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What to do when the deliverables have been completed, but the client has not paid?

As we all know, one of the challenges of being an Independent Consultant, Contractor or Service Provider, is the uncertainty inherent in that way of life. There is considerable stress around securing the next contract: to be able to pay the bills, keep a roof over our head, pay staff, send our kids to school, etc. But what happens when after you have gotten the contract, submitted all of the deliverables, but you have not been paid? That was a situation recently shared by a Project Calls subscriber:

Been a Caribbean consultant for many years but recently have been seeing a slowing down in the effort to pay on completion of deliverables by some countries.  An associate was recently told that the final payment (nearly US$10,000.00) cannot be made as “there are no more funds”.  What can the individual do in these circumstances?  A contract was in place.

1.  Review to the contract and procurement framework

With regard to the situation communicated, and in the first instance, we recommend revisiting to the contract and the overarching procurement framework for guidance. Most Caribbean governments have a comprehensive set of guidelines and even legislation in place to manage their procurement processes. Large private corporates are also likely to have detailed policies in place. The challenge tends to be with smaller organizations, where relatively brief contracts are the norm.

2.  Negotiate with client

Although a client may say that they cannot pay you, that does not automatically mean that you should just write off the outstanding sums and walk away. Consider options that can be explored with the client to allow you to recover what is owed to you. For example, could a payment plan by installments, rather than just a single lump sum, work? Could you be amenable to payment in kind? If there is agreement on a way forward, do remember to ensure that it appropriately documented and signed.

3.  Refer to oversight committee

For projects for a government/public institution, there could be scope to refer the matter, or to seek recourse through an oversight group, such as a Tenders Board. Most Caribbean countries have such as unit, which monitor tender processes. However, many are also empowered to weigh in after the contract has been awarded. Further, with all of the effort across the region to reduce corruption in public procurement, increasingly, governments are assigning personnel (such as the Office of the Contractor General in Jamaica) to monitor their contracts.

On the other hand, an oversight body for private contracts is generally non-existent. However, depending on the size of the client and/or the industry in which it operates, it might be a member of a professional/business association. In some instances, matters related to unethical practices and behavior by its members might be something the association might wish to know, and it could be in a position to intervene.

4.  Seek legal advice

Finally, there is always option to get one’s lawyers involved. Depending on the circumstances, it may be necessary in the first instance to better understand the arguments/case that could be successfully made, and the recourse available, before the matter is escalated (with legal action).

Off the bat, questions could be raised about whether the client acted in good faith. For example, did client know it was unable to pay, but failed to communicate that to the consultant, but yet allowed him/her to continue with the work?  At what point did the client know that it was unable to pay? Also, recognizing that the work was delivered, is the client not prepared to offer a payment plan or some other alternative, or does it just expect the consultant write off the outstanding amount?

Additionally, advice could be sought on matters related to ownership and intellectual property. Typically, consultants produce work for their clients for an agreed fee. On submission of all deliverables and outputs, the consultant gets paid all that was agreed. Further, depending on the contract, the client either owns the material produced outright, or it is implied that although the material is recognized as still belong to the Consultant, the client can use it as it sees fit. However, if the consultant has not been paid in full, what right does the client have to the deliverables?

Some final thoughts

Typically, the successfully delivery of the specified project outputs requires considerable effort on the part of the contracted party, who is out of pocket, not only with regard to time and effort, but also with respect to funds advanced (for reimbursables or if goods/material had to be procured). Although there is always the option to write off outstanding payments, that posture might not be tenable, based on the amounts involved and/or how frequently such delinquencies occur.

In the event clients are no longer making the effort to pay all monies they owe – which hopefully our poll will either substantiate or refute – it may mean that contracted parties may need to be more proactive and vigilant from the outset, and be clear upon their options for recourse as needed.

Let’s hear from you. What advice would you give?

Image:  Nick Youngson, Alpha Stock Images