#WiseUpWednesday: Don’t Get Angry Get Paid…

This week’s “Wise Up Wednesday” is about a topic close to every Specialist Contractor’s heart; Getting Paid.

If you don’t get paid your business fails. It’s that simple.

Ask any insolvency practitioner and they will confirm that lots of otherwise profitable businesses fail because they don’t collect what’s owed to them.

Of course actually getting paid is sometimes easier said than done, and it’s one of the problems StreetwiseSubbie are most commonly asked to help our members with – and one which I have personally been advising Specialist Contractors about for the last 27 years.

So, don’t get angry, get paid, by understanding these key points;

  • The payment provisions of a contract should be clearly established and fully understood
  • Prior to the Construction Act (where it applies) you had no automatic right to interim payments, and no payment notices, no suspension, no adjudication etc., so despite it being a bit complicated the Act is good news for Specialist Contractors
  • Most standard form contracts have provisions entitling you to interim payments, with clear rules set out as to how these should be calculated and when they should be made

So, first things first please make sure you understand the contract and whether or not it complies with the Act

Be aware that the Construction Act does not apply to all contracts, there are certain types of project to which the Act does not apply, these include supply only contracts, process industry and power generation sites etc. (a full list is set out in the Act and you can download a copy from our web site)

Understanding The Rules Is Crucial

Unless the  Act applies or the contract provides for it, there is no common law right to suspension of the works in the event of non-payment’ therefore, unless there is an express provision in the contract, or the Act applies you will be in breach of contract by stopping work.

However, once you’re certain the terms of your contract provide the right of suspension, then this can be the most effective weapon in the fight to get paid on time.

The  Act and in particular the 2011 amendments introduced some key rules about payment;

  • Contracts are required to be clearly establish the “Due Date” and “Final Date for Payment” – confusingly the Due Date isn’t when the money is due to be paid, but the Final Date is the last date by which you must be paid
  • The act does not preclude lengthy timescales – negotiate them!
  • The contract must also provide for Payment Notices to be issued by the paying party, and if they are not provided there are favourable default provisions

But, watch out because most Contractors will try and bend the rules in their favour by way of their own terms or amendments to the Standard forms such as JCT and NEC/3.

Speaking Of Different Rules

Watch out for contracts that are completely different from the norm. For example, the NEC/3 is so different from any other contract that you will have used previously it is a real challenge.

Please don’t ignore the problems that the NEC/3 creates for you as a subcontractor, and please get advice from the outset, because it really will save you a fortune.

Advertisements

#WiseUpWednesday: Losing The Right to Payment

This week’s “Wise Up Wednesday” is about Specialist Contractors unwittingly losing the right to payment.

It’s hard enough to make a profit when things go well. But when things go wrong and you are delayed through no fault of your own, you are entitled to be paid for that right?

Wrong!

You can lose that right completely under the terms of the NEC/3 contract if you don’t do what you need to do and at the time you need to do it.

And that could cost you £thousands…

Losing The Right To Be Paid Under The NEC/3 Contract

Compensation events are events which are not your fault, and they change the cost of the work, or the time needed to complete it. As a result, the prices, key dates or the completion date may be reassessed, and in many cases the you will be entitled to more time or money.

Examples of compensation events

There is a list of specific compensation events at clause 60.1. The list includes:

  • Instructions
  • Access prevention
  • Failure to provide something e.g. information etc.
  • Actions by the Employer or the Contractor
  • Contractor not replying to a communication
  • Contractor withholds acceptance
  • Unexpected physical conditions

The list is fairly extensive, and you need to know how to ensure you take full advantage, and most importantly, avoid losing your entitlements altogether.

Notification of Compensation Events

The aim of the compensation event regime is for compensation events to be assessed as early as possible at the time they incur and not at the end of the project. For this reason, the NEC/3 form imposes strict notification provisions.

The mechanism for notification depends upon the type of compensation event but crucially, the notification of compensation events may be subject to a time bar at clause 61.3.

Clause 61.3 provides that if the Subcontractor does not notify a compensation event within seven weeks of becoming aware of the event, he is not entitled to a change in the prices, the completion date or a key date.

Depending on the facts and surrounding circumstances, any failure by the Subcontractor to notify a compensation event in accordance with clause 61.3 may operate as a time bar, and you will lose the right to be paid.

Applying the strict application set out in WW Gear Construction Ltd v McGee Group Ltd and Education 4 Ayrshire Ltd v South Ayrshire Council, to the NEC3 form, the wording of clause 61.3 leaves little doubt that a condition precedent is anticipated by the parties, and that means you won’t get paid.

It Is So Different It Is A Real Challenge

Unfortunately the NEC/3 is so different from any other contract terms that you will have used previously it is a real challenge. But it can be a massive opportunity to make money too. But, you have to know what to do.

Please don’t ignore the problems that the NEC/3 creates for you as a subcontractor, and please get advice from the outset, because it really will save you a fortune. And if you fancy learning more about what the NEC/3 is all about, and how it will morph into the NEC/4 please see the panel below.

#WiseUpWednesday:Get It Wrong And It Stays Wrong!

This week’s “Wise Up Wednesday” is prompted by a problem that we see time and time again, and it catches Specialist Contractors totally unawares.

“The Devil is in the detail” is an expression you’re probably familiar with, because when it comes to contracts and the construction industry, Specialist Contractors often find themselves on the receiving end of a colossal amount of detail.

As we all know contracts can be a complex area that leaves us scratching our heads, and the use of Standard Form Contracts should be welcomed. But, in the case of the NEC/3 contract however, the Standard Form just isn’t that “standard”.

What’s Wrong With The NEC/3 Contract?

Unfortunately a contract that was conceived as a “clear and simple document” is not widely understood.

There is nothing onerous about the Standard Form, but unfortunately

  • it is not widely understood
  • it is seldom set up properly, and
  • rarely is it properly administered by the parties

All that makes for problems for you as Specialist Contractors, and the key thing when entering into NEC Contracts, is “to know what you are letting yourself in for.

Even an un-amended Standard NEC/3 causes problems, but we’ve seen contracts that had 80 pages of additional Z clauses, and that isn’t an NEC/3 contract anymore!

Confusing And Unfamiliar

The NEC/3 (and soon to be NEC/4), is full of confusing terminology;

  • activity schedule
  • core clauses
  • options and secondary options
  • Compensation Events,
  • accepted programme,

The list goes on and on.

Get It Wrong And It Stays Wrong

“Get it wrong in the NEC/3 contract and it stays wrong”, said Michael Brown, at our last training session on the NEC/3. And Michael is indeed something of an expert, as he has advised on some of the major sub-contract packages using the NEC/3.

“Subcontractors need to to remember that although all parties should follow non-confrontational procedures, every party “will try to dump risk down the line, when it should remain with those best suited to managing it” said MIchael.

In simple terms, the responsibility for Specialist Contractors is to know what they have to do and when they have to do it.

Unlike other forms of contract, which tend to stay in the drawer, Michael advised delegates that Specialist Contractors should refer to the NEC/3 Contract daily and know their exact position in regard to its provisions at any given time. And if that isn’t happening then you simply are not administering the contract properly.

No wonder that I suggested that by the end of the day, our delegates would have a far greater understanding of the operation of the NEC/3 contract than most Main Contractors!

It Is So Different It Is A Real Challenge

Unfortunately the NEC/3 is so different from any other contract terms that you will have used previously it is a real challenge. But it can be a massive opportunity to make money too. But, you have to know what to do.

That’s why I’m going to repeat two things here;

  • Get it wrong and it stays wrong, and
  • Use the contract every day

Please don’t ignore those two maxims, and please get advice from the outset, because it really will save you a fortune. And if you fancy learning more about what the NEC/3 is all about, and how it will morph into the NEC/4 please see the panel below.

#WiseUpWednesday: Evidence!

This week’s “Wise Up Wednesday” is prompted by a problem that I’m helping one of our Buddies to solve right now, and it’s about a recurring problem that catches Specialist Contractors out over and over again.

Here’s an extract from the email that I sent my client this morning;

“As regards establishing the extent of work undertaken, my advice would be that you cannot have too much evidence. So, the kind of things that spring to mind immediately are marked up drawings, photographs, videos, marked up cable schedules, site records, time records, delivery notes, witness statements etc. 

At this stage we are looking to establish a physical measure, a comprehensive picture of the extent of the work done.”

It’s All About The Evidence!

Or to put it another way, and I quote from a learned source;

“Most cases are won or lost based on the strength or weakness of the parties’ evidence, so it is vital to ensure that as much relevant evidence (both documentary and witness) as possible is gathered at an early stage (ideally before proceedings are even issued).”

3 Crucial Factors Determine Whether You Win or Lose

There are three crucial factors that determine whether you win or lose and please, please, please bear these in mind even before you enter into the contract, and especially when you are doing the work. Because come the end of the job (and you’re not getting paid properly) it will be too late.

The three factors are;

  • the evidence (facts),
  • the relevant law when applied to those facts, and thirdly,
  • the tactics of the case.

Whilst our Consultants are extremely good at the law and the tactics, the most important of the three is the evidence, as very few cases are won without strong evidence to support the winner’s arguments.

Getting the right evidence early is crucial, not only so you can properly assess the strength or weakness of your case, but also to try to persuade your opponent to negotiate an early and hopefully cost-effective settlement.

If you are not sure what evidence to collect or how to collect it, please give me a call on 01773 712116 and let’s talk it over.

Need More Information?

We have lots of resources at your disposal from the free information on our web site, to our specially written guides for Specialist Contractors, to our exclusive LinkedIn Group of 2,192 Specialist Contractors, right through to our best selling Gold Buddy Membership.

(Speaking of which, I’d just like to  remind our Gold Buddies to use their free consultancy time to help you resolve any of your problems. We love helping!)

Do not suffer alone. Come and find out how we are helping Specialist Contractors of all sizes, in all trades, right across the UK.

I hope you enjoyed my Wise Up Wednesday email and that it gave you some food for thought, and I sincerely hope to speak with you soon.