The Construction Contract Patricia Haywood

Episode 9
Summary
In the video, Patricia discusses parent company guarantees - documents where a parent company promises to step in if their subsidiary construction company breaches a contract or goes insolvent. She notes that developers increasingly demand these guarantees upfront, seeing them as providing security, but questions whether they are really worth the hassle. 
Patricia explains what parent company guarantees are, why developers want them, and their limitations - they rely on the financial stability of the parent company and don't provide all the protections developers presume. 
She advises understanding their purpose in your contracting strategy. Patricia also covers alternatives like comfort letters if a contractor's parent company refuses to provide a guarantee, and questions whether the proliferation of guarantees helps or harms construction groups.
Takeaways:
Parent company guarantees provide a sense of security for the developer/employer, but they are not an absolute guarantee. The financial stability of the parent company is crucial - if the parent company is not financially strong, the guarantee may not be worth much.
 
Parent company guarantees and indemnities have different purposes. Guarantees only kick in if the subsidiary defaults, while indemnities are primary obligations independent of the contract. It's important to understand the difference when drafting these agreements.
 
If the contractor refuses to provide a parent company guarantee, alternatives like comfort letters or letters of support can provide some assurance, although they lack the legal force of a guarantee. Weighing the benefits against the challenges of obtaining a guarantee is an important part of the negotiation.
In this episode:
00:00:08 What are Parent Company Guarantees?
00:00:39 Parent Company Guarantees
00:04:19 Should you add a parent company guarantee to your contract?
00:08:18 What is a Parent Company Guarantee?
00:17:14 Parent Company Guarantees
00:21:22 Parent Company Guarantee and Indemnity
00:29:46 Democracy in the Age of Trump

 
Quotes
"Gone are the days when the contract would say may. We'll say an employer may ask for a parent company guarantee." - Patricia Haywood
"In today's market, there is a change. People want the parent company guarantee to be executed at the same time that they execute the contract." - Patricia Haywood
"I know of some developers and employers who will go far to get a parent company guarantee and I'm wondering, how far will you go? Would you pay to have a parent company give you a guarantee?" - Patricia Haywood
 
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Episode 8
In the episode, Patricia Haywood, a construction lawyer, discusses the unique challenges and opportunities she experienced as a woman in the male-dominated construction industry.
Detailing her journey, Patricia shares how she entered the industry, the surprising scope of career opportunities in construction, and the joy and satisfaction she discovered in contributing to various projects.
She also reflects upon the industry's issues, such as the low percentage of women in high-ranking or decision-making roles and the sexism faced by women at the workplace.
Patricia talks about 'Women in Construction Week', a dedicated time to acknowledge and appreciate the contributions of women in the sector while also discussing necessary changes for making the environment more welcoming for women.
Timeline
00:00 Introduction and Women in Construction Week
02:31 My Journey into Construction
04:14 The Beauty and Opportunities in Construction
05:41 My Personal Transformation through Construction
15:13 The Challenges of Being a Woman in Construction
18:52 The Importance of Women in Construction Week
21:13 Conclusion and Farewell
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Did you know that you can find me around the Internet?
Go and support me here:
Medium: https://medium.com/@patricia_10040
Medium: https://medium.com/the-construction-contract
Youtube: https://www.youtube.com/@TheConstructionContract
Linkedin: https://www.linkedin.com/in/patriciahaywoodesq/
Website: https://www.haywoodcommercial.co.uk/
And when I am not on the Internets writing or speaking my random thoughts, you can find me in the real world living my best life over at Haywood Commercial.
 

Episode 7: Patricia illuminates the pivotal role of risk management in projects of all sizes, likening risk allocation to the equitable division of a pie. She underscores the importance of ensuring each stakeholder receives a proportional slice reflective of their risk-handling capabilities. Patricia also posits that mastering risk allocation is a continuous journey of growth and adaptation, rather than an inherent skill.
The episode outlines key steps for achieving balanced risk allocation, including comprehensive risk assessments, matching risks with the party best equipped to manage them, and engaging in collaborative negotiations.
Patricia emphasises the need for informed decision-making, seeking expert advice, staying flexible, knowing your risk tolerance, and learning from each negotiation to enhance future contracts. The aim is to secure balanced contracts that lead to cooperative relationships and successful project outcomes.
Takeaways:
Mastering risk allocation in construction contracts is not an innate ability but a skill that requires continuous learning, practice, and refinement. 
A successful risk allocation strategy involves distributing risks according to each party's ability to manage them effectively. By ensuring that risks are assigned to the parties best equipped to handle them, construction projects can achieve more cooperative relationships, leading to better overall project outcomes.
Adopting a strategic approach to risk allocation, including thorough risk assessments and aligning risks with expertise, is crucial. Collaborative negotiation, informed decision-making, and flexibility in discussions are important. This approach not only helps in achieving a balanced contract but also maintains positive relationships between parties, laying the groundwork for future project successes.
In this episode:
[01:02] The episode's focus is unveiled: mastering risk allocation in construction contracts to enhance profit margins and achieve sustainable cash flow, targeted at construction CEOs.
[01:33] Patricia explains risk allocation using the analogy of cutting a pie, emphasising the need for a balanced distribution among contract parties.
[02:00] The concept of mastery in risk allocation is introduced, stressing it as an ongoing process of improvement rather than an innate skill.
[03:26] The impracticality of equal risk distribution in construction contracts is discussed, with an emphasis on tailoring risk allocation to each party's capacity.
[05:11] Patricia outlines the steps for mastering risk allocation, beginning with observing and understanding the game being played in contract negotiations.
[06:16] The objective of playing the negotiation game is clarified: not to win at all costs, but to achieve a balanced construction contract.
[08:26] The strategic approach required for balanced risk allocation is detailed, including understanding project risks, their distribution, and negotiating collaboratively.
[11:44] The necessity of a practical, not just legal, approach to risk allocation is highlighted, alongside the importance of expertise and informed decision-making.
[17:25] A thorough risk assessment as the first step in balance risk allocation is discussed, emphasising the need to evaluate all potential risks and their implications.
[20:31] The episode concludes with the importance of playing the negotiation game wisely and nicely to maintain relationships and achieve project success.
[24:22] Patricia wraps up the episode by summarising the importance of mastering risk allocation and how Haywood Commercial can assist in navigating these challenges.

Resources
Haywood Commercial UK
Connect with Patricia on LinkedIn
Connect with Patricia via Email
Quotes
"I like to think [risk allocation] about it as cutting up a pie. That's how I often see it in my mind; it is a pie and we're cutting it up and we want to ensure that we give the right size pie to each party to that con

Episode 6 - In this episode, Patricia Haywood of Haywood Commercial tackles the critical challenge of payment defaults in construction, a sector where even large companies face the threat of financial instability with profit margins dipping below 2%. She highlights the importance of safeguarding finances through diligent client evaluation, contract review, and the use of escrow accounts to protect funds. 
Patricia offers actionable strategies for improving cash flow, such as milestone payments and late payment penalties, to help construction CEOs navigate the industry's financial risks. Her insights are aimed at empowering leaders with the tools for building a financially secure and reputable business in the face of industry challenges.
Takeaways:
Evaluate client creditworthiness and scrutinize contract terms to mitigate payment risks.
Utilize escrow accounts and milestone payments to enhance cash flow and financial stability.
Implement late payment penalties to ensure timely compensation and safeguard profits.
In this episode:
[00:00] Introduction to the high risk of non-payment in construction and the critical need for companies to understand how to mitigate this risk, with insights from Patricia Haywood's expertise.
[00:29] Highlighting the issue of dropping profit margins in construction, where even large companies face profits below 2% despite significant turnovers.
[01:00] Patricia shares alarming statistics on the financial performance of construction companies, demonstrating the commonality of low gross profits relative to high turnovers.
[01:38] The importance of managing payment risk in construction is emphasized, along with practical advice on how to prepare and protect your business from these challenges.
[02:12] Patricia Heywood introduces herself, her background, and the mission of her firm, Haywood Commercial, aimed at helping construction CEOs leverage contracts for better financial outcomes.
[03:00] Key strategies for identifying and managing payment risks, including assessing client creditworthiness, scrutinizing contract terms, and understanding project viability.
[04:29] Detailed advice on mitigating payment risks through clear payment terms, the use of escrow accounts, milestone payments, and implementing late payment penalties.
[06:19] The significance of regular invoicing and disciplined financial management to ensure timely payment and maintain cash flow.
[08:28] Discussion on the importance of reviewing third-party contracts and funding documents to assess the financial health and viability of construction projects.
[10:58] How managing and mitigating payment risks leads to improved cash flow, reduced financial stress, and a stronger business reputation in the construction industry.
[19:34] Closing thoughts on the critical nature of financial management in construction, beyond just project management, to prevent businesses from going into administration.

Resources
Haywood Commercial UK
Connect with Patricia on LinkedIn
Companies House
How Finance Works: The HBR Guide to Thinking Smart About the Numbers Paperback
Quotes
"In construction, financial management is important, if not, more important than project management." - Patricia Heywood, Host
"And if you can play the game in such a way that you pay your subcontractors, you know, you pay your consultants, people aren't out here on social media naming you and shaming you. It's going to help to build your credibility in the market. People will want to work with you." - Patricia Heywood, Host
"The moment you stop cash flow, that's when you know your business is going to start going through those stages of financial distress." - Patricia Heywood, Host

Episode 5 - Patricia Haywood, founder of Haywood Commercial, a rapidly expanding construction contract advisory firm in London, addresses the critical issue of construction companies going into administration on her podcast, aimed at CEOs in the construction sector. Highlighting the current distress within the industry, where approximately 12% of UK construction companies, equating to around 80,000 businesses, face financial difficulties due to factors like high interest rates, inflation, cash flow problems, and low profit margins.
Patricia discusses the process and implications of administration, where a licensed insolvency practitioner, referred to as Mary, steps in to potentially rescue the business. She advises subcontractors on immediate actions, such as contacting the insolvency practitioner, understanding their rights under the Corporate Insolvency and Governance Act, and emphasizes the importance of maintaining thorough documentation and a strong understanding of their contracts to navigate through these challenging times efficiently.
Takeaways:
About 12% of UK construction companies are in financial distress, influenced by high interest rates, inflation, cash flow issues, and low profit margins, impacting both small and large businesses.
When a construction company enters administration, a licensed insolvency practitioner is appointed to manage the company with the aim of rescuing the business, involving a statutory moratorium to provide breathing space for strategic planning.
Subcontractors should immediately contact the insolvency practitioner, ensure all documentation and invoices are in order, and familiarise themselves with the Corporate Insolvency and Governance Act to understand their rights and obligations during the administration process.
Companies should conduct due diligence on partners, maintain robust payment processes, and build a cash reserve to mitigate the impacts of potential administration scenarios, emphasising the need for proactive financial and contract management.
In this episode:
[00:36] Patricia Haywood introduces herself as the founder of Haywood Commercial, sharing her background as an award-winning entrepreneur, lawyer, and her extensive experience in the construction industry.
[01:08] The focus of the podcast is revealed: leveraging construction contracts for improved profit margins and sustainable cash flow, specifically aimed at CEOs in the construction sector.
[01:40] Discussion on the distress within the UK construction industry, with about 12% of companies facing financial difficulties, translating to roughly 80,000 businesses.
[02:12] Patricia outlines the main causes of distress in the construction industry, including high interest rates, inflation, cash flow problems, and low profit margins.
[03:29] The real-world impact of a construction company going into administration on projects, employers, and subcontractors is examined.
[04:03] Detailed explanation of what administration entails for a construction company, including the role of a licensed insolvency practitioner.
[05:07] The significance of the statutory moratorium period during administration for strategic planning and potential business rescue.
[06:50] The concept of the "lucky window" and the challenges of finding a financial savior for construction companies due to low profit margins.
[07:58] The continuation of business operations during administration and the reality of the challenges faced due to slim profit margins.
[08:23] The process of moving from administration to liquidation and the role of converting assets to cash to address cash flow problems.
[10:09] Insight into the common financial misstep of investing in assets, which can exacerbate cash flow issues.
[11:09] How to recognise signs that a company is heading towards distress and the importance of due diligence.
[15:49] Immediate steps subcontractors can take if their main contractor goes into administration, including cont

Episode 4 - In this episode of "The Construction Contract," host Patricia Haywood, founder of Haywood Commercial, discusses the critical importance of contract management in the construction industry. She emphasises the need for comprehensive understanding and compliance with contracts to drive profit margins and achieve sustainable cash flow.
Patricia also shares her insights on the common pitfalls in contract management and offers practical tips for construction CEOs to improve their contract management strategies. She stresses the importance of teamwork, risk evaluation, and continuous improvement in the contract management process.
Takeaways:
Effective contract management is crucial for leveraging construction contracts to drive profit margins and sustainable cash flow.
Team collaboration, including involving various experts during contract negotiation and management, is key to successful contract execution.
Continuous improvement through regular auditing and process refinement is essential for maturing an organisation's contract management capabilities.
In this episode:
[2:19] Patricia discusses the lack of contract management systems in many businesses and the importance of setting up such a system.
[5:36] She elaborates on the complexity of construction contracts and the need for detailed understanding and compliance.
[11:03] Patricia talks about the significance of risk evaluation, opportunity identification, and stakeholder engagement in contract management.
[14:25] The importance of a streamlined process for compliance with contracts, especially regarding payment applications and other key contractual obligations, is highlighted.
[18:00] Patricia discusses the necessity of setting alerts for key contract dates and breaking down silos within organisations for effective contract management.
Resources
Haywood Commercial UK
Connect with Patricia on LinkedIn
Quotes
"Contract management and compliance is more than just building the thing." - Patricia Haywood
“You need to establish some markers of quality and confidence in the process to say yes, we are doing things correctly.” - Patricia Haywood