QUEENSLAND would be $6.42 billion better off annually and construction sector employment would be boosted by an additional 1089 jobs under a more secure payment regime.
These are two key findings of a Deloitte Report commissioned by the State Government into the impacts of insolvency on construction in Queensland.
The report is part of a wide-reaching review of the industry in Queensland following the collapse of Walton Construction in 2013, which left Sunshine Coast subcontractors who worked on the Nambour Coles project $3m out of pocket.
Housing Minister Mick de Brenni commissioned the Deloitte Report following extensive consultation with subcontractors across the state into the impact of 2014 Newman Government amendments to the Building Construction Industry Payments Act.
The Palaszczuk Government is now likely to introduce widespread reform of the sector and has promised to start before Christmas legislation to ensure subbies get paid "on time, every time”.
Deloitte modelled two different scenarios for the implementation of Project Bank Accounts into which clients would make progress payments and from which subcontractors and the principal contractor would be paid.
Project Bank Accounts are seen by subcontractors as the key to solving the insolvency crisis in the Australian construction industry which leaves debts of $3.2b annually.
At present principal contractors can take money paid by a client for one job and use it to fund the cash flow of another.
The cascading nature of payments in the construction sector down from the principal contractor means subbies are left to bear the risk of head contractor insolvency.
There is also an incentive for contractors higher up the chain to delay payments to those lower down as a means of supplementing their own cash flow and working capital, the Deloitte Report found.
"As detailed in the (Housing) Department's Discussion Paper, these issues can leave subcontractors unpaid for work already completed, retention money can be lost as a result of being used as operating cash flow by contractors and head contractors rather than being held in trust, and subcontractors may suffer protracted delays in obtaining payment for work done,” the report found.
Late last year the Senate Standing Committee on Economics tabled a report into construction industry insolvency which found that while the sector accounted for 8-10% of gross domestic product, it was responsible for between one-fifth and one-quarter of all insolvencies recorded in Australia.
The Deloitte Report found a requirement for Project Bank Accounts for all contracts worth $1m or more would cut construction costs by 2.5% and deliver a cost benefit ratio of 3.52.
Any CBR over one is considered to be in the public interest.
The introduction of the scheme to just government projects valued between $1m and $10m, Deloitte found, would increase real state gross product by $269.3m and deliver an extra 51 jobs.
Mr de Brenni is expected to announce mid-week a clear policy response to the report which may also signal a wider shake-up of the industry in Queensland.
Subcontractors Alliance head Les Williams said he was surprised by the amount of money the Deloitte Report had found was withheld from subbies for work done and materials supplied.
Mr Williams said the report vindicated the position subcontractors had maintained since the Walton collapse and also mirrored the findings and recommendations of the 1996 Scurr Report into the sector in Queensland.
He said the 85,000 subcontractor small businesses in Queensland and their 250,000 employees would like to see Project Bank Accounts introduced as soon as possible.
He said the Deloitte Report had refuted repeated claims by some sections of the industry that the accounts would be too costly and would create more red tape.
"We're sick of hearing it,'' Mr Williams said.
"That is the typical ongoing response and it's a claim that has now been comprehensively refuted.''
He urged Prime Minister Malcolm Turnbull to look beyond the unions and see there were broader problems.
"The industry is massively dishonest,” Mr Williams said.
"There is more than just security of payment that needs addressing.”
Update your news preferences and get the latest news delivered to your inbox.