Our main contractor still pays, just later each month. Is it too early for Insolvency Loss Prevention?
No, now is the right time, because what you lose if it fails depends mostly on how much it owes you on the day.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
The answer
Insolvency Loss Prevention is built for the months while your main contractor is still trading. Payments landing later each month are one of the first warning signs. Others are requests to hold an invoice and other trades leaving site. They tend to be noticed but not acted on, because the job is busy. We start from your subcontract: the payment cycle, the retention terms, who owns materials on site, and when you may suspend or stop. Then we measure what each live job would cost you if the main contractor failed tomorrow, and agree a ceiling with you. We set up the routine that keeps each job under it. Applications and default Payment Notices go in on time, and overdue sums are chased from the final date for payment. Deliveries are timed so unfixed stock stays low and stays yours until paid. The warning signs are read every month, and a suspension notice is prepared for the day its conditions are met. The turnaround is 10 working days, and your own team runs the routine once we hand it over. If the main contractor has already failed, the service you need is Insolvency Claim.
Example
Illustrative example. The scenario and figures are invented.
The facts
A plastering subcontractor's last three payments from one main contractor have each arrived later than the one before, and the scaffolder has left site. The main contractor is still trading and still paying.
What happens
- The subcontract is mapped: the payment cycle, 5% retention, who owns the boards once delivered, and the right to suspend after 7 days' written notice.
- The exposure on the job is measured: the unpaid application, the work done since, the retention held and the boards in the store.
- The director sets a ceiling of £60,000 for this main contractor.
- Board deliveries are cut to a week's work and the next application goes in on its due date. A suspension notice is prepared for the next sum that goes unpaid past its final date for payment.
The exposure in figures
| Point | Exposure |
|---|---|
| When measured | £96,000 |
| Ceiling set | £60,000 |
| After 2 cycles | £54,000 |
The outcome
After 2 cycles the exposure is £54,000, under the ceiling. The subcontractor's own team is running the routine on every job it holds with that main contractor.
To have the routine that keeps your exposure small set up while your main contractor is still trading, see our Insolvency Loss Prevention service.