Builder Gone Bust? What Earthmoving Contractors Should Do When a Builder or Developer Collapses
Builder Gone Bust? What Earthmoving Contractors Should Do When a Builder or Developer Collapses
When a builder or developer goes into administration, earthmoving contractors can suddenly find themselves with unpaid invoices, machines or materials tied up on site, unfinished work and very little idea about what happens next.
The recent administration of major Sydney developer Bathla Group is another reminder of the risk subcontractors carry when working further down the construction payment chain.
So what should an earthmoving contractor actually do when a company they are working for enters administration?
1. Stop and establish exactly what has happened
Administration, receivership and liquidation are not the same thing.
Before making assumptions, confirm the company’s status and identify who has been appointed to manage the process.
Find out:
Which legal entity you actually contracted with
Whether that particular company is in administration
Who the administrator or liquidator is
Whether work on the project is continuing
Whether you have been formally instructed to continue working
Don’t assume that because the project may continue, your existing invoices will automatically be paid.
2. Work out exactly how much you’re owed
Get your paperwork together immediately.
Collect:
Your contract, subcontract or purchase order
Outstanding invoices
Approved variations
Timesheets and dockets
Machine-hour records
Emails and written instructions
Progress claims
Evidence of completed work
Any correspondence concerning payment
Work out exactly what was completed, what has been invoiced and what remains unpaid.
Good records can become extremely important when you’re trying to prove a debt.
3. Be very careful about continuing work
One of the biggest decisions is whether you keep machines and operators working.
Don’t simply continue because someone on site tells you everything will be sorted out.
You need to understand who is authorising the new work and who will be paying for it.
There can be a significant difference between money owed for work completed before an administrator was appointed and work specifically authorised afterwards.
If substantial money is involved, get professional advice before continuing.
4. Protect your machines and equipment
Earthmoving businesses can have hundreds of thousands of dollars of equipment sitting on a project.
Know exactly where your machines, attachments and other equipment are and establish whether you are entitled to remove them.
Don’t assume you can simply enter a closed or controlled site and take equipment without authorisation.
If equipment has been hired, leased or supplied to another business, PPSR registrations can also become extremely important when insolvency occurs.
5. Contact the administrator
If you’re owed money, don’t sit back waiting for someone to call you.
Contact the appointed administrator and make sure you’re recorded as a creditor.
Ask what documentation they require and whether you need to submit a proof of debt.
Keep copies of everything you submit.
6. Understand your Security of Payment options
Every Australian state and territory has legislation dealing with payment for construction work.
In NSW, subcontractors may have options under the Building and Construction Industry Security of Payment Act, including payment claims and adjudication.
There may also be circumstances where other recovery mechanisms are available.
Time limits can apply, so don’t leave it sitting in the too-hard basket.
Speak to a construction lawyer or other suitably qualified adviser if a significant amount of money is involved.
7. Don’t forget variations and work not yet invoiced
Earthmoving contractors regularly perform additional work on verbal instructions:
“Just dig this out while you’re here.”
“We’ll sort the variation later.”
When a company collapses, those informal arrangements can become much harder to prove.
Go through the project carefully and identify anything completed but not yet invoiced.
Find the emails, text messages, photos, dockets or other records supporting the work.
A $50,000 or $100,000 unpaid invoice isn’t just an accounting problem for a small earthmoving contractor.
You may still have:
Machine finance
Wages
Fuel bills
Insurance
Supplier accounts
Tax obligations
Equipment repayments
Work out quickly what losing some or all of the outstanding money would mean to your own business.
Speak to your accountant early rather than waiting until your own bills become overdue.
9. Learn from the warning signs
A builder rarely tells its subcontractors, “We’re running out of money.”
The warning signs can be much more subtle.
They might include:
Payments getting progressively later
Constant disputes over invoices
Unexpected contra-charges
Requests to resubmit invoices
Staff disappearing or changing frequently
Fewer workers on site
Projects slowing down
Suppliers demanding upfront payment
Promises that payment will come “next week”
Pressure to keep working despite overdue accounts
One late payment doesn’t necessarily mean a company is in trouble.
A pattern is different.
10. Reduce your exposure before the next collapse
You can’t eliminate insolvency risk, but you can reduce how much of your business is exposed to one customer.
Consider:
Setting internal credit limits for customers
Reviewing overdue accounts weekly
Stopping work when agreed payment terms are repeatedly breached
Conducting credit checks before taking large contracts
Using written contracts and variations
Keeping accurate dockets and machine records
Understanding Security of Payment legislation
Considering PPSR registrations where relevant
Avoiding excessive dependence on one builder or developer
Sometimes the most profitable-looking job becomes the worst job you’ve ever taken if you don’t get paid.
The bigger lesson for earthmoving contractors
When a large construction company collapses, attention naturally focuses on the builder, developer and unfinished projects.
But further down the chain can be excavators, truck operators, plant hire businesses, concreters, plumbers, electricians and dozens of other small businesses that have already supplied labour, machines and materials.
For an earthmoving contractor, one substantial unpaid account can represent weeks or months of work.
Protecting yourself therefore starts before a builder collapses — through good contracts, good records, disciplined credit control and knowing when an overdue account has become too large to ignore.
This article provides general industry information only and is not legal or financial advice. Contractors dealing with an insolvency or significant unpaid debt should obtain advice relevant to their individual circumstances.
For more helpful information, check out our Workshops and Academy section.
Builder Gone Bust? What Earthmoving Contractors Should Do When a Builder or Developer Collapses
Builder Gone Bust? What Earthmoving Contractors Should Do When a Builder or Developer Collapses
Builder Gone Bust? What Earthmoving Contractors Should Do When a Builder or Developer Collapses
When a builder or developer goes into administration, earthmoving contractors can suddenly find themselves with unpaid invoices, machines or materials tied up on site, unfinished work and very little idea about what happens next.
The recent administration of major Sydney developer Bathla Group is another reminder of the risk subcontractors carry when working further down the construction payment chain.
So what should an earthmoving contractor actually do when a company they are working for enters administration?
1. Stop and establish exactly what has happened
Administration, receivership and liquidation are not the same thing.
Before making assumptions, confirm the company’s status and identify who has been appointed to manage the process.
Find out:
Don’t assume that because the project may continue, your existing invoices will automatically be paid.
2. Work out exactly how much you’re owed
Get your paperwork together immediately.
Collect:
Work out exactly what was completed, what has been invoiced and what remains unpaid.
Good records can become extremely important when you’re trying to prove a debt.
3. Be very careful about continuing work
One of the biggest decisions is whether you keep machines and operators working.
Don’t simply continue because someone on site tells you everything will be sorted out.
You need to understand who is authorising the new work and who will be paying for it.
There can be a significant difference between money owed for work completed before an administrator was appointed and work specifically authorised afterwards.
If substantial money is involved, get professional advice before continuing.
4. Protect your machines and equipment
Earthmoving businesses can have hundreds of thousands of dollars of equipment sitting on a project.
Know exactly where your machines, attachments and other equipment are and establish whether you are entitled to remove them.
Don’t assume you can simply enter a closed or controlled site and take equipment without authorisation.
If equipment has been hired, leased or supplied to another business, PPSR registrations can also become extremely important when insolvency occurs.
5. Contact the administrator
If you’re owed money, don’t sit back waiting for someone to call you.
Contact the appointed administrator and make sure you’re recorded as a creditor.
Ask what documentation they require and whether you need to submit a proof of debt.
Keep copies of everything you submit.
6. Understand your Security of Payment options
Every Australian state and territory has legislation dealing with payment for construction work.
In NSW, subcontractors may have options under the Building and Construction Industry Security of Payment Act, including payment claims and adjudication.
There may also be circumstances where other recovery mechanisms are available.
Time limits can apply, so don’t leave it sitting in the too-hard basket.
Speak to a construction lawyer or other suitably qualified adviser if a significant amount of money is involved.
7. Don’t forget variations and work not yet invoiced
Earthmoving contractors regularly perform additional work on verbal instructions:
“Just dig this out while you’re here.”
“We’ll sort the variation later.”
When a company collapses, those informal arrangements can become much harder to prove.
Go through the project carefully and identify anything completed but not yet invoiced.
Find the emails, text messages, photos, dockets or other records supporting the work.
See Variation templates that are available on Earthworks Hub
8. Watch your own cash flow
A $50,000 or $100,000 unpaid invoice isn’t just an accounting problem for a small earthmoving contractor.
You may still have:
Work out quickly what losing some or all of the outstanding money would mean to your own business.
Speak to your accountant early rather than waiting until your own bills become overdue.
9. Learn from the warning signs
A builder rarely tells its subcontractors, “We’re running out of money.”
The warning signs can be much more subtle.
They might include:
One late payment doesn’t necessarily mean a company is in trouble.
A pattern is different.
10. Reduce your exposure before the next collapse
You can’t eliminate insolvency risk, but you can reduce how much of your business is exposed to one customer.
Consider:
Sometimes the most profitable-looking job becomes the worst job you’ve ever taken if you don’t get paid.
The bigger lesson for earthmoving contractors
When a large construction company collapses, attention naturally focuses on the builder, developer and unfinished projects.
But further down the chain can be excavators, truck operators, plant hire businesses, concreters, plumbers, electricians and dozens of other small businesses that have already supplied labour, machines and materials.
For an earthmoving contractor, one substantial unpaid account can represent weeks or months of work.
Protecting yourself therefore starts before a builder collapses — through good contracts, good records, disciplined credit control and knowing when an overdue account has become too large to ignore.
This article provides general industry information only and is not legal or financial advice. Contractors dealing with an insolvency or significant unpaid debt should obtain advice relevant to their individual circumstances.
For more helpful information, check out our Workshops and Academy section.
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