Estimates of the amount the builder owes to creditors have skyrocketed
The amount owed to creditors by collapsed construction firm PBS Building has ballooned to around $40 million as the wider construction sector continues to grapple with labour and materials issues.
The national firm abandoned its projects across Australia earlier this month and called in administrators RSM Australia, according to a report by The Australian.
PBS collapsed earlier this month, leaving around 80 projects unfinished. It was initially estimated to owe its creditors around $25 million.
The sharp spike in that estimate comes amid a series of construction company collapses as builders are hit with rising costs at the same time that fixed-price contracts tie their hands on pricing, The Australian reported.
More administrations to come
Some experts predict that this model is changing, but have cautioned that there will still be more administrations in the sector after they all but disappeared during the COVID-19 pandemic as governments enacted support measures.
Deloitte partner Richard Hughes told The Australian that conditions in the sector were only now beginning to normalise after a long period of cheap money. Hughes said debt was more expensive now, and that companies were still dealing with disruption in the wake of the pandemic.
“We certainly see it as being challenging on the basis that the structure of the industry is generally fixed-price contracts,” he said. “But you’ve got costs which move up with inflation … and then you have delays in projects because of supply chain disruptions.”
Deloitte partner David Orr said that labour supply was one of the sector’s biggest challenges.
“The demand for skilled labour, especially in that engineering space and the construction space in general, is very challenging and we can’t see a solution anytime soon,” he told The Australian.
Hughes said that while builders were now pushing for cost-plus contracts, they faced pushback from investors and homeowners who expected fixed costs.
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“It’s pretty hard to get cost-plus contracts, so there’s a bit more of a shake-out in the supply chain to happen,” Hughes told The Australian.
More than 1,000 creditors
PBS owes about $40 million to more than 1,000 secured and unsecured creditors, according to RSM Australia. This does not include the company’s 180 employees, who were made redundant and paid their entitlements in full before the administrators were appointed.
RSM Australia partner Jonathon Colbran told The Australian that the estimate of what PBS owed would continue changing throughout the administration process as administrators assessed the merits of incoming claims.
At an upcoming meeting, creditors will vote on whether to put PBS companies into liquidation or enter into a deed of company arrangement, the publication reported. RSM Australia will report to creditors in mid-April.
PBS isn’t the only construction firm to collapse so far in March. Last week, Queensland-based National Construction Management went into liquidation owing creditors an estimated $3 million.
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