WHY WORK FOR FREE?

 

 

Every year in the construction industry, millions of pounds are lost by sub-contractors.  Most of this money is lost because of comparatively "simple"  causes, such as :

 

1)          Lack of commercial awareness (eg  legitimate  contractual and financial entitlements)

2)          Failure to identify variations, delays, disruptions as they occur

3)          Failure to give prompt written notice to the main contractor/client.

4)          Failure to keep good site records

5)          Poor presentation of the sub-contractor's case for compensation

 

These brief notes concentrate upon the "simple steps" which can be put into practice by every sub--contractor - not next year, but tomorrow ! After all - why should a sub--contractor "work for free" ?

 

 

Variations – Simple steps for getting paid !

 

·   Check at the outset exactly who is authorised to  issue instructions to you.

 

·   Check at the outset exactly who is responsible for agreeing and paying for your variations.

 

·   Get all instructions confirmed in writing before spending your money.

 

·   Don’t spend money on the instructions of “little tin gods” (ie people with a lot to say but no contractual authority).

 

·   Don’t be fooled by the “PQS” excuse (eg “the PQS has been too busy to look at your variations prices  etc”).  Your contract is with the main contractor  – not the PQS.

 

·   Check your subcontract conditions. The PQS is unlikely to be mentioned. So insist that the main contractor addresses your variations as a matter of urgency.

 

·   Don’t use the bill of quantities as a shopping list – remember that you are entitled  to a varied rate if the character and/or conditions of the work changes.

 

·   Remember that JCT 98 and DOM/1 etc allow you to re-price original (unvaried) contract works where you can show that the character and/or conditions have been affected by variations.

 

·   Include additional preliminaries expenditure in your variations prices where appropriate.

 

·   Don’t leave the pricing of your variations until the end of the job.

 

·   Get the variations priced and include in the next monthly interim application.

 

·   Be a nuisance – nice guys get ignored!

 

 

Valuation of variations

 

·       Improve your cash flow

·       Grasp your entitlements to “star rates”

·       Don’t accept bill rates for varied work

 

Most sub-contract conditions contain provisions whereby varied work, and/or contract work affected by variations, qualifies for a revised rate if it can be demonstrated that the work has changed in character and/or conditions from that reasonably apparent from the original contract documents. 

 

In practice, most main contractors’ quantity surveyors tend to overlook these provisions and prefer to use the original bill or schedule rates rather like a "shopping list".  This is not the correct approach.  However, the initiative, in practical terms, must rest with the sub-contractor.  Leading  text books emphasise that, in reality, a substantial proportion of works carried out under variations do qualify for re-rating! 

 

Appended is a "check list" summarising factors which may be reasonably argued as   having changed  the original character and/or conditions of the work.  It may be seen from the  list, which is by no means exhaustive, that a substantial proportion of variations in fact require re-rating to reflect the changed character/conditions.  Equally, it is possible to show that areas of original contract work have been similarly affected by variations.

 

 

 

Check list of possible factors changing character/conditions.

 

·             Winter working.

·             Late and/or "piecemeal" receipt of instructions.

·             Immediate/short notice response required to instructions.

·             Special procurement, planning, supervision arrangements.

·             Loss of trade discounts due to  purchase of small quantities of materials.

·             Extra costs due to transport and handling of ditto.

·             Increased costs (fluctuations) on labour and materials.

·             "Piecemeal working" in disregard of programmed sequences.

·             Special return visits to areas in order to execute small quantities of work.

·             Special isolation of individual electrical circuits in energised areas.

·             Special return visits by sub-subcontractors.

·             Special hire and/or retention of plant and access  equipment.

·             Additional builder's work (eg holes and chases etc).

·             Re-familiarisation on return to completed areas.

·             Working in exceptionally congested circumstances due to out of sequence working.

·             Re-testing and commissioning.

·             Working in areas which have been prematurely occupied by the end client.

·             Working out of normal hours.

·             Obtaining access permits for return visits to occupied areas.

·             Detours around site to gain access to obstructed areas

(e.g. blocked stairways etc).

 

By maximising these avenues during the currency of the works, it is possible to expedite cash flow and to minimise the overspill  balance of disruptive costs  remaining to be processed through the medium of a formal loss and expense claim.  If these simple steps are put in place and maintained as a matter of routine on all jobs, then there should be no question of the sub-contractor “working for free”.

 

 

 

This article is based on the “Jack Russell “ contract law column in Electrical times for March 2005.

 

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John Russell

Construction Contracts & Training Consultants (Established 1984)

Cheshire CW4 7DP Tel : 07770 986444

Email : swsubbie@globalnet.co.uk    Website: www.jrconsultant.co.uk