Construction is a risky game…or so many that operate in the industry would have you believe. Whilst there is obviously truth to this, I often think it’s an excuse for not addressing the basics.
Many construction professionals blame the unknowns. In my experience, most of the problems on site are not as a result of genuine unknowns. The number one reason is due to a lack of clarity in defining the construction works. As a result, variations are needed to correct the scope. These variations are often more expensive than what would have been paid at the tender stage.
Why is this the case?
Once the construction contract is signed, the mentality of the contractor normally changes. This isn’t the contractor acting underhand. It happens because different teams are involved at different stages. Each of these teams have differing motivations.
The bidding team is sales driven. Their main goal is to secure the project. The project delivery team’s main goal is to deliver a successful project. This means they want to build to the required quality, deliver on time and make profit.
During the bidding stage, changes are cost effective. This is because the contractor wants to remain competitive to win the project. After the contract is signed, changes are inconvenient to the contractor. They often hinder his ability to deliver the project and are hence undesirable.
The key to reducing these issues is to accurately define the scope of works within the contract. This negates the need to change things after the contract is signed.
For a lot of private clients, identifying the scope can seem trivial. It is natural to believe that the contractor should just build everything. Yet, there are always grey areas such as:
- Statutory service connections
- Section 106 installations
- External Works
- Fit Out
- Discharge of planning conditions
- Responsibility for achieving the BREEAM rating
Take care when addressing these areas, as the answers are not always clear.
For main contractors and developers, identifying the correct scope is critical. This can be the difference between profit and large losses. Just to give a few examples I’ve encountered in the past:
- On a cladding contract, hoists were the responsibility of the Employer. One contractor had stated that a particular size hoist was needed. This was required due to the large size of some of the curtain walling panels. The hoist required was 4x as expensive as the standard. This was very important when preparing an accurate comparison against other bidders.
- On a blockwork package, initially scaffolding was the responsibility of the Employer. These particular works needed to be undertaken in many small phases. Having the Employer follow the contractor with a scaffolder would have been expensive.
- On a structural frame contract, the scope of works stated the contractor should allow for all cast in items. However, the design wasn’t complete for this element. This meant not all the cast-ins required for the building would have been procured. For a building of this size, that would have been a huge cost increase.
All these problems were simple and cost effective to resolve. This was only because they were dealt with before the contract was signed. I’ve seen issues like these realised afterwards, and the results were bad. Disputes, cost increases and delays.
So how can you improve the quality of your construction contracts? I would suggest you focus upon the actual construction works. Avoid getting too hung up on the contract terms and conditions. When writing a scope of works, be specific, write about all levels of detail and keep the language simple. Don’t worry if it is long, make sure it is precise.
Above all, make sure you have an experienced procurement manager. Ensure they are individuals that understand what the design isn’t showing, as well as what it does.
Call 020 3150 0710 if you need any assistance with procurement and tendering.