Compliance with legislative and policy requirements (Construction Guidance 7.2.1)

Effective date: 1 December 2022

Objective: To list policy requirements that construction contracts must comply with.

Summary

Contracts for Public Construction Procurement need to address legal and policy requirements.

Policy requirements include those that apply generally, those specific to procurement, and others specific to construction procurement.

This guidance summarises the legal and policy requirements that are most relevant to contracts for Public Construction Procurement.

Purpose

Many legislative and policy requirements impact the way that government interacts with its external suppliers, including the rights and obligations owed.

These requirements seek to achieve many aims, some of which include:

• effective public financial management (e.g. auditing requirements)
• fair treatment of suppliers (e.g. fair payment and intellectual property requirements)
• transparency and accountability (e.g. freedom of information and contracts publishing)
• broader social, economic or environmental outcomes (e.g. industry participation and social procurement).

In many instances, compliance with policies and legislation requires Agencies to include certain rights and obligations in their contracts with external suppliers.

Summary of legislative requirements

This is not an exhaustive summary of policy and legislative requirements that may be relevant to contracts for works or construction services. Agencies must ensure that they comply with any other policy or legislative requirements that are not summarised here.

Not all laws or policies apply to all procurements. Verify the operation of policy or legal requirements before addressing them in contracts.

Nothing in this guidance is intended to extend, limit or alter the scope of these legislative and policy requirements.

Victorian Auditor General’s ‘follow the dollar’ powers

Under the Audit Act 1994 (Vic), the Victorian Auditor-General’s Office has powers to determine the efficiency, effectiveness and economy of the services and functions delivered through contracts with private or not-for-profit providers and associated entities through 'follow-the-dollar' performance audits.

The Victorian Auditor-General’s Office’s powers to conduct follow-the-dollar audits exist under legislation. Instruction 4.2.1(3.1(g)) of the Standing Directions 2018 Instructions requires contracts to provide for the Auditor-General to have access to the premises and systems of private sector contractors and subcontractors as necessary under statute.

Contracts for works or construction services should reflect Victorian Auditor-General‘s statutory powers to conduct 'follow the dollar' audits under the Audit Act to achieve the following outcomes:

• clarify that any audit undertaken by Victorian Auditor-General under the Audit Act does not give rise to any entitlement to time or cost under the contract, or to other claims against the Agency
• require the Contractor to permit, and procure that its subcontractors and suppliers permit a public audit and comply with the Victorian Auditor-General ‘s requirements during the audit
• require the Contractor to provide the Victorian Auditor-General with reasonable working accommodation and associated facilities where required for the purpose of undertaking the audit
• clarify that the Contractor's obligations of confidentiality under the contract are subject to the Contractor's obligations under the Audit Act.

Security of payment

Security of payment (Construction Direction 7.2.7) requires contracts to be consistent with the requirements of the Building and Construction Industry Security of Payment Act 2002.

The Act is designed to ensure that people and businesses who undertake to carry out construction work or supply related goods and services under a construction contract are:

• entitled to receive progress payments, by granting them a statutory entitlement to that payment
• able to recover progress payments, by establishing procedures for the making of payment claims, adjudication of disputed payment claims, and recovery if payment is not made.

Privacy and data protection

Agencies covered by the directions must handle official and personal information in accordance with the Privacy and Data Protection Act 2014 (Vic) and associated Information Privacy Principles and Codes of Practice.

At a minimum, Agencies must ensure that contracts for works or construction services contain provisions addressing the Privacy and Data Protection Act that:

• require the Contractor to be bound by the requirements of the Privacy and Data Protection Act, particularly the Information Privacy Principles and applicable Codes of Practice as if it were the Principal
• require the Contractor to notify the Principal when it becomes aware of a breach of the requirements of the Information Privacy Principles and applicable Codes of Practice
• ensure these obligations survive termination or expiration of the contract
• ensure that these requirements are passed on to subcontractors where necessary.

Additional contractual obligations and management systems may be required if the nature of the works or construction services mean that the Contractor will have access to sensitive information.

Freedom of Information

Tender documentation and contracts must make it clear that the Agency may disclose documents submitted by tender participants to comply with the Freedom of Information Act 1982 (Vic), subject to the exemptions in that Act.

Summary of policy requirements

This is not an exhaustive summary of policy and legislative requirements that may be relevant to contracts for Works or Construction Services. Agencies must ensure that they comply with any other policy or legislative requirements that are not summarised here.

Not all laws or policies apply to all procurements. Verify the operation of policy or legal requirements before addressing them in contracts.

Nothing in this guidance is intended to extend, limit or alter the scope of these legislative and policy requirements.

Partnerships Victoria Requirements

When undertaking a public private partnership, Agencies must comply with the Partnerships Victoria Requirements. This policy comprises the Partnerships Victoria Requirements and associated guidance and templates, along with the National Public Private Partnerships Policy and Guidelines.

The Partnerships Victoria Requirements include standard form contracts and agreed commercial positions. The requirements of the Partnerships Victoria Requirements take priority over any of the matters set out in the directions and instructions to the extent there is any conflict.

Refer to the Partnerships Victoria Requirements for more information.

National Alliance Contracting Guidelines

When undertaking an alliance or other collaborative form of contracting, such as early contractor involvement or managing contractor arrangements, Agencies must comply with the National Alliance Contracting Guidelines.

The requirements of the National Alliance Contracting Guidelines take priority over any of the matters set out in the Directions and Instructions to the extent there is any conflict.

Refer to the National Alliance Contracting Guidelines for more information. References to the Victorian Alliancing Policy have been superseded by the National Alliance Contracting Guidelines.

Fair Payments Policy

The Victorian Government’s Fair Payments Policy exists to support small and medium businesses by increasing the timeliness and certainty of cash flow. The Fair Payments Policy applies to contracts entered into for goods and services, including works or construction services, where the total value does not exceed $3 million.

If the Fair Payments Policy applies to a procurement, Agencies must include contractual provisions that provide for:

• payment of properly rendered tax invoices within 10 business days
• penalty interest to be paid on any overdue amount outstanding for more than 10 business days, accrued at the rate set out under the Penalty Interest Rates Act 1983 (Vic)
• the supplier to provide notice on late payment in order to receive penalty interest
• suspension of the 10 day payment period in the event of a dispute.

Most contracts for works or construction services are also subject to the Building and Construction Industry Security of Payment Act 2002. Security of payment (Construction Direction 7.2.7) requires that contracts for works or construction services be consistent with this Act and provide for:

• fair entitlement to payment, including identifying appropriate milestone payments
• prompt payment, with interest payable on late payments.

Protective Data Security Standards

The Victorian Data Security Standards, issued under the Privacy and Data Protection Act, establish 18 high level mandatory requirements that Agencies must comply with to protect public sector data.

Agencies must ensure that contracts contain provisions that prohibit the Contractor from breaching or causing the Agency to breach a Protective Data Security Standard in respect of any data held, used, managed, disclosed or transferred by the Contractor on behalf of the Agency.

Refer to the guidance issued by the Office of the Victorian Information Commissioner.

Where health information may be accessed by the Contractor when performing works or construction services, Agencies should ensure appropriate provisions are included in contracts to address the requirements of the Health Records Act 2001 (Vic).

Intellectual Property Policy

The Whole of Victorian Government Intellectual Property Policy applies to all Departments and Agencies. It is supported by the Intellectual Property Guidelines. The intention of the Intellectual Property Policy is that:

• the State grants rights to its intellectual property, as a public asset, in a manner that maximises the impact, value, accessibility and benefit consistent with the public interest
• the State acquires or uses third-party intellectual property in a transparent and efficient way, upholding the law and managing risk appropriately.

Intellectual property may arise in a procurement for Works or Construction Services in a number of ways:

• intellectual property inputs: intellectual property brought to the agreement by the agency or contractor, including:
  • background intellectual property: existing intellectual property owned by the agency or the contractor and brought to the agreement as a tool or building block, such as pre-existing business processes
  • third party intellectual property: intellectual property brought to the agreement by one of the parties to the contract but owned by a third party, such as software programs
• intellectual property outputs: intellectual property generated as a result of the agreement, usually referred to as project, contract or developed intellectual property. There may also be improvements made to intellectual property inputs which are created incidentally to the procurement activity. These should also be considered as part of the project intellectual property.

Under Principle 9 of the Intellectual Property Policy, when procuring works or construction services Agencies must:

• address in an agreement any rights to intellectual property (including pre-existing intellectual property) that may arise as a consequence of the procurement
• secure a licence to the intellectual property, only to the extent necessary to achieve the purposes of the procurement
• only acquire ownership of the intellectual property if a licence is not adequate in the circumstances.

The Intellectual Property Guidelines require contracts to address background intellectual property, third party intellectual property and project intellectual property in a manner appropriate to the purpose of the procurement and consistent with the Intellectual Property Policy. Appropriate contract management procedures must be followed, including the ongoing management of any intellectual property at the time of variations to the contract and after the contract has ended.

DataVic Policy

The DataVic Access Policy applies to all Departments and Agencies. It is supported by the DataVic Access Policy Guidelines. The intention of the DataVic Access Policy is to:

• enable public access to government data to support research and education
• promote innovation
• support improvements in productivity and stimulate growth in the Victorian economy
• enhance sharing of, and access to, information rich resources to support evidence based decision making in the public sector.

The DataVic Access Policy Guidelines state that Agencies should secure contractual permission to release data by including a clause in the contract to facilitate making datasets available to the public.

As an intended departure from how other Intellectual Property is dealt with under the Intellectual Property Policy, the DataVic Access Policy Guidelines state that Agencies should negotiate contracts in which the ownership of all data, including any intellectual property rights, vest in the Agency upon the time of its creation. If an Agency does not wish to maintain ownership of a dataset, a contractual licence should be negotiated that permits the use, reuse and sharing of data.

Compliance with legislative and policy requirements (Construction Instruction 7.2.1(f)) sets down specific requirements for the State to take custody and ownership of geoscience data.

Ownership and custody of geoscience data

When procuring services for geotechnical investigations, or works or services that may require geotechnical investigations, Agencies must ensure that their contracts provide for the ownership and custody of geoscience data collected for the project to be transferred to the State of Victoria, where:

• ‘geoscience data’ includes geological, geotechnical and environmental information, reports, maps, images, recordings, survey results and drill core, drill cutting and associated materials embodied in any form
• ‘geoscience data collected for the project’ includes geoscience data generated, placed, stored, processed, retrieved, printed, accessed, or produced using data supplied by the Principal, for the purpose of the contract.

Supplier Code of Conduct

The Victorian Government is committed to ethical, sustainable and socially responsible procurement. In ensuring that suppliers maintain the same values as the Government, the State has established a Supplier Code of Conduct. The Code outlines ethical standards in behaviour that suppliers, as partners, will aspire to meet when conducting business with the State.

Agencies must ensure that suppliers have submitted the required commitment letters in relation to the Code either as part of the tender process or through pre-qualification.

Refer to Supplier Code of Conduct for more information.

Fair Jobs Code

The Fair Jobs Code is committed to ensuring that suppliers are recognised for treating workers fairly.

Requirements under the Fair Jobs Code applies to open tenders, Selective Tenders, or Limited Tenders, (and to the resultant contract), in the following circumstances:

An Agency may enter into a contract with a tender participant that does not hold a Fair Jobs Code Pre-Assessment Certificate, subject to sections 4.3 or 4.4 of the Fair Jobs Code.

From 1 December 2022, Agencies must ensure that their Tender Documentation and contracts contain the relevant Fair Jobs Code model clauses. Refer to the Fair Jobs Code for more information, including guidance, templates and model clauses.

Commitments made by suppliers

To give contractual effect to commitments made by suppliers under Construction Instruction 4.1.5, contracts for works or construction services need to contain provisions that:

• include continuing obligations on the supplier, that apply from the date the tender is submitted and survive contract termination or expiry, that mirror the probity commitments made by the Contractor in the tender process, and
• entitle the Agency to remedies if the obligations are breached, including remedies for substantial breach where appropriate.

Shared reporting regime

Contracts for works or construction services need to contain provisions that will comply with the shared reporting regime in Supplier performance and shared reporting regime (Construction Instruction 8.2):

• obtain supplier consent for performance information for that contract being used to evaluate the supplier in future Victorian Government tenders
• link to provisions in the tender documentation
• require the supplier to cooperate with the shared reporting regime.

Disclosure of information

To give contractual effect to an Agency’s legal or policy requirements to disclose information, contracts for works or construction services must grant the Agency sufficient rights to enable this disclosure to occur.

Non-use of certain cladding products

Contracts must prohibit the installation or design of Prohibited Cladding products into any work in connection with buildings of Type A or Type B Construction, as per the Prohibition of High-Risk External Wall Cladding Products Declaration issued by the Minister for Planning.

Minimum rate of pay for tip truck owner drivers

When procuring works that may require the use of tip trucks, Agencies must ensure that their contracts require any tip truck owner driver engaged in connection with excavation work, directly or indirectly, through one or more subcontractors, receives at least minimum rates of pay.

The minimum rates of pay that apply are based on the advisory rates and cost schedules for tip truck owner drivers developed by the Transport Industry Council.

The requirement applies to all tip truck owner drivers engaged on a project, whether the owner driver is engaged directly by the Contractor or indirectly through one or more subcontractors. Contractors will need to pass this requirement on through their supply chains.

The requirement provides flexibility for the method of payment to tip truck owner drivers:

• payment of hourly rates, or
• payment of per load rates.

The requirement for minimum rates of pay for tip truck owner drivers is intended to ensure tip truck owner drivers are paid a rate that will fully cover their operating costs, provide a return for their own labour and a return on their business investment. This will ensure they can cover their business costs and maintain their vehicles and that actions to obtain work do not create safety concerns which compromise the safety of all road users.

The rates and cost schedules for tip truck owner drivers provide information about typical operating costs and specify hourly rates of pay. They form the basis against which the minimum contract rates of pay for owner drivers on Victorian Government construction projects can be determined. They do not provide advice on per load rates.

The Transport Industry Council has developed tip truck rates and costs schedules, which are required to be updated annually and published in the Government Gazette.

The minimum hourly rates published in the Schedule (as Gazetted 18 August 2022) are:

Practitioners should verify currency of rates at rates and cost schedules for tip truck owner drivers, when they undertake due diligence on compliance with this requirement.

Per load rates must be arrived at based on a reasonable estimate of the time likely to be required to complete a specific job, taking into account all of the relevant circumstances, multiplied by the minimum hourly rate and adjusted for any agreed incentive payment. The agreed incentive component, which is in addition to the minimum rate, may be reduced where agreed loads are not met.

For projects that impose additional project-specific requirements Agencies should consider a reasonable adjustment to be paid to tip truck owner drivers in addition to the minimum rates. Agencies should specify any proposed adjustment rate in the contract released at tender.

Example - to determine a per load daily rate:

Where the relevant hourly rate is $148.03 per hour, to arrive at contract load rates, typically 20 per cent should be added to the hourly rates. This is then converted to a daily rate that will be paid if the driver completes an agreed number of loads. The daily rate can be amended in accordance with the required number of hours for the project.

For a tip truck owner driver using a Truck and Quad Axle Dog Trailer GCM 42.5, engaged through a hiring agency, the standard approach would be:

Note: Tip truck owner drivers are generally engaged through a hiring firm. Hiring firms add an agency fee to the tip truck charge which is in the order of 10 per cent. It is important that this fee is not deducted from the required minimum payment to the owner drivers.

Local Jobs First – Victorian Industry Participation Policy

The Local Jobs First - Victorian Industry Participation Policy requires Agencies to consider competitive local suppliers, including small and medium sized enterprises, when awarding projects valued at:

• $1 million (exclusive of GST) or more in regional Victoria, or
• $3 million (exclusive of GST) or more in metropolitan Melbourne or for state-wide activities

Victorian Industry Participation Policy Strategic Projects, which are procurements valued at $50 million (exclusive of GST) or more (or as otherwise agreed by government) must meet minimum local content requirements determined on a case-by-case basis. Strategic Projects also have a requirement to maximise the use of local steel products from locally milled steel where relevant.

Minimum local content requirements can be set by the Minister for Industry and Employment for selected Strategic Project types:

• 90% for a construction project;
• 80% for a services project or a maintenance project; and
• 80% for the maintenance or operations phase of a Strategic Project.

Agencies must ensure that their tender documentation and contracts contain the relevant Local Jobs First model clauses.

Local Jobs First - Major Projects Skills Guarantee

The Local Jobs First - Major Project Skills Guarantee requires all publicly funded contracts for certain works or construction services valued at or over $20 million (exclusive of GST) to use Victorian apprentices, trainees, or engineering cadets for at least 10 per cent of the total estimated labour hours.

Agencies must ensure that their tender documentation and contracts contain the relevant Local Jobs First model clauses.

Victoria’s Social Procurement Framework

Victoria’s Social Procurement Framework puts social and sustainable outcomes at the centre of the Government’s procurement activity.

The Framework applies to all Government departments and agencies and to procurement of all goods, services and construction. The framework includes specific social and sustainable procurement objectives and corresponding outcomes.

All Agencies must apply Victoria’s Social Procurement Framework from 1 September 2018.

Agencies implement the Framework through individual procurement activities using a scalable approach based on expenditure.

Regional under $1 million; Metro or State-wide under $3 million (values exclusive of GST)

Incorporate social objectives into regular procurement planning.

Seek opportunities where available to directly or indirectly procure from social enterprises, Australian Disability Enterprises or Aboriginal businesses.

Regional $1 to $20 million; Metro or State-wide $3 to $20 million (values exclusive of GST)

Incorporate social objectives into regular procurement planning.

Use evaluation criteria (5 to 10 per cent weighting) to favour businesses whose practices support social and sustainable objectives.

$20 to $50 million (values exclusive of GST)

Complete a Social Procurement Plan during procurement planning.

Include performance standards and contract requirements that pursue social and sustainable objectives.

Over $50 million (exclusive of GST)

Complete a Social Procurement Plan during procurement planning.

Include targets and contract requirements that pursue social and sustainable objectives.

Refer to the Social Procurement Framework for more information, including guidance, registers and templates.

Building Equality Policy

The Building Equality Policy will create training and employment opportunities for women through government procurement on building and infrastructure projects.

The Building Equality Policy is implemented through the Social Procurement Framework. It aligns with the Women’s equality and safety objective.

The Building Equality Policy applies to:

• all publicly funded construction projects valued at $20 million or more (excluding GST)
• Requests for Tender released to market from 1 January 2022.

Where the Policy applies, tenderers are required to:

• meet project-specific gender equality targets
• engage women as apprentices and trainees for at least 4% of the contract works’ total estimated labour hours for these roles
• develop and implement Gender Equality Action Plans.

Agencies must ensure that their Tender Documentation and contracts contain the relevant Social Procurement Framework and Building Equality Policy model clauses.

Refer to the Building Equality Policy for more information, including guidance and templates.

Useful resources

Suite of Victorian Public Construction Contracts available at Construction standard form contracts.

Revision history

First release - 1/07/2018

Revision 1 - 27/808/2018

Minimum rates of pay for tip truck owner drivers: New section inserted to describe the policy Minimum rates of pay for tip truck owner drivers on government projects

Revision 2 - 18/10/2018

Minimum rates of pay for tip truck owner drivers:

• For vehicles over 5 years old, the minimum hourly rates published in the Schedule updated to reflect the rates gazetted in October 2018.
• Example to determine a per load daily rate updated to reflect the minimum hourly rate gazetted in October 2018.

Revision 3 - 30/12/2018

Victorian Industry Participation Policy:

• Update thresholds applying to this policy to reflect recent policy change.
• Thresholds are established at the project level, no longer at the contract level.
• Insert new paragraph noting that the responsible Minister can establish minimum levels of local content requirements for selected Strategic Project types.

Major Projects Skills Guarantee: Update thresholds applying to this policy to reflect recent policy change. Thresholds are established at the project level, no longer at the contract level.

Revision 4 - 8/07/2020

Working for Victoria: New section inserted to describe the policy Working for Victoria.

Revision 5 - 1/07/2021

Fair Payments Policy: Amend discussion to reflect revised Fair Payment Policy – payment of a properly rendered invoice with 10 Business Days and related procedures where the contract value does not exceed $3 million.

Non-use of certain cladding products: Revise requirement restricting use of certain cladding products based on the Prohibition of High Risk External Wall Cladding Products Declaration.

Minimum rates of pay for tip truck owner drivers:

• For vehicles over 5 years old, the minimum hourly rates published in the Schedule updated to reflect the rates gazetted in April 2021
• Example to determine a per load daily rate updated to reflect the minimum hourly rate gazetted in April 2021.

Revision 6 - 22/04/2022

Minimum rates of pay for tip truck owner drivers:

• The minimum hourly rates published in the Schedule updated to reflect the rates gazetted on 21 April 2022.
• Example to determine a per load daily rate updated to reflect the minimum hourly rate gazetted on 21 April 2022.

Revision 7 - 16/06/2022

New section inserted to describe the Building Equality Policy.

Revision 8 - 1/12/2022

New section inserted to describe the Fair Jobs Code and deleted Working for Victoria policy.

Revision 9 - 11/04/2023

Deleted reference to Victorian Alliancing Policy and update reference to National Alliance Contracting Guidelines

Revision 10 - 1/09/2024

Updated Fair Jobs Code requirements applicable as at 1 September 2024.

Tools and support

The Construction Toolkit includes key documents, guidance and information about the Ministerial directions and instructions for public construction.

This fact sheet summarises the Tip Truck Policy, describes how to calculate minimum rates of pay for tip truck owner drivers engaged in the removal of soil and rock from excavation work on Victorian Government funded construction projects and sets out managerial responsibility and compliance requirements.

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