WARNING SIGNS AND EARLY ACTIONS

Works are falling behind programme. If a Contractor is struggling financially then they may not be able to buy sufficient resources to complete the job within the time limits. If a Contractor starts asking for advance payments, this is another sign that it is not in good financial health. Is the Contractor proceeding regularly and diligently with the works? If the Contractor is falling significantly behind programme then consider serving a notice requiring this to be remedied. If the Contractor does not proceed regularly and diligently with the works, consider terminating the Contractor’s employment under the Contract. This is a significant step and should only be taken with legal advice. If a Contractor fails to pass on payments to Sub-Contractors, again this is a sign that there may be some financial difficulty. Consider entering into direct payment agreements which must also be agreed by the Contractor. Only take this step with legal advice, and use carefully worded agreements. Ensure all Collateral Warranties from Sub-Contractors and Consultants are in place and, if possible, that these contain step-in rights so you can ‘step in’ to appointments and sub-contracts to complete the works. Make sure that all properly executed Bonds and Parent Company Guarantees have been provided. Analyse all payments certificates very carefully to ensure that you are not paying for materials which are not in your possession. Ensure you have all of the documents to which you are entitled, including the Health and Safety File and any drawings.

CONTRACTOR BECOMES INSOLVENT

Immediately serve notice to terminate the employment of the Contractor under the Contract.
If you can, secure the site as soon as possible to prevent anyone from removing materials from site (for example, Sub-Contractors taking materials which have been paid for through the Contract, although payment has not been passed on through the sub-contract). Try to secure the Health and Safety File and all drawings.

If any payments are due, serve a withholding notice, in accordance with the Contract.

Establish what monies are due from the Contractor to Sub-Contractors. Consider whether to exercise step-in rights in any Sub-Contractor or Consultant Collateral Warranty in order to ensure the project continues.

Make formal claims under any Bonds, Parent Company or Personal Guarantees that are in place.