“With market activity slowing in some sectors and deflationary pressures mounting, contractor pricing is expected to be more competitive in 2024. Although procurement conditions may become more favourable, interest rates and the high cost of debt remain a key pressure on viability.”
These are not the opening words from Liz Truss on how the Tories can be popular again, but are those taken from Gardiner & Theobald's Q1 2024 Tender Price Indicator and they ought to know a thing or two (and possibly three or more) about construction prices. Liz Truss and G&T have (as far as I am aware) very little in common save possibly that each media report will be an unwelcome read to many.
To a solicitor who remembers the boom of the 1980s and the market ‘corrections’ from the late 1980's onwards, these words from G&T coupled with the recent headlines about the rise in construction firms becoming insolvent (one reported a 35.8% increase in November 2023 compared to November 2019) read, “disputes are back again”. This is certainly what I am witnessing at the comfort cooled, City office based, coal face of the construction industry. So, what is to be done?
Just do one thing (well several)
To misquote a famous TV personality, my advice to all those up the payment chain is simple:
- read your contract (assuming you can find it and you signed the contract);
- re-read it, particularly, the section on payment and the rights to deduct/withhold payment, e.g. for liquidated damages, the non-provision of bonds, warranties etc;
- re-re-read it if it is a JCT or NEC form and has been ‘amended’ by some excellent solicitors to be twice its normal length;
- work out the payment process and put the relevant dates on a wall planner with big red stickers (I am old-fashioned, but it works); and
- serve the Payment Notices and Pay Less Notices on time - please don't wait to the very last day to serve the ‘pay less’ notice because it makes legal people very nervous - and don't overlook the little nasty that is clause 2.29.1 of the JCT DB 2016 (and its equivalent in other forms).
If you do this, you should avoid the dreadful ‘smash & grab’ adjudication and the additional pain and cost that comes with that. Of course, you might be a bit unpopular at your next monthly progress meeting and/or you might get a terse email or letter saying you should not be acting ‘contractually’ but “That's Life!” (I also old enough to remember that TV programme).
The above 5-steps will also avoid the often unmeritorious claims from the ‘no recovery, no 30% fee’ debt recovery agents acting for the Insolvency Practitioners. Their letters of demand usually arrive on your desk or laptop at the same time as you are trying to finalise the contract for the new contractor to complete your project. The last thing you want to be doing is having to correspond with such people or, even worse, pay solicitors to do this.
Put simply, taking time to remind yourself of what your contract says and knowing what bits of 'electronic paper’ to serve and by when, can save you (and, if you are a contract administrator, your clients) from very avoidable financial headaches. If in doubt, you can give this old hack of a construction solicitor a call - yes I still use an old fashioned telephone too - and the first 30 mins are free (honest, guv).
Unfortunately, none of this advice will save you (or me) from the continued re-appearance of certain public figures who, one might suggest, did not benefit the construction industry or UK plc more widely and, therefore, should keep ‘mum’.