Contracting requirements (Direction and Instruction 7.1)

Direction 7.1 and Instruction 7.1 explain the requirement to use standard form construction contracts and the circumstances when an Agency may be allowed to use a non-standard form contract.

Contracting requirements (Direction 7.1)

Effective date: 1 July 2018

Principles

Value for money, scalability and probity are procurement principles that are specifically relevant to contracting requirements.

Of particular relevance to this Direction are the following construction procurement principles:

  • appropriately planning and managing Public Construction Procurement to deliver procurement objectives;
  • employing the appropriate Procurement Models and processes taking account of the complexity and value of the project and supplier market capability;
  • reducing unnecessary burden of Public Construction Procurement for all parties;
  • encouraging appropriate innovation and responsiveness in the supplier market; and
  • undertaking Public Construction Procurement in accordance with the relevant legislation, policy, guidance and any mandatory requirements in these Directions.

7.1 Contracting requirements

7.1.1 Approval of Victorian Public Construction Contracts

The Secretary, or a person approved in writing by the Secretary, must:

(a) approve forms of contract for use as Victorian Public Construction Contracts, which may be approved for use subject to any specified conditions or restrictions;

(b) publish a list of Victorian Public Construction Contracts; and

(c) give at least six months’ notice for the withdrawal of a Victorian Public Construction Contract.

7.1.2 Use of Victorian Public Construction Contracts

(a) When issuing a tender (including a Limited Tender) for Works or Construction Services, an Agency must include an unamended Victorian Public Construction Contract in the Tender Documentation, except:

(i) to the extent that amendments are required to comply with law or policy, including these Directions; or

(ii) as permitted in the Instructions.

(b) Where the Instructions permit the release of a tender that includes either an amended Victorian Public Construction Contract or an alternative form of contract, Agencies must ensure that the form of contract is:

(i) appropriate for the Procurement Model;

(ii) consistent with other contracts used by the Agency to engage suppliers to perform comparable Works or Construction Services; and

(iii) consistent with any applicable Victorian Government policy, including any mandatory requirements or approvals required under those policies or set out in the Instructions.

(c) In addition to paragraph (b), where the Instructions permit the release of a tender that includes an amended Victorian Public Construction Contract, Agencies must:

(i) avoid unnecessary amendments; and

(ii) clearly identify any amendments to allow tender participants to readily identify the differences from the approved form of contract.

7.1.3 Departures to contracts during tender negotiation

(a) Agencies may, at their discretion, accept non-material contract departures requested by tenderers.

(b) Agencies must obtain approval under the Instructions before accepting a material contract departure proposed by a tenderer.

7.1.4 Amendments to contracts during life of contract

(a) Agencies may, at their discretion, agree to non-material contract amendments at any time after the contract is executed.

(b) Agencies must obtain approval under the Instructions before agreeing to a material contract amendment after a contract is executed.

7.1.5 Departures and amendments to comply with law and policy

For the avoidance of doubt, Agencies must ensure that departures and amendments under Directions 7.1.3 and 7.1.4 comply with these Directions, the Instructions and any legal, policy or probity requirements.

7.1.6 Projects subject to the High Value High Risk Framework

For Public Construction Procurements subject to the High Value High Risk Project Assurance Framework:

(a) an amended Victorian Public Construction Contract or an alternative form of contract permitted under that framework is permitted under these Directions;

(b) material contract departures approved under the High Value High Risk Framework do not require separate approval under Direction 7.1.3(b); and

(c) material contract amendments approved under the High Value High Risk Framework do not require separate approval under Direction 7.1.4(b).

7.1.7 Partnerships and alliancing

Public Construction Procurements that are subject to the Partnerships Victoria Requirements or the Victorian Alliancing Policy:

(a) are not required to comply with this Direction 7; and

(b) must use contracts that are consistent with those policies.

Contracting requirements (Instruction 7.1)

Effective date: 1 July 2018

Objective: To prescribe approved contracts and rules for contract use, to promote the consistent use of contracts

7.1.1 Victorian Public Construction Contracts

(a) The Victorian Public Construction Contracts are those contracts listed as being Victorian Public Construction Contracts on the Department’s website.

(b) The Victorian Public Construction Contracts approved under Instruction 7.1.1(a) must be:

(i) published on the Department’s or an Agency’s website; or

(ii) made available for inspection on request where publication is not possible due to third party intellectual property rights.

7.1.2 Use of Victorian Public Construction Contracts

(a) An Agency is permitted under Direction 7.1.2(a)(ii) to issue a tender that includes an amended Victorian Public Construction Contract or an alternative form of contract if one or more of the following circumstances apply:

(i) Victorian Public Construction Contracts are inappropriate for the type of works being procured;

(ii) Victorian Public Construction Contracts do not sufficiently address interface issues where there are multiple contractors working on a site or where the works are undertaken on an operational site; or

(iii) the Works or Construction Services relate to leased premises or third party property where the form of contract is required to be approved by the lessor or such third party.

(b) Within 30 days after issuing a tender that relies on paragraph (a), the Accountable Officer must provide a copy of the contract to the Department and details of the applicable circumstances.

Transitional use of agency precedent contracts

(c) Agencies are permitted to use existing precedent forms of contract instead of Victorian Public Construction Contracts in accordance with the transitional processes published by the Department.

(d) If, under the processes described in paragraph (a), an Agency is advised that a contract is no longer permitted for transitional use, the Agency must discontinue use of that contract from the date the Agency is notified of the decision.

7.1.3 Departures to contracts during tender negotiation

(a) For the purposes of Direction 7.1.3, a material contract departure is one that, taking into account the value, complexity and risk of the Works or Construction Services, could substantially impact the manner in which Public Construction Procurement is undertaken by other Agencies.

(b) A material contract departure must only be accepted during tender negotiations following approval by the Secretary or a person authorised in writing by the Secretary.

(c) A request for approval under paragraph (b) must be made in writing to the Secretary by an Accountable Officer, including:

(iv) the contract departure marked up against the contract issued at tender; and

(v) the reasons why the departure or departures should be accepted.

7.1.4 Amendments to contracts during life of contract

(a) For the purposes of Direction 7.1.4, a material contract amendment is one that, taking into account the value, complexity and risk of the Works or Construction Services, could substantially impact the manner in which Public Construction Procurement is undertaken by other Agencies.

(b) A material contract amendment must only be agreed to following approval by the Secretary or a person authorised in writing by the Secretary.

(c) A request for approval under paragraph (b) must be made in writing to the Secretary by an Accountable Officer, including:

(i) description of the nature of the proposed amendment;

(ii) explanation as to how the proposed amendment arose; and

(iii) reasons why the proposed amendment should made.

Tools and support

The Victorian Public Construction Contracts are listed at Practitioners Toolkit - Standard form contracts.

Victorian Public Sector standard form construction contracts have been refreshed and are available at Practitioners Toolkit - Standard form contracts.

Model Request for Tender Conditions are available at Practitioners Toolkit - Tools and templates.

Further information on the transitional use of Agency precedent contract is presented in the Fact sheet - Transition provisions for the introduction of the revised Ministerial Directions for Public Construction, available at Practitioners Toolkit - Fact sheets.

The Practitioners Toolkit includes key documents, guidance and information relating to the Ministerial Directions and Instructions.

For further information about the Ministerial Directions and Instruction for public construction procurement, please contact the Construction Policy Team.

Reviewed 24/07/2018
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