Posted on 13/03/2018

Industry has mixed response to government review into payment security for subcontractors

Industry has mixed response to government review into payment security for subcontractors

By Natalie Hordov

Industry bodies have had a mixed response to the government’s recent announcement for a review to improve security of payments for subcontractors in WA’s building and construction industry and the establishment of an Industry Advisory Group (IAG).

Key industry representatives and public works agencies will be able to provide input to the IAG, which will facilitate the consultative process to implement industry wide laws.

One potential reform will include introducing trust arrangements to protect funds owed down the contracting chain, in case a head contractor experiences financial difficulty.

Six building companies have gone into administration in the past three months and the aim is to prevent losses such as the potential $5 million facing subcontractors following the collapse of Cooper & Oxley.

Master Builders WA and Subcontractors WA are among the organisations invited to provide input to the IAG.

While Master Builders WA acting director Graeme Dix said it was a step in the right direction, Subcontractors WA chair Louise Stewart said an IAG was a waste of time and an excuse for the government not to act, particularly as they had already gone through the process with the previous government.

“We want legislation like Queensland’s new Building Industry Fairness (Security of Payment) Act 2017, it went live on March 1 and requires project bank accounts for building projects,” she said.

“This is a trust account that secures funds to cover subcontractor payments.

“It’s a well-established requirement in other industries where bankruptcy can place at risk funds earmarked for a particular purpose.

“Real estate agents, for example, are required by law to hold their clients’ deposits in a trust account; travel agents who are members of IATA are required to hold their clients’ payments in trust or guarantee them in some way.

“The state government needs to stand by its election commitment to implement legislative measures to safeguard payments to subcontractors.”

Mr Dix said Master Builders WA was keen to ensure the scope of the IAG was broad enough to cover security of payment for head contractors as well as sub-contractors and others in the contractual payment chain.

“Good should come from the review,” he said.

“We’re keen to see outcomes which benefit all industry stakeholders.

“As acknowledged by the government, it’s a complex industry issue and Master Builders is keen to look at the root causes of the problems as well as explore potential solutions.”