Specialists set to take action unless Construction Act review protects them against insolvent employers

Specialist are set to hit clients with a wave of demands for upfront payments due to fears that legislative changes will fail to protect the supply chain.

Legal experts are currently making revisions to the Construction Act, which covers payment laws, but the specialist sector is worried that it will not get adequate protection against non-payment from main contractors.

A small number of M&E firms are already refusing to work without upfront payment from clients, fearing that they will be out of pocket if companies higher up the chain go bust.

More firms are expected to take similar action if the finalised Construction Act review fails to resolve key payment issues.

Rudi Klein, chief executive of the Specialist Engineering Contractors Group, said companies would take matters into their own hands if the review failed to offer significant payment reform.

He said: “We want the review to solve payment problems. We are lobbying to get rid of pay-when-paid and pay-when-certified clauses. But the consultation document was disappointing in its measures to protect against upstream insolvency.”

M&E firm Mechelec Engineering, a subsidiary of RTT group, is one company that has secured upfront payment from a client after failing to obtain adequate insurance. The firm threatened to walk away from a deal with Dorset-based John Walker Developments for work on the Royal Courtyard housing scheme in Ramsgate, Kent unless the client made an advance payment.

Dave Wilkinson, Mechelec operations director, said: “We have an ongoing relationship with John Walker, but on this project it had changed its main contractor. This meant we could not get insurance cover, so to retain our services the client paid £46,000 of our £460,000 contract up front.”

Wilkinson added that Mechelec was negotiating with another client, GSE, to be paid fortnightly rather than monthly for work on a schools project. He said: “We are not doing projects unless we have fortnightly payments to reduce exposure. We’ve been caught out by payment problems in the past, and if we were a smaller contractor the difficulties would have caused us to fold by now.”