HIA, subbies go head to head over payment security

HOUSING Minister Mick De Brenni went on a statewide information roadshow before announcing major changes to improve security of payment to subcontractors in the construction industry.
HOUSING Minister Mick De Brenni went on a statewide information roadshow before announcing major changes to improve security of payment to subcontractors in the construction industry. Che Chapman

THE decision by two peak construction industry bodies to attack proposed payment security legislation has been slammed by subcontractors who say the measures are long overdue.

Mike Roberts, the Housing Industry Association's acting Queensland executive director, has described the Palaszczuk government's Building Industry Fairness Bill as high on the list of the worst legislation it had ever seen.

And Master Builders Queensland has commissioned billboards claiming Housing Minister Mick de Brenni was not listening.

Mr Roberts described as "laudable" the government's attempt to address non-payment in the sector but claimed the vast majority of Queensland builders and head contractors paid subcontractors on time.

He said the proposed bill singled out builders and head contractors and buried them in red tape with potential prison time if they got it wrong.

Additional paperwork generated by the legislation, according to the HIA, would result in an additional 17 million new business processes and the establishment of an additional 10,000 bank accounts every year at a cost of $350 million annually.

Subcontractors' Alliance head Les Williams rejected Mr Roberts' claims, describing them as mischievous and nonsense.

Mr Williams said payment schedules were already a legislative requirement under the Building and Construction Industry Payments Act 2004 and was provided prior to payment.

"The schedule is issued to a subcontractor confirming the amount of the progress payment to be made by the builder," he said. "It is a computer-generated record of payment and is issued electronically. The former state government removed the penalty for not providing a payment schedule in 2014 and opened the door wide to the spike in the non-payment practices of Queensland's builders. This proposed legislation corrects that problem."

Mr Williams said project bank accounts were in use successfully in Great Britain, Canada, USA and Western Australia.

He said it was simply not reasonable for building and construction industry small businesses to have to extend millions in unsecured and interest-free credit to building contractors.

Mr Williams said a Deloitte report commissioned by the government ahead of the push for a better deal for subbies had found project bank accounts would provide significant cost savings to consumers and benefit Queensland society generally.

A 2015 Senate Committee inquiry into insolvency in the Australian construction industry also found "serious imbalances of power in contractual relationships, harsh, oppressive, unconscionable commercial conduct and unlawful and criminal conduct all play a major role and when combined with a growing culture of sharp business practices contribute to nearly $3 billion in unpaid debts annually".

Mr Williams said tight margins mean many building companies funds current debts through new work.

He said payment of subcontractors was reliant on diversion of funds between projects with builders using subcontractors' revenue as an interest-free overdraft.

Project Bank Accounts would ensure payments by a client for progress work on a project would reach the subcontractor who supplied the materials and the labour.

Mr Williams said since 2014 more than 4000 Queensland building industry subcontractors had borne in excess of $200 million in losses due to building companies using pre-packaged liquidation to avoid debt and defective work litigation.

And from December 2016 (10 months ago) there have been 25 Queensland domestic residential builders that have liquidated out of the industry leaving debts to subcontractors, suppliers and expectant home owners of about $120 million and many hundreds of homes and residential units left incomplete.

Individually at any one time subcontractors had unsecured amounts from $10,000 to $1 million owed them.

"A review of payment practices by the Minister for Housing and Public Works Mick de Brenni discovered the appalling payment practices of Queensland's building companies and is the very reason why this welcome legislation is being introduced," Mr Williams said.

"The HIA and MBAQ have nobody to blame but their own members who have continually indulged in unconscionable payment practices and until now have got away with it."

He was dismissive of the HIA's claims most contractors paid in full and on time saying statistics showed most indulged in non, late or reduced payment for work done.

"They mostly employ a take-it-or-leave-it approach," Mr Willaims said.

The State Government had committed to introducing this term its Building Industry Fairness bill to address security of payment for subcontractors.

The joint party committee was due to report next week making the second October sitting the first chance to bring the final legislation before parliament.

Topics:  hia legislation mick de brenni payment security senate inquiry subcontractors alliance

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