Yet another survey that identifies that subcontractors are being poorly treated and are suffering with late and reduced payments.
The latest Construction News survey; ‘Late Payment: The state of the construction Industry’ concluded that respondents to the survey indicated that 25% of payments are not made on time with 40% of respondents stating that their payment terms exceeded 40 days. In addition, only 55% of respondents from tier one contractors indicated that they pay in accordance with their contractual terms, with 25% of Main Contractors and 20% of subcontractors’ respondents indicating that contractual disagreements affect prompt payment.
Unsurprisingly, these depressing results are not new, as the recent BIBBY Financial Services Subcontracting Growth report also highlighted; “27% saying that late payment is the biggest threat to their business over the next 12months…with, on average, subcontractors waiting 42 days for payment from main contractors”, and only “29% of firms indicating they ‘always’ get paid the full amount they bill contractors for”.
Taking these reports together paints a bleak picture of the construction industry’s payment landscape. So why are only 55% of respondents from tier one contactors paying in accordance with contractual terms, and why do subcontractors have to wait approximately 40 days for payment? Well, it could be that some businesses higher up the supply chain use other businesses’ money lower down to temporarily support their own cash flow. Which, interestingly, is how the Famer Review of the UK Construction Labour Model reported unjust payment practices:
- "...The multiple and tiered sub-contracting interfaces within the industry and between industry and its clients has generated a further non-value add process whereby some businesses higher up the supply chain will use other businesses’ money lower down to temporarily support and enhance their own cash flow."
Furthermore, the surveys suggest that prompt payment is affected by contractual disagreements and that the majority of firms do not always receive the payment that they have billed for. How could this happen? An answer may be, as indicated in the Farmer report:
- "...Clients tend to fixate on lowest initial tendered price and this is often perpetuated by their advisors, who, in a traditional procurement model, are implicitly employed (at least partly) to manage a fixed and adversarial transactional interface between clients and industry"
Another reason may be that, as indicted in the BIBBY Financial Services Subcontracting Growth report, 19% of subcontractors do not thoroughly check contracts before they sign them; which is madness. And with 38% stating that construction contracts are too complex to understand - not checking contracts and not understanding contracts makes it far too easy for Main Contractors not to pay. Subcontractors do not help themselves, the majority do not send their staff on contract training courses, which includes, Contractual Dispute Avoidance courses, and as indicated in all surveys, disputes affect prompt payment.
We at the Confederation of Construction Specialists promote the best way to win a dispute is to completely understand contractual positions, understand contract law and understand contract processes and procedures. In short, book on to contractual training courses which will instil contractual knowledge and the confidence to interrogate contracts and use them to your advantage.
There are many contractual CPD courses to choose from, including a University Construction Contractual Dispute Avoidance L4 qualification. There is not an excuse not to train staff. After all, Main Contractors see it as a priority, subcontractors should do also.
By Gerald Kelly – General Manager, Confederation of Construction Specialists
For over 30 years the Confederation of Construction Specialists has been supporting construction specialist companies. By providing up-to date relevant contract training courses, professional advice and contractual guidance, the Confederation of Construction Specialists enables specialist companies to optimise the ways in which they operate contractual arrangements when dealing with Main Contractors or clients.
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By Talk. Build The Specialist Engineering Contractors’ (SEC) Group is calling on the Government to solve the UK construction industry’s long-standing and crippling payments problem, labelling the current cashflow position as “critical”. In a recent article, the SEC Group – which represents SMEs in the construction engineering sector – warns that its members are increasingly being propped up by their directors’ wallets as an interim cashflow ‘solution’. They cite Funding Options figures that show directors lent their construction businesses £38 million in 2015/2016, up from £29.7 million in 2013/2014 – a jump of 28 per cent in just two years. Unsurprisingly, the SEC Group labels this rise as “unsustainable” and has urged the Government to introduce legislation to solve the problem. We agree wholeheartedly with the SEC Group – the cashflow issue has affected growth of construction businesses of all shapes and sizes for too long and needs to be addressed urgently. However, we feel that while the Government has a role to play in improving B2B payments in the industry, businesses themselves can do much more to take greater control of their finances. We’ve partnered with Invapay, an Optal company, to make this easily achievable. Our unique proposition – a combined full-service payment solution – provides construction businesses with a quick and effortless way to manage their payment process and maximise working capital benefits. With Open ECX and Invapay, businesses are able to make their payment processes simple, streamlined and effortless from the moment a payment application is made right through to the point that it is paid. Our cloud-based paper-free WebContractor solution manages the first half of the process, giving subcontractors and suppliers the ability to submit invoices quickly and easily through an online portal. The automated service then processes the application, sending verification notices emails to the applicant and the QS, allowing invoicing authorisation to be granted hassle-free. At this stage Invapay’s payment solution comes into play. With no changes to processes and systems, Invapay’s business-tobusiness payment platform allows businesses to optimise their payments to suppliers and subcontractors. Through Invapay, businesses can take greater control of their cash flow – across working capital, credit lines and third party funds – ensuring long term cash flow benefits for buyers and subcontractors. By Matthew Jones, CEO of Open ECX For more information and to download a free payments guide visit: http://openecx.co.uk/maximising-payments-maximising-cash-flow/Sep 21, 2017 0 -
By Talk. Build Britain might be one of the world’s richest countries but housing is in a crisis of under-delivery. In another bid to tackle this shortage, the Government’s proposed 14 ‘garden villages’ and three additional ‘garden towns’ across England will see more than 48,000 new homes created, turning smaller hamlets into villages and expanding existing towns onto nearby land. While these initiatives are clearly a step in the right direction to ease the lack of new housing and create new communities, they need to be carried out well and responsive to the needs of the market and local people. There remains a need to upgrade our existing stock and make use of what we have, but too often the current stock is not in a location which is favourable to modern living. One of the huge benefits of the garden village plan is that residents will be more able to be stimulated by the environment in which they live. This in turn has an impact on their general well-being and mental health. In other words, it’s not just the home, it’s about what is around them. Setting and community is key, but it depends on the specification, how much the developers have actually bought into the concept and what will come out of it at the end. When these homes are built, it is hoped that the companies will take pride in the design and the build, and that sub-contractors will take pride in the work that they do. It cannot be seen as a way of making a quick profit because the Government is supporting the scheme. Special planning freedoms’ given for these villages also invoke a word of caution. Often this gets translated into pounds and pence and less about the experience the individual will have when they are in the house. It’s a given that we need more homes, but they have to be homes people want to live in and will last for generations. Ultimately, all parties should aspire to build high quality, attractive and thermally efficient homes which are a well-integrated mix of types, tenures and sizes to meet the identified needs of all ages and sectors of these new communities. The garden village scheme will have its detractors, but in a bid to build more homes and as an extra tool to fight the housing crisis, it has a lot of potential. It remains imperative that quality isn’t compromised and that each new home is desirable and will perform efficiently in the long term. Darren Evans is Managing Director at Darren Evans Assessments Ltd Visit: http://www.darren-evans.co.uk/Aug 05, 2017 0
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By Talk. Build The importance of science within today’s economy should not be underestimated writes Mark Gatrell, Head of Research & Development, Sika UK. It’s essential for a country’s prosperity, environment, health, and quality of life. So when it comes to the next generation of scientists for industry, how do you inspire and find them, to ensure the UK remains at the forefront of global innovation? Graduate training programmes and internships are an ideal way to train and develop a workforce of homegrown talent. While construction product manufacturers are perhaps not household names as far as prospective interns are concerned, Sika is a globally renowned name within the industry, something that is recognised by new applicants and highly valued. Sika's UK Research & Development department offers four graduate internships, operating in either polymer synthesis; coating formulation; sealant and adhesive formulation; or cement chemistry. These posts are based at our three sites, in Preston, Leeds and Welwyn Garden City, and run for a one year, fixed term. There are significant benefits of internships for both the company and the intern. Sika has been extremely impressed with the students who have participated within the scheme since it commenced, and the skills and knowledge that they have brought to the business. It is seen as a valuable route to develop relationships with a group of highly talented people, who will soon be looking to build careers within companies such as Sika. The graduate programme brings a new influx of ideas and initiatives every year, which have contributed significantly to the development of new products, and the growth of intellectual property. The scheme offers interns a meaningful placement, with engaging work in product development and testing. Time is usually split evenly, between contributions to the ongoing development programmes, and a single dedicated project. This is selected on the basis of its value to Sika, and applicability to being the subject of the intern’s thesis. For the intern, the opportunity to spend a full year in employment within product development teams, and surrounded by some of Sika's leading experts within their field, is an engaging and highly motivating experience. There is incredible progress in their understanding of the business and its products over this time, as well as significant growth in their capability, presentation skills, and business acumen. The company invests heavily in its people, and the graduates join and benefit from our learning and development activities. Sika is a firm believer in the merits of industrial placements, and often experiences stronger performance at interview from those students who have completed industrial placements. For many of the company’s interns, an industrial placement potentially marks the beginning of a career path. Understanding of the importance of networking, effective time management, presentation skills, and organisation, are rapidly developed. Success in this environment is seen to offer greater intrinsic rewards, though the consequences of failure are far more significant and apparent. Sika believes this exposure provides an engaging challenge for candidates entering the workplace, and provides the impetus for developing new skills. Visit www.sika.co.uk.Jan 04, 2019 0
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By Talk. Build How guaranteed are product guarantees? The answer, unfortunately, is not as simple and clear cut as perhaps they should be, with a wide range of caveats and get-out clauses often hidden among pages of complicated T&Cs. At Sika UK, our mission statement is ‘Building Trust’ and as part of this endeavour we believe in giving meaning to the guarantees we place on each of the various products we manufacture. That starts with taking care of everything within our control at our Sika sites; investing in our research and development, production and delivery processes and teams to ensure our products are always the best that they can be. But it doesn’t stop there. To make sure our guarantees have the greatest value possible, we also take great care on ensuring our products are being specified and installed correctly. That’s why we work closely with roofing contractors up and down the country to give them the training and support they need to carry out installations to a satisfactory standard. In terms of training, we insist that anyone who wants to install our products comes to our sites for product training. We have a range of bespoke courses, including two-day courses for Sika Liquid Plastics and Sika-Trocal and four-day course for Sika Sarnafil, which, once completed, will see each operative issued a Sika ID competency card. We train more than 600 people every year across our sites in Preston and Welwyn Garden City. We also offer a number of management training courses to help contractors gain a better understanding of our products and their various advantages and applications to help simplify and improve specification. Beyond this, we also have two training support vehicles, both equipped with TVs, roofing products and various tools, which we take out on the road to deliver refresher training and new product courses. The final element in securing and validating our guarantees comes through inspection of installations and on-site support. We have a team of 16 field technicians, all of whom have a minimum of five years’ experience in the roofing industry, who are based across the country. These technicians go to sites on a regular basis to give their expertise and assistance where required and to carry out a number of checks, from product specification to installation – checking all layers within the system – and storage. Once the job is finished, they will carry out a final inspection and issue a guarantee only if every stage has been completed to a satisfactory level. We carry out more than 6,000 site inspections every year. All of this helps to give meaning to our guarantees and reassure our customers that the products they’re purchasing will deliver what they’re expecting them to. And that helps to reduce the risks to the installing contractor and improve their efficiency. It’s a time-consuming process but one that we’re happy to pursue in order to maintain our position as a leading manufacturer of products working across multiple industry sectors (see http://bit.ly/2o8Ca6Z). By Ian Muddiman, Head of Applications – Roofing at Sika UKOct 26, 2017 0
