Payment problems set to persist

Cashflow problems could still plague the construction industry and put subcontractors out of business despite the expected new payment rules in the Housing Grants, Construction and Regeneration Act, a leading consultant claimed this week.

Procurement specialist Frank Griffiths told CJ that while the Act would soon make a form of progress payment legally enforceable, the question of how much would be paid was still open to question.

"It would still be possible to make large last payments," said Griffiths.

The problem could hit subcontractors due to main contractors varying payments, despite the efforts of Sir Michael Latham to kill-off the cashflow problem.

However, cashflow difficulties could also hit contractors and subcontractors due to clients questioning the need to pay too much upfront before their projects are completed, said Griffiths. He added that clients are wary of initiating cashflow problems that could affect their projects.

Clients plan to keep up pressure to help overcome the apparent weakness of the Act on contractor-subcontractor cashflows. They are working with the Construction Industry Board to introduce a new Code of Practice: Engagement of Main Contractors within a few weeks.

The idea of clients varying the payments to contractors echoes moves that are underway on Design, Build, Finance and Operate projects in South East Asia, such as the Bakun hydroelectric scheme in Malaysia. Here payments are at the developer's discretion and depend on satisfaction with the work on the project.