Kum - I provided a response on your other question, which seems to cover the same topic. Please review my response on your other post, and if it does not provide sufficient information, please let me know at firstname.lastname@example.org
The answer to your question is that first you should look beyond the contract and explore the commercial factors that might influence a solution.
- what is the reason that the customer is delaying payment? Are they unhappy with your performance or is it perhaps due to their process; for example delay could be due to their payment cycles, or because of the need for internal sign-off by a particular individual.
- if you identify the cause, you may find an immediate remedy - eg change your invoice date to better align with the payment cycle, or work with your customer to see how approval can be streamlined.
- if there is no apparent reason, do you have leverage with the customer - for example the value of your supply - which could be used to encourage greater discipline? Can you explain to them the impact that delayed payment is having on your business and the possible flow through of consequences on the quality of supply.
- as a last resort, the remedies may include a charge for late payment, a threat to raise prices or a formal notice of breach and requirement for advance payment. But these really are last resort solutions because they run the risk of severely damaging your relationship.
As Tim said, first of all you have to ask your customer what is the reason for delaying payment. In case your customer alleges financial or liquidity problem, you can make an amicable settlement plan by making the customer sign a payment plan to settle the debt in monthly installments. In this case, i would advise to ask for an immediate 1st payment that can cover your costs of production.
In case your customer alleges quality problem, you should check the contract terms to see if there is any clause about the term to raise a complain about quality. You should also ask for proves, for example photos. never accept a quality complaint without proves.
In case of quantity complaint, you should check if there is any clause in the sales contract about allowing variation of quantity. many contracts have this type of clause, as for example allowing 5% more or less quantity. In any case, I would advise to always try the amicable means before threatening with stronger measures or legal actions.
• New Zealand Defence Industry Association (NZDIA)
www.iso27001security.com/html/27001.html This site has good material around the security standards.
If you cannot negotiate this clause out you are probably going to need to sit down with your IT security compliance people and look at both the requirements of the standard and the extent to which you are in compliance. Requiring compliance is becoming more commonplace in any contract where you will have custody of IT or data belonging to your counter party. If you are not going to hold any data/info/IP to which the standard, applies you can make a risk assessment or have a go at negotiating the issue.
• Contract Manager Canada Inc.
If the project is delayed by the Employer... first make sure that there were no delay causes by the Contractor on the previous agreed milestones, for you to be fully eligible for a compensation. Now the tricky part to kick in, is the delay resulting to only warranty extension, which means that all construction, installation and pre-commissioning done? Just ensure that you've all signed-off documents that it's pre-commissioned. if so, your service team will provide an additional cost for extra-warranty coverage and you can lever it as a scope-creep. This is not an issue, if all of your works are completed and no more to come back to do additional works, then you need to add remob to commissioning cost plus the extended warranty cost and get a CO prior to agreement of extension. Don't forget to have your insurance company informed on this extension, as they were notified of previous warranty commitment, not the new one. Hope this serves.
• Seiersen Enterprises
It strikes me that the actual costs of extending the warrantee might be considered.
These may be nil if the delay in the project delays the in service date, and thus the risk of fault.
The onus might be put on the supplier to prove the materiality of additional warrantee costs whatever they might be.
• Capgemini India
As warranty effort is provisioned to fix bugs of contractor's defects, since the delay is caused by the Employer, the Contractor is entitiled to claim additional cost. Not only is this instance 'due to failure of the employer (customer)', which is not due to cause by the contractor, there could also be a delay in the service start date, which means the plans for service could be impacted. Therefore, I believe the additional cost is justified.
Our service department has actually been able to provide a number for us by unit of what an additional year of warranty costs us. Do you know how much the first year costs you? You could always just submit that as an estimate for year two.
It is quite usual and normally is complied with. However one has to see the origin of delay or shift in delivery date as it could provide the basis for argument which ultimately will determine such an extension is mandatory or not irrespective of contract provision.
To counter such situations sometime the guarantee texts states bond shall be valid until (date) or until advance is fully adjusted against the claimed payments.
In such a situation you may not be having any specific provision in the contract but extension validity becomes a necessity.
Do you not want to provide the extended BG at all, or are you happy to provide if the Client pays for it?
• Schlumberger India
Thanks for the useful reply.
To answer this
"Do you not want to provide the extended BG at all, or are you happy to provide if the Client pays for it?"
Firstly we do not want to provide extended BG. The Client have already paid the advance while we gave the BG during start of the project.
• Schneider Electric
I do not know if I can help you. It is very common in the usual practice and I very used to submit a new BG or even simply extend the validity.
Even if you do not have any provision for providing renewed BG, do you have any provision regarding the validity of the BG, for example, that the BG shall be valid until the delivery.
I think it is common sense and the Client has the right to ask for the extension.
If everyone was in agreement up front to provide the guarantee, I see no reason it should not be provided given a delay, unless that delay is the fault of the requester of the contract. I would consider refusal to renew the BG to not be a good faith move on the part of the other party, and while I may or may not have leverage on this contract, you can bet I will on the next one. It will likely have a lasting adverse affect on the business relationship.
I think the comments above are a good reflection of the items you should be considering:
- how clear was the original intent to align delivery and BG dates?
- who initiated the changes that led to delays? Were these delays agreed collaboratively?
- do you have any reason to question the good faith of the client or that they might seek to abuse the BG?
- are you concerned about your own performance and fearful you will miss the delivery date?
- do you expect / want to further business from this client? Does it make business sense to fight the client on this issue ?
Please can you share a copy of the 2015 Contract Management Benchmarking Report as I am not able to locate this on the website?
• Seiersen Enterprises
I suggest you go to the Resources tab, a do a search on Benchmarking Reports. Remember to click sort by most recent. You will find a wealth of materials on any aspects of benchmarking. I have also sent you the 2015 Contract Management Benchmarking Report. Be sure to participate in the 2017 Benchmark study.
Charlotte, building on Nick's reply, the study he has forwarded was issued early 2016 and provides a wide variety of benchmarks on process. This is supplemented by a series of reports that offer data on the issues that most often undermine the value achieved from contracts. These are part of the Ten Pitfalls series. Clearly, all benchmarks are norms or averages and if you have specific questions for a particular industry, geography, company size etc., you should ask us for the relevant break-out information.
• Info-Tech Research Group
Hello - could I also get direction on how to access this report?