23/07/10

By Richard Hildrick

The Construction Industry has suffered more than most through the recession and despite the imminent introduction of new legislation, payment problems in the industry continue to be commonplace. Here are some ways of avoiding those problems before they become a reality.

1)Know your contract
Always check the terms and conditions of your contract — when do you need to submit payment applications and in what format, when is the payment notice due and are the payment terms acceptable?

Ensure that the Adjudication Clause does not say that you will have to pay the other party’s and the Adjudicator’s costs, whoever wins. Look at who will be or will choose the Adjudicator, if one is needed.

Make sure that you understand the variations & extension of time (or compensation events) clauses, and note any time limits for issuing notices.

If in doubt, have the contract reviewed by an expert before you sign it or start work.

2)Correspondence
Ensure that you give notice, at the time, of any event which is going to hold up your progress or incur additional costs. Take care to be clear and specific in your wording.
Manage your client’s expectations by giving regular updates of where your final account is heading. This needs to start from day one as no-one likes a surprise bill at the end of the job.

3)Instructions
Always get a written instruction from your client before carrying out any additional work. This can be in many forms, including revised or new drawings, meeting minutes or letters, but beware of e-mails as your contract may not recognise electronic communications.
If instructions are given to you verbally by your client, confirm it in writing.

4)Obtain agreement to additional costs
Whenever possible, get agreement to the costs of additional works before you carry them out. Otherwise, sit down regularly with your client to agree and sign-off any additional work costs. Don’t wait until the end before getting his agreement to anything.

5)Final Account
Build-up your final account file from day one on site. Keep copies of all correspondence, cost information and site records relating to each individual variation in the file. This will save an incredible amount of time and frustration at the end of the job, should a dispute arise.

6)Programme
Ensure that your programme requirements are fully and properly reflected in the contract received from your client.

Issue a detailed programme and monitor it daily, giving notice of all hold-ups as soon as they occur. If your programme is going to be over run, ensure that the causes of the delay are recorded and notified, and that any reasons given are those which entitle you to additional time.

This is a particularly difficult area to get right; often an independent review will see something of importance that those close to the project may inadvertently miss.

7)Records, records, records
You can never keep too many records - these will be invaluable in pursuing any payment or time entitlement should the other party not agree later on.
Record when information is received, what resources are on site and what they are doing each day. Record verbal requests for you to work in a certain way or move around the site. Most importantly, record what is preventing you from progressing your works in an efficient manner.
Get any records / day work sheets signed promptly.

8)Take remedial action early
Don’t wait to take remedial action when things are going wrong. The sooner action is taken, the less impact it will cause, regardless of whether the problem relates to time, quality or cost.

Most importantly, never allow an unpaid account or unpaid variations to go unresolved, as the problem is more than likely to grow rather than resolve itself.

9)Consider speaking to a senior manager
If discussions at site level are not addressing the problem, consider elevating the matter to a senior decision maker within your client’s business. It's often the case that when site personnel become entrenched in their views, senior management are able to take a wider view and thus help to resolve the dispute without the need for adjudication or other proceedings.

10)Pick up the phone
A phone call to obtain appropriate expert advice at the time a problem first arises will cost nothing in comparison to the cost of resolving an escalated dispute later on. For more information on how to settle disputes in a cost effective manner visit www.rjhconsulting.co.uk or call us on 01347 811155.