PAYMENT ISSUES FOCUS


Beware the domino effect


Cashflow problems can soon escalate and lead to other knock-on issues that impact both your business and your health. So what steps can you take to avoid the pitfalls?


By Len Bunton FRICS FCIArb, HON FRIAS


SEC Group Scotland I


start this article on a sombre note. I am greatly concerned about what I see every day in the construction industry, with increasing levels of business failure and the recent collapse of two well-established firms in Scotland. The whole thing creates a domino effect that could be further complicated by the impact of the coronavirus. So why the sudden escalation in cashflow problems? I’ve seen this coming for some time, with more clients calling me about payment problems and an increase in the number of disputes being referred to adjudication. And it’s


34 CABLEtalk APRIL/MAY 2020


not just the numbers – disputes are becoming more complex and the amounts are also increasing. The real cause of all of this goes right back to procurement strategies of competitive tendering, i.e. low margins, tender prices being driven down and projects going on to site and not being fully designed. There is a move to change all of this, but it will take years. In the meantime, there is far too much design and build – or as some colleagues call it “design and dump” – where the employer puts unreasonable risk on the contractor and it then goes down the supply chain. However, the real culprits out


there are public and private sector employers who don’t observe the 30-day payment periods – so don’t be afraid to call them out, especially in the public sector. If your first payment is late then put a marker down IMMEDIATELY. The other culprits are contractors who also pay late, and they also need to be named and shamed. My advice is simple – don’t work for anyone who has a poor payment record. I see the same symptoms all the time – the first payment is late, measurements are slashed, variations are denied and/or are slashed and contra charges introduced from day one.


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