Council to introduce new contract measures to help protect subcontractors

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Sunshine Coast Council has endorsed additional contract measures as part of its procurement process, to help protect subcontractors in events of head contractor insolvencies.

These new measures will assist council identify financial stress or risk with head contractors and will be implemented from 1 July 2020, ahead of the legislated introduction of project bank accounts (PBAs) for councils Queensland-wide in July 2021.

Division Four and Outstanding Organisation portfolio holder Cr Joe Natoli said the new measures were designed to bring insolvency risks to the surface before sub-contractors were left without any option to be paid for their work.

“It is challenging to see local subcontractors struggling when head contractors become insolvent,” Cr Natoli said.

“We have resolved to implement new contract clauses and a new subcontractor register for each contract, and strengthen statutory declaration requirements to help ensure subcontractors working on our projects are paid what they are owed.”

He said the new council-led measures were a pre-cursor to state-wide industry reform being rolled out by the Queensland Government. 

“Project Bank Accounts will be introduced in council contracting in line with the Building Industry Fairness (Security of Payment) Act 2017. This is anticipated to be 1 July 2021 when the amendments are finalised by the Queensland Government.”

Payments are made into Project Bank Accounts under the head contract and, when due, would be disbursed to sub-contractors as part of the building or construction project.

“Council had considered implementing Project Bank Accounts ahead of the legislated timeframe, and sought expert external advice on the matter. It was determined that introducing Project Bank Accounts in line with the Queensland Government’s timeframes for councils would be more successful for all parties and minimise the impacts of disruption to the building sector.

“This July 2021 timeframe, as outlined by the Building Industry Fairness (Security of Payment) Act 2017, allows for greater stakeholder engagement and ensures contractors and sub-contractors are aware of what is required from them and engaged prior to these being mandatory,” Cr Natoli said.

Division Seven and Outstanding Organisation portfolio holder Cr Ted Hungerford said the additional measures to be introduced by council for new contracts from June 2020 would include:

·        drafting contract clauses and/or amendments for inclusion in council’s contracts to:

o   give council the ability to review subcontracts to ensure compliance with the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act)

o   impose baseline payment terms for head contractor payment of subcontractors, and allow for the review of subcontracts to ensure compliance by head contractors

o   provide greater security of payment to subcontractors in light of the BIF Act

o   in limited circumstances, allow for payment directly to subcontractors in compliance with the BIF Act.

·        drafting amendments to contracts in relation to insolvency events by head contractors to help address difficulties council identifies with the operation of some clauses in contracts (several of which specifically relate to contractor insolvency)

·        introduction of subcontractor registers and requirements for the registers to be incorporated into Tender and Contract documentation. This would see the completed register being created and supplied by the Head Contractor as part of package of other construction management plans.

·        seeking improved and stronger wording and referral of statutory declarations where there is a reasonable belief that declarations may be false.

“Council is both a supporter and customer of local businesses and we are backing our business community,” Cr Hungerford said.

“These additional measures will further support our business community following council’s quick, decisive response to the impacts of the novel coronavirus (COVID-19). At the height of the national public health restrictions we expedited paying council contractors and released two separate business support packages.

“Council’s support packages have already benefited over 3,000 business and community groups directly and more than 10,000 in-directly, via business advice, support, assistance and referrals.”

Council will work with contractors over the coming months to implement these new measures that aim to protect the construction sector of our business community.


What is a Project Bank Account (PBA)?

The Queensland Government has introduced new laws requiring a head contractor to set up a PBA for certain projects to ensure subcontractors are paid for the work they do.

A PBA is an account set up for a building contract by head contractors into which the Principal pays progress payments. The head contractor and the first-tier subcontractors are beneficiaries of the account. Further details about PBAs and the Building Industry Fairness (Security of Payment) Act 2017 (BIF Act) are available on the Queensland Government’s Business Queensland website.

 
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