Deliver the contract and get paid

Winning the contract is only half the journey. It is during delivery that a small firm makes or loses money, most often because of work done without a written order or a payment that runs late. This article follows the contract from notification to the last guarantee released. Your contract prevails over what follows, so read all of it before you start.

From notification to start of work

The order and names of these steps change with the country and the buyer, but you will find them almost everywhere.

1. 1

   Notification

   The buyer officially tells you the contract is awarded to you. The time for what follows often starts on this date. Keep the proof of receipt.

2. 2

   Signature and approval

   You sign the contract. Depending on the amount and the country, an authority must still approve it before it takes effect. Reread the amounts, time limits and attachments before signing.

3. 3

   Performance guarantee

   You hand it over within the time set. Delaying this document can lose you the contract. See Bonds and guarantees.

4. 4

   Registration

   Where the rules require it, the contract must be registered with the tax administration, which has a cost. Without this, your payments may be blocked.

5. 5

   Start order

   The start order (ordre de service) is the written instruction to begin. Your delivery period generally runs from its date, or from the date it states. Do not start without it, and note the date you received it.

6. 6

   Advance payment

   If the contract provides for an advance, ask for it as soon as you can with the required guarantee. It helps fund the start, but do not count on it arriving at once: plan to be able to manage without it.

During delivery: everything in writing

Your best protection is a complete record. When a disagreement breaks out, what is not written does not exist.

Keep the diary. On a works site, the site diary records each day's workforce, equipment, weather, deliveries, visits and problems. For supplies or services, keep the equivalent: delivery notes, attendance sheets, meeting notes. This record is what later shows that a delay came from the buyer and not from you.

Never work without a written order. An official on site asks you for extra work, or a change of model. Without something in writing from the person with the power to order it, you may never be paid for that work, even if it was done in good faith. Reply politely, and ask for the written order or the amendment (avenant, the act that changes the contract) before you begin.

Report problems straight away. Wrong drawings, access to the site refused, late payment: write as soon as the problem appears, asking for an extension of time if needed. Many contracts set a limited time for making claims.

Watch the penalties. A late delivery penalty (pénalité de retard) is usually calculated on the length of the delay and deducted from your payments, sometimes up to a cap beyond which the contract can be terminated. It applies to delay for which you are responsible. Hence the value of the diary, and of written requests for more time for anything that does not come from you.

Get acceptance in stages. When the contract allows it, have each delivered part or completed phase recorded in minutes. This triggers payments and limits arguments at the end. On a site, have work that will be covered up inspected before it disappears.

The payment chain

In a public contract, your payment generally passes through several hands, and each step can stall. Understanding the chain tells you who to talk to.

1. 1

   Your request

   An invoice or, for works, a payment certificate (décompte), the dated statement of what has been done and what is owed. Attach the documents the contract requires: acceptance minutes, delivery notes, measurement sheets.

2. 2

   Verification

   The supervising engineer, inspector or technical department checks the quantities, then the buyer certifies that the work was done. This is where most returns and corrections happen.

3. 3

   Payment order

   The competent authority orders you to be paid (ordonnancement). It gives the formal instruction to the accountant, with the amount and the payee.

4. 4

   Payment

   The public accountant, or the project's finance department, makes the transfer after its own checks and depending on available cash.

On a funder-financed project the chain often goes through the project unit, and it may need action by the funder or the State for their respective shares. An international organisation or a private company has its own circuit, usually shorter. The contract or the finance department will tell you.

Why it stalls

The most common causes are an incomplete or non-compliant invoice, a signature waiting because someone is away, a budget that is not available, tight public cash, a change of official, or a funder's money that has not arrived. You cannot solve everything, but you can avoid the first two.

How to follow it

• File each invoice with a copy, and have it stamped or signed. This receipt proves the date from which any delay is calculated.
• Keep a simple table: invoice number, amount, filing date, stage, person to contact, date of the last reminder.
• Follow up regularly and courteously at each stage of the chain, and confirm in writing what you are told verbally.
• If a document is missing, correct it the same day: any delay on your side pushes your payment back.

Late-payment interest

Where the applicable text or the contract provides for it, payment after the set period gives a right to late-payment interest (intérêts moratoires), which is interest owed by the buyer for its delay. This right does not exist in the same way everywhere, and you often have to claim it in writing. Many firms hesitate to do so. At the very least, keep the proof of dates, which leaves you the choice.

🇧🇫The rule in Burkina Faso

Advance payment

• A start-up advance may be granted, defined in the tender file. Caps: 30% of the initial contract amount for works, 20% for supplies, equipment, ordinary services and intellectual services. It must be covered 100% by a repayment guarantee from an approved bank, insurer, financial institution or microfinance institution. It is paid after the contract is signed, within 45 days of acceptance of the request (art. 197, 171 and 204).[2]unofficial source
• No advance for contracts below 20 million F CFA, except for SMEs whose turnover excluding tax is below 50 million F CFA, which are entitled to one whatever the amount. The advance is repaid by deduction from progress payments, from 30% completion up to 80% (art. 197 and 198).[2]unofficial source

Retention

• When the contract has a warranty period, the performance bond is released only once a retention or a completion guarantee of at most 5% of the contract amount (including amendments) is in place. The retention may also be withheld from payments, up to 5% of the sums paid, as set by the specifications. It is refunded, or the guarantee returned, at final acceptance (art. 170).[2]unofficial source

Payment

• Contracts are paid through advances, progress payments and a final balance. Progress payments are due for contracts with an execution period of at least 3 months, on proof of work done or goods delivered. The buyer pays advances within 45 days of accepting the request, progress payments within 60 days of accepting the invoice and the balance within 90 days of accepting the invoice. If late, default interest is due, at the BCEAO (West African central bank) legal rate plus one point, on the holder's request. Approved subcontractors may be paid directly (art. 199, 204 to 206).[2]unofficial source
• Every contract must provide for late-delivery penalties, applied without prior notice. They range from 1/5000 to 1/2000 of the amount excluding tax per calendar day for works, and from 1/2000 to 1/1000 for supplies, ordinary services and intellectual services, capped at 5% of the amount excluding tax. At the cap the buyer may terminate. The holder may terminate if non-payment makes performance impossible and a request stays unanswered for at least 3 months. The holder may assign its claim to a bank or pledge the contract (art. 178, 191 and 207).[2]unofficial source
• An intellectual-services report is deemed validated if the buyer does not validate it within 30 days of receipt. Contracts of 18 months or more include a price revision clause. For fixed-price contracts, the holder may request updating if the bid validity period has expired without an order of service or if circumstances upset the economic balance of the contract (art. 183 and 185; report validation: acceptance section).[2]unofficial source

Financing the wait

The need for cash is one of the first dangers of a public contract for a small firm. Plan for it when you price, as Price your financial bid shows, and talk to your bank before you sign. Several tools exist depending on the bank and the country.

• An overdraft or cash facility: short-term credit attached to your account, to cover the gaps between your spending and your receipts.
• A pledge of the contract (nantissement de marché): you give the bank a right over this contract's payments in exchange for credit. It often requires payments to go through your account with it, and the buyer often has to be informed in the prescribed form.
• Invoice discounting or assignment of a receivable: the bank or a specialist firm advances you the amount of a validated invoice, less a fee, without waiting for the buyer to pay.
• Supplier credit: a payment period negotiated with your suppliers. It is not a bank product, but it is often the first lever.

Always calculate the cost and compare it with your margin. Credit that is too expensive can swallow the contract's profit.

Acceptance and release of guarantees

For works, the end of a contract usually comes in two stages. A simple supply may have only one.

Provisional acceptance (réception provisoire). The buyer records that the work is complete, with minutes and possibly a list of snags, the defects to fix. It generally stops the risk of late penalties and opens the warranty period. Request it in writing as soon as you are ready, and clear the snags without delay.

Final acceptance (réception définitive). At the end of the warranty period, if defects have been fixed, the buyer issues final acceptance. This is generally when you get back the retention and the remaining guarantees.

These releases do not always come by themselves. Write to request the release (mainlevée), the act that frees the bank, and the balance of the retention. A forgotten guarantee keeps costing you fees and keeps your money blocked.

Your next reference

At acceptance, ask for a certificate of good performance (attestation de bonne exécution) signed by the buyer, with the subject of the contract, the amount, the dates and an assessment. This is what will let you prove this reference in your next bid, as Write a technical bid that gets through explains. The longer you wait, the harder it gets to obtain, because officials move on.