and supplier chain as to who will wear the cost of the loss caused as a result of the delay with Contractors aiming for variations to their existing contracts. At the same time Principals and upper tier Contractors and Head Contractors will be looking to on flow the loss to lower order Contractors and Suppliers.
The first step for any Contractor is turn to their contract and look at the mechanisms provided for in that contract in relation to:
- Extension of Time;
- Legislative provisions;
- Unforeseen events; and
- Covid-19/Pandemic clauses .
Most standard form, un-amended construction contracts will contain at least 3 to 5 of the above conditions (depending on when the contract was entered into). Accordingly, it is important that you review each of these clauses to determine if you or the parties to the agreement are relying on the proper mechanisms for managing a potential extension of time, suspension or variation claim whether you are the Principal, Head contractor, Subcontractor or Supplier.
At this time, it is prudent for astute Contractors to be communicating directly with their superior Contractors or the Principal in order to manage the delay caused as a result of the Orders.
While it is an unfortunate set of circumstances to find ourselves in, the easiest path to navigate the situation is ensure that all lines of communication are open and parties are aware of their rights and obligations.
There are many Government Financial Relief Packages available as a result of the imposed Orders. Various guidelines are available as to what financial relief you may be entitled to as either a corporation or an individual as a result.
Should you require further assistance with regard to the impact of the Orders on your business or the interpretation of your contract terms, please do not hesitate to reach out to either our Helen Kowal or Christian Marchant of our Projects team.
- Provided it is a place of work that falls under the exemptions in clause 24(1A) of the Public Health (Covid-19 Temporary Movement and Gathering Restrictions) Order 2021 (the Orders)
- Cl 24A, 24B and 24E of the Orders
- Cl 22(4A) of the Orders
- Note that these types of clauses are relatively new and therefore may only be included in Contracts entered into within the last 12 months.