Minister looks at protections
Building and Construction Minister Jenny Salesa is holding talks with the industry about ways to strengthen protections in cases of collapse.
The failure of several big companies such as Mainzeal, Ebert Construction, Orange H Group and now Arrow International has prompted the Government to review the impact of collapse on the wider sector, including consumers.
Salesa promised last year to ensure the Government was doing its bit by reinforcing the need to not necessarily accept the lowest price when tendering government contracts.
But even before Thursday’s news that Arrow had gone into administration,
Salesa’s office said she had asked officials to monitor how tighter laws around subcontractor retention money were playing out.
‘‘More broadly, I have also asked MBIE [the Ministry of Business, Innovation and Employment] to explore and advise me on options for rebalancing risk and liability in the building process. As part of this, I will consider options to ensure consumers are protected if a builder or developer becomes insolvent.’’
Retentions are a small percentage of subcontractor payments, which are held back by the developer for a time to warranty completed work. Until April last year there was no mandate that retentions be kept separate from a lead contractor’s general funds.
Already there is concern that the legislation may have failed its first test, after Ebert Construction collapsed last August, leaving debts that are now thought to have topped $100 million.
Ebert set aside close to $4m for retentions. It appears that the money may have been up to $1m short, although receiver PwC is still going through the repayment process.