Why Specialist Contractors Aren’t Getting Paid…
Sadly yet another Specialist Contractor went to the wall this week as Wrexham-based specialist steelwork contractor L M Engineering Services went into administration.
No doubt that when the details come out they will show that the firm, which specialised in stainless steel structures for the nuclear and process industries, didn’t get paid on time!
It’s that simple!
Businesses fail because they don’t get paid when they should!
Businesses fail if they don’t get paid, even when they are profitable!
Scarily businesses fail faster when they are growing!
We see a lot of discussions about payment, in our free LinkedIn group (see below) the complexities of the payment process, the penalties that late payment should attract and the difficulties of using existing dispute resolution processes.
As one of our contributors rightly said;
“You can make the punishments as tough as you like but if you can’t establish your basic entitlement to payment quickly and cheaply, the penalties just won’t be pursued.
When the amount “Due” and the “Final Date for Payment” are clear, existing remedies such as Adjudication, Late Payment of Commercial Debts and Small Claims are quick and easy to use and effective.”
Justin went on to suggest that to make effective use of these tools you need to know only 2 things
HOW MUCH? (am I due to be paid)
WHEN? (am I entitled to receive it).
And I absolutely agree with him. If you know these two things with certainty then the process of ensuring you get paid what you are entitled to, and on time, gets a lot easier.
Notice that I said “the process of ensuring you get paid” and “gets a lot easier”.
That’s because getting paid has to be treated as a process and it’s a process that’s never entirely easy!
One of the biggest obstacles to overcome is the determination and ingenuity of certain unscrupulous Contractors when it comes to finding ways not to pay. As a result, many contractors have drafted payment regimes that comply with the letter of the Construction Act but completely avoid its intent.
So, the first part of the “process” is ensuring that you DO NOT sign up to contracts that you do not understand.
If You Don’t Understand It – Don’t Agree To It!
Very often that’s easier said than done!
Contractors know this and have put such convoluted payment terms in their “standard” contracts that it is very difficult to show that a payment actually became due at all.
Watch out for their ridiculous requirements for a “valid application” which is a precursor to a payment becoming “due.” These include full substantiation of all amounts applied for, copies of invoices, forecast final accounts with every interim application, etc.
That way they can say that your application doesn’t comply with the contractual requirements and no payment becomes “due”!
Don’t agree to these clauses unless you fully appreciate their impact. And don’t allow yourself to be pressured into doing so because you think you have no option because you want the work.
Do you want the work so much that you are prepared to do it for nothing?
Because that might very well be how it turns out!
Onerous Terms That Still Meet the Act!
If the contract complies with the Act then it is the contract which applies.
But remember, and beware, because the Act does not preclude the onerous requirements for substantiation and the like that certain Contractors may have put there!
If you are in any doubt about what the payment terms mean, 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.