Should You Be Issuing Payment Notices?

If you employ Sub-Contractors this week’s blog is for you; it’s about the all important topic of Payment Notices.

Is Your Payment Mechanism “Adequate”?

Every construction contract (as defined in the Construction Act) must have an “adequate” payment mechanism.In very simple terms it must have a:

  • Payment Due Date – when the work must be valued
  • Payment Period – time between Payment Due Date and Final Date for Payment
  • Final Date for Payment – latest date when payment can be made In any event,
  • Mechanism that clearly determines the Payment Due Date and the Final Date for Payment.

If the contract payment terms do not meet these requirements, the provisions from the  Scheme for Construction Contracts will apply.

Payment Notices

There are strict requirements for both payer and payee to issue and manage payment notices which operate the payment mechanism.

All Notices must state the amount and the “basis” of calculation. So, you must be certain of what the Payment Due Date is as there is an absolute requirement to serve a Payment Notice up to 5 days after the Payment Due Date. If this time period is missed it is a breach of contract with consequences.

Bad News For You

This is could all be bad news for you, because when you are the payer you must get it right or you could find yourself in breach of contract by failing to serve a Payment Notice within in 5 days of the Payment Due Date.

Most contracts require your Sub-Contractors to submit an application for payment, and in that case their application for payment automatically becomes the Default Payment Notice.

If a Default Notice is served there is no defence to the amount claimed if a Payless Notice is not served in the time specified.

Valid Payless Notice?

A Payless Notice is a final chance for you as the payer to value the works and withhold monies trumping the Payment Notices or Default Payment Notice. However, the Payless Notice must be valid and must state the amount and basis for calculation.

The key thing about Payment Notices is that timing and content is critical to their validity, and if these Notices are not managed properly by you your Sub-Contractors will be entitled to challenge them.

And that means you could end up paying monies which the Sub-Contractor is not actually entitled to. don’t risk it, check your processes now.

Got a payment problem? Get in touch and let us help! Call 01773 712116 or email info@streetwisesubbie.com to find out more.

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Another Two Specialist Contractors Bite The Dust…But Who’s Counting?

Another One Bites The Dust…

(It’s two actually – but no-one seems to be counting)

Just read about not one, but two Specialist Contractors that have bit the dust this week…

McGrath Bros (Engineering) Group has ceased trading with the loss of 171 jobs.

The firm, founded in 1981, worked on major projects across the UK, including the London Olympics Aquatics Centre, with a London office in Tottenham handling a large order book in England and a Glasgow office covering Scotland.

And…

Hull-based offsite manufacturer Modular Space Limited has fallen into administration.

The firm specialised in site cabins supplying the Costain/Skanksa joint venture on Crossrail and Wates.  It also delivered prefabricated buildings for school and health projects.

Skills and High Profile Projects Do Not Equal Success

Clearly both firms had worked on high profile projects, they don’t come much bigger than the Olympics and Crossrail. And there was no shortage of skills and expertise in these two companies, Modular had even developed a special two-storey house design, which could be assembled from four basic units in just five hours.

So What’s Going Wrong?

The fact of the matter is that whilst Trade Associations and Build UK tinker around the edges of the major issues facing you and your business, and promote nonsensical solutions to the very real and business threatening payment problems facing the industry, more Specialist Contractors are going to fail.

As Brian McGrath is quoted as saying;

“Legacy contracts taken on during the recession have also taken their toll on main contractors and specialist subcontractors alike, all linking to underpayments of completed works and disputed final accounts.”

So, if you are not getting paid properly then don’t delay in getting it sorted.

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.

You can download a complimentary “How To Get Paid” report right now, and put an end to reduced, late and non-payment.

And you can call us for initial no cost advice on 01773 712116, and our Gold and Platinum Buddies can use their commercial and contractual consultancy to find an answer.

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.

 

Delays on construction site? Ignore it now and you’ll regret it later!

 

ARE YOU BEING DELAYED ON SITE?

If you are please;

  • don’t ignore it
  • don’t simply accept it as normal
  • don’t throw more men at the job to catch up
  • don’t simply accept what the Main Contractor says

At its simplest, if you are being delayed by events beyond your control, you are entitled to more time!

If those delaying events cause you to take longer to complete than originally planned, you are entitled to an extension to the contract period.

But you must take action.

ISSUE THOSE NOTICES!

Most sub-contracts will require you to identify any cause of delay or likely delay to progress, and to notify the Contractor of that delay and estimate the effect on the date for completion.

Even if it doesn’t say that, it is a good discipline to adopt in any event.

You should also be very wary of Main Contractor’s onerous notification requirements that are designed to prevent your entitlement to extension of time. Check the contract – and do what it says!

And don’t fall for the age old trick of the Contractor saying; There’s no need to be contractual or we will sort it out at the end or any other BS. It’s a trap – don’t fall into it!

FAIL TO ACT AND YOU WILL BE CLOBBERED

Specialist Contractors routinely get clobbered financially by Contractors because they have allegedly delayed the Works, and have no records or notices to say otherwise.

Here’s an example of the sort of thing coming your way if you don’t, from a live job we are currently resolving for a Specialist Contractor;

Deductions, LAD’s, Charges relating to incomplete works – £72,656.82

Setting aside any commercial considerations (but why worry about upsetting someone who is trying to screw you?), one of the main reasons Specialist Contractors get clobbered is that there is a good deal of uncertainty about what to do , and they end up like rabbits caught in the headlights.

We routinely see Main Contractors setting off monies for alleged delay in the tens and hundreds of £thousands!

Don’t let it happen to you.

PRESS YOUR CLAIMS

There are some key measures that you can implement now:

  • Understand your programme obligations under the contract, in particular the start date, duration and completion date.
  • If you cannot proceed with your work due to preceding trades, record the fact with an email, letter or fax, doing nothing is fatal.
  • Understand the requirements for submitting applications for extensions of time, as in some circumstances you may lose your entitlement with a late application.
  • If there are other delays being incurred in regard to information or variations, record the fact with an email letter or fax.
  • Take dated photographs of anything that is delaying your progress.
  • If it becomes evident that you will not complete by the completion date, you must be able to demonstrate it’s not your fault.

 

You must apply for and do whatever it takes to demonstrate your entitlement to an extension of time.

Not doing so puts you at massive financial risk.

DON’T BE PUT OFF!

Once you get your head around such matters, it all makes sense, so don’t let the way contracts are drafted, or the Contractor’s reactions put you off.

Most of all don’t put off taking action, problems do not get better with age, get those notices in and protect your interests. If you don’t do it, you put your business at financial risk, and all your hard work goes down the drain.

And remember that if you need any help to resolve such problems, please don’t hesitate to pick up the phone, take action and give us a call.

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 and see you at the biggest event of the year for Specialist Contractors.

Construction Disputes: 3 Crucial Factors Determine Whether You Win or Lose

Where’s the evidence?

This week’s “Wise Up Wednesday” is about a recurring problem that catches Specialist Contractors out over and over again.

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.

The Good The Bad and The Ugly!

Evidence takes many forms and with good evidence a good Quantity Surveyor, Construction Contracts Consultant or Lawyer (all of whom are available via StreetwiseSubbie) will be able to substantiate your claims for variations, extensions of time, additional costs, and of course helping you get paid.

 

Without it you are at the mercy of the Client or Contractor who wants to allege all manner of wrong doing against you and make the resultant deductions from your account.

 

In the 26 years that I have spent representing Specialist Sub-Contractors in all sorts of contractual situations, I have come across the good, the bad and the ugly.

 

The Good

 

The good came from a mechanical services sub-contractor who had all of the following records in place:

 

  • Weekly progress reports detailing exactly where his works had been delayed.
  • Progress photographs cross-referenced to the progress reports.
  • Labour allocation sheets detailing exactly where his men were working every day.
  • Delay notices confirming the most significant delays and cross-referencing them to the progress reports and photographs.
  • All of the contract documents recording in precise terms the agreement between the parties.
  • Detailed variation submissions cross-referenced to marked-up drawings and instructions.
  • Daywork sheets signed by the Contractor.
  • Confirmation of verbal instruction forms confirming all the verbal instructions received from the Contractor.
  • Copies of all the Contractor’s instructions.
  • Detailed programmes showing the impact of delays.
  • Detailed interim applications.

 

Needless to say, when the time came to prepare that particular Specialist Sub-Contractor’s claim for extensions of time and delay and disruption costs, all the information we needed was readily to hand.  The net result was that the claim was very economical to prepare and resulted in a substantial settlement in the Specialist Sub-Contractor’s favour.

 

The Bad

 

The bad came from a steelwork sub-contractor who had undertaken a multi-million pound project for a very well-known petro-chemical company.  The work undertaken was first class and in all but the contractual aspects of the project, the Specialist Sub-Contractor had performed impeccably.

No proper systems were put in place initially and contractually the project was a bit of a shambles. The Specialist Contractor had even been persuaded to stop issuing notices, very much against our advice!

 

Several months passed and the Specialist Sub-Contractor completed his works in spite of all the problems he had encountered.  By this time his costs were a cool £500,000 more than he had recovered!

 

The blue chip multi-national petro-chemical giant’s response to this claim?

 

They told him that he had not kept proper records as required by the contract.  In particular, they said that his claim failed because he had not issued the delay notices required by the contract!!!

 

The Ugly

 

Trust me, ugly is an under-statement!  The only proper records this particular ground-works contractor had were photographs!  Literally hundreds of them.

 

His claim was that he was entitled to be paid circa £1,000,000 for labour plant and materials.  At the point in time, he consulted me he had finished the work and had been paid only £500,000.

 

It is fair to say that he had been turned over good style by the main contractor, but he had certainly made a massive contribution to his own downfall.

 

Apart from the supplier’s invoices, he had no proper records of anything.  He had no proper wage records and could never explain how he had employed his labour.  He had submitted monthly applications which were completely unsupported by any back-up information.  His daywork sheets simply referred to “Ground-worker(s)” instead of named individuals.  He had no measures of the work he had undertaken and no marked up drawings.

 

Not surprisingly, the cost of unscrambling this situation was considerable and although our considerable efforts on his behalf secured a further £250,000, this was well short of a profitable outcome!

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 exclusiveLinkedIn Group of 2,192 Specialist Contractors, right through to our best sellingGold 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.

In the meantime if you need any help with any of your business issues, please don’t hesitate to pick up the phone and give us a call on 01773 712116.

A Stark Reminder Why We Shouldn’t Ignore The Contract Or Delays…

A stark reminder…

I’m just back from representing a Specialist Contractor at a meeting with a national Main Contractor.

And it’s a stark reminder of all that is bad about some Main Contractors!

A £60,000 set off

No warning, no discussion, just a £60,000 set off.

And guess what it’s from the last payment, because now the works are finished.

Don’t Ignore The Contract Or Delays

Let’s face it delay and disruption is a common occurrence within the construction industry.

To protect yourself properly  from the outset you need to know a certain amount of time related information, and make sure you not only agree with this, but also that it is properly incorporated in the contract.

This information should include:

…the dates of possession and completion of the main contract works

…the period required to approve drawings after submission.

…the period you require for submissions of your drawings

…the period required for off site work prior to commencement

…the dates between which the Sub-Contract Works should start on site

…the notice which you require to commence work on site

…the time required for the execution of works on site

…the order or sequence of the works

…any other relevant time related information

It is essential that these items are completed carefully; taking into account all the factors which you consider will affect your works.

By including such items in the contract you will be identifying the factors outside your control (such as preceding works by other trades) that need to be in place to enable you to complete your works.

If these factors change when you subsequently come to do the work, then it will be easier to demonstrate that you have been prevented from completing your works in the way that you envisaged.

And believe me you will need to have a grip on all of this if you are being accused of delaying the job, and facing a £60,000 set off…

As always, I hope you enjoyed my Wise Up Wednesday email and that it gave you some food for thought, and if you need any help tackling the problems arising from delay and disruption, please don’t hesitate to pick up the phone and give us a call, especially if you are being clobbered for delay!

Our Very Best Ideas To Help Protect and Grow Your Business

We’d like you to have our very best ideas to help protect and grow your business over the next 12 months, and they’re now available in a set of 10 Relevant, Informative, No-Nonsense Video Presentations That Will Boost Your Success as a Specialist Contractor.

“Win Work-Get Paid-Make Money” was recorded live at our Conference this year, on one AMAZING DAY of presentations designed exclusively for Specialist Contractors by top industry experts.

It reveals all the business secrets you need to know about “Winning Work”, “Getting Paid” and “Making Money” in the Construction and Engineering Industries. But don’t take my word for it, here are a just a couple of the dozens of comments we got on the day;

“It was a fantastic conference with lots of useful information and actions to take away” Ollie Yeo – Security Direct Ltd

“Very interesting with excellent tips on sales and marketing, business planning and getting paid” Graham Holmes – Ground Control

** Why Else Should You Take a Look? **

Specialist Contractors make things happen. You have all the skills, you take all the risks, and incur all the costs, and it’s no exaggeration to say that without you nothing would ever get built.

Unfortunately, for many Specialist Contractors business is full of struggle. Financial struggle, personal struggle, dealing with staff and suppliers struggle. And most importantly, getting paid from tight fisted Contractors struggle. It’s a long list…

So if you would like some great ideas and information to help you and your staff avoid that struggle then please take a look at this; http://conferencevideo.streetwisesubbie.com/

You don’t need me to tell you how difficult it is to turn those jobs, and all your hard work into decent profits. But with profit margins for the top 25 firms dipping below 1.5 per cent, you can be sure that the Contractors aren’t going to make your life any easier just yet!

What we are going to share together is the expertise you need to turn all your hard work into better and worthwhile profits, whilst protecting your contractual interests.

Gain access today to “Win Work-Get Paid-Make-Money” recorded live at the exclusive StreetwiseSubbie Conference July 2015.

Simply click this link; http://conferencevideo.streetwisesubbie.com

And Watch At Your Leisure As Many Times As You Like!

Best regards

Barry

P. S. The presentations were eloquently summed up in three words by one of our Gold Buddies “Enjoyable, useful, informative!” Trevor Kirby – Anglian Architectural

“Only Those Who Are Asleep Make No Mistakes…”

“Only those who are asleep make no mistakes”

-Ingvar Kamprad, founder of IKEA, world’s largest furniture brand

It’s only 7 words long, but what a great quote that is!

Everybody makes mistakes, especially in the business world, and as a Specialist Contractor making mistakes can be extremely costly for your business. So, it’s important to ensure that we don’t make mistakes that we could easily have avoided with a little bit of forethought.

And although what we install, and how we do it can be extremely complicated, avoiding commercial and contractual problems can be surprisingly easy with the right approach.

So, here are my 7 top tips for avoiding costly commercial and contractual mistakes.

1 Who Are You Actually Contracting With?

Even in good times Contractors will still become insolvent, and when G B Building Solutions failed earlier this year they owed over £30million their Specialist Contractors!

If the Contractor you’re working for goes bust you will get nothing!

Watch out for contracts that allow the Contractor not to pay you if the Employer becomes insolvent, because you are then taking the risk of not getting paid if they go bust.

2 Scope of the Works

It’s a chore but you should carefully check that the scope of works in the contract matches what you have priced.

At best Contractors don’t care if you get it wrong – their terms will protect them.

At worst some Contractors will deliberately manipulate the scope of works to increase their profits.

3 Time/Programme

Make sure the contract period is agreed and properly documented before you start the works.

Don’t agree to work “in accordance with the Contractor’s programme” or “in accordance with his directions.”

Failing to protect your interests in respect to time can prove extremely costly!

4 Price and Discount

If you have made important qualifications in your tender make sure they are not lost when the contract is formed.

Make sure you know the fundamental basis of the contract (e.g. lump sum, re-measurable, cost plus) and therefore who is taking the risk of quantifying the scope of the works.

Don’t allow one off discounts to be applied to variations.

5 Payment Terms

Make sure the payment terms are clear and unambiguous, and that you understand how they will work in practice.

Watch out for pay when paid, or pay when certified type abuses, and make sure you know what has to be done to ensure you get paid on time.

If the payment process is linked to valuation dates make sure these are agreed and recorded and go beyond the end of the anticipated contract period.

6 Design Liability

It is very easy to acquire design liability even when you think you haven’t got any responsibility for design.

If the contract does not expressly limit your design liability to “reasonable skill and care” you will get the more onerous liability of “fitness for purpose.”

Fitness for purpose obligations will void your professional indemnity or product liability insurance cover!

7 Non Payment And Dispute Resolution!

Being able to suspend performance for non-payment is a very effective remedy.

Adjudication (used correctly) is a very effective legal solution.

Neither remedy is automatically available, and you need to ensure that these rights are not taken away by onerous drafting of the contract.

Free Advice And information

If you want to know more, our unique web site has lots of free advice and it’s exclusively for Specialist Contractors, and it provides you with information about 40 different aspects of your business!

Our expert team of professionals provide all the expertise and support you need to resolve your problems and grow your business. Our goal is your wealth and security, now and in the future.

We look forward to keeping you up to date and helping you to resolve all your business problems.