My phone is ringing a lot just now with clients saying – “we need help as we are not getting paid.” Is that going to improve, and I would say no in the current market conditions. What business in the construction industry need to do is to become much more focused, and commercially smarter in dealing with the financial aspects of their projects.
So here are a few suggestions…
As mentioned in my first blog, check the subcontract to see if you can live with the payment provisions.
If they are too onerous, then try to negotiate a better position, or walk away.
• Make sure there is an agreed payment schedule before you sign the subcontract. The schedule should show the application date, due date, final date for payment, and the date when a pay less notice has to be issued. So, make sue you stick to these dates. Put the application date into your calendar so you do not forget. A large number of issues I deal with are because contractors do not hit these dates.
• Applications for payment – check what the subcontract says as to who your applications should be sent to. In some cases, I have seen clauses where the application goes to the contractors QS, and a copy to someone elsewhere in the contractors organisations. If you do not comply, then you will not be paid, or the application might go into the next cycle. Its brutal, so make sure you get it right! Put a delivery and read receipt on your emails.
• Make sure that your application is as detailed as possible; if you are providing quantities then submit the back up; provide material and plant invoices; provide site instructions; provide photographic records as well if necessary. A lot of applications in my experience get shredded as they are not substantiated.
• Follow up your application with a call to the contractors/clients QS, to check it has been received and does the recipient need further information.
• You have to do everything you can to make sure your application stands up to scrutiny.
• Pick up the phone and communicate, as it is too easy to send e mails.
This is not rocket science, it is simply good practice to protect your cash flow and your business.
Another key area to consider are the requirements for notices under the contract, and you must comply with these, and there are dozens of different versions floating around – just make sure that you comply.
In future blogs I will look at the Low-Cost Value Adjudication Scheme and the Conflict Avoidance Process.
FIS publishes short blogs by its Consultant Len Bunton on contractual and commercial issues he experiences when supporting FIS members and the wider community – it is designed to help FIS Members avoid common traps and build on the FIS focus on collective experience. The blogs are published fortnightly as FIS member only content and released to SpecFinish two weeks after publication.
Len provides an initial free one hour consultation to FIS members to discuss and review specific issues and to help develop a strategy to address. Should further advice and support be necessary, thereafter then Len will agree the necessary fee levels with each FIS member.
You can find out more about FIS membership here.