Building and Construction Industry Security of Payment (Authorised Nominating Authorities) Amendment Bill

Second Reading

Adjourned debate on second reading.

(Continued from 24 March 2016.)

The Hon. M.L.J. HAMILTON-SMITH (Waite—Minister for Investment and Trade, Minister for Small Business, Minister for Defence Industries, Minister for Veterans' Affairs) (10:49): I rise to speak on behalf of the government as the minister responsible for these matters and to commend the member for Schubert for bringing the matter before the house, which he did on 24 March 2016. The purpose of the bill is to amend the current Building and Construction Industry Security of Payment Act 2009 to withdraw all authority from the current Authorised Nominating Authorities (ANAs), appoint the Small Business Commissioner as the sole ANA and create an adjudicator review panel. I wanted to do the member for Schubert the courtesy of responding to this as the minister rather than to send it in with another member.

My approach is always to listen very carefully to constructive suggestions and recommendations in whatever form they may come from members opposite. I would certainly like to see the government recognising good ideas that come from the opposition and giving them credit and either taking them into account with its own deliberations and initiatives or supporting them if the case is made. Similarly, it would be nice to see the opposition, whoever that may be from time to time, supporting government initiatives where they can see it is clearly in the best interests of the state, rather than the situation where the opposition and the government are always disagreeing with each other out of principle without considering the merits of the argument.

I think the member for Schubert has made some constructive, purposeful and worthwhile suggestions in his bill, though, as I will explain, the government will not be supporting the measure. This is because we will be taking it back to the parliament in a different form that covers some of the things that the member for Schubert has not included in his initiative, in order to make it more complete. I will explain further.

One of the recommendations set out in the Moss review dated 12 March 2015 and put forward by the Small Business Commissioner in a public consultation paper is to withdraw authority from the current ANAs and appoint the Small Business Commissioner as the sole ANA. On 17 June 2016, I announced a two-month consultation process, and that the consultation paper can now be accessed on the Small Business Commissioner's website. Submissions close on 19 August 2016.

The point is that the Moss review addresses many of the concerns that are shared by the member for Schubert. The consultation paper puts forward a series of recommendations in a three-stage approach to reform the building and construction industry. In stage 1, the Small Business Commissioner proposes that the following amendments be made to the act:

the insertion of a penalty provision for intimidation;

an amendment to section 29 to withdraw the authority of existing ANAs and appoint the Small Business Commissioner as the sole ANA. These are recommendations 40(a), 40(b), 40(d) and 40(f) of the Moss review;

a further amendment to section 29 to allow fees to be fixed (by regulation) to cover the administrative costs of the Small Business Commissioner for providing services as the sole ANA. That is recommendation 40(e) of the Moss review;

the insertion of a provision to enable the Small Business Commissioner to publish adjudications, which is recommendation 40(j) of the Moss review; and

an amendment to section 4 to clarify the Christmas shutdown period, as proposed by the Master Builders Association.

The Small Business Commissioner also proposes the following under stage 1:

the implementation of procedures by government to ensure subcontractors working on government projects are paid on a regular basis;

the development of a building and construction industry code under the Fair Trading Act 1987 which would provide alternative dispute resolution services;

the establishment of a secretariat to support the Small Business Commissioner in the new role as the sole authorised nominating authority and the responsibility of training adjudicators and administration of the act. The estimated cost of this resource is around $900,000; and

the establishment of an education program to promote the act and educate the industry, which is recommendation 40(c) of the Moss review. The estimated cost of that resource is $200,000.

The commissioner then points to stage 2 and he suggests the following legislative and policy reforms to be considered:

the introduction of simple and complex claims, which are recommendations 40(g), 40(h) and 40(i) of the Moss review;

an extension of the act in order for it to apply to homeowner builders as discussed in paragraph 37 of the Moss review;

the development of a policy, in conjunction with the Industry Participation Advocate, which in effect would be a 'good behaviour' test for principal contractors who bid for government projects of $4 million and above for the metropolitan area and $1 million and above for regional areas;

the insertion of a provision in the act requiring directors of principal contracting firms to sign a statutory declaration confirming that subcontracts have been paid. These declarations would be published on a principal contractor's website and on the noticeboard at the worksite;

the insertion of a provision in the act relating to the holding of payments in dispute in cases where a claimant has lodged an adjudication application; and

the establishment of trust arrangements for all retention payments for projects over $10 million.

Then there is a stage 3, which involves the establishment of a project bank account for government projects, which is in a form of trust account that allows subcontractors to be paid directly by the state government on an agreed schedule. The Small Business Commissioner anticipates that the expeditious implementation of stage 1 will result in a significant improvement in the operation of the act and principal contractor behaviour. A heavier regulatory approach could be implemented by the government under stage 2, and possibly stage 3, if the changes made under stage 1 fail to improve conduct in the industry and payment to subcontractors.

Following the conclusion of the consultation period, the Small Business Commissioner will review the feedback and prepare a briefing for consideration of the Minister for Small Business with the intention of bringing detailed recommendations, including legislative amendments to the act, back to cabinet later this year. It is evident from the three-stage approach I have outlined that the bill brought forward by the member for Schubert with good intent provides only a partial solution to some of the issues highlighted in the Moss review, and that what the government will be proposing will provide a more complete response to the issues he has raised.

Security of payment in the building and construction industry is a very important issue for the government and one which goes beyond the private member's bill, which is why the government will be opposing the bill. It is not because it is not a genuine bill, and not because it does not contain some good measures, but rather because we think we can do it better, if you like, and more completely, once we have gone through the process.

Again, can I just say to members opposite that I really encourage them to bring forward private members' bills and motions in the small business area. I will always consider them most carefully. Members opposite have a great deal to offer in this area. It is always better if you could ask for a meeting to explain your point of view to me. I will have my officers there, and I will make sure that we listen carefully.

I can assure the member for Schubert that we will be taking a lot of the issues he has raised in the measure into account as the process unfolds, and we look forward to his participation in the debate in the fullness of time. As mentioned, for the reasons I have outlined, we cannot support the bill, but it will form part of the substance of what is eventually brought to the house for consideration at a later time. With that, I conclude my remarks.

Mr KNOLL (Schubert) (10:57): I will make a number of points on the minister's speech. To take a slight step back to understand why we are where we are, on I think 11 March 2015, the retired District Court judge Alan Moss handed down his review into this Building and Construction Industry Security of Payment Act. The government then sat on it for three months, and then, in a speech to this place, the member for West Torrens, in a ministerial statement, tabled the review to parliament and also made reference to, at that time, the collapse of Tagara Builders which is, as we can still see, winding its way through the media and has done in recent weeks.

So, in March, the report was handed down. In June of last year, the minister makes a statement in response to the collapse of a major builder here in South Australia, and then nothing happens. We get to Christmas, and still nothing has happened, and the concerns that were raised in the review continue to go on, so that is why, after undertaking my own consultation on the review, I decided to bring a bill before this place in March of this year. Now, we are already in July, some 15 months after the review was handed to the government, with still no real advancement.

I think the government and I agree, and the Liberal Party agrees, on the principle of needing to change the way adjudications are handled but, certainly from the discussion paper that the minister has put out, there are some discrepancies between what they are proposing and some of the measures that I am proposing as part of this private member's bill.

Essentially, the reason that I put those things in the bill is that, at the moment, we have a breakdown of trust between head contractors and subcontractors, and to a certain degree the natural tension that exists between the two of them is going to continue, because they will always be on different sides of the fence. What I tried to do quite explicitly was find a mechanism by which the two sides would be forced to come together, and that is why I included the provision of an adjudication panel, to appoint or review adjudicators, as part of making the Small Business Commissioner the only ANA.

The reason I did that was that it gives a very explicit opportunity for the subcontractors or head contractors, both of whom will have seats at that adjudication panel table, to air grievances about specific adjudicators, and for the Small Business Commissioner to then, upon the recommendation of that adjudication panel, make decisions about the appropriateness of a person.

Essentially it says to the industry: if you have a problem with the way the adjudicators are doing their job, you have an explicit legislated review mechanism by which you can make known your grievances and potentially have them heard. It is a panel made up of different sides of the industry that makes a recommendation to the Small Business Commissioner who, as the independent umpire, can make a determination.

What I see in the discussion paper does not provide a mechanism in that way. It does, as part of the background, and the Moss review talks about 'the SBC, as the ANA, refers the application for adjudication to an adjudicator whom he considers to be competent and unbiased'. I think that is something that needs to be fleshed out because 'unbiased' is the operative word.

The other thing I will say about this is that certainly we initially had a look at the discussion paper and we are welcoming feedback from the industry on it, but on the face of what we have seen here we think there will certainly be points where the changes need to be strengthened, and certainly the measures in my bill that we sought to bring forward are principles and ideas we will fight for throughout this change process.

I am disappointed the government has chosen to vote it down as opposed to essentially putting through my bill, which would help to enact legislation now as opposed to going through another consultation process, which is likely to still take months and months. They have obviously chosen to vote this down and to delay the process. In here they talk about Tagara Builders and about B.J. Jarrad, and there are issues within the construction industry that are not going away, and the longer this is delayed the more regulation, the more red tape, the more distrust and lack of confidence will continue to go on in this industry. It is sad to see that, once again, the legislative process will be used to delay better outcomes for this vital sector of the South Australian economy.

The house divided on the second reading:

Ayes 17

Noes 21

Majority 4

Second reading thus negatived.