Standard Form Contracts

ACCC Proposes to Grant Authorisation to the CMPA

Two standard form contracts released by the Construction Materials Processing Association are expected to improve efficiency, productivity and reduce uncertainty in quarry material suppliers business relationships with purchasers and also owner drivers.

The agreement between members of the CMPA to prepare and publish two standard form contracts, one relating to the Supply of Materials and the other for the contracting of Owner Drivers has been authorised by the Australian Competition and Consumer Commission (ACCC).

The CMPA said the standard forms were designed to provide clarification in dealings which have in many cases, been subject to misunderstanding or dispute.

In authorising the agreement to prepare and publish the agreements the ACCC considered any anti competitive effect of the agreement and any public benefit arising from it and in doing so considered the detail of the contracts. It concluded that there was likely to be a net public benefit.

The Chairman of the ACCC, Mr Graeme Samuel, said “The ACCC considers that the conduct relating to the supply contract will result in public benefit as a result of greater certainty in legal relationships, transaction cost savings and enhanced compliance with legislative requirements.”

CMPA Chairman Grant Phillips said the forms removed uncertainty and expense for quarry owners and owner drivers or material buyers in business dealings.

“We are seeking to provide clarification for each party involved – whether it is an owner driver undertaking delivery work for a quarry or a customer purchasing materials,” Mr Phillips said.

“We have made every effort to ensure the forms are scrupulous in detail and fairness and function to streamline business operations for all parties,” Mr Phillips said.

“The industry has relied for too long on agreements sealed only with a handshake, or orally and often without even a written order form for the supply of material or the contracting of owner driver services,” Mr Phillips explained.

“While we recommend use of the standard forms as guidance only, and there is certainly no compulsion for any CMPA member, contractor or owner driver to use them as is, or amended, we do believe the forms can deliver a greater deal of business efficiency,” Mr Phillips explained.

The CMPA retained Competition Economic Services Pty Ltd to develop the contracts. CES director Lindsay Coombs said he was surprised to learn there were few written contracts to set out responsibilities and obligations of parties.

“We have worked to eliminate that scenario and develop a contract which can be used to record these important details,” Mr Coombs said.

“From my experience in the predecessor organisation to the ACCC, I was convinced that a common form template covering all potential requirements of a contract would provide quarry suppliers with a cost effective and practical starting point for contracting,” he said.

“With experience in its use parties should get benefits from more quickly being able to conclude a contract.”

The Supply contract developed is based on the VicRoads head contract and is particularly suitable for contracts over $80,000. However, it can also be used for contracts of lesser value, according to Mr Coombs.

“In developing the Owner Driver contract we have taken into account the chain of responsibility which is now incorporated in road laws nationally. We have also incorporated the payment procedure set out in the Building Industries Security of Payment Act 2002 which if adopted by suppliers as required by law, should ensure prompt and fair payment from contractors and a fair dispute resolution system,” Mr Coombs explained.

“It is important suppliers and contractors understand that the standard forms are a template and not a contract to mandate what happens between the parties,” Mr Coombs said.

“The form covers as many situations as could be identified. If any provision is not relevant to a particular contractual situation it is expected that the template will be amended,” he said.

“This is emphasised by the fact that there are a number of items in an attachment which have to be negotiated. While there are default amounts suggested for these Items some may be completely removed if they are not relevant.

“This procedure also reduces the risk of the use of the contracts being alleged to be anti-competitive. Any amount of money or time periods – basic issues in competition – are not set by the template but are left to be negotiated,” Mr Coombs said.

Parties to a contract are able to negotiate their own relationships with the “templates a fair and cost efficient starting point if so desired,” Mr Coombs said.

While the current contract relates to work with VicRoads as the principal, it is expected that the contract will be adapted for other major contractors such as local government, water and rail authorities. A version for contracts of lesser value is also planned for release.

The development of the Owner Drivers Contract has been undertaken using the same principles as the major contract and was precipitated by the requirement of the Owner Drivers and Forestry Contractors Act 2005 for a regulated contract for use in employing owner drivers.

In developing the Owner Driver’s contract, the CMPA recognised the existence of a similar document developed by the Transport Industry Council but believes this does not provide the certainty in describing the responsibilities and obligations of both parties in the quarry industry – a situation the CMPA believed left room for disputes to arise.

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