Review of subcontractors payments soon

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While an industry advisory group will review ways to improve security of payments for subcontractors the HIA says more needs to be done to keep a building and construction workforce to avoid shortages in the future. File picture

AS the building industry continues to deal with the fallout of businesses going bust the McGowan Government has announced a review to improve security of payments for subcontractors.

At the same time the Housing Industry Association says a predicted increase in housing starts during the next five years means more needs to be done to support apprentices, training and local jobs.

On Friday, February 23 the government said it would establish an industry advisory group and its first meeting with industry stakeholders was to be held on Monday, March 26.

Commerce and Industrial Relations Minister Bill Johnston said once established the industry advisory group would carry out an inquiry based on five terms of reference (see terms of reference below).

He said it would consider amendments to the Building Services (Registration) Act 2011 and the need for new or amending legislation to provide fairer contracting practices.

Other reforms for consideration include introducing trust arrangements to protect funds owed down the contracting chain, in case a head contractor experiences financial difficulty.

The industry advisory group will be chaired by John Fiocco, who Mr Johnson said was experienced in commercial and contract law, with East Metropolitan MLC Matthew Swinbourn to assist him.

Meanwhile, Housing Industry Association WA executive director John Gelavis said as the building and construction industry was slowly recovering it was important to maintain a building and construction workforce to support the levels of construction required and not have a repeat of the past where skill shortages affected the industry and housing affordability.”

“HIA forecasts indicate that new housing commencements will increase from 19,230 in 2018-19 to 23,270, in 2020-2021 as well as the construction of other major infrastructure projects, which will require an increase in skilled trades such as bricklayers, roof carpenters, plumbers and electricians,’’ he said.

Mr  Gelavis said  the downturn in the state economy had led to a decrease in apprenticeships in the building construction trades so a focus on local jobs was critical.

“A step in the right direction is the recent policy announcement by the state government of the Jobs Bill, which will support local content and provide a boost to jobs in WA.

“HIA has had a long history of supporting local jobs and local apprentices in Western Australia and recently HIA has been approved by the federal government to deliver its Australian Government Specialist Mentoring for Australian Apprenticeship (ISMAA) program.

“This program will assist in ensuring those who commence an apprenticeship have a greater chance for completion.

“HIA believes more needs to be done to support apprentices, training and local jobs and continues to advocate further support through its policy manifesto – Housing Western Australians.

“Initiatives such as reform to the Construction Industry Training Fund Levy, improving incentives for apprentices, supporting mature age apprentices, supporting group training organisations and further training funding in the VET sector would have a significant impact.’’

Terms of reference for the industry advisory group

  1. Whether amendments should be made to the Building Services (Registration) Act 2011 to:
  2. introduce a demerit point system (or other appropriate power) to sanction registered builders that do not pay debts owed to subcontractors and suppliers in a timely manner, or engage in behaviour designed to dissuade a subcontractor or supplier from enforcing their rights under security of payment legislation;
  3. require applicants for registration as a builder to demonstrate sufficient managerial and business acumen qualifications; and
  4. place greater limits on the ability of directors of failed building companies to obtain a new building contractor registration.
  5. Consider the need for new or amended legislation to provide fairer contracting practices in the industry by:
  6. regulating dealings with retention amounts withheld under construction contracts, including mandating maximum amounts and time periods for release;
  7. introducing defined processes for calculating deductions from payment claims made under construction contracts;
  8. introducing defined procedures relating to variations and appropriate sanctions where variation costs have not been approved prior to work commencing;
  9. simplifying and standardising construction contracts by mandating minimum documentation requirements;
  10. prohibiting unfair terms and implying certain reasonable terms into construction contracts; and
  11. mandating the use of standard form construction contracts.
  12. Whether improvements can be made to the rapid adjudication process under the Construction Contracts Act 2004 to:
  13. assist subcontractors and suppliers with small value disputes use the adjudication process; and
  14. improve the compliance framework and standards for registered adjudicators.
  15. Whether statutory trust arrangements should be introduced to protect monies owed to subcontractors in the event a head contractor on the project experiences financial difficulty, and, if so, a preferred model for such trust arrangements.
  16. Consider any alternative and/or complementary reforms or measures which will improve fairness and security of payment for subcontractors and suppliers in the building and construction industry.

In addition, there may be further issues that warrant consideration which the IAG is at liberty to identify and consider.  This may include findings made by recent reviews into payment issues in the building and construction industry completed by the Commonwealth and State and Territory governments.

The industry advisory group should, as far as practicable, identify any negative impacts or additional regulatory burden that may arise in connection with any recommended reform, which may be the subject to a regulatory impact assessment at a later date.