It’s coming.

A conga line of unpaid and ripped-off contractors; all hired to repair or rebuild properties destroyed by the fires.

It was the same a few years back, after the massive Queensland floods, we were contacted by all kinds of contractors who had been engaged to repair homes, and then left unpaid.

As we have seen in the media there is a great push by the insurance industry to use local tradies to put some money back into local communities. I am holding my breathe waiting for that to unravel in a PR nightmare.

After a disaster like the fires, the bulk of work arises from insurance policies. The insurance company will appoint a head contractor to oversee construction work usually by area or region. In the fullness of time these head contractors will pocket the payouts from the insurance companies and leave the subcontractors unpaid or part paid.

Why does this happen?

It happens because of the mix of 1) big money promised for 2) totally un-scoped work, that 3) cannot be quantified or quoted beforehand that 4) needs to be done yesterday.

This just makes for the biggest payment disputes you can get.

The head contractor will be given a list of addresses. The problem starts here. No one really knows what work needs to be done at those addresses. So, the head contractor issues a Purchase order to the tradie and send him off to the site. The purchase order has nothing on it but the site address. It has no rates, no scope, and no agreed price. But it will never be revisited or updated, even when some of this information becomes known. So, the basis of the agreement is almost worthless.

It is then left to the trade contractor to work out what needs to be done.

Then comes the pressure of time. There is no time to tender, or quote, or agree on rates. The only thing the head contractor says it ‘Just get it Done!’ And so off goes the tradie embarking on a huge job with no agreed price and no defined scope.

As the work progresses the contractor will bring various issues to its attention; basically works that came out of left field. Issues and things that could not have been known when work first started. Again the call from the head contractor will be ‘just deal with it, just get it done’. If the contractor provides a quote he’ll be told, ‘we’ll sort it out at the end’. Or maybe it will be agreed to orally. And then denied later. Either way it’s not nailed down.

When the work is completed. The insured get their new or repaired property, the insurer gets to fulfil its obligation to its policyholder, and the head contractor gets paid by the insurer. And what about the trade contractor?

He/she gets a fraction of what he’s/she’s owed for the following reasons;

We never issued you a Purchase Order for that

That’s too expensive, I could have got it done cheaper

It’s defective

It isn’t complete

You didn’t need to do that

We never agreed to that price

That was never in your scope

That was all in your scope!

And so it goes.

The tradies are the victim of a hurried, ad hoc, unplanned tornado of work that they cannot control. The process of doling out insurance work is just ‘who’s who’ of the worst contacting practices you can think of. It’s everything you’ve always been told not to do. Too many contractors get caught up in the pressure of time and the endless race to complete.

Let’s see what the next 6 months bring.

While it all sounds great, the pipeline of insurance work is less likely to inject cash into affected regions, and more likely to send tradies to the wall. It is also more likely to destroy small businesses, reduce employment, and increase debt levels; both personal and commercial.

But you know what?

I really hope I’m wrong.