In this section:
- Variation payment procedures
- Outstanding retention
- Non-compliance with OGC Fair Payment Charter
- Guidance and support
Proposed price reductions
Notification of price reduction has been received
If you have received notification from a contractor that he intends to reduce the price of your works which you have already started or for which you have agreed a contract, send letter 3a - Proposed price reduction telling him that he cannot unilaterally reduce the contract price without your agreement.
Although it would be highly unusual, it is advisable to check your contract before sending the letter to make sure it does not include an express provision which would allow the contractor to change the terms of your contract including the price of the works without your agreement.
Letter
3a - Proposed price reduction
Next steps
Price reduction is made
If the contractor ignores your letter and makes deductions on the price of works carried out under your agreed contract, you can use adjudication to get the monies owed to you.
In an adjudication in February 2008 between Southern Glass Services, a specialist glazing contractor, and housebuilder Barratt Southampton, it was found that Barratt had neither the contractual right nor the evidence to take a 3% discount over a 2-year period and was ordered to pay back the deductions plus interest.
Like Southern Glass, you can go to adjudication to recover any unauthorised deductions.
How to get it right next time
1. Check your contract
To avoid any argument about the price of your works, you should always check that the contract documentation reflects the agreement you have reached and make sure it is signed before you start work on site. This way there can be no dispute at a later date about what the prices were.
You should also check the contract to make sure there are no clauses which would allow the contractor to change the terms of the contract (including the price of the works) without your agreement.
2. Record all communication
It is good practice to record all communication regarding your work, so that, if the contractor does try to change what you have agreed such as reducing the price, you have something in writing to fall back on. This includes telephone calls – make a note of the date and time, the name of the person that you spoke to, and the details of the conversation.