Jacob Austin (00:00:08) - Hi everyone. My name is Jacob Austin, owner of QS.Zone, and I'm here today to introduce our new podcast, The Subcontractors Blueprint. So welcome to the show and I'm going to tell you what it's all about. So my mission here is to upskill our subcontract supply chain across the construction industry. There's around about a million small and medium enterprises working in the subcontract construction sector. And I want to give you the commercial skills, the tools, the knowledge that you need to protect yourselves from risk to understand the contracts that you're working on to make yourself a profitable business, understand payment processes, notices, and various of the things that you're going to come across during your journey as a subcontractor. So let me just tell you a little bit about me, the boring bit. I've worked in the industry for some 15 years. I've worked for Balfour Beatty, for Kier, and more recently Vistry Group in their partnerships homes business. During that time I've worked on all manner of construction projects, so delivering things from a tiny extension to put a platform lifting through to multi-million pound projects to deliver hospitals and really large scale housing developments.
Jacob Austin (00:01:42) - During that time I've worked with some really, really good subcontractors, and one of the clear themes that I've come across is we see guys who have got great site presence, great management, they really know how to build. They're really competent. The safety is on point and they just can't administer a subcontract. And when you put that alongside the main contractor who's got multiple QSs running a site, they've got commercial resource processes and procedures to underpin their commercial activities. You're sort of trading at a deficit, and I really want to get you into a position where you can hold your own. You can understand what risks you're being dealt in your subcontract, and you can get the fair payment that you deserve, the money that you deserve for changes. And you can understand how to identify when your project is running smoothly and what to do about it when it isn't so. The kind of things I'm going to cover. How to administer applications for payment. One of the bugbears of mine over. Well, it's happened hundreds of times.
Jacob Austin (00:02:59) - You get a great Subbie- he's doing some good work for you, and he sends you in a bill and it's ten grand in a month, and there's no real basis for calculating any of that. It's just drawn down a little bit more than what it's costing him. And at the end of the day, I've got to go about out there, measure the work, value the work, start from scratch. And if we're working together, that's fine. But at a point where things aren't quite working and running so smoothly, if you're asking for more money, then the work is worth and it might well be for good reason. That can really put us in a situation of a fractious relationship. And it might be the case that you've come across some variations. You've been held up, you've got ten lads on site, and for whatever reason, a different contractor has stopped you from accessing the work or caused some delay to you, or a detail has changed and it's more expensive than you've priced without the skills and the knowledge to properly present that and understand your entitlements around it.
Jacob Austin (00:04:13) - If you just sending me a bill and I'm getting that and I'm going, your progress doesn't match up with your expectations here. We're going to start arguing about how much things are worth quite quickly and with a little bit more understanding of how to present things, how to ascertain entitlements around changes, we could be working together quite quickly, quite easily, and have a better understanding, a better working relationship than everybody. All parties will be happier with the outcome. I also want to go to some lengths to debunk some of the mysteries around contracts. So some subcontractors I've worked with, they don't even open the thing and I get it at times. You get this 300 page piece of paper. Bound together document. Let me say that again. So you get a 300 odd page document. It's all bound together. It's got an official cover on it, and you look at it. You don't even want to start reading it. It looks dull as shit to start off with. And the thought of reading through terms and conditions and fine print and getting to the meat on the bones. I wouldn't be thrilled by either. But the last thing you want to be doing is entering into any kind of contract, any kind of agreement, to deliver things where you don't understand the risks that you're taking on board and what you've got to do to achieve the payment that you've you've quoted for. So we'll be covering things like common risks, common issues with contracts to watch out for, and the Holy Trinity of contracts that you absolutely MUST get right. Any time you're delivering any work, you must focus on the three most important things, and we'll cover that in some length in a later episode. We'll cover in basic terms, some of the industry's common contracts. So we're talking JCT, Fidic, NEC. We'll look at some of those contracts, and I'll try and explain some of the responsibilities and roles around that in pretty straightforward terms. Unlike the documents, when you read them yourself. And I hate some of those contracts, particularly JCT seems to be a contract where you'll want to read one clause. You've got to refer to 4 or 5 different places, sometimes to get a full understanding of what this one clause is trying to get you to do.
Jacob Austin (00:06:59) - And for whatever reason, these things just aren't written in a way that is easy to understand. Part of me being cynical would think that this is because the lawyers who have written them really want to earn more money for their trade, to argue their points in court than to actually deliver something meaningful, workable that everybody can understand. I will cover things like some of the contract amendments that get made and some of the reasons behind those amendments. And a lot of subbies out there that I've spoken to think that these things are really deriving themselves from the contractor. But take it back a step, and what you'll usually find is some client with a poorly informed lawyer has input, a load of amendments into their contract, and all that's happening is they're trying to cascade some of that risk downhill into the subcontract. So if not all of it, some of it, it just isn't appropriate to pass on. Some of it is quite right to pass on. But what you'll see is the contractor isn't usually coming up with these things on their own.
Jacob Austin (00:08:18) - These are things that their client is trying to pass on to them. And what would be a lot fairer is if the client really understood what they were doing. They would understand that the likes of a JCT arrangement is written in a way that is pretty well balanced, and it's been tested over many, many years, hundreds of years. And what they're really doing is upsetting the natural balance of the contract. They're putting risks onto the contractor and then complaining when those risks have passed on to the supply chain. Anyway, that one really is a rant for another day. So I'm going to cover things such as variations and what the best way to value those variations are. So that might be around day works. It might be around applying already contract rates to something that you can now measure and understand the value from, and appreciate and build up a cost directly from the bill of quantities that you've already priced. Or it might be some kind of pro rata or star rate situation, or it might well have to be a situation of fair cost.
Jacob Austin (00:09:36) - But we'll cover that in detail. And we'll also cover what the best ways to establish your entitlement to those changes are. We will cover some of the common bugbears that subcontractors have. So retentions. What do you do about retentions? Some contracts now because of the issues that are known about in the industry of subcontractors recovering retentions, some contracts are now set out. So there is a nail retention, but the contractor sometimes tries to sneak it in there and tries to take it off you guys anyway. How is that fair? How is that reasonable? And on top of that, the idea is that the retention is stopped off the contractor. The contractor passes the same retention downstream to the subcontractor. And what you see is if you refer to some of the main contracts which you're able to see and you're able to look at, you can use that to your advantage and check the retention percentage in the main contract. The contractor may well try and increase the percentage which they're not supposed to do according to the law.
Jacob Austin (00:10:55) - So when you get that and it's often a document within your inquiry, pack the main contract. Certainly you get the particulars. A quick flick through that will uncover all manner of things sometimes.
We'll also cover our payment notices. Some of the technicalities that you can look out for to be able to challenge the payment. Notice that you receive, such as on account payment, lack of build up to any adjustments that made poor level of detail or detail less than what you've provided as part of your application. We'll have a look at programs, or have a look at how the periods that you've got to deliver your work are defined in your subcontract, and some of the things that you can look out for that contractors try and slip into the agreement as quite often they will try and limit their liability for delays that they may cause to you starting a work or starting a section of work, but still retain the ability to punish you for failing to meet your obligations. And what can happen in a scenario like that is in spite of you not then being entitled to an extension of time.
Jacob Austin (00:12:21) - Say you will be perhaps keeping your supervisor on site for a longer period of time is costing you more money. You're there for longer and you otherwise would be entitled to recover more money. So I'll show you some of those tricks that that I've seen employed over the years and what to do about it when you come up against it. We'll talk about disputes. So disputes can be a daunting thing for a subcontractor, particularly when you're dealing with the likes of some of my old employers, where these are massive organizations with massive financial backing and also a massive in-house legal team. And that's not to say that you will come up against their in-house legal team, because quite often they're there just to read through the black and the white. But you will no doubt come up against one of their panel lawyers who will be cutting edge, renowned within the industry, construction lawyers. And what chance do you have as a small or medium sized company against that kind of organization and their resources? So we will cover the three P's of disputes.
Jacob Austin (00:13:48) - And it's not program price and peanuts or whatever. It is, piss poor procurement. So many disputes that I've seen unfold have been as a result of trying to hide some risk, trying to buy something that was never intended to be there, trying to get away without paying for something because it's on a drawing. But that drawing has been slipped into the order without being part of the inquiry. That line on the scope that everybody knows during tender stage that you haven't priced, but it never got crossed out. It's in the order. And now you're duty bound to provide something that everybody knows you didn't price for. Sometimes it's on purpose, sometimes it's just lack of understanding and laziness and the fact that somebody has taken the tender drawings they've posted out, they haven't checked to see whether the bills of quantity that they are asking you to price is anywhere reflective of what's on the drawings. You've priced it now you're on a lump sum and the quantity risks yours. But you haven't checked. The contractor hasn't checked. All of a sudden, the quantities were wrong in the bill of quants. No fault of yours or no real fault of the contractor. It's the person who's put the bill of coins together. This causes a problem here. But somebody left holding the baby. And it isn't the man with the scale ruler. The man with the scale ruler probably got paid a couple of grand, measured the thing over a couple of days, a weekend, whatever. And now is on the beach. Sunning is pale freckly skin, turning it pink whilst you're there in the trenches, building more substructure masonry than you'd ever priced for just because somebody doesn't know how to read the scale properly. If you're somebody that takes pride in your work, as I always like to think I have been. You want to understand that you're buying what you need. You want to buy into each package. The work that it's going to take to deliver the finished job. Sometimes it's not possible. Sometimes you have to place things on a remeasure. Sometimes there just isn't the time.
Jacob Austin (00:16:16) - So when you procuring the first package on site, you might not have the time to get all of the drawings out and fully understand whether it works or not, whether the quants are right. So there's always some instances where things are a bit more fluid, but in most instances there is no real reason not to get the schedules out, not to get the drawings out and have a look and satisfy yourself with the amount of work that you've got to buy and whether it fits in the budget or not, you've got to get that delivered. That's in the contract. So why contractors don't take the time to understand what they've got to deliver up front, buy it from you, get your best price and factor in the logistics, the two visits that they need, the different conditions that the work might be completed under the day work rates get the more negotiated tendered part of the package understood on the piece of paper, so that when it gets down to agreeing a price for a change, hopefully there won't be many changes because you've bought what you needed, but you've got the rates there.
Jacob Austin (00:17:29) - You've both got an understanding of what is in the price to start with. And one thing that boils my blood is late payments. Now, I can't claim to be whiter than white and 100% clean, and I've never paid anybody late. Ever. But if there's one thing for me that you can always try and do is pay your supply chain on time. Some of the payment terms that you see out there in the industry are absolutely ridiculous to start with. I mean, I've seen 90 day payment terms bandied around and that's 90 days, not from the point of completing your first bit of work. It's 90 days from a valuation date. So if you started on the first of the month, you've then got to go 30 days, probably before you're entitled to apply for the money that you've earned already. And then the 90 days start ticking. There might be the best part of four months before you see any money that is ridiculous in itself, but to then not meet the 90 day payment terms on time? It's outrageous.
Jacob Austin (00:18:46) - But I've seen a statistic out there on LinkedIn that shows 50% of all payments within the construction industry are made late, 50%. That is unbelievable. So I'll tell you what to do about it, and I'll tell you in detail. And before you start with the tactic of I'm pulling off site because my payments are late and that money needs to be in my bank account by Friday, or else there's a simple way which will stick the willies up most of the main contractors, and it's written in black and white in your subcontract. It's there for all to see in the Construction Act, and you just need to use it to your advantage. So we'll cover that in detail, and we'll also cover some additional strategies for if that doesn't quite do the deed for where you can go next. And make sure you get your hands on the money that you deserve on time. And let me tell you, when you follow these things, it'll only happen once, and you won't have late payments for the rest of that contract.
Jacob Austin (00:20:06) - Now and then you're also going to see me interview some experts from the industry who've got additional advice for you, expertise in a particular area. Also, some successful contractors that I've worked with in the past. I'm going to try and get them in the show with you as well, to talk about their business and bring you some of their stories, tricks, tips and hints that you can deploy yourself. So I think that roughly covers what the show is about. I think that's enough of me droning on for one day, and next episode, we're going to dive straight in and start looking at what that 300 odd page subcontract document is trying to get you to do, and the Holy Trinity of contracts that you must make sure is right if you don't do anything else.
If you like what you've heard, please visit QS.Zone. It's a subscription portal for support and education around commercial matters within the construction industry, where you can get the support and education to ensure profitability, maintain cash flow, and grow your business for less than the price of your daily coffee with templates, instructional videos, interviews, and more.
Jacob Austin (00:21:30) - So thanks for tuning in today. Hope you've enjoyed the first episode and we'll love to see you back here for episode two shortly. I've been Jacob Austin. You've been amazing.
