State Government To Look Into Recommendations In The Building Industry Reform Package

In November last year, we provided you with an overview of the issues being experienced in the construction industry and some of the reforms which were being proposed by MBAWA. You may access the publication here.

On 1 March 2023, the State government announced that it would be partnering with MBAWA to examine the recommendations in the Building Industry Reform Package which was released on 11 November 2022. This will be done by a new industry working group (comprising of members of MBAWA and the Department of Finance) which will collaboratively aim to explore the structural changes that may need to be made to the way the government does business with participants in the construction industry.

This is a step towards a more collaborative approach to deliver improvements to procurement of significant building projects (in the non-residential sector).

It will be interesting to see the impact of this collaboration on issues relating to (amongst other things):

• reform to the procurement model in an environment where the use of lump sum contracts (which often ultimately promotes an unfair allocation of risk between parties which in turn has been one of the contributing factors to insolvency in the construction industry) still remains the norm;
• the use of cost escalation clauses to allow for a fair adjustment for additional costs which are incurred in the cost of a project; and
• abridged payment terms under the contract, given that one of the recommendations in the November Report was that payment terms should be reduced to certification period of 7 days and a payment timeframe of 7 days so as to promote greater cashflow in the industry.

You may access the Minister’s statement here.