Making Sure Subbies Pay Their Subbies

The Australian Building and Construction Commission (ABCC) has commenced a targeted national audit campaign to ensure large-scale subcontractors comply with their security of payment obligations, including paying their subcontractors on time.

The campaign will examine whether a sample of large subcontractors meet their security of payment obligations. Some of these obligations include requirements to:

• Pay subcontractors on time and for the agreed amount.
• Report delayed or disputed payments within the required period.

The audit campaign is in addition to the ABCC’s rolling compliance program involving audits of head contractors.

Where issues of late or non-payment of money are identified, the ABCC will work with companies to resolve the situation. If deliberate breaches of security of payment laws are found, the ABCC will consider recommending the Minister for Industrial Relations impose a sanction preventing the company from applying for or being awarded Government-funded work.

How subcontractors have been identified

The ABCC has adopted a multi-pronged approach to identify larger-scale subcontractors for the audit.

This involves:

• Writing to a sample of head contractors working on Commonwealth-funded projects to request details of the subcontractors they have engaged.
• Identifying subcontractors with a history of non-payments, or delayed payments.

How the audit is being undertaken

The ABCC has contacted identified subcontractors to advise them of its intention to audit their compliance with security of payment laws and reporting obligations.

These companies are required to provide invoices from subcontractors, proof of payments and other records. They will also be subject to detailed desktop audits and interviews.

What happens if non-compliance with security of payment laws are found?

The late payment of subcontractors can be caused by many factors. Some of these are inadvertent, while others are deliberate. Depending on the circumstances, the ABCC will work with each company to improve their payment and reporting processes. Companies might be required to:

• Agree to provide training for staff involved in payment processing.
• Introduce better processes, such as improved internal tracking and time-critical reminders.
• Amend their dispute settlement processes to provide access to a binding method of dispute settlement.
• Establish a management information system to report contract management disputes and variations to senior management.
• Reorganise budget reporting frameworks to ensure potential issues are dealt with more accurately and in a timely manner.

At the other end of the scale, companies that deliberately breach security of payment laws can be subject to sanctions preventing them from applying for Government-funded work for up to 12-months.

To find out more about your security of payment obligations visit the ABCC’s website.