The CICV Forum recently finished hosting six commercial webinars, covering everything from contracts and industry culture to conflict avoidance. We look at the main points from these valuable online sessions – and what practical advice contractors can take forward into 2021
As someone who deals with payment issues every day, I think contractor problems can often be self-induced. It was therefore decided to host a series of free webinars to help improve the contractual and commercial management of building projects and try to ensure that contractors were paid what they were due, when they are due.
To do this, I was joined by a team of extremely experienced presenters including Professor Rudi Klein, CEO of the SEC Group, Ian Honeyman, Commercial Director of the Scottish Building Federation, Angus Pearson, Contracts and Disputes Specialist with Fortis and Deborah Harrison, Legal Counsel with the British Constructional Steelwork Association.
So what were the main points we wanted to get across? I decided the easiest way to sum things up was this bullet point guide:
Read the sub-contracts you receive and look out for issues that might cause a problem and attract risk. If the risk is too high, then be prepared to walk away.
Make sure you understand what documentation constitutes the CONTRACT DOCUMENTATION and read through carefully to ensure that all documents are aligned and that there isn’t conflict between or within documents.
Watch out for amendments to the payment provisions.
Be aware of clauses which extend your obligations and know how to deal with them, such as third-party agreements, collateral warranties, indemnity wording and cross-contract set-off.
If you cannot negotiate any other amendment, at the very least seek to reasonably limit your liability – a ‘cap’.
Look at the contract duration stated within the tender documents and consider whether the time period stated is adequate to carry out the scope of works to be undertaken.
If the time period is not sufficient, having given due consideration to all factors which could impact on programme, propose an alternative or qualify your tender.
Check that you have the right to claim for an extension to the date for completion. Understand the process which allows you to do so.
Make sure your tender is qualified in respect of potential fluctuations in materials – remember Brexit is looming – and put in something that means you do not take any risk in connection with sites closing and/or being disrupted by site closures.
Use or adapt the payment schedule that is on the CICV Forum website and you will not run into any issues during the project on not meeting payment dates.
Make sure you keep records. This could include email communications, site diaries, resource schedules, videos and photographs. You might need these months down the line.
Payment applications – provide as much detail as you can and don’t give anyone any excuses to put a red pen through your applications. If you are asked for information, provide it.
If you’re not paid in full by the final date for payment then you have a statutory and contractual right under SBCC conditions to suspend the performance of any or all of your obligations under the contract/sub-contract – a powerful remedy, so use it. You may be able to terminate your contract/sub-contract providing you follow the specific procedures.
Make sure you follow the procedures in the contract/sub-contract for issuing notices. Send them to the correct person, at the correct address, within the specified time, in the manner described. Try to accommodate notice by email in your contract if you can.
Get your final account in on time. Be sure it is clearly labelled as a final payment application in the terms of the contract. Chase up and collect your retentions. Keep a running ledger of when retentions are due to be paid. Apply for retention if necessary.
Have in mind the risk of insolvency of ANY party higher up the payment tree and not just the party that is employing you.
You have no need to be concerned about project bank accounts (PBAs), which ensure you get paid on time. If you need advice, talk to SELECT. You can also find lots of information in the Useful Links section at www.cicvforum.co.uk
Conflict avoidance – inevitably you might need to take some action if you are not getting paid. Have a look at the CIC Low Value Adjudication Scheme and the Summary Procedure, which are low-cost adjudication schemes where the adjudicators’ fees are fixed, making adjudication much more attractive to the construction supply chain. Consider writing these schemes into your contracts and sub-contracts. Again, information on these schemes is in the Useful Links section at www.cicvforum.co.uk
Conflict Avoidance Processes (CAP) – this is a game changer for the industry. It provides early intervention into any contentious issues on a construction project to resolve issues and stop them escalating. The process builds relationships as well.
And finally…. Collaborate. Negotiate. Talk. Find solutions. Do not let problems escalate.
The six commercial webinars can be viewed on the CICV Forum website at www.cicvforum.co.uk/webinars along with other sessions on employment advice and health and safety matters. If you would like to see any other topics covered in 2021, email firstname.lastname@example.org
By Len Bunton FRICS FCIArb, HON FRIAS
SEC Group Scotland