To maximise the likelihood of on time progress payments on a construction project, it is critical that contractors ensure that progress claims comply with Victoria’s Security of Payment legislation.
Here are 5 tips for a valid Security of Payments claim:
- Make one claim per reference date – The contract should state the reference date. A common example is “last day of the month”. The claim can be made on or after the reference date, but there must only be one claim for each reference date. If there is no agreed reference date, a claim can be made every 20 business days after the work commenced.
- Identify the work done or goods and services provided – A general description of the work (“roadworks near Benalla in March”) will not be enough. The payment claim needs to itemise what is charged for and describe each item in a way the recipient can understand and respond to. Use a standard form such as the Victorian Building Authority’s sample SOP payment claim form (click here), or one of the more sophisticated tools available commercially.
- Specify the amount claimed – Include all amounts due under the contract as at the reference date, even if previously claimed. Deduct previous payments. Deduct retentions. Include agreed variations. Exclude non-agreed variations, time-related costs, damages claims, claims relating to latent conditions or changes in regulatory requirements, and claims arising outside the contract.
- Label the claim – For the claim to be valid, it must be identified as being made under the legislation. The following wording is sufficient: “This is a payment claim under the Building and Construction Industry Security of Payment Act 2002 (Vic).”
- Serve the claim – The contract often provides that the Superintendent is the Principal’s agent for this purpose – if so, serve on the Superintendent. Check the contract – it may provide for means of service, including by email. The Act allows personal service, hand delivery to the Principal or Superintendent’s office, post or facsimile.
If the payment claim complies with the Security of Payment Act, the recipient must either pay the full amount or provide a payment schedule within 10 business days. If full payment is not made, the Act provides for relatively quick adjudication of disputes and for payment of undisputed or adjudicated amounts.
Need advice or assistance in recovering payment on a construction job?
Civil Contractors Federation member and experienced construction lawyer Roland Burt has a long‑standing interest in and knowledge of civil engineering and contracting and the legal issues in the area, especially security of payment, programming and delay, latent conditions, the superintendent, OH&S, environmental regulation and standard form contracts.
For specialist advice on security of payment or other legal issues in construction, contact Roland on 03 8199 3300 or email firstname.lastname@example.org
This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please also note that the law may have changed since the date of this article.