Security of payment for subcontractors | Department of Housing and Public Works

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 Security of payment for subcontractors

Security of payment is about helping subcontractors get paid for the work they do. Subcontractors are particularly vulnerable because they are generally further down the payment chain.

Security of payment in the construction industry is important - it is about making sure subcontractors get paid on time, every time. This is not just important for subcontractors and their families, it is important for Queensland’s economy and productivity.

From 17 December 2015 to 31 March 2016, the Queensland Government released a Security of Payment discussion paper (PDF, 141MB) to seek feedback from industry and the community on how best to tackle this issue for subcontractors.

The discussion paper included a series of options for the public to consider:

  • Option 1—Project Bank Accounts: A project bank account facilitates simultaneous payments of a project's head contractor and all participating subcontractors through a trust arrangement.
  • Option 2—Retention Trust Fund Scheme: This option requires subcontractors’ retention money to be held in a separate trust account.
  • Option 3—Insurance schemes: This option includes a range of insurance schemes to safeguard against defects, late completion and insolvency of contractors.
  • Option 4—Federal legislative changes: This option seeks to lobby the Commonwealth government for reform to Commonwealth legislation relating to security of payment.
  • Option 5—Education: This option proposes education for the building and construction industry stakeholders regarding matters such as financial management and business management.
Finally, the discussion paper sought feedback in 2014 on the effectiveness of the amendments to the Building and Construction Industry Payments Act 2004, as well as the Subcontractors’ Charges Act 1974 and the Queensland Building and Construction Commission’s Minimum Financial Requirements Policy.
 
The Government engaged Deloitte to undertake economic and financial analysis of certain reform proposals that arose as a result of consultation. The Government is continuing to engage with stakeholders to ensure the effectiveness of any potential measures that may be adopted to improve security of payment for subcontractors in Queensland. 

Report findings

 
The Report shows that implementing Project Bank Accounts would deliver positive benefit cost ratios (BCR) over a 20 year evaluation period in certain scenarios.
 
Deloitte’s analysis also showed strong positive rating scores for delivery of an education program, and positive overall benefits from proposed changes to the Building and Construction Industry Payments Act 2004.
 
A cost-benefit analysis on the Retention Trust Fund Schemes option found that these did not provide a positive benefit.

More information

If you have any questions regarding the discussion paper, please email securityofpayment@hpw.qld.gov.au.


Last updated 26 November 2016    


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