Introduction
There is a popular myth that construction projects are funded by developers.
They are not.
Projects are funded mostly by subcontractors and to some extent by builders.
How is the funding broken up?
Builders tend to provide concrete, reinforcing steel, scaffolding, cranage and hoisting.
Unless a subcontractor enters into a labour only contract which is usually the form of contract for concreters and steel fixers, subcontractors provide the balance of goods, materials, installation and services.
The reality
The reality is that nothing arrives on site or is installed on site without a subcontractor incurring a debt to finance the delivery and installation on site except in circumstances outlined above where the materials are provided by the builder.
That funding provided by subcontractors is secured over assets held by subcontractors such as the family home.
Further sting in the tail
The funding of projects by subcontractors is amplified by the operation of the retention monies system.
It is a myth that retention monies are simply an amount that is added to the subcontractor’s quote for the work.
Retention monies are not an add on. They are in fact a deduction from the value of the product supplied by the subcontractor and the cost of installation.
Therefore, the developer does not have to pay as much as it should for the work completed as the project progresses.
The advantage to the developer is that it can sell off the project or gain income from it before the developer is required to pay the retention monies into the system. Therefore, the developer most definitely did not fund any of that component in any way.
Click here for a discussion as to why retention monies should be abolished.
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