DISCUSSION AND ISSUES PAPER

Bruce Collins QC Chair

Inquiry into Construction Industry Insolvency in NSW

12 October 2012

Security Of Payments Act NSW Inquiry
Available here : Discussion_and_Issues_Paper_IICII_12_October_2012

  • If this discussion paper is anything to go by the final report will ask many questions of the big end of town and the NSW Government in respect of their abusive & negligent behavior toward subcontractors.
  • The Inquiry is looking into some NSW Govt Dept’s practice of accepting “low price tenders” as opposed to the selecting the best “value for money” tender.
  • Subsequent to the Reed & St Hilliers failures the NSW Govt has set up a taskforce to review the NSW Govt’s procurement & contract administration processes. Further, the Inquiry goes on to state :“In that way, and to the extent government whilst not being properly described as the cause of insolvency, can nevertheless be seen to be a participant in the facilitation of a structure within which a distressed building contractor is given the opportunity to enter into a range of subcontracts at a time when its financial future was doubtful.”
  • Note the damning questions around pages 11 & 12 as to why NSW Govt Dept awarded contracts to Reed Constructions & St Hilliers without completing adequate due diligence !?!
  • The Inquiry says that subcontractors are being used by contractors to in effect provide “interest free and unsecured loans” by virtue of drawn out terms at the same time the subcontractor is paying the bank interest on an overdraft. This is described as “bottom up financing” resulting in the subcontractor carrying disproportionate risk.
  • The Inquiry is presently of the view that subcontractors are not adequately protected.
  • The Inquiry is clearly focused on the mistreatment of subcontractors in the industry and a range of measures to alleviate the unfair position they have in this industry.

Excellent work so far Mr Collins. And I dare say we speak on the majority of subcontractors when we say thank you and please keep up the good work – we are counting on you !!

 

 

 

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