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The construction industry’s Pandora’s box

The parks are closed, and public gatherings have been reduced from 10 to 2 … What’s install for the construction industry?  Will contractors be permitted to continually implement more rigorous controls to manage their sites or will they too be closed?

Qld’s Courts aren’t enforcing warrants for the possession and sale of land before 18 June, Bankruptcy Notices and Statutory Demands are subject to 6-month moratoriums and as of yesterday the right to evict a tenant has been suspended.

However, there have been no changes to:

  1. the operation of Qld’s Security of Payment legislation. If a party receives a payment claim, it has 15 business days (unless the contract says sooner) to act or face penalties, disciplinary action, liability to pay the entire amount claimed and the claiming party suspending works.
  2. the timing to introduce reforms to the Security of Payment legislation which are slated to commence on 1 July 2020 and include the extension of Project Bank Accounts to the private sector (but renaming them Project and Retention Trusts), the ability for a claimant to make a withholding request if they’re not paid an adjudicated amount, the ability for a contractor to place a charge on land if they’re not paid an adjudicated amount and the introduction of penalties for underpayment of a scheduled amount.
  3. the reporting obligations imposed by the QBCC’s Minimum Financial Requirements and whether or not the QBCC will shift its focus away from strict compliance in an effort to avoid the suspension and cancelation of licences.

These issues open the can on how the uncertainty caused by COVID-19 and the responses to it by every level of government are impacting the construction industry, an industry which nationally represents about 10% of Australia’s GDP.  In Qld, for the 2017-2018 financial year, the construction industry was the State’s 3rd largest employer, employing some 236,100 workers and contributing $29B to its economy.

As far as the Sunshine Coast is concerned, the construction industry is without doubt the dominate contributor to the region’s Gross Regional Product with about $3.7B in projects to be delivered between 2019 and 2020 across 166 projects.  There are a further 177 projects planned but not committed and the value of those committed and planned projects is about $7.6B.

Construction sites, unlike other areas that have been closed, are able to be controlled and to a high degree.  Participants are already used to complying with, and operating in, a highly regulated industry.  Responsible Departments within State Government have published COVID-19 best practice procedures, Victoria updated theirs on Sunday, 29 March.   These have been mirrored by industry bodies such as Master Builders and HIA.  We saw over the weekend that Victoria’s construction union is pushing for construction sites to operate 24 hours a day.  That suggestion was supported by Master Builders in Victoria to ensure the 228,000 person workforce can continue to operate and provide an essential service to the economy.

However, construction sites are noisy.  Development applications typically dictate that works cannot start before 7am.  Amendments have already been made to Qld’s planning legislation to improve continuity and remove red tape by allowing the Minister to decide when an essential business can operate 24 hours a day, 7 days a week (as we’ve seen with the restocking of supermarkets) and there is now the ability for a person looking for relief from existing DA conditions and operating constraints to make a more streamlined application to the State for a temporary use licence.

If construction sites (both commercial and residential) are to operate 24 hours a day, 7 days a week, will that move maintain confidence in the building industry?  If so, will that confidence flow through to the many thousands of small businesses that make up the supply chain, and most importantly, can it be done safely?

On a parting note, before he was re-elected over the weekend Sunshine Coast Mayor Mark Jamieson announced, among a number of other positive initiatives, that infrastructure charges can be deferred up to 3 years with no interest payable for the first 12 months.  Consequently, there is now a real possibility that some projects may be fully delivered and almost entirely settled before infrastructure payments become due.

These issues mark some of the concerns I’ve been speaking to trades, contractors and developers about and I plan to touch on them regularly over the coming days and certainly as more announcements are made.