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On 31 October 2018, the State Government’s Industry Advisory Group published its report on ‘Security of Payment Reform in the WA Building and Construction Industry’.
The Report was a response to recent high-profile corporate collapses in the building and construction industry such as Diploma and Builton, which left numerous contractors and subcontractors without payment for work performed. In addition, despite significant regulation already existing, subcontractors continue to face significant difficulties in getting paid in full and on time without legitimate cause, in circumstances where their principals or head contractors hold greater financial power.
As the industry continues to transition further away from directly employed workforces and towards greater use of external subcontract relationships, those at the lower end of the contractual chain of payment remain vulnerable. Statistical evidence indicates that the industry has one of the highest rates of insolvency and payment delinquency.
For those people who may from time to time be involved in negotiating variations, perhaps the most significant recommendation in the Report is that all contracts valued at $20,000 or more (including variations) be in writing and contain specified information, unless an exception applies such as extreme urgency. If implemented, this will significantly limit the scope for oral variations.
Other key recommendations from the report include: