Winning a commercial construction contract comes with the expectation that you outlay for materials & pay your workforce well in advance of receiving any money, with very little protection should things go wrong with your builder or developer.
Even frequently late or partial payments can result in businesses falling behind on their own bills & defaulting on suppliers. Cash flow issues can in turn prevent businesses from bidding on new projects due to the upfront costs associated with winning.
Late payments put Sub-Contractor businesses at risk however, withholding funds often works to the advantage of Developers & Builders.
Aside from lowering Sub-Contractor risk, all IPEX projects are tracked via the IPEX Mobile App which provides:
‘IPEX Ready’ Builders have an understanding of the IPEX Framework & have indicated that they are willing and able to operate within IPEX payment conditions. Check whether your Builder is ‘IPEX Ready’ or find a new Builder who is!
There is no cost to Builders for using the IPEX platform.
There is a small cost to Sub-Contractors which pays for the verification/onboarding process & payment protection software. IPEX cost to Sub-Contractors is 0.025% ($2.50 per $1000).
IPEX payment platform costs are shared by Developer & the awarded Sub-Contractors. Costs are extremely low considering the level of payment protection that IPEX provides to each.
The process by which the Sub-Contractor requests a progress payment remains unchanged. All standard QS approval checks & processes undertaken prior to payment approval also remain unchanged.
The process by which the Builder processes Sub-Contractor & Supplier payments is unchanged except for the fact that Builders will upload payment file from their accounting software directly into IPEX platform for payment. The IPEX platform prevents payment to anyone other than approved Sub-Contractors & Suppliers.
IPEX runs each Sub-Contractor registering to receive payments through a series of checks as part of the onboarding process. These checks are performed to help prevent the incidence of fraud. Checks include:
The Developer will be notified of any item that raises doubt re: status of a Sub-Contractor entity.
The Builder will be automatically paid the agreed prelim & margin as a function of the amount paid out to verified Sub-Contractors & Suppliers. For example, if the agreed margin is 5%, the Builder will be automatically paid $5K for every $100K paid to Sub-Contractors and/or Suppliers.
Standard operation of the IPEX platform allows Developers to see which Sub-Contractors & Suppliers have been paid & when, but not how much. Developers & Builders may agree to open book terms which would allow full transparency however.
Finally, should a Builder default on payment or enter administration, before practical completion of the project, ownership of the project trust account is transferred to the Developer, at which point all values will be visible & the Developer can then facilitate direct payment to approved Sub-Contractors & Suppliers.
Retention rates and caps are set through IPEX. Retention money is automatically collected at pre-determined rates (typically 10% of each payment with a cap at 5% of total contract value) & is set aside in a separate trust account. The Builder can see current retention balances but cannot use these funds.
Sub-Contractors can apply to have retention funds released when contract obligations have been completed. Assuming the Builder has not raised any dispute to this request within 14 days, the funds will automatically be released back to the Sub-Contractor.
IPEX’s platform provides an overview & history of all payments distributed & retention funds held across any IPEX project you are appointed to.
A Project Trust Account is an account through which all payments required by the construction contract are received and paid. Project Bank Accounts are now a legislated compliance requirement for many projects in Queensland & an increasingly used payment process on tenders nationally.
Unlike a standard project trust account, the IPEX Payment Platform has an additional layer of security, which prevents the use of funds for anything other than payment of approved Sub-Contractors & Suppliers. Whilst there are penalties associated with doing so, there is nothing physically stopping the improper movement of funds out of a regular project trust account, limiting the level of protection it offers Developers/Lenders & Sub-Contractors/Suppliers.
The Project Trust Accounts are held with Macquarie Bank.
IPEX is working with NCC Group, a global cyber security organisation, to ensure our technical solutions, processes, procedures and staff are at an appropriate level of cyber maturity. We will continue to enhance our privacy program to ensure our clients & customers receive the highest level of end-to-end security across the full data lifecycle, assured that IPEX is embedding privacy by design and default to meet and exceed any privacy obligations.
To learn more about NCC Group, please visit: https://www.nccgroup.com/au/
