Sat 27 August 2022, 5pm.
No doubt they did, after all, it was April 2022, almost 5 months ago when Oracle was putting the squeeze on their clients demanding upwards of 120k over and above their contract value to finish their homes.
Ok thats wrong of builders but its also wrong that they are put in that position in the first place.
Why do developers and home owners feel they are entitled to special treatment over and above other industry participants when they enter into a commercial fixed price contract, a transaction with a builder and it all goes wrong?
I am not down on home owners, I have spent a lot of time helping them as recently as in the Privium Liquidation, I know the emotional rollercoaster they ride.
I get it, they have saved hard, borrowed from family and banks and often they don't really know what they are doing but for the most part they are covered by the QBCC Home Warranty Insurance so their losses, while a setback, are rarely the end of their dreams.
Why do developers and homeowner get the luxury of "fixed price contracts", especially in chaotic times of massive price increases and huge labour shortages?
If their contract was for say 350k but the house cost 450k, then they have made a 100k capital gain before the build is finished but the builder has done all his profit and on the low margins they work on, 70k as well. Good luck to the homeowners but thats not fair and equitable.
I know it's devastating but for most of them, their house is eventually completed and life goes on. As for developers and the way some of them treat builders and subbies, the less said the better.
For many subbies life as they know it ends. They cannot cope with the losses, mentally or financially.
I know a subbie who worked for his boss for 14 years, when the boss retired he borrowed against his house and he took over the business. Then he was financially devastated on his first job out on his own when the builder liquidated. He is now back licking his financial and mental wounds and is working for someone else, he and his wife's dreams are shattered.
Subcontractors have no insurance policy unless they pay for trade credit insurance and while I had it myself and am all for it, it's not cheap and its not for all subbies, many cannot afford it or are small operators but those who can afford it, cannot afford not to have it.
Trade credit insurance has other advantages, they know what is going on in the industry and often warn their clients in advance.
Nothing can be built without Subbies, but we are at the bottom of the food chain when builders liquidate.
What makes it even worse is when builder publicly admit insolvency and continue to trade for weeks. Any payments made after that admission are open to preferential payments from the circling vultures, the dreaded insolvency practitioners and thats exactly what Oracle did on August 6th even though they won't admit it. In fact liquidators go back 6 months prior to the date of liquidation and look for unfair preferences and subbies to sue. They call us "the low hanging fruit". We are easy pickings.
If ever there needed to be changes made to totally wrong legislation, it's the complicated laws around the preferential payment fishing expeditions mounted by greedy IPs. I know there are genuine Preferences like when a builder liquidates and transfer money or property to relations that are not arms length transactions but the way they are used in the building industry is abhorrent.
Subbies almost had a safety net in place thanks to Les Williams in Project Trust Accounts (PTA's) but it would not have helped with builders like Oracle Building Corporation Pty Ltd because their contracts are under 1 million.
Besides, Minister for Housing & Public Works - Mick De Brenni was under undue influence from the MBA to postpone PTA's which has let builders off the hook and kept subbies in the firing line, still up shit creek without a paddle. To us at SubbiesUnited, the level of influence the MBA has over the minister borders on being inappropriate. Maybe we should start calling ourselves a "peak body" and De Brenni might listen to us.
He postponed yet again despite his re election promise when he assured us that "Subbies would be paid on time every time". That promise was made about 3 years ago. How many subbies have been done over and how many millions have been lost in that time? Bloody disgrace.
MBA should put their time to good use and develop a fair contract for its members that allows for "rise and fall" in the contract sum. Especially when the supply chain and prices are so volatile and labour is almost non existent. It's no surprise that builders are dropping like flies.
The QBCC knew in April that Oracle was holding home owners over a barrel but did not have the power to do a thing about it.
The QBCC knew on the 6th of August that Oracle were trading insolvent when they publicly admitted they could not pay their debts when they fell due. That is a definitive definition of insolvency.
That is an admission of insolvent trading by Oracle if ever I saw one but again, the QBCC can only do what the QBCC Act allows them to do. They have to do is give a builder 21 days to show cause which they probably did around that time and thats why we see Oracle in liquidation now, some 20 days later although they still have a valid licence.
So the QBCC could not help subbies and suppliers then despite all the evidence that Oracle was going down. Blame that on poor legislation in regard to the QBCC Act.
On the other hand, it can help homeowners to a large degree and good luck to them.
If the Home Warranty Insurance was taken off QBCC, they would not be worth having and it should be taken off them because at times in the past, it looked like they kept builders alive to protect their insurance profits.
Subbies add a level of protection to your business and join SubbiesUnited and make use of our private members forum for up to date information but a warning, do not join if you are NOT a subcontractor, we will weed you out, you are not welcome.
While I agree with most of what you have written, I’m not as sympathetic to the position builders found themselves in with regard to the fixed price contracts. These contracts are a marketing strategy to attract clients, and during the insane covid bubble stimulus offer that was instrumental in initiating the current situation, builders were tripping over each other to get these contracts signed. OK, nobody could fully foresee the dilemma that was to emerge with escalating costs and material and labour shortages, but I personally found it hard to swallow that quite a few builders turned to their clients to rectify these problems, even in some instances placing responsibility on them (not to mention blaming subbies for gouging). In this same context, there are quite a few builders out there who have remained silent throughout this, have made no demands upon anyone, and seem to be continuing as usual. My main point here is that most of the clients who signed onto the stimulus packages know very little about the building industry, and just jumped on a Federal Government knee jerk covid offer. To turn to them for another 40k to 120k with a pseudo extortionist threat of not finishing their house unless they paid up, struck me as highly unethical. They should have looked elsewhere.
I agree, what you say makes a lot of sense.