The New South Wales Government has announced an inquiry into the building and construction industry after ‘hundreds of companies’, including Reed Constructions and St Hilliers, have collapsed over the past three years, leaving up to 24,000 unsecured creditors short changed on money owed to them.
Announcing the inquiry on Thursday, New South Wales Finance Minister Greg Pearce says the fragility of the construction industry is having a severe impact on workers and the economy.
Pearce says the inquiry will focus on construction industry insolvency and how to safeguard the interests of sub-contractors.
“Between 2009 and 2011, hundreds of companies in NSW collapsed owing billions of dollars, slamming the brakes on vital projects and investment” Pearce says.
“Up to 24,000 unsecured creditors, including suppliers and sub-contractors, have been left out-of-pocket, some by millions of dollars”.
“The Commonwealth regulates insolvency and company practices, but the NSW Government won’t walk away from its responsibility to address this issue”.
The inquiry comes amid growing political fallout for the government amid its handling of the collapse of Reed.
Following Reed’s collapse, a report from administrator Ferrier Hodgson has said that after secured and priority creditors were paid, essentially nothing would be left to pay an estimated $89.2 million owed to unsecured creditors – many of them sub-contractors who will now go unpaid for work on government infrastructure projects.
Whilst the government denies any responsibility for Reed’s troubles, the company itself has blamed its financial difficulties solely on a dispute with government bodies such as Roads and Maritime Services and the Department of Education and Communities (DEC).
The latest move also follows calls for an inquiry from the NSW division of the Construction, Forestry, Mining and Energy Union, as well as the likelihood that more collapses could follow amid an increasingly pessimistic outlook for construction in the state.
Pearce says the inquiry, to be chaired by Bruce Collins QC, will look at the extent and causes of insolvency in the NSW construction industry and what reforms are needed to minimise the adverse effects on subcontractors.
“The inquiry will look at how to resolve these issues in the absence of effective policy direction from the Commonwealth” Pearce says.
“The NSW Government has outlined an infrastructure program to get the state moving again, but this relies on a strong construction industry”.
The terms of reference for the inquiry include how initiatives such as insurance schemes, trust arrangements or mutual funds could help secure subcontractors.
Pearce also says the Government will also establish a taskforce to ensure government agencies are managing construction risks.
By Andrew Heaton