By KEVIN TAYLOR
Building suppliers will be left out in the cold under legislation seeking to protect the industry from construction firm collapses, says the Building Industry Federation.
Executive director Kevin Marevich says the Construction Contracts Bill is flawed because suppliers of materials and services will be denied the same level of protection planned by law for subcontractors.
He said installers and prefabricators would be excluded from the bill's fast-track mediation procedures for resolving disputes.
The bill, backed by Associate Commerce Minister Laila Harre, was introduced in May.
It followed concern about the number of insolvencies among smaller contractors when large companies failed.
The last big example was in February when Auckland's Hartner Construction went into receivership, and later into liquidation, with debts estimated at $28 million.
Subcontractors and suppliers were owed thousands of dollars.
Mr Marevich said the bill was likely to further increase tension in the industry and result in more litigation.
The definition of construction work should be broadened to include every player in the industry, Mr Marevich said.
"The unprotected side under this legislation includes engineers, architects and material suppliers. Many service-supply businesses are two or three-person firms."
The views of the federation - and other industry groups - will be heard in Auckland on Friday by the finance and expenditure select committee, which is considering the bill.
A spokesman for Ms Harre confirmed that the bill drew the line at subcontractors.
He said the relationship between contractors and subcontractors was one of unequal power, but in the case of suppliers many were big, well-financed firms.
"There's not that imbalance of power. That's why we excluded them," he said.
"We had to draw the line somewhere."
It was accepted that suppliers had valid concerns, but it was hoped they would be addressed in the wider insolvency review being carried out.
Subcontractors Federation chief executive and head of the Hartner creditors' committee, Peter Degerholm, said the bill needed a lot of fine-tuning, something that had been made clear in submissions.
The subcontractors supported the suppliers' case, saying sections of the industry should not be excluded.
Contractors Federation president John Pfahlert agreed that suppliers should be covered by the bill.
But the federation was more concerned that the bill was transferring the risk from subcontractors to the head contractor.
It argued that mandatory bonds should be lodged by building project developers to protect the lead contractors.
Mr Pfahlert said the federation had suggested that the bond be between 10 and 20 per cent of the contract's value.
He said that in the United States, bonds of 100 per cent of a project's value were common.
"If I can't provide you a bond, that should be sending all sorts of signals to you as head contractor about my liquidity."
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