Yesterday in the post our company received two heavy A4 envelopes full of many pages with small print on each one. One came to my desk because I deal with new business opportunities, the other came to my colleagues desk because he deals with legal issues. Both letters were seen by both of us by the end of the morning. He saw them both because my document was a contract for a ‘new’ piece of work. It relates to a major piece of work that we have been working on for over 12 months and the final but most significant stage is about to begin. The total value of the project represents nearly 10% of our annual turnover and so it is a huge piece of work, although the actual work in the building which was a bit of waste land back in July 2017 will take less than a month to complete. Having agreed terms and conditions a few months ago, the client which is a large charity suddenly asked us to work for the main contractor as a sub contractor. Yesterday Morning the terms and conditions from the main contractor arrived, following phone calls and emails last week when we managed to satisfy them regarding our legal and professional standards including our insurance policies. The terms include the fact that they will pay us 42 days after we submit an invoice, even though the work will take around half that time which is why our terms are 14 days. They also want to retain a proportion of the overall sum for a year even though we cannot wait a year to pay our staff or pay for the goods we will be installing. However the big concern for us regarding this contract is best explained by describing the second letter.

The letter was an explanation that a company we worked for as a sub contractor last October had gone into insolvency. The project we worked on was much smaller than the one above, but nevertheless after many months of pursuing the sum owed to us, the company went under owing us £7,000 which is a  significant sum of money representing 1/4 of the size of the contract. That particular contract was to fit out a large room in a University and after agreeing prices and the nature of the work, the University then asked us to work for their main contractor who insisted the work was carried out through the electrical installer. Long after the job was completed we have spent hours chasing up the outstanding sum. The irony is that the company called in the insolvency team on 31st August, yet when we last checked their creditworthiness on 7th September they appeared credible using the various mechanisms open to us.

A couple of years ago we worked for a Church in central London who did the same as the other two organisations and in that case the main contractor was a company called Fairhurst Ward Abbots who looked solid on the credit checks and had a fancy website and they were even a warrant holder to the Queen so it would have been hard to deny the church their wishes. FWA went into liquidation owing us £12,000 as we were finishing the job off and we then spent many more hours carrying out the various commissioning parts of the project, costing us money that we knew would never be repaid.

In the year that has seen Carillion go bust owing many subcontractors millions of pounds and as we read the letter which tells us our £7,000 represented around 1% of the companies liabilities and that they went bust because two other companies went bust on them it is surely time for large organisations to stop trying to parcel up contracts under one main contract. Particularly when our work is no real connection to building and only partially connected to electrical installations. The Government could lead the way on this by ensuring that they offer guarantees to all the sub contractors who work for their main contractors.