Why it’s Time to Register Subcontractors 8

Monday, April 27th, 2015
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Construction Trades
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In the likes of Victoria, all members of the the front line of the building practitioner community are required  to be registered with the Building Practitioners Board.

The categories of registrants are prescribed under Part 11 of the Building Act and they are are:

  • Commercial builders
  • Quantity surveyors
  • Draftspersons
  • Residential builders
  • Architects
  • Engineers
  • Building surveyors
  • Building inspectors
  • Plumbers

There is, however, a very important second line of flank of key contractors that slip through the net and these are the subcontractors (sometimes referred to as “subbies”) or the trade contractors. These are contractors that the builders and construction managers contract with by way of sub-contracts.

Many building disputes are characterised by problematic workmanship generated by members of the subcontractor fraternity that are engaged by builders. It may be shoddy brick work, compromised structural form work, inadequate fit out and so on. The builder, however, is always accountable to the owner for the acts, error or admissions of the trade contractor fraternity, particularly in the residential sector where there are statutory warranties that dictate the builder must generate fitness for purpose product.

If the subby does a “runner” or refuses to rectify defective workmanship, the builder cops the liability and has to pay for the rectification out of his/her own pocket. That is the law, period. Woe betide the builder who deserts his post, because there will be a law suit and disciplinary censure courtesy of the building Practitioners Board. That’s OK – that’s the law and the consumer must be protected, but the person that generates the defect regardless of whether that person is a builder, a subcontractor or a building surveyor should be accountable and should rectify the defect.

If the subcontractor occasions the defect, then the subby must account, but if the subcontractor harbours no fear because there is no independent body do take issue with a failure to account then he or she may just say, “see you in court, buddy” or “I’ll just wind up the company and its your look out, mate.”

Absent a centralised registration system where the independent umpire can use the threat of disciplinary censure, common law redress can have its limitations. When a builder has no resort to the subcontractor then the subcontractor has effectively migrated a responsibility.

It is also problematic that subcontractors do not come within the jurisdiction of professional competency jurisdictions. This creates a double standard. On the one part, front line practitioners such as engineers and building surveyors are expected to behave in a professional fashion in an environment where if they fail to do so, they can be fined, reprimanded our “rubbed out.”

Yet the subcontractor fraternity is effectively exonerated from professional misconduct accountability because it escapes the jurisdiction of bodies like the BPB. In NZ, they do things differently; the sub trades are caught up in the registration scheme under the NZ Building Act. In NZ, practitioners involved in design, site work, carpentry, roofing, external plastering, brick work, block laying and foundations are required to become licensed building practitioners.

Maybe it’s time for Australian jurisdictions to give consideration to the registration of the “second flank” of the building trade contracting fraternity. This second flank may well include the likes of carpenters and joiners, brick layers, fit out contractors and electricians. They too should come within the jurisdiction of the regulated regime, with the view to lifting the bench mark of subcontractor competencies.

The net effect would be an overall improvement in construction process integrity and the quality of the as built environment. Furthermore, the system would be more balanced because there is something fundamentally disquieting about a concept where a bloke can do a job, get paid, stuff up and expect another poor devil to “cop the hospital pass.” This has never really been the Australian way.

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  1. beverley-jane

    It is long overdue. Our builder left us with repairs of over $200 000 on a brand new house as well as more than $75 000 in missing refunds. He conveniently liquidated to avoid all responsibility and walked away with our money. ( VCAT records show we were not his only victims.) Alarmingly, he established a new business promoting himself as a Building Inspector for which he was not registered or obviously qualified, clearly illustrated by the mess he left us (and others) with. Found guilty in the magistrates court on criminal charges for misleading and deceptive conduct but let off on good behaviour bond. No problem, he now calls himself a 'property' inspector which does not require registration and his attorney stated in court that he used this builder's services for his VCAT reports. Horrifying knowing critical VCAT decisions are based on reports of such incompetent, dangerous builders! This explains the fundamental failures of the current system. Currently, I could establish a business as a 'property' inspector and charge homeowners who mistakenly believe regulators control this industry, for reports that are not worth the paper they are written on!

  2. Gareth White

    I would like to see some accountability in the sub-contractor sector. I'm a Registared Builder in Victoria and I've worked my way up through the system so to speak since arriving here from New Zealand ten years ago. I am very conscious of the take the money and run attitude that is rife in the subbies in my business, it's everywhere from plumbers to window manufacturers and it's not good enough. I think people have definitely lost the pride in their work. Also we need to look at the training of these trades which is fast tracked to produce low quality inattentive work force.

  3. Mel

    To clarify, the 'law suit and disciplinary censure courtesy of the building Practitioners Board' exists in theory, but not in practice. My case has been with the practitioners board for over 2 years now, we still have not had a hearing. The maximum our builder will receive we are told is a $14,000 fine for leaving us with a home needing $250,000 spent on repairs. There is no benefit adding another tier to the current system when the registered builders and trades have no accountability as it is. Fix the 'system' that we have first, then maybe we can look at the other trades.

  4. Tom Haynes

    A worthy point to make Kim. However subbies also cop a hard time from builders rorting the system with "rampart insolvency". What are your thought on that?

  5. Grant Spork

    Subcontractor's for major trade packages should be registered as they are in Queensland. As well as surity of payment clauses becomming mandatory, an insurance program funded by a levy should be implemented for all sub contractors who are registered. This would pay out on a quantum meruit basis when a head contractor fails. Pay-out of the insurance would be based on 85% of the completed works, enough to reduce the number of flow on insolvencies. The cost to the economy and in terms of the lack of finance availabl to sub contractors because of the poor position they hold in the contract chain, would improve viability and productivity of all our sub-contractors. We have home owner wartranty in Queensland where very few claims are made. Similarly once head contractors and financiers realise that sub-contractors are no longer targets in the chain, there will be fewer insolvencies and lower finance costs. Sub-contractors can improve investment in the longer term, banks can provide funding understanding that sub-contractors are less likely to be randomly insolvent due to the collapse of a head contractor. Measuring Quantum Meruit should be undertaken by an independent body. Currently the

  6. john

    Kim, it is without doubt that there should be some sort of accountability for subcontractors. How is it that I as a registered building practitioner have my personal home tied up with builders warranty insurance for min 7 years, while sub contractors have no responsibility at all ? The system is an absolute sham. Ive had countless situations where trades have done the wrong thing, don't come back to fix, and the rectification costs exceed what moneys they were due, but to chase them through the system is simply not an option, and most of them really don't care. The really good trades, are simply not cost effective if one is to try and make money, due to supply demand within the industry. I remember talking about this 25 years ago at Uni – pie in the sky stuff. Whats needed to make it happen?

  7. Brett Bates

    NSW has categories of license required under the Home Building Act that include the construction trades mentioned in the article. Granted, the limitations are for residential home building work over $1,000 only (apart from the specialist licence categories – plumber/ electrician/ gasfitter/refrigeration mechanic) but it surprises me that Victoria doesn't have such similar requirements? I don't think this information is correct? If so, then Victoria is far behind the times and the postponement to institute a national standard of building licence with respective higher qualifications required for more complex building works as is done in Queensland is a failure of the current government.

  8. Russell Boyd

    The concept sounds logical, however there is another view on this: it's up to the Builder to take responsibility for the final service or product. If a builder engages a subcontractor, he ought to firstly ensure the subby is competent and has a credible history in delivering that which is specified. Unfortunately, many builders take on a cheaply priced subby and then the "wheels fall off….." As we know, a cheap price usually brings a cheap job.

    The second issue is the question of whether we already have more regulation and bureaucracy in the building industry than we need; introducing yet another layer of red tape is not what is required to deal with the situation described above; what is required is a little more responsibility on the part of builders. If you want to get someone else to do part of your project, then be prepared to take responsibility for their workmanship. After all, that's what you are selling to the end buyer: a full service.
    In my view its time the industry took greater responsibility for its actions and encouraged Government to bow out of the loop. Many of us would like to see LESS red tape, not more. So I guess I don't support the proposition.