Time for a Construction Revolution?

I read an article in The Times the other weekend about how the uprising began in Tunisia with a simple story about a fruit and veg man being badly treated and how that subsequently spread to the events we all saw in Egypt, and now other countries too.  It got me thinking (dangerous I know…)

The thing about being an SME, or at the lower end of the food chain, is that it’s a very hard and lonely place to be right now.

You’ve got the big companies holding on to your cash for longer. Getting paid after 60 or 90 days is not uncommon now and, really, for no other reason than to fund the way they are pricing their work. It looks good to their backers as it appears they’ve cash in hand at the bank. Everyone knows the game.

You’ve got your own banks telling you to get your cash in earlier otherwise they’ll, well, you know what… to you.

You’ve got the Government fiddling with red tape and employment laws making it even harder for you to know what’s best for your business. Can someone tell me what the new retirement changes will mean to an SME for instance?

And in the end all that happens is any little profit you may be making is squeezed out of you when you get hit by, yes… a bad debt!

Sounds like I’m speaking from experience here and, well, I am… I’d love to give you a few real case studies here, but I’ll keep quiet. Maybe that’s another blog….

So what to do?

Building did try and get a campaign going last year before the election with their Charter 284 Manifesto… Remember that? It had the great statistic that every £1 spent in Construction is worth £2.84 to the Economy. That’s a fantastic statistic and makes our industry one of the most important to the Economy.

So what happened to that? Well all we’ve had since then is cuts in spending and more cuts in spending. Why wasn’t our voice heard? I don’t trust the new way in which the Economy statistics are being produced either at the moment. Who feels like our industry grew by 8% in the fourth quarter of 2010 compared to 2009?!

Surely it’s time for a Construction Revolution of our own?

The RICS has tried again to kick things off in it’s own way with a call for a reduction in the VAT rate on the repair and maintenance of homes to 5%, which they calculate this could lead to £17bn of benefits to the Economy by 2019. But is anyone at the Government really listening to us? I think not…

It’s time for some action from us in the industry to make the Government truly understand how important this industry is to UKplc.

So what to do? I wish I knew but if there were enough of us ordinary everyday people in the industry who could get together and start a campaign for some action to kick start things then I’d be up for the revolution!

Notices in Writing

As its getting nearer to Christmas I thought I’d trot out one or two of our favourite old chestnuts…

It’s a very old one……

Get your notices in writing!

If I had a pound for every time we’ve had to tell a contractor or subcontractor did you send them a notice under the contract that you were in delay, that it was a variation, that you haven’t got this vital piece of information…..well, I’d be a rich man and not sitting here on a cold, dark and foggy December night writing this!

It doesn’t have to be anything elaborate, confrontational or quoting the contract clauses verbatim. What it simply has to do is quote the facts of the situation. Record the current position, nothing more, nothing less.

Simple!

Keep it up-to-date too, tell the other party if things have improved or got worse, have a dialogue you’ll be surprised what it may bring out. If it brings out the worst, well then you know where you stand a lot earlier that if you let matters drift. You could end up with a serious financial penalty that could perhaps have been avoided.

Then why don’t we do it?

Not enough time, afraid of offending the other side, not sure what or how to say it, think you are in the wrong too, or something else? Then pick up the phone and talk to your counterpart, tell them the situation and that you are going to drop them a line as a result recording it. At least they will know its coming.

If you cannot do that then ask me to do it for you, I’d be only too pleased to help!

A relevant case if you are interested in reading more is Steria Limited v Sigma Wireless Communications limited, or have a read of our briefing paper (number 1 on the list, now there’s some irony!)

Letters of Intent and all that….

Now here’s a thing who works on a letter of intent….no one in their right mind would? Surely?

Ah but oh yes we do, and there are lots of you out there doing it.

We did a state of the economy survey at the beginning of this year (we’ll do another one next year) and a massive 75% of respondents said they worked on them…….so what of the pitfalls?

Why do we do it? We haven’t got time……then make time I say, it’s so vitally important to establish the correct contract at the outset.

If you find you really really must, then use them ever so sparingly……make sure that if you do enter into such an agreement that the formal contract is executed as quickly as possible thereafter, and at least before the expiration of any financial cap or time limit you have imposed/agreed to and that you include provisions for ‘what if’ it all goes wrong too.

Otherwise if you fall out…….. you could be asking yourself……
what are the terms
have they been varied
did you do what was agreed
have there been subsequent variations to it
were the variations recorded and agreed
was the original letter of intent revised/amended
if so by whom
did they have the authority to do that
was it sent correctly
did you receive it
have you been paid by the terms
do we pay/charge VAT
did we sign a copy
have we got a copy of the letter
is there a dispute
what mechanism is there to resolve disputes ………..

And then you’ll be asking yourself why on earth did we start on a letter of intent and not get the contract sorted in the first place?

If you wanted some further examples of cases to read when things went wrong then have a read of this! (number 4 on the list)

Happy reading……of your contract that is!

Adjudication Injustice

Now here’s a thing, I started a discussion recently on Linkedin about an adjudication issue we had crop up with a client of ours.

The issue was that we had successfully defended a claim against our client. We beat them fair and square as the saying goes. Now I’m not one to boast about our achievements (maybe I should!) but I saw it as all in a days work and how we go about doing things: Give the client the service they want (tell them how it is, mind you!) pay your dues and let’s work together on the next project. Just be professional about things, you know?

So here’s the issue: As I say, we defended the referral notice successfully with the adjudicator ruling in our client’s favour. He also decided that the other side should pay all of his fees too. Here comes the justice part: The other side (being advised by a reputable claims consultancy business I’ll add) have decided that they will not pay the adjudicator’s fees. Basically they don’t like the justice that has been served on them. So guess what… Yes, you guessed it… The adjudicator is signed up on the basis of joint and several liability. So our client has to pay the fees in full and then spend more money trying to get that money back too! Now to me that’s not really justice for our client. He has, quite rightly, defended a claim made against him; it’s been ruled that he’s right, and now because the other side don’t like the result for something they started, our client picks up that tab too! He’ll never get his money from the subcontractor as I fear they will not be around. As the theme of the comments made make… That’s life and the way of adjudication! Suck it up and get on with it!

If you want to read all of the comments or participate in the discussion (have you ever come across the situation where the other side refuses to pay the adjudicators fees?) you’ll have to join the Contract Risks Management Group – Construction Industry on Linkedin. Or otherwise you can post your comments here!