Signs that indicate that the contractor may be financially unstable include:
- submission of a claim followed by a request for payment in a reduced period (maybe due to pressure from creditors)
- overclaiming for work not yet complete or materials on-site but not fixed (particularly worrying where overclaiming occurs regularly)
- subcontractors working more slowly than expected or not coming to site (perhaps they are not being paid)
- job progress is generally unsatisfactory.
Should these or other signs of financial problems appear:
- Advise the owner. If a meeting is called with the owner and the contractor, discuss only the facts. You are entitled to express your fears to the owner confidentially, but drawing an inference, in a meeting involving third parties, that the contractor is in financial difficulties, may be defamatory.
- When issuing certificates for payment, ensure that nominated subcontractors are aware of amounts certified for them. You will soon be informed if payments are not being passed on.
- Follow the contract to the letter and keep notes of all telephone calls, meetings and instructions.
When the problem is not quickly resolved or the contractor appears to be on the brink of insolvency, advise the owner to consult a lawyer who is experienced in building matters.
Identifying financial problems is not really part of the job that architects are paid to do, but is frequently performed as a service to owners and also to keep the job moving. Giving legal advice is not part of the architect's task – do not do it. In the case of a contractor's insolvency, whether threatened or actual, the owner should consult a lawyer for legal and tactical advice.
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