New bill to shield subcontractors amid Pindan fallout

The state government is expected to introduce a new bill to improve security of payment across the state’s construction industry today, one week after the collapse of construction giant Pindan.

In a statement released this morning, Commerce Minister Amber-Jade Sanderson confirmed the state government would be introducing the Building and Construction Industry Bill 2021, which is designed to complement the use of project bank accounts on government projects and include a mandatory retention scheme to protect subcontractors’ retention money from being lost in insolvency.

The draft legislation also sets out the guidelines for a rapid dispute resolution process to speed up the receipt of outstanding payments, including provisions for monthly progress payments, and addresses registered contractors with a history of ripping off subcontractors or those that engage in 'phoenixing' activity.

The draft legislation sparked controversy among industry upon its release last year, with many expecting the implementation of cascading statutory trusts, following the release of recommendations by an independent advisory group chaired by barrister John Fiocco.   

The independent advisory group was formed in 2018 to undertake a state government-prompted review of the security of payments for subcontractors in Western Australia’s building and construction industry.

Cascading statutory trusts were previously floated as an idea to better protect payments for subcontractors, however the Bill opted for mandatory trust retention schemes instead.

The bill was due to be introduced last year and was placed back on the agenda in a bid to do more to shield subcontractors following news Pindan Group had been placed in administration last Tuesday, a process that is expected to affect as many as 500 subcontractors and 400 trade suppliers.

Pindan Group had 68 active projects across Western Australia and 280 staff when it and several of its subsidiaries were placed into administration.

While it has not yet been confirmed how much money the company owes, initial estimates indicate it could be more than $A50 million.

The company had a suite of contracts with the state government, including $10.9 million in upgrades to Hedland Senior High School and a $35 million per year contract with the Department of Communities to maintain social housing in the state’s north.

On Wednesday, Finance Minister Tony Buti said the state government was in the process of determining the scope of the exposure and who had been affected, but confirmed that project bank accounts were in place for several construction projects and that subcontractors would be paid.

Dr Buti had indicated that the state government planned to introduce the bill within the next fortnight amid criticism from the state’s construction union.

On Friday, EY confirmed that the state government had agreed to release funding to facilitate the operation of the asset management arm of the embattled construction company.

Business News is a registered creditor of Pindan in relation to a small advertising contract.