Wise Up Wednesday: Subbies Owed £9.2m Won’t Receive A Penny!
The collapse of M&E specialist Vaughan Engineering Ltd has left subcontractors and suppliers holding unpaid bills totaling more than £9m.
The firm called in administrators at its three UK offices in March blaming its demise on the knock-on effects of Carillion’s collapse.
Trade creditors are owed £9.2m and are unlikely to receive a penny.
KPMG said Vaughan hit cash flow troubles following two contract disputes and the failure of Carillion who were a “key customer”.
And There’s More Bad News…
On Friday it was announced that Flooring specialist Polydeck Group has gone into administration with the loss of more than 100 jobs.
It is understood that Polydeck had been in a long-running £1.7m payment row with Balfour Beatty over work carried out at the RAF Marham base in Norfolk.
And today (30.05.18) two related historic building restoration specialist firms have been placed into administration with the loss of around 55 jobs.
The firms, Heritage Building & Conservation and Heritage Building & Conservation (North), were launched two years ago taking on skilled staff following the collapse of York-based conservation specialist William Anelay.
One former employee is reported as saying: “There are a lot of suppliers and subcontractors owed millions as well so I’m sure they will want to know exactly what has gone on here.”
Sad State Of Affairs
That is the sad state of affairs of today’s construction industry!
The UK is a “debtor’s paradise” and if an organisation doesn’t want to pay it is difficult to make them. Unless of course you have the knowledge and expertise, but more on that shortly.
A Waste Of Time?
In recent weeks political support for holding cash retentions in trust has soared to over 120 MPs in favour of ring-fencing subcontractors’ money. Cross-party support for reform includes Conservatives, Labour, Liberal Democrats, SNP, DUP, Plaid Cymru and the Green Party.
Peter Aldous, the MP behind a Private Members Bill on Retention said: “There have been proposals to stop the abuse of retentions before, but this time there is the largest coalition on fair payments ever.”
All very laudable but in my view a complete waste of time and effort. Sorry to sound so blunt, but the government is going to have to do a whole lot more than tinker with retention in order to effectively fix the issue of late payment.
What’s The Answer?
In my 28 years resolving disputes for Specialist Contractors I have seen the payment situation gradually deteriorate and I have also seen contracts become more and more onerous.
And, I have also seen the results of an awful lot of payment related insolvencies, and it isn’t pretty!
Losing your business and all that you have worked so hard for is a gut wrenching experience…
Protecting Your Business
Avoiding payment problems can be a whole lot easier when you know how.
Understanding the “Payment Law” in the form of the Construction Act is not difficult, so please don’t be put off by thinking it’s legal mumbo jumbo that only lawyers can understand.
Used effectively it is there to ensure you get paid on time. But the key is “used effectively”.
How Can Sub-Contractors Get Paid On Time?
Here a few simple rules to help ensure you get paid on time;
- Don’t blindly accept whatever contract is put in front of you.
- Make sure that you and everyone in your team understands the payment terms and how to apply them.
- Know the dates your payments are due and the final date for payment, and make the Contractor aware that you know.
- Make sure that all applications are in on time and comply with the contract.
- Contact the Contractor before the payment is due to make certain they know when you are expecting payment.
- Make sure the Contractor knows that if payment is late, you will suspend your works in accordance with your contract.
Can You Suspend Performance?
Suspending performance of the works is a powerful incentive to make the Contractor put you at the top of the list when it comes to making payment.
Used properly, suspension is your best solution to prevent late payment.
Probably the biggest benefit included in the Construction Act provides that if payment is not forthcoming in accordance with the contract terms then the subcontractor may subject to proper written notice suspend work until payment has been received.
When money is in short supply it is often the sub-contractor who threatens to suspend work is the one who gets paid first!
Please Make Sure You Protect Your Business
So, there you have it, some very real reasons why you must be extremely careful who you work for, certain what basis you are working on, and you must take action if things are not going well.
With the right assistance and application of the right principles at the appropriate time, you can make sure you protect your business!
I have been assisting Specialist Contractors just like you, to resolve commercial and contractual problems for the last 28 years. And, StreetwiseSubbie.com has been providing services to improve the lives of our Buddies (members) for the last 10 years.
We are pretty confident that we can help you, so please feel free to call any time. Initial advice is free, subject to you meeting certain criteria.
Thanks and best regards
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