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Credit has always been a huge risk to the HVAC industry, says South African Refrigeration and Air Conditioning Contractors Association (SARACCA) Director, Barney Richardson. He adds that an increasing number of HVAC contractors report a similar difficulty when entering into a contract with builders: Obtaining their payment guarantee.

According to the JBCC Nominated/ Selected Subcontract Ed 6.2; the contractor shall 11.5.1. Provide to the subcontractor a guarantee for payment equal to ten per cent (10%) of the subcontract sum where required in the accepted tender (CD) within fifteen (15) working days of acceptance of the subcontractor’s tender.

Payment guarantees essential to HVAC industry

However, when HVAC contractors request a payment guarantee from the builder, as is expected, they are often denied the request and expected to carry the cost risks of completing the installations without receiving payment on time or any form of payment guarantee. “It should be noted, it is not the responsibility of the HVAC contractor to fund the projects due to late payment of claims,” Richardson says.

“Based on a logical risk-analysis, a HVAC contractor should not enter into a contract which provides no payment guarantee. However, it has been reported that when one contractor insists on a payment agreement, the project manager simply moves on to the next contractor who is willing to complete the work without a guarantee and risk not being paid on time. The contractor can either accept the risk of signing a contract and completing the work at risk and hoping to get paid, or reject the contract and be victimised and lose out on future work. Could this be contractual bullying?”

He points out that competitiveness is healthy in every industry, but that poorly principled practices can jeopardise HVAC contractors by putting unnecessary risks their way. “The JBCC form of contracts are there to protect all parties and must not be modified to the benefit of one against another. For the growth and success of the HVAC industry, the contractors should be running profitable and reasonably safe businesses.”

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