The peak Australian electrical industry body the National Electrical and Communications Association (NECA) is calling on the NSW Government to protect electrical and communications contractors caught up in the alarming amount of insolvencies that have been occurring in the state’s construction industry recently.

In a submission to a NSW Government inquiry looking into construction industry insolvency, NECA calls for the introduction of a number of measures including the compulsory payment of retention sums into trust accounts, to safeguard these payments to sub-contractors in the event of insolvency and sub-contractors being treated with the same priority creditor status as employees.

NECA NSW executive director Oliver Judd says, “NECA is alarmed at the rate of failure and insolvencies that have hit the NSW construction industry recently.

“Almost all of our members carry out work in the construction sector and a number of them have been badly affected by the spate of recent business failures which have seen them lose significant payments or even face insolvency themselves as the principal contractor fails to pay them for work they have carried out in good faith.”

Some NECA members have lost money on a number of occasions as the slump in the NSW construction sector worsens. Examples include;

• One small electrical contractor losing $280,000 over four years following the collapse of four of its client builders;
• Another was left being owed $30,000 in payments following the insolvency of the Reed Group in June. The same member lost $20,000 when a builder in Wollongong failed; and
• A third NECA member lost $350,000 in unpaid payments in the Reed Group collapse and also lost $110,000 it had invested in plant and equipment.

“Many of our members are small electrical companies with only a handful of employees and cannot afford to lose these sort of sums,” Oliver says.

“This situation cannot be allowed to continue and we call on the NSW Government to act as soon as possible to protect electricians and other sub-contractors being forced to suffer through no fault of their own.”

In its submission NECA states that the preferred method of ensuring sub-contractors get paid in the event of an insolvency is through legislation that requires clients or principal contractors to establish retention payment trust accounts.

Other methods could include the client or main contractor taking out insurance indemnifying sub contractors for loss and elevating the status of sub-contractors to preferred creditors so that they are in the same position as employees of businesses that become insolvent.