Mr NORTHE (Morwell) (12:32): My question is to the Treasurer. Treasurer, whilst I remain concerned at the lack of real local content within government-led projects in my community, I do raise a question on behalf of those local contractors who have been fortunate enough to gain work on such projects. My understanding is that the government withholds payments from the principal contractor of 5 per cent, and this in turn is also applied to subcontractors. These payments by the government, which I assume are in the millions and millions of dollars, can be withheld from a contractor for a period of up to 12 months after a project is actually completed, despite contractors having previously paid fully for their labour, materials, supplies and other costs. Given the government recently announced it would pay supplier invoices within five business days, can the Treasurer confirm that the same terms are being applied on government-led projects in regional communities?
Mr PALLAS (Werribee—Treasurer, Minister for Economic Development, Minister for Industrial Relations, Minister for the Coordination of Treasury and Finance: COVID-19) (12:33): I thank the member for Morwell for his question, and I want to acknowledge it as a very insightful question in the sense that quite frankly we do need to constantly look at what more we can do in respect of businesses. The arrangements that have been put in place really deal with how we withhold payments from companies effectively relating to satisfaction that the taxpayer is getting value for money, and these retention payments amount to about 5 per cent. They are divided into two parts, as I understand it—2.5 per cent upon the completion of the contract and 2.5 per cent upon satisfaction that the contract has met its stipulated terms and no defects have been identified. From a government point of view I think there is more we can do in this space so that we can assist with what are essentially cashflow problems. Now, because each contract is different in nature, it will require the state to have some direct engagement with the individual contractors, but we will be talking to the member himself, if he can draw to our attention those companies that are encountering difficulties, and we will be encouraging departments to move as quickly as they can. They have to satisfy themselves firstly that the job has been completed—that is not unreasonable—and secondly that the job has been completed in a way that there are no emerging defects in construction. I think we can improve the performance. Some contracts actually provide for what could be a 12-month period for satisfaction as to the compliance with regard to specifications, and certainly from our point of view it is in everybody’s interests, particularly at the moment when businesses are doing it tough, that government moves as efficiently as we can to ensure that those businesses are provided with the payments that they are due for the work that they have performed as quickly and expeditiously as possible.
Mr NORTHE (Morwell) (12:35): Treasurer, Laser Electrical Traralgon is one of those businesses I am referring to. They employ approximately 20 local staff and have been subcontracted for works on the Gippsland Hi-Tech Precinct in Morwell and as mentioned 5 per cent of their total invoice value is being withheld from the business for a prolonged period, which obviously impacts their cash flow during such a volatile economic period. Now this is just one example of so many, but at this crucial economic time, will the Treasurer urgently consider and improve the cash flow outcomes for contractors and businesses who work on government-led projects by ensuring that at worst contractors are paid on the completion of a project and not months or even years after the completion or handover date?
Mr PALLAS (Werribee—Treasurer, Minister for Economic Development, Minister for Industrial Relations, Minister for the Coordination of Treasury and Finance: COVID-19) (12:36): Thanks very much for the question again. I can assure the member that, yes, we will look to see what more we can do. As I say, the contract has to be complete—that is the first requirement. And that money should flow immediately—the 2.5 that has been withheld. The second payment, for satisfaction as to works, we will work with the member and the companies that are adversely affected. If he would care to share the details with me, I will make sure that we have a look at those arrangements to ensure that payments are as forthcoming as possible. You will recall that we have made it clear that the government will move quickly on the payment of invoices due, and we absolutely smashed our target: some $1.1 billion worth of payments out the door as a consequence of the survival measures that we have put in place. We can do more, and I would be appreciative if the member were to share the details. We will see what we can do in this particular case and in others.