The Australian Constructors Association (ACA) has released its ‘Trust deficit’ report challenging the notion that underpayment of subcontractors is rampant in the construction sector.
Using Federal Government data, the ACA says construction firms pay almost 70 per cent of its invoices on time – only slightly under the mean across a range of industries, meaning the industry is performing similarly to its counterparts. The ACA also highlights the seasonally adjusted recent downturn in late payments by the construction industry, sourced from Xero Small Business Index – Australia, to underscore its contention that payment in the construction industry is on par with others.
Furthermore, the ACA’s ‘Trust deficit’ report also lambasts the role of Project Bank Accounts (PBA) scheme. The association labelled the statutory trust holding money belonging to one party under strict conditions as “an additional layer of regulation over-and-above these standard regulations”, an intervention it labels as “not inherently inappropriate” but must still bring less “negative impacts” than “the harm it seeks to minimise”.
The purpose of PBAs is, according to the ACA’s report, to ensure money is held over by builders to distribute in regular payments to subcontractors on projects, combatting the recent closures of developers leaving subcontractors unpaid. The ACA, however, believes PBAs distort normal market mechanisms in “several important ways”, such as by assuming construction contracts are similar to other transactions where trusts are used. This, according to the ACA, results in PBAs “compulsorily acquiring a builder’s legal property and reducing that property to the status of trust money”.
Acknowledging the “unfortunate reality” of subcontractors not receiving their full money owed due to insolvencies and the higher prevalence of construction firms experiencing insolvency – making up 29 per cent of insolvencies despite being just 17 per cent of businesses – the ACA’s ‘Trust deficit’ report believes PBAs imposed on construction firms “cannot be justified by the evidence” the association presents in its report.
The ACA’s ‘Trust deficit’ report comes after the association released a report earlier this year detailing the poor health of the building industry, highlighting the need for urgent government intervention to fix ‘fixed-price contracts’.
The ACA is the national body representing Australia’s leading construction, infrastructure, and services companies.
The ‘Trust deficit’ report can be read in full here.
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