Unpaid sub-contractors trigger NSW government reform inquiry into construction industry collapses

The NSW government has launched an inquiry into the state of the building industry following a spate of recent high-profile construction firm collapses, some of which had contracts with the state government.

The inquiry, announced by NSW Finance and Services Minister Greg Pearce and being led by Sydney barrister Bruce Collins, QC, will look at the “construction industry insolvency with aim of safeguarding the interests of sub-contractors in the sector”.

It may also shed some light on the nature of the working arrangement between construction firms and contractors, the timing, negotiations and disputes over payments to contractors as well as government arrangements with private building firms on public projects.

A spokesperson for the office of Greg Pearce told Property Observer the enquiry was “effectively underway”, with Collins already starting to write to interested parties as part of a “long list of people” he intends to write to.

Submissions will be posted on the NSW government’s online discussion portal Have Your Say, with a closing date of September 14.

A technical glitch has delayed the launching of a section on the website dedicated to the building inquiry, but it is expected to go live tomorrow or next week at the latest.

The government set out the terms of reference for building inquiry late today.

Recent high-profile building collapses including St Hilliers Construction, Kell & Rigby and Reed Construction.

The NSW government has come under fire for awarding contracts to some companies that were proven, with hindsight, to be struggling financially.

It awarded social housing contracts to St Hilliers Construction just months before the firm collapsed.

St Hilliers Construction founder Tim Casey says the firm is owed more than $6 million from the NSW government and slammed its decision to take over 13 NSW social housing projects.

Reed Group owner Geoff Reed has launched a legal claim of between $50 million and $60 million against the NSW government, alleging “premature and unreasonable action in terminating its contracts with Reed Constructions”.

Announcing the inquiry, Pearce, says that between 2009 and 2011, “hundreds of companies in NSW collapsed owing billions of dollars, slamming the brakes on vital projects and investment”.

“Up to 24,000 unsecured creditors, including suppliers and sub‑contractors, have been left out‑of‑pocket, some by millions of dollars,” he says.

Pearce says the fragility of the construction industry is taking a toll on workers and the economy.

“The Commonwealth regulates insolvency and company practices, but the NSW government won’t walk away from its responsibility to address this issue.

“Mr Collins will look at the extent and causes of insolvency in the NSW construction industry and what reforms are needed to minimise the adverse effects on subcontractors,” he says.

“The inquiry will look at how to resolve these issues in the absence of effective policy direction from the Commonwealth.

“The NSW government has outlined an infrastructure program to get the state moving again, but this relies on a strong construction industry,” Pearce says.

The terms of reference for the inquiry include how initiatives such as insurance schemes, trust arrangements or mutual funds could help secure subcontractors.

Pearce says the government will also establish a taskforce to ensure government agencies are managing construction risks.

Greg Pearce also announced today the completion of a $4.4 million social housing project in Caringbah that will house up to 25 senior residents.

The project was one of a number of housing projects that stalled when the construction company St Hilliers Constructions collapsed in May this year.

It was then announced the NSW Government would take over the unfinished projects.