Website Upgrade Incoming - we're working on a new look (and speed!) standby while we deliver the project

Tips on using this forum..

(1) Explain your problem, don't simply post "This isn't working". What were you doing when you faced the problem? What have you tried to resolve - did you look for a solution using "Search" ? Has it happened just once or several times?

(2) It's also good to get feedback when a solution is found, return to the original post to explain how it was resolved so that more people can also use the results.

Main Contractor Delay

11 replies [Last post]
Mon, 2008-11-17 15:08
Mohammed Owais
User offline. Last seen 11 years 23 weeks ago. Offline
Joined: 11 Mar 2005
Posts: 17
Groups: None
My company Role in a project is A/C Local subcontractor , we contracted with the main contractor to do A/C work
for a Residential Tower project, our contract is based on "back to back" payment terms.
Recently we are facing too much cash problems in this project due to
1-Main Contractor’s delay in paying my company. (it takes more than 80 days to pay us against monthly running bills)
2-delay of the project (the project was supposed to complete in Augest 2008) and it is not completed
till now.(expected to complete not before Feb. 2009)

Our agreement with main contractor has no provisions determining how we deal with main contractor’s delay of payment or how we deal with the main contractor’s delay in the project’s civil works where our A/C works must follow.

Do you think we have a right to claim the main contractor for a delay damage due to payment delay and also for civil works delay ? How ?

I’m waiting your valuable advices



Top

Replies

Mon, 2009-01-19 04:38
#1
Ken Sadler
User offline. Last seen 4 years 29 weeks ago. Offline
Joined: 14 Jul 2008
Posts: 71
Groups: None
Ah - the Aussie connection!

Having worked in Australia myself, they do have some rather unique rules concering payments between Principal, Contractor and Subcontractor. It seemed to me that alot of this is borne out of the unusual power that the unions still exert in Australia. Remember also that the laws differ dramatically between the individual states in Australia.

The Building and Construction Industry Security of Payment Act, 1999 does confer rights (in NSW) on sub-contractors to seek direct payment from the Principal (thats the Employer!) and I guess the reason it was expressly included in the contract was because the Act requires the ruling of the courts to enforce the payment.

As the markets in Australia are very small (5 major cities, 1 per state = 5 markets)there is a greater desire to protect the subcontractors, even if this distorts the free market.

Of course the Housing Grants Construction and Regeneration Act 1996 here in the UK is similarly intended to give the sub-contractor more "teeth" but it does not extend to cutting the Main Contractor out of the cash-flow party. Doctrines such as Privity of Contract are more cherished here than in Australia and there are all sorts of legal problems to be created if the Employer is seen to disregard his duty to one party for the benefit of a third party. A direct payment can be secured, in very exceptional circumstances with a Garnishee Order.

Sorry - got carried away.... what was the question again?
Top
Fri, 2009-01-16 18:31
#2
J H
User offline. Last seen 16 years 18 weeks ago. Offline
Joined: 14 Jan 2009
Posts: 14
Groups: Civil Engineering
OM,

We have experienced a similar situation to you before but, we found out in the contract it says that the Princpal may elect to pay the Subcontractor direct if the Managing Contractor fails to pay the Subcontractor on time. See if you can find this somewhere in the contract. There are benefits for the Principal pay you direct. As for the rest you may have cause to claim for an EOT but, I think you may also need a lawyer.
Top
Tue, 2009-01-13 08:15
#3
Ken Sadler
User offline. Last seen 4 years 29 weeks ago. Offline
Joined: 14 Jul 2008
Posts: 71
Groups: None
Hi, Please give us an update on how this project is progressing. Just a couple of points to consider:

You say that the conditions relating to progress state "the subcontractor work programme follows the main contractor work programme". You also say that you are working to the Main Contractor’s programme.

First question is; is that programme a contact document. i.e. is the Main Contractor obliged to progress the work in accordance with that programme. If he is, then his failue to do so is a breach of your sub-contract agreement. Even if he is not obliged to work to that programme, is the delay caused by some act or ommission on his part that was not reasonably in the contemplation of the parties when the contract was formed? This may still be an implied breach o the agreement.


Regarding the Payment terms, have you ever received a notice to record that payment has been received by the Main Contractor from the Employer? It is likely to be an implied term that he should provide this to you for each payment. If he does not, then you have a reasonable case for approaching the Employer for confirmation.

Do you know the conditions of the Main Contract? It may be that the main contractor has an obligation to pay the sub-contractors within a specified time. If this is the case, and you have been paid late, you could involve the Employer and give the Main Contractor a headache!. Certainly in UK jurisdiction, there are rights of third parties in ts respect - not sure whether there is legislation where you are.

Please let us know how you are getting on

Regards

Ken
Top
Wed, 2008-11-26 04:50
#4
Neil Tait
User offline. Last seen 13 years 11 weeks ago. Offline
Joined: 31 Jan 2001
Posts: 29
Groups: None
You do have a case to claim for works delay and associated costs. You can refer to the main contractor’s programme that was in place when you signed your sub-c and use this as basis for comparison of planned versus actual. Once time periods are established they can then be fed into your cost claim - which will comprise various standard heads.

To support your claim you will need a narrative (brief), clear calculations, site records that demonstrate actual labour / costs / plant / rentals / etc. I suggest a reasonable submisison is provided to show the mc that you are serious. You may then be in a position to proceed with a negotiated settlement - it depends which cards you are holding! Also be wary of the terms & conditions of any such settlement.

Unfortunately it is your cash flow that is screwed in the meantime. There are potential remedies but more detail is required...
Top
Tue, 2008-11-18 16:54
#5
Samer Zawaydeh
User offline. Last seen 6 years 12 weeks ago. Offline
Joined: 3 Aug 2008
Posts: 1664
Groups: Civil Engineering, Regional Representatives
Dear Mohammed,

You will need to know all the details about the following:

1) Contract between you and the Main Contractor.
Can you go to Arbitration?
Read all the clauses and start sending the Main Contractor letters on a weekly basis showing clealy the scope completed, and the amounts due as of that time. If they do not reply then you can go to stage 2.

2) Contract between the Main Contractor and the Client.

a - Certain clauses under FIDIC clearly state that the Contractor should have paid all his subcontractors for the works completed in the previous invoice submitted. If this is the case, then your only outstanding payment should be the last one only.

b - You Main Contractor should be smart enough to claim for finance charges if the Owner is delaying the payment.
Otherwise, the Interim Payments should be paid regarless of the delay.

c- If the Main Contactor is late and ultimately it is proven to be his responsibility, then Delay penalties might be enforced and he will not receive all his money.
Again, most of the A/C works should be completed well in advance and the only payment percentage that is retained is that associated with the commissioning and 3rd party inspection.

3) If your Main Contractor has othersubcontracts then you need to check with them also regarding their payments.

4) Do take the Contract to a legal advisor in matters of Construction.

Good luck,

Samer
Top
Tue, 2008-11-18 07:01
#6
Mohammed Owais
User offline. Last seen 11 years 23 weeks ago. Offline
Joined: 11 Mar 2005
Posts: 17
Groups: None
Thank you all for your valuable comments
I understand we are in a big trouble and i’m also a ware that we did a big mistake when we accept like this contract with that conditions and terms But for time beeing is there any chance to claim to recover our running loss due to delay of the project’s civil work and also delay of our payments?
And i’m also worry to stop the work in the project because in this case i think the main contractor will has a right to terminates the contract and start to claim us...!
Waiting your suggestions....
Top
Tue, 2008-11-18 05:59
#7
Trevor Rabey
User offline. Last seen 2 years 26 weeks ago. Offline
Joined: 29 Nov 2005
Posts: 530
Groups: None
Suggestion:
Do not terminate the contract.
Stop work, now.
Pull all of your people and equipment out.
Wait and see if the main contractor notices.
Advise the main contractor and his client that there will be no further work until you see all of the money that you are owed.
Top
Tue, 2008-11-18 05:45
#8
Trevor Rabey
User offline. Last seen 2 years 26 weeks ago. Offline
Joined: 29 Nov 2005
Posts: 530
Groups: None
The person who is to blame is whoever signed the contract without reading it or without crossing out the terms which puts this sub-contractor in this position, and also puts all of the sub-contractor’s project staff in this position of not being able to do their jobs or being able to anything much about the situation.
In most countries, in mine anyway, "pay when paid" clauses are outlawed, or at least no one in their right mind would agree to it.
Someone makes a huge blunder, then there are consequences. Now you know.
Try to get on a better project next time.
Top
Tue, 2008-11-18 04:50
#9
Anoon Iimos
User offline. Last seen 3 years 19 weeks ago. Offline
Joined: 22 Sep 2006
Posts: 1422
Groups: Pinoy Planning Planet Community
First of all, you have accepted and taken the risk (who’s to blame?). I may suggest that you make analysis of the following: 1. Continue your contract (A/C); 2. Terminate your contract; 3. Settlement with the Main Contractor (re: Contract); toss a coin, heads or tails (joke).
Top
Tue, 2008-11-18 02:34
#10
Mohammed Owais
User offline. Last seen 11 years 23 weeks ago. Offline
Joined: 11 Mar 2005
Posts: 17
Groups: None
Thanks Raviraj for your replay
The work programme article on the contract says: "the subcontractor work programme follows the main contractor work programme" but we didn’t submit any programme for the A/C work just we follow the main contractor programme of the total project which including dates for MEP works as a general tasks.

Regarding the Payment terms it states the folowing article:
"Payment will be released on back to back basis after 15 days of receipt of payment from the client"
But the problem here the owner may be delay payment to maincontractor for other reasons not related to our scope of work in the project , also i have any idea about when the owner pay to main contractor? and why sometimes he delays payments?
and evey time we ask for our dued payments they said: "your payment has no time to due it’is only dued after 15 days if owner pays us as your contract says..., you have to wait..!" and in other hand our A/C work progress on the project is going very fast to recover the main contractor’s delay of the project..!
Top
Tue, 2008-11-18 00:05
#11
A D
User offline. Last seen 4 years 28 weeks ago. Offline
Joined: 20 May 2007
Posts: 1027
Groups: Accreditation Editors
It all depends if u have a agreed PROGRAMME with the Main Contractor and ur CONTRACT CONDITIONS.

Plz let us know the payment terms and what it states in the Contract regarding payment period.

As far as Sub-Contractors right to claim is considered, he can always claim for EOT and associated cost with it.

Cheers,

Ravi
Top