The Queensland Government is inviting submissions on a number of potential options for reform (including potential amendments to existing legislation) to better protect payments to sub-contractors.

These matters are outlined in the Security of Payment discussion paper released by the Department of Housing and Public Works in December 2015.

The deadline for submissions to be made in response to this paper is 31 March 2016.

Industry participants interested in attending the consultations can find further details on the Department of Housing and Public Works website.

OVERVIEW

The Government’s discussion paper:

  • outlines five options which the Government is considering to improve payment outcomes for sub-contractors;
  • seeks feedback on the implementation of the recent (2014) amendments to the Building and Construction Industry Payments Act 2004 (BCIP Act); and
  • raises the possibility of reform to the Subcontractors’ Charges Act and/or the QBCC’s ‘Minimum Financial Requirements Policy’.

FIVE OPTIONS UNDER CONSIDERATION

The five options to improve payment outcomes for sub-contractors in the construction industry that the Government is seeking feedback on are:

  1. the use of Project Bank Accounts, (trust accounts set up with a bank to assist with the payment of progress claims);
  2. the implementation of a Retention Trust Fund Scheme under which a head-contractor would hold retention money in a trust account (with an authorised deposit-taking institution) and may only withdraw funds in accordance with the contract terms;
  3. the use of an insurance scheme (instead of retention money) to secure sub-contractor performance;
  4. federal legislative changes, notably to the Corporations Act 2001and the Bankruptcy Act 1966, to prioritise payments owing to sub-contractors; and
  5. the implementation of education programs which focus on the financial skills of relevant stakeholders.

Given the levels of detail provided in the discussion paper on each of these options for reform, it may be that the options most likely to be pursued by the Government are the use of Project Bank Accounts and the Retention Trust Fund Scheme. 

The use of Project Bank Accounts is currently being piloted in Western Australia, the Northern Territory and New South Wales.  

Similarly, a Retention Trust Fund Scheme would be a more feasible option because the reform would be specific to retention moneys and the legislative reforms needed to implement such a scheme would be less likely to span across industries (as compared with, for example, an insurance scheme).

BCIP ACT AND THE SUBCONTRACTORS’ CHARGES ACT

While there is also an opportunity to provide feedback on the recent changes to the BCIP Act and the Subcontractors’ Charges Act, it remains to be seen whether there is appetite for significant amendments to be made to these pieces of legislation in the near term, given that:

  • the BCIP Act only recently underwent major changes (following a detailed review process) to the payment claim and adjudication process[1]; and
  • an overhaul to the Subcontractors’ Charges Act may be more likely as part of the suggested harmonising of all of State and Territory security of payment regimes under a Commonwealth initiative[2].