Wednesday, 30 October 2024

Environment and Planning Committee

Employers and Contractors Who Refuse to Pay Their Subcontractors for Completed Works

Juliana ADDISON (Wendouree) (10:41): I am very pleased to provide a report from the Environment and Planning Committee on our inquiry into employers and contractors who refuse to pay their subcontractors for completed works, following the government response to our inquiry being provided just last sitting week.

I am very privileged to chair the Environment and Planning Committee and have the opportunity to work cooperatively with members from both sides of the chamber, especially the deputy chair, the member for Morwell, who has been an outstanding committee member. I would also like to thank the members for Bass, Croydon, Monbulk, Nepean, Ripon and Warrandyte, who are also great to work with, for their positive and collaborative approach.

In Australia subcontractors complete 80 per cent of our national construction. Significantly, this is the highest in the world. The construction industry in Victoria has been found to have higher levels of insolvency than other sectors, and these insolvencies can lead to non-payment and financial hardship for subcontractors, workers and consumers, as well as having an adverse effect on the economy.

A key focus of our committee’s work was payment practices in the construction industry. We received 44 submissions from 73 stakeholders, as well as hearing from 10 witnesses across two days of public hearings. Our recommendations proposed reforms to address problems of systematic poor payment practices and issues of financial risk in Victoria’s construction industry when it comes to the non-payment of subcontractors.

Our inquiry made 28 extensive recommendations to the Victorian government, including legislative reform to modernise the Building and Construction Industry Security of Payment Act 2002. I note that the last time that that was amended was 2006, so the industry has changed significantly in those last 18 years, and an update and modernisation is most necessary. Many of our recommendations made proposals to repeal provisions added to the Building and Construction Industry Security of Payment Act 2002 in 2006, which will bring it into alignment with other state and territory jurisdictions across Australia, many of whom who have already attacked this very insidious problem.

I welcome the Victorian government’s response to our inquiry, which was tabled last sitting week, which acknowledged the impact of poor payment practices and contracting practices on construction in our state. The Victorian government recognises the importance of a strong and stable construction industry and that subcontractors are an integral part of the industry. The government’s response broadly supports the need for reform, and of the 28 recommendations, 16 recommendations have been accepted in full and 12 recommendations in principle and part. As a community we should be very, very proud of that. This will come as welcome news for subcontractors across Victoria, particularly those who know firsthand the thin margins, the poor payment practices, the financial insecurity, the power imbalances and high levels of insolvencies that are hallmarks of Victoria’s hierarchical construction industries.

Recommendations 2 to 14 from chapter 2 of our report propose changes to the payment practices to strengthen the statutory right to claim payment. I am really pleased that the Victorian government supports in full recommendations 2, 3, 4, 5, 6, 7, 8, 9 and 11 and supports recommendations 10, 12, 13 and 14 in principle. Further, in terms of improving the adjudication of payment disputes, which was addressed in chapter 5 of our report, the government supports in full recommendations 15, 16, 17, 19, 20, 24 and 26; supports recommendations 18, 21, 22, 23 in principle; and supports recommendation 25 in part. Finally, recommendations 27 and 28, made in chapter 6 of the report, pertaining to insolvency and the construction industry, both are supported in principle.

As a result of our inquiry into employers and contractors who refuse to pay their subcontractors for completed works, important reforms will be introduced to provide greater support and protections for Victorian subcontractors, including a new provision to enable contractors to claim a progress payment calculated in accordance with the contract or, if the contract does not provide for the matter, calculated on the basis of the value of the construction work to be carried out.

In closing, I am incredibly proud of the work that was completed by the Legislative Assembly Environment and Planning Committee, and I know that contractors will get back to doing what they do best – constructing for Victoria.