08 March 2017

Building and Construction Industry Reform – Security of Payment

The Queensland Government is currently undertaking public consultation on a suite of proposed law reforms for the building and constructions industry.  A key component of the proposed reforms is improved security of payment for sub-contractors.

The planned changes will impose an obligation on head contractors (in projects over $1 million) to set up a Project Bank Account (“PBA”) for large construction contracts which the principal will make payments into.  The account is to be set up as a trust account with the head contractor and sub-contractors as the beneficiaries.  Progress payments and retention amounts paid by the principal will be required to be paid to the PBA.

The purpose of the account is to quarantine payments to subcontractors particularly in the event of the head contractor’s insolvency.  It is also designed to encourage head contractors to pass on progress payments more quickly, instead of retaining progress payments for other general expenses.  The PBA requirements will only apply to sub-contractors who have contracted directly with the head contractor (i.e. sub-subcontractors will not be covered).

To coincide with the introduction of PBAs the Queensland Government is also considering:

  • changes to the Building and Construction Industry Payments Act to encourage earlier lodging of payment claims by sub-contractors where adjudication is required;
  • amending the Subcontractors’ Charges Act to update the Act in accordance with the other proposed changes; and
  • combining the legislation dealing with sub-contractor payments into one act.

The PBAs will be brought into effect for government projects between $1 million and $10 million from January 2018.  The government plans for the changes to be in effect and begin applying to private sector contracts from January 2019.

Some of the other proposals for reform include:

  • builders’ licensing requirements;
  • powers of the QBCC in relation to non-conforming building products; and
  • the Queensland Home and Warranty Scheme.

The closing date for written submissions on the proposed changes is 15 March 2017.  Further information on the Queensland Building Plan and making submissions can be found here.

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