As areas like New South Wales introduce more stringent security of payment laws, Mike Antis, Global Vice President of the Textura cloud based payment management service in the Construction and Engineering Global Business Unit of Oracle and James Kellagher, Regional Senior Manager, Textura at Oracle Construction and Engineering, assert that a global change in construction industry payment practices is happening now.

In the past, Antis states that construction has been a ‘slow-paying’ industry. This has instigated issues for sub-trades who do the bulk of the work and yet need cashflow to stay afloat. It is also an issue for the broader industry and economy as weak cashflow impels escalated levels of construction industry insolvency.

In accordance, he says that governments both around the world and in Australia are requiring expanded accountability in contractor payments while private industry players are taking action to better manage payment processes.

In Australia in particular, with payment security, the government is trying to regulate slow or late payments detrimental to the industry and the economy in general. If contractors can’t remain viable, says Antis, that bears a great effect across the board.

As this is happening, Kellagher and Antis say new software tools are helping to facilitate change. Speaking of their own Textura payment management platform, Kellagher and Antis say the system performs several important functions.

These include:

  • Keeping all payment claims gotten from subcontractors in a centralised location, including claim details along with required supporting info.
  • Automating a great number of functions, like the generating of progress claims, the notification of project teams that a claim has been made, creation of payment schedules and the compliance checks to guarantee that all information required for the claim has been attained.
  • Including an analytics function that will allow builders to establish thresholds in regard to security of payment, be alerted to non-compliance and act quickly when a threshold is breached.
  • Integration with enterprise resource management systems to facilitate a flawless data flow across financial systems.

Antis and Kellagher said this system creates benefits throughout the supply chain in regard to transparency, visibility, efficiency and accountability.

For private or governmental clients, these systems supply visibility regarding the payment flow through the supply chain and facilitate verification about whether payments made to contractors are making it to subcontractors and suppliers.

This is vital, as payment issues on projects can jeopardise the delivery of the project and the professional reputation of the project owner.

For builders, the automation empowers them to streamline payment processes, enable staff and management to pursue other activities, and to deliver pay to their subcontractors in a more expedient manner.

Storing documents in central locations facilitates easier access to important information regarding an issue or dispute.

And the centralisation of data in a single database and the ability in the analytics function to establish boundaries which if breached would generate warning advisories to ensure compliance with the Security of Payment law and to identify any problems which may result in breaches of the law and actions against them. This enables them to run their business more smoothly—and successfully.

Payment software systems benefit subcontractors and suppliers. The transparency that these systems lend to project owners regarding payments benefits subcontractors and suppliers, who can be assured that project owners can set up a steady money flow.

And these systems empower claimants to get payment faster as automation helps to quicken builder administration and automated checking systems cite errors or missing information.

On a related note, the Queensland government presented new laws in 2017 which called upon contractors on projects worth more than $1 million to establish bank accounts reserved for principal payment to suppliers and subcontractors.

In New South Wales, new laws enacted October 21 under the Building and Construction Industry Security of Payment Amendment Act 2018 (NSW) mandated the abolition of ‘reference dates’, the abbreviating of payment periods from 30 business days after the date of the payment claim to 20 business days following the date of the claim, a new ability for subcontractors and suppliers to bring payment claims in cases where construction contracts are brought to an end, and the ability of claimants to withdraw application adjudications.

At a Commonwealth level, a review researched by John Murray AM, printed in late 2017 and released last year, made 86 recommendations for best-practice security of payment legislation in 17 areas.

These efforts coincide with the Senate Inquiry into construction industry insolvencies, which discovered a culture of non-payment in 2015—and that suppliers, subcontractors and workers and taxpayers were losing about $630 million each year through unpaid debts.