Improving Security of Payment Building and Construction Industry

5. Proof of Payment Page 77National Public Works Council IncImproving Security of Payment in the Building and Construction IndustryIt is of interest to note that a ministerial working party in South Australiahas recommended that applicants for building licences should meet certainfinancial requirements in order to obtain a licence. It was suggested thatthose financial requirements could be met by one or more of the following:(a)(b)(c)(d)(e)personal guarantees to a certain value covered by registeredsecurities over specific assets;bank guarantees to a certain value;indemnity insurance to a certain value;use of independently audited trust accounts to hold pre-payments;other financial resources agreed to by the commercial tribunal,which is responsible for issuing those licences (SA Working Party12).5.8.9 The effectiveness of proposalsThe effectiveness of alternative dispute resolution in resolving disputes under thefollowing approaches is set out below:(i)(ii)Queensland Build Approach; andVictorian Catholic Building Office ApproachThe Victorian Catholic Building Office Approach has the advantage of restrictingthe Head Contractor's cashflow whilst the dispute remains unresolved, thusproviding impetus for its speedy resolution.According to Bob Giles, Manager of Contract Services in the QueenslandAdministrative Services Department and Chairman of CIDA's Security of PaymentAction Team, the model in Queensland does not seem to be causing any problems inpractise. However, this is more a comment on the effectiveness of the proof ofpayment model, rather than an observation on the specific effectiveness ofalternative dispute resolution in resolving disputes that arise within that model.Another perspective from which to examine the effectiveness of both approachesinvolves a consideration of whether or not changes should be legislated or simplyincorporated into contracts through industry incentives.