In the previous post we reviewed the outline of how the construction industry in the United Kingdom treats Sub Contractors and Sub-Sub Contractors. In this post we will examine how the little guy can strike back by just using the available rules, regulations and legislation together with their own Sub contracted commercial support.
Ansell Murray Limited as a boutique Consultancy is able to offer commercial advice and support at any time of the life cycle of the works as well as, as much or little support as is required. A new company may need robust systems to capture what they are doing and more mature business may be expanding on taking on works where not only the contract to be entered into is more complex and onerous but may require more compliance.
In the following sections we will set out typical functions that can be undertaken.
Pre Contract Advice / Support
As the title implies these are activities that take place prior to a contract being awarded and can even be in support of a tender and include:
- Build up of “Actual Cost” rates for Labour, Plant and Materials
- Preliminaries Build up and Requirements
- Review of proposed form and contract and schedule of amendments
- Design implications (Professional Indemnity & Warranty requirements)
- Condition Precedents and their potential Implications
- Main Contract programme requirements and support
- Notice Service requirements
- Specific recurring requirements of the contract
Of course nothing is going to stop “subby bashing,” however the risk of payment problems can also be reduced by ensuring that a fair contract and contract procedures are in place.
Ideally, you should incorporate your own Terms & Conditions of business into any order which can be done by careful submission prior to commencing work, making the last document on file the contract. If this is achieved it can only be trumped by the later signing of a formal contract, which does not have to be done before payment is to be made, such malpractice is outlawed by the Construction Acts.
Ansell Murray Limited are well placed to assist in this key pre contract activity to ensure many of the terms in the contract cannot be turned into disastrous “subby bashing” tools.
Contract period Advice / Support
During the period of construction works the works can either run smoothly with little or no real change in what has been contracted for and at the other extreme can be delayed and disrupted, subject to dispute. Ansell Murray Limited to provide commercial and project management support at both ends of the spectrum as well as the eventualities in between.
- Application for Payment support, including dealing with all contractual reporting requirements
- Management of Change Control, be these Variations or Compensation Events
- Payless Notice support
- Robust support of Variation / Compensation Event entitlements
- Robust support against Contra Charges for additional contractor labour
- Claim of Compensation and associated interest for Late Payment
- Invoicing and Payroll (Employee’s and Sub Contractors)
- Management of supply chain commercially, including ensuring back to back contract provisions and reporting to the supply chain
- Notice service requirements
- Insurance liability
- Programme management, including period updates
In the event Ansell Murray Limited had been utilised during the Pre-Contract phase our primary objectives are to ensure the following are as favourable as possible to the Sub Contractor:
- Onerous payment periods and lengthy due dates are removed and are at worst in line with legislation defaults
- Retention, Liquidated and Ascertained Damages, Main Contractor Discount advice and support
- Letters of intent where issued and being subject to Contract
- Condition precedents (Extension of Time, Loss & Expense entitlements and Practical Completion)
- Unrealistic programmes, time requirements & time essence clauses
- Ensure “Pay when paid” or “Pay when certified” clauses are removed and are in line with current legislation
- Termination and Suspension rights
- Set off clauses are removed
- Onerous adjudication clauses are removed and are in line with The Scheme for Construction Contracts.
- Insolvency of the Employer and or Contractor advise and support
During the construction phase there is often a false belief that there is nothing that can be done about Contractors entering into contracts and then ignoring them, to the detriment of the Sub Contractor undertaking the work.
Because in large organisations people effectively learn how to mechanically undertake their day to day job, many do not understand their duties and obligations under the contract that they are effectively administrating. In effect the rules that protects a Sub Contractor from bad practices
Often the paying parties do not understand the Payment Notice requirements and that their timing and content are critical. As well as this they fail to recognise the power of payment applications becoming the sum due where the rules of assessment and certification are not followed. In effect your payment application becomes the sum due. If the paying party wants to contest this it must prove its case in later proceedings, which if made up and is not supported by contemporaneous evidence will be impossible.
Post Contract Advice / Support
Often a Sub Contractor may provide the works in accordance with the contract, yet the Contractor regularly and consistently under values your works. This is often a precursor to a robust Final Account negotiation where the Contractors seeks to maintain his margin on the project by using your monies. The larger the amount due as a Final Account settlement and the more chance the Contractor will use delay tactics to try and struck the best deal for the Contractor, often to the detriment of the Sub Contractor.
And what can you do? Your works are complete, often you will have made all the payments due to your supply chain, but you need the cash flow to fund the next project.
Contractors know this and will then use this to drive down the agreed final value.
But it does not need to be like this. Ansell Murray Limited can be engaged at Final Account stage purely to ensure that you are paid what you are owed together with any agreement on the amounts of effective free money you want to give the contractor.
This should only be necessary where the objectives are clear that the Contractor is seeking a significant reduction in the final cost he will pay. For the sake of the industry as a whole these companies should be challenged to stop their behaviour for the greater good of all Tier 2 / 3 contractors.
By engaging Ansell Murray Limited during the construction phase our clear objectives are to ensure the value that has been earned by your efforts on site are paid in that period and in effect to make the final account negotiation about the final 5% of the contract value.
Claims & Dispute Advice / Support
Sometimes contracts simply do not happen as planned and if you are the innocent party and have suffered loss the contract between the parties will allow you to be compensated for this. Ansell Murray Limited can provide assistance in setting out contractual claims generally around Loss & Expense and Extension of Time claims.
The United Kingdom construction industry offers its customers great flexibility. Many construction project are not fully designed when they commence and can progress with the design continuing in the background. This means changes in scope are inevitable and change means a revision in price being charged to the Employer and usually the programme. In this environment disputes are ordinary and common place, so too is a settlement that both parties can accept. However this is often dependent on robustness of the change and associated detail in the pricing and impact on the programme that is put forward. If this is not efficiently managed it reduces itself and the project to conflict which can affect overall quality, time and health & safety. Ansell Murray Limited can manage and handle these claim processes to ensure they do not result in a larger dispute. This is not limited to large scale industrial and commercial construction and civil engineering but can be something as small as a fit out of a local shop.
However sometimes the claim ends up as a dispute where both parties believe their stance is correct and the only method to resolve the claim will be through Alternative Dispute Resolution (ADR) as usually the legal option in the Technology and Construction Court (TCC) is prohibitively expensive.
On 1st May 1998 the construction industry took a great stride into the future with the introduction of a statutory right to have a dispute determined by Adjudication. In the subsequent 19 years this process has become entrenched as a relatively cost effective way of having a dispute determined in 28 days. It is a decision which is further binding and can only be overturned, revised or confirmed in Arbitration (if the contract contains an Arbitration clause) or in litigation. Please see previous posts in relation to the mechanism of Adjudication at this link: https://ansellmurray.wordpress.com/tag/adjudication/
Ansell Murray Limited offers support in Adjudication whether you are the party commencing Adjudication [The Referring Party) or to assist in defending where you have been referred to Adjudication (The Responding Party).
Can a party commence its own Adjudication without using a company such as Ansell Murray Limited? The short answer is “Yes” and the slightly longer answer is “It’s not advisable.”
An Adjudication is an argument giving each party a reasonable opportunity of putting his case forward and rebutting the case put by the other party to the contract, with the watchword being fairness.
Why is “It’s not advisable?”
The Adjudicator does not make a case for either party or find the evidence to undermine a party’s case. The role is purely to make a Determination based on facts, evidence, rights and duties in the contract and at law. If an adjudicator investigates at all, it will be to clarify points of fact or law in the party’s case. Therefore it is vital that in preparation of a Referral Notice as the party commencing an Adjudication or in the Response where contesting that the facts are laid out clearly and concisely for the Adjudicator, even where appropriate using legal precedent as a justification of an argument. In reality where there are no legal complexities to be considered the Adjudicator will have little time to do much more than simply make his Determination based on the written arguments of each side.
Of course this entire process is not one-sided and only requires a specialist consultancy such as Ansell Murray Limited. As the real strength (or weakness) of a case for a simple claim or even Adjudication is based on the golden rule or “Records, Records, Records.” These records are your evidence to prove your claim or to disprove a claim made against you. For a claim to be successful it demands good evidence.
Systematic keeping of all site correspondence, instructions, meeting minutes, record photographs (which with modern technology are date stamped), correspondence in writing and electronic mails, site diaries and site resource record sheets. This is also easily verified by the use of technology such as biometric scanners. These are the types of records that help back up a successful claim.
As stated at the start of this post, as a boutique consultancy, Ansell Murray Limited can be your Estimator, Surveyor, Programme Manager, Project Manager, Commercial Manager or Commercial Director. The name on the badge may be slightly different to your organisations name, but we are there to integrate as much or as little into your organisation as you want.
Go to www.ansellmurray.com to view our website and make contact.