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Guest Blog: Payment of Subcontractors and Suppliers

Guest Blog: Payment of Subcontractors and Suppliers

Sometimes subcontractors or suppliers aren’t paid correctly.

This could result in them being overpaid, paid for work that’s defective or incomplete or them being paid late which could result in disputes.

Many subcontractors are keen to complete the easy work in their contract, and claim as much of their contract value as they can. Smaller works of low value often take far more effort and time, and cost the subcontractor more than they earn from completing them, so they may be reluctant to carry out these works, and may even default on the contract.

Payment of subcontractors and suppliers should be done in accordance with the agreed terms and conditions.

Payments should:

  1. be made on time so that discounts can be claimed
  2. have the relevant retentions withheld from them
  3. not be released without completion and receipt of:
    • warranties and guarantees
    • a signed final account
    • the completed punch lists
    • the required spare parts and manuals
    • all commissioning data
  4. be checked to verify:
    • the subcontractor has completed the work they’ve claimed
    • the work complies with the specifications and quality requirements
    • all materials have been received undamaged
  5. only include claims and variations which have been agreed with the contractor and where necessary the client
  6. only be made for unfixed materials if this is in accordance with the subcontract agreement and providing the required guarantees or sessions have been received

Often subcontractor payments are prepared and made by the Contract Administrators, or Quantity Surveyors, who sometimes work in isolation to the project staff. This is obviously unacceptable because they may not be aware of any problems that the project has with the subcontractor which may require set-off or back-charges. These problems may relate to poor quality work which has to be replaced, poor work performance which caused the main contractor to undertake some of the subcontractor’s work, or the contractor supplying materials, equipment of personnel to assist the subcontractor to complete their work.

(Written by Paul Netscher the author of the acclaimed books ‘Successful Construction Project Management: The Practical Guide’ and ‘Building a Successful Construction Company: The Practical Guide’. Both books are available in paperback and e-book from Amazon and other retail outlets. This article is adapted from information included in these books. To read more visit www.pn-projectmanagement.com  )

© 2015 This article is not to be reproduced for commercial purposes without written permission from the author

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