Who Funds the Construction Industry?

18-07-23

While watching 4 Corners on 17th July 23, they made it clear what some of the issues for subcontractors are and how to fix them.

A big thank you to 4 Corners and reporter Stephen Long, this was your best work, its a must watch for anyone in the industry because every word of it is true but there is oh so much more to tell.

You could do an expose' every week for the rest of your life and not get close to exposing the actual number of industry scum who have liquidated away almost a billion dollars of subbies money.

The problem is that builders think the money owed to subcontractors should be available to be used by them as their operating capital and thats how they use it and it's that reason why so many of them owe so much unsecured money to subbies when they liquidate.

Builders have access to many millions of dollars of subcontractors money interest free and use it as their own and many builders cannot be trusted with their own money, let alone ours. While they might know how to build a house, many have no idea how to manage money and that is why so many subcontractors struggle when builders go broke.

John Murray AM is an experienced building industry contracts dispute adjudicator who has made hundreds of adjudications and knows what effect non payment of account and builder liquidation has on subcontractors.

John Murray undertook a review of Security of Payment for the Federal Government (SOP). Part of that his recommendations are Project Trust Accounts.

Mr Murray is advocating for project trust accounts but it's not easy to find politicians with enough intestinal fortitude to fully implement them and until they do, the industry will spiral even further out of control.

You only have to look at the half arsed job done here in Qld with Project Trust Accounts where they have deferred them again at the behest of the Master Builders Association.

In the 4 corners program when asked about Trust Accounts, Metricon Chief Executive Officer Brad Duggan admitted that subcontractors money is required for builders cash flow.

He said "it would remove significant cash flow from the business, a lot of our contracts are heavily weighted being paid by our customer at the back end so for us to have money tied away with subcontractors, while we need money to run our organisation, so I don't think it will work".

In other words and I am not talking about any particular builder, take Subcontractors money out of a builders cash flow, put it in a Trust Account and watch them fall off the financial cliff!

Well I guess its about time we had another clean out.

From a subbies point of view, it's not working now while builders have total control over our money.

And if the contracts are heavily weighted to back end payments, change the contracts rather than use other peoples money "interest free"

When hearing that and clearly frustrated, John Murray shook his head and said quite forcefully, "its not their money, it's the subcontractors money.

It's the subcontractors who have done the work, they should be paid for the work that they have done.

Its improper for builders to use other peoples money.

Mr Murray said it's unethical, it's improper, it's immoral".

By his own admission, Metricon's Brad Duggan said they operate on a wafer thin margin of "2%".

"f something goes wrong with a fixed contract, a 2% net margin becomes a loss which is where many builders including Metricon, found themselves in 2020 and beyond. He said the owners injected "80 million" into Metricon.

And we subbies are supposed to be content to leave our money in builders accounts to be used and in many cases, mismanaged as builders interest free cash flow.

No thanks, how to fix the issues facing subcontractors?

Most builders are clearly undercapitalised, even with subbies money they are trading insolvent but that is not our problem, subcontractors must become secured creditors.

Bring on National Project Trust Accounts.

In the meantime implementation of trust accounts in Qld has stalled as the Palaszczuk Labor Government has decided to defer the final phase of Project Trust Accounts despite the difficult times we are facing and the high insolvency rates.

This underlines that it is subcontractors who are funding the construction industry and they need to be protected so Labor both state and Federal, get off your arses, stay home for a few weeks instead of strutting the world stage first class, pretending to be real statesman and get someone to fully implement Project Trust Accounts to protect the backbone of the industry, subcontractors!

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, if you are NOT a subcontractor, DO NOT JOIN, you will not have access until we approve you and in the approval process, we will weed you out, you are not welcome.