Adjudication processes for construction payment disputes in South Australia would be radically altered under a private member's bill which is supported by building industry lobby groups but heavily criticised by subcontractor representatives and debt collection experts.
Introduced into parliament recently by South Australian lower house Liberal MP Stephan Knoll, the Building and Construction Industry Security of Payment (Authorised Nominating Authorities) Amendment Bill 2016 would see the abolition of authorised nominating authorities (ANAs) and the responsibility for appointing adjudicators to hear construction payment disputes transferred to the Small Business Commissioner.
Currently a core part of the adjudication process under Security of Payment legislation across most states, ANAs manage the administrative aspects of the adjudication process including the appointment of adjudicators and provide support and advice to respective parties in the dispute with regard to the administrative aspects of the adjudication process.
Whilst advocates of ANAs feel they provide essential support to subcontractors and other parties to the dispute, major development lobby groups complain of conflicts of interest which arise from the dual role of ANA’s in terms of receiving applications for adjudication from claimants and also appointing adjudicators.
Such dual roles, it is argued, can lead to situations whereby ANAs have an incentive to ‘shop around’ for adjudicators which are favourable to claimants.
Instead, the new bill would see responsibility for these functions transferred to the Small Business Commissioner, who would instead select individual adjudicators on a random basis from a pool of pre-approved adjudicators.
That pool, in turn, would be overseen by an adjudication panel of five members, which will include at least one representative of construction contractors and at least one subcontractor representative.
In a written response to questions, Knoll told Sourceable that the proposed new arrangements would help to restore impartiality and confidence to the system.
“There is distrust from both sub-contractors and head contractors in the current security of payments system evidenced by the fact that most firms that go through this dispute process do not end up working together again,” Knoll said.
“The model proposed aims to include both head contractors and sub-contractors in the process for deciding on the pool of adjudicators to help restore confidence and impartiality. Security of Payments is an important mechanism for the construction industry and as such we need to get it right.”
Building industry lobby groups voiced support for the bill.
A spokesperson for the Master Builders Association of South Australia told Sourceable that his organisation had heard stories about parties shopping around in order to find adjudicators whom they felt would be likely to view their claim favorably, and that the new system would lead to a fairer and more transparent process for adjudicator selection.
Critics, however, blasted the latest moves, which some say represents an attempt by lobby groups at the big end of town to attack the support structures which underpin Security of Payments legislation and neuter its impact.
Pointing to a surge in the number of claims ‘falling over’ and being withdrawn prior to adjudication following the removal of ANA’s in Queensland, Adjudicate Today managing director Bob Gaussen says the removal of administrative support from ANAs in that state led to a surge in applications which had to be withdrawn because of errors or lapses in time frames.
In the five months prior to the abolition of ANAs in December 2014, Queensland Building and Construction Commission figures show, around three ‘non-complex’ claims (typically below $750k in value) reached adjudication for every one such claim which was withdrawn.
In the first seven months of the current financial year, by contrast, more claims were withdrawn than reached a decision.
Subcontractors Alliance president Les Williams is outraged.
“I see this private member’s bill as an underhanded attempt by peak industry groups to erode the support network for subcontractors seeking to access the adjudication process in SA and to destroy the intent of their legislation,” Williams said.
Sydney based debt collection expert and managing director of Contractors Debt Recovery Anthony Igra is equally scathing.
Were allegations of claimant friendly bias of any substance, Igra said, the proportion of decisions which went in favour of respondents should have risen following the abolition of ANA’s in Queensland.
Given that this has not happened, he says claims of such bias remain without foundation, and the only claims which were supported by factual evidence revolve around the rise in fall-over rates of claims.
“I find it amazing that, given the dismal outcomes in Queensland, anyone in SA would suggest eradicating ANA’s,” Igra said.
Nevertheless, supporters of the latest bill in South Australia argue that in fact, the proposed new system should be easier for subcontractors.
Having the Small Business Commissioner as a single point of contact should reduce complexity and should thus aid those likely to seek help through the Security of Payment process, Master Builders argued.
Knoll, meanwhile, says the SBC will be able to support subcontractors, and is well positioned to do so given its long history of helping small business across a range of industries.
In order to become law, however, the bill requires the support of the current Labour government.
The office of small business minister Martin Hamilton Smith has not responded to requests for comment about Labour’s position with regard to the legislation.