Security of Payment Reform in the Western Australian Building & Construction Industry

On 31 October 2018, the State Government’s Industry Advisory Group published its report on ‘Security of Payment Reform in the WA Building and Construction Industry’.

The Report was a response to recent high-profile corporate collapses in the building and construction industry such as Diploma and Builton, which left numerous contractors and subcontractors without payment for work performed. In addition, despite significant regulation already existing, subcontractors continue to face significant difficulties in getting paid in full and on time without legitimate cause, in circumstances where their principals or head contractors hold greater financial power.

As the industry continues to transition further away from directly employed workforces and towards greater use of external subcontract relationships, those at the lower end of the contractual chain of payment remain vulnerable. Statistical evidence indicates that the industry has one of the highest rates of insolvency and payment delinquency.

For those people who may from time to time be involved in negotiating variations, perhaps the most significant recommendation in the Report is that all contracts valued at $20,000 or more (including variations) be in writing and contain specified information, unless an exception applies such as extreme urgency. If implemented, this will significantly limit the scope for oral variations. 

Other key recommendations from the report include:

• permitting disciplinary action against builders that fail to pay undisputed or determined debts;
• introducing a demerit point system which will empower the State Administrative Tribunal to suspend or cancel registration of builders who demonstrate poor payment practices;
• granting the Building Services Board the power to exclude individuals and companies with a history of business failure from remaining registered as builders;
• implementing steps to encourage greater use of standard form contracts;(again, this means subcontractors will be protected upon insolvency of the head contractor); and
• mandating that any security withheld under a construction contract be returned no later than 12 months after practical completion.

For further information on how these changes may impact on your business please contact Chris Bailey, Special Counsel on 08 9481 2040 or chris.bailey@whlaw.com.au
 

This article is general information only, at the date it is posted.  It is not, and should not be relied upon as, legal advice.  This article might not be updated over time and therefore may not reflect changes to the law.  Please feel free to contact us for legal advice that is specific to your situation.