Bibra Lake-based Magellan Power has been hit by the insolvency of EC&M after supplying nearly $500,000 of equipment to a project, leading managing director Masoud Abshar to add his voice to calls for stronger laws around payment of subcontractors.
It comes after Business News revealed last week that EC&M, which employs about 400 staff and had been working on the Tianqi lithium refinery in Kwinana, had entered administration.
Mr Abshar told Business News Magellan had been specified by the Department of Defence to supply back-up power systems for a refurbishment of HMAS Stirling Naval Base at Garden Island.
EC&M was selected for the project by head contractor Doric, with Magellan, which was a winner in this year Rising Stars Awards, was to supply equipment.
“They pushed down for every penny but we managed to get the right thing together,” Mr Abshar said.
“They put an incredible amount of pressure on us to deliver really fast, they were very strict, we put a lot of time and effort, a massive amount of overtime, to meet the deadline.
“They picked the things up (last month) and never paid us.
“Up until a month ago they were still pushing us to deliver equipment.
“They kept promising … they would pay, even the day before they declared that they are in receivership.”
Mr Abshar said Magellan would survive but was disappointed the business would lose cash that might otherwise have been used for growth, research and development, or staff bonuses.
“It’s unnecessary pain,” he said.
Mr Abshar said something needed to change to give subcontractors increased protection.
“The subcontractor protection law has got to come in so the bigger contractors are not subjecting subcontractors to pain like this,” he said.
“Subcontractors are totally unprotected in situations like this.
“The government has a responsibility to make sure whoever they give these contracts to is actually looking after the subcontractor, not leaving it like the law of the jungle.
The state government has been working on legislation to improve protections for contractors, after the Fiocco review late last year.
