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Defining building work for a project bank account
The Building Industry Fairness (Security of Payment) and Other Legislation Act 2020 received assent on 23 July 2020.
This Act will replace project bank accounts with a new trust account framework, delivering a more streamlined framework. Read about the new trust account framework.
The following information only applies to project bank accounts for certain government contracts tendered after 1 March 2018 up to 28 February 2021.
To decide whether a contract does or will need a project bank account (PBA), a head contractor needs to apply several threshold tests. One test involves determining how much of the contract value relates to building work.
They may need a PBA if more than 50% of the contract price is 'building work' as defined in the:
- Building Industry Fairness (Security of Payment) Act 2017 (BIF Act)
- Building Industry Fairness (Security of Payment) Regulation 2018.
Activities that are building work
For the purposes of a PBA, building work includes:
- erecting or constructing a building (and any related site work)
- renovating, altering, extending, improving or repairing a building (and any related site work)
- providing lighting, heating, ventilation, air-conditioning, water supply, sewerage or drainage for, or in connection with, a building (and any related site work)
- preparing plans or specifications for the performance of building work
- contract administration in relation to the construction of a building that the person has designed
- carrying out a completed building inspection
- fire protection work
- inspections, investigations, advice or reports relating to a termite management system or termite infestation
- building certifying functions under the Building Act 1975
- assessment of a building's energy efficiency
- erecting, managing and removing scaffolding if it is, or was, used for other building work.
Building work also includes work performed by these professionals as part of their professional practice, but only to the extent the work relates to other building work:
- an architect under the Architects Act 2002, schedule 2
- a registered professional engineer under the Professional Engineers Act 2002, schedule 2
- a surveyor under the Surveyors Act 2003, schedule 3.
Examples of activities that are considered building work are:
- refurbishing a high school home economics block
- replacing the roof of an administrative office
- upgrading a chilled water air-conditioning system
- altering a courthouse
- constructing a sports clubhouse.
Activities that are not building work
Building work does not include:
- the construction, maintenance or repair of a busway, road or railway, including associated structures
- an authorised activity for a resource authority under the Minerals and Energy Resources (Common Provisions) Act 2014
Examples of activities that are not building work are:
- extending a public shared pathway
- upgrading or repairing dam and weirs
- upgrading a car park
- marking pavements
- demolishing a building.
Definition of maintenance work
'Maintenance work' is defined as work required on an ongoing basis to:
- prevent deterioration or failure of a thing
- restore a thing to its correct operating specifications
- replace a component at the end of its working life.
Maintenance work doesn't include:
- improving a building to increase its capabilities or functions, or meet new statutory requirements applying to the building
- refurbishing or replacing a building to extend the life of the building.
Determining the percentage of building work
The contract value for most contracts is all for building work, so determining that a PBA is required is straightforward.
Some contracts include combinations of building work. For example, civil, infrastructure and transport projects often include activities defined as building work, so determining the percentage of building work is more complicated.
For example, a project to install new elevator facilities at a town hall, and provide ongoing lift maintenance and servicing, would involve both included and exempt building work for the purposes of a PBA (installation - building work; ongoing maintenance - exempt work).
The head contractor would need to establish how much of the contract price comes from building work and how much from maintenance work to apply the 'more than 50% of contract price' test.