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Building & Construction Industry Update – Builder’s $30 Million Dollar Collapse

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Steps to limit exposure

Most people know that the building and construction industry in Australia is particularly volatile. With the exception of most major players and a number of smaller builders that have managed to carve out either niche industries or solid practices based on quality output and reliable cash flow methods, many builders are and always will be subject to the whims of the market, the reliability of suppliers, sub-contractors and more broad economic conditions.

The recent collapse of Kell & Rigby Builders has sent shockwaves through the industry insofar as 1,300 creditors remain unpaid and an alleged sum in excess of $30 million is owed to creditors and staff.

The collapse of Kell & Rigby will have a significant impact on the broader building and construction industry when it comes to markets for suppliers as well as sub-contractors.

This collapse highlights the need, when working in the building and construction industry, to follow a few steps in order to minimise exposure. To the extent possible, you should consider the following:

  1. Requesting money up front where appropriate;
  2. Ensuring all variations are properly documented and comply with contractual requirements;
  3. Issuing payment claims under the Building & Construction Industry Security of Payment Act 2002 (Vic) and in other states and territories where available; and
  4. Maintaining a clear and direct line of communication with your customer.

A lot has been said recently from many sectors in relation to how the Australian economy is travelling generally. The building and construction industry is not one that tends to attract significant government interest in relation to tax payer funded bailouts and/or senate enquiries, so builders must manage their own affairs closely.

Whilst the above tips are not intended to be a panacea during these difficult times in the building and construction industry, they represent a good head start when it comes to the issues of managing cash flow and managing client relationships. Please let MST know if we can assist regarding the above.

Author: Mark Skermer

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