Subcontractors deserve to get paid for honest building work

The West Australian, Editorial, 3.8.16:

It was the Senate Economic References Committee that stated most clearly the overriding goal that should concern governments regarding the payment of subcontractors on building projects.

“In the view of the committee, there is one principle and one principle only that should be observed in relation to security of’ payment in the construction industry,” its report said in December.

“It is a fundamental right of anyone who performs work in accordance with a contract to be paid without delay for the work they have done.”

It sounds almost redundant to assert such a straightforward concept.

But as that committee observed, the reality is very different.

The power balance sometimes leads to head contractors bullying subcontractors, who fear they won’t get further work and who often do not have resources to challenge non-payment.

One solution proposed by that committee – project bank accounts – is gaining traction in WA.

 

These PBAs protect the subcontractors’ money if a head contractor goes bust and also cracks down on dodgy companies that are trading while insolvent, propping up their own cash flow by relying on payments owed to subcontractors.

WA Labor this week promised PBAs would be adopted on public projects if it won power next year.

Yesterday, the State Government revealed it was already preparing to roll out an accounts program to protect subcontractor payments on government building schemes worth less than $100 million.

Finance Minister Bill Marmion said he was “fine-tuning” details of the changes, which he believed would also crack down on so-called “phoenixing” in the construction industry, when a company transfers assets to a new entity before going into liquidation.

But why has it taken so long for protections to be put in place?

Four years ago, subcontractors lost millions of dollars when seven builders with government contracts imploded.

PBAs have been trialled since then, to the praise of subcontractors.

The Master Builders Association has argued they duplicate processes and increase costs. But evidence from the past few months shows just how much damage can be done to the lives of hardwarking tradespeople and their families.

If PBAs had been in place sooner, perhaps those subcontractors who have been burnt by the collapse of the CPD Group in May with $17 million in government contracts would have been protected.

It is a shame it has taken such a travesty for both sides of politics to take action.