Make Payment Disputes a Thing of the Past

July 26, 2017 by Progressclaim Job Done

Payment disputes are bad news for large construction companies; they jeopardise relationships with suppliers, consume administrative resources, undermine staff morale and often cause project delays.

So why do disputes remain so common in the Australian construction industry? Research suggests the value of such disputes routinely runs into tens of millions of dollars and that they can take many months to resolve. And yet, there’s little sign of the construction industry addressing this issue, with statistics showing no let-up in the number of disputes.

We consider five distinct options for consigning disputes to the dustbin.

1. Consider new approaches to payment

Project bank accounts are increasingly seen as a strategy for avoiding payment disputes and late payment problems. The idea is to establish a single bank account through which all contractors and named members of the supply chain are paid in common, avoiding delays and improving transparency.Project bank accounts ring-fence payments for subcontractors and suppliers, where the principal makes payments directly to a head contractor and subcontractors. The PBA is opened for each project and is a trust account whereby any monies held in the account are held for the benefit of beneficiaries of the money (including subcontractors). The use of PBAs has gained traction within the governments of Western Australia and New South Wales as well as at Federal level. Both the WA and NSW governments are currently trialling PBAs across several government construction projects and the Federal Senate Economic References Committee has recommended the use of PBAs on federally funded projects. If successful, then they may become a mandatory requirement across all construction projects.

PROS

  • Quicker settlements
  • Greater transparency
  • Cost savings with reduced disputes
  • Protected Retention

CONS

  • Do not on their own eliminate the scope for confusion and uncertainty

Download your full copy of 5 Ways to Make Payment Disputes a thing of the Past

2. Promote collaborative working

When payment disputes occur, it’s easy for mistrust and suspicion to develop, and there’s a tendency for all parties to blame someone else for the problem. But while it may be tempting to slip into this sort of mentality, it’s likely to lead to relations souring even further, and it certainly won’t prevent further disputes arising. Construction projects, ultimately, are complex exercises in teamwork. Multiple parties come together to deliver a final outcome, overcoming all sorts of complexities and planning difficulties along the way. When everyone involved brings that sort of mindset to the payment process, the results are bound to be impressive.

PROS

  • Shared responsibility, and work load, meaning less unnecessary wasted time spent on the payment claim process
  • Reduced scope for disputes

CONS

  • None, when done in a structured and managed way

Download your full copy of 5 Ways to Make Payment Disputes a thing of the Past

3. Invest in change management

Large construction projects almost always evolve over time, changes to the original plan are necessary when unexpected circumstances are encountered. However, construction companies aren’t always brilliant at managing such events – they tend to be very good at finding a solution to an emerging need, but much less effective at communicating that solution across the project as a whole, or envisaging how certain situations have a knock-on effect on other parties.

The result is that contractors and other parties in the supply chain are taken by surprise and forced on the defensive. This very often gives rise to a payment dispute, since there is little consensus on how the work involved in the project – and what is required from each party – has changed.

Download your full copy of 5 Ways to Make Payment Disputes a thing of the Past

4. Focus on dispute avoidance and resolution

There’s nothing inevitable about protracted disputes in the construction sector. Companies that make it a strategic priority to avoid disputes in the first place will avoid many of the most common problems. And those with clear dispute resolution mechanisms will ensure that where a dispute does occur, it can be resolved quickly, cheaply and with minimal loss of goodwill. However, such an approach will require strong leadership from

the very beginning of each and every project. Leaders who make strategic decisions early in the life of the project have a responsibility to consider how they will limit the potential for disputes to develop – in particular, having the foresight to effectively manage sudden changes in the nature of the project.

Download your full copy of 5 Ways to Make Payment Disputes a thing of the Past

5. Digitise the application and payment claim process

With so much paper moving back and forth between construction companies and contractors, and so little standardisation in how information is presented, it’s no wonder that confusion and complexity are proliferating. The solution is to attack these challenges at the source of the problem – construction companies that move to a single online platform for contract management can avoid many of these problems. Such a platform needs to be simple to use for all parties concerned, offering access from a range of different devices so that all parties can use the technology, on or off site and at any time, day or night.

Download your full copy of 5 Ways to Make Payment Disputes a thing of the Past

Digital technologies, smarter payment processes and cultural change such as stronger leadership and collaboration can help such businesses to streamline their payment processes and finally begin to reduce the number and value of disputes, to the benefit of all involved.

Learn how a combination of new technology and cultural change can help construction companies reduce damaging payment disputes. Download: The Construction Payment Blueprint – 5 Ways to make Payment Disputes a thing of the Past

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"What used to take me two days, now takes me two hours. Because Progressclaim.com is online, adminstration of the monthly payment claim cycle is less time consuming and much easier to manage. No more processing everything on a spreadsheet prone to error, and the assessment can be carried out at the touch of a button."

PAUL LINKE

Contract Administrator, BUILT

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