Builder in financial distress / non-payment of subcontractors and suppliers
IPEX as a preventative measure ‘Higher’ risk projects
In higher risk instances, developers and/or lenders may wish to link payment of builder entitlements to the ‘on time & in’ full payment of subcontractors & suppliers; this can be automated – the builder may receive an agreed percentage (prelim & margin) on every dollar paid out of the account – or, via a developer approval process.
In these scenarios, the builder is required to pay all entities linked to the previous claim before they can access their own payment. As you can imagine, subcontractors & suppliers tend to be paid VERY quickly under this model (typically within 24 hours of progress payment landing) which not only reduces developer/lender risk, it also keeps those onsite extremely happy.
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IPEX setting
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'Heightened' risk: Typical commercial set-up - Prevention focus
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Developer portal view |
Full open book or hybrid view (open book for any high value contracts or any requiring additional payment) |
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Entities required to be paid through IPEX |
All subcontractors and suppliers outside those identified as preliminaries or overheads to be paid via IPEX |
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Builder payment method |
Builder must demonstrate that all required subcontractor/supplier payments have been made in full before balance (builder prelims/margin/costs) are released. |
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Developer notification/approval of new payees |
Required |
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Subcontractor validation of contract value |
Not required |
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Joint approval of subcontractor payment |
Not required |
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Subcontractor retention to be held under IPEX |
Required |