Laws to speed up payment of subbies

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The Housing Industry Association says ultimately effective cash flow starts with payment from the client to the builder.

LEGISLATION to help resolve contractual payment disputes and provide Yanchep and Gingin building contractors, subcontractors and suppliers with a right to be paid within a reasonable period of time has been welcomed by the Housing Industry Association.

The association’s executive director John Gelavis said cash flow played a major role in underpinning the building and construction industry’s viability, so balanced and efficient security of payment laws were needed to protect both the builder and contractor’s rights to get paid.

Mr Gelavis said while the current rapid adjudication system for construction contracts had, by and large, created a fair and reasonable system, the laws could be updated and improved.

Small Business Minister Sean L’Estrange introduced the Construction Contracts Amendment Bill 2016 into State Parliament on September 22.

Mr L’Estrange said the legislation was the first part of a “whole of Government” approach to improving payment protection for subcontractors.

He said the legislation would make it easier for subcontractors to access the rapid adjudication process for resolving construction payment disputes.

“The non-payment and late payment of subcontractors, many of which are small businesses, is being addressed by the State Government,” he said.

“This legislation will also be complemented by a Code of Conduct for contractors and the establishment of a compliance unit within the Department of Commerce to monitor compliance with the code.

“Other measures include the Small Business Commissioner having expanded power to review and mediate disputes between contractors and subcontractors.

“Plus, from September 30, 2016, the Government is rolling out Project Bank Accounts across Building Management and Works construction projects valued at more than $1.5 million to speed up the payment process for businesses working on these projects and enable subcontractors to better protect themselves in the event that a head contractor experiences financial difficulty.”

Two key aspects of the Bill include reducing the maximum time in which head contractors can pay subcontractor payment claims to 30 calendar days and increasing the time in which an application for rapid adjudication of a payment dispute can be lodged by a subcontractor to 90 business days.

Another two key aspects include creating greater flexibility in the scheme by allowing adjudication of previously rejected or disputed claims and providing a faster and more efficient means for a party to enforce an adjudication determination through the courts.

Commerce Minister Michael Mischin said having listened to the concerns of subcontractors and other stakeholders, the Liberal National Government was taking action to encourage better behaviour in the building and construction industry, as well as improve the operation of the Act in keeping the money flowing in the contracting chain.

Mr Gelavis  said the Government’s Bill largely reflected recommendations of the independently prepared Evans report and were a sensible further step in addressing non and late payment in the building industry.

“Increasing the period of time for contractors and builders to apply for rapid adjudication of a payment dispute to 90 days is particularly welcome,’’ he said.

“The current 28 day timeframe is too short and in some instances has expired before a subcontractor or builder is even aware of its rights to use the laws.

“However HIA does note that the Bill reduces the maximum time in which head contractors can pay subcontractor and supplier payment claims to 30 calendar days.

“Whilst this time frame might reflect good industry practice, some suppliers may wish to retain the right to commercially negotiate longer payment terms on credit with builders and contractors.”

“In moving forward with further reforms and developing codes of practice, the Government must continue to consult with the residential building industry to ensure that there is no additional unnecessary red tape or cost to the building process.”

“It is equally important that government departments similarly adopt prompt payment procedures to ensure that they pay builders, contractors and suppliers working on public sector projects on time too.

“Ultimately, effective cash flow down the contracting chain starts with payment from the client to the builder.’’