Thursday, November 18, 2010

Security of Payment Registrar supports process over disputes

Michael Chersteman, the BCIPA (Qld) registrar, in an address at the BDPS (Building Dispute Practitioners Society) annual dinner, talked about his views of the Top 10 criticisms of the Queensland security of payment act.  These criticisms are:

  • The pendulum has swung too far towards claimants,
  • It is not intended for payment disputes between large parties,
  • The lawyers have hi-jacked it,
  • It is too complicated,
  • Claimants use the Act to "ambush" respondents,
  • it is not intended for delay claims,
  • Some ANA's are "claimant friendly",
  • Adjudicators ignore contract provisions,
  • it is unfair that claimants can not respond if they have not served a payment schedule;
  • Adjudicators are a bunch of dopes,

Essentially, he does not swallow any of them, but he made a strong point that the Act primarily establishes an orderly payment process and that adjudicators should act more like certifiers than quasi-judges.  

He also talked about the rise of 'creative' contract clauses, designed to impede the operation of the Act, including "look around the corner" provisions, popular with major State government subcontracts.

Most of the current advice in relation to the Act is from legal and claims firms who, quite correctly, concentrate on the collection process and the litigation that surrounds adjudication.  After all, this is their end of the business.

Sadly, there are few champions of the substantial benefits of the payment process established  by the Act.  The professions with the most to gain are accountants and quantity surveyors and they have been ambivalent about driving the process.

State government departments are not championing the Payments Act process in the way that they could and should.

The benefits of the process are:
  • it protects entitlements to payment;
  • it creates a consistent, transparent payment process;
  • it establishes reasonable terms of trade, especially for SME's,
  • it builds trust and business relationships;
  • it creates "bankable" security;
  • it prepares parties for rapid collection in the event of default, and
  • it prepares parties for rapid adjudication of disputed payment claims.

It is time for the professions, Accountants, architects, engineers and quantity surveyors to step up and champion the excellent process that governments around the country have gone to the trouble of establishing for the sustainability of the construction industry.

Subcontractors - Manage Your Debtors

Understand the Correct Process for Handling Variations Under Your Contract - If you are working for a builder or head contractor make sure you know how a variation may be requested, accepted and approved. Find out who is authorised to issue instructions to you, who is responsible for agreeing to any variations you request due to latent conditions or other unexpected costs and who is responsible for paying for the variations. Make sure you comply with any time frames and other strict requirements under your contract and don't take any short cuts.

  1. Know What Paperwork Must be Completed - If the other party doesn't have anything, you need a document of your own. Make sure your document with a homeowner complies with your legal obligations under the Domestic Building Contracts Act 2000.(Contact Ledger Guard for a practical 1 page Variation to Original Quote/Contract Form).
  2. Nothing Verbal, Everything in Writing - Insist that the customer/ builder/head contractor put their request for additional work or changes to the original quote/contract in writing. Despite a good relationship at the start of the project, verbal instructions can be forgotten or denied when it comes to payment time and cashflow is tight. Under the QBSA Act your builder or head contractor is legally required to give you a direction in writing within 3 days of your request so don't feel pressured to start the variation work without instructions in writing. Take a note of any conversations in regard to a variation whether requested by you or the other party so you can verify what was said, by whom, on what date and at what time. You can't rely on your word against the other party.
  3. Claim for any Variation Work in the month it is completed or within the timeframe stipulated in your contract. Don't wait until the end of the job or your variation claim may not be valid. Dealing with variations promptly will also reduce the possibility of forgetting any details of the work and what needs to be claimed.
  4. Keep Copies of Everything and make sure your paperwork and site records are accurate and up to date. It pays to be more thorough than you think you need to be in case a dispute goes to arbitration or you need to take legal action.
    Courtesy of Ledger Guard - Ledger Guard is a licensed debt collection agency specialising in recovering business to business debt.
    Excellent advice - but sometimes it is not so simple to achieve. Thepowertool takes the pain out of payment and keeps track of site issues with no disruption to your work.