The Post-BPIC Playbook: Fortifying Your Subcontractor Agreements Against New Liabilities

John Merlo
Jan 5
13 min read

The permanent abolition of Queensland's Best Practice Industry Conditions (BPIC) policy is more than a legislative footnote; it's a seismic shift in the construction industry's risk landscape. For head contractors on government projects, the removal of this prescriptive, top-down compliance framework creates a significant liability vacuum. Where project failures, defects, and non-conforming products were once partially governed by BPIC's stringent supply chain mandates, that responsibility now falls squarely on your shoulders.

Your standard subcontractor agreements, likely drafted in a pre-abolition world, are now your primary—and potentially inadequate—line of defence. This playbook provides a strategic guide to understanding the new liabilities and outlines the critical amendments needed to transform your subcontractor agreements from a potential weakness into a contractual fortress.

Key Takeaways

BPIC Abolition Shifts Risk: The permanent removal of the Best Practice Industry Conditions policy fundamentally alters the risk landscape for head contractors on government projects.
Your Sub-Contracts Are the New Frontline: Standard subcontractor agreements are likely insufficient to protect you from new liabilities, especially concerning non-conforming products.
Focus on Liability Re-delegation: The primary defensive strategy is to amend agreements to create a clear, enforceable chain of liability that flows down to the responsible subcontractor.
Proactive Amendment is Essential: Waiting for a dispute to arise is too late. A thorough review and update of your contract templates is a critical, immediate priority.

The End of an Era: What BPIC's Abolition Really Means for Head Contractors

The decision to scrap the BPIC policy was not made in a vacuum. It represents a deliberate move away from a highly regulated procurement model towards one that prioritises economic efficiency and places a greater onus on individual contractors to manage their own affairs. Understanding this transition is the first step in adapting your business practices to the new reality of government projects and legislative updates.

Deconstructing the Best Practice Industry Conditions (BPIC) Policy

The BPIC policy was a top-down compliance framework originally intended to elevate standards on major government construction projects. It was a detailed and prescriptive set of rules that head contractors were contractually required to enforce throughout their entire supply chain.

These conditions went far beyond standard building codes, dictating specific requirements for wages, employment conditions (such as the ratio of apprentices to tradespeople), local content quotas, and various other supply chain practices. In essence, it made the head contractor the de facto enforcer of government industrial relations and procurement policy on-site.

Why Was BPIC Scrapped? The Financial Imperative

The core driver behind the policy's permanent abolition was economic. Queensland Treasury modelling released in November 2024 revealed alarming financial data. It found that the compliance burden and prescriptive nature of BPIC could increase project costs by up to 25%. The broader economic projections were even more stark, suggesting a potential net economic cost of up to $17.1 billion to the state and the risk of 26,500 fewer homes being built over five years if the policy had been allowed to continue.

This was subsequently confirmed by the Queensland Productivity Commission's Interim Report released in July 2025, which modelled the net economic cost at between $5.7 billion and $20.6 billion depending on assumptions used. Faced with these figures, the government opted to remove the policy to reduce construction costs and stimulate building activity, a key consideration in the complex world of Queensland’s building and construction law.

Introducing the Queensland Procurement Policy 2026

The BPIC framework has been replaced by the significantly streamlined new Queensland Procurement Policy 2026. This marks a dramatic shift in philosophy, reducing a cumbersome 700-page document to a concise 50 pages. The new policy moves away from rigid, prescriptive rules and adopts a more principles-based approach. This change places a much greater onus on head contractors to develop and implement their own robust risk management and procurement strategies. The government is no longer dictating the 'how'; it is simply setting the 'what', leaving you to manage the execution and, critically, the associated risks.

The shift from the BPIC to the QPP 2026 is more than just a reduction in paperwork; it's a fundamental transfer of risk. Previously, compliance with BPIC provided a certain, albeit costly, safe harbour. Now, head contractors are solely responsible for managing supply chain risks, making robust subcontractor agreements more critical than ever before. The focus must shift from top-down compliance to bottom-up contractual defence.

The New Risk Landscape: Identifying Liability Gaps in a Post-BPIC World

With the BPIC scaffolding removed, the structural integrity of your project's risk management now depends entirely on the strength of your contracts. Head contractors must urgently reassess their standard agreements to identify the liability gaps that have been exposed by this policy change. The primary areas of concern are supply chain risk, subcontractor liability, and the ever-present threat of non-conforming products.

Where Does the Project Liability Now Fall?

The abolition of BPIC creates a liability vacuum that, by default, is filled by the head contractor. Without the prescriptive framework mandating certain supply chain checks and balances, the primary legal nexus for project failures, defects, and product non-conformance now rests squarely on the head contract between you and the principal.

Regardless of which subcontractor was at fault for supplying faulty materials or performing defective work, the client will look to you—the head contractor—for recourse. Your legal obligation is to the principal, and it is your responsibility to manage your downstream risk.

Uncovering the Hidden Gaps in Your Standard Agreements

Now is the time to review your standard subcontractor agreement through this new lens. Imagine a scenario where a significant defect is discovered post-completion. Your first move is to turn to your agreement with the responsible subcontractor. But what if the definition of "defect" is vague? What if your indemnity clause is weak and doesn't explicitly cover all associated costs like investigation, expert reports, and delay damages? What if there are no specific provisions for non-conforming building products, a risk previously mitigated by BPIC's supply chain rules?

These once-acceptable clauses, drafted under a different regulatory regime, now represent significant financial risks. A skilled building and construction lawyer can be invaluable in stress-testing these documents for post-BPIC vulnerabilities.

The Critical Threat of Non-Conforming Product Liability

Non-conforming product liability refers to the legal and financial responsibility for building materials or components that do not meet Australian Standards, the National Construction Code, or the project's specifications. Clear examples include flammable cladding, substandard insulation, or structural steel that fails to meet grading requirements.

The absence of BPIC's supply chain mandates makes it easier for such products to inadvertently enter a project. Without specific contractual protections that push this liability downstream, the head contractor will be left bearing the enormous cost of investigation, removal, replacement, and any resulting project delays.

Relying on your old subcontractor agreement template is a significant gamble. These documents were often drafted with the BPIC framework as an assumed backdrop. Without it, they may lack the specific, robust language needed to successfully pursue a subcontractor for liability related to non-conforming products, potentially leaving your company to bear the full cost of rectification.

Building Your Contractual Fortress: Key Amendments for Subcontractor Agreements

To effectively manage the risks exposed by BPIC's abolition, head contractors must proactively amend their subcontractor agreements. The goal is to build a contractual fortress that clearly defines responsibilities, establishes a direct line of liability, and provides unambiguous mechanisms for cost recovery. This is not about creating an adversarial relationship; it's about creating clarity and ensuring the party responsible for a failure is the party that bears the cost.

Redefining "Defect" and "Non-Conforming Product"

The foundation of your contractual fortress lies in its definitions. You must draft a more comprehensive definitions clause that leaves no room for ambiguity. Start by broadening the definition of "Defect" to be as inclusive as possible. It should explicitly state that a defect includes any work, material, or product that fails to comply with the head contract, the project specifications, the National Construction Code, any relevant Australian Standard, or foundational legislation like the Building Act 1975.

This precise language removes subjective interpretation and creates a clear, objective standard against which the subcontractor's performance can be measured, forming the bedrock for all subsequent liability and indemnity clauses.

Crafting Ironclad Indemnity and Liability Clauses

An indemnity clause is a contractual promise by one party to cover the losses of another. In a post-BPIC world, this clause must be ironclad. The key is to implement "back-to-back" provisions.

This legal drafting technique ensures that any liability, obligation, or responsibility you have to the principal under the head contract is mirrored in the subcontractor's liability to you for their portion of the works.

The clause must be drafted to explicitly cover all costs associated with the rectification of defects or non-conforming products. This includes not just the direct cost of removal and replacement, but also indirect costs such as expert investigation fees, re-certification, legal expenses, and any liquidated damages or delay costs passed down from the principal. An expert commercial lawyer can ensure these clauses are enforceable and tailored to your specific business needs.

Illustrative Example

Scenario: A head contractor discovers that a subcontractor installed a fire door system that doesn't meet Australian Standards. A weak contract might only allow the head contractor to claim for the cost of the replacement door. A fortified contract, with a strong indemnity clause, would allow the head contractor to claim for the door, the labour to remove and replace it, the cost of re-certification, and any liquidated damages incurred from the project delay caused by the rectification work. This is the difference between a minor loss and a catastrophic one.

Implementing Stricter Quality Assurance and Documentation Requirements

Your contractual amendments must shift your quality assurance process from being reactive to proactive. This is achieved by adding clauses that mandate specific QA actions from your subcontractors before work is carried out.

Start by including a requirement for subcontractors to provide verifiable evidence of compliance—such as manufacturer's data sheets, product test results, or certificates of conformity—for all specified materials before they are brought to site or installed.

Then, include a clause that gives you, the head contractor, the explicit right to inspect and reject any materials that arrive without the required evidence of conformity. This simple but powerful mechanism prevents non-conforming products from ever being integrated into the build, saving immense time and cost down the line.

Flowchart of subcontractor material procurement: procurement, compliance submission, approval check, and delivery. Contact info for guidance.

Strengthening Rights for Rectification and Cost Recovery

A simple "right to rectify" is no longer sufficient protection. Your argument in any dispute must be backed by clear contractual power. Your agreement needs clauses that grant the head contractor the unambiguous right to rectify defects using another contractor and to recover all associated costs from the original subcontractor if they fail to act within a specified, reasonable timeframe. This prevents a non-performing subcontractor from holding your project hostage. It ensures that rectification work can proceed without delay, protecting your project timeline and ensuring that mechanisms related to security of payment are not complicated by protracted disputes over who should perform or pay for the remedial work.

Enforcing the Fortress: Practical Steps for Proactive Contract Management

A well-drafted contract is a powerful tool, but it is useless if it sits in a drawer. Enforcing your contractual fortress requires proactive management, clear communication, and diligent record-keeping. The goal is to use the contract to prevent disputes before they begin and to place you in an undeniable position of strength if they do.

How Should You Communicate These Changes to Your Subcontractors?

The most effective approach for rolling out these new, stricter agreements is transparency. You must frame the changes not as a punitive measure, but as a necessary and professional response to a major legislative shift that impacts the entire Queensland construction industry.

When presenting the new agreement, explain that the abolition of BPIC has transferred significant risk to head contractors, and these updated terms are designed to create a clear and fair system of accountability. Reinforce the core principle: the clauses are there to ensure that the party responsible for an error is the party that bears the cost.

This approach fosters a more accountable supply chain for everyone involved, from Brisbane CBD high-rises to regional projects.

The rollout of these new agreements is a critical moment in your relationship with your subcontractors. Avoid simply sending a new template and demanding a signature. Hold a briefing, explain the 'why' behind the changes—the abolition of BPIC—and frame it as a professional evolution to protect the entire project. A subcontractor who understands the reasoning is far less likely to be adversarial than one who feels ambushed.

The Critical Role of Diligent Record-Keeping

Even the most perfectly drafted contract is only as strong as the evidence you have to enforce it. Meticulous record-keeping is non-negotiable. This includes maintaining detailed site diaries, taking regular, date-stamped photographic evidence of works in progress, documenting all conversations in meeting minutes, and saving all correspondence (especially emails and formal notices).

This evidence trail is crucial for demonstrating a subcontractor's breach of the agreement. This connects directly back to your strengthened QA clauses; the compliance documentation provided (or not provided) by the subcontractor becomes a key part of your evidence file, making any dispute resolution process, including matters before QCAT, far more straightforward.

What Happens When a Dispute Arises?

Your fortified contract provides a clear escalation path. The first step is to issue a formal notice of defect or breach to the subcontractor, referencing the specific clauses in the agreement they have violated. The clear, unambiguous terms you've implemented should, in many cases, facilitate a faster resolution without needing to resort to litigation. If the subcontractor remains non-compliant or disputes the claim, your contract gives you the power to proceed.

You can engage another contractor to perform the rectification work and then initiate cost recovery action against the original subcontractor. This may involve adjudication, or for more complex matters, resolving matters through QCAT or the courts. When a dispute arises, having a strong contractual and evidentiary foundation is your greatest asset.

Looking Ahead: The Broader Implications for Queensland's Construction Sector

The abolition of BPIC is not an isolated event but a signal of a broader shift in government policy towards deregulation and a focus on economic productivity. Head contractors who adapt quickly will be best positioned to navigate the evolving landscape of construction law, while those who don't may find themselves at a competitive disadvantage or exposed to unnecessary risk.

The Re-established Queensland Productivity Commission (QPC)

The significance of the Queensland Productivity Commission Bill 2024 cannot be overstated. The re-establishment of the QPC with a mandate to conduct a priority review of the construction sector indicates that further reforms are likely on the horizon. This review will scrutinise everything from project tendering processes to regulatory burdens.

For contractors, this underscores the urgent importance of getting their own houses in order. Having robust, clear, and fair contracts in place is the first and most critical step in preparing for any new recommendations or regulations that may emerge from this comprehensive industry review.

Will This Change Impact Project Tendering and Bids?

Absolutely. In a post-BPIC environment, sophisticated principals and developers will place a higher premium on demonstrated risk management. A head contractor who can present a well-developed, fortified subcontractor agreement as part of their tender documentation is showcasing a superior level of professionalism and risk mitigation.

This can become a powerful competitive advantage. It signals to clients that you have adapted to the new legislative reality and are less likely to be derailed by costly downstream disputes, subcontractor failures, or issues with non-conforming products. It shows you are not just a builder, but a professional manager of project risk.

Preparing for a More Litigious Environment

Historically, the removal of a prescriptive compliance framework like BPIC can lead to an increase in disputes as parties test the boundaries of new contractual arrangements and responsibilities. The goal of building your contractual fortress is not to invite litigation, but to prevent it. By making liability so clear and the mechanisms for cost recovery so unambiguous, you make it commercially unviable for the party at fault to contest their obligations. This proactive stance is essential for navigating the complex ecosystem involving key bodies like the Queensland Building and Construction Commission (QBCC), the Queensland Civil and Administrative Tribunal (QCAT), and the Queensland Law Society.

Conclusion

The abolition of the BPIC policy is a pivotal moment for Queensland's construction industry, marking a definitive shift of risk and responsibility directly onto head contractors.

In this new environment, relying on a standard-issue subcontractor agreement is no longer a viable or prudent strategy. The only path forward is the proactive development of a "contractual fortress"—a suite of carefully amended agreements meticulously designed to delegate liability, enforce quality, and protect your business from the costly consequences of non-conforming products and subcontractor defaults.

This is not merely a legal technicality; it is a new cornerstone of sound business practice in a post-BPIC world. If you need assistance reviewing and fortifying your contracts to meet these new challenges, contact Merlo Law’s experienced team today.

FAQs

What was the BPIC policy in Queensland?

The Best Practice Industry Conditions (BPIC) was a detailed policy applied to major Queensland Government construction projects. It mandated specific conditions for head contractors to enforce down their supply chain, covering areas like wages, apprentice ratios, employment conditions, and local sourcing. It was a top-down compliance framework that was permanently abolished due to findings that it significantly increased project costs.

How does the abolition of BPIC affect my liability as a head contractor?

The abolition of BPIC removes a layer of prescribed risk management, placing the full responsibility for supply chain conduct, product conformity, and subcontractor performance directly on the head contractor. Without the BPIC framework, your primary defence against downstream failures is your subcontractor agreement. If this agreement is weak, you will likely bear the full financial and legal liability for any defects or non-conforming products.

What is the single most important change I need to make to my subcontractor agreements now?

The most critical change is to strengthen your indemnity and liability clauses to be "back-to-back" with your head contract. This ensures any liability you have to the project principal for a subcontractor's work is mirrored in that subcontractor's liability to you. This clause must explicitly cover all associated costs of rectification, including investigation, removal, replacement, and delay damages.

Can I just use a standard subcontractor agreement template?

It is highly inadvisable. Most standard templates were created when BPIC was in place and may not contain the specific, robust language needed to protect you in the current environment. They often have vague definitions and inadequate indemnity clauses that create significant financial risk for the head contractor. A custom review and amendment by a legal professional is essential.

What are "non-conforming building products" and why are they a bigger risk now?

Non-conforming building products are materials or components that do not meet Australian Standards, the National Construction Code, or project specifications (e.g., flammable cladding, faulty wiring). The risk is greater now because BPIC's supply chain mandates provided some level of oversight. Without them, the onus is entirely on the head contractor to contractually require and verify that subcontractors are using compliant products.

How do I enforce a stronger contract without creating a bad relationship with my subcontractors?

The key is transparent communication. Frame the new agreements as a necessary professional response to a major legislative change (the abolition of BPIC). Explain that the goal is to create a fair system where the party responsible for an error is the one who bears the cost, which ultimately protects the entire project and all parties involved.

This guide is for informational purposes only and does not constitute legal advice. For advice tailored to your specific circumstances, please contact Merlo Law