The region's economy could take a multimillion-dollar hit after the collapse of a company working on a project at HMAS Albatross, Nowra.
At least 30 contractors are owed money after Canberra-based civil engineering company Hewatt's Earthmoving was placed into administration.
Contractors spokesman Mark Nelson from Co-ordinated Logistics said more than 20 of those subbies were from the Illawarra.
Mr Nelson said his company was owed $350,000 and reckoned all-up, contractors were out of pocket by as much as $5 million.
The loss has already led to Mr Nelson tightening his company's belt and spending less money.
"Just my business alone, we had to cancel machinery we had on order to be purchased," Mr Nelson said.
"We had to walk away from the purchase of a block of ground for a truck depot. These were all things that were ready to go into place by the end of June."
He also has six trucks, designed for the work at HMAS Albatross, which are now only getting jobs here and there since the collapse of Hewatt's.
Mr Nelson's contract was due to run out in August, meaning the May collapse has cost him three months' work.
Other contractors could be in a worse position as they were due to work on the project until Christmas.
Administrators have been called in and have made an offer that might see contractors receive between 4¢ and 14¢ in the dollar on their missing payments.
And worse still for the subcontractors, if they accept those repayments they will still have to wait up to nine months to receive them.
"Under the offer we would receive half our funds in 4½ months and the remainder another 4½ months after that," Mr Nelson said.
"There is a second creditors' meeting this Friday in Canberra and we will see what that brings, but I'm not hopeful of the offer rising.
"To receive between 4 and 14¢ in every dollar we are owed means I would walk away with $15,000, which is insulting."
Gilmore MP Ann Sudmalis raised the subcontractors' plight in Federal Parliament last week, saying "some hardworking local subcontractors are facing bankruptcy with debts around $2 million and more to come - unpaid invoices go back to March, April and May".
Mrs Sudmalis called on all relevant parties to come together and mediate the issue.
Mr Nelson hasn't returned to the site, saying after speaking up he hasn't been offered work.
"I would like to express my thanks for the support, both emotional and personally from subcontractors and business associates," he said.
Mr Nelson's company has fortunately managed to sign a major contract for the next 12 months, but he said it would be a case of once bitten, twice shy.
"Believe me, there was a lot of negotiation over payment schedules on that one," he said.
"There was lots of reading of fine print."
with the South Coast Register