Fighting for subbies rights
The ruins of a once great industry
This is a true story about a Subcontract Manufacturer who works in the Qld Building Industry. Like in the movies, it's based on fact but it reads like fiction because no sane person could believe it would be true in the 21st Century.
It's a long story, it might take 5 minutes of your time but if you are a Subcontractor, read it.
Only the names have been changed to protect the innocent, in this story I will be known by my medieval name, Alphonsins.
Before we go any further, from this day forward as is my right, I decree that "Subcontractors" are to be spelt with a capital "S". Any objections to that, tell someone who cares because I don't. Further to that, all builders will be spelt with a lowercase "b", even the good and reputable ones.
Manufacturers.
Manufacturers are a dying breed, they are being slaughtered in their thousands by draconian contractural obligations, cheap non conforming imports, feudal forces sweeping across the land with great armies led by what we will call the Liquidators. Their armies are resupplied, re-fueled and aided and abetted by the terrible decisions of governments present and long gone.
Manufacturers and Fabricators are being slaughtered by cheap, non conforming imported building products being used, sometimes unwittingly by builders. Whilst Australian Manufacturers are forced to comply with the Australian Standards and the Australian Building Code, builder bob uses cheap products that local businesses employing Australians, can’t compete with because they have to comply.
Not all imported products are non compliant but using untested cheap products in a lot of instances can be a major public safety issue that doesn’t appear to be of any concern to the feudal Lords or certifiers.
Manufacturing Subcontractors are the Serfs of the 21st Century.
The feudal forces they face represent various interest groups such as builders, liquidators, lawyers, law makers and the industry watch dogs.
Who benefits most from all the carnage in the industry? I don't need to answer that, it's as plain as the nose on your face but I will, everyone except Subcontractors.
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ye olde feudal landscape - 19th Century
In the building industry of this unbelievably enlightened information age, Manufacturers and Subcontractors are on a par with the peasants of the feudalism of the middle ages in Europe.
Serfdom was a condition of bondage also known as "debt slavery" and still is. That pretty much describes Subcontractors in the building industry.
ye newe feudal landscape - 21st Century
Serfdom ended in Europe in the 19th Century but is still alive and well in Australia today.
Protection.
The difference between us and the serfs of bygone days is that in return for their labour, the serfs were entitled to protection, justice and the right to til the soil and grow crops in certain fields within their lords estates, primarily to maintain their own subsistence.
We Subcontract Manufacturers are afforded no such protection or justice, none whatsoever, we are left to fend for ourselves.
Debt Free at Last!
Every so often, sometimes bi-weekly, builders or developers cleanse their debt and free themselves from the shackles of their creditors by meticulously planning and implementing a pre packaged liquidation. They all have it down pat, with the help of your friendly neighbourhood liquidator of course.
Within a few days, the liquidator appointed by the builder makes the announcement that there is only enough money for the secured creditor being the bank and of course, enough for the liquidators fees. That goes without saying, there will always be enough for them but they say that, often without lifting a finger to look for hidden funds and assets. They give up on finding some money for the creditors before they start because it's easier that way, after all, they will be paid no matter what.
They also gleefully state what a "good builder" he is and he has "only" been trading insolvent for a couple of months because believe it or not, he paid his tax and the Super for his staff. Good man, that's the boy.
What they don't tell the Creditors is that:
- If "good builder" doesn't pay the ATO and the Super, good builder is personally liable.
- What they don't tell the Creditors is that they (the liquidator) can claw back the tax paid as a preferential payment because the ATO is not a secured creditor.
Brilliant isn't it?
Very sound advice has been given to "good builder". I am wondering where "good builder" got the money from to pay the ATO and Superannuation, mmmm.
Yes, that's correct, "good builder" didn't pay us (the Creditors) did he so "good builder" is a dishonest rectum hole and so is the liquidator or accountant who advised him to be such a despicable, dishonest carrion eater. By way of explanation, carrion is the dead flesh of the slaughtered Subcontract Suppliers, better known now as the Creditors.
The Manufacturers, Suppliers and Subcontractors are told they will get ZERO.
Why wouldn't you liquidate if you knew you could start over again immediately, even before the dirty deed is done?
A prerequisite for package liquidation is to shift, hide, make assets disappear at the rate of knots, pay the ATO, pay the Super and transfer property to the missus, the kids, mum or dad. It's self preservation, anything goes. Bugger it, hide some assets with all of them and then start using that brand spanking new Phoenix company purchased with Creditors money but make sure the wife is the director. That should throw them off the scent.
It makes perfect sense doesn't it...
Lord and Masters.
Manufacturers & Subcontractors lord and masters in no particular order are:
- builders who every so often throw the grateful Subbie a bone. Thank you kind sirs, very generous, that is just bloody brilliant, you will never know how grateful we all are.
- The industry watchdog, the QBCC who gives us nothing. Not one iota of protection in return for our alms, better known in this day and age as license fees and taxes we pay to employ them.
- If you have the hide to call the QBCC and ask about a particular company who owes you half a million, you will get the standard answer - "due to privacy laws, we are not at liberty to discuss that company with you!" We look up their license knowing full well that they must be under investigation but there is nothing adverse noted.
- Meanwhile, Manufacturers keep manufacturing, installing and pouring all their resources into the job for fear they will be in breach of contract. The good old boys of the QBCC do not deviate from the plan, instead they fiddle while Rome burns.
- Let's not forget the developers, after all, where would we all be if it wasn't for the likes of a good old Lord James liquidation every now and again. Retired? In Europe? We must know our place in this world and that is to serve our lord and masters.
- Finally we have yours and my old favourite and a much revered staple of the industry, the always jovial, the ATO. Thanks for the laughs guys, it's been more fun than you can imagine.
- Oh, how remiss of me, I almost forgot about the legislators, our Government who we installed to make laws to protect the safety and financial interests of all Queenslanders but hey, we are only 21st Century serfs so do as you will.
Let's get started!
Our story is typical of most of the Subcontractors and Suppliers who work in this industry except we start a month or two earlier than many because of the manufacturing time and program restraints.
We expose our financial security to the bottom feeders who prey on this industry and get away with it time after time.
What is a bottom feeder?
- "An opportunist who seeks quick profit, usually at the expense of others or from their misfortune". We usually start our expenditure two months earlier than most other trades.
Please stay with me, you should read on, you may need to know this one day. How many liquidated builders or developers have gone to jail in the last 10 years? None you say?
This is how it works.
We receive a request to estimate on a project.
- As usual, the head contractor doesn't supply us with a bill of quantities because they prefer us to do their work for them. Besides, if we underestimate on a product, they can hold us responsible. There is a dollar to be made there. Free balustrade coming up!
- We do the takeoff which of course takes valuable time and if a mistake is made, we OWN it, providing it's an underestimation. If our mistake is more than their quantities, they are quick to let us know.
We submit our estimate based on:
- Current material prices.
- Current labour rates.
- Current overheads.
No rise and fall clause is permitted.
Contract.
18 months later the builder accepts our estimate and sends us a contract.
- The contract has payment terms that are 25 business days from end of month in which we submit our claim which is the 6th or 7th day after the end of the following month. Up to 45 days after submitting the claim IF they pay on time and 3 or 4 months after ordering material.
- It has a 5% retention clause.
- It has a liquidated damage clause.
- It does not allow us to stop work immediately for non or late payment.
- We are required to issue a breach notice once the due date has passed, even if we know they are on the nose. Then we have the pleasure of sweating bullets for a further 5 business days before we are allowed to cease work or WE will be in breach of contract, talk about arse about face. Have you ever heard of anything so obnoxiously ridiculous? Only a builder or the body representing them could have come up with that one.
Feeding the Monster.
Everyone needs to eat so we sign off on the contract. Call me an idiot but we have long term, loyal staff and they have families, they are all hungry...
We feel relatively comfortable with this tasty scrap thrown our way because we have worked and performed like monkeys for this builder for three years, there is a level of trust here.
In the intervening period of 18 months since we quoted the job, things have changed.
- Wages have increased.
- The government of the day decided we need a dumb renewable energy target so power, fuel, gas and energy costs have soared.
- Because of their ridiculous and unsustainable renewable targets, the cost of manufacturing raw materials has increased. In our case it's Aluminium and glass.
- Rent has increased due to CPI (twice).
- Because of all these increases, everything else has increased so our potential profit has decreased.
Schedule of Work - Installation Dates.
We are given a schedule of works, our on site start date is 3 months down the track, we start on site in November 2016.
- To keep within our contractural terms and to meet their targets, we need to start ordering material for manufacturing of screens and balustrade now.
- We order a mill run of special sections in August for deliver in early September.
- We start manufacturing in September.
- We deliver the product for powder coating.
- We pay our staff weekly.
- We pay PAYG and Super.
- We pay our BAS.
- At the end of October we pay our suppliers.
- We deliver product to site in early November and our installers are inducted and start work.
- If there is anything left, we pay ourselves. If not, we tip more money in because we are the eternal optimists, we believe that one day business will come good.
- We are required to sign a stat dec stating that we have paid our staff to finally reach the day where we can make our first claim.
But wait, here's the good part.
On the 25th of November, after 4 months of planning and expenditure, we get to submit our first invoice but guess what?
Yes, you are correct, theres a hitch, we are to be paid 25 business days from the end of November and guess when that is? Yep, it's in the middle of the Christmas holidays.
- We break our holiday and go into work on the 30th December, check our account for their deposit, sadly, after 4 months, no payment but we do not dwell on it, instead, we pay our suppliers for the fourth time since we started on this job.
- The builder returns on the 9th January, we call them and cap in hand, we ask them when they will be paying us and they say hey, we just came back to work today, for heavens sake, if we must, we will look into your claim but you could have at least given us a few days to settle back in. The hide of us to expect to be paid on time. Alphonsins give yourself an uppercut you idiot, don't upset them for gawd's sake.
- On the 14th January we are paid half our claim, only half you ask?
- Finally, after numerous phone calls the other half is paid on the 27th January, almost a month late and by then, our next claim is almost due. They put non and late payment down to the holiday break. We don't believe them but what choice do we have?
On the 7th of February, we call regarding claim number 2. It's now due but they drop the bombshell we have seen coming but couldn't do anything about. The poor office girl tells us that they cannot give us a payment date, they have serious cash flow issues but bear with us.
We have been preparing, ordering, manufacturing and then installing on this job since August. We have paid for everything months ago and now they tell us they have cash flow problems and to "our loyal Subbies, please be patient".
Patience is not my strong suit nor is it a virtue I hold dear to my heart, stuff patience, we need payment.
The End.
A week later the excretion has hit the fan, most of their sites are now shut down. There is still some hope they will pull though this near fatal train wreck with a cash injection but it's highly unlikely.
The industry is abuzz with rumours, gossip and half truths because the builder is not communicating with anyone except his inner circle and even they know little. The one and only constant is that no one is being paid.
They are in a critical condition on life support, their injuries will severely impact on our health too, with the usual domino effect down the line, all the way to our ever patient, loyal and long suffering suppliers.
Even if they had a cash injection, who could ever trust them again? It suddenly dawns on me, the end is here, Alphonsins, you are a fool, when the trust is gone, the relationship is over.
We better be nice to the ATO, we might need their benevolence for a while. We better be nice to the good old boys of the QBCC because they might decide to demand our financials. They will know from the list of creditors that we have suffered a financial right cross, left hook and uppercut to the jaw. They investigated or are in the process of investigating all the poor creditor serfs after the last big liquidation a few weeks ago, they will do it again.
If we are non compliant, they can and will shut us down too, making us a double victim, adding insult to injury in their normal fashion. Boys, apologies if anything I have said earlier has offended you, I retract it all... until next time.
Don't worry about investigating why this was allowed to happen, just go for the easy target, the Manufacturers, Subcontractor and Suppliers also known as the unsecured Creditors, the victims who get sweet fuck all out of any liquidation.
We have some debtor insurance which I would highly recommend to any Subcontractor who is essentially funding builders projects and that's all of us. The insurance is substantially less than the debt. The one saving grace for us is that a large chunk of our product is still on our factory floor waiting to go to site, we held off delivering it because we smelt a rat months ago, it really was our only defence.
There are now hundreds of thousands of dollars of our work that will remain unpaid if the worst happens, at least until the developer finds a new builder and we are thrown another bone.
If we place subcontractors charges on the work done so far, we are a chance but the timing of that has to be just right, before the developer cancels their contract.
Unlimited Interest Free Credit.
There is nowhere else in the world that I know of, where companies like ours, through these 19th Century, harsh, brutal contracts, force us to extend hundreds of thousands of dollars in unsecured credit to a building company, owned by people we don't know but that's the price of doing work in this disgrace of an industry. Worse still, these strangers provide no security or collateral. Not even a director's or personal guarantee.
If you were lending your brother huge sums of money, most people would get him to sign a guarantee of some sort but builders give us nothing.
The PPSR scheme is almost useless if the builder doesn't agree and sign off on it so forget that, no protection there.
If a liquidator is called in, as is the norm, we will get zero.
Security of Payment.
The above history lesson is why Les Williams and his Subcontractors Alliance team have battled tirelessly for 3 years to get changes made to the industry. We cannot continue to be pounded into submission without a fighting chance.
We need support for the Subcontractors Security Of Payment Policy Document that Les and a handful of others have worked on all these years. Les believes that the Minister for Housing and Public Works Mick De Brenni will help us get it over the line. Les is hopeful, I am angry and disillusioned with a system that allows this to happen having been on the receiving end for 30 years here in this state.
Subcontractors Alliance needs financial help, they pay for their expenditure out of their own pockets. When they fly to Canberra to a senate committee hearing to represent us, they pay for themselves and do it on their own time.
Les is retired, he should be on the French Riviera soaking up the sun but he too was the victim of a massive liquidation sting so he dedicates himself to ensuring this doesn't happen to others and he inspires us to do the same. These people are not fat cat politicians living on the gravy train that is the public purse so if you can help with a donation, ultimately you will be helping yourself.
Please contact Les on les@wkcivil.com.au. He and his team are working for you, there aim is to stop the abuse of Subcontractors and put to death the system that enables it.
QBCC Announcement.
We are getting traction, the QBCC have announced an "immediate review of building industry financial reporting" that has been a contributing factor to the recent tsunami of liquidations.
Great work Les and a pat on the back to SubbiesUnited. It's too late for many or our friends who have fallen victim on the road to slavery but it's a step in the right direction to release us from the bondage and the mercy of our feudal lords and masters.
To read this startling QBCC admission, click here.
Next time I will write about the Concretors, Scaffolders, Surveyors, Carpenters, Bricklayers, Plumbers, Electricians, Steel Fabricators, Carpet Layers, Roofers and all the other Subcontractors who build these buildings and fund the industry, only to have it stolen from them year after year, decade after decade.
This industry is in ruins, at least from the perspective of Manufacturers, Subcontractors and Suppliers.
For the bottom feeders, the Queensland Building and Construction Industry is fucking fabulous.
Yours in servitude
Alphonsins
PS, not all builders, liquidators and those described as bottom feeders are bad or unscrupulous. Only the ones who do this to Subcontractors, Manufacturers and Suppliers.
No horses or animals were killed in the making of this movie.