Australian construction company gets one-month ban for not paying subcontractor on time

A building company in Melbourne has been banned from tendering for government-funded projects for one month after it failed to pay a subcontractor more than A$40,000.

APM Group will be prevented from tendering or winning Commonwealth-funded work for the month of May after Jobs and Industrial Relations Minister Kelly O'Dwyer backed sanctions recommended by the Australian Building and Construction Commission (ABCC).

APM had engaged the subcontractor for excavation works on a project in Victoria, but it refused to pay the company because it claimed the latter had performed defective work. When the subcontractor sought adjudication of the dispute, the ABCC claimed APM threatened to cash the subcontractor's bank guarantees given to secure work.

APM also allegedly withheld the bank guarantees from prior projects to pressure the subcontractor to perform works on its current project and to not suspend works. It refused to pay up even after the ABCC decided APM had to pay the subcontractor by the end of 2017. The builder finally made payment in March after it was notified it could be excluded from building work.

APM joint managing director Paul Howard was quoted by The Australian Financial Review as saying the company had not made any threats and maintained it acted legally at all times. He said APM was claiming the subcontractor owed it about A$300,000 in a case before the Victorian Civil and Administrative Tribunal, and that substantive repairs had to be done to address defects in the subcontractor's work.

The move by the Australian government to ban APM has been commended by The Australian Small Business and Family Enterprise Ombudsman, Kate Carnell. “This action, the first exclusion sanction imposed by the government, is a great first step in ensuring small business subcontractors get paid fairly for their work,” Carnell said.

“Taxpayers’ hard earned dollars should not be used to pay building companies that do not pay their subcontractors on time," she said.

Last year, the Australian government committed to paying prime contractors within 20 days, with a requirement they pay their subcontractors on the same terms.

Carnell said there should be significantly longer bans on building companies that continue to offend, and even recommends up to three years or permanent exclusion from all government contract work in serious cases.

“Many large construction companies have a track record of poor payment practices and this exclusion sanction will go some way to level the playing field between subbies and the companies they work to," she said.