[ Spotlight: Late payment ]
To support growth in construction GDP and jobs, the problem of supply chain insolvency must be tackled head on
in the construction supply chain – another issue about which the ECA has been active in heightening awareness. Reeve says: ‘We are telling ministers that to support growth in construction GDP and jobs, the problem of supply chain insolvency must be tackled head on. It’s one thing when a company fails because of bad decisions, but completely another when a well-run business becomes insolvent due to not being paid in good time – or at all.’
Smart thinking In order to offer its members the best possible protection from the effects of late and non- payment, the ECA’s Commercial, Contracts and Legal department provides a range of services – both advisory and practical – on this issue. These range from its Down to Earth ‘survival guide’, which covers topics such as tendering, running contracts, surveying and contract management, through to the ECA Debt Recovery Service that provides discounted advice on issuing proceedings, the court process, judgement and enforcement, as well as a free ‘letter before action’. ‘Prevention is always better than cure,’
comments Paul Jackson. ‘Too many subcontractors rush into doing business with a main contractor and simply neglect to carry out the type of basic checks that can prevent problems further down
Case in point
When leading fire detection and security system installation specialist and ECA member Amalgamated Ltd won a contract to carry out works at a well-known department store, it was the beginning of a tumultuous period for the company. ‘In October 2010, we were
subcontracted by a large electrical contracting company – which we’ll call Company X – to carry out the extension and associated commissioning of an existing fire detection system,’ explains Amalgamated company director Ian Teader. ‘As much of the work had to be carried out at night when the store was closed, many of our instructions were delivered and received via email, which we acted upon in order to ensure that the work was completed on schedule.’ Three staged invoices were issued during the course of the project. Teader continues: ‘The invoices were for a total of £21,000 – none of which were contested. After a lot of chasing up we were finally told that as there were no signed orders for some aspects of
the job, Company X was only prepared to pay us £3,000.’ Feeling a sense of injustice, Amalgamated contacted the ECA’s Commercial, Contracts and Legal department, which connected the member to Effective Credit Collections. Teader comments: ‘After an initial letter went unanswered, Effective’s Bob Partridge went through the options available to us and after looking at our financial status he recommended pursuing the money through the courts by suing Company X.’
Lessons learned Despite more than 40 years in the construction industry, this was the first time Amalgamated had ever been to court. This was a new, and somewhat daunting, experience. Partridge and his team made sure that everything went as smoothly as possible, though, by liaising with the barrister and guiding the company through the entire process. A court date was finally set, however, because Company X sent requested
papers late and employed other delaying tactics, it had to be rearranged and the case was finally heard in September 2012. After two days, the judge was convinced that Amalgamated followed correct procedure and awarded the company its original claim and associated costs. Teader says: ‘The relief we felt was palpable, as if the verdict had gone against us we would have been liable to pay £80,000. Both the ECA and Bob were excellent throughout the entire process.’ Asked what lessons have been learned
as a result of this wholly unpleasant and stressful experience, Teader concludes: ‘We learned that legal proceedings should be avoided at all costs, though we would not hesitate to use the ECA service again, should the need arise in the future. And although we have effective credit control procedures in place, we always make sure there is a written, confirmed and signed order for every aspect of any project we are working on. This can sometimes be difficult, but it is well worth doing in order to avoid any problems.’
56 ECA Today March 2013
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