SA Water Contracts

The Hon. S.G. WADE (14:27): I seek leave to make a brief explanation before asking the Minister for Sustainability, Environment and Conservation a question about the Kingscote water main upgrade.

Leave granted.

The Hon. S.G. WADE: I am advised that SA Water contracted BJ Jarrad to undertake a 3.2-kilometre pipe replacement work at Kingscote on Kangaroo Island. In its media release dated 2 April SA Water advised that it expects 12 people to be employed, including locals, and the works would be completed at the end of August. BJ Jarrad is listed as a key tier 2 provider for construction on SA Water's website, in spite of the fact that BJ Jarrad went into administration in 2011 with $14 million in debts.

Subcontractors for this project, I am advised, contacted SA Water last month with concerns about BJ Jarrad's financial position and were informed that not paying subcontractors is a breach of contract and grounds for SA Water being able to terminate that contract. I am advised that BJ Jarrad went into voluntary administration on 31 July 2014 and, as a result, several Kangaroo Island contractors who had performed work on this project are collectively owed hundreds of thousands of dollars. My questions to the minister are:

1. What due diligence steps were taken in relation to BJ Jarrad following its business closure in 2011?

2. Will SA Water guarantee Kangaroo Island subcontractors all outstanding payments for work that they have performed but have not been paid for by BJ Jarrad?

The Hon. I.K. HUNTER (Minister for Sustainability, Environment and Conservation, Minister for Water and the River Murray, Minister for Aboriginal Affairs and Reconciliation) (14:29): I thank the honourable member for his most important question. I understand that SA Water was advised on the morning of Friday 1 August this year that BJ Jarrad had been placed into voluntary administration. BJ Jarrad is contracted by SA Water to complete 11 projects which are at various stages in their delivery.

SA Water is working closely with the administrator Ferrier Hodgson to ensure that current projects are delivered as per their contracts, with as few disruptions to stakeholders and project time frames as can be managed. The administrator has indicated that they intend to keep BJ Jarrad trading, I am advised, whilst a buyer is sought for the business. Any subcontractors of BJ Jarrad should make the administrator their first port of call for resolving financial matters that are outstanding. Having said that, I understand completely that this is a distressing time for contractors who may still be owed money by this company. My priorities are to ensure that those contractors engaged by BJ Jarrad are paid for any work that they have done and that the work they are currently doing continues with minimal disruption.

SA Water will continue to work closely with the administrator to ensure the best outcome for all parties. All due payments have been made by SA Water, I am advised, to the contractor, including a recent payment made direct to the administrator. SA Water is willing to consider expediting payments to hasten the cash flow for the administrator, generating revenue to meet the current obligations of BJ Jarrad so that they can continue to trade while they look for a purchaser for that business.

Whilst SA Water and, indeed, the government cannot impose conditions as to who the administrator pays and on what basis—this would have to be determined by agreements between BJ Jarrad or now the administrator and those subcontractors—it would not be normal practice, and I think the honourable member would appreciate this, for SA Water to pay subcontractors directly because SA Water has no commercial or legal relationship with subcontractors. As SA Water has no agreement or status with the subcontractors, SA Water cannot directly pay those subcontractors but, as I said, we will continue to work very closely with the administrator. We will do our very best to make sure the projects are delivered in line with the contracts and our expectation will be that the contractors shall receive due payments.