Reduce payment rows with schedules of rates

Payment disputes caused by variations on a project could be reduced through use of schedules of rates – and lead to better relations between client and subcontractor, says David Brown

David Brown

While great strides have been made in the post-Carillion era to shine the spotlight on the importance of prompt payments to subcontractors, more must also be done to streamline the pre-payment process.

The failure of main contractors and clients to stick to agreed payment terms can severely impact on a subcontractor’s ability to continue to operate.

That is why it has been great to see such prominence given in recent months to the need for fair payment practices to be adopted and more companies sign up to the Construction Supply Chain Payment Charter.

But more can be done by both clients and subcontractors to improve the pre-payment process through better management of sub-contract accounts during the course of the project.

One common issue is agreeing the cost for additional works, commonplace on almost all construction projects. This comes despite the best efforts at tender stage to produce a detailed and fixed schedule of works. But plans and programmes change. When this results in additional works, it is only fair that the subcontractor is remunerated accordingly. 

The client wants confidence that the additional works have been valued fairly. Where appropriate they can be priced on a pro rata basis based on items detailed in the original scope of works. But the extent and cost of additional works can often be the cause of conflict between the client and subcontractor and create an additional barrier that prevents prompt payment.

Avoid uncertainty

The National Access & Scaffolding Confederation (NASC) encourages scaffolding contractors to avoid any uncertainty regarding variation orders through the use of a schedule of rates. This offers a number of advantages:

• Rates for additional works are agreed from the outset;
• Disputes in connection with the valuation of additional works are avoided completely or at least significantly reduced;
• Valuation and payment of additional work is made easier and earlier thereby improving cash flow;
• Schedules can be incorporated within the sub-contract order;
• Final accounts are prepared more quickly because of fewer disputes; and
• Clients appreciate the clarity on how additional works are measured and valued.

A schedule of rates should be prepared at tender stage, negotiated with the client during pre-contract discussions and incorporated into the contract documents and orders from the outset. It is possible to agree them after the contract has started, particularly if the contract is unexpectedly found to be subject to an excessive number of variations. However, the preference would be to agree a schedule of rates in the first instance.

A schedule of rates can help to significantly streamline the pre-payment process and also ensure the client-subcontractor relationship isn’t affected by any financial disputes. An example schedule of rates is included in NASC’s CG11:17 Preparation of Schedule of Rates guidance.

David Brown is managing surveyor at IBN Scaffold Access and chair of the NASC Contracts Committee.