"Andy Hall" wrote in message
...
On Thu, 10 Jun 2004 22:55:39 +0100,
wrote:


Following on from some earlier posts on this where I raised the issue
at the time of getting the quotes, the quote that we'd most like to go
with looks like this (together with the stated payment terms)

(hope the wrapping on this doesn't make it too hard to read in some
newsreaders)


Cost of conservatory supplied - £8,837 (a)

Cost of installation - £720 (b)
(paid directly to installer)

Planning approval - £400 (c)
(paid direct to architect)

Cost of building works, including - £1,980 (d)
base, brickwork, electrics etc
(paid direct to tradesmen)

TOTAL -£11,937



The payment terms are as follows:

Deposit with order - 2,837 (1)

Planning fee - £400 (2)

Building works completion - 1,805 (3)

Delivery of conservatory - 6,000 (4)

Completion of electrics - 175 (5)

Installation completion - 720 (6)

TOTAL - 11,937


Although it doesn't specifiy who the actual payments are to be made
to, obviously (1) + (4) + (a), (2) = (c), (6) = (b), and (3) + (5) =
(d)

My problem with this is that by the time the conservatory has been
delivered to site, but not erected, I've paid over £11,000 of the
total bill, with only (5) and (6) outstanding.

Much too much too soon, especially if you are paying some contractors
separately. For example, you can't reasonably withhold on the
electrician because the conservator supplier misbehaved.



Furthermore, neither of the outstanding amounts is payable to the
conservatory supplier. (ie the people I'm doing business with), but to
their subcontractors, who I'm supposed to pay direct. In effect, the
conservatory supplier is paid their part in full by the time they
deliver the unit to site, before its even been touched.

I would agree to architect separately and planning fee (assuming it's
even required.)

I would want all basework and conservatory supply as one contract to
avoid three way disputes on base builders and conservatory supplier.
The argument will be that you will pay more because the conservatory
supplier will mark up any payment to the base builder.

In my case, the main contract was with the conservatory supplier and
they subbed out the base. There were some project management issues
with the base builder which were all fixed OK in the end, but I would
not have wanted a three way dispute. Since almost all of the cost
is to these two areas, I dould go for a supplier who will bundle the
contract even if you pay a bit more.

I think that the deposit is high. I would negotiate it down to 10%
but accept 15%. No more.

I would also want 50% of the contract payment outstanding until
completion to satisfaction. £720 is only 6%. They can afford to lose
that. On a contract of this value, try for 50%, but if not,
accept £5k as the final payment. If there is a dispute, it is then a
small claims matter.

I wouldn't worry about paying the electrician or somebody to screed
the floor and things like that, outside the main contract; The
amounts are small and you will save the conservatory company's markup.



[Note: given the time taken to process planning applications, which is
not within the control of the supplier, the supplier has stated that
they would reduce the deposit payable (1) to a nominal amount until
planning has been granted. This would then increase the balance
payable (4) by a corresponding amount]


Yes and no. The planning is an out of pocket expense.

If you are OK with the deposit plus this, then you don't need to
necessarily push on that. Do make sure you pay it by credit card or
another regulated credit agreement without early repayment penalty.

Then if they go bust in the interim, you are protected.


Now, I'm not trying to nail the supplier to the floor on this - I
understand that everyone has to make a living along the way

You don't need to do so, but it would be far safer to have one
contract, but do be prepared to pay a bit more for it.

- but my
preference would be for two things:

i) all payments made by me, with the possible exception of the
planning costs, I would like to be paid to one supplier - the
conservatory company - and leave them to sort out payment to their
subcontractors

I agree but would not be hard about that on the electrician. The
amount is small an you will save money. The risk is low.

I would have the conservatory supply and erection and groundwork all
on one contract.



ii) I'd like to still be holding somewhat more than 10% of the total
cost, say £1,500 - £2,000, until the project is completed to my
satisfaction.

I think that that is too little too give you leverage if something bad
happens along the way.

I had the following structure to the contract. Architects fees were
not involved:

- Initial deposit - 10%
- Stage payment after completion of ground work, further 15%
- Stage payment on completion of base and delivery to site of
remaining materials of frame etc., further 25%
- Final payment on satisfactory completion - 50%




Before I propose something like this to the supplier, my questions are

- Am I being unreasonable?

Nope. I think you can be firmer than even you are suggesting.



- If they don't even want to go with option i), and insist that all
the suppliers should be paid separately, should I even go ahead with
them?

Nope, but be prepared to pay a bit more.. Think also about what
happens if there's a problem in 5 years time and you need to invoke
the guarantee and each says it's the other's fault.



- If they would go for i) but not ii), or alternatively ii) but not
i), what would be a good compromise solution?

Too little. £2000 withheld does not give you enough leverage.

On a contract of this value, they have probably covered most of their
material and labour costs by 50-75% of the value having been paid.
Beyond that, the discussion is about their margin, which if they screw
up and you withhold £2k, they can almost afford to write it off.

Having the situation the other way round where you owe them money and
hold out on them until perfection is achieved, is far better.

I had a situation where there were issues of supervision during the
project. I had discussed this at great length with the company
involved that I expected very good project management to make sure
that everything ran smoothly. There were a series of shortcomings
in this area which involved real cost as a result of some damage to
the drive that they did through carelessness (or rather the base
builder did), which all in all, accounting for the hassle and time
involved added up to about £7000. However, some of the time
aspects would have been difficult to defend. I paid them £2000 on
completion and withheld £5k and waited until they inevitably
threatened legal action.

Needless to say I had put together a very well prepared case which ran
to 20 pages and sent this to their solicitors, who of course knew very
well the significance of an outstanding £5k. The discussion went
back and forth with more information being added by me each time and
their settlement agreement offer figure rose from £1500 to £3500.
In the end I settled with them on an agreement for £3500 deduction,
£1000 worth of items for the conservatory and an agreement not to
reveal the name of the company. I also have the satisfaction of
knowing that they spent several £k on professional fees - way in
excess of if they had agreed to my initial £7k proposal.

So the moral of the story is don't approach this with the attitude
that they will get it all wrong and you'll get a poor outcome, but
that you will cover yourself at all stages and make it clear to them
that you are paying a good price for what they have represented to you
as being a good product. You are simply expecting them to do what
they say they are going to do.

Some suppliers find it a real shock to be held to their commitments.
Do make sure that everything is in writing and that they confirm every
little detail in writing. No confirmation, no money.

Remember that once the project starts, they have the cash flow issue
and you have a lot of control. Keep it for as long as you can.




I'm satisfied that the quality of the proposed product looks OK (its
a Shield Conservatory) and the quote is somewhat less than others,
(which have been up to £19,700 for essentially the same thing), so if
possible I'd like to find a way to take something back to them that
would work

Is it the same though? Apart from the materials, and perhaps there
are some differences, this one is partly less because the element of
one contract isn't there.

All things considered, I would probably be prepared on a deal of
£11700 to pay £12500 for the terms and conditions that I described -
not more than that and certainly not £19700. That one would
probably be negotiable down to £17k at a guess.

You could try something like the structure I've suggested and see if
they go for it or something close.


My concern in going for the absolute lowest price is that you are
running risk in three areas.

a) They may have cash flow problems because they are asking you to pay
subcontractors directly, and large proportions of payment early in the
contract.

b) They may be running to a very low margin which reduces their
cushion to be in business in the future when you may need them.
They may offer an insruance backed guarantee. This goes into the
cost, but read very carefully the terms and conditions. Some are not
worth the paper they are written on.

c) The resources may not be there to resolve problems and you could
have a lot of hassle getting things fixed as a result of agreements
with different suppliers.

You could do a simple check on the company.

Go to the Companies House web site and for £10 or so you can download
the last year's accounts and return. If it is a company of less
than approx £2.5m turnover (can't remember the precise figure) they
only have to file short form accounts but there may be clues in them.
One telltale is if they are persistently late on filing. You can get
some information on company debt, who the directors are and where they
live. Are the directors involved in other businesses or have they
ever been disqualified. You can get some indication of the
company's payment behaviour by going to the Dun and Bradstreet UK web
site. From there you can pay £15 and get a shortform report on this.
It is only a guide, but if they are poor payers, be careful.
You could ask them to supply a bank reference to your bank manager.

If your main criterion is the lowest price and you are prepared to
handle some contractual hassle if it arises then OK.
There is no guaranteee that paying more alleviates that, but I would
be careful about companies who operate close to the wind.
It only needs a supplier with whom they have had a poor payment record
or their bank to withdraw credit facilities and their cash flow can be
out of the window. If they are then insolvent, you become an
unsecured creditor.

At the very least, if you do nothing else, cover yourself with a
credit agreement or credit card payment to give some protection.

I think this is excellent advice by Andy Hall and would suggest that it
should be placed in the D-I-Y FAQs if Andy is willing.
Thank you Andy
Best Regards
Tom