The Small Business Ombudsman conducted an inquiry into the collapse of Canberra company Hewatt’s which went into voluntary administration during the multi-million dollar defence project at the Nowra naval base, owing local contractors millions of dollars.

Following an in-depth investigation into the Nowra incident, the Ombudsman, has recommend the federal government/defence reimburse millions of dollars owed to around 30 subcontractors who worked on the $138 million maintenance and training facilities for the navy’s new Seahawk Romeo helicopters.

The NSW Government last week agreed to pay subcontractors who experienced a similar situation while working on the Pacific Highway on the North Coast, which inaugural Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell believes sets a precedent the federal government should follow.

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Ms Carnell said it was recommend the Commonwealth do the same.

“We found the contractor, Hewatt’s, that went into liquidation, was already having financial problems when it signed the contract with Lend Lease and ultimately the prime contractors, defence,” she said.

“The liquidators stated Hewatt’s were probably trading insolvent at the stage when the contracts were signed and had been so for some months.

“Our recommendation is we believe the subcontractors should be paid and there should have been procedures in place to stop contracts being signed when a company was already in financial difficulties.

“The fact this didn’t happen is not the subcontractors’ fault and therefore they should be paid.

“We have seen in the last week or so the NSW government take a leadership position regarding the Pacific Highway project on the North Coast where a very similar thing happened.

“The NSW government stepped up and paid the subbies. And I think it is the responsibility of the Department of Defence and Lend Lease to work together to ensure the subcontractors are paid in the Nowra scenario as well.”

More concerning was the fact she said the problem seems to be ”endemic”.

She said subbies told the inquiry they started getting paid erratically and complaints were not followed up and were told “just to keep working, it was a government project and they would get paid”.

“People had the right to believe that,” she said “Hewatt’s were paid but the subcontractors were not.

“And mechanisms should have been in place to ensure these types of things don't happen.

“We all accept companies go broke from time to time. In the construction industry it happens quite regularly.

“But there are procedures in place to ensure people have the capacity to deliver on contracts they sign and we believe even the basic efforts could have determined Hewatt’s had some very significant cash flow problems at the time they signed.

“This might not seem to be a huge amount of money but people have to remember to the subbies this is huge.

“In some cases this is a life and death especially for a small business. We have seen this on the Pacific Highway project and a number of others.

“It impacts business, marriages, lives - it is more than just money.

“And subcontractors, the little guys have no reason to believe in a government project they would get burnt - there would and should be a feeling of safety.”

Local contractor Mark Nelson who has lost more than $330,000 on the Nowra defence project, has driven a campaign to try and get the subcontractors their missing money.

“I would like to think the federal government would follow the lead set by the state government and be forthcoming with the payments,” Mr Nelson said. 

“If there are issues with other parties being blamed, it’s up to defence and the federal government to make payments to us and then they recover their money.”

The battle for payment has been going on for just over four years, two months - Mr Nelson can even tell you the days, hours and minutes if you like.

His company, Coordinated Logistics, is one of 30 local businesses that have been left out of pocket following the project.

“Personally, our company is owed around $337,000,” he said.

“That has a massive impact on a small regional business.

“It has forced us to withdraw from other developments, which could have created 15 to 20 jobs within the Shoalhaven and an investment of $5 million over time.

“We had planned to have a recycling project but we had to sell the land and shelve those plans and the whole concept.

“There are 30 small businesses in the same boat - caught up in the defence project and Hewatt’s demise - I had 68 guys working for me at the time.

“The majority of them have all had to restructure and tighten our belts.”

He said the failure to be paid for the defence job had made him “nervous and reluctant” to get involved in other large projects even if they were for the government.

“At the moment we are looking into the highway upgrade from Berry to Bomaderry,” he said. “But I’m extremely nervous having seen what happened on the Pacific Highway - that was a RMS job and even though they have been paid out now, look what happened.”

As for seeing his money Mr Nelson said he wouldn’t hold his breath.

“I think defence will be happy to just try and stall and squirm out of making the payments,” he said.

“It’s great the Small Business Ombudsman is making a recommendation that defence pay the outstanding funds, but I will believe it when i see it.”

The Department of Defence has been contacted for a response.