by Clair Mooney | 27 Feb, 2025 | CICV - Best Practice Guides, Contractual and Legal
Introduction
Ensuring prompt and full payment is critical to maintaining healthy cash flow in construction projects. This Practice Note provides best practices for preparing and managing payment applications to maximize your chances of getting paid on time and in full.
Once entitlement—such as for variations (as covered in Practice Note 4)—is established, the next challenge is securing payment. Many businesses fail to take a proactive approach to financial management, leading to cash flow problems and disputes.
This guide outlines key steps to streamline payment applications, minimize delays, and protect your financial position.
- Understanding Payment Terms and Cash Flow Impact
Before Signing the Contract:
Evaluate the impact of payment terms on your cash flow. If the terms are unfavourable, discuss alternative provisions with the Client.
Agree on a clear payment schedule before signing the contract. The schedule should specify:
- Application date
- Due date
- Final date for payment
- Deadlines for issuing payment and pay-less notices
Ensure the contract provides fair and realistic payment terms. If provisions do not align with your cash flow needs, negotiate adjustments.
- Submitting Payment Applications
Many disputes arise simply because payment applications are not submitted correctly or on time. Follow these steps to ensure compliance:
Know where to send applications. Some contracts require applications to be sent to both the Client’s/Contractor’s QS and another designated contact. Failure to comply may result in delayed or missed payments.
Use email tracking. Enable delivery and read receipts when submitting applications. Confirm that electronic submissions are accepted under the contract.
Follow contract format requirements. Ensure your application is detailed, clear, and well-documented, including:
- Quantities with supporting evidence
- Material and plant invoices
- Site instructions
- Photographic records
- Any other relevant back-up documentation
Tip: Many payment applications get rejected due to lack of supporting evidence. Make sure yours is comprehensive and meets the contract’s requirements.
- Follow-Up and Communication
Call the Client/Contractor QS after submission to confirm receipt and check if additional information is needed.
Send a follow-up email summarizing the discussion to document the status of the application.
Engage in proactive communication—don’t just rely on email; pick up the phone and discuss payment matters directly.
Before the contract begins, schedule a pre-contract administration meeting to ensure all financial procedures are agreed upon and documented.
- Managing Payment Delays and Non-Payment
If payment is not received by the final due date, you may have the right to suspend work until payment is made in full.
However, before suspending work, follow all contractual notice requirements carefully to avoid breaching the contract.
Monitor outstanding payments closely—do not allow unpaid invoices to accumulate.
Act quickly if payments are overdue. Many businesses let unpaid balances drag on, leading to serious financial strain.
Remember: It’s YOUR money. It should be in YOUR bank.
Final Advice
Understand your contract’s payment provisions before signing.
Submit applications correctly and on time.
Provide full supporting evidence to avoid rejections.
Follow up and communicate proactively.
Enforce your rights if payments are late, but always follow proper procedures.
By adopting these best practices, you can protect your financial position, improve cash flow, and reduce payment disputes in construction projects.
by Clair Mooney | 27 Feb, 2025 | CICV - Best Practice Guides, Contractual and Legal
Introduction
This Practice Note highlights the risks associated with variations in construction contracts, including onerous clauses, conditional precedents, and the risks of performing work without formal instructions. It builds upon Practice Note 1 on Notices and reinforces the importance of the “no instruction, no work” principle.
A key challenge for both contractors and subcontractors is completing work on-site only to face disputes over payment. This PN outlines how to identify and mitigate contractual risks related to variations, ensuring proper documentation and adherence to contract terms.
- Understanding Variations and Instructions
One of the most common clauses in subcontracts requires that all variations must be formally confirmed in writing. In many cases, failure to obtain a written variation order may result in the subcontractor having no entitlement to additional time or money.
How Variations Typically Arise:
- Site managers often issue verbal instructions on-site for additional work.
- Subcontractors, keen to progress the project, proceed without formal written approval.
- When the final account is settled, contractors dispute or reject the variation due to a lack of records or proper authorisation.
- Best Practices for Managing Variations
Step 1: Always Obtain Written Instructions
If a verbal instruction is given on-site:
- Request a formal site instruction (SI) in writing from the site manager.
Email the Contractor’s Quantity Surveyor (QS), seeking confirmation that it is a variation.
- Provide a cost estimate and request written approval before proceeding.
- If no written instruction is received, do not proceed unless the subcontract allows the subcontractor to issue a variation notice. If the contract requires written approval, failing to obtain it may mean the work will not be paid for.
Step 2: Clarify the Contractor’s Position
If the contractor refuses or delays issuing an instruction, this is a red flag and a potential dispute risk. In such cases:
- Explain that the contract requires written approval to avoid future disputes.
- If the contractor insists that work must start without a written instruction, escalate the issue immediately.
- Document the request and refusal for future reference.
- Keeping Accurate Records for Variations – refer also to PN 2
Maintaining proper records ensures variation claims are substantiated. The following records should be maintained:
- A log of all variation requests with request and response dates.
- A tracker for site instructions (SIs) received and whether they were in writing.
- Photographic and video evidence of the work before, during, and after completion.
- Labour, material, and time records for all additional work.
- Regular correspondence with the contractor’s QS to ensure agreement on variation costs.
Tip: Agree on variations as they occur rather than leaving disputes until the final account stage.
- Handling Disputes Over Variations
If an instruction is disputed, or if the contractor refuses to issue a variation order:
- Red flag the issue and document the request.
- Request an official instruction allowing the work to proceed, pending valuation under the contract.
- If no resolution is reached, consider alternative dispute resolution (ADR) options, such as the Conflict Avoidance Process (CAP), and the Low Value Adjudication Schemes.
- Readers should note however the provisions in the JCT and SBBC Contracts in Schedule Part 2, which relates to Clause 5.3 in the Contract, which allows for a Variation Quotation to be submitted, and this will include the direct loss and expense to be incurred. This brings cost certainty to the employer, and the contractor, and goes a long way to eliminate payment disputes.
- Final Advice
- Be proactive in managing variations — do not wait until the final account stage.
- Always insist on written instructions — verbal agreements are not enforceable.
- Keep detailed records — this will strengthen any claims for additional payment.
- Communicate regularly with the contractor’s QS — avoid last-minute disputes.
By implementing these best practices, contractors and subcontractors can ensure clarity, fair compensation, and effective commercial management while minimising disputes.
by Clair Mooney | 27 Feb, 2025 | CICV - Best Practice Guides, Contractual and Legal
Introduction
Contract amendments continue to be a major issue in the construction industry, often shifting risk disproportionately onto contractors and subcontractors. This Practice Note aims to highlight key contractual risks, explain why early contract review is essential, and provide guidance on managing amendments effectively.
For those new to the CICV Best Practice Guide (BPG), we strongly recommend reviewing its contractual and commercial management recommendations to reduce disputes and improve cash flow stability.
- Why Early Contract Review Matters
Many contractors fail to review contracts until it is too late. A common scenario is when a contractor only seeks a contract review the day before work starts—by then, it’s too late to renegotiate.
Review the contract at the tender stage to identify risks early.
If amendments are unreasonable, negotiate or price the risk accordingly.
If the contract terms are unacceptable and non-negotiable, be prepared to walk away.
Tip: Some industry bodies, such as the Finishes and Interiors Sector (FIS), offer Contract Review Services to help members identify high-risk clauses before signing.
- Common Risk Areas in Contract Amendments
Below are some of the most problematic contract amendments contractors should watch for:
Payment Terms
- Amendments that delay payments beyond standard terms.
- Retention clauses that extend payment periods or increase retention percentages.
Notice Provisions
- Onerous “time-bar” clauses requiring notification of delays within a very short timeframe (e.g., 2-7 days).
- Strict notice requirements for submitting claims—refer to Practice Note 1 (PN1) on Notices for details.
Liquidated & Ascertained Damages (LADs)
- LAD amounts that are disproportionate to the subcontract value.
- No clear cap on liability, exposing subcontractors to excessive financial penalties.
Practical Completion
- Does the subcontract have its own completion date, or is it tied to the main contract completion?
- Are there unfair dependencies on other contractors’ work?
Variations and Design Responsibility
- Unclear variation procedures—refer to Practice Note 4 (PN4) on Variations for best practices.
- Expansion of Contractor Design Portions (CDP), shifting design liability to subcontractors.
- No clarity on interface issues with other trades or contractors.
Site Conditions and Title Issues
- Clauses that pass responsibility for ground conditions or existing buildings to the contractor.
- Unclear responsibilities for resolving title issues or dealing with external utility providers.
Insurance Requirements
- Contractual insurance provisions that do not align with your actual policies.
Design liability clauses that may not be covered under your Professional Indemnity (PI) insurance.
- How to Manage Unfavourable Amendments
If you encounter onerous contract amendments, you have three options:
- Negotiate the terms with the client/contractor. Many amendments can be modified if raised early.
- Price the risk—factor potential liabilities into your tender pricing.
- Reject the contract and walk away if the risks are too high.
Tip: Industry bodies and trade organisations can provide support if you face unreasonable contract terms.
- Industry Response and Conflict Avoidance
The construction industry is increasingly concerned about excessive contract amendments. The Conflict Avoidance Coalition is actively working with industry experts to address unfair practices.
If you are seeing highly unfair or unworkable contract amendments, reach out to your trade body or the Conflict Avoidance Coalition for support.
For further insights, watch the Cash Flow and Contract Webinar on the CICV website.
Final Advice
Always review contracts before signing—never wait until work is about to start.
Understand your obligations and risks—identify clauses that could impact your cash flow.
Engage in early discussions—negotiate terms that protect your interests.
Seek expert advice—use industry contract review services if needed.
Taking a proactive approach to contract amendments will help mitigate risk, reduce disputes, and improve financial stability.
by Clair Mooney | 20 Feb, 2025 | CICV - Best Practice Guides, Contractual and Legal, Main News Feed
This Practice Note is a supplement to Practice Note 1 ‘Notice’, aimed at highlighting key specific notice provisions under NEC3 & 4 Engineering and Construction Contracts (‘ECC’) and the NEC3 & 4 Engineering and Construction Subcontract (‘ECS’).
Specific Situations Requirement Notices
Contractors and subcontractors should be aware that generally, NEC contracts contain notice provisions in respect of the following situations:
- Compensation Events.
- Early Warning.
- Defects.
- Ambiguities and inconsistencies.
- Illegal and impossible requirements.
- Prevention.
- Termination.
A brief overview these provision is as follows:
NEC3 & 4 (ECC)
Compensation Events
- The Project Manager notifies the Contractor of compensation events arising from an instruction, the issue of a certificate, the changing of an earlier decision, or a correction of an assumption (cl.61.1).
- The Contractor notifies the Project Manager of an event the Contractor believes to be a compensation event that has not been notified by the Project Manager (cl.61.3).
- The Project Manager notifies the Contractor if the Project Manager decides that an event notified by the Contractor is not a compensation event (cl.61.4).
- When requesting a quotation from the Contractor, the Project Manager notifies the Contractor if the Project Manager decides the Contractor failed to issue an early warning notice (cl.61.5).
- If the effects of a compensation event cannot be reasonably ascertained with certainty, then, in an instruction to provide quotations, the Project Manager states any assumptions made by the Project Manager concerning the effects of a compensation event (cl.61.6).
Early Warning
- The Project Manager and the Contractor notify each other as soon as they become aware of any matter which could increase the total of the Prices, delay Completion, delay meeting a Key Date, or impair the performance of the works in use (cl.16.1[NEC3] / cl.15.1[NEC4]).
Defects
- Up to the defects date, the Supervisor and the Contractor notify each other of Defects as soon as they find them (cl.42.2[NEC3] / cl.43.2[NEC4]).
Ambiguities and Inconsistencies
- The Project Manager or the Contractor notify each other as soon as they become aware of any ambiguity or inconsistency in or between the contract documents (cl.17.1).
Illegal and Impossible Requirements
- The Contractor notifies the Project Manager if the Contractor believes the Works Information [NEC3] (or ‘Scope’ as per the NEC4) requires him to do anything illegal or impossible (cl.18.1[NEC3] / cl.17.2[NEC4]).
Prevention
- If an event occurs, which neither Party could prevent, that stops the Contractor from completing the works by the date shown on the Accepted Programme, the Project Manager notifies (instructs) the Contractor on how the event is to be dealt with (cl.19.1).
Termination
- If either Party wishes to terminate the Contractor’s obligation to Provide the Works, the Party wishing to terminate notifies the reason to the Project Manager and the other party (cl.90.1).
NEC3 & 4 (ECS)
Compensation Events
- The Contractor notifies the Subcontractor of compensation events arising from an instruction, the issue of a certificate, the changing of an earlier decision, or a correction of an assumption (cl.61.1).
- The Subcontractor notifies the Contractor of an event the Subcontractor believes to be a compensation event that has not been notified by the Contractor (cl.61.3).
- The Contractor notifies the Subcontractor if the Contractor decides that an event notified by the Subcontractor is not a compensation event (cl.61.4).
- When requesting a quotation from the Subcontractor, the Contractor notifies the Subcontractor if the Contractor decides the Subcontractor failed to issue an early warning notice (cl.61.5).
- If the effects of a compensation event cannot be reasonably ascertained with certainty, then, in an instruction to provide quotations, the Contractor states any assumptions made by the Contractor concerning the effects of a compensation event (cl.61.6).
Early Warning
- The Contractor and the Subcontractor notify each other as soon as they become aware of any matter which could increase the total of the Prices, delay Completion, delay meeting a Key Date, or impair the performance of the works in use (cl.16.1[NEC3] / cl.15.1[NEC4]).
Defects
- Up to the defects date, the Subcontractor and the Contractor notify each other of Defects as soon as they find them (cl.42.2[NEC3] / cl.43.2[NEC4]).
Ambiguities and Inconsistencies
- The Subcontractor or the Contractor notify each other as soon as they become aware of any ambiguity or inconsistency in or between the contract documents (cl.17.1)
Illegal and Impossible Requirements
- The Subcontractor notifies the Contractor if the Subcontractor believes the Works Information [NEC3] (or ‘Scope’ as per the NEC4) requires him to do anything illegal or impossible (cl.18.1[NEC3] / cl.17.2[NEC4]).
Prevention
- If an event occurs, which neither Party could prevent, that stops the Subcontractor from completing the works by the date shown on the Accepted Programme, the Contractor notifies (instructs) the Subcontractor on how the event is to be dealt with (cl.19.1).
Termination
- If either Party wishes to terminate the Subcontractor’s obligation to Provide the Subcontract Works, the Party wishing to terminate notifies the reason to the other party (cl.90.1).
Final Advice
In the management and administration of NEC contracts, parties have the opportunity to act promptly and issue notices in accordance with a wide variety of contractual provisions. This not only aids in avoiding disputes by maintaining communication but also ensures certainty regarding the correct contractual position, which directly contributes to, or even governs, robust commercial management and financial outcomes.
Additional guidance notes
by Clair Mooney | 20 Feb, 2025 | CICV - Best Practice Guides, Main News Feed
This Practice Note is the second in a series designed to enhance commercial management in construction projects by promoting best practices for record-keeping. Authored by experienced consultants Len Bunton, Sean Bradley, and Mark Holden-Smith, it outlines key recommendations from the CICV Best Practice Guide (BPG) to help subcontractors and contractors safeguard their contractual position.
The Importance of Record-Keeping in Construction Contracts
One of the most common mistakes contractors make is failing to maintain comprehensive records of contract events. These records become crucial if a contractual claim arises or if an employer seeks to impose liquidated damages.
As highlighted in Practice Note 1, ensuring that contractual notices are issued in compliance with the agreement is fundamental. This is particularly important when pursuing claims for extensions of time or loss and expense, as failure to provide proper notice may invalidate a claim.
A recurring issue in construction disputes is the loss of project knowledge when key personnel—such as site managers, contracts managers, or commercial managers—leave their roles. Additionally, poor management of electronic files, including missing or deleted documents, can create significant challenges. To mitigate these risks, all project records should be securely stored and readily accessible from the outset of the contract.
Key Records to Maintain
To ensure robust documentation, contractors should retain the following records:
- Essential Contract Documentation
- All tender documents.
- Emails and electronic communications (both inbox and outbox).
- Hard copies of key correspondence (recommended for larger projects).
- Meeting and Site Documentation
- Pre-start meeting minutes.
- Progress meeting minutes.
- Meeting records with subcontractors.
- Project Execution Records
- Site diaries documenting daily progress.
- Site instructions.
- Requests for Information (RFIs) with a tracker showing request dates and response times.
- Records of variations to the contract.
- Construction drawings and a maintained drawing register.
- Programme Management
- Tender programme.
- Contract programme and any progress updates.
- As-built programme (critical for extension of time claims).
- Additional programming documentation.
- Defects and Quality Control
- Snagging lists.
- Defect resolution records, including dates of client acceptance.
- Visual Evidence
- Weekly photographs with date stamps and annotations.
- Video recordings of progress and site conditions (helmet-mounted camera systems can be used to document delays, disruptions, and inaccessible areas).
- Subcontractor Documentation
- Ensure that all subcontractors also maintain detailed records, as their support may be needed for claims.
Consequences of Poor Record-Keeping
Failure to maintain adequate records can severely undermine a contractor’s ability to:
- Pursue contractual claims (e.g., extension of time, loss and expense).
- Defend against employer allegations (e.g., delays, defective work).
- Support adjudication or legal proceedings, as weak documentation reduces the likelihood of success.
Without clear and comprehensive records, a contractor pursuing an adjudication may face:
- Unsuccessful claims due to lack of evidence.
- Liability for adjudicator and consultant fees.
- Serious financial repercussions for the business.
Final Advice
“If you fail to prepare, then prepare to fail.”
Proper record-keeping is not just an administrative task—it is a critical business safeguard. By following these best practices, contractors can improve project management, avoid disputes, and ensure contractual compliance.
You can access the full guide here
Additional guidance notes
by Oscar Venus | 14 Feb, 2025 | CICV - Best Practice Guides, Main News Feed
This Practice Note is the first in a series aimed at improving the commercial management of construction projects by guiding and sub-contractors , contractors on best practices. Authored by Len Bunton, Sean Bradley, and Mark Holden-Smith, all experienced construction consultants, it highlights key recommendations from the CICV Best Practice Guide (BPG).
Importance of Notices in Construction Contracts
One of the most common pitfalls for contractors is failing to issue contractual notices at the required time. Notices play a crucial role in protecting entitlements to extensions of time (EOT), additional payments, and other contractual rights.
Key Steps to Ensure Compliance with Notice Requirements
To avoid disputes and safeguard contractual rights, contractors should:
- Read the Contract Carefully
- Identify when a notice must be issued. E.g. within 14 days.
- Determine who the notice should be sent to.
- Understand how the notice must be issued (e.g., email, recorded delivery).
- Maintain Proof of Service
- If sent by email, enable read and delivery receipts.
- If sent by post, keep recorded delivery proof.
- Educate Project Teams
- Ensure site management, contract management, and commercial teams understand the notice requirements.
- Train supply chain partners on their responsibility to issue notices promptly.
Consequences of Failing to Issue Notices
Failure to issue a timely and compliant notice can invalidate a contractor’s entitlement. A notable legal precedent is the Scottish Court of Session case, FES Limited v HFD Construction Group [2024] CSOH 20, where a claim for an extension of time was rejected because the contractor failed to provide a notice within the stipulated timeframe. The court ruled this requirement was a “condition precedent”, meaning that compliance was mandatory for any claim to be valid.
A condition precedent in contract law is an event that must occur before a party is entitled to a particular contractual right or benefit. Ignoring such conditions can lead to the automatic loss of claims, even if the contractor has a legitimate entitlement.
Common Situations Requiring Notices
Notices are typically required for:
- Variations (changes to work scope).
- Late receipt of information impacting progress.
- Potential delay events.
- Disruption affecting work schedules.
- Loss and expense claims arising from employer-related delays.
- Unforeseen events beyond the contractor’s control.
Applicability to Different Contract Forms
This guidance primarily applies to JCT and SBCC contracts but is also relevant to NEC4 contracts, which contain a dedicated Communications section outlining notification requirements. Also, almost every Subcontract will contain condition precedents in relation to notices.
Final Advice
Contractors should not be concerned about issuing multiple notices. Doing so is simply complying with contractual obligations and protecting their legal and financial position. Employers, contract administrators and contractors should recognise the necessity of issuing notices and acknowledge them accordingly.
By following these best practices, contractors can improve commercial project management, avoid disputes, and ensure compliance with contract provisions.
You can access the full guide here
Additional guidance notes
