Construction File: Prompt Payment Creates a Sustainable Industry
Construction work is project based, with unique project teams assembled through a tendering process. These project teams typically involve an owner who is the buyer of construction services from a general contractor, who in turn employs sub-contractors and often sub-sub-contractors. Add numerous suppliers to the mix, at all levels of the contracting pyramid.
This complex system is relatively unique to the construction sector and it has some significant requirements for success. One of those requirements is reliable cash flow: payment for work that has been satisfactorily completed must flow from the owner to the general, then to the sub-contractors and the sub-sub-contractors, in a timely manner.
Prompt payment brings many economic and business benefits:
- Cash flow to small employers strengthens businesses, families, and communities;
- Liquidity builds a stronger employment base in the sector;
- Employers can afford increased investment in apprentices (construction employs about 50% of trades apprentices);
- It drives investment in new machinery and equipment, which increases productivity;
- Construction costs are lowered
- Contractors don’t have to factor financing costs associated with late payment risk into their bids
- Contractors can afford to take on more work, which increases competition and drives prices down
Savvy owners and developers recognize that as purchasers of construction services they are also industry leaders. Their commitment to prompt payment has a huge impact in building a sustainable workforce and ensuring industry access to the most modern equipment, without which they cannot deliver premium construction products to their clients.
When contractors are paid in a prompt manner it benefits everyone, from industry employees to the users of the facilities and infrastructure.
Sign the cheque today, and have a stronger industry tomorrow.