Should principal contractors have the power to divert retention monies, or earn interest on them, while sub-contractors wait months for payment? Master Electricians Australia (MEA) CEO Malcolm Richards says no way.
Just this month, another round of sub-contractors has been left high and dry after the collapse of Brisbane-based Trac Construction, which had been working on a string of apartment projects across the city. Its collapse has left nine projects unfinished, and a $9 million debt.
But insolvency experts are tipping that residential unit developers in the state’s south-east may be in for more pain because of the current oversupply of developments, but were does that leave all the hard-working subcontractors whose blood, sweat and tears have gone into these projects?
The Queensland Building and Construction Commission (QBCC) had suspended Trac’s building licence in February for non-payment of debts – around the same time it released its discussion paper, Better Payment Outcomes.
It asks industry representatives, including us, to explore questions including whether the state needs a system to ensure better payment outcomes for sub-contractors, and why; and whether there is a need for a Construction Retention Trust Scheme.
Put simply, we need one, and we need one fast. We’ve been fighting this fight on a national front for some time now, after watching these kinds of situations play out time after time – sub-contractors forced to wait months on end for payments, at the mercy of principal contractors who’ve diverted funds to other projects before paying up, or worse, never getting paid at all because the principal contractor has ended up in liquidation.
One of the biggest gripes among sub-contractors is of course that they must still pay out their own overheads, like wages, materials, insurances, vehicle running costs etc. involved in performing the work, while principal contractors are often able to utilise retention monies to even accumulate interest for their own businesses, while leaving subbies in the lurch until they are ‘satisfied’ the work on a project has been completed.
We are arguing that the current structure of the payment hierarchy in the construction industry is incredibly damaging, and should be overhauled for a Construction Retention Trust Scheme, which would create a more equitable balance between the interests of principal contractors and the sub-contractors engaged on a project – who no-one could possibly deny are legally entitled to get paid after holding up their end of the bargain.
The New South Wales Government has taken action by introducing a retention trust scheme which is due to start this year, with the costs involved in administering the scheme to be offset through lodgement fees for audit reports, to be prepared by head contractors.
This may be an option for the Queensland Government to consider to cover the costs involved in establishing such a scheme, but we would argue that no matter the cost, the benefits are far greater.