Thursday, 13 September 2018
Building and Construction Industry
I take this opportunity of five minutes to talk to the House about the building industry, with respect to subcontractors. In many instances, they are the most vulnerable of the various contractors within the building industry. I have been a builder myself and I understand how reliant subcontractors are on receiving the ongoing payments through main contractors and how they are totally vulnerable to those payments coming through in a timely fashion—in some respects, coming through at all. There is a real inequity in the bargaining power that is inherent in the structure of the contractual chain. We find that it's not uncommon to encounter subcontractors who have not been paid simply because the main contractor may have had cost overruns due to weather, due to industrial action or due to the fact that they may have gone in too skinny in the first place to win the main contract to build whatever it is we're talking about.
You continually bump into tradesmen from small, family-owned businesses that are so reliant on being paid in a timely fashion so they can, in turn, pay their own employees. This is something that is currently becoming a real problem in the building industry. We need to actually do something about this and create a method of payment and a structure around a method of payment that is going to give subcontractors genuine comfort and confidence that, if they win a tender and do a competent job, they are going to be paid. That confidence isn't there at the moment. It can be a matter of a major contractor saying that you have to take 'a haircut' on this job. A contractor may say: 'We've got a dispute now over a variation in the building. The contract was varied halfway through construction and now there's a dispute as to what that's going to cost.' It may simply be that a major building contractor has phoenixed and has, all of a sudden, gone out of business, saying to the various subcontractors: 'It's too late. We're out of business. You're on your own.' Unfortunately, we see too many of these building companies starting again in another state or in another part of the same state, maybe with a different initial to their registered company name, and they start applying for jobs again—not just private sector jobs; these examples have happened where they've won council work, state government projects and, potentially, federal government projects. Governments can do an awful lot to crack down on any of the major contractors who are not playing by the rules of fair play and who are not paying their subcontractors in a timely fashion.
It is fair to say that it was the modus operandi of many of these contractors to expect their subcontractors to take a reduced payment just because that's the way they do business. They create this need. Subcontractors need to stay on the books of the major contractors if they're going to keep getting the work. So, when those major contractors say, 'You're going to take a 20 per cent reduction on this job,' even though the job was completed perfectly, you're faced with maybe a $20,000, $30,000 or $40,000 reduction in the money that you are owed. Private subbies, which are normally mum-and-dad and family-owned businesses, are faced with a couple of options: take the big construction companies to court and try to win in a legal sense—and we all know that they're not going to win that; the companies will just run the system out and they'll end up paying more than the $20,000, $30,000 or $40,000 in legal fees—or spit the dummy and say, 'I'm never working for them again,' and then it will be very difficult for them to get the work that they need in an ongoing fashion.
I think this is predominantly a state government issue. Predominantly, we need the state governments' small business ministers to get their heads together and stop doing something in one state that they don't do in other states. We need these provisions harmonised around Australia, and we need to create a payment system that gives security and comfort to all of the subcontractors who are working within the building industry, so they know that if they win a contract and complete the job to a high level of competency they will be paid.