A contra charge is a deduction a Main Contractor makes from money owed to a Subcontractor, to recover costs the subcontractor caused. Typical examples are damage, clearing up, using other labour to finish or put right defective work, or attendance that was supplied and not paid for. The contract has to allow it, and the deduction has to be notified in time to be valid.
Worked example
A roofing subcontractor keeps the main contractor's scaffold for three weeks longer than its order allowed, which costs £2,100 in extra hire, and leaves debris that costs £350 to clear.
| Item | £ |
|---|---|
| Subcontractor Valuation, net of Retention | 22,000 |
| Contra charge: extra scaffold hire | (2,100) |
| Contra charge: clearing debris | (350) |
| Payable | 19,550 |
The £2,450 deduction has to appear in a Pay Less Notice, with its basis, if it takes the payment below the notified sum.
Contra charges in the money trail
A contra charge touches three places. The subcontractor payment drops. The cost you incurred, such as extra hire or your own labour, is a cost against the package. And the recovery should be shown against the Subcontract, so the package cost is not overstated.
On a CVR, show the contra charge on the subcontract line, not as a credit in an unrelated Cost Code. Otherwise the package looks cheaper than it was, and the rework hides inside another budget.
Disputed contra charges are better kept out of the valuation until the position is agreed. Record the amount as a claim and forecast cautiously.
The rules to get right
- The subcontract should give a right to deduct. Without one, only the narrower set-off rights at law apply.
- Serve a notice of the problem as the subcontract requires, before the cost is incurred where you can.
- Serve a valid pay less notice for the deduction, within the contract's deadline.
- Keep records that tie the cost to the default.
Related terms
Back-Charges, Pay Less Notice, Valuation, Retention, Subcontract.
Planyard's subcontractor orders keep each subcontract's valuations, retention and adjustments in one place, so a contra charge can be shown against the package it came from.
