Consultancy witholding 20% of each invoice in new contracts

[The Spartan]

Just been speaking with a friend who is working for a Government department via a well known consultancy. As part of the changes in response to the IR35 private sector rollout the new contracts that have been issued have a clause whereby 20% of each invoice is witheld till the end of the contract and release upon adequate performance. Has anyone else encountered this?

[eek]

Nice way to demonstrate financial risk (a minor CEST determining factor from memory) while potentially substantially increasing the consultancy's profits if the clause doesn't have clear cut success factors.

[ladymuck]

That would set my alarm bells ringing. I'd want to know exactly what "adequate performance" meant and how it was evidenced.

That sort of thing totally drives the wrong behaviour as you'd spend more time collecting proof than delivering value to the client.

[northernladuk]

That would set my alarm bells ringing. I'd want to know exactly what "adequate performance" meant and how it was evidenced.

That sort of thing totally drives the wrong behaviour as you'd spend more time collecting proof than delivering value to the client.

Absolutely. If they want to withhold it I'd want to see very clear definitions of what the criteria is for it to be released. Very clear and tangible activities should be listed so they can be assessed and if need be argued. A general 20% and we'll pay you at the end is not acceptable at all.

[eek]

Absolutely. If they want to withhold it I'd want to see very clear definitions of what the criteria is for it to be released. Very clear and tangible activities should be listed so they can be assessed and if need be argued. A general 20% and we'll pay you at the end is not acceptable at all.

The problem is - in a very wishy washy T&M agreement with flexible requirements - how do you determine prior to the contract beginning what the criteria is.

[The Spartan]

It does seem very vague on what adequate performance is, additionally it's only been dropped on several contractors I've previously worked with 2 weeks till their current contracts expire. Maybe it's a coincidence however it does seem the timing may benefit the consultancy in some capacity.

[mallisarealperson]

Shame they cannot get a 20% increase in case of inadequate performance by the end client

[northernladuk]

The problem is - in a very wishy washy T&M agreement with flexible requirements - how do you determine prior to the contract beginning what the criteria is.

Absolutely. I'd imagine in a vast majority of cases they'll honour it.. it's just that one that goes wrong and they are up the creek. Knowing the size of the client and the size of the consultancy will help. If they are both monsters they less to worry about than a small start up and two bit new consultancy.

EDIT : It's Public Sector isn't it and you did say well known consultancy sorry. That should give you a bit more confidence.

[JohnM]

Just been speaking with a friend who is working for a Government department via a well known consultancy. As part of the changes in response to the IR35 private sector rollout the new contracts that have been issued have a clause whereby 20% of each invoice is witheld till the end of the contract and release upon adequate performance. Has anyone else encountered this?

I have never come across this and would turn a gig down if it had this clause in it I have not done any public sector work for years anyway that is probably why I have not seen it

[eek]

I have never come across this and would turn a gig down if it had this clause in it I have not done any public sector work for years anyway that is probably why I have not seen it

You haven't come across it because it's brand new - as companies try to work out how to keep their contracts outside IR35 given the forthcoming rules...