Posts Tagged 'payment disputes'

Partnering, is it working?

Let me tell you what I think of partnering, or collaboration as some may put it on projects.

And then you tell me if you agree with my views.

Working together in sweet harmony just isn’t working in the construction industry in my humble opinion, no matter hard all of us may try. It’s always been the lowest price that wins no matter what.

Why?

Well I believe every stakeholder, no matter who they are, has a commercial interest somewhere along the line in the outcome of any given project.

Don’t they?……….Think about it.

Forget about shared goals and fluffy stuff like that, at the moment its hard nosed business attitudes that prevail. Isn’t it?

And depending upon which end of the collaboration chain you’re on will depend upon how you view it to be working.

Wikipedia defines collaboration as: ‘working together to achieve a goal….’

Constructing excellence has a definition of partnering as: “Partnering is a management approach used by two or more organisations to achieve specific business objectives by maximising the effectiveness of each participant’s resources. It requires that the parties work together in an open and trusting relationship based on mutual objectives, an agreed method of problem resolution and an active search for continuous measurable improvements.”

So, the next project you are asked to work in collaboration with a client, design team, contractor, subcontractor, supplier are you all going to have the same goal? Well that depends on the goal doesn’t it I hear you say. Getting the building handed over on time, to the right quality and to budget are the normal acceptable goals aren’t they.

But making a decent return out of it too? Working on a cost-reimbursable, target cost, open book with a percentage addition for on-cost and profit?

Is that part of it? Yes, it should be.

So my point is, it’s a commercial world, everyone is looking after their own business interests at the end of it all. So to see true collaboration some big barriers have got to be broken down, and a truly trusting partnership formed between all parties.

Will that ever happen?

 No, not at the moment……but wait until BIM really comes into its own, then you will see the cultural change that this will demand, that in my opinion will change the way we work in this industry in a very significant way.

Honest tendering

I’ve had a rest this week from my normal blogging and provided a guest blog for John Langford a good friend of mine.

it’s about, as the title says above………. Honest tendering.

It can be found at http://www.cmmuk.com/honest-tendering-derek-mynott

So where is the future for us?

Let’s start with Professor Brain Cox and his wonderful programme on Sunday evenings Wonders of  the Solar System, all burnt up in the sun is the most likely outcome but that’s billions and billions and billions (or whatever he says)…….of years away.

By the way is it just me or does he send you to sleep too, and you have to watch the programme again to understand it?

Well enough of that, we did our annual State of The Economy Survey again this year and one of the questions we posed was where do you think the work is going to come from this year?

And without giving names of anyone away, I thought you all might like to see the most popular answers we received and whether you agree with them or not, so here goes…..

1. High End Residential –and/or high income private clients with money to invest
2. Refurbishment – all sectors
3. Retail
4. Schools, including Free schools
5. Student accommodation
6. Hotels
7. New office developments
8. Health
9. Regeneration of brownfiled sites
10. Infrastructure – power, rail, utilities

Now if any of these rock your boat or are in an area you were or were not thinking about you’ve got some like minded people out there. The wittiest comment of them all however I liked was ‘Finding oil!’

All I can say is the very best of luck for what is going to be another challenging time ahead for everyone associated with the construction sector

If you missed the link above full details are on our website www.gf-partnership.co.uk/news/

Something might turn up…

Now this is a word of warning for those of a nervous disposition……don’t read this! Why?

Well I could be writing about anyone you know in construction right now…..

I read the article The Eye Test in last Fridays ‘building’ magazine, page 42/43 if you happen to get a paper copy, or here’s the link if you subscribe.

It’s a message for all company directors out there, don’t take risks at the expense of the support of your creditors.

The gist of the case was about a property company continuing to trade beyond the point any reasonable person would, on the blind belief ‘that something might turn up’ and the consequences this had.

The thing is it really is quite a difficult call to make, as if you are certain you’ve got a deal that will make you a fortune, and you’ve got all your eggs in that basket, and bang! All of a sudden things don’t quite fall into place. Suddenly you could be in a very cold and lonely place! And who wouldn’t think…..something might turn up……..as invariably if you put the effort in, make a few calls, ask a few favours ………..it does. But be warned it might not, and there are consequences…..

The judgment in the case itself is a message to company directors, but the key principles apply to anyone involved in running a business these days when they get to that point of no return.

So the messages from the article that came out to me were:

  • Look after you creditors and their interests – surprising that to some people you might think
  • Monitor your cash flow intensely, identify any irregularities that highlight the company cannot make its payments by the due dates – basic common sense isn’t it?
  • Investigate all available options for putting the company back on track – and don’t delay in doing so, it takes time
  • Hold regular board meetings, and keep notes of why you have decided to act in that way, what facts did you have that made you take a particular decision – you’ll never remember in time to come.
  • Consider the need to keep all stakeholders in the business informed at the appropriate times – everyone has an interest in keeping the business alive
  • Don’t place orders for work when there is no prospect of you paying for that work – common sense again!
  • Don’t put personal or any other interests before those of the company – difficult one to judge but don’t go for short term greed

And………….don’t continue to trade on the basis that ‘something might turn up’…..

For anyone interested to read more on this, the case is Roberts vs Frohlich and if you do read it, it has some great insights into the way or industry works with developers and contractors jostling in the formation of contracts. It also has around paragraph 43 a great quote from the letter of intent and the problems of naming individuals in any such letter. Fancy naming the Chairman of an organization as the only person you could negotiate commercial matters with!

Couldn’t resist this one either……….there’s also a Spanner in the works too!

Calm before the storm…….

I don’t know about you but we’ve been rushed off our feet since we came back after the Christmas break and things have only really just slowed down for us – producing boq’s for contractors that is. Time to draw breath we think. Conversely our Consultancy site based QS services has been at a low level of activity for quite a while now, everyone getting by the best way they can.

But is it just me, or is there something in the air………things are about to get more, dare I say sinister this year?

Buildings headline news of insolvencies being down in January compared to last year is more optimistic news – sad news for those 205 companies and all their employees mind, not a great start to the New Year for them.

But I think things are about to take a turn for the worse…….. (and I’m not the only one, take a look at Neil Edwards blog for some words of warning too)

Now I normally look on the bright side when I can, but I can hear too many alarm bells starting to ring now, meaning it’s going to get tough and nasty for us all. And soon.

Fuel prices, raw material prices, interest rates, extended payment periods, government spending cuts, increases in national insurance contributions….I feel like I could go on ……the thing is nothing is going to get any cheaper.

Where is the pressure for everyone?

To reduce costs, and we just cannot do it any longer…..…there’s only one direction for costs this year and that’s upwards.

What has everyone been doing this last year or so? Living off the higher priced projects on the past, and taking advantage of their supply chain reducing its costs over the same period.

What is happening now? Prices are still being submitted at low rates anticipating that things will be bought even cheaper later on.

The bad news………….It’s just not going to happen.

The supply chain is at rock bottom and cannot go any lower. Look also at the Construction Products Association recent press release ‘Sharp Material Prices Add to Construction Woes’. I predict some serious repercussions for lots of organisations as a result. So now is the time to be vigilant and if the bank says that client is a bad bet, you know what? They are probably right.

It really is the calm before the storm………..

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!

Pitfalls of Design and Build

I was reading the article by Rudi Klein in building magazine at the weekend (yes I still subscribe and get a paper version, old fashioned I know!) and his article HOW TO STAY OUT OF HELL about design risk.

Have to say he has a point doesn’t he? Why as an industry do we separate the design process from construction? As he says any manufacturer worth his salt wouldn’t separate design from manufacture.

But don’t you find that the design and build contract process is being abused?

Here’s a recent example to mull over….

Contractor calls our office: ‘I’ve got a potential contractual problem on a job, can you help me please?’

GFP: Well I’d like to think we can, tell me more….

Contractor: I’m trying to handover a job, and I’m having difficulties because the building was originally built in the wrong place!

GFP: Oh, now that is a problem, tell me more….

Contractor: You see we set the building out as the drawings and documents, all checked out ok on site, and then we looked at the proximity of some overhead power lines to where the imaginary building (as of then) would have been built. And well quite frankly we thought it wasn’t right.

GFP: What did you do? Tell me more……

Contractor: Well we sort advice from the design team who checked everything over and we were told we had built it in the right place. All as per the contract drawings. Except that nobody had considered the implications of the overhead power lines and the proximity to the building.

GFP: What happened next then? Tell me more….

Contractor: The design team worked out that we had to move the building. So we were instructed by way of a priced and agreed variation under the contract to carry out some remedial works so the building could be built in a different position (now not as the approved planning drawings). This we did and finished the building, albeit a bit later than scheduled. But as it turns out it was only relatively minor works to what we thought could have been a major problem. So we all felt quite pleased we’d come up with a good solution.

GFP So what’s the problem then? Tell me more….

Contractor: The client says it’s all our fault and won’t accept the building.

GFP: Why is that I don’t understand? Tell me more….

Contractor: I forgot to tell you it’s a design and build contract, the design team have been novated to us and as far as the client is concerned we are responsible for all of the design and the risk that goes with it.

GFP: Now I understand, I’m afraid we’ll have to look at what you’ve signed up to. Send us over some documents……

So who is right, and is it the Contractors fault?

To be continued……


Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 58 other followers

About Me

I’m now the Managing Director of Mynott Associates Limited my own specialist measurement business. I’ve been in the industry all of my life since I left school. My first job was with Bovis Construction as a management trainee where I trained to become a quantity surveyor. I’ve worked for contractors all through my career, I am FRICS, FCIOB and MCIHT qualified and act as an RICS assessor. I’m also a keen Arsenal supporter having followed them from a young boy

For more information, please click on my photo.

My Tweets

RSS The Construction Index News