In my 22 years working for the construction industry regulator and now in the private sphere of the construction industry, I have never witnessed anything that has come close to the hype concerning security of payment (SOP) initiatives and reforms.
In this Helix Insight article, I look at if the SOP hype is justified in relation to adjudication. I have concluded that based on an analysis of statistics, adjudication is no longer the flavour of the month.
When it comes to statistics, a Mark Twain quote resonates with me, namely:
“Facts are stubborn things but statistics are pliable”
While I also have a healthy scepticism of statistics, I nevertheless appreciate their insight. Outlined below is my analysis of published BCIPA adjudication information on the QBCC website.
BCIPA Adjudication Decisions handed down 2005/2006 – 2017/2018
- In the 2008/2009 financial year, a total of 754 adjudication decisions were handed down under the Building and Construction Industry Payments Act 2004 (BCIPA), representing $77.8 million adjudicated in favour of claimants. 576 adjudication decisions (76%) were under $100,000. This represents the most adjudication decisions ever handed down in a financial year in Queensland.
- Contrast this to the 2017/2018 financial year (last reported financial year for Adjudication statistics) where a total of 268 adjudication decisions were handed down under BCIPA, representing $37 million adjudicated in favour of claimants. 182 adjudication decisions (68%) were under $100,000.
Has the recent adjudication reforms impacted this declining adjudication decision trend?
BCIPA was repealed on 17 December 2018 and replaced by the Building Industry Fairness (Security of Payment Act) 2017 (BIFA).
In a press release by the QBCC dated 17 July 2019 it is advised:
“More than $18.2 million in disputed payments has been awarded to unpaid building and construction workers in less than six months since changes took effect to make adjudication easier to access for subbies.
Since February, 124 adjudication decisions have been handed down under the Building Industry Fairness (Security of Payment) Act 2017, which implemented a number of measures to ensure everyone in the building industry is paid in full and on time.”
Based on the above information, I forecast that approximately 270 adjudication decisions will be handed down for the first year of the new adjudication regime under the BIFA. Consequently, based on these early published statistics and my expanding on them, the answer is NO.
Why has adjudication lost its appeal?
I believe there are two main reasons:
- Parties are working much harder to resolve payment disputes by negotiation.
- Respondents are far more effectively defending payment claims with better and more targeted payment schedules.
I am also of the view that even affording the BIFA ‘claimant focused’ reforms (e.g. removal of the payment claim endorsement requirement) a greater period of time to have an impact, they will not reverse a decade long trend in the decline of adjudication decisions resolving payment disputes.
I do not view this fact as all bad. In my view, parties reaching negotiated payment outcomes is generally a good thing. Furthermore, while adjudication is important to be on top of, there are many other significant business and legislative initiatives contractors should be focused on to improve their financial position.
Helix Legal will address issues like these BIFA payment and adjudication reforms at the upcoming event called “Building Businesses: a conversation with the QBCC” where Brett Bassett and a number of senior QBCC staff will be participating in a Q&A style event.
Numbers are limited so if you or any of your colleagues or contacts are interested in attending this event, I would recommend that you promptly register.
We look forward to hosting the inaugural event for the Building Business Series at Helix Legal on 26 September 2019.Not intended as legal advice. Read full disclaimer.