SA Water Contracts

The Hon. S.G. WADE (14:32): I seek leave to make a brief explanation before asking a question of the Minister for Water and the River Murray.

Leave granted.

The Hon. S.G. WADE: I refer to questions and answers in this council on 7 August in relation to the subcontractors BJ Jarrad not being paid for work done on the Kingscote main upgrade. The minister advised the council:

I understand that BJ Jarrad had entered into voluntary administration in September 2011.

The minister went on to say:

Over this period of administration, I am advised that BJ Jarrad was not invited to tender for any new work from SA Water.

Upon refinancing of the business and leaving voluntary administration, SA Water only invited BJ Jarrad for new opportunities once a review of their advised financial strength and retained capability was undertaken and, I'm also advised, once they received a written financial undertaking provided by a key investor. Since this period, BJ Jarrad have been closely monitored in line with other panellists who may be given contracts through SA Water, and they have performed to an acceptable standard and, to SA Water's knowledge, until last week met all of their requirements.

The opposition has been contacted by a subcontractor who advises that he is owed a six-figure sum and is concerned that he will not receive any funds for the work done. In answer to a supplementary question on the same day, the minister said that SA Water has:

…a very stringent process of managing their contracts, and I would imagine that the board will keep that under active review.

I ask the minister:

1. Can the minister update the council on payments to the subcontractors of BJ Jarrad?

2. Can the minister advise what due diligence SA Water undertook before awarding additional contracts to BJ Jarrad?

3. Can the minister confirm that BJ Jarrad had met all of the SA Water requirements before contracts were awarded?

4. Can the minister update the council, two months on, of the progress in and outcomes of any review of SA Water's processes in the light of the BJ Jarrad case?

The Hon. I.K. HUNTER (Minister for Sustainability, Environment and Conservation, Minister for Water and the River Murray, Minister for Aboriginal Affairs and Reconciliation) (14:34): I thank the honourable member for his most important question. As I said in this place previously on 31 July 2014, SA Water was advised that BJ Jarrad has been placed into voluntary administration, with Ferrier Hodgson the appointed administrator. The South Australian government recognises that this is a distressing time for those contractors who are owed money by BJ Jarrad, and the government has encouraged SA Water to do whatever is possible to lessen this burden. In doing so, SA Water has worked closely with the administrator to ensure the best outcome for parties.

The administrator has indicated that creditors of BJ Jarrad are best served by allowing the company to complete its existing SA Water commitments. SA Water has assisted in this by ensuring that outstanding payments have been paid to the administrator, and I understand SA Water has also accelerated payments for work currently being undertaken. These expedited payments have helped, I understand, to stabilise the cash flow so that payments can be made to creditors by the administrator.

Since learning of BJ Jarrad's insolvency, SA Water has undertaken extensive investigation into its own internal procurement practices; however, I am advised by SA Water that all appropriate safeguards were carried out to ensure that BJ Jarrad was a financially viable company at the time of being awarded its most recent contracts. I have explained previously how BJ Jarrad has entered into voluntary administration, but upon refinancing and leaving voluntary administration, SA Water invited BJ Jarrad to tender for new opportunities only, I am advised, after a review of BJ Jarrad's financial strength and capability was carried out and also after a written financial undertaking was provided by a key investor.

Since leaving voluntary administration two years ago, BJ Jarrad has successfully completed, I am told, over $20 million of projects for SA Water with all creditor obligations being met. Over this period SA Water has monitored BJ Jarrad's financial capability in line with its own commercial practices, and I am also advised that SA Water met with the company regularly and received written statements from senior representatives that attested to the financial strength of the business.

As I said, the South Australian government understands the concerning nature of voluntary administration and empathises with the subcontractors; however, as members would know, and as alluded to in the honourable member's question, matters of payment to creditors are a matter for the administrator. I encourage all creditors to continue to work with the administrator in obtaining the best outcome for all parties. I am sure the administrator will carry out the process in a way that best supports the needs of these creditors, and SA Water will continue to work cooperatively with the administrator to help ensure the best outcome for all impacted by BJ Jarrad's insolvency.