With construction activity expected to increase across Ireland next year, how can contractors improve cashflow, strengthen supply-chain relationships and make their payment claim processes more efficient?
In a recent webinar hosted by the Construction Industry Federation (CIF) and Payapps, Paul Sheridan, CIF’s Director of Main Contracting, joined Fiona Graham, Product Specialist at Payapps, to discuss the challenges facing Irish contractors and the opportunities presented by digitalisation.
From the outlook for Irish construction to the Construction Contracts Act and the importance of efficient payment systems, here are some highlights from their conversation.
What’s the outlook for Irish construction, and why is cashflow so important?
Certain parts of the industry are definitely seeing a major pickup in momentum, particularly around utilities, water, energy, grid and transportation. There’s a lot of mega projects that are currently going through the tender process.
It’s likely lining up to be very, very busy in Ireland by 2027, and a lot of the projects that would be called critical infrastructure or megaprojects are likely to be on-site, or at least awarded.
Contractors still need not just cashflow, but they also need that pipeline of work – a clear pipeline of what’s coming so they can plan and invest in the necessary people, plant, equipment and technology for their business to enable them to win and deliver these projects.
However, as all contractors know, every project must perform on its own cashflow.
That’s why it’s critical for contractors to ensure that they know the form of contract they’re signing up to on the project, so as to understand the payment processes within that particular contract and have their systems aligned to them, and to ensure they can track their payments effectively and productively.
The last thing you want is your team chasing money every other day rather than executing the programme. You want your payment system to be able to tell you when to do that.
How critical is an efficient payment system to project success and managing the supply chain?
A big drive for the Government and CIF is innovation and productivity through digitalisation. If your payment system can be worked on paper, it can be worked through digitalised solutions.
You need to understand the processes of payment within the contract you’re in, and align your systems towards that. This will ensure your team and labour costs are focused on productive and value driven tasks, and that your payment claims are being processed automatically, with minimal human factor intervention.
Having an efficient system that gathers all that information in a dashboard – which can be communicated to the project team, client, supply chain and the company board – is very important.
If you can set that up, and each block in your supply chain is aligned to the way you’re doing it, and you’re working with them, you’re going to create a system where you’re protecting the entire project.
Good contractors, whether subcontractors or main contractors, understand that.
Protecting the entire supply chain not only protects their business in terms of getting off-site quicker, it also enables the formation of positive and trusting relationships with your supply chain, that you can take to the next project.
You then have confidence to go after more commercially attractive projects, because you have developed a reliable supply chain that is willing to work with your company.
But if you’re living in an ecosystem where you’re just trying to manually manage your cashflow on a reactive day-to-day basis, you’re going to find it very difficult to build a reliable supply chain that delivers quality for clients and offers higher margins of return on your investment.
How can the contractual and commercial realities of construction projects lead to payment delays or disputes?
When you’re procuring a construction service, or when a client is engaging a construction contractor, you’re inviting a service that lasts over a number of years. Naturally and very commonly, there are changes and things that happen during that time, and risk events manifest themselves on-site that may not have been foreseen.
While progress has been made on-site, there can be disputes about how progress has actually been achieved. Often, it’s not just the contractor and/or a subcontractor or a sub-subcontractor that’s making that judgement. It could well be the architect, or it could be the client. It could be the quantity surveyor. So there are different interpretations depending on the contract.
That’s why collaboration on-site is critically important. All parties should be able to agree on progress and what equipment has been purchased and/or installed. This should be done in a reasonable way through regular communication and dialogue, supported by robust payment systems.
Things happen on-site. There could be something discovered that requires a design change, which could lead to disruption to the site workflow, which can then impact where your resources are allocated on the project in order to maintain progress.
If a design change is required and an instruction given, this requires the contractor to go back in there and carry our remedial works, which can impact the entire supply chain on the project. This can lead to potential costs and delays, which in turn can lead to disputes over payment and the valuation of that particular instruction.
Ideally, you need to be able to track that in the system automatically, regularly and accurately. Records are a contractor’s best friend when it comes to getting paid.
You don’t want to be spending three days putting in a payment claim. You want to be able to do it in half an hour. Let the system do its work, with minimal human intervention to quality check for accuracy and approve the payment and/or claim
You have your evidence lined up within your system for why that payment is being requested, and it supports anything that’s subsequent to a discussion with the client, or anything that might further lead to dispute resolution mechanisms.
If you decide to use the Construction Contracts Act, you have a system that’s gathering the evidence to support your payment claim under the Act,or a refusal to pay a payment claim.
Has the Construction Contracts Act improved payment practices in Ireland, and where do challenges remain?
I think the Construction Contracts Act is really, really welcome. It’s something that the CIF was quite active in introducing and working with the Government to bring in.
There are certain aspects CIF wasn’t happy about.
First of all, main contractors are not protected by a 30-day payment period. They’re subject to whatever the client decides. But the subcontract supply chain is protected, and that’s important to protect the supply chain for reasons I explained earlier.
The right to adjudication remains, but what’s happened recently is that there have been several judicial decisions or rulings providing guidance on what the actual Act means. While some parties within the industry did not welcome them, many in fact welcomed the greater clarity provided by them and the true intent of the drafters of the underpinning legislation. These judgements, in a way, provide guardrails for the industry.
Many contractors and subcontractors are now risk-assessing their clients and the terms and conditions of their contracts. It’s important that SMEs ensure they have a contract in place, even if it’s a small contract, so that there’s minimum terms and conditions that can be relied upon if you make a notification under the Act for an adjudication.
However, this can be a time and system burden for many SMEs, who may not be in a position to execute this type of commercial governance and risk management process. Unfortunately, it is not uncommon for many SMEs to be literally pricing their next job at the kitchen table, and that’s a challenge that needs to be overcome.
Therefore, putting in place a payment process that can be digitalised – to track everything that’s going on during the project and with your supply chain – is advantageous and will help reduce the burden for SMEs managing their systems and risk. That’s where you need a really efficient payment system to capture and record what has been happening on that project, and your commercial position.
Nobody wants to go to adjudication, because it’s 28 days. It’s hard justice. You get a quick decision. And it’s always been expensive to go to adjudication because you have to get all your arguments lined up in one go. Therefore, if you do choose to go to adjudication, having a digitalised payment system will be more efficient in demonstrating your entitlement to a payment claim and thus, reducing your legal costs.
Have the industry’s commercial and financial processes kept pace with digitalisation on-site?
You see a spectrum of innovation and adoption of digital technologies across our industry.
Once you get below, say, the top 100 construction companies in Ireland, you’re into a very fragmented SME sector.
A lot of those guys are under stress to get the next project in to keep the cashflow moving. Often, they don’t understand whether they’ve made money on a project until the following financial year, and they look back on it.
What you really need is a system that can tell you whether or not you’re making money at the very end of the project. You need more real-time information.
The only way to do that, really, is through digitalisation, because you don’t have the time to be doing it manually anymore.
We all know that getting skilled staff is difficult in construction, and if we keep escalating and growing as an industry, we’re going to have to do more with less, and the only way to do that is through digital models.
If you look at the way the Government are procuring, they’ve launched eWorks, and eTenders. They’re digitalising, they’re pushing BIM, they’re mandating the use of BIM.
Let’s think beyond BIM as a model, a design system. It’s also an information management system.
Tracking your payments is purely information management. That’s what it is. Data goes in, data comes out.
Digitalisation is the way to go, but to digitalise, you need to understand your business.
You need to be able to map out your business. You need to know the type of clients you’re using and the type of contracts they’re using, and then you can digitalise, and that will reduce the pressure on you.
What support is available to help Irish contractors make the transition to digital processes?
We’ve lobbied hard for Build Digital to be much more industry-focused and less academic-focused, so it can provide short, sharp training programmes on how to implement last planner, lean principals, process design, business transformation, and how to digitalise processes in your company.
CIF has lobbied hard in budgets to use the National Training Fund to help digital adoption, AI adoption, amongst not just the big contractors but also the SME sector.
I’d recommend that contractors do look at what business supports are available to them with Enterprise Ireland or with the Department of Enterprise, Trade and Employment.
The CIF’s Construction 4.0 Committee – which has been driven by the excellence work of Denise Tuffy, CIF Director of Specialists – remains very active in trying to develop and support members in this area, and the Committee works collaboratively with the Government and its agencies to drive more support for industry.
Looking ahead to 2027 and beyond, what advice would you give Irish contractors wanting to strengthen their commercial performance?
One of the big issues we have, and it leads into payment issues, is that contractors often skip the commercial analysis of a project on its own merits and jump to pricing the bill of quantities.
Before they do that important step, we recommend that they consider setting up a basic governance model to support their evaluation of the project they are looking at tendering for.
This is not about pricing how to do the job, but involves look at it strategically and in terms of what’s unique about the project.
Think about the site, think about the client, the design team, your supply chain, your experience, your insurance policies, the terms and conditions, the risk transfer. Think about the type of design that’s required in it and whether you can perform. Ask yourself, have I got my A-team available?
You need to look at what risk has been transferred to you, and in particular what design has been transferred to you.
If you’re going to be managing more risk and more design issues, you’re going to have more processes involved, more interactions with design houses and the client, and therefore you need to track more payments.
The only way you’re going to be able to do that is good governance, good systems.
Understand the process within your business and digitalise as much as you can.
The discussion highlighted that improving payment claim processes isn’t simply about reducing administration. It’s about giving contractors greater control over cashflow, managing commercial risk and building stronger supply-chain relationships – all increasingly important as Ireland’s construction industry prepares for growth.
Seeing digital payment claim management in action
Following the discussion, Gavin Crombie, Head of Pre-Sales, demonstrated how Payapps helps contractors manage payment claims from submission through to assessment and approval.
The demonstration covered how the platform enables contractors and subcontractors to work from a consistent set of information, with payment claims, variations, supporting documentation and approval workflows managed centrally.
It also highlighted how automated reminders, audit trails and reporting can help commercial and finance teams improve visibility, reduce administration and maintain greater control over the payment process.
Are you ready to improve your payment claim process?
As Ireland’s construction industry prepares for increased activity, having the right processes and systems in place will become more important.
Whether you’re looking to reduce manual administration, improve financial visibility, or create a more consistent process across your supply chain, Payapps can help.
Book a demo to see how Payapps could work for your business.
