❓ Hon. Kate Doust questions the Treasurer on why project bank accounts (PBAs) aren't implemented on all government projects, particularly those managed by the Office of Strategic Projects. The Attorney General, representing the Treasurer, explains that PBAs are deemed unnecessary for Treasury's major projects due to low insolvency risk and existing strong measures to protect subcontractors.
AnsweredQoN 790Legislative Council
QuestionView source ↗
GOVERNMENT CONTRACTS — PROJECT BANK
ACCOUNTS
790. Hon KATE DOUST to the Attorney General
representing the Treasurer:
This question is being redirected
from the Leader of the House to the Attorney General.
I refer to the response of the Western
Australian government to the ''Report on the Operation and Effectiveness
of the Construction Contracts Act 2004 (WA)'', recommendation 21(b).
Noting the government's
comment in relation to Professor Evans' finding that project bank
accounts are more suitable for higher value or larger one-off projects and are
generally unsuitable for the majority of construction projects regulated by the
act, why is the government not implementing project bank accounts on all
government projects, particularly those being run out of the Office of
Strategic Projects in the Department of Treasury?
ACCOUNTS
790. Hon KATE DOUST to the Attorney General
representing the Treasurer:
This question is being redirected
from the Leader of the House to the Attorney General.
I refer to the response of the Western
Australian government to the ''Report on the Operation and Effectiveness
of the Construction Contracts Act 2004 (WA)'', recommendation 21(b).
Noting the government's
comment in relation to Professor Evans' finding that project bank
accounts are more suitable for higher value or larger one-off projects and are
generally unsuitable for the majority of construction projects regulated by the
act, why is the government not implementing project bank accounts on all
government projects, particularly those being run out of the Office of
Strategic Projects in the Department of Treasury?
AnswerView source ↗
I thank the honourable member for
some notice of the question.
The fundamental purpose of the
implementation of project bank accounts is to ensure that subcontractors can be
paid moneys owing in the event of head contractor insolvency when the
contractor is unable to meet its payment commitments. Whereas this has proven
to be a significant risk for low-value building projects managed by the
Department of Finance's Building Management and Works division, the
reverse is the case for the major projects managed by Treasury where the risk
of insolvency is low —
Hon Kate Doust interjected.
Hon MICHAEL MISCHIN : Is the member all right? Is she
asking me the question or does she just want to talk?
The PRESIDENT : Order!
Hon MICHAEL MISCHIN : The reverse is the case for major
projects managed by Treasury where the risk of insolvency is low, given the
nature of the large contracting firms involved. Indeed, no such incidence of
insolvency has ever occurred on a building project managed by Treasury.
Hon Kate Doust interjected.
Hon MICHAEL MISCHIN : It is like an illness, is it not?
The PRESIDENT : Order, members! I do not think we
want the Attorney General to start again, but we do want to hear the answer to
the question.
Hon MICHAEL MISCHIN : I am happy to start again, Mr
President.
The PRESIDENT : No, I do not want you to start
again. I think Hansard has got it to this point. Just complete the answer.
Hon MICHAEL MISCHIN : In addition, recognising the scale
and complexity of the projects in question, Treasury's building
contracts already incorporate a range of strong measures to address
subcontractor non‑payment should it arise. These measures, which are
typically not suitable for low value contracts, include in the event of
contractor default, such as insolvency, parent company guarantees, whereby the
contractor's obligations are assumed by its parent company; substantial
performance bonds, able to be called upon by the state; requirement for key
subcontracts to include terms enabling their novation to the state; and
provision for the state to pay subcontractors direct if a demonstrated payment
entitlement has not been met by the contractor.
As a result of the very different
risk profile associated with Treasury's major building projects and the
effective measures outlined above that are already in place, the state
government has elected not to mandate PBAs for these projects at this time.
However, the application of PBAs will be monitored closely to determine whether
expanded use is warranted in future, including for non-building infrastructure
projects.
some notice of the question.
The fundamental purpose of the
implementation of project bank accounts is to ensure that subcontractors can be
paid moneys owing in the event of head contractor insolvency when the
contractor is unable to meet its payment commitments. Whereas this has proven
to be a significant risk for low-value building projects managed by the
Department of Finance's Building Management and Works division, the
reverse is the case for the major projects managed by Treasury where the risk
of insolvency is low —
Hon Kate Doust interjected.
Hon MICHAEL MISCHIN : Is the member all right? Is she
asking me the question or does she just want to talk?
The PRESIDENT : Order!
Hon MICHAEL MISCHIN : The reverse is the case for major
projects managed by Treasury where the risk of insolvency is low, given the
nature of the large contracting firms involved. Indeed, no such incidence of
insolvency has ever occurred on a building project managed by Treasury.
Hon Kate Doust interjected.
Hon MICHAEL MISCHIN : It is like an illness, is it not?
The PRESIDENT : Order, members! I do not think we
want the Attorney General to start again, but we do want to hear the answer to
the question.
Hon MICHAEL MISCHIN : I am happy to start again, Mr
President.
The PRESIDENT : No, I do not want you to start
again. I think Hansard has got it to this point. Just complete the answer.
Hon MICHAEL MISCHIN : In addition, recognising the scale
and complexity of the projects in question, Treasury's building
contracts already incorporate a range of strong measures to address
subcontractor non‑payment should it arise. These measures, which are
typically not suitable for low value contracts, include in the event of
contractor default, such as insolvency, parent company guarantees, whereby the
contractor's obligations are assumed by its parent company; substantial
performance bonds, able to be called upon by the state; requirement for key
subcontracts to include terms enabling their novation to the state; and
provision for the state to pay subcontractors direct if a demonstrated payment
entitlement has not been met by the contractor.
As a result of the very different
risk profile associated with Treasury's major building projects and the
effective measures outlined above that are already in place, the state
government has elected not to mandate PBAs for these projects at this time.
However, the application of PBAs will be monitored closely to determine whether
expanded use is warranted in future, including for non-building infrastructure
projects.
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