Building manager says factors such as flooding and rising prices left him with no choice but to put the business into liquidation

The managing director of collapsed Gold Coast construction firm Pivotal has warned that other ‘big builders’ risk insolvency, soaring construction costs and ‘price pricing’ compounding a problem at industry-wide.

Pivotal, which has built more than 1,500 homes in 15 years, went into liquidation on Thursday, following other large companies such as Condev and Probuild earlier this year.

Chief executive Michael Irwin said the combination of flooding, building material price hikes, high labor demand and COVID-related disruptions left him with no other choice.

“It’s a bigger picture,” he said.

“There are other builders, big builders, out there right now who are in the same position as us.”

Pivotal, which employs 16 people, has 103 homes under construction, and work has yet to begin on 177 others.

Dreams of home shattered

Sam Huth, 32, said he signed a construction contract with Pivotal in May 2021 and hoped to start construction in December when the land settlement is finalized.

But Mr Huth said construction never started and three weeks ago he signed a $12,000 construction variant for the site’s slab.

“Then on Monday I got a call from them saying ‘we’ll send you another variation’ and it was $93,000,” he said.

Mr Huth said he was unsure what he would do next, but the $5,000 deposit was likely lost.

“It’s no use, I bought it 12 months ago with a contract that said we were going to get a build for that much money,” he said.

“I took out my mortgage ($325,000) for that purpose, with a bit of variation obviously because things are happening in the builds, but I won’t be able to go back to the bank and say ‘hey, I need an additional $100,000.”

Mr Huth said the dream of owning his first home had been delayed and he would instead sell the land and find a new rental property.

“For me to be able to build the same house now would cost at least $100,000 more,” he said.

“Excessive prices” and fixed contracts

Mr Irwin said pandemic measures such as the Schema HomeBuilder fueled strong demand in the construction sector.

But because homes are being built on fixed-price contracts, companies such as Pivotal have been forced to absorb rising material and labor costs.

“We used to see price increases once a year in January,” he said.

Mr Irwin said the rate of pay for bricklayers had jumped 100% in the past 12 months, while the cost of carpentry had risen by 44%.

“It adds thousands of dollars to the cost of a house and with a fixed price contract, the two ends just weren’t going to meet,” he said.

“Rather than keep trying to fly and move forward, I had to make the really tough decision.”

But Mr Irwin said some traders had “inflated prices and raised them” beyond what was necessary.

“Because there’s such a shortage of trades there, it comes down to demand and they can charge whatever prices they want if you want your homes finished on time,” he said.

“We provide everything, they just show up on site.”

A “domino effect” for manufacturers

Mr Irwin said Pivotal staff would see their dues paid, their suppliers had been paid and any other outstanding debt would be resolved “within the next week”.

Derek Cronin of Cronin Miller Litigation, which acts on behalf of Pivotal, said he has seen an increase in inquiries from the construction industry.

“The company will have significant creditors,” he said.

Mr Irwin said ‘this week was the turning point’.

“Do I take the responsible stance yesterday and put the company into liquidation knowing that my staff would be paid in full, knowing that all accounts were up to date,” he said.

“Or do I keep flying, which you can’t do, but other builders probably do.”