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FACT SHEET
Building and Construction Industry Security of
Payment Bill 2009
Following an analysis of the extent of payment problems in the
Tasmanian Building and Construction Industry the report
'Security of Payment in the Tasmanian Building and Construction
Industry' was released by consultants Stenning and Associates in
October 2006.
This report determined that many participants in the
contractual chain are poorly or thinly capitalised, resulting in a
significant reliance on cash flow to sustain their business
operations.
The range of activities undertaken as part of compiling this
report confirmed that the Tasmanian building and construction
industry experiences security of payment problems of a
non-trivial nature.
A survey undertaken in conjunction with developing the report
found that 43% of those surveyed reported experiencing
security of payment problems over the previous financial year.
In the sample of businesses surveyed, security of payment
problems affected over $37 million dollars of revenue flow in
the previous financial year.
The main objective of this Bill is to reform payment behaviour
in the building and construction industry. The bill creates fair
and balanced payment standards for building and construction
contracts.
The standards include use of progress payments and quick
adjudication of disputes. The Bill will speed up payments by
removing incentives to delay. Reforms include the power for
an unpaid contractor or subcontractor to suspend work and a
ban on pay-when-paid clauses.
All states and territories, except Tasmania, have legislated to
address the security of payment problem in their building and
construction industries. South Australia has tabled a Bill and
the Australian Capital Territory is soon to debate their Bill.
The Bill is based on the Building and Construction Industry Security
of Payment Act 1999 of New South Wales.
A key departure from the policy outcomes contained in the
New South Wales Act is the ability for builders to claim against
residential home owners who potentially have no commercial
background in the building and construction industry. This
departure is seen as necessary to ensure that all participants in
the building and construction industry are treated equally.
Additional mechanisms are introduced by the Bill to ensure
these parties are afforded special consideration for their lack of
experience in the building and construction industry. These
mechanisms include mandatory warnings on claims and 20
business days to consider the content of a progress payment
claim, rather than the 10 days afforded building practitioners.
This additional time is provided to allow these
non-practitioners to consider their options and if necessary to
seek assistance or advice concerning the claim process.
Adjudication provides the claimant with important benefits: a
prompt interim decision on a disputed payment; impartial
assessment of a disputed payment; and the opportunity to
progress the matter as a judgement for a debt in court. Failure
to pay will also allow the claimant to suspend work.
The adjudicator's decision is only an interim decision until the
final financial payments or restitution is determined at the end
of the contract under the provisions of the contract.