Project bank accounts will become a reality in the case of every construction project worth more than $1 million in Queensland as the state moves to better protect subcontractors from the effect of major corporate collapses.
In its latest announcement, the government says it is preparing legislation to require project bank accounts on all projects worth more than $1 million by the start of 2019.
To support the transition, the government will introduce the accounts on all government funded projects of between $1 million and $10 million in value in 2018.
Premier Anastacia Palaszczuk said evidence had been that the balance within contractor/subcontractor contracts had not been correct and that greater protection for the state’s 69,000 subcontractors was in fact needed.
“What’s been clear from listening to subcontractors is that some more unscrupulous operators in the industry are using non-payment as a business model,” she said.
“Too many families have been torn apart because of this issue, and too many tradies have lost their businesses and even their homes.”
Widely considered to be a critical aspect of subcontractor protection on major projects, project bank accounts involve money from principals being paid directly into project trust account rather than a head contractor’s normal bank account.
Funds from which payments which relate to work performed by the subcontractor are subsequently paid directly out of the trust account to the subcontractor in question.
Whilst the accounts are fact operated by the head contractor, they provide greater protection to subcontractors because of their trust status and the consequential requirement for the accounts to be operated according to the trust deed.
Throughout Queensland, calls for greater subcontractor protection have grown over recent years as a number of corporate collapses saw subcontractors go unpaid.
In the most high profile example, more than 1,000 subcontractors went unpaid after Walton Group collapsed in late 2013.
Only a few months ago, meanwhile, Loganholme-based businesses Gary Deane Constructions and DJ Builders & Son went bust owing creditors $13 million and $2 million respectively.
Indeed, in the past month alone, no fewer than 31 construction businesses entered external administration throughout the state.
Moreover, the Government says implementation of reform would provide demonstrated benefits to workers, subcontractors and the state economy as a whole.
According to a Deloitte report commissioned by the Government, such a scheme could deliver up to $6.4 billion (net present value) in additional Gross State Product and 1,089 full-time equivalent jobs depending upon how widely it is applied.
Nevertheless, building industry lobby groups reacted coolly to the announcement.
In a statement, Master Builders Association of Queensland executive director Grant Galvin argued that much of the Deloitte report was based on unsupported assumptions and that implementation of its recommendations would in fact slow down payments to subcontractors, increase consumer prices and risk greater head contractor insolvencies.
“Today’s announcement was based on a Deloitte’s report that includes several assumptions that we cannot support,” Galvin said.
“We believe several of these assumptions are incorrect and will be calling on our strong working relationship with Minister de Brenni and the Queensland Government to continue our conversations on this matter.”
Galvin said there were better ways to improve payments to all parties using existing regulation.