Flooring & Ways To Get Your Money
Barry Ashmore on ways to get your money
LIFE would be much simpler if you did the work, sent in your application and received your payment in full and on time! But in reality as a specialist sub-contractor your works are not being valued properly by the QS and you are not getting paid.
You can take positive steps to make it more likely that you will be paid the right amount of money at the right time.
And that will mean being able to manage your cashflow, reduce your overdraft and get bigger discounts because you can pay your suppliers on time. Getting paid on time could mean the difference between survival and insolvency!
So what can sub-contractors do to get paid on time?
1. Know the dates your payments are due and make the contractor aware that you know;
2. Make sure that all applications are in on time and comply with the contract;
3. Contact the contractor before the payment is due to make certain they know when you are expecting payment; and
4. Make sure the contractor knows that if payment is late, you will suspend your works in accordance with your contract.
Can sub-contractors suspend performance?: This is a powerful incentive to make the contractor put you at the top of the list when it comes to making payment. Used properly, suspension is your best solution to prevent late payment.
Suspending your works: Probably the biggest benefit included in the Construction Act is that if payment is not forthcoming in accordance with the contract terms then the sub-contractor may, subject to proper written notice, suspend work until payment has been received.
But if you do decide to suspend your works you need to be careful and we recommend that you take our specific advice before suspending performance.
Use the Ask Streetwise or Streetwise Confidential sections on our website for free advice about suspending the performance of your works for non-payment.
Or you can phone us on:
T: 01773 712116
Our team includes quantity surveyors and construction contracts consultants.
Set off and contra charges: If the contractor makes a set off from your account or deducts contra charges, there are steps you can take.
First and foremost you must take action fast, because the situation will not get better of its own accord. There is a significant difference between them saying it has cost £’x’, for whatever reason and being able to prove that; A. it is your responsibility; and
B. they have actually incurred those costs. In both cases their claims and the burden of proof falls on them.
In other words, they must prove that these matters are your responsibility and that any costs they say they have incurred are genuine, and that they are reasonable costs reasonably incurred.
Pay when paid: These clauses are intended to allow the main contractor to delay payment to his sub-contractors until the money is received from the employer and to avoid payment to the sub-contractors entirely if the employer doesn’t pay.
Since the Construction Act came into force, such clauses are made ‘ineffective’ unless non-payment is due to the insolvency of the employer. You therefore need to know about the financial stability of the employer!
Late payment: If payment is made late, interest becomes due on the outstanding money in accordance with Late Payment of Commercial Debts (Interest) Act 1998 which applies to all contracts as from November 1, 2002.
The rate of interest payable is 8% above bank minimum lending rate unless the contract itself provides a substantial remedy for late payment. The contractual rate has to be around 8% for it to be regarded as substantial remedy.
Our top 10 tips to help specialist contractors avoid payment disputes:
1. Check and understand the contract: Always check the terms and conditions. Not all contracts are the same. Some are extremely onerous. So do not simply hope for the best. Make sure the four key elements are clearly spelt out and understood. These are:
Time: Ensure that your programme requirements are fully and properly incorporated;
Price: Have all your qualifications been incorporated, do have you agreed/understood discount?;
Specification: Check that the scope and specification is what you have actually agreed to provide;
Key administrative terms: Make sure you understand them; and check when do you need to submit payment applications and in what format, when is the payment notice due and are the payment terms acceptable?.
Ensure that the adjudication clause does not say that you will have to pay the other party’s and the adjudicator’s costs, even if you win!
Make sure you understand the variations or compensation event clauses and how these will be agreed or who is responsible for valuing them.
Check the extension of time or compensation events clauses, and note any time limits for issuing notices.
2. Correspondence: Ensure that you give notice, at the time, of any event which is going to hold up your progress or cause additional cost to be incurred. Take care to be clear and specific in your wording.
Manage your client’s expectations by giving regular updates of where your final account is heading. This needs to start from day one as no-one likes a surprise bill at the end of the job.
3. Instructions: Always get a written instruction from the person authorised to give instructions on behalf of the contractor/client before carrying out any additional work. This can be in many forms, including revised or new drawings, meeting minutes or letters.
But beware of e-mails as your contract may not recognise electronic communications, and if you are in any doubt get it checked out. In all probability the contract will say that instructions given to you verbally by the contractor/client are not valid. Therefore you must always confirm them back to him in writing.
4. Obtain agreement to additional costs: Whenever possible, get agreement to the costs of additional works before you carry them out. Otherwise, sit down regularly with the contractor/ client to agree and sign-off any additional work costs. Don’t wait until the end of the job before getting his agreement.
5. Final account: Build-up your final account files from day one. Keep copies of all correspondence, cost information breakdowns etc, together with site records relating to each individual variation. This will save an incredible amount of time and frustration at the end of the job, should a dispute arise.
6. Programme: Ideally you should produce and issue a detailed programme for your works and monitor it daily/weekly depending on the size and circumstances of the project.
If you are prevented from achieving the progress set out in your programme, ensure that the causes of the delay are recorded and notified, and that any reasons given are those which entitle you to additional time.
This is a particularly difficult area to get right; and independent advice will help protect your interests. Our team includes planning experts who can help you with this.
7. Records, records, records: If specialist contractors want to resolve their payment problems, they need records, records, records.
A learned arbitrator called Max Abrahamson once said: ‘You can never keep too many records. These will be invaluable in pursuing any payment or time entitlement should the other party not agree later on.’
Record when information is received, what resources are on site and what they are doing each day. Record verbal requests for you to work in a certain way or move around the site.
Most importantly, record what is preventing you from progressing your works in an efficient manner. Get any records or daywork sheets signed promptly.
8. Take remedial action early: Don’t wait until things are going wrong. The sooner action is taken, the lesser the impact of the problem will be, regardless of whether the problem relates to time, quality or cost.
Most importantly, never allow an unpaid account or unpaid variations to go unresolved, as the problem is more than likely to grow rather than resolve itself.
9. Consider speaking to a senior manager or director: If discussions at site level are not addressing the problem, consider elevating the matter to a senior decision maker within your client’s business.
It is often the case that when site personnel become entrenched in their views, senior management can take a wider view and thus help to resolve the dispute without the need for adjudication or other proceedings.
10. Pick up the phone: A phone call to obtain appropriate expert advice at the time a problem first arises will cost nothing in comparison to the cost of resolving a dispute later on.
Here are two ways for specialist contractors to get free advice about construction payment problems:
Register with StreetwiseSubbie as a Silver Buddy and you can have access to free initial advice and a unique suite of exclusive StreetwiseSubbie Power Resources, designed to protect you and your business win more orders, outsmart your competitors and take a big step towards ensuring your future wealth and security.
Become a Gold Buddy and you not only get immediate access to free advice, you will also benefit from a service exclusively for specialist contractors via our nationwide support network. This provides you with ongoing free advice worth more than your monthly subscription!
And you will receive your suite of exclusive StreetwiseSubbie Power Resources which provide essential information and professional solutions that will resolve your commercial and contractual problems quickly and economically!
Included in our team are quantity surveyors, construction contracts consultants and specialist construction solicitors, so we have the capability to resolve your problem fast, whether it’s £10,000 or £100s of thousands!
So if the contractor or the quantity surveyor is not paying you, or not valuing your application or variations properly or is making a set off or contra charge against you, or payment is delayed, and you want to know if you can suspend the works, walk off site, adjudicate or arbitrate you can ask us!
But, if your problem exceeds £10,000 and need someone to take action on your behalf right now, call us on 01773 712116.
If you are owed less than £10,000 and your turnover is less than £1m a year we recommend that you contact the Citizens Advice Bureau.
In particular, check out the small claims section of the website: www.citizensadvice.org.uk
This article has been reproduced from the Contract Flooring Journal. You can find them at www.contractflooringjournal.co.uk.