Friday, July 23, 2010

A week may be a long time in politics, but is it enough in construction?

Subcontract conditions being used for major projects in Queensland can be extremely difficult to comply with; and the consequences of failure to meet them are dire.

Subcontractors must give the main contractor written notice of a delay to the construction program, and its effect, within 5 days of the start of the delay, followed by weekly updates. This notice is a strict condition precedent to being granted an extension of time. Liquidated damages for late completion are high, up to $60,000 per DAY. How many subcontractors could realistically sustain NO payment for delays and extensions of time, for any reason, with severe penalties for delay, at the whim of the head contractor, laid at their door?

Do you identify with this scenario?
Something happens on site on Wednesday to cause a delay to your work. Perhaps a critical work area is not ready to commence or some other cause of delay beyond your control -
1) The tradesman mentions it to the site supervisor, who takes a note in his site diary.
2) Your site supervisor (SS) makes a note in his diary and talks to the head contractor's site supervisor about the problem, who promises to get back to him, but redirects your team to another work area for the moment. (SS notes the change in his diary).
3) SS raises it at his weekly management meeting on Monday.
4) After the meeting your project manager asks your (contract) programmer to check the delay when he is doing his weekly progress update, which he does on a Friday.
5) Programmer looks at the issue after his weekly status. He emails the PM Monday to tell him that the effect on your critical path is 3 days.
6) You are now 3 days past your last date for giving notice of delay and you have lost your entitlement to claim an EOT. You must either accelerate the job at your own cost or face $180,000 in liquidated damages, plus the disruption cost of moving a team and re-programming your work.

It is not possible in practice to meet these extremely tight notice deadlines using normal business communications and business meeting cycles in a construction environment. You must have a system to collect and transfer site intelligence instantly for quick action from the responsible parties.

Systems like thepowertool Site Diary allow you to gather critical time-sensitive information at site with text, voice and marked-up photos, synchronised to the office as a task (with deadlines) for immediate action.

Subcontractors who accept conditions that are difficult to meet must ensure that they have fast, foolproof communications and systems to manage their contractual responsibilities.

Monday, July 12, 2010

Who is responsible for your payment?

Security of payment acts give you an entitlement to payment, but you must protect your entitlement as contracts move through the construction phase with the inevitable variations and other contractual claims. Notices and time bars must be strictly adhered to and you must record everything that might affect your costs on site.

Getting paid is a team effort. Here is the list of staff who need to be involved in your payment processes:

Site supervisors and site operatives
- These are the people "on the ground". They are the most likely to see and experience day-to-day activity that needs recording, including oral instructions for extra work, access issues, delay and disruption, completed work, defects, workplace health & safety, environmental protection and industrial relations. They need to be given the authority and means to collect site intelligence as things happen;

Manufacturing staff
are well placed to identify delays and changes to their workflow due to delays and document changes;

Contract managers must be aware of time constraints and other contractual requirements, check incoming documents and instructions for completeness, accuracy and change and convert gathered "intelligence" into contract processes;

Accounts departments must have a clear understanding of contract terminology and procedures and how they interface with corporate accounting and be alert to late payment and the recovery procedures under security of payments acts.

Management must ensure that all relevant information is gathered and available at all times to allow them to quickly negotiate differences and act quickly to collect overdue payments. facilitates the division of work, the payment process under security of payment legislation and the collection of site data with its unique mobile applications that synchronise site issues, complete with text, photos, drawings and recorded data, direct to the job account.