The Queensland Department of Housing and Public Works has
released a discussion paper seeking consultation from the building
and construction industry, in response to reforms it has considered
to respond to perceived problems within the industry.
The discussion paper seeks to address four key problems,
insolvency in the contractual chain leaving subcontractors
unpaid for work they have already completed
retention money that is being used as cash flow by contractors
and head contractors, instead of being kept aside for defects
protracted and unjustified delays in payment for work done
a lack of financial management skills in the industry.
In response to the perceived problems, the discussion paper
highlights 5 key areas for reform and encourages the public's
Option 1: Creation of a Project Bank Account to
facilitate simultaneous payment
This option introduces the idea of a Project Bank Account (PBA)
to remove the contractual chain between head contractor and
subcontractor, and facilitate simultaneous payment to both head
contractors and subcontractors through a trust arrangement.
In this option, the subcontractors will submit payment claims to
the head contractor. The head contractor then submits a progress
claim to the principal for the work done.
Upon approval by the principal through the superintendent, the
principal makes payment for the work into the PBA.
The bank, upon receiving signatures of the principal and the
head contractor on the progress claim, will distribute the payments
in accordance with the progress payment claim.
In this instance, the bank will pay the head contractor and all
subcontractors from the PBA at the same time, transferring funds
into both the head contractor and subcontractors accounts.
The PBA ensures that funds are held on trust. In the event the
head contractor becomes insolvent, there is no risk of non-payment
as the money is held on trust directly for the subcontractor and
the subcontractor becomes a secured creditor.
Option 2: Retention trust fund scheme
The retention trust fund scheme requires subcontractor's
retention money to be held in a separate trust account. The trust
account requires a head contractor to hold retention money in a
bank and prevents the head contractor from using the retention
money as cash flow.
The subcontractors will become beneficiaries of the trust
account and are therefore seen as secured creditors. This means
that if the head contractor becomes insolvent, the retention money
is securely held on trust and cannot be accessed by
Option 3: Insurance Schemes
The Insurance Scheme replaces the idea of retention money with
insurance. This option introduces a range of insurance schemes to
safeguard against factors like late completion of work, defects and
insolvency of contractors.
The insurance scheme would eliminate the need for contractors to
hold retention money.
Option 4: Federal legislative changes
This option seeks to action the other states and territories to
lobby the Commonwealth Government to reform the Corporations
Act 2001 (Cth) and Bankruptcy Act 1966 (Cth) to grant
subcontractors a priority payment in the event a head contractor
Option 5: Education
This option proposes to increase financial and business skills
within the building and construction industry through
Have your say
The Department of Housing and Public Works is seeking feedback
from the building and construction industry in response to the
The Department is also seeking response in relation to the 2014
Building and Construction Industry Payments Act 2004 (Qld)
Let them know your submissions by reviewing the discussion paper
here and completing either the
survey or providing written submissions.
This publication does not deal with every important topic or
change in law and is not intended to be relied upon as a substitute
for legal or other advice that may be relevant to the reader's
specific circumstances. If you have found this publication of
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Warranties can be risk-shifting mechanisms when the party giving the warranty is not the party at fault for the defect.
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