WA Water Corporation payment delays shine a light on economic thuggery

By Simon Stokes
Editor, Construction Worker Magazine

Today the McGowan Government had to pull up the Water Corporation for engaging in predatory business practices used by big corporations to delay payment or effectively blackmail small operators into conceding discounts if they want to be paid in a timely manner.

CFMEU Construction Division State Secretary, Mick Buchan, was highly critical of the revelations.

“Given the difficulties faced by small contractors and local businesses in what continue to be very difficult economic circumstances for WA, these predatory practices are totally unacceptable by any business, let alone a Government owned essential service provider.”

The McGowan Government was quick to correct the issue once it was made public today, but CFMEU WA have revealed the problems with security of payments to local companies working for government departments and on government projects extend way past today’s revelations.

“The truth is that State and Federal Governments have eagerly outsourced both the provision of government services and the running of infrastructure projects. And with it they have tried to outsource their responsibility to ensure local businesses are paid in a timely way, or even at all, for work on Government projects.” Mick Buchan said.

“It represents a monumental risk to all small operators and subcontractors in the construction industry and threatens the viability of the whole industry.”

“We’ve seen a disgraceful string of businesses going under while working on Government projects, resulting in a domino effect, as subcontractors down the line are not paid and workers are left without jobs and without payment for work that they’ve completed.”

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Major infrastructure contractor Omega went belly up while working on the State Government’s Northlink project owning hundreds of thousands of dollars to eleven different local subcontractors. Neither the primary contractor, Laing O’Rourke, nor the State Government, took any responsibility for making sure these local business and their workers were paid for work they had completed in good faith.

Acrow Ceilings manager Ross McGinn took his own life amid accusations that his business was owed up to $2 million of delayed or withheld payments by primary contractor John Holland while working on the State Government’s troubled Perth Children’s Hospital project.

On Wednesday June 17, 2015, Mr McGinn’s Acrow Ceilings reduced labour at the hospital construction site due to problems with payments. On Thursday June 18, John Holland withdrew Acrow’s licence to enter the site. On Saturday June 20, Ross McGinn took his own life.

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The CFMEU’s criticism has been echoed by Prof Alan Patching of Bond University in recent research into the building and construction industry which found that current practices were corrosive and detrimental to the wellbeing of workers in the industry.

Prof Patching was the project director for construction of the Sydney Olympic Stadium, and said a ‘cutthroat approach to tendering and wafer-thin profit margins’ were driving a ‘stress epidemic’.

“The current most commonly used contracting system effectively often requires tenderers to bid with low or no margin prices or offer reduced construction time in order to win work,” Professor Patching said.

“That, in turn, requires appointing already overcommitted project managers to manage the project in a way that drives some level of profit from it. Many of the participants in my research told stories of the impacts of this on their health and on their family life that were disturbing, to say the least, with some reporting having experienced suicide ideation.”

It’s now been more than a year since the WA State Government released a report on the issue by respected WA barrister John Fiocco. The report made 44 recommendations to ensure security of payment for WA businesses to protect them from non-payment due to business collapses up the chain, corruption, or predatory business practices like those Water Corporation have been exposed as engaging in.

The McGowan Government undertook to ‘carefully consider’ all recommendations with Minister Bill Johnston claiming the McGowan Government was ‘committed to providing a fairer system and more certainty for subcontractors and their families’.

“We look forward to carefully considering each recommendation in the report and expect the first legislative reforms to be introduced in the first half of 2019,” Minister Johnston said.

So far no reforms have been introduced, including the key reform of cascading construction trusts that would ensure money was set aside for payment of subcontractors in the case of business collapse.

The CFMEU have roundly condemned the lack of action in ensuring local businesses and workers are not exposed to predatory payment practices and economic bullying.

“The solutions are known. The Fiocco Report gives a comprehensive list of what needs to be done to give local businesses basic economic security and confidence. But we’re still waiting for all of those recommendations to be implemented, particularly cascading construction trusts,” said Mick Buchan.

“It destroys businesses. It destroys people’s lives and livelihoods.”

“It sends good local businesses who employ local workers to the wall through no fault of their own. It strips the capacity of our industry and robs our local economy.”

“And it’s driven by greed. Simple, old-fashioned greed. Anyone who engages in it, or profits from it, should be rightly condemned and called out for the thinly veiled thuggery this sort of practice represents. And that includes the State Government.”