The unfinished Moment Townhouses in Whitlam. Builder Imagine Building Concepts went into voluntary administration this month owing $4 million to more than 100 creditors. Honest Trade aims to prevent contractors and sub-contractors from not being paid when companies fold. Photo: Ian Bushnell.
Contractors can lose thousands of dollars and even their business when developers and builders go belly up, but a new industry-based payments platform using a secure trust fund could put an end to this all-too-familiar story.
Honest Trade has been in development for more than four years and is ready to become a reality if government, industry and financial institutions get on board.
Thynk Unlymited senior consultant Aziz Kocak, who was brought on to build the platform, said Honest Trade began as an idea over a beer between two contractors, one of whom lost $78,000 after a company went bust, nearly taking him out of the game.
In recent years, the building and construction sector has suffered a string of business failures, the latest being Canberra builder Imagine Building Concepts, which went into voluntary administration this month owing $4 million to more than 100 creditors.
Mr Kocak said the group behind Honest Trade had consulted extensively with industry associations, unions, lawyers and financial institutions and based it loosely on Queensland’s Project Trust Account model, but this platform would be much simpler.
“The Queensland model is an administrative nightmare,” he said.
Mr Kocak said Honest Trade would need legislation to operate, a board with industry representation, and a bank or financial institution to partner with it. However, the backers did not want it to become just another banking product that slugs users exorbitant fees.
In fact, they would be happy for government to take it off their hands altogether.
Mr Kocak said the platform would cover all stages of the development chain – client, builder, supplier, contractor and subcontractor – and offer complete project and contract transparency, options to vary contracts and top-up trust accounts, and a dispute button when problems occur and a legal resolution is required.
“It’s top-down, bottom-up reconciliation,” he said. “We know all the pricing both ways.”
But builder’s and contractors’ margins would remain private.
Whichever way payments flowed, amounts would be deposited in the trust account and only released in agreed stages or when the work is complete.
This would stop the practice of using what is essentially other people’s money funds as working capital or to buy the next development block.
In smaller projects, it would take the risk out of clients being asked to pay lump sums upfront to someone they hardly knew.
Builders and contractors would be able to plug into the system from their own project management programs.
Mr Kocak said Honest Trade would weed out the dodgy operators and risky practices and reduce costly litigation, where the only winners are the lawyers.
He said the industry situation was worsening, and a solution was needed.
“It’s happened to a lot of recognised companies,” Mr Kocak said. “Whoever thought PBS would go bust or Project Coordination?”
Honest Trade would also provide financial planning certainty to companies, automate invoices and payments, and flag issues and elevate disputes.
An example of the Honest Trade dashboard. Image: Honest Trade.
Ideally, Honest Trade would be a national payments system that would have the individual requirements of each jurisdiction built in.
Mr Kocak said that after 4.5 years of development and problem-solving, it was beyond the prototype stage and ready to launch when an appropriate legislative and financial framework was settled.
The backers will road-test it through a few companies to iron out any bugs before taking it fully live.
They were talking to banks, and a former Reserve Bank official was excited about its potential, and industry feedback was encouraging.
The next step is to approach the government at both the local and federal levels.
Mr Kocak said the backers would like to recoup their investment in the project, but they really wanted it to be their contribution to making the construction industry more secure and stable.
He believed that while there were other payment platforms, there was nothing like the all-round solution that Honest Trade offered.
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