Mainzeal liquidation another blow to sub-contractors

5 May 2013

MEDIA RELEASE

Mainzeal liquidation another blow to sub-contractors

The appointment of liquidators  to Mainzeal was another blow to the many sub-contractors owed money by the company, according to the Specialist Trade Contractors’ Federation (STCF).
Urgent changes are needed to the practice of construction firms holding retention payments, in the wake of the Mainzeal collapse, STCF president Graham Burke said.
“While the news was not unexpected, it brings home the fact that as unsecured creditors, sub-contractors are very unlikely to recover their debt,” said Mr Burke. 
“Subcontractors are the backbone of our building and construction industry and are critical to the country’s economic growth and the Christchurch rebuild. This represents a further blow to affected sub-contractors and we have fielded many enquiries from our members.”
Much of the money owed to sub-contractors is tied up in retentions – up to ten per cent of a sub-contractor’s total invoice which construction firms often hold, without interest, for up to two years after the completion of a contract by way of a guarantee.
“There is an urgent need for changes to the current system of retentions to provide security for any retentions held or the introduction of an alternative system, such as bonding,” said Mr Burke.
“A survey of our members has found that up to a third of money owed to sub-contractors by Mainzeal is in retention payments.
“This could well mean loss of all profit from jobs sub-contractors have completed for Mainzeal in the last 12 months or more – on top of whatever claims are outstanding on current projects.
“These sub-contractors have already paid their staff wages and purchased the materials for this work. They are the ones who carry all the risk and the Mainzeal crisis may lead to some becoming insolvent. It is simply not reasonable to expect sub-contractors to continue to do this without binding security over retentions.”

The appointment of liquidators  to Mainzeal was another blow to the many sub-contractors owed money by the company, according to the Specialist Trade Contractors’ Federation (STCF).

Urgent changes are needed to the practice of construction firms holding retention payments, in the wake of the Mainzeal collapse, STCF president Graham Burke said.

“While the news was not unexpected, it brings home the fact that as unsecured creditors, sub-contractors are very unlikely to recover their debt,” said Mr Burke. 

“Subcontractors are the backbone of our building and construction industry and are critical to the country’s economic growth and the Christchurch rebuild. This represents a further blow to affected sub-contractors and we have fielded many enquiries from our members.”

Much of the money owed to sub-contractors is tied up in retentions – up to ten per cent of a sub-contractor’s total invoice which construction firms often hold, without interest, for up to two years after the completion of a contract by way of a guarantee.

“There is an urgent need for changes to the current system of retentions to provide security for any retentions held or the introduction of an alternative system, such as bonding,” said Mr Burke.

“A survey of our members has found that up to a third of money owed to sub-contractors by Mainzeal is in retention payments.

“This could well mean loss of all profit from jobs sub-contractors have completed for Mainzeal in the last 12 months or more – on top of whatever claims are outstanding on current projects.

“These sub-contractors have already paid their staff wages and purchased the materials for this work. They are the ones who carry all the risk and the Mainzeal crisis may lead to some becoming insolvent. It is simply not reasonable to expect sub-contractors to continue to do this without binding security over retentions.”