Builder insolvency

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IPEX

Strengthening existing legal protections

The suite of industry-standard rights and responsibilities (‘stat decs’ for confirming subcontractors have been paid, ‘step in’ rights) have proven to be largely ineffective in preventing construction industry payment problems. There are countless instances where a builder has entered administration, leaving behind subcontractors and suppliers that are owed large sums of money across multiple progress claims.

Without oversight or control over how progress payments are being distributed by the builder, developers are forced to accept builder statutory declarations at face value and continue to make payments.

Often, by the time a developer has sufficient information to confirm that subcontractors have not been paid, it’s too late to act on or make effective use of their legal protections.

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Using IPEX

Benefits for developer clients

‘Test’ builder due diligence outcomes before awarding the contract

Stop payments being used to cashflow other projects

Validate ‘stat decs’ to confirm subcontractor payments

Act on ‘step in’ rights before your builder goes under

Protect funds already paid to builder in the event of insolvency

No change to builder processes and no impact on builder payment

Attract subcontractors by reducing risk of non-payment
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About IPEX

IPEX combines a range of practical controls with existing legal protections to greatly reduce the risk & impact of builder insolvency for developers. The IPEX payment platform ‘ring fences’ project funds paid to the builder; progress payments can be used only to pay approved subcontractors & suppliers linked to that specific project. Developers can then verify who has been paid & when rather than relying on solely a statutory declaration and, in the event that the builder has failed to pay those linked to the previous claim, the developer can seek to have this remedied before the next claim is approved. In the case of more serious/repeated breaches, developers have access to the right information at the right time to act on existing protective clauses i.e. ‘step in’.

Should a payment default event occur, IPEX helps to minimise the impact to the developer via a range of practical controls that complement existing legal protections. Progress payments already made to the builder via IPEX have either been distributed to approved subcontractors & suppliers or, remain in the account – the funds can’t be siphoned off to other projects/accounts in the period leading up to the appointment of administrators. In addition, the developer receives full visibility of all previous transactions, removing much of the work associated with substantiating creditor claims & establishing their exact position on the project.

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IPEX process

  • IPEX provisions are included in the head contract (or any deed of variation). Standard builder obligations re: payment of subcontractors remain unchanged.
  • There is no change to subcontractor/builder claim process and no impact on the builders’ payment; builders can access their own entitlements immediately (only subcontractors and suppliers entitlements are off limits). Importantly, IPEX provides developers with this additional visibility over who has been paid and when, without requiring a builder to share commercially sensitive information including their margin or subcontract values.
  • IPEX does not change the agreement between a developer and their builder, it just provides a range of practical controls to ensure they are always operating within it.
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New project vs distressed project application

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  • Guard against the potential impact of other, less-feasible developments linked to your builder
  • Additional protection when working with a builder for the first time or builder is ‘stepping up’ a level
  • Provide lender comfort should builder due diligence has raised minor red flags
  • Provide lender comfort on developer-builder projects
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  • ‘Controlled’ payments to assist your builder with funding supplier deposits
  • ‘Ring-fence’ additional payments outside of the contract to ensure they’re spent on your project
  • Move forward with the builder despite substantiated instances of non/delayed payment of subcontractors or suppliers
More applications

Market adoption

There are 2 levels of transparency available to developers – standard vs open book.

Most developers are happy for their builder to keep values confidential and are just seeking to verify who has been paid and when – the level of transparency provided by our standard portal view should not be of concern to any builder any most (~80%) agreements are implemented at this level initially. However, our contract templates contain clauses that allow developers to escalate visibility levels should a ‘payment default’ event occur. Of course, no matter what transparency level is agreed, the same restrictions apply to how builders can use project funds.

Typically, projects operating under a cost-plus agreement or ‘distressed’ projects would run under the open book visibility setting.

There are various other settings, controls and alerts that can be customised to manage specific situations and processes. These additional protections can be scaled up or down on a project-by-project basis in direct relation to level of perceived risk to the developer.

$1B+ in funds protected and counting

Testimonials

What our customer say

“Based on our experience IPEX should be mandatory. It is now an integrated and essential part of our governance. It’s delivering a new standard of providing trust downstream to our subcontractors and suppliers that they’ll be paid and upstream to our clients and the financial institutions funding these projects.”
Ken O'ConnorDirector
Ken O'Connor
“IPEX delivers the security of funds subcontractors need on projects. Everyone prices risk into jobs; however, with the IPEX concept, there is a reduction of payment risk, which should translate into a more competitively priced trade insurance outcome. It’s really in everyone’s best interests in the long run to use IPEX.”
Sam LeslieGeneral Manager
Sam Leslie
“Once we were aware of IPEX and decided to implement this new standard for project payments, it was a seamless onboarding and end-user experience. It reduces risk and addresses trust and relationship building in one platform. This will put us in a powerful position as the demand for construction labour increases.”
Rob MoolmanManaging Director
Rob Moolman
"At Frasers, we take our commitment to every project, and every investor, builder, subcontractor, supplier, and customer we work with seriously. That means putting in place financial frameworks and processes to ensure that every dollar is used for its intended purpose, and there is full accountability and transparency over the budget for a project.” “We’re so excited about the Encompass development, which has a real ‘wow’ factor, and through IPEX we’re better positioned to deliver the project securely and successfully.”
Sarah BloomGeneral Manager Development Victoria
Sarah Bloom
"From the moment I understood what IPEX provided I had no hesitation in introducing it to BlueScope. With such a major capital works project it was clearly a very prudent risk management tool. With hundreds of millions of dollars being paid to suppliers and subcontractors through major contractors, securing certainty that monies were being delivered into the accounts of the substantial number of subcontractors and suppliers was critical.“
Steve ChandlerCEO
Steve Chandler
"After a year of utilising the IPEX platform on one of our key commercial construction projects, the experience has been overwhelmingly positive. The platform’s user interface and our customer service experience have exceeded our expectations, significantly bolstering the security and efficiency of our collaboration with the builder. The adoption of IPEX has been embraced by the builder and & it provides additional comfort to trades particularly with the current construction industry challenges."
John VickersDirector
John Vickers
“Based on our experience IPEX should be mandatory. It is now an integrated and essential part of our governance. It’s delivering a new standard of providing trust downstream to our subcontractors and suppliers that they’ll be paid and upstream to our clients and the financial institutions funding these projects.”
Ken O'ConnorDirector
Ken O'Connor
“IPEX delivers the security of funds subcontractors need on projects. Everyone prices risk into jobs; however, with the IPEX concept, there is a reduction of payment risk, which should translate into a more competitively priced trade insurance outcome. It’s really in everyone’s best interests in the long run to use IPEX.”
Sam LeslieGeneral Manager
Sam Leslie
“Once we were aware of IPEX and decided to implement this new standard for project payments, it was a seamless onboarding and end-user experience. It reduces risk and addresses trust and relationship building in one platform. This will put us in a powerful position as the demand for construction labour increases.”
Rob MoolmanManaging Director
Rob Moolman
"At Frasers, we take our commitment to every project, and every investor, builder, subcontractor, supplier, and customer we work with seriously. That means putting in place financial frameworks and processes to ensure that every dollar is used for its intended purpose, and there is full accountability and transparency over the budget for a project.” “We’re so excited about the Encompass development, which has a real ‘wow’ factor, and through IPEX we’re better positioned to deliver the project securely and successfully.”
Sarah BloomGeneral Manager Development Victoria
Sarah Bloom
"From the moment I understood what IPEX provided I had no hesitation in introducing it to BlueScope. With such a major capital works project it was clearly a very prudent risk management tool. With hundreds of millions of dollars being paid to suppliers and subcontractors through major contractors, securing certainty that monies were being delivered into the accounts of the substantial number of subcontractors and suppliers was critical.“
Steve ChandlerCEO
Steve Chandler
"After a year of utilising the IPEX platform on one of our key commercial construction projects, the experience has been overwhelmingly positive. The platform’s user interface and our customer service experience have exceeded our expectations, significantly bolstering the security and efficiency of our collaboration with the builder. The adoption of IPEX has been embraced by the builder and & it provides additional comfort to trades particularly with the current construction industry challenges."
John VickersDirector
John Vickers
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