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Win for subs

Friday, 19th April, 2013

The state government is moving to better protect subcontractors who are left out of pocket when head contractors go bust on government jobs.

The government yesterday announced its response to an inquiry into construction industry insolvency and recommendations to better protect
subcontractors, including progress payments and a cash retention trust scheme.

It was revealed earlier this month the company in charge of building the Broken Hill Health Service's mental health and rehabilitation units went into administration, allegedly leaving local contractors $1 million out of pocket.

National Buildplan Group (NBPG) was awarded the tender for the hospital projects and was responsible for several other NSW Health Infrastructure projects around the state.

A Broken Hill business owner told the BDT that one subcontractor was owed as much as $400,000.

Member for Murray Darling John Williams said the recommendations would improve the relationship between building contractors and subcontractors.

"Through the reforms, NSW will become the first state to set up a trust fund scheme administered by the Office of the Small Business Commissioner
to protect retention sums," Mr Williams said.

The inquiry received numerous submissions from builders claiming their payments are often withheld or retention sums misused by head contractors.

To ensure subcontractors receive prompt payments, the government is introducing legislative changes to improve payment practices in the building
industry and government construction contracts will be subject to reform.

"Head contractors will be required to pay subcontractors progress payments within 30 days rather than the long payment cycles of 45-60 days and on occasion up to 120 days,"

Mr Williams said. Key reforms include:

* Establishing a cash retention trust scheme for subcontractors.

* Introducing prompt payment provisions to enhance cash flow and address the serious issue of delayed payment to subcontractors and head contractors.

* Enacting a legal requirement for written statements by head contractors to ensure all subcontractors are paid and allowing authorised officers to investigate and prosecute offences.

* Implementing a trial of project bank accounts on government construction contracts where the government will directly pay subcontractors as well as revamped and more frequent financial assessments of contractors.

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