6008 Assignment 1 Articles.docx

8/14/2019 6008 Assignment 1 Articles.docx

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As Govt moves for stronger construction sector...

Howai: Plans in place to pay contractors on time

Published:

Monday, November 26, 2012

Rhonda Krystal Rambally Trinidad Guardian

http://www.guardian.co.tt/news/2012-11-26/howai-plans-place-pay-contractors-time

Javid Adam of Adam's Project Management & Construction Ltd, second from left, and Chris Garcia of CG

Construction Services Ltd, second from right, pose with President of the T&T Contractors Association

Mervyn Chin, left, and Finance Minister Larry Howai at the Associations annual awards dinner at the

Hilton Trinidad and Conference on Saturday. Adam won the Contractor of the Year award and CG

Construction Services Ltd was presented with the award for Speciality Construction - Small Building

Construction. PHOTO: ANDRE ALEXANDER

Finance Minister Larry Howai says mechanisms are being put in place to alleviate the perennial problem

of late payments faced by local contractors. He said the Government has begun settling many

outstanding bills since coming into office. We will Howai work to ensure that monies due to the m are

paid within a reasonable period of time, Howai said.

Part of the problem and only part has been the rather haphazard manner in which change orders and

adjustments to billing schedules have taken place in the past. He said the Government was steadfast in

its resolve to re-energise the local construction sector with a view to stimulating economic growth.

Howai was the feature speaker at the annual contractor awards and gala banquet hosted by the

Trinidad and Tobago Contractors Association at the Grand Ballroom, Hilton Trinidad, on Saturday. I

recognise that the industry faces many challenges, chief among them being the lag sometimesexperience in the receipt of payments from government and other state agencies, he said.

I for one can fully appreciate the cash-flow problems which arise for firms engaged in construction

activities as a result of the late settlements or late reimbursement of funds for projects undertaken for

the State.
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He said the construction sector has the greatest potential to create employment, stimulate the economy

and ensure maximum return on public expenditure because of the linkages of the sector with the rest of

the economy and the multiplying effects associated with them and spending within the domestic

economy.

Howai said his vision was to the sector become a competitive and innovative exporter of services into

Central and South America. Governments priorities for national infrastructure development depends

heavily on an active, vibrant and modern construction industry and from what I've heard this evening,

we have every reason to be confident in the vibrancy of the sector, Howai said.


3/18

Cash-flow problems hurting industryChin

Published:

Monday, November 26, 2012

http://www.guardian.co.tt/news/2012-11-26/cash-flow-problems-hurting-industry%E2%80%94chin

The present economic state of affairs of the country is stagnant, partly due to the lack of criticalimplementation of development projects in the previous budgets by the current administration. So said

president of the Trinidad and Tobago Contractors Association (TTCA) Mervyn Chin.

He said, This has presented onerous challenges to the construction industry and our stakeholders.

Chin, in his address at the TTCAs annual contractor awards and gala banquet at the Grand Ballroom,

Hilton Trinidad, on Saturday, listed several concerns with the hope that Finance Minister Larry Howai

and his government would attempt to resolve. Howai was the feature speaker.

Foremost in our concerns has been the late and non-payment of money owed to contractors and

consultants, Chin said. Regretfully this continues, and as publicly stated in the media by the Ministry of

Education for the Education Facilities Company Limited and by the chairman of Udecott, in excess of

$500 million is currently outstanding for previous work done.

He said it continues to place those in the sector under hardships. Many have gone bankrupt, he said.

Chin described the late and non-payment as an unsatisfactory situation. Government, over the last two

and a half years in facing the challenges of the economy has openly admitted failure in its

implementation measures, he said.

The statistics on the contraction of the construction industry according to the Central Bank state severe

deterioration. Local firms comprising manufacturers, suppliers, service providers and contractors were

forced to contract, resulting in loss of employment for many.

He said according to the Central Statistical Office, the construction industry is arguably the largestemployer after the Government and during the boom period employed approximately 120,000 workers.

Now, that figure is around 80,000 and will continue to reduce if the Government fails to get on track

with its implementation plans.
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Local contractors to be paid $150m

Published:

Wednesday, January 23, 2013

Raphael John-Lall

http://guardian.co.tt/business/2013-01-23/local-contractors-be-paid-150m

Food Production Minister Senator Devant Maharaj, third from left, unveils the plaque for the re-

commissioned Orange Valley Wholesale Fish Market in Couva. Looking on, from left, are Namdevco CEO

Krishna Ramrattan, Chaguanas Mayor Orlando Nagessar, local government representative for the area,

Allan Seepersad, and Namdevco chairman Ronald Forde. Photo: Vindra Gopaul

The Ministry of Finance has allocated $150 million to be paid to local contractors as part settlement of

the $500 million owed to them. Mervyn Chin, President, Trinidad and Tobago Contractors Association

(TTCA), who revealed this to the T&T Guardian yesterday. described it as a partial relief. He said

Finance Minister Larry Howai has asked the TTCA for an updated status on the matter and it will beforwarded to him shortly.

The TTCA and local contractors have been calling on the government for years to pay money owed to

them for local projects. Chin and his predecessor Mikey Joseph have been saying that the situation has

not been doing any good for the construction sector which is an important part of the economy.

Two weeks ago, Trade Minister Vasant Bharath said the construction sector contributed seven per cent

of the Gross Domestic Product (GDP). Chin said the money will be disbursed in tranches but could not

give further details of how many contractors will be paid.

I canonly speak for the TTCA members as I am not privy to debts owed to non-members. The Ministryof Finance disburses tranches to the various ministries and state agencies who in turn paid contractors

likewise, he said. Last week, at an ANSA Coating Limited award ceremony, Gerry Brooks, Chief

Operating Officer of the ANSA McAL Group reiterated calls for the government to move urgently to

settle all outstanding debts to local contractors.

Chin said the ANSA McAL Groups concerns reflects what the TTCA has been saying all along.
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Contractors association boss, Late payments trickling in

Published:

Tuesday, November 27, 2012

Dixie-Ann Dickson

http://guardian.co.tt/business/2012-11-27/contractors-association-boss-late-payments-trickling

Finance Minister Larry Howai

While contractors have been given the assurance by Finance Minister Larry Howai that outstanding bills

would be paid in a timely manner, Contractors Association president Mervyn Chin says it would still take

some time for the industry to bounce back. Last Saturday, at the celebration of the 44th anniversary ofthe T&T Contractors Association (TTCA), Howai said the Government had set up a bond to pay

contractors in the construction industry, according to Chin.

The government floated a bond for $2.5 billion at the end of September this year, part which is for

settling contractors payment, Chin said. The contractor said he was uncertain of the exact figure the

government owed to date, since his colleagues have been receiving their money on a gradual basis.

Earlier this year, Udecotts chairman said it was owing contractors $300 million, while Education

Facilities Company Litd(EFCL) was owing approximately $250 million. Since then payments have trickled

in, but given the length of time, the interest would have gobbled up whatever profits the contractors

would have made.

Chin said for those contractors who have folded up, their payments would go to their creditors. He said

the TTCA has hope in Howai as there are efforts on his part to bring this issue to a close. He did

symptathise with the contractors regarding the tardy payments and we appreciate that.

P3 model a challenge

Meanwhile, Chin said the industry would need the bigger projects to kick start the entire industry. It
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still might be awhile before Government rolls out its big projects that would require the Public/Private

Partnership (P3 Model) agreement.

He said projects that require traditional designs like the Housing Development Corporation (HDC) would

come on stream soon, but those requiring the P3 model, would not start until the middle of 2013. For

example, he said: EFCL is currently tendering for design and construction. If they just put out these

tenders, then it would have to go through the approval process and that would have a natural gestation

period in itself. So it would take awhile.

He said: The 2012- 2013 National Budget of last October listed a few developmental projects under the

PSIP (public sector investment programme) which government intends to undertake using the P3 Model.

While this model has had success in some countries, so too, it has also had failures that have been

largely influenced by the variation of the model adopted and the suitability of the type of development.

He explained that while the P3 procurement model adds a substantial financial component to the

contract, the model is best suited to projects that have a clear revenue stream (ie hospitals, car parks,

toll roads etc) but impractical for court houses, police stations and the like that are more effectively

funded by government as it has access to much cheaper financing than private business.

Chin recommended that there should be a mix of procurement models in construction industry. The

contractor noted that the Government had not yet outlined the implementation strategy to be adopted

for procurement and he predicted that there would be little activity in the sector until those risks were

clarified.

One of the most important ingredients for a successful P3 proposal is access to low cost funding and

this puts prospective local developers at a disadvantage, said Chin. He said both government and

foreign contractors can access financing much cheaper than what obtains on the domestic T &T market.

If Government is to continue with this procurement model in keeping with Professor Uffs Commission

of Enquiry Recommendation #43 which states Local contractors and consultants who compete with

foreign companies should be provided with the same or equivalent benefits as enjoyed by those foreign

companies and should be protected from unfair competition through matters such as soft loans,

Government must provide access to competitive funding to equalise this disadvantage, he said.


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Contractors link Govts unpaid $$ with crime

Published:

Wednesday, August 21, 2013

Kevon Felmine

http://guardian.co.tt/news/2013-08-21/contractors-link-govt%E2%80%99s-unpaid-crime

Vice-president of the T&T Contractors Association (TTCA) Ramlogan Roopnarinesingh says Governments

failure to honour $1 billion in payments to local contractors is responsible for an increase in

unemployment and crime. Commenting on an article in Mondays T&T Guardian which highlighted

Governments debt owed to contractors developing lands at Petit Morne, Ste Madeleine and Cedar Hill,

Princes Town, he called on Government make the payments soon.

Both sites are being developed by the Estate Management and Business Development Company Limited

(EMBD) for the relocation of residents living in the path of the San Fernando to Point Fortin Highway. He

said the construction industry already was crippled by a lack of opportunities while interest on loans

taken to finance projects continued to increase.

Roopnarinesingh asked: Why is it that Government is doing work and does not have the finances

available to pay the contractors? They have been asking the contractors to continue until they assess

the finances. Housing Minister Dr Roodal Moonilal told the T&T Guardian last week small payments

would be made this week.

However, he said, claims amounting to $300 million by Namalco Construction Services Limited, LCB

Contractors Limited and BBFL Civil Limited for work done on the EMBD sites were being

assessed. Roopnarinesingh said 17 per cent of T&Ts labour force relied on the construction industry for

jobs but as contractors await payment, they are forced to retrench workers. That trend, he said,

increased unemployment and, indirectly, crime.

He added: The local construction industry is basically crippled. It is the Government and then the

construction industry who employs people. The thing with the construction industry is everyone

benefits. From the engineers, architects and designers, come straight down to the man on the street...

the masons, the labourers, everyone benefits. When contractors are not paid, you will seethey are

owing the bank and there will be unemployment.

Because of unemployment people cannot provide for their family and it is one of the reasons you have

this high murder rate, Roopnarinesingh said.Already, Namalco has retrenched 250 workers as a result

of non-payment with project manager Lenny Sookram saying more cutbacks may come soon. This has

been happening to a lot of contractors. Contractors are shutting down and they are going into

receivership. A lot of the established contractors are not getting work and the ones that are at work are

not being paid.

You see it on television, people are saying if they get jobs the crime will shut down. When foreign

firms are given large projects, the bulk of the payment is repatriated to their home country, according to

Roopnarinesingh. He said Governments awarding of major jobs to these contractors would lead to the

demise of the local construction industry. He added: Our future generation, people who arent even

born yet, will be born into debt.
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All the major projects which are being given to the foreign contractors in the government-to-

government agreements, that is also crippling the industry. In the meantime, our local contractors are

suffering. They are killing the local construction industry to benefit the foreigners.Roopnarinesingh

also lamented the lack of proper surveys. He said black organic material found embedded in the soil at

the Petit Morne site would raise the cost of construction.

During a site visit last week, one expert said the EMBD did not conduct a geotechnical survey on the site

to determine whether the land was suitable for housing. He said the land was a former canefield which

meant it was layered with clay. He also recalled that refuse from the old Usine factory in Ste Madeleine

would be dumped at the site during Caronis 1975 Limiteds operation.

He added: I remember what Usine used to do in the back there, they would dump waste products. That

product was a by-product from the cane when they manufactured sugar. Theysaid no geotechnical

survey was done. All those things were supposed to be done because all those things extend the cost of

your construction. When that happens, for you to get paid for that, it is a variation that the engineer on

site has to approve.

However, he said, contractors at the site compounded their financial woes by continuing to work

although they knew finances were not allocated by Central Government.


9/18

Contractors to Govt: Pay us now

By By Abby Brathwaite

Story Created: May 4, 2011 at 12:03 AM ECTStory Updated: May 4, 2011 at 12:03 AM ECT

http://www.trinidadexpress.com/business-magazine/Contractors_to_Govt__Pay_us_now-

121226659.html

In construction, you are either building or you're out of business.

There is no in between.

That's the harsh reality of the industry, explains newly-elected president of the Trinidad and Tobago

Contractors' Association Mervyn Chin.

A combination of runaway State agencies awarding lucrative construction contracts without the

requisite funds to pay for the work and the slowdown in the global economy have left many contractors

in a precarious situation.The State owes more than $1 billion to local contractors.

Last month Government took a loan of $230 million to assist special purpose company Urban

Development Corporation of Trinidad and Tobago (UDeCOTT) to pay contractors.

And while news of the payment weeks after Chin was elected was welcomed news he says this money

does not go towards the debt owed to contractors, but will be used to pay contractors to complete work

that was at a standstill.

"So when the minister made the announcement it was believed that a loan was being made available to

assist UDeCOTT with the payment of the outstanding debt, but in a subsequent interview with Jerlean

John she clarified this does not settle UDeCOTT indebtedness to contractors but rather it will use that

money to restart projects which were being examined when the PP Government came into power," he

said during an interview."Those projects that now have the green light to be completed, which are ongoing contracts, that

money will be used to pay those contractors and to fund until completion."

The effects of the delay in payment according to Chin has forced contractors into a near hopeless

situation as they do not know when they will be paid for work completed and they also do not know

when they will be awarded new projects.

"Two scenarios are before building contractors, you have money for your creditors, which extends to

your manufacturers for local goods, so they are affected. You don't know when you will be paying them

back and you don't have work before you. There are contractors who finished their commitments since

last year and are unable to get new work," he said

"They had to release their staff against a backdrop of being out of pocket. They have had to make

mandatory severance payment to workers so that compounds the financial issue and those who wereunable have ended up in the Industrial Court. So it is an ugly situation."

The fate of the construction industry at times seems inextricably linked to politics and with the change in

Government, Chin believes many contractors have found themselves having to adjust to a dramatic shift

in policy.

"The new government became aware of the extent of the deterioration of the infrastructure and so they

came into power and they want to make good on their election promise ... that is all well and good but

the industry up to last year's elections was primarily driven by the building sector of tall buildings here,
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academy here, sporting complex here and little was devoted to infrastructure type development now

we have this radical change," he said.

"Now you're talking about highways, drainage, dredging, dams, pavements but you're not talking about

buildings ... to make mention of ten licensing buildings a few of this and a few of that .... you have to

understand that when the PNM was in government and they were talking about achieving their 20/20

vision ... so the local industry expanded, local manufacturers invested in expansion, contractors

expanded their operations, they recruited staff ..."

He added: "Right now there are inadequate building projects. So that where the business in recent years

was geared primarily in building construction with the new Government this radical shift of doing

infrastructure-type development you will find that those in the building sector find themselves

displaced."

Chin says the construction industry will be protected from the repeat of a similar scenario if the

Government moves to enact the new procurement legislation.

"Unless you understand the fiasco of the past the same things will repeat themselves. This fiasco was as

a result of poor procurement practices," he said

"We are challenging the Government to make public procurement a policy and law and this will take

away all that happened before where a State enterprise spending taxpayers money but turn around and

tell yuh we are a private company, we don't have an obligation to share to taxpayers how we spendtheir money."

And while the nonpayment of the debt has caused the industry to slow down considerably, Chin says

not knowing when the debt will be paid is worse.

"We are saying to Government by now you are in power a year. You will have known about the situation

... you would have mapped out a strategy to come out of it ... at least say something. If you are truthful

and later on things do not quite work that way, but we realise that you were genuine, nobody could

fault you for that."


11/18

WE'RE IN CRISIS

By Andre Bagoo Tuesday, August 10 2010

http://www.newsday.co.tt/news/0,125478.html

BETWEEN September 2008 and August 2010 the local construction industry has been forced to shedan estimated 39,000 jobs, president of the Trinidad and Tobago Contractors Association (TTCA) Mikey

Joseph said yesterday as he warned the industry is on the verge of collapse because of the failure of

the State to pay an estimated $7 billion in debt owed to the sector.

The industry is making a statement that it is in crisis, Joseph told reporters at a press conference at the

TTCAs offices at the Professional Centre Building, Fitzblackman Drive, Port- of-Spain. He warned that

more jobs will be lost if nothing is done and implored the State to deploy a $1.5 billion lifeline in

payments on certified contractual sums due to the sector.

The solution is for the Minister of the Finance to dip into the Heritage (and Stabilisation) Fund (HSF)

and save the industry, he said.

In an immediate response, Minister of Finance Winston Dookeran said the concerns of the TTCA must be

addressed. However, while the State will move to pay contractors, it will not dip into the HSF, which is a

statutory fund with a specialised purpose, to do so. Speaking with reporters yesterday at San Fernando

City Hall where he was attending the appointment of the citys new mayor Marlene Coudray, Dookeran

said, Their concerns must be addressed but not through the Stabilisation Fund.

In a press release issued hours later yesterday afternoon, the ministry said payments will be made

before the end of the year and funds will be sourced from loan financing which should be finalised by

August 31.

Josephs warning that thecountrys decades-old local construction industryand the estimated 79,000jobs it currently supportsis in jeopardy marks the culmination of years of marginalisation at the hands

of the State as large projects, absorbing billions worth of State funds, were awarded to foreign firms

under the policies of the PNM.

Joseph explained that under the last administration payment of contractual sums due to local

contractors dried up, amidst that administrations policy of choosing foreign contractors for not only

large, but also small projects.
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The Government has just not been paying its bills on time for the last three years and in the past five

months, Joseph explained. Some of our members have not been paid certified sums, certified

payments going as far back as two years...it is having a devastating effect on the industry. A lot of

companies are now facing foreclosure. He said he was aware of at least four companies on the verge of

collapse.

Joseph noted the non-payment of contractors has tightened cash-flow and had a crippling effect on

companies. He estimated the industry could collapse in three months time and warned contractors may

not last beyond the next Budget.

We need to be paid now: we have suppliers, we have bills, we could be faced with lawsuits, even when

we choose to let go of employees we have severance payments to pay. Please do not underestimate the

gravity of the situation...We cannot wait. The industry operates on a monthly payment system. Joseph

estimated the total debt of the State was between $5 billion and $7 billion. He said the largest

components of this debt originated from non-payment by: Udecott, the National Insurance Property

Development Company (NIPDEC) the Housing Development Corporation, the Educational Facilities

Company Limited (EFCL), the Ministry of Education, the Ministry of Works and the Ministry of LocalGovernment.

Debts are due to local contractors on work done on: secondary schools, housing projects, road repairs,

construction projects, community centres, and even, in one case, on the upgrade of the Red House in

Port-of-Spain. Joseph called on the Ministry of National Security to reverse a May decision to award the

construction of nine police stations to foreign firms.

Under the administration of former Prime Minister Patrick Manning, the State took an express policy of

choosing foreign contractors over locals, ostensibly for reasons of capacity. However, local industry

experts consistently argued that the industry was skilled enough for a proportion of the States flagship

Vision 2020 projects.

The issue, in part, led to the setting up of the Uff Commission of Inquiry into the public construction

sector. The Uff Report would later find that there was, in most cases, little difference between the

quality of work done by foreign and local firms.

We have not found any pattern of higher standards being achieved by foreign contractors as compared

to local contractors or workers, inquiry chairman Professor John Uff found in his Report. We believe

that appropriate standards are achievable and are usually achieved both by local contractors and foreign

contractors.

Yet, according to Joseph, some foreign contractors have been paid sums due to them. In contrast local

contractors, he said, must now be left with the option of taking legal action, a course of action which is

unlikely. He noted that companies are shy to bite the hand that gives them bread and are reluctant to

initiate costly legal proceedings. Joseph said despite requests for meetings lodged with the Ministries of

Education, Local Government, Works, Housing and Development and to the Office of the Prime Minister,

only one ministry, the Ministry of Planning has responded.

Yesterday Dookeran explained the issue of tapping into the HSF, the establishment of which he oversaw

when he was a Central Bank Governor, was not necessary in order for the State to deal with the


13/18

problems now facing the local industry. We were very careful to ensure that the fund will be used for

stabilisation of the economy, he said. The Finance Minister described the concerns raised by the

contractors as a cash flow problem which does not justify the release of money from the HSF.

Dookerans Ministry, hours later, said the payments would have to be sourced from loan financing.

At present, government ministries and departments are reviewing invoices and making the necessary

arrangements to pay contractors for (certified sums). Funds will be realised to do so through various

mechanisms, including existing loan facilities, one of which is a bond issue using the auction system

which is expected to be finalised by August 31, 2010. It is expected that once the claims are certified and

authorised, payments will be processed and made by the end of the current financial year or earlier,

the ministry said in a press release.

STATE OWING CONTRACTOR$ FOR:

Ministry of Education/

Educational Facilities Company Limited (EFCL) projects:

Barataria North Secondary School

Couva West Secondary SchoolPleasantville Secondary School

Renal Rock Road Hindu School

Princes Town Secondary School

Siparia Secondary School

Genivar/Udecott:

Ministry of Legal Affairs Tower, Port-of-Spain

Upgrade of the Red House, Port-of-Spain

Infrastructure for Signal Hill, Tobago, Housing Complex

Housing DevelopmentCorporation projects:

Pioneer Drive Mt Hope

Commercial Village Centre

Bon Air Commercial

Greenvale housing development

Oropune housing

Clifton Hill housing

Cleaver Heights housing

Tarouba housing

Edinburgh South housing

Carlsen Field Phase 3

Carlsen Field Commercial Centre

Ministry of Works and Transport (MOW):

Programme for Upgrading Road Efficiency (PURE) programme

MOW relocation project

Ministry of Community Development:

St Joseph Community Centre


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Barataria Community Centre

Cocorite Community Centre

Evolving Technologies

Company Limited (Eteck):

Flagship Building Tamana

Utilities Building Tamana

Ministry of National

Security/Local Government:

Police Training College, St James

St Paul Street Court facilities, Laventille


15/18

Cash Flowthe lifeblood of the building industry

http://www.ttca.com/articles/cash-flow-lifeblood-building-industry

Cash flow is the life blood of the building industry. So said Lord Denning in a series of Court of Appealdecisions starting with Dawnays vs Minter (1971) and finishing with Modern Engineering vs Gilbert Ash

(1973). The statement is as true today as it ever was; yet the problem of late payment in construction, which

initiated the comment by Lord Denning, persists globally throughout the industry.

On a weekly basis I encounter new cases of late payment or non-payment. In every case I see that the

hierarchical structure of the procurement practices within the industry dictate that late payments or non-

payment are passed downstream; from Owners/Employers to Contractors, to Sub-contractors and to

Suppliers. The body that can least afford the burden is often the one faced with it.

Without doubt in many countries there remains a deep-seated culture of delaying, reducing, or simply

avoiding payment. What is surprising is that those responsible often seek to then blame the innocent (or at

least those who are less guilty) for the subsequent effects of poor performance in delivering projects late and

over budget.

I am not seeking to present a position of suggesting that late payment or non-payment is the sole factor

determining a projects performance; it is not but it remains as a highly significant influence.

Late payment decimates cash flow, kills growth and innovation and ultimately forces businesses to the wall.

Companies

cannot achieve sustainable growth if they aren't paid on time and consistently. In some countries that in turn

is one factor

dictating the countrys rate of growth and standing.

Three obvious questions then arise. What causes late payment? Who should bear the greatest responsibility

and play the most

important role in lessening the impact? How can the issue be resolved?
http://www.ttca.com/articles/cash-flow-lifeblood-building-industryhttp://www.ttca.com/articles/cash-flow-lifeblood-building-industryhttp://www.ttca.com/articles/cash-flow-lifeblood-building-industry


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Late payment can be attributed to several factors but the following are commonly seen, demonstrating that

both of the

principal parties can be considered as contributors to the problem:

Clients poor financial and business management; Client withholding payment; Contractors invalid claim; Delay in valuation and certification; Inaccuracy of evaluation; Insufficiency of documentation; Overworked consultants; Involvement of too many parties in the process of honoring certificates.

Who should bear the greatest responsibility and play the most important role in lessening the impact?

Arguably if Clients do not pay their bills they will not foster a philosophy of co-operation within the industry.

Furthermore Clients and main contractors ought to be the ones whose standing allows them to bear the

greatest burden.

As to how the issue of late payment can be resolved, solutions are easily found but often poorly executed.

Whilst some Governments have taken steps in the past to outlaw pay when paid clauses, to impose special

regimes upon construction industries, to ensure more timely payment, and to give automatic right to the

payment of interest on late payments, such measures are not entirely successful; particularly if the cash isnt

available to begin with.

Each Party to a contract (construction contracts are not unique or special in this respect) should exercise good

house-keeping and my suggestions are as follows, starting at the top with the Owner/Employer organization

and those other bodies which might be dictating the procuring of the project.

Employer organisations should ensure that there are sufficient funds to procure the project in the first place.

Entering into a contract when there is no, or insufficient financial resources in place could void the contract.

In recognition of the fact that some Employer organisations adopt a somewhat contrary practice in procuring

their projects some of the major forms of contract, the FIDIC forms for example, provide the facility of a


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payment guarantee by the Employer to the Contractor. Is it too fanciful to think that trade, contractor and

other professional bodies should lobby for the use of such on behalf of their members?

For projects in progress, Employer organisations should remember that withholding money with intent may

be a repudiatory breach of contract. Even if the right to terminate is not expressly stated the Contractor may

be able to take such action.

The terms of the contract should be fairly balanced and should incorporate speedy dispute resolution

processes, which the parties do not feel threatened by. Further there should be an effective remedy to

discourage slow payment and an automatic right to compensation.

These provisions are already found in many standard forms of construction contract, for example in the FIDICsuite; however I have encountered many occasions where the Employer amends the contract to protect

himself from the consequences of late payment and where the Contractor does not wish to implement the

contractual provisions for the risk of biting the hand that feeds. In those circumstances the business

community and professional bodies can be more proactive.

Contractorsand suppliers at all levels in the procurement chain should look at their own capability to fund the

project and to perform in light of the constraints identified. This is not to say that contractors and suppliers

should take on the responsibility of the Employer in funding the project; which is a position statement I have

heard suggested in some quarters!

Contractors and suppliers should ensure that their bids are suitable for the risks they are required to adopt on

the project and should consider carefully the payment terms and how such will impact upon their ability to

perform. When new projects are in short supply within the industry there is often bidding strategy that

involves cutting prices and taking more risk. It is never a good strategy to cut ones throat in an attempt to

survive! Employers should bear this in mind firstly when deciding upon the payment terms and subsequently

when assessing bids and prior to award.

Contractors should recognize the obligations they have under modern forms of contract, to provide detailed,

regular reporting and forecasting; they should ensure that they provide all the documentation in support of

their claims for payment and that those claims are accurate and not fanciful or aspirational.


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Conclusion

Within this short article it is not possible to debate all the reasons why payments are made late or not at all, or

the merits f the range of solutions available. The purpose of the article is to underscore that the problem exists

and can be managed proactively.

Cash flow drives the construction industry and the lack of cash drives good projects and competent

contractors to failure. The solutions to the problems should be adopted and shared by all sectors of the

industry, although those capable of bearing the burdens should be the ones to more readily embrace changes

in practice.

Good planning of the project is essential from an early stage and will reduce risks and encouragebetter cash flow management. The likelihood is that if things are wrong before tenders are invited, they will

be more difficult to correct later.

Well drafted and balanced contracts with suitable rights and remedies will undoubtedly assist, especially if a

realistic approach is taken to the fact that construction projects do suffer changes, which often give rise to

extra cost. Accountability is a fundamental and the parties should not be discouraged from asserting their

entitlements.

Author:

Mr. John Dowse LLB (Hons) PgDip MCInstCES MCIArb MIOD Barrister

Date:

Sunday June 30th, 2013

Additional Info:

Mr. John Dowse is an Arbitrator, Adjudicator, and Mediator.

Cerno

Distinguish; determine; resolve.

Documents

6008 Assignment 1 Articles.docx