Wise Up Wednesday: Payment Dates… What Payment Dates?

This week’s Wise Up Wednesday is a bit longer than usual, but please stick with it, because getting this wrong could kill off your business!

If you’ve agreed a schedule of interim payment dates, but the works continue beyond the last date in the schedule – will you still carry on getting paid?

Balfour Beatty thought so, but let’s see how they got on.

Quick Fact Check

Grove developments (GDL) employed Balfour Beatty (“BB”) to design and construct a hotel and serviced apartments under a JCT Design and Build Contract 2011 with bespoke amendments.

The Date for Completion was 22 July 2015.

In the contract “Option A – Stage Payments” was selected, but the space to insert a brief description was left blank, and the words “To be agreed within 2 weeks from date of contract” inserted.

Stage payments were not agreed. Instead, the parties agreed a schedule of 23 valuation and payment dates, which covered the period to July 2015.

What Happened Next?

On 21 August 2015 (after the expiry of the final date in the Schedule), BB issued a further application for interim payment for £23million (“IA24”).

Yes, you read it right £23 million!

On 28 August 2015, GDL served a Payment Notice and then on 15 September 2015 it issued a Pay Less Notice for the sum of £440,000, which it paid on 18 September 2015.

Ouch, that’s quite a bit less…

Time to get serious

BB argued that in the absence of any further dates in the Schedule, the correct approach was to revert to the terms of the JCT contract and the Housing Grants, Construction and Regeneration Act 1996 (the “Act”) and the Scheme for Construction Contracts (the “Scheme”).

BB argued that GDL’s Payment Notice and Pay Less Notice had both been given out of time.

BB started an adjudication on this basis and the adjudicator found in BB’s favour, deciding that GDL was to pay BB a further £2m on top of the £440,000 GDL had already paid.

Round 1 to BB…

The Fight Back!

GDL weren’t about to take this lying down…

GDL started court proceedings to obtain a declaration that BB had no contractual right to make any further claim for payment once the payment dates in the Schedule had expired.

Round 2 Goes To…

The Court said that “where the contract complies partially with the Act, the provisions of the Scheme only apply to the extent that the Parties have not already concluded binding contractual arrangements that can remain operative.”

And that; “It is for the parties to agree stage payments by reference to whatever stages and amounts they see fit.” For example, if the parties wish to agree a single stage payment during the course of a project, that is their choice.

The court added “the mere fact that the agreement does not provide for interim payments covering all of the work under the contract is no reason to import the provisions of the Scheme”.

Put simply, a contract that only provides for one interim payment, or in this case, 23 interim payments, will comply with the Act even if there are periods during which the contractor is doing work and not receiving interim payments.

Out For The Count!

Did BB have a contractual right to make and to be paid in respect of IA24 or any subsequent interim application?

The court stated “the parties’ agreement was clear and provided for 23 interim payments on the dates set out in the agreed Schedule and no more…

BB tried various different arguments – well you would wouldn’t you for £23 million!

But the court rejected all BB’s arguments, stating that it would have been foreseeable that the works might be delayed and the payment dates could expire. It was a mistake on BB’s part that they had failed to negotiate payment terms which would protect them against the risk of the works overrunning.

In conclusion, the court found that BB had no contractual right to make or be paid in respect of IA 24, or indeed any subsequent application for the remainder of the works!

The Moral Of The Story?

This case demonstrates that if you agree to a payment schedule in your contract, it is essential to make provision for what will happen if the dates in the schedule expire.

Failure to do so may well result in you having no further entitlement to interim payment at all.

And that could have disastrous consequences for your cash-flow!

The best way to overcome this risk is to agree a schedule of dates which continues far beyond when the works might be expected to complete. Alternatively, very clear wording needs to be added to the payment schedule to explain how further interim payments are to be calculated if the stated payment dates expire.

Unscrupulous Contractors

Needless to say that this is yet another angle that the unscrupulous Contractors will seek to exploit!

Take action to safeguard your business from the catastrophic impact of reduced, late, or non-payment in 2016.

If you don’t then it could cost you your business!

Unscrupulous Contractors use every trick in the book, to reduce and delay payments. Specialist Contractor’s efforts to avoid or rectify this problem often come too late in the process.

Don’t be one of the casualties, take action now.

Download “How To Get Paid” for free right now, and put an end to reduced, late and non-payment!

Whatever level your business is at, and whatever your specialisation I want to encourage you to experience and enjoy a better more profitable, less stressful way.

I hope you enjoyed my Wise Up Wednesday and that it gave you some food for thought, and please don’t hesitate to grab your Free Report at “How To Get Paid” and if you need any help with any of your business problems pick up the phone and give us a call on 01773 712116.

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Payment Still Major Concern Despite Increased Workload

Specialist Contractors are still suffering from late payment on public sector projects despite an upturn in workload.

According to the latest survey payment remains a major concern for building services firms, with just 8 per cent of Specialist Contractors saying that public sector work was paid on time. And the private sector was even worse with just six per cent of respondents being paid within 30 days.

ECA CEO Steve Bratt said: “… payment continues to be a major concern to Specialist Contractors across the industry, with the overwhelming majority indicating that they are not paid within 30 days, which is now the widely understood measure of good practice”.

So, if you are not getting paid properly then don’t fall for the Contractor’s BS, because it is highly likely (there are some exceptions), that what they are telling you is a pack of lies.

Please don’t stand for late or underpayment.

Take action!

Take action to safeguard your business from the catastrophic impact of reduced, late, or non-payment in 2016.

If you don’t then it could cost you your business!

Unscrupulous Contractors use every trick in the book, to reduce and delay payments. Specialist Contractor’s efforts to avoid or rectify this problem often come too late in the process.

Don’t be one of the casualties, take action now.

Download “How To Get Paid” for free right now, and put an end to reduced, late and non-payment!

Whatever level your business is at, and whatever your specialisation I want to encourage you to experience and enjoy a better more profitable, less stressful way.

Wise Up Wednesday: Orders Are A Process Not An Event

Orders Are A Process Not An Event

Receiving an order is not just an event, it’s a process and it’s one of the most difficult processes to get right!

Nowadays most enquiries say that you are ‘deemed’ to have read dozens of documents that you have never seen and have allowed for their contents in your price and programme.

The Contractor is trying to transfer as much responsibility as he can onto you.

Don’t make it easy for him to stitch you up!

State Your Offer Clearly

You simply don’t have time to check every document and his one sided onerous sub-contract terms and conditions, so in order to protect your interests you must qualify your tender to record precisely what you have included and, equally importantly, what you have excluded.

You should not simply accept the Contractor’s terms and conditions!

Either state that your tender is based on a standard sub-contract (such as the JCT standard building sub-contract) or your own terms and conditions.

As a very minimum, if you don’t refer to any terms you should state that the terms are to be agreed.

There are a whole host of onerous terms you need to watch out for and last week’s Wise Up Wednesday gave you lots of examples. If you are in any doubt please get in touch.

The Minimum You Should Do

If you are uncomfortable about submitting qualified bids, or just don’t have the time to respond to every enquiry in detail, you should as an absolute minimum include a general qualification along the following lines:

“Our offer is based generally on your enquiry but there are a number of commercial and contractual issues to discuss and agree before it is capable of acceptance or your order issued”

This should allow you to negotiate with the Contractor if your offer is otherwise of interest to him.

Remember It’s A Process

Whatever else you do please remember that getting an order is a process not an event.

And, you must make sure that any amendments are properly incorporated into the contract.

Just having your tender as a “Numbered Document” is NOT good enough!

​In order not to be caught by onerous provision you must make it perfectly clear that you are rejecting their onerous terms. Notice I said rejecting their terms, not rejecting their order.

​There may be times when you have to take a commercial decision to accept onerous terms and conditions of contract.  In this situation you need to be very clear about the risks you are running and manage them accordingly.

​I hope you enjoyed this week’s Wise Up Wednesday.

​If you are in any doubt about how to manage this process, or whether or not the terms and conditions are onerous, you need to take professional advice and StreetwiseSubbie’s Nationwide Network of Consultants are experts in helping you to deal with such matters.

If you need help, you can call us for initial free advice on 01773 712116.

​Once again thank you all for your support.