Hon Bill Johnston MLA

Hon Bill Johnston MLA

Minister for Mines and Petroleum; Energy; Corrective Services; Industrial Relations

    Improving security of payment for subcontractors gets approval

    23/02/2018 6:30 AM
    • McGowan Government to review security of payments to subcontractors 
    • Experienced barrister John Fiocco will chair Industry Advisory Group  

    The McGowan Government today announced a review to improve security of payments for subcontractors in Western Australia's building and construction industry, and the establishment of an Industry Advisory Group (IAG).


    Key industry representations and public works agencies will be able to provide input to the IAG, which will facilitate the consultative process to implement industry wide laws.


    Once established, the IAG will complete a full and careful inquiry based on the Terms of Reference. 


    It will also consider amendments to the Building Services (Registration) Act 2011 and the need for new or amending legislation to provide fairer contracting practices.


    Other reforms for consideration include introducing trust arrangements to protect funds owed down the contracting chain, in case a head contractor experiences financial difficulty.


    The IAG will be chaired by John Fiocco and East Metropolitan Region MLC Matthew Swinbourn will assist him.


    Mr Fiocco is highly regarded among the legal fraternity in Western Australia and widely experienced in commercial and contract law.


    The first IAG meeting with industry stakeholders will be held on March 26, 2018. 


    Comments attributed to Commerce and Industrial Relations Minister Bill Johnston:


    "The McGowan Government is delivering on its election commitment to improve payments to subbies and we are getting on with the job.


    "We're committed to ensuring a regulatory framework for the building industry that provides fairer contracting practices.


    "This is a complex industry problem and we are getting key industry players together to deliver practical solutions."


    Minister's office - 6552 6700  


    Terms of Reference


    1. Whether amendments should be made to the Building Services (Registration) Act 2011 to:

    a. introduce a demerit point system (or other appropriate power) to sanction registered builders that do not pay debts owed to subcontractors and suppliers in a timely manner, or engage in behaviour designed to dissuade a subcontractor or supplier from enforcing their rights under security of payment legislation;

    b. require applicants for registration as a builder to demonstrate sufficient managerial and business acumen qualifications; and

    c. place greater limits on the ability of directors of failed building companies to obtain a new building contractor registration.


    2. Consider the need for new or amended legislation to provide fairer contracting practices in the industry by:

    a. regulating dealings with retention amounts withheld under construction contracts, including mandating maximum amounts and time periods for release;

    b. introducing defined processes for calculating deductions from payment claims made under construction contracts;       

    c. introducing defined procedures relating to variations and appropriate sanctions where variation costs have not been approved prior to work commencing;

    d. simplifying and standardising construction contracts by mandating minimum documentation requirements;

    e. prohibiting unfair terms and implying certain reasonable terms into construction contracts; and

    f. mandating the use of standard form construction contracts.


    3. Whether improvements can be made to the rapid adjudication process under the Construction Contracts Act 2004 to:

    a. assist subcontractors and suppliers with small value disputes use the adjudication process; and

    b. improve the compliance framework and standards for registered adjudicators.


    4. Whether statutory trust arrangements should be introduced to protect monies owed to subcontractors in the event a head contractor on the project experiences financial difficulty, and, if so, a preferred model for such trust arrangements.


    5. Consider any alternative and/or complementary reforms or measures which will improve fairness and security of payment for subcontractors and suppliers in the building and construction industry.


    In addition, there may be further issues that warrant consideration which the IAG is at liberty to identify and consider.  This may include findings made by recent reviews into payment issues in the building and construction industry completed by the Commonwealth and State and Territory governments. 


    The IAG should, as far as practicable, identify any negative impacts or additional regulatory burden that may arise in connection with any recommended reform, which may be the subject to a Regulatory Impact Assessment at a later date.