Many subcontractors are so starved of cash that they are cutting corners in their work, creating a legacy of unsafe buildings and that “will result in the deaths of people” a witness to the late payments inquiry told MPs.
Steve Sutherland of Dortech, a specialist commercial glazing contractor based in Huddersfield, said: “I feel very strongly about this…we’ve got the situation where I’m absolutely convinced ‘sick’ buildings are being built and creating a major legacy in this country. Some of the buildings… I’ve seen being built are shocking, are dangerous, and will eventually result in deaths of people.”
The inquiry was convened by Debbie Abrahams MP to investigate the effects of late payments by large businesses on SMEs, including the construction sector. In 2011 £24bn was owed and a third of SMEs were affected. Balfour Beatty also appeared before the committee this week.
Showing the MPs a photograph of a completed building in a city in the north of England his company was contracted to carry out maintenance work on, following the failure of the original contractor, Sutherland said: “Each piece of glass on there weighs approximately 200 kilos and there is a formally approved method of securing that glass in place. None of the formal procedures for securing that glass in place have been followed.”
“On this building we actually (had to) put on the equivalent of 300 metres of glass fixings and pressure plate where it’d been missed off (to secure the glass). And here on the 5th floor you can see that’s how the glass should be secured round its perimeter.
“The subcontractors, because they weren’t being paid, presumably by the main contractor, couldn’t afford (to do the work); or their supplier was not prepared to supply the material, so they were cutting lengths and just stitching the glass in.”
Problems repeated
After giving evidence at the late payments inquiry, Sutherland added: “This is a problem I have seen repeated in cities and towns across the north of England.
“But I have to be very clear that every time we have pointed out problems with the standard of work in a building the main contractors have always reacted immediately to put the work right without skimping on the cost.
“But what’s shocking to me, and as clear as day, is that the reason many building jobs are having corners cut is the fact that the small subcontractors are not getting paid on time; are having payments retained and the main contractors are using every trick in the book to claw money back for themselves.
“As the economy dried up the big contractors started fighting for work and quoting prices below the cost of the job. So from that point on they do everything they can to claw back the money they have lost by screwing the small sub-contractor companies.
In reaction to Mr Sutherland’s revelations inquiry chair and creator of the Be Fair – Pay on Time campaign Debbie Abrahams, said: “I think we all know that the obvious result of a late payments culture is misery for the tens of thousands of SME owners, their staff and the knock on effect to their families but Steve’s testimony today has added a whole new dimension to the problem.
“Construction is one of the industries that is really being affected badly by the practice of late payments and it seems now that it could even be putting people’s lives at risk.
“Rather than viewing fair payment terms as part of their corporate social responsibility (CSR) many large companies are deliberately paying late or extending their pre-agreed payment terms simply because they have the power to do so.”
Another SME contributor Steve Paul, Managing Director, SDP Floor Screeds told the inquiry how main contractors had withheld payments totalling £1.2m sending his company, which he had built up over 25 years, into administration. He said: “It’s organised crime really, they know what they are doing and they are playing with us. They hung me out to dry.”
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The situation will not get better without some sort of effective intervention. This need not be massively costly or take an age to bring about.
On behalf of StreetwiseSubbie and the Nationwide Alliance of Specialist Contractors, I have produced a Fair Treatment Charter. This is a simple set of protocols, which if adopted throughout the industry would achieve a much fairer, more open and honest approach to payment throughout the entire supply chain.
It would be a simple matter to make the Fair Treatment Charter applicable to the contractual relationship between every party in publicly funded contracts, and to amend the Construction Act to make them applicable to every “Construction Contract”.
The Fair Treatment Charter is available to download on our web site at; http://www.streetwisesubbie.com/fair-treatment-charter
I agree with everything being said, but in addition, Main Contractors give instructions, sign record sheets and then refuse to pay or pay in part for the variation and it seems impossible to come up with a system that gets fair on time payment for the “subbie.” I’ve seen a number of subbies accounts and they are always getting beaten up by arrogant contracts surveyors. There is no affordable mechanism for getting paid for disputed amounts and it would be foolish for anyone to suggest that there is! I despair these days at the state of the industry, the total lack of knowledge and integrity, QSs now buy on price only with scant regard for the specification. Quality, service and performance count for nothing. Not to mention the number of major contractors who ask for hidden discounts to be included in the price and then won’t pay legitimate variations. The current system strongly promotes the need to cut corners and take risks, which providing the Main Contractor has a method statement and the “no hard hat etc.” sign is complied with anything goes. Low prices affect safety! Bad, arrogant, site management affects safety and there is an awful lot of that about. I have an account, a variation occurred, records kept and agreed, variation charged in the first interim account, QS said, let’s deal with that at the end, despite your protests it’s not dealt with and the inevitable happens, at the end the QS wont pay, “let’s do a deal to get the account settled” and you don’t get your entitlement. You can’t afford to battle for few hundreds of pounds and they know it. I think the only way would be for the PQS to actually do his job and take on board the fair valuation of all of the works and be responsible for the on time and full payment of all trade subcontractors, paying from a client escrow account.
Perhaps I am being naïve as to the extent of this practice but we for one would not want to place contracts with companies that had a demonstrable track record of paying their subcontractors deliberately late.
It is not my experience that the regionally based (often family owned) companies operate in this way. However I am beginning to wonder that with those types of companies being sold to the multinationals in recent years the practice is becoming more prevalent.
I also gave evidence at the enquiry and made the point that the situation will not get better without some sort of effective intervention. This need not be massively costly or take an age to bring about.
On behalf of StreetwiseSubbie and the Nationwide Alliance of Specialist Contractors, I have produced a Fair Treatment Charter. This is a simple set of protocols, which if adopted throughout the industry would achieve a much fairer, more open and honest approach to payment throughout the entire supply chain.
It would be a simple matter to make the Fair Treatment Charter applicable to the contractual relationship between every party in publicly funded contracts, and to amend the Construction Act to make them applicable to every “Construction Contract”.
The Fair Treatment Charter is available to download on our web site at; http://www.streetwisesubbie.com/fair-treatment-charter