Frequently Asked Questions

We are a subcontractor on a NEC3 Term Service Contract (TSC) using option A (priced contract with price list). The contractor has flowed down the head contract to us, which has 30-day payment terms. Unfortunately, it consistently does not pay us on time and regularly takes 100 days or longer, having adopted a ‘pay-when-paid’ attitude. What options do we have?

Presuming you are on a standard TSC, the payment terms and are set out in clauses 51 and 52. You get paid by reference to the assessment date, see clause 50.1. The service manager (in your case the contractor) must certify the amount due within one week of each assessment date, see clause 51.1. Payment should then be made within 3 weeks of each assessment date, unless a different period is specified in the contract data, in which it should be paid by that period, see clause 51.2. If your contractor does not pay within that period, it has to pay you interest on the delayed payment, see clauses 51.2 to 51.4.

So, in your next payment application you can include the interest that has accrued on all your overdue payments. This should be included in ‘other amounts to be paid to the Contractor’ in the second bullet of clause 50.2. If the contractor does not pay that, you can initiate the dispute resolution process set out in your contract, which should be either W1 or W2, and will most likely start with adjudication.

Finally, if the contractor does not pay you any amount due within 11 weeks of the date you should have been paid, you are entitled to terminate your obligations to provide the service, see clauses 90 and 91.4. However, this can be a risky strategy and you must be sure of your grounds for doing so and scrupulously follow the processes and procedures in clauses 90 to 93. It is prudent to get legal advice before deciding to terminate.

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