Our industry expert gives an in-depth update on some of the most important issues facing today’s Scottish electrotechnical sector
In the April/May edition of CABLEtalk, SELECT Managing Director Alan Wilson wrote an extremely interesting and accurate article entitled ‘The tide is beginning to turn’.
I agree with him that change is under way. In fact, so many things are happening in the industry it’s difficult to keep pace, but thankfully on the cash flow and payment front, there are a number of positives emerging.
The Scottish Government’s support of Project Bank Accounts (PBAs) is very good news for the industry supply chain and made even better by the decision to reduce the threshold to £2 million. The Specialist Engineering Contractors (SEC) Group and SELECT have some very helpful publications on how PBAs operate in practice and I see no reason why the threshold should not be reduced even further.
As far as retentions are concerned, Rudi Klein has written some splendid articles recently in relation to the removal of retention, something the industry has canvassed for over the past 30 years, and at long last the UK and Scottish Governments have picked up the baton – and not before time. The only downside in Scotland is that we’re going through another consultation – which I kindly refer to as “kicking the can down the road” – but hopefully 2019 will see some real action on removing retention entirely.
When it comes to payment periods, some splendid work by SELECT and the SEC Group has demonstrated that, factually, the public sector in a number of areas are not meeting the 30-day payment period. It is up to the Scottish Government to enforce this and the more examples we have of sloppy payment periods, from the public and private sectors the better. If you see payment abuse, then please let SELECT know because we need accountability from employers.
As an aside, I was pleased to see the UK Government announcement last November that there would be a crackdown on companies who fail to pay their suppliers on time, which could result in them being prevented from winning government contracts.
So is the Scottish Government listening?
I am glad to say that the answer to this is YES. Having been involved in various committees, working groups and ad hoc discussions over the last 12 months I believe that government is now making itself aware of industry issues, and is looking at the potential resolution of these issues.
The Scottish Government Economy, Energy and Fair Work Committee has recently had some consultation and has met several influencers involved in the industry, and I think their report is due to be published in June.
I also submitted a hard-hitting commentary on industry problems relating to cash flow and payment problems and listened to the TV coverage of most of the sessions.
I hope our MSPs will have had a wake-up call about the industry’s problems and the solutions that are needed, and needed quickly, so let me turn to these, with no apologies for repeating some of my comments in earlier editions of CABLEtalk.
In my experience as an adjudicator, all of the problems we experience go right back to the fundamental problems of procurement. Thankfully again, the Scottish Government is now looking at a number of issues and many of these were considered at the recent sessions of the Economy, Energy and Fair Work Committee.
In relation to consultants’ fee levels, more consideration needs to be given to quality, capability and track record rather than price. The old adage of “you get what you pay for” is never truer, so designers need to be paid an appropriate level of fees to design buildings.
All too often, projects are going to tender with the design not completed, the contract documents loaded with provisional sums and a significant increase in the use of contractor designed portions – again, in short,
risk is transferred to the contractor and the supply chain.
The same issues apply to contractors’ tenders, where price is king over quality and track record and capability. Pay a decent price and you will get a decent project, so the Scottish Government urgently needs to address the issue of suicidal bidding.
I keep emphasising two areas concerning contract terms: First, I see no justification to amend the JCT/SBCC Forms of Contract so take care when you’re tendering if you see areas where these forms have been amended – especially the payment provisions. I have had some serious discussions with various organisations about them imposing onerous contract conditions.
I deplore this practice.
Secondly, you want to avoid accepting some changes to contract terms like the plague. It is interesting that Build UK has just published a note in relation to not using certain contract terms – these include fitness for purpose provisions, unquantifiable risks, specified perils, breach of contract, uncapped liabilities and performance securities.
Let me give you an example of a completely unacceptable provision I read recently where the tenderer was given ground condition reports and site investigation reports, but was held to be liable for the accuracy of these and would be liable if the ground conditions were not met. It is utter rubbish to impose risks like these on contractors.
Last year the SEC Group ran three seminars in Scotland relating to better management of the commercial aspects of projects. Much remains to be done here, and more seminars are planned for later in 2019, so please contact Yvonne Wilson at SELECT if you want more details.
In these seminars, we identified problem clauses in building contracts, better management of the application for payment processes, and the need to ensure that your applications for payment are submitted on time and
are rigorous in detail. Don’t give anyone an excuse to whack money off your applications for payment!
I spend 95% of my time as an adjudicator so what do I think of the process these days? The answer is not much. The process was introduced to improve cash flow in the industry, and we have lost sight of that.
It is now a convoluted and expensive process. Even if you get a decision in your favour then the chances are that you still won’t get paid and it is common nowadays for an adjudicator’s decision to be the start of a negotiation process and then a deal gets done.
The type of issues I see are jurisdictional challenges, and many are complete nonsense. Parties won’t agree the adjudicator’s terms and conditions, there are complaints about breaches of natural justice and moans and groans about decisions. One judge even revealed recently that lawyers were picking over an adjudicator’s decision to find any morsel to challenge its validity. That’s the sort of thing that’s going on.
I think the lessons is this: If your negotiation with another party fails, and you are owed money and consider that adjudication is the only solution, then make sure your case is thoroughly put together and is as comprehensive as possible, and then follow the procedures. But be warned – the other side will throw the book at you.
There needs to be a better way forward than adjudication, which brings me on to...
Conflict avoidance processes (CAP)
This is an early intervention process where parties bring in an industry heavyweight to hear the issues before recommending a resolution.
This strategy has been run successfully on a number of major projects for Transport for London,
who have hailed it a great success by virtue of early resolution, a huge reduction in legal fees and a decrease
in claims costs.
RICS Scotland recently launched CAP in Scotland and is now making progress in engaging public sector bodies who are very interested and want to move this forward. For more information, see the RCIS website where you can sign your company up to be involved.
So just to sum up, I am greatly encouraged at the momentum we are building in the industry for change.
Huge credit is due to Rudi Klein, CEO of SEC Group, and Alan Wilson at SELECT, for their continuing drive to effect change on behalf of their members. It has been a real pleasure to work with both of them, and the various bodies involved in SEC Group.
And remember – if you have any issues that concern you, then flag them up so that action can be taken, and keep driving to improve both change and relationships across the industry.
Find out more about the Conflict Avoidance Pledge at bit.ly/RCIS_CAP