Testing the right waters is happening now as a live trial

Michael Chesterman January 19, 2022
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When it comes to the new Trusts regime impacting the construction industry, to date not many boats have been out in the waters. Those that have been would appear to be successfully moving through the relatively smooth waters of Government projects.

In 2022, we will see more boats on the rougher, much more challenging private sector waters.

They have been testing the wrong waters!

I have always been of the view that a Government trial of Trust Accounts was ‘Testing the wrong waters’, a phrase I used as the heading of an article I published 4 years ago on 7 March 2018, where I stated:

“In my view, even if the review process for the implementation of PBA’s for Government contracts finds the model for this purpose was successfully implemented, that in itself should not be justification to proceed and impose PBA’s on captured private sector projects.

I say this for the following three main reasons:

  1. DHPW, on behalf of the Queensland Government, administers a system of prequalification for contractors in the building and construction industry known as the Prequalification (PQC) System. Contractors must first be prequalified and appropriately registered on the PQC System to be eligible to compete for any Government building project estimated to exceed $1,000,000 in value. These PQC requirements are over and above the QBCC licensing requirements and are very comprehensive. One major point of difference is that the PQC financial requirements are much tougher than the QBCC licensing financial requirements. This means that contractors that will be tendering for Government projects where PBA’s will be applicable are not representative of many other licensed contractors.
  2. DHPW stipulate that only certain widely used standard form contracts will be utilised in relation to the operations of PBA’s on Government projects. Obviously, this will not be the case with private sector projects.
  3. DHPW will select superintendents to administer PBA projects that understand their responsibilities to act in a responsible manner when deciding payment entitlements of contractors. Again, this will not necessarily be the case with private projects.”

NOTE: In this almost 4-year-old article and other previous articles by me, as well as Government reports, the abbreviation “PBA’s” refers to the initial version of Trust Accounts called Project Bank Accounts. DHPW refers to the department formally known as the Department of Housing and Public Works which is now the Department of Energy and Public Works.

Testing the right waters is now happening.

 

This development has made me pause to reflect and wonder: “if any concerning issues are identified in this initial private sector rollout, what will the Government do?”

To be very clear, I am working on the basis that the rollout will occur as scheduled, and I strongly recommend that all affected parties do likewise. 

The quote attributed to Mick de Brenni, the responsible Minister for Public Works, in Mackenzie Scott’s article in The Australian makes it very clear to me that the Government is committed to the scheduled rollout of the Trust regime. He is quoted as saying:

“Based on this extensive consultation and proven track record with phased implementation, continuation as planned for projects after 1 January is appropriate.” 

If we are now live testing the correct waters, then in my view, we should expect to see the emergence of some concerning issues. In the event of this happening then changes to the BIFA provisions giving effect to Project Trusts may have to occur.

In subsequent articles, I provide insight into issues I believe are likely to arise.

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Not intended as legal advice. Read full disclaimer.
Michael Chesterman January 19, 2022

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