Greenfield Agreements – When is construction commenced?
The recent decision in Applications by CPB Contractors Pty Limited & John Holland Pty Ltd [2019] FWC 1122 (21 February 2019) has examined eligibility requirement to enter into a Greenfield agreement, specifically the fine line between preparatory works and works in the conduct of an established enterprise.
Applications for two Greenfield agreements were made to the FWC by the joint venture partners in late 2018 in respect of construction work on the West Gate Tunnel Project. The unions, after unsuccessful negotiations of the agreements, opposed the applications primarily on the ground that they did not relate to a genuine new enterprise of the Joint Venture.
The decision turned on consideration of the works the Joint Venture considered preparatory to the establishment of the new enterprise, including site establishment, foundation works and services relocation.
Prior to application to the FWC, the Joint Venture executed the Design and Construct contract with the Client for the design and construction of the tunnels, freeway upgrade, bridges and elevated roadways and other works pursuant to the Contract. It was found that the execution of the contract in itself did not constitute an established enterprise. However, the Commission considered that in a commercial context there will be a point in time where the actual activity intended to be performed for commercial reward will commence, and at that time, the enterprise is established. In this case, this point was when the Joint Venture commenced delivery of the works required pursuant to the Contract in exchange for commercial reward.
Utilising progress reports prepared by the Joint Venture, the Commission concluded that, as at the date approval of the Agreements was sought, works pursuant to contract had ‘well and truly’ commenced and commercial reward had been sought for the works performed including piling work and the claim of payment for executed works.
This decision illustrates the limitations of a Greenfield application. Prior to engaging in the Greenfield process Employers should consider the following and plan necessary activities accordingly:
Allow plenty of time to negotiate an agreement. Negotiations with unions may cause significant delays to project deadlines and fulfillment of contractual obligations. Particularly where agreement is unlikely and it is necessary to invoke the statutory 6 month negotiating period prior to seeking approval of an application by the FWC; and
Be aware of the nature of works able to be completed during the negotiation process. The contracted works to be performed for commercial reward, particularly after the execution of the Contract, cannot be performed prior to the date approval of a Greenfield application is sought (i.e. the date the application is submitted to the FWC).
If you require any assistance, place contact Drayton’s on (07) 3831 7099.
