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The Security Amount held is determined by the total Contract Value - with the proportion of the total contract value held as security decreasing as the Contract value increases.
This is because with lower value construction contracts, the contract works should, if properly and efficiently carried out, be completed in a relatively short period of time. In some cases that will be less than one month. In such a case the risk to the contractor of non-payment due to the default by the Owner is considerable because the works would be completed before any payment is due under the contract. Under the BUILDSAFE® Security of Payment Scheme, the Contractor is protected from significant loss on smaller jobs because BUILDSAFE® holds a large percentage of the Contract Price and will release that to the Contractor upon proper completion. The Owner is also protected by not having to pay the Contractor a large deposit to cover the Contractor’s risk at such time as there is little or no value of work in place. On the other hand, the greater the value of the construction contract, the longer the period over which the contract works will be undertaken and over which progress payments will and must be made monthly to ensure cashflow for the contractor. In such a case, the risk to the Contractor of loss through nonpayment is relatively small during the early stages of the project with the risk progressively getting greater as the project nears completion. On the proper completion of the works, the contractor will receive the Security Amount from BUILDSAFE. Once again the Owner is protected by not having to pay the Contractor a deposit at the start of the project to cover the Contractor’s risk at such time as there is little or no value of work in place. It can be readily seen that the Scheme works fairly and for the equal benefit of all parties to a construction contract. To calculate how much security will be required for your building project please refer to our calculator. |
