How many more times are we going to put up with watching construction subcontractors abruptly escorted off sites, mere hours after finding out the principal contractor they’re working for has gone bust and their pay is now in doubt?

This scene is becoming too much of the construction industry’s ‘new normal’. We are 55 days into 2022, and we’ve already seen two major builders go down, Hotondo in January and Probuild this week.

Blamed on COVID, global economic uncertainty, lack of confidence in the market, planning delays, financing complexities – we’ve heard it all before.

But a virus or recession won’t be the root cause within an industry that sees big companies collapse year in, year out, no matter the state of the economy. Company directors and executives of prominent corporations sail off into the sunset, largely financially and legally unscathed, leaving small and often family-run businesses out of pocket.

Finishing trades like electrical subcontractors are particularly exposed. Supplying expensive materials and components, performing technical testing and commissioning works at the back end of projects when the bank accounts of a company going under are running dry or already empty. Tradespeople perform their jobs, blissfully unaware there may be no prospect of full payment.

It’s disgraceful that an industry that accounts for $360 billion in revenue, generating around 9% of Australia’s GDP, continues to be plagued with contractual imbalance, rife with unfair payment.

So how does it happen? Typically, a large developer or building company, in this case, Probuild, will be the principal contractor, controlling the overall project funding obtained by investors, banks and governments. Most principal contractors don’t have the specialist workforce to complete the various parts of a project, say electrical work, so they subcontract it. Depending on the size and scope, this may be subcontracted again – creating a chain of businesses and suppliers bound together by a web of contractual agreements.

The collapse of a principal contractor then leaves a trail of destruction in its wake. Subcontractors are the last on the list to receive payment, usually a few cents in the dollar for the work they’ve done months or even years earlier.

The toll on mental health from the stress and financial impact is well documented. Whole families are impacted, relationships strained, and the mental health and well-being of the subcontractors and their employees can range from anger, aggression and depression. We have even seen on-jobsite suicide. The roll-on effects into our community are not only measured in dollars. It is measured in human tragedy and societal disruption. The subcontractors I meet speak of the stress, lack of sleep and even shame of not knowing how they will pay their employees, suppliers or themselves. They don’t know how they will recover or simply explain to their families what went wrong. They feel they have let people down even though they had done everything right. These are well trained professional tradespeople who do great work in sometimes dangerous and difficult working conditions. They are proud of what they create. Governments have been more active in recent times, improving payment times, and this is a good thing.

The Queensland Government’s strong step towards really protecting the industry and subcontractors by implementing Project Bank Accounts which have come in from January 1 this year for projects over $10m and will be reduced to projects over $1m from January 2023. However, this needs to extend to the thousands of contractors working on projects less than $1m but still employing many workers. Especially when smaller subcontractors will often have several projects under $1m with a principal contractor, the individual projects are under the protected threshold but could be well over when accumulated. This issue is not state-based, and we should see this solution implemented nationally and adopted by all states and territories.

The industry needs stability, and subcontractors need protection. State and Federal Governments need to strengthen protections for small businesses and subcontractors at the same rate they’re writing billion-dollar cheques underpinning an infrastructure boom. Principal contractors who stand to gain the most are happy to take on mountains in the full knowledge they can pass future pain down the supply chain to subcontractors and suppliers.

Without wholesale reform, we’ll continue to see subcontractors suffer as they chase the elusive honest day’s pay.

By Oliver Judd, CEO of the National Electrical and Communications Association