Yesterday, I was pricing the painting works on a large residential development for one of our painting contractor clients. Prior to measuring and costing, I was reading through all the tender documents when I came across the clause relating to Defects Liability Period.
Now bearing in mind that this project has a 12 month decorating program: The clause read that the defects liability period would commence upon 'practical completion of the FINAL PLOT and would be 24 months duration'.
This means that for plots completed in the early stages of the program, the painting contractor would be waiting over THREE years for the last part of the retention and for the last plots, TWO years!!
Given the 'competitive' nature of 'house bashing' projects and the low margins, this means that a significant proportion of the painting contractor's profit will be 'tied up' for at least 2-3 years at which point, given inflation, when paid, it will be worth far less to him. Not only that, he will probably have to 'fight' to get payment of the outstanding retention as most Principal Contractor's try and make it as difficult as possible for the painting contractor to receive these monies.
Why would a painting contractor agree to this and sign up to the contract?
Many would and here's why:
1. The painting contractor is enticed by the large value contract, so is willing to accept these terms in order to secure.
2. The painting contractor didn't read all the tender documents and so completely missed this clause only finding out at the end of the project when it is too late.
3. Some painting contractors add this proportion of retention into their original price, so that in reality they are getting paid the full amount they require before the start of the defects liability period. Any moies they then receive at the end of the defects liability period are a bonus! The problem with this strategy is that it makes your initial tender submission 'high' which means you may not secure the project in the first place.
If only ALL painting contractors would refuse to accept such contract terms, then the Client /Principal Contractor would be forced to offer more 'reasonable' terms. Problem is, there is always some painter who, for whatever reason, is willing to accept any terms.
When will they realise that they are making it very difficult for both themselves and all other painting contractors throughout the UK?
When will we all learn??????
What is The Defects Liability or (Rectification) Period?
The Defects Liability Period is usually a period of 6-12 months following practical completion of a project, at which point the painting contractor will be asked to correct defective works that have been caused by 'poor workmanship'.
Up to practical completion, The Principal Contractor will withold 3-5% of the contract/invoice value (retention), to cover this. Upon practical completion of the project, 50% of this retention will be released to the painting contractor. The final 50% is released upon satisfactory completion of any defects caused by 'poor workmanship'.
Note: If there are defects (due to defective workmanship) apparent BEFORE practical completion, then these should be rectified by the painting contractor BEFORE a certificate of practical completion is issued. Defects which become apparent AFTER practical completion, would be remedied at the end of the defects liability period.
It is important to note that 'shrinkage cracks' DO NOT constitute 'poor workmanship' but should be deemed as 'maintenance' defects for which the painting contractor would be entitled to additional payment.
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