IPEX New Builder Entitlements Product Feature Release
Builders Can Now Access Their Entitlements Immediately (But Still Can’t Touch Anyone Else’s)
IPEX has now released a third option for the payment of builder entitlements, removing the last commercially valid point of contention (without compromising the security of subcontractor & supplier entitlements).
Until now, builders either received an agreed percentage of any subcontractor/supplier payments made (cost plus) or more commonly, requested the release of their entitlements via a developer approval process. Typically, the developer would deposit the progress payment and ask that the builder pay all subcontractors and suppliers linked to the claim. Once these payments were validated (payment recipients are immediately visible in the IPEX system), the builder would request the release of their entitlements. Provided that the amount requested was in line with the QS assessment, the developer would approve.
This process is designed to achieve 2 primary outcomes:
- Ensure that the builder cannot access subcontractor entitlements (the developer will only ever approve the release of an amount if it is actually due to the builder); and
- ‘Encourage’ prompt and in-full payment of the subcontractors – there is no incentive to short pay as the builder can’t access the surplus and when the builder entitlements are only released after all subcontractors/suppliers have been paid, they tend to distribute funds quite quickly – typically inside 48 hours under IPEX.
Secure For Developers & Subcontractors, But Builders Had A Legitimate Gripe
Whilst this process continues to work very well in certain situations, it was perhaps a step too ‘secure’ in others; some builders were a little put off by having to ‘ask’ for their money given that it had already been approved by the QS. And fair enough.
Developers Can Now ‘Pre-Approve’ Release Of Builder Entitlements
IPEX now offers developers the option to provide builders with immediate access to their entitlements whilst still ‘ring-fencing’ the remainder of the claim.
A developer (or their QS) can now enter a value into IPEX that has been assessed as the amount payable to the builder, isolating this value from the remainder of any progress payment. In other words, the developer can give the builder access to $200K out of a total progress payment of $1M – the $800K remaining is subject to standard IPEX limitations & can only be used to pay subcontractors and suppliers linked to the project.
If the builder believes they’re due an amount greater than that which has been allocated, the ‘approval’ process remains – they simply submit a request and make their case; if the developer is comfortable, it gets approved.
The End Of Builder Objections?
Well, legitimate ones anyway – what justification could a builder have for needing access to subcontractor entitlements that would be commercially acceptable to any developer?
IPEX can now be implemented in a way that conceals subcontract/payment values, builder margins AND gives builders immediate access to their entitlements. There’s really nothing left to object to.
All IPEX payment options/processes remain commercial decisions to be agreed between the developer & their builder on a project-by-project basis.
To find out if IPEX can be implemented on your next project, get in touch.