Written by: Wilhelm Harnisch, Chief Executive Officer, 06 Aug 2012

Imbalance in security of payment legislation causes friction between building contractors and their principals and must be changed.

Chief Executive Officer of Master Builders Australia, Wilhelm Harnisch, said out-dated and imbalanced security of payment laws have become a “bug bear” issue for the building and construction industry.

“Cash flow plays a major role in underpinning the building and construction industry’s viability. When the sector is caught in the slow lane of a two speed economy, unnecessary and costly time spent in adjudication is inefficient.

“The industry needs balanced and efficient security of payment laws to protect a contractor’s right to get paid and to facilitate a fair and efficient adjudication process.

“Master Builders Australia commissioned Australian National University Emeritus Professor Jim Davis to develop 10 new best practice principles to improve security of payment law. These Principles, should form the foundation for national action to achieve a greater degree of uniformity in security of payment legislation,” Mr Harnisch said.

Australia’s security of payment laws are based on principles developed more than 16 years ago.

In a submission to the Australasian Procurement and Construction Council, Master Builders Australia called for harmonised, open and balanced security of payment legislation.

“Rather than protecting contractors, the laws are creating cash flow bottlenecks which curtail the industry’s viability and lead to project delays through the sidelining of resources. For example, a $1,000 payment claim is governed by the same procedures as for a $10 million claim – which is a practical nonsense.

“Since their inception in 1999, the security of payment laws have grown inconsistently and now each state and territory has different laws.

“Differing laws have led to issues surrounding the selection process for adjudicators. In particular, most states do not require adjudicators to have formal qualifications or experience, which is not acceptable,” Mr Harnisch concluded.