❓ The Minister for Finance provides an update on the Liberal-National government's actions to assist subcontractors affected by non-payment on state projects, including financial assistance and the implementation of project bank accounts.
AnsweredQoN 841Legislative Assembly
QuestionView source ↗
BUILDING MANAGEMENT AND WORKS — CONSTRUCTION
SUBCONTRACTOR INVESTIGATION
841. Mr P.T. MILES to the
Minister for Finance:
Can the minister please update the house on what the Liberal–National
government has done to help subcontractors in the construction industry who
were part of the Small Business Commissioner's investigation into
non-payment of subcontractors working on state projects?
SUBCONTRACTOR INVESTIGATION
841. Mr P.T. MILES to the
Minister for Finance:
Can the minister please update the house on what the Liberal–National
government has done to help subcontractors in the construction industry who
were part of the Small Business Commissioner's investigation into
non-payment of subcontractors working on state projects?
AnswerView source ↗
I thank the member for the question. As he will remember, the
Liberal–National government responded to the Small Business Commissioner's
report in June, and it set up a number of things. First, it set up a financial
assistance program to help those subcontractors who were left without payment
due to a raft of bankruptcies during the period from October 2008 to 2012 and
those identified in the Small Business Commissioner's report. RiskCover
was given the task to identify and contact the subcontractors and to receive
and assess their claims. It has taken a while. There was some tardiness in
communicating and also a number of claims had to be thoroughly assessed. We are
dealing with taxpayers' money and an ex gratia payment based on
invoices, which we went through.
Ms M.M. Quirk interjected.
The SPEAKER :
Member for Girrawheen!
Dr M.D. NAHAN :
This week RiskCover will send letters to 111 subcontractors, indicating the ex
gratia payment that they will receive and asking them to respond by 16 December,
which I urge them to do. Payment will be made by the Office of State Revenue
within five days of receipt of acknowledgement. It has taken a while. It has
been an arduous exercise for all involved, but it is now on the path to
completion.
The Small Business Commissioner's report also issued
14 recommendations related to Building Management and Works. Twelve of those
have been completed in full and two more will be completed by the end of
January 2014. An initiative that was flagged by the commissioner and developed
by us is project bank accounts, which addresses the real crux of the issue;
that is, when a head contractor goes bankrupt or into receivership, funds get
pulled into the receivership and the subcontractors who are owed money under
the project are way down the pecking order. This has been a common problem
identified repeatedly over 20 years in Australia and around the world. The UK
set up what are called project bank accounts, whereby money for a project goes
into a bank account administered by the head contractor. All the payments are
then made transparent. Most importantly, in case of bankruptcy or the head
contractor going into administration, the funds remain in the bank account and
are paid, firstly and primarily, to the liabilities on the project and
specifically to subcontractors. In other words, it provides protection to the
subcontractors in case of the insolvency of head contractors. This has been an
arduous exercise. Although it has been mentioned many times, it had never been
implemented in Australia. It had to be developed and implemented originally
with care and with the feedback of head contractors. As Hon Kate Doust said on
6PR today, I could have gone out and done it some months ago. I could have
hurried up and got it done, but that would have been a recipe for disaster. If
we did not get feedback from the
head contractors, first and foremost, they probably would not have bid for the
projects. Second, if they did, they would have built the excess cost into their
tender arrangements and the taxpayer would pay. We have spent the time getting it right, working with the head
contractors and creating an original element. I might add that the call for
expressions of interest has gone out for the first project under the project
bank account. The Bentley Health Service subacute rehabilitation refurbishment
project went out for a tender value of around $5.5 million. We understand that
there are a number of bidders for that and we plan to have three or four more
tenders go out by the end of the year.
This has been a long exercise. We
have assisted those people whose contracts were not paid. We addressed all the
recommendations of the Small Business Commissioner. We put in project bank
accounts. However, we cannot guarantee that head contractors will not go
insolvent. Since we started this exercise, three more have gone insolvent,
including Gavin Construction, which worked very successfully for 20-plus years
in Western Australia and was a good operator in both Building Management and
Works and the private sector. We have to put in processes so that BMW can do
the best it can in assessing head contractors so that subcontractors can get a clear indication of the problems
of their head contractor; we also have to afford subcontractors more protection
in case of insolvencies.
Liberal–National government responded to the Small Business Commissioner's
report in June, and it set up a number of things. First, it set up a financial
assistance program to help those subcontractors who were left without payment
due to a raft of bankruptcies during the period from October 2008 to 2012 and
those identified in the Small Business Commissioner's report. RiskCover
was given the task to identify and contact the subcontractors and to receive
and assess their claims. It has taken a while. There was some tardiness in
communicating and also a number of claims had to be thoroughly assessed. We are
dealing with taxpayers' money and an ex gratia payment based on
invoices, which we went through.
Ms M.M. Quirk interjected.
The SPEAKER :
Member for Girrawheen!
Dr M.D. NAHAN :
This week RiskCover will send letters to 111 subcontractors, indicating the ex
gratia payment that they will receive and asking them to respond by 16 December,
which I urge them to do. Payment will be made by the Office of State Revenue
within five days of receipt of acknowledgement. It has taken a while. It has
been an arduous exercise for all involved, but it is now on the path to
completion.
The Small Business Commissioner's report also issued
14 recommendations related to Building Management and Works. Twelve of those
have been completed in full and two more will be completed by the end of
January 2014. An initiative that was flagged by the commissioner and developed
by us is project bank accounts, which addresses the real crux of the issue;
that is, when a head contractor goes bankrupt or into receivership, funds get
pulled into the receivership and the subcontractors who are owed money under
the project are way down the pecking order. This has been a common problem
identified repeatedly over 20 years in Australia and around the world. The UK
set up what are called project bank accounts, whereby money for a project goes
into a bank account administered by the head contractor. All the payments are
then made transparent. Most importantly, in case of bankruptcy or the head
contractor going into administration, the funds remain in the bank account and
are paid, firstly and primarily, to the liabilities on the project and
specifically to subcontractors. In other words, it provides protection to the
subcontractors in case of the insolvency of head contractors. This has been an
arduous exercise. Although it has been mentioned many times, it had never been
implemented in Australia. It had to be developed and implemented originally
with care and with the feedback of head contractors. As Hon Kate Doust said on
6PR today, I could have gone out and done it some months ago. I could have
hurried up and got it done, but that would have been a recipe for disaster. If
we did not get feedback from the
head contractors, first and foremost, they probably would not have bid for the
projects. Second, if they did, they would have built the excess cost into their
tender arrangements and the taxpayer would pay. We have spent the time getting it right, working with the head
contractors and creating an original element. I might add that the call for
expressions of interest has gone out for the first project under the project
bank account. The Bentley Health Service subacute rehabilitation refurbishment
project went out for a tender value of around $5.5 million. We understand that
there are a number of bidders for that and we plan to have three or four more
tenders go out by the end of the year.
This has been a long exercise. We
have assisted those people whose contracts were not paid. We addressed all the
recommendations of the Small Business Commissioner. We put in project bank
accounts. However, we cannot guarantee that head contractors will not go
insolvent. Since we started this exercise, three more have gone insolvent,
including Gavin Construction, which worked very successfully for 20-plus years
in Western Australia and was a good operator in both Building Management and
Works and the private sector. We have to put in processes so that BMW can do
the best it can in assessing head contractors so that subcontractors can get a clear indication of the problems
of their head contractor; we also have to afford subcontractors more protection
in case of insolvencies.
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