In the last financial year alone, nearly 3,000 building and construction companies in Australia went out of business.1

This highlights a precarious situation many subcontractors are faced with, as their livelihoods can depend on the financial stability of primary contractors.

When a primary contractor fails, subcontractors may find themselves out of pocket for unpaid work, while still facing their own financial obligations, such as supplier payments, employee salaries, and overhead costs.

Crucially, subcontractors need to be wary of aligning with builders who may pose financial risks.

Even though the federal government aims to build 1.2 million homes before 2030, protective regulations in the Australian construction industry have not been stringently enforced. This was highlighted in a recent SBS News report.1

However, subcontractors can help minimise primary contractor risks by gathering vital information about them.

This means assessing not only the profitability of a tendered project, but also gauging the financial health and creditworthiness of the contracting business.

Obtaining comprehensive data on a prospective partner, such as credit history, existing debts, and overall financial stability, can provide valuable insights into their potential for fulfilling a contractual obligation.

Information from services such as illion Express – which offers a range of data from public and private sources, including credit reports – can help subcontractors identify potential red flags before entering into an agreement.

Ultimately, to help avoid any fallout from contractor failure, subcontractors need to evaluate a primary contractor’s financial health first. This can be done by conducting thorough research and assessing risk.

Reference

  1. https://www.sbs.com.au/news/insight/article/my-dream-turned-into-a-nightmare-why-sids-home-is-still-unfinished-after-six-years/gzlzunuxb

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