Have you ever been a broke down contractor?...
What does it mean with broke down contractor? it is very common that we here that contractor complaining that they cant bring some more construction material. this is not because that they do not have even a single sen but it merely because what they have is just enough to run the company. Most of the time construction payment is base on monthly or progressive payment certified by the client or their representative. However there is cases that after the evaluation and verification process after contractor submit their claim, contractor had being paid very late. some time they only received their payment after 3 months or even more. with this view, lets we make some calculation;
lets say, contract sum = $50M
construction period = 12months
Average (prorated) spending /months = $50M/12 = $4.167M
Hence total spending for 3 months = 3 X $4.167M =$12.5M
let say, Evaluation on work done take 2 weeks after progress claim submission.
therefore spending for 2 weeks =( $4.167/4weeks) X 2 weeks = $2.08M
The total spending from the date contractor submit their claim until they received their payment
will be;
=3 months spending + 2weeks spending = $12.5M + $2.08M = $ 14.58M
With that you have to fork out $14.58M!!!!!!!! its is a big sum of money.
Looking at this scenario, It is very important that a proper financial planning being carried out for every construction project.
This scenario is only for one project. what if you have 2 or even more project in hand !! It can be a deadly disaster...
Looking into this situation, if contractor is now well prepared with the financial planning when they are participating in a quotation or tender it will be a trap for your self...you will be one of the broke down contractor or even a bankruptcy!!!!!!!!!!!!
Construction is not for those that are not prepared to be a broke down person.
