We were engaged by a large listed property company to undertake a detailed supplier and financial review of a building and construction company that had been selected for the development of a major building contract in Victoria.
Background
The client was concerned with the current economic conditions and the fact that the last builder selected for the project had collapsed into voluntary administration. The client was seeking greater insight into the financial position and capacity of the builder to assess its capacity to deliver on the project.
How did we assist
We investigated and provided comments on the following:
- Sub-contractor concentration risk and types of sub-contractors.
- Level of due diligence conducted by the contractor on its sub-contractors and suppliers.
- Compliance with payment times reporting.
- Trading terms in place with major sub-contractors.
- Aged creditor reports identifying sub-contractors.
- Details of historical and current disputes with subcontractors.
- Public searches on top 20 sub-contractors to identify any insolvency history or insolvency processes commenced.
- Any visible contagion risk to these parties from recent large failures (to the extent identifiable).
- The current and large projects pipeline with a focus on the financial implications and whether the builder had capacity issues to deliver on the client’s forthcoming project;
- A review of the contractors overall financial position and performance;
- The key industry risks and how they could affect bid capacity of contractors; and
- The contractors general compliance with statutory obligations.
Outcome
The client utilised our report and the project was able to commence with the knowledge that the builder’s financial position and capacity to complete were sound.
