Still more building industry reforms
The Queensland Department of Housing and Public Works is seeking industry responses to a discussion paper concerning:-
- insolvency in the contractual chain leaving Contractors and Subcontractors unpaid for their work;
- Contractors and Principals using retention money as cash flow;
- delays in payment for work done; and
- lack of financial management skills within the industry.
The discussion paper can be accessed here.
The options being proposed are:-
1. the use of Project Bank Accounts
A Project Bank Account is established to facilitate simultaneous payment to both Contractor and Subcontractor, once the Principal (via the Superintendent) approves payment.
The way it might work is:-
(a) Subcontractors submit payment claims to their Contractor;
(b) Contractor submits a progress claim to the Principal;
(c) Principal pays the amount approved for payment into the account from where monies are paid direct to the Principal and the Subcontractor.
2. retention monies trust fund
This only affects retention monies, not payment of the contract sum.
Retention monies are held in a trust account, thereby preventing that money from merging with the cash flow of the Contractor or the Principal.
Contractors and Subcontractors will be beneficiaries of the trust fund. If a Principal or a Contractor become insolvent, the money in the trust fund will not be available to liquidators.
Perhaps the trust fund and claims against the retention monies and the payment out of those monies might be administered by QBCC?
3. insurance scheme
This would eliminate the need for Principals and Contractors to hold retention monies.
Contractors and Subcontractors would insure against non-payment by Principals and Contractors.
4. changes to legislation
Reforms to the Corporations Act 2001 and the Bankruptcy Act 1966 … to grant Subcontractors and Contractors a priority payment in a Contractor’s insolvency.
5. education - to increase financial and business skills within the industry.
There are other parts of the discussion paper that invite comment in relation to the recent amendments to the Building and Construction Payments Act 2004 and the operation of the Subcontractors Charges Act.