Wednesday, 29 November 2023

Environment and Planning Committee

Employers and Contractors Who Refuse to Pay Their Subcontractors for Completed Works

Daniela DE MARTINO (Monbulk) (10:34): It gives me great pleasure to rise and speak on the Environment and Planning Committee’s first report for this parliamentary term, Employers and Contractors Who Refuse to Pay Their Subcontractors for Completed Works, tabled yesterday by our chair the wonderful member for Wendouree. I would like to begin by acknowledging and thanking the secretariat staff, who worked tirelessly in the background on this report through organising hearings and witnesses and ultimately compiling the evidence in this report. Special thanks also to our chair and the deputy chair the member for Morwell for their work on this inquiry, embodied by a spirit of good bipartisanship and a genuine desire to uncover the truth of the situation.

The members for Ripon, Bass, Croydon and Nepean, most recently replaced by the member for Warrandyte, and I all worked constructively together to explore this issue with open minds and curiosity. The results of our inquiry are found within the pages of this report and are quite concerning when it comes to non-payment of subcontractors across the construction industry. Across the state of Victoria it is apparent that non-payment and long-delayed payment of subcontractors are widespread, from domestic through to large-scale commercial and civil construction, and our current Building and Construction Industry Security of Payment Act 2002, or SOPA, now 21 years old, is failing to comprehensively address and quash this concerning practice. It is absolutely in need of review and improvement.

We heard from a broad range of witnesses, including departmental representatives, industry associations, unions and individual businesses as well as adjudicators who work in the security of payment field. We also heard from Mr John Murray AM, widely considered to be the foremost Australian expert in SOPA. The Honourable Tony Robinson, who chaired both the industry working group which developed the original Victorian legislation and the 2004 group which made recommendations informing the 2006 amendment to the SOPA, also provided a submission and evidence which pointed to the need for this SOPA to be reviewed and improved. With the exception of the Housing Industry Association, all other witnesses and submissions were in agreement that non-payment of subcontractors is rife across domestic and commercial construction and has terrible consequences for those affected.

It is important to note that this is not a phenomenon limited solely to Victoria; it occurs across the Australia and beyond. It appears to be a common practice in construction abroad, but this does not mean that we cannot nor should not do something to address this terrible practice, which sees smaller companies collapse or subcontractors lose their family home when those further up the payment chain fail to pay for completed works. Individuals suffer. Small and larger businesses suffer. The Victorian economy suffers.

The statistics on the prevalence of non-payment are breathtaking. The Murray review of 2017 included a survey of 526 Australian construction industry contractors. It found back then that 72 per cent had 40 per cent or more of their invoices paid late and over a third had 60 per cent or more of their invoices paid late. Further, 44 per cent of respondents said that their invoices were unpaid for more than 30 days on average. Others reported not receiving payment until at least 60 days after completing work. More evidence was supplied by the National Electrical and Communications Association, which correlated with the Murray report survey. They indicated that outstanding payments to subcontractors are all too common: 54 per cent of respondents were owed amounts greater than $10,000, 16 per cent were owed more than $100,000 and 2 per cent were owed more than half a million dollars. They are extraordinary figures. I do not think anyone out there in retail would ever accept someone not paying for goods that they have walked out of a shop with.

The submission from the Construction, Forestry, Maritime, Mining and Energy Union, CFMEU Victoria, similarly observed that non-payments are so rife that the union has a dedicated team whose principal responsibility is to recover the unpaid wages of union members. So whilst we do have security of payment laws which were once nation leading, they have now fallen behind in their usefulness. They are not widely known and therefore they are under-utilised. They do not apply universally to all moneys owed and across all sectors. Put simply, they require an update to ensure that the construction industry is a fair place to earn and be paid for the satisfactory work that one performs or the goods which they provide.

This is a comprehensive report with much detail, and 5 minutes simply does not do it any justice. I would like to thank once again all of those involved. I am looking forward to speaking on this further along, and I thank you for the time today to do so.