Are you not getting paid for work done under the 2018 edition of the JBCC N/S Subcontract Agreement ? Fear not as your Contractual Documents may just be the strongest tool in your toolbox to enforce payment.
More and more subcontractors are complaining about not being paid by the contractor as the latter generally claims that it has not been paid by the employer. The strangling of the cashflow pipeline for these subcontractors often has a domino effect, resulting in many subcontractors folding under the pressure of not having funds to pay their respective suppliers, employees and so on.
A great analogy that I saw recently compared the construction payment process to a house of cards where a disruption to one card has the potential to cause the whole house to come crashing down. It goes without saying that timeous payment of both contractors and subcontractors is one of the pillar stones of creating an environment where projects succeed.
The payment provisions provided for in the 2018 JBCC N/S agreement read with the 2018 edition of the JBCC Principal Building Agreement (the PBA) provide that the principal agent must issue the relevant Payment Certificate to the contractor. The Payment Certificate sets out the amount that is due, owing and payable by the employer to the contractor at that point in time.
Upon the issuance of a Payment Certificate to the contractor, the principal agent must in addition, issue a schedule to the contractor which sets out all amounts due to each subcontractor as well as a Subcontract Payment Notification to each subcontractor, which sets out what amount the contractor is liable to pay each subcontractor.
Importantly, the contractor is obliged, within 7 days of the payment certificate being issued, to issue a Subcontract Payment Advice to each subcontractor, in terms of which the contractor sets out what amount is due, owing and payable by it to each subcontractor.
Once the Subcontract Payment Advice has been issued, the amount certified therein (which may be less than the amount specified in the Subcontract Payment Notification and if so, an explanation is to be found within the Subcontract Recovery Statement also issued by the contractor) must be paid by the contractor to the subcontractor within 21 calendar days of the issuance of that Subcontract Payment Advice.
Simply put, under the 2018 JBCC N/S agreement, the contractor is entitled, upon presenting an affidavit stating that it has not been paid, to defer payment for not more than 30 calendar days to resolve partial or non-payment from the employer. Upon the expiry of this period, the subcontractor may give 5 working days’ notice to the contractor to make payment failing which the subcontractor may:
- suspend the subcontract works (i.e. walk off site);
- exercise a lien or any right of retention of the site, if this has not been waived;
- call up the guarantee for payment.
- Do not jump the proverbial gun and simply suspend the works without ensuring that you are contractually covered. Wrongful suspension of works under a construction contract may ultimately lead to the termination of the agreement and serious financial consequences for the party in the wrong; and
- Ensure that you fully understand the procedure of correctly calling upon the relevant guarantee for payment.
Have a solid contract in place, a construction contract specialist in your corner, stand your ground and use the contractual mechanisms at your disposal to secure payment.