Builders are adapting faster than developers and lenders realise

Cross-project cash leakage – when funds intended for healthy projects are diverted to cashflow troubled developments – is one of the primary sources of exposure for developers and lenders and remains largely invisible under standard construction governance processes.

But despite a commercially acceptable solution now being available – one that enables certified progress to be reconciled against live payment data at each drawdown without changing existing processes – developers and lenders are regularly choosing to start new projects ‘in the dark’ because, in their words, the builder ‘wouldn’t accept payment verification’.

While this is troubling enough when true (if project funds are being distributed as reported, why would verification be controversial?), IPEX talks to a lot of builders about a lot of projects – in many cases, the builder was never really asked in any meaningful sense.

Where resistance is anticipated – whether real or imagined – the conversation around payment verification tends to be framed in a way that almost seeks permission rather than establish a genuine governance requirement. In that context, it’s pretty easy for the builder to say ‘No’.

Builder resistance is no longer the real barrier

Now that monthly payment transparency can be achieved without requiring the builder to reveal commercially sensitive information or submit to any form of payment control, the reasons for past resistance have fallen away. Builder acceptance is no longer the issue.

That shift is reflected in market uptake – there are currently 80 commercial builders operating projects under IPEX across the multi-residential, aged care, commercial and industrial sectors, with build contract values ranging from $5M to $250M.

More than a dozen of those builders have multiple active IPEX projects underway, with several now approaching double figures. Some are now even including IPEX in their capability statements to differentiate themselves in the eyes of prospective clients. That’s how far the conversation has moved.

The real barrier is no longer builder resistance; it’s the assumption amongst developers and lenders that resistance still exists.

Beneath that assumption often sits a concern that requesting payment verification will be interpreted by the builder as a lack of trust. But that thinking is increasingly giving way to a more pragmatic view: requiring independent payment verification is no different to requiring independent progress verification.

A request for payment verification is not an accusation; it’s just good governance
The industry already accepts subcontractor payment verification as an appropriate governance requirement when concerns emerge around a builder’s balance sheet or there are outward signs of project distress. But this positions payment verification as a reactive tool – a process implemented only once problems become visible. By then, the opportunity for prevention has passed and payment verification becomes a damage control exercise.

A lender doesn’t wait until a questionable claim is submitted before engaging a QS. Independent verification is required before funds can be advanced because trust alone is not enough. Payment verification applies that same principle after funds are released.

IPEX is the payment equivalent of the QS assessment

The QS verifies progress. IPEX verifies payment. Both are fundamental governance checks on the same drawdown.

All governance processes exist because trust alone is insufficient, but a request for payment verification no more implies distrust of a particular builder than engaging a QS does. Both are simply mechanisms to independently validate information that is critical to funding decisions and the protection of the developer, lender and their investors.

The question is not whether a particular project is ‘risky enough’ to justify a process for payment verification; it’s why a developer or lender would routinely verify project progress, but not the distribution of funds advanced against that progress.

What’s the greater risk: paying for work yet to be performed, or paying the right amount but allowing those funds to disappear into the builders’ other projects?

Financial governance has evolved; good builders have evolved with it. If you want to close one of the largest points of exposure on your projects, stop treating payment verification as optional…

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