Fighting for subbies rights
Under the current system, the unsecured credit terms extended to builders are used essentially to fund their developments. To add insult to injury, the builder also withholds 5% of each contract claim in retention.
Subcontractors and suppliers then have to sweat it out for weeks and months in the hope that they are paid. In the meantime, subbies have paid their staff and suppliers then BANG!
The builder liquidates leaving their creditors to fend for themselves.
- Subcontractors are almost always unsecured creditors
- Subcontractors often have to fight to retrieve their retention.
- This must change now.
The Subcontractors Alliance sought and received a commitment from the current QLD State Labor Government to implement a system of Project Bank Accounts.
The aim is to quarantine and secure payments to subcontractors and suppliers in Queensland’s building and construction industry. It will also secure payments to builders to ensure their viability.
The policy document summarises the submissions made and the discussions held with the Qld State Government.
We will go into more detail later on each item but following are the main points of the policy document.
1) Categorise the construction industry, not by sector but by Project Value
- Two categories (1) Project Value above $10m (2) Project Value $250k to $10m
2) Client or Main Contractor to provide a Bill of Quantities [BOQ]
- A BOQ allows everybody to tender using the same schedule of quantities.
- The BOQ is to form part of the subcontract documents to confirm scope of work.
3) Regulate and simplify Subcontract Documents
- Remove unfair contract clauses and standardise subcontracts.
- Legislate to make subcontracts comply with Unfair Contracts Law [ACCC]
4) Restore the main elements of the original Building and Construction Industry Payments Act 2004
- Restore the penalty provisions for failing to provide a payment schedule within 10 business days. This allows a swift payment judgment from a court of law and will ensure progress payments are made to the project bank account.
- Restore the marketplace of Authorised Nominating Authorities to provide a crucial support and advice service for claimants seeking adjudication.
- Remove the appointment of adjudicators from the QBCC Adjudication Registry to a more independent and transparent body.
- Remove the training of adjudicators from “peak” industry associations. That process is neither transparent nor independent.
5) Introduce Project Bank Accounts - Construction Trusts
- All Project Bank Accounts to be quarantined from contractor / builder insolvency.
- Client to provide project capital to the Project Bank Account paid 3 months in advance, this is required to cover Work in Progress until project completion.
- Project Bank Account to be overviewed by the bank in which it is held.
- Funds to be released from the Project Bank Account to the builder and subcontractor simultaneously upon certification – reduce payment time.
- Establish a rapid, on site expert dispute resolution process to resolve performance and payment disputes.
- Disputed funds to be held within the Project Bank Account.
- Provide an independent third party Project Bank Account agency for projects valued over $10m.
- Legislate to stop developers cancelling contracts in the event of main contractor insolvency.
6) Securing the client or developer – last resort security option
- Legislate for contractors and subcontractors who improve a property under a construction contract, to be permitted to place a charge or lien over the property as security.
7) Abolish retentions for subcontractors – currently a 5% interest free donation to builders cash flow
- Retention held by contractors from subcontractors claims should be abolished by law. There is no existing law that requires retention to be provided by subcontractors. There already exists a QBCC license demerit points system and when coupled with retentions, it is double dipping.
Note: We know one company still chasing $30,000 of retention that was due in 2014. Everything is signed off, why haven't they been paid? https://subbiesunited.com.au/topic/retention-urgent-action-required-by-government-qbcc/#post-1229
8) QBCC - Policy changes
- Overhaul the existing Minimum Financial Requirements for licensing regime; make the company accountant liable for financial information submitted.
- The existing QBCC demerit point policy discriminates against the subcontractor - it fails to give the subcontractor any right of reply to contractor claims.- Reduce the current 3 demerit points and provide a right of reply for subcontractors.
Footnote:
Following the senate inquiry into insolvency in the Australian Construction Industry, the Subcontractors Alliance sought a commitment from the federal government to implement the 44 recommendations made by the senate committee.
Our negotiations with Senator Nick Xenophon to have consistent federal security of payment laws were successful and a security of payment amendment was attached to the ABCC Bill.
The Subcontractors Alliance is currently involved in that review and we have submitted 2 nominations to the federal “Security of Payment - Working Group.”
SubbiesUnited and Subcontractors Alliance are as one in our crusade for a fair go for all subcontractors and suppliers. We also need strong builders to keep our industry viable.