In this article we look at the rules and methods for calculating construction progress payments and the types of related goods and services covered by the Act.

The Security of Payment Act 1999 (NSW) (Part 2): What are the rules for calculating construction progress payments? What related goods and services are covered?

Calculating construction progress payments in accordance with the Act

The amount of a progress payment is to be calculated as follows:

• the amount calculated in accordance with the terms of the contract (Section 9), or
• if the contract does not specifically deal with the matter, the amount calculated on the basis of the value of the construction work done and/or the value of the related goods and services supplied under the contract.

Where construction work and/or related goods and services require valuation for the purposes of a progress payment because the contract does not specifically deal with the matter, the work and/or related goods and services are to be valued having regard to:

• the contract price for the work and/or related goods and services
• any other rates or prices set out in the contract
• any agreed variation by which the contract price, or any other rate or price set out in the contract, is to be adjusted by a specific amount
• if any of the work or related goods are defective, the estimated cost of rectifying the defect

and

• in the case of materials to form part of any building, structure or work arising from construction work, the only materials to be included in the valuation are those that have, or will, become the property of the person for whom the construction work is being done.

Beyond the requirements of the Act, a construction contract may make express provision for the calculation of a progress payment to be set-off against some other amount such as liquidated damages (see J Hutchinson Pty Ltd v Glavcom Pty Ltd [2016] NSWSC 126).

The types of related goods and services covered by the Security of Payment Act

“Related goods and services” are defined in Section 6 of the Act as:

• Goods of the following kind:
  • materials and components to form part of any building, structure or work arising from construction work
  • plant or materials (whether supplied by sale, hire or otherwise) for use in connection with the carrying out of construction work,
• Services of the following kind:
  • the provision of labour to carry out construction work
  • architectural, design, surveying or quantity surveying services in relation to construction work
  • building, engineering, interior or exterior decoration or landscape advisory services in relation to construction work.

Providers of related goods and services who are not already relying on the protections in the Act should consider bringing their contractual and commercial practices within the scheme to enjoy its benefits.

In our next article in this series, we will look at the requirement for service of a valid payment claim and the due date for payment of claims.

Jason Francis