CONSTRUCTION Alert: Queensland Government consulting with industry regarding security of payment reforms

Feb 11 2016

Publications

The Queensland Government, by the Department of Housing and Public Works, is conducting community consultation regarding potential reforms to the security of payment regime for subcontractors in the construction industry.  The consultation is on the back of a security of payment discussion paper released in December 2015, and is designed to prevent the misuse and breakdown of the traditional chain of payment which not infrequently leads to insolvency in the construction industry.

The consultation is focused on:

  • receiving feedback from industry regarding the current regime, with particular focus on the utility of the Building and Construction Industry Payments Act 2004 (Qld) (BCIP Act), Subcontractors’ Charges Act 1974 (Qld) (Subcontractors’ Charges Act) and the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act); and
  • receiving feedback in relation to five proposed options aimed at improving the security of payment regime in Queensland.  The options upon which feedback is sought are below.

Option 1 – Project bank accounts

The establishment of project bank accounts (PBA), which are externally administered bank accounts that disrupt the traditional chain of payment.  Progress payments are made directly by the principal into the PBA, and once the head contractor’s progress claim is certified, payment to subcontractors is made directly out of the PBA (effectively skipping payment to the head contractor). 

Option 2 – Retention Trust Fund Scheme

Similar to the recent reform of the security of payment regime in New South Wales, subcontractors’ retention money would be held by head contractors on trust in a separate account.

Option 3 – Insurance schemes

The discussion paper proposes a range of insurance schemes to safeguard against defects, late completion and insolvency of contractors.  It is proposed that retention would be replaced entirely by mandatory policies of insurance.

Option 4 – Federal legislative changes

This option seeks to lobby the Commonwealth government for reform to federal legislation, to allow for subcontractors to be treated with priority above secured creditors in insolvency situations; much like is currently afforded to employees in the event of insolvency.

Option 5 – Education

Further education for building and construction industry stakeholders regarding matters such as financial management and business management. It is proposed that industry members be made aware of existing rights and remedies under the BCIP Act, the QBCC Act and the Subcontractors’ Charges Act in order to militate against disputes and problems arising in the first place.

The Government’s consultation is unsubtly aimed at furthering the interests of those towards to the bottom of the contractual chain – subcontractors and suppliers – however all participants should be aware of the proposed changes as the effects of the reform (if adopted) would be felt at all levels.

Submissions in response to the discussion paper close at 5pm, Thursday 31 March 2016.

Written by:

Andrew Kelly | Partner | +61 7 3338 7550 | akelly@tglaw.com.au

Tom McKillop | Senior Associate | +61 7 3338 7530 | tmckillop@tglaw.com.au    

Joshua White | Lawyer | +61 7 3338 7939 | jpwhite@tglaw.com.au