Let’s start by asking a similar question to the one in this article’s title:
“Would you start work without agreeing what you are going to get paid?”
Most of the time, this isn’t a question at all. Of course we want to have our price agreed on up front.
Now, don’t get me wrong – there are certain situations where you may not be able to agree on all the costs up front. For example, certain refurbishment contracts or works which have a lot of unknown works at tender stage. But even in these situations, you will normally have some basic rates agreed.
When it comes to the programme, we seem to take a different view. Why? The most common objections from sub-contractors I have heard are:
Objection 1 – I’m afraid I will underestimate the amount of time it will take to complete the works
This is a valid concern. However you are not solving the problem by not stating the programme. There are two situations that happen.
The first is when you are silent on the programme but the contract states a duration… one that cannot be achieved. Sometimes this can be difficult to spot, therefore it is risky to rely on your ability to review a contract. Because you have said nothing in your tender, your options are severely limited. You can’t even take the moral high ground and try to negotiate your way out of the problem.
Even when the programme is not defined, you still have to complete the works in a reasonable time. The problem and question here is what is a reasonable time? If your Client views a reasonable time to be a quicker duration you, you’re in real trouble. A lack of clarity is never a good basis for a contract nor relationships in general.
Objection 2 – If I stay quiet on the programme, I can take as long it takes to complete the works
Wrong. When the programme is not defined, you still have to complete the works in a reasonable time. See the issues covered above. If you are a follow on trade, sometimes the lack of progress of others starts to become your issue. Not fair of course, but we’ve seen this occur many times.
Objection 3 – I don’t want to commit to my target programme in case something doesn’t go to plan
Understandable but there is a simple solution. I recommend running two programmes.
The first should be your target programme. This should be a realistic estimate of how you will complete the project. I recommend keeping this document in house.
The second should be your contract programme. We all know things do not always go to plan. This programme will contain the durations of the target programme plus periods of float. If you are concerned about showing what your float is to the Main Contractor, don’t show it. Just extend the durations of each activity. Use this programme for your tender submission. After all, you wouldn’t show your profit margin on each cost would you?
Objection 4 – When I’ve won the contract, I can negotiate the programme
You are in danger of being too clever and there are some big risks here.
Often with this strategy in mind, the programme doesn’t get resolved at contract stage. This results in the problems described under objection 1. By incorporating a programme into your tender submission process, you are reducing your exposure to risk.
Another potential problem can be damaging your relationship with the Main Contractor / Client. If they provide a programme in their tender documents and you submit a price, and you submit a price with no comment on the programme, you are effectively saying you will hit their programme. Resolving the programme at the end of the tender process will often be seen as renegotiating. This can really upset Main Contractor’s / Clients and may even cost you future tendering opportunities.
In my experience, honesty is the best policy. In previous articles, I’ve talked about how important relationships are in the construction industry. You run the risk of damaging a relationship with a Client by not addressing the programme at tender stage. Also keep in mind they are not judging you purely on cost. Time is often viewed as even more important.
No doubt you may have other areas of concern. I’d be more than happy to discuss other issues so feel free to send me any questions.