A Stark Reminder Why We Shouldn’t Ignore The Contract Or Delays…

A stark reminder…

I’m just back from representing a Specialist Contractor at a meeting with a national Main Contractor.

And it’s a stark reminder of all that is bad about some Main Contractors!

A £60,000 set off

No warning, no discussion, just a £60,000 set off.

And guess what it’s from the last payment, because now the works are finished.

Don’t Ignore The Contract Or Delays

Let’s face it delay and disruption is a common occurrence within the construction industry.

To protect yourself properly  from the outset you need to know a certain amount of time related information, and make sure you not only agree with this, but also that it is properly incorporated in the contract.

This information should include:

…the dates of possession and completion of the main contract works

…the period required to approve drawings after submission.

…the period you require for submissions of your drawings

…the period required for off site work prior to commencement

…the dates between which the Sub-Contract Works should start on site

…the notice which you require to commence work on site

…the time required for the execution of works on site

…the order or sequence of the works

…any other relevant time related information

It is essential that these items are completed carefully; taking into account all the factors which you consider will affect your works.

By including such items in the contract you will be identifying the factors outside your control (such as preceding works by other trades) that need to be in place to enable you to complete your works.

If these factors change when you subsequently come to do the work, then it will be easier to demonstrate that you have been prevented from completing your works in the way that you envisaged.

And believe me you will need to have a grip on all of this if you are being accused of delaying the job, and facing a £60,000 set off…

As always, I hope you enjoyed my Wise Up Wednesday email and that it gave you some food for thought, and if you need any help tackling the problems arising from delay and disruption, please don’t hesitate to pick up the phone and give us a call, especially if you are being clobbered for delay!

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What The Budget 2016 Means For Specialist Contractors and The Construction Industry

Another year, another budget. It’s time to see what impact this year’s revelations will have on the construction industry and on the Specialist Contractors that make up the foundation of it.

Rate Relief = Business Boost

The chancellor made a number of cut announcements that actually benefit SMEs for a change!

  • Business rate relief has more than doubled, from £6,000 to £15,000 max for small businesses.
  • The higher business rate relief threshold has risen from £18,000 to £51,000.

His announcement concluded that from April 2017, 600,000 SMBs will pay no business rates at all, with a further 250,000 seeing significant reductions in their business rates.

And hopefully a large proportion of those businesses will be in the construction sector!

Corporation Tax Cuts Pressure On Subbies

Another exciting announcement for construction SMBs:

  • By April 2020, corporation tax will have fallen by 3%, to a rate of 17%.

This cut will offer more much needed relief for small businesses across the UK, particularly Specialist Contractors.

Government Green Light For Construction Projects

The approval of several large scale construction projects should have a positive impact throughout the industry, as much needed money is invested back into construction:

  • £30m set aside to fund Crossrail 2.
  • £60m funding approved for HS3.
  • £161m designated for Highways England to upgrade the M62.
  • £700m allocated for flood defence schemes across UK.

The real test will be how this new investment and signs of positivity impact the industry’s deep-set culture.

Will the main contractors play fair and pay fair? Or will the continued greed continue to grasps the higher tiers, leaving those further down the construction supply chain to struggle on?

Wise Up Wednesday: Specialist Contractor Payment Nightmares….

No apologies…

This week’s “Wise Up Wednesday” is a very brief one about avoiding Payment Nightmares…

Yes I keep banging on about it…

And I make no apologies for doing so because getting paid is tough, and it’s going to get tougher.

And if you think any of the hair brained government schemes being talked about in certain areas of the construction press are going to make a blind bit of difference then, I’m sorry but you are not living in the real world!

And I’m not making any apology for saying that either…

 

What’s Really Happening?

Some of the commentators say construction is still on the up, some say the bubble has burst.

I say wake up and smell the coffee!

Late payment is on the up and that’s a fact; according to credit experts Euler Hermes who found that the number of delayed payments in construction has grown by 27 per cent year on year.

Specialist Contractors are still suffering from late payment on private and public sector projects despite an upturn in workload.

According to the research payment delays were particularly bad in the last quarter of the year, with the three months to December seeing 12 per cent more late payments than July to September.

And it’s no surprise when many of the major Contractors are reporting huge losses. They are so desperate to preserve cash that they will resort to all sorts of underhand tactics to hang on to your money! These include;

 

  • “Underpayment without reason”
  • “Pay when paid and if certified”
  • “Spurious contra charges with no prior notice and no detail”
  • “Unpaid applications in excess of 6 months”
  • “Contractors ignore you, even after repeated threats of legal action”
  • “Even large contractors who used to pay on time hold onto payments”
  • “Contractors use you to bankroll the contract”
  • “They screw you to maintain their margins”
  • “Contractors that are in adversarial mode from day one!”
  • “CIS deducted incorrectly and not paid back”

Every single day we see good hard working Specialist Contractors like you suffering at the hands of the non-paying, arrogant, bully boy Contractors!

 

So What’s To Be Done About It?

If Specialist Contractors are ever going to receive the returns that your hard work and efforts deserve, effective action needs to be taken at grass roots level.

So please;

  • come and join the debate with 2,178 Specialist Contractors in our FREE LinkedIn Group: FREE LinkedIn Group
  • already in the group? Then please spread the word to every other Specialist Contractor you know and forward this email to them
  • in a Trade association? Why not get in touch and see how we can link up
  • think more should be being done or got some ideas? Please get in touch
  • Buddies, please make sure to use the initial free advice and free Consultancy resources at your disposal.
  • let us help you to protect and grow your business,
  • and if you’re not yet a member why not email us at info@streetwisesubbie.com for details?

 

Because, together we can make a real difference!

I hope you enjoyed my Wise Up Wednesday and that it gave you some food for thought.

If you need any help with any of your business issues, please don’t hesitate to pick up the phone and give us a call on 01773 712116.

Does This Sound Familiar? Common Issues Subbies Have Over and Over Again

This week’s blog is about the questions Specialist Contractors ask us over and over again.

Here’s a typical example (amended to preserve anonymity);

“We have recently completed a contract for the installation of … at a hotel in London. Contract value c £480,000. We have been working as a sub-contractor.

The main contractor has been slow in paying our monthly valuations and now at the final account(s) stage they have refused payment for additional labour resources that we have provided over recent months; they have also disputed the quantities of … installed.

Currently we are owed some £65k and the main contractor is now refusing to communicate.

We are attempting to arrange to meet the main contractor although this is proving difficult with the lack of communication response problem.

The contact was agreed by a signed Letter of Intent. There is no form of contract (JCT etc.).

The above represents a brief summary of our situation.

We would welcome your initial thoughts and an indication of whether you will be able to take action on our behalf to recover the outstanding debt.”

So What Can Be Done?

Let me answer the Specialist Contractor’s last question first; “will we be able to take action on their behalf?” We most certainly can, and do take action for you guys every day of the week!

Our Consultants are experts in taking action to solve this kind of problem and ensure you get paid. Here’s the exact text of an email to me from Mike who is one of our Consultant’s only yesterday. It shows just how effective we can be;

“Successful outcome at the meeting today, settled at £472k gross giving a payment of nearly £50k to be paid within 7 days.”

I’m sure you will agree that’s a great result. Now let’s take a closer look at the problem above.

Breaking The Problem Down

Here’s some thoughts on the problem as posed above;

1. The problems always start when the works are complete! Be ready for this and get as much agreed as possible as you go along. If problems still arise at the end, take action and quick! Problems definitely do not improve with time.

2. If the main contractor has been “slow in paying” throughout the job, what have you been doing about it? Don’t procrastinate – escalate!

3.They have “refused payment for additional labour”. If you have been delayed through no fault of your own don’t supply additional labour to “catch up” without a proper agreement.

4. Main contractors that won’t communicate only understand one language. Get tough. Know your rights and apply them – properly applied the threat of adjudication usually gets people talking.

5. The “contract was agreed by a signed Letter of intent” and boy was it fraught with problems! So, the message there is don’t agree to anything you don’t understand.

Don’t Suffer – Take Action

We have lots of resources at your disposal from the free information on our web site, to our specially written guides for Specialist Contractors, to our exclusive LinkedIn Group of 2,192 Specialist Contractors, right through to our best selling Gold Buddy Membership.

(Speaking of which, I’d just like to  remind our Gold Buddies to use their free consultancy time to help you resolve any of your problems. We love helping!)

Do not suffer alone. Come and find out how we are helping Specialist Contractors of all sizes, in all trades, right across the UK.

I hope you enjoyed my post and that it gave you some food for thought, and I sincerely hope to speak with you soon.

In the meantime if you need any help with any of your business issues, please don’t hesitate to pick up the phone and give us a call on 01773 712116.

StreetwiseSubbie – How Can We Help?

The clue really is in our name – StreetwiseSubbie. We specialise in helping Specialist Contractors of all sizes and in all trades, so why not give us a call and see how we can help you and your business?

“Improving The Lives Of Specialist Contractors”

StreetwiseSubbie.com exists to help all Specialist Contractors regardless of size or specialisation, and remember you can ask for our help on any of your business problems as and when you need it.

Our initial advice is free and there’s no obligation just good honest, down to earth advice.

You can call us during office hours on 01773 712116 or check out our Gold Buddy support package can help you get paid.

Wise Up Wednesday: Beware The Hidden Dangers Of The NEC3 Subcontract

Beware The Hidden Dangers Of The NEC3!

This week’s “Wise Up Wednesday” is about avoiding the hidden dangers of the NEC3 Subcontract.

The NEC/3 Engineering and Construction Subcontract is becoming increasingly popular throughout both the public and private sector.

It’s meant to be easy to use and understand because of;

  • its simple language, and
  • its approach to effective management

The idea behind it is that risks are managed pro-actively and identified as part of the contract, rather than battled out afterwards.

This makes a lot of sense and appeals to those involved in the execution of projects, but the fact of the matter is that life is never that simple.

Risks and Challenges

The NEC3 is not without its risks and challenges and various experts have warned of the dangers. EC Harris, for example, said:

“We are seeing an increasing number of disputes with NEC contracts, clients and contractors don’t understand how different it is to JCT contracts and get themselves into a bit of mess.”

So, what are the risks and how do you avoid them?

Plain English – But Not Plain Enough?

In an attempt to escape the complexity and “legalese” of other more traditional contracts, NEC3 is written in plain English, in the present tense, and avoids the use of legal terminology.

However, it’s been argued that this actually creates ambiguity, particularly as much of the rest of construction, the law and our legal system operate in a completely different style. And even a high court judge has complained that the use of the present tense makes referral to adjudication or other tribunals difficult to construe as a result.

The judge said: “No doubt this approach to drafting has its adherents within the industry but … it seems to me to represent a triumph of form over substance.”

New Concepts

The NEC3 introduces a raft of new concepts. Terms such as “risk register”, “activity schedule”, “compensation events” and various other schedules including “Subcontract Data” will all be new to those who have not used this form before.

The collaborative “management tool” approach of the form, and its usefulness as a contract document can be negated by;

  • Lack of understanding
  • Being badly compiled (by the Contractor)
  • Being heavily amended (again by the Contractor)

Managing Risk

The management approach of the contract aims to ensure risks are clearly defined, monitored, identified and managed from an early stage.

However, most Contractors aren’t very good at that, so they still want to push the risk in your direction!

Interpretation Of Key Fundamentals

It’s essential that you understand such issues as the “Early Warnings” mechanism and how Compensation events are intended to work.

And how about the interpretation of the simple matter of how to calculate costs – a fundamental issue in many NEC3 disputes.

Clause 63.1 deals with assessing Compensation Events and reads as follows:

“The changes to the prices are assessed as the effect of the Compensation Event upon

  • the Actual Defined Cost of the work already done
  • the forecast Defined Cost the work not yet done and
  • the resulting fee.”

It’s not hard to see how different people can interpret that in different ways. And that’s before the contract gets amended!

Onerous Amendments

Specialist contractors are at risk whenever a standard Form Contract is amended, but NEC3 is particularly troublesome in this regard. Here are just some of the reasons why;

First, most Contractors are familiar with JCT forms of contract, and attempt to add JCT type clauses, or even directly take JCT clauses and add them to the NEC. Conflicting language will lead to unpredictable results, and pose real problems should a dispute arise.

Secondly, the contract defines precise time limits for communication and responses by both parties. Ordinarily this means Contractors have to reply promptly to notifications and quotations in respect of Compensation Events and get things agreed.

Thirdly, failure to reply within the allocated time carries express sanctions within the NEC. Such provisions are drafted so that both parties agree the cost and time effect of Compensation Events in a prompt manner.

That’s all unfamiliar territory for most Contractors!

 

Finally, understanding risk apportionment under NEC3 is crucial. It’s important to understand this in order to avoid being caught out by risks being unfairly “re-arranged” by the Contractor.

Success Or Catastrophic Failure!

It would appear, then, that the key aspects for successfully working with NEC are understanding, pro-active project management and communication.

When coupled with good advice, working with NEC3 can be successful. But please be warned that the key is understanding. Without that you may be risking catastrophic failure.

Training and education can help and we have a full day Masterclass planned at the NEC in Birmingham on 22 April 2016, so please take advantage of this to ensure you have the latest knowledge and tools to stay ahead of the competition.

And because our StreetwiseSubbie Buddies have been given priority, as of today there are only 11 places left, so you will have to be quick.

Single delegate rate is £250 plus VAT or £200 plus VAT for two or more delegates

Please email info@streetwisesubbie.com to book or request more details.

Together we can make a real difference!

I hope you enjoyed my Wise Up Wednesday and that it gave you some food for thought, and I sincerely hope to speak with you soon.

In the meantime if you need any help with any of your business issues, including problems with NEC3 contracts please don’t hesitate to pick up the phone and give us a call on 01773 712116.