Let’s press pause on the BIF Bill and have a respectful and informed discussion about Security of Payment.
During the course of the consultation period on the Building Industry Fairness (Security of Payment) Bill 2017 (BIF Bill) my biggest disappointment has been the failure of the conversation to be respectful and informed due to the great SOP divide that exists in the building and construction industry. In my experience, when this occurs it is counterproductive to the important cause that we all should be supporting, namely ensuring subcontractors obtain improved payment outcomes.
I have authored 9 other articles highlighting significant BIF Bill implementation issues ranging from lack of details, narrow objectives focus, unintended consequences and an absence of costing details. The purpose of this analysis has been to open up meaningful discussion and take a minute to make sure the detail of the Bill matches its purpose and objectives.
In undertaking research for these articles I have adopted a very cautious and evidence based approach in evaluating the BIF Bill. My extensive regulatory experience in matters relating to Security of Payment (SOP) has given me a unique insight into the challenges facing building and construction industry. The desperate plight of subcontractors in battling to get paid for work they have done is something I have witnessed many times over 22 years of working for the industry regulator in Queensland.
My work over this period of time involved advocating, on behalf of all parties in the industry, but particularly subcontractors, for the right to be paid for work they have done. I did this through many legislative and policy contributions. Tim Sullivan, an experienced and highly respected adjudicator, in a LinkedIn recommendation stated:
“Michael was the driver for developing and then implementing the Queensland Building and Construction Industry Payments Act 2004”.
I believe that any SOP legislation for the construction industry should be focused on providing solutions that improve the flow of money right through the contractual chain. That was certainly my intention when introducing the legislation back in 2004. A builder should have the same control of their business as a subcontractor does. Yes, there are builders out there that do the wrong thing and in my years as compliance manager, I saw my fair share.
Even with having been exposed to the worst of the construction industry in my years at the Regulator, I still cannot support placing all builders in a straight jacket and asking them to build with no control. Those in the industry working hard every day to do the right thing need legislation that is not one sided. There needs to be a better answer. Providing a SOP legislative platform that supports all parties to obtain payment for work they do is the most effective way of ensuring monies flow down the contractual chain to subcontractors.
The SOP initiatives contained in the BIF Bill are purposefully and exclusively focused on looking at the industry’s payment problems through the eyes of a subcontractor. Unfortunately, this narrow legislative focus on just subcontractors will cause significant unintended consequences.
The SOP initiatives contained in the BIF Bill are:
(1) Imposition of new and tougher Licensing Minimum Financial Requirements on contractors.
(2) Regulating contracts between contractors and subcontractors by mandating certain provisions and prohibiting others.
(3) Controlling and directing the flow of money between subcontractors and builders with the establishment of Project Bank Accounts.
(4) Redefining to a greater extent in favour of subcontractors the operation of the BCIPA through a number of procedural changes.
In respect of (1) and (2) above, the government has not provided sufficient detail as to what it has in mind. I am hopeful that this can still be remedied with the Parliamentary Committee set to deliver its report Friday 13th. With regard to (3) and (4) above, the government has failed to make an effective case justifying these initiatives, at least to the satisfaction of two major industry bodies, the HIA and MBA.
While BCIPA will always favour subcontractors because it grants them statutory payment rights, I believe that the process still has to afford builders a reasonable and fair opportunity to defend themselves in any payment dispute. Furthermore, the government has failed to appropriately cost all 4 initiatives, a fact I pointed out in my article titled ‘SOP Reforms…..something does not add up‘.
The Parliamentary Committee reviewing the BIF Bill is scheduled to hand down a report on 13 October 2017. I am of the view that the government should revisit its SOP agenda with a view to developing legislation and policies that can be demonstrated as effective in delivering improved payment outcomes for all parties working in the industry. I want to see subcontractors paid. I want a healthy construction industry and right now the best way to achieve that is to press pause on the BIF Bill and rethink what will truly be best for subcontractors and others who work in the industry.
If you have any questions relating to the BIF Bill or any SOP issues, please contact Michael Chesterman at email@example.com or Earl Tan at firstname.lastname@example.org.Not intended as legal advice. Read full disclaimer.