Nahan pledges to aid subcontractors

The West Australian on July 7, 2016

The State Government has promised a range of measures to boost protection for subcontractors but rejected calls for project bank accounts to ensure they are paid in full if a builder collapses.

Treasurer Mike Nahan said the Government would give itself the power to audit all “cascading” subcontracts on public projects so it could decide when disputes arose down the contracting chain whether the complaints were valid.

The Government would also consider a code of conduct to regulate the treatment of subcontractors and blacklist builders who breached it.

But Dr Nahan was not convinced that project bank accounts, which subcontractors support, would secure the funds if a company went bust.

Instead, the Government would adopt a measure that building companies favour to quarantine only retention funds of less than 10 per cent of a project’s value in a trust account for subcontractors.

“The feedback was that project bank accounts are very costly and involved red tape,” Dr Nahan told The West Australian.

“We are going down a different route, which is trust accounts, that we are more confident will stay with the project to help pay the subbies rather than get pulled into the insolvency.”

The Treasurer flagged the new regime after The West exposed concerns about payments to subcontractors, including a cabinetmaker owed more than $300,000 after the CPD Group collapsed in May with $17 million in State contracts.

The full reform package, to be detailed when Parliament resumes next month, includes monitoring the treatment of subcontractors and extending the 28-day deadline for complaints about non-payment.

Dr Nahan said the Government would give Small Business Commissioner David Eaton extra power and resources to respond to subcontractors’ complaints. It would also encourage subcontractors to improve their record-keeping while offering them more information about their rights.

Master Builders WA broadly endorsed the measures but Subcontractors for Fair Treatment said trust accounts would protect only a tiny fraction of what was owed if a builder collapsed.

Dr Nahan said the State could not prevent insolvencies or guarantee all payments.

In a tightening economic climate, he said some builders underbid on projects and then passed the tighter margins on to subcontractors.