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Which way is the wind blowing?

Barry Ashmore explains why you should never just ‘hope for the best’, and outlines
how one onerous contract could destroy your business.

SO, what is PR? One public relations expert who started his career in a local newspaper before eventually becoming head of a PR team in a major PLC once described his career in public relations as going from ‘never letting the truth get in the way of a good story, to defending the indefensible’.


This rather cynical approach to the art of PR does illustrate the breadth and complexity of public relations, which, for many specialist contractors (including some flooring contractors) tend to ‘hope for the best’ when it comes to contractual arrangements. A sad fact that’s played a part in a staggering 2,579 construction sector firms across England and Wales becoming insolvent in 2021.


According to Ben Harwood at Naismiths: ‘At almost one in five (19%) of all insolvencies, construction once again had the dubious honour of accounting for more company failures than any other industry. The headline figures were bleak. Across all sectors, the number of companies going bust in 2021 was up 11% compared to 2020; construction insolvencies surged by a punishing 25%.’


Not setting your stall out from the outset and/or accepting onerous terms can contribute significantly to the risk of insolvency as unscrupulous contractors will exploit ambiguities and their onerous them to avoid paying you.


You don’t have time to check – so you need to protect
You simply don’t have time to check every document and all the one-sided onerous terms and conditions, so in order to protect your interests you must qualify your tender to record precisely what you’ve included and, equally importantly, what you’ve excluded. As a minimum, there are several items that should be stated clearly in your tender:

  • The price, in words and numbers, confirming that it excludes VAT, which will be added at the applicable rate
  • If you’re asked for a discount ensure it’s for prompt payment and exactly what conditions must apply in order for the discount to apply. And that it only applies to the original contract sum and not variations and additional works
  • The period for which the tender is open for acceptance. At the moment this is extremely important as material prices are very volatile and unpredictable
  • The period over which the price is fixed. You should clearly state the price is only fixed for a specified period and/or up to the anticipated completion of the sub-contract works. Not practical completion of the main contract which could be delayed or postponed
  • The extent and scope of work you’ve included for, particularly if what you’ve allowed for isn’t in accordance with the specification or drawings
  • Importantly you must obviously list items that are specifically excluded from your tender. A general statement to the effect that anything that isn’t expressly included is in fact excluded may not be appropriate unless your tender includes a very specific schedule
  • You should clearly state which documents you’ve considered when preparing your tender. If you’ve allowed for only part of what is stated, then make that clear and unambiguous
  • If your tender is based on a bill of quantities provided by the contractor, state that it’s based on his quantities and is subject to re-measurement on completion
  • If your tender is based on drawings and specifications, list the drawings (with revision numbers) and specifications on which it’s based
  • Make sure you clearly state what attendances are to be provided by the contractor, free-of-charge for the period you’re onsite and the manner in which they are to be provided
  • In regard to the time for completion you may wish to state the periods you’ve assumed and in certain situations you may even submit your own programmes
  • As a minimum you should state that no agreement to programme is implied and you anticipate a meeting to discuss the contractor’s own programme, and the manner sequence and timing in which the works will be undertaken
  • If obtaining labour and materials might be a problem, make special mention of extended lead-in times
  • Specify how many visits to site you’ve allowed for and include rates and lead-in times for additional visits or mobilisations
  • The tender stage is a good time to put forward your daywork rates. You may wish to state these as all-in hourly rates, so there’s no confusion as to the prime cost of your particular labour. Alternatively, if the contractor refers to a schedule (such as RICS) you need to specify the necessary percentage additions.
  • State whether you’ve included for the provision of a performance bond or warranties etc and that they’ll only be provided subject to the wording being acceptable/mutually agreed.


Before entering into the contract
Onerous terms can be obvious and not so obvious. A clause which states that the contractor doesn’t have to pay you if the employer goes bust may not even get your attention, but how safe is that employer? Thousands of companies go bust each year, so never accept this clause unless it’s the bluest of blue-chip employers.


Check that the scope of works in the contract matches what you’ve priced. Some contractors will deliberately manipulate the scope of works through ‘value engineering’ or other ruses to get you to sign up to doing more than you priced for.


If you’ve made important qualifications in your tender ensure they’re not lost, and get them properly incorporated into the contract, not just the numbered documents. Make sure you know the fundamental basis of the contract (eg lump sum, re-measurable, cost plus) and therefore who is taking the risk of quantifying the scope of the works.


The contract period must be agreed and properly documented before you start the works. Don’t agree to work ‘in accordance with the contractor’s programme’ or ‘in accordance with his directions’. This will prove extremely costly.


You must understand the payment terms including retention, and watch out for pay when paid, or pay when certified type abuses. The devil is in the detail.


If the contract doesn’t expressly limit your design liability to ‘reasonable skill and care’ you’ll get the more onerous liability of ‘fitness for purpose’ which will void your professional indemnity or product liability insurance cover.


Never agree to start work or sign anything unless you’re 100% sure you understand the contractual arrangements you’re getting into. There’s no substitute for this vigilance and a little bit of effort will go a long way towards protecting your company.


You don’t have to go it alone
Please remember we’re here to help you and our experience and first-hand knowledge of the construction industry and construction disputes equips us to help you deal cost effectively with whatever challenges may be thrown at you.


Our team have been at the sharp end with national and local contractors, subcontractors, PQS practices, and specialist dispute resolution organisations. We’ve seen the industry from all angles, and we understand the problems that impact your business.


And, because we only work with specialist contractors, trade contractors and subcontractors, you can be sure we know the kind of problems you face, and the solutions that work best which saves a lot of time, and a lot of money.
01773 712116
info@streetwisesubbie.com
www.streetwisesubbie.com
Barry Ashmore is managing director
and co-founder of StreetwiseSubbie.com

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