Page 4541 - Week 12 - Thursday, 15 October 2009
Next page . . . . Previous page . . . . Speeches . . . . Contents . . . . Debates(HTML) . . . . PDF . . . .
The Building and Construction Industry (Security of Payment) Bill 2009 establishes a statutory mechanism for operators in the building and construction industries to quickly resolve payment disputes through an adjudication process. It provides an alternative to costly and protracted court proceedings that often present a barrier to subcontractors and small business operators.
This proposal was first advanced in 2007. However, implementation was delayed after consultation with key industry stakeholders indicated a greater disparity of views on an appropriate model than initially anticipated. That said, I would like to offer my personal thanks to the exhaustive work of the Master Builders Association, its members and other significant industry participants in the successful resolution that we have before us today.
Mr Speaker, the New South Wales and Queensland security of payments acts have been operational since 1999 and 2004 respectively. They are now considered benchmark models for security of payment legislation. These acts together provide a blueprint for this scheme. However, because of the ACT’s geo-economic position, the ACT scheme is more closely aligned with the New South Wales model, which is a tried and tested legislative framework.
In essence, this bill will facilitate for the ACT building and construction industry timely payments between parties to construction and related contracts, rapid resolution of disputes concerning such contracts, and mechanism for the rapid recovery of payments of such contracts.
Major studies into the building and construction industry have concluded that failure to pay subcontractors moneys due to them has a substantial impact on their capacity to operate as small to medium business enterprises. This in turn impacts on the security of their employees. Relatively low capital backing and a heavy reliance on cash flows to sustain business typify the industry.
The structure of the building and construction industry is a multi-tiered hierarchy of principals, agents, contractors, subcontractors and suppliers, with cascading payment obligations. The failure of any one party in the contractual chain to pass on moneys owed can cause a domino effect on other parties in the chain, with those at the bottom most at risk. The consequences to the affected parties include restricted cash flow and, in some cases, insolvency.
Difficulty in ensuring that subcontractors and others are paid fully, and on time, is not unique to the building and construction industry. The impact, however, is often worse than in other industries that generally do not depend to such an extent on subcontracting.
The building and construction industry plays an important role in the ACT economy. Throughout the 2007-08 financial year, there were over 15,000 people employed in the construction industry in the ACT, and the value of building, construction and engineering work done in the ACT exceeded $2 billion. Also, of all ACT building and construction businesses, 93 per cent employ five or less tradespeople.
Next page . . . . Previous page . . . . Speeches . . . . Contents . . . . Debates(HTML) . . . . PDF . . . .