SA Water Contracts

I seek leave to make a brief explanation before directing a question to the Minister for Water and the River Murray regarding SA Water's contracts.

The Hon. J.M.A. LENSINK: On ABC radio this morning a gentleman by the name of Dane, one of the labourers who has worked on the Kingscote water main replacement, said that he was forced to become a subcontractor before he could work on the project. Matthew Abraham put the question to him as follows, 'So you're a labourer and you had to get an ABN?' Dane says, 'Yes, there was no other option given to me.'

On radio this morning, SA Water chief John Ringham mentioned that BJ Jarrad is in the process of undertaking 11 projects for SA Water. The Liberal Party is in receipt of a leaked 2011 memo relating to a company which was contracted to the government to provide services, and in particular that it was flouting federal laws to avoid paying leave entitlements, superannuation and payroll tax to enable it to undercut its competitors when bidding for government contracts. The crown law advice in this instance to the CEO of DCSI was that this company should engage its interpreters and translators as employees and not contractors.

One of the Kangaroo Island subcontractors for the Kingscote project today contacted Fair Work Australia to inquire as to whether they should have undertaken work as PAYE taxpayers or subcontractors, and it has been confirmed that they should have been engaged as employees. My questions are:

1.Can the minister advise whether all BJ Jarrad's contracts which are being undertaken for SA Water are not in any way breaching federal laws?

2.As part of its due diligence, does SA Water seek to ensure that anyone who is engaged in work on behalf of SA Water is receiving their entitlements and coverage, including public liability insurance, WorkCover and superannuation?

The Hon. I.K. HUNTER (Minister for Sustainability, Environment and Conservation, Minister for Water and the River Murray, Minister for Aboriginal Affairs and Reconciliation) ( 14:51 :11 ): As I said in this place yesterday, I understand that on the morning of last Friday, SA Water was advised that BJ Jarrad had been placed into voluntary administration under the administrator Ferrier Hodgson. BJ Jarrad is currently contracted by SA Water to complete 11 projects, which I am told are at various stages in their delivery, including the almost completion of a Kingscote water supply upgrade.

SA Water, as I said, is working closely with the administrator, ensuring that current projects continue as per the contracts. SA Water aims to ensure as little disruption as possible to stakeholders and project time frames as can possibly be managed. I understand the administrator intends to minimise disruptions by keeping BJ Jarrad trading whilst a buyer for the business is sought.

I am very pleased that SA Water is working closely with the administrator in ensuring the best outcome for the parties involved as best as we can manage it. All due payments, I want to advise the council again, have been made by SA Water, is my advice, to the contractor, including a most recent payment made directly to the administrator. SA Water is willing to consider expediting payments to hasten cash flow, to assist the administrator, generating revenue to meet current obligations.

The government recognises, of course, that this is a distressing time for those contractors who are still owed money by this company. Subcontractors of BJ Jarrad should contact Ferrier Hodgson, the administrator, if they have any more queries about those issues. SA Water and the government are unable to impose conditions as to who the administrator will pay and on what basis that payment will be made. This, I would imagine, will be determined by the agreements between BJ Jarrad, or now the administrator, and the subcontractors. It certainly would not be normal practice for SA Water to pay subcontractors directly, because SA Water has no commercial or legal relationship with those subcontractors. I covered that yesterday.

I am also advised that the administrator will hold a meeting next Tuesday which will be a forum for all creditors to receive an update on the status of BJ Jarrad. My office has asked SA Water to encourage the administrator to take into account the concerns of those creditors who may be unable to attend the meeting and travel from Kangaroo Island. SA Water monitors its key suppliers on an ongoing basis for any potential signs of financial difficulty. BJ Jarrad's performance has been acceptable in recent years, I am told.

SA Water approaches the market for capital project delivery in several ways. SA Water evaluates a number of key criteria in all tenders, including price, methodology, personnel, relevant proven experience and risk, including financial liability, and the majority of capital projects involve subcontract elements as part of normal business. That would not be unusual, either for SA Water or indeed other businesses.

I understand that BJ Jarrad had entered into voluntary administration in September 2011. SA Water's response at the time was to work with BJ Jarrad to complete existing work whilst they refinanced their business. Over this period of administration, I am advised that BJ Jarrad was not invited to tender for any new work from SA Water.

Upon refinancing of the business and leaving voluntary administration, SA Water only invited BJ Jarrad for new opportunities once a review of their revised financial strength and retained capability was undertaken and, I am also advised, once they received a written financial undertaking provided by a key investor. Since this period, BJ Jarrad have been closely monitored in line with other panellists who may be given contracts through SA Water, and they have performed to an acceptable standard and, to SA Water's knowledge, until last week met all of their requirements.

The Hon. J.M.A. LENSINK ( 14:55 :07 ): I have a supplementary question. Notwithstanding that the minister didn't answer either of my questions at all, can the minister advise whether SA Water will be changing its key criteria, given that BJ Jarrad is potentially in breach of federal laws?

The Hon. I.K. HUNTER (Minister for Sustainability, Environment and Conservation, Minister for Water and the River Murray, Minister for Aboriginal Affairs and Reconciliation) ( 14:55 :28 ): I imagine that it is normal business practice for SA Water to keep under constant review its criteria for putting its work out to contract. I am not aware of the claims the Hon. Michelle Lensink has made, but I am quite sure that SA Water would be on top of these issues. They have a very stringent process of managing their contracts, and I would imagine that the board will keep that under active review.