Monday, August 16, 2010

Getting the Payment Process Right and adding time is a Win/Win deal

Major contractors are struggling with the concept and the process of security of payment acts, including the Queensland BCIPA Act 2004.  The problem is they see the process as a precursor to dispute, rather than an effective, cost and time-saving process.  Fear takes over.  As a result, to circumvent the Act, they have come up with a non-compliant (but probably not illegal) process that puts contractors, subcontractors and quantity surveyors under enormous pressure to prepare and evaluate payment claims in 5 working days.  A complying process would allow up to 5 weeks.

Payment claim process for large contracts
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Adding thepowertool to your payment process not only turbocharges your business processes, but protects your valuable entitlements with the mobile Site Diary (pat. applied).

Sunday, August 8, 2010

Variations - snakes in the woodpile

90% of variations do not come packaged with the label, "We would like to make a change; please tell us how much you will charge." Variations mostly arrive as instructions to do something, or in the form of changed drawings or specifications. Upstream clients (we will call them C) rarely take full responsibility for identifying and managing the cost of change before it happens. This is partly because it takes extra resources and good processes to do so and partly because, if they do not tell you, you might just miss it and they avoid the cost altogether.

The responsibility and liability is squarely on your shoulders to manage variations, whether you generated the change or not.

Strict contract conditions can make it very hard to get paid for variations. Here is a good example of a popular real-life subcontract:

1) The head contractor can issue drawings, instructions or directions that you must comply with within the time instructed.
2) If an instruction (including a direction, drawing or spec) involves a variation not identified by C, you MUST:

  • Give written notice within 5 days of receiving the instruction, and
  • Wait for a written, clearly identified, variation notice BEFORE starting the work.
If you do not do these things, you are not entitled to claim the variation.

Do you have procedures in place to identify variations from instructions, drawings and spec changes and notify C of a variation within 5 days of receiving an instruction?
Do you have a process to stop your site staff from implementing any instruction until you are satisfied that you have received a written variation notice from C?

What do you do if the instruction will hold up your work while you are waiting for a variation notice?

Do you identify with this scenario? -

The Engineer gives your supervisor an oral instruction on Wednesday (with a quick sketch) to make some changes to your work as a result of a coordination issue. C's site foreman confirms the instruction and tells you to get on with it, otherwise the program will be delayed. You have a team working in the area and your supervisor does not want to delay the work, so he instructs the tradesmen to prepare for the change. They start work.

1. Your site supervisor, makes a note in his site diary and raises it at his weekly management meeting on Monday.

2. The engineer changes and C issues the amended drawing, under an instruction, the following Monday via the Aconex system, so you get it the same day.
3. Your engineer notes the change and passes it to the drafters for making manufacturing changes. On Wednesday they tell the engineer that there will be variation costs.
4. The engineer mentions at the next coordination meeting (Friday morning) that the instruction might involve a variation.
5. The work is urgent, so the drawings have been passed to the workshop, where the change is underway.
6. Your project manager drafts a variation notice and issues it on Monday.
7. The engineer (and C) are reluctant to issue a variation notice. They say detail design is your responsibility. You will need to demonstrate to them why this is a variation.

You are now at least 5 days past your last date for giving notice of a variation and you have started work on the change before receiving a written variation notice. You have lost your entitlement to claim the variation. By now you are entirely at the mercy of C and the engineer.

It is not realistically possible to maintain your site momentum and 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.