Jacob Austin (00:00:17) - Hi, all. Jacob Austin here. Owner of QS.Zone. And welcome to episode 30 of the Subcontractors Blueprint. I feel that is a mini milestone. Achieved 30 episodes, meaning that we've actually been bringing you educational information for over six months now to help improve the rights of subcontractors across the industry. And this is the show where subcontractors will learn how to ensure profitability, improve cashflow and grow their business. Today's episode number 30. I'm going back to an old favourite- the subject of change. And what I'm going to do is outline a simple five step model for you to establish your entitlement to changes. Speaking to some subcontractors out there changes change management variations still remain one of the biggest issues on any given construction project, and one of the biggest causes of conflict. That can either be because the client or the contractor doesn't believe that the change has been instructed or changes occurred. We get situations where things aren't mentioned in quotations or bills or quantities or your price build up, but there are still arguments that a reasonable subcontractor or reasonable contractor would have foreseen.
Jacob Austin (00:01:27) - This piece of work is required, and sometimes that's down to clarifying the work before you start the contract. And just a reminder that in episode 15, I went into detail on quoting and tendering and how to best protect yourself and clarify what you have priced for in that episode. We then, of course, get the arguments about the valuation of changes, and sometimes those can be particularly difficult, especially when it's the nature of the work that has changed rather than what you're looking at in physical form and condition. Change can be one of the most difficult things to overcome. So today I want to talk about five easy steps that you can take to give you a recipe to follow and try and ensure that your time spent, pricing and establishing variations is successful. And you want to think of this as like formulating a miniature claim. One of the most frustrating things that can happen as a contractor is to sit there and receive a valuation from a subcontractor, and it's got a list of changes that you don't know about.
Jacob Austin (00:02:26) - You don't know whether they've been instructed, you don't know perhaps even where they've come from. But what you do know is you're now being charged for something. The onus is now on you to go and measure and value something that you perhaps didn't even know is coming. And sometimes the easiest thing, as the contractor, is to sit there and go, oh, that's not a change then. And that is really frustrating because it just ends up in arguments. The subcontractor thinks that they have got an entitlement. The contractor says you've got no instruction. And when you sat on a site, as the contractors says, you've got a limited window to get all of your payment notices out. And what you don't want to have to do is suck up all of your time trying to establish facts, trying to establish what has happened, going and talking to your site team, liaising with the subcontractor and what is a really busy part of the month, because you might have 20, 30, 40 subbies per site that you've got to process payments for.
Jacob Austin (00:03:19) - You've got to issue payment notices to. And if these issues crop up on multiple subcontracts, it can all seem to take an inordinate amount of time. And that approach doesn't help anybody if it results in you as the subcontractor not getting paid what you want, then it certainly hasn't helped you. And what you really want to do is to make it as easy as possible for the contractor to see where you're coming from, understand what you're pricing and why, and that will give you the best chance at getting paid what you want. And really, the change process is a completely different process to the valuation process as in your interim valuation process. So you ought to really keep those two things separate and let the change process feed into the valuation when you've established your entitlement. So how do we go about doing it in five simple steps. So you want to set out a simple template that you can use time and again and make this really easy to follow. And I would use the same process for valuing a change that's a few hundred pounds as I would to establish a change that's worth many thousands of pounds.
Jacob Austin (00:04:25) - I'm not saying you have to go to the same amount of effort every time, and certainly in the case of small changes, it's not worth that time and effort to recover the small amount of money that you're going to recover. But one, it will make you seem like a professional contractor and you know what you're doing. And secondly, it's going to improve the speed that the contractor is going to approve your variations. By putting in the bit of effort yourself, you're going to get more out of it. And I would do this on Excel in a simple two sheet document. So you're going to have the front sheet which does the storytelling. And then a second sheet which is the price build up. And to make this look really slick, you'll set it out with your company logo, your project reference number. You'll give it a reference number and refer to any instruction that you're given by the contractor. So, item number one- we want to establish what the variation is. So we want to talk the contractor through the change, giving a description of what you've been asked to do, what the physical work is, and how and why it's different to what you priced at tender stage, or what you've got included in your order, and include within that how you've been instructed to do it.
Jacob Austin (00:05:37) - Is it a formal instruction? Is it an oral request from your site manager? Is it over an email? A request in a meeting that's been minuted? Is it a formal issue of a drawing that's got something different, a different detail, a different product to that, that you priced at tender stage. So this is where you start leading the contractor through and establishing the facts, establishing the story and telling them in words what has happened. So let's say we're in a building. We're constructing a building. The use of a room has changed. And you're the plastering contractor on this contract. So the designer has changed the build up to the partitions around this room to give it greater acoustic performance. And this wall has gone from one layer of a standard plasterboard 12.5mm thick on a regular stud. And they've changed it to two layers of a sound block board with an acoustic stud, and with some of that special ice over insulation in the cavity. So let's start by establishing the facts.
Jacob Austin (00:06:38) -My tender drawing was reference 204 Revision A. 204 revision C now shows this different wall. This is introduced a different board. It's heavier. There's two layers of it and it's introduced a different stud. And the insulation. The drawing was issued on the 14th of February. And at this time I've erected the stud for the original wall already, but I haven't done anything else onto step two. Then establish the definition of the change under your contract. In this example, we're working under the old favourite, the JCT design and build subcontract. So we're referring to 5.1 for changes in physical work and 5.2 for changes in conditions or restrictions and those kind of things. Now we've actually got two definitions that we want to refer to here, because firstly we're going to have to remove from sight some already executed work, because you've already put up part of the stud petition for the original design, and we're going to want to do it in that order. It's always logical to follow the order in which things get carried out. It helps to tell the story of your change.
Jacob Austin (00:07:42) - And then we're going to talk about what has been added. And in this instance, I would say that this is a substitution of one partition type to another. The next thing we want to do is to set out how we're going to value this piece of subcontract work. Going back to episode 18, where I spoke in detail about valuing changes, what we're going to do here is refer to the valuation rules, which starts at clause 5.6. We've got your remeasurement of work, which is the same as other work on site already. We've got pro-rata rates for similar but different work to what you've already got. We've got your day work. And finally we've got your fair rate or fair price. So you've got to value the work via one of those methods in that order of preference. So in this instance we're going to tell the contractor we're going to strike the existing partition stud that we've already installed. We're disposing of it into the contractor skip. And we're going to value that on a day work basis. Then we're going to apply a pro-rata remeasure to the construction of the new wall.
Jacob Austin (00:08:42) - And for the sake of this example, within our original bill of quantities, we've got the same wall build up, but where we've got to construct this new partition, it's at 2.8m high, whereas elsewhere where we've got it measured, it should be 2.4m high. So we're going to clearly tell the contractor here, we've remeasured it in accordance with a pro-rata of an existing rate. And we're also going to state that we've added the extra time for our site manager and a bit of time in measuring and valuing the change, which is included in the build up item number for value the change in accordance with the variation rules. So we've just set out what those rules are. We're now going to apply those to the change. So on your summary sheet this is where we're going to state the price. But we're going to issue a build up on the second page and refer your contractor to the detail build up. So let's dive into the second page. We're going to set this out like a bill of quantities. We're going to value it in the order that it's completed.
Jacob Austin (00:09:39) - So item number one will be the removal of the existing partition let's say six hours for two men plus the use of your access equipment. So this has been completed on a day work basis on site where transferring the records from the day work sheet into your bill of quantities. You've already told the site manager that's what you're going to do. He signed your day work sheet and now you're building up the price. The next item is going to be a little bit more complicated because we're taking the original rate, which was for your 2.4m high partition. We're adjusting it up to 2.8m. So that needs us to break down the rate in. To some of its component parts, so the head track is going to be the same. The studs are all going to be longer, the sole plate is going to be the same. You've got more board, you've got more insulation. You've also got more time cutting the board, because the original height at 2.4 didn't require you to cut, you could just install the board straight as it was.
Jacob Austin (00:10:37) - So we're now introducing cutting. We've now got a bit more waste of unused material, but finally you're skimming is going to be the same. So we're splitting that price down into the detail. We're adjusting the bits that have changed. We're adding in the new bits that we now need to add, and we're demonstrating the build up and our entitlement to more money for that increased height partition. And it's not going to be just the same as dividing out in times by the new height, but by showing the contractor our build up, what we're doing is we're step by step demonstrating what our entitlement is going to be in a way that the contractor can follow. Hopefully, he'll just check through it, see that you've factored in all of the right parts, and it makes it easy for him to agree to. So we've done our pro-rata calculation. The next thing we need to do is measure out how much partition we're omitting, and how much we're adding back at the new rate. Then we've got the final bit because we'd already installed the stud.
Jacob Austin (00:11:31) - We need to make sure that we charge the right amount for that part as well. We can either do that by claiming for the first part of your stud wall, install in your valuation, or by doing another pro-rata calculation. Obviously, I think the first is going to be easier in this situation. So all we're going to do is tell the contractor that that's the case. So a little statement to say the petition we originally installed has been valued in the main valuation. So then we're adding that all up. We're adding to it a period of time for our site manager and the quantity surveyor. And then that will be our valuation of the work. So let's add that all together and put the total on the summary page. And that will be step four done. Finally. Then step number five we're going to provide supporting evidence. So in this instance I would take a snip of your original contract drawing. Then take a snip of your revised construction status information. Print them quickly to a PDF and they will be documents one and two.
Jacob Austin (00:12:28) - We then also need to include the date worksheet. So the signed document by the site manager to vouch for and establish how long the original removal took. And in this instance, I would nip out on site and take a photo or get one of your lads to do it. Take a photo of the existing petition before you take it down, so that you can establish your entitlement to be paid, to first put that up and then to take it back down again. And it is really important to take those records, because timing is everything when it comes to changes. And in this instance, we've already done part of the work. So we need to be paid to put up what we've put up, to take it back down again and then redo it. If somebody just started looking at this as a pure drawing exercise, I would miss out on that fact. So it's down to you to establish the facts and demonstrate them so that you can get paid properly for what you've done. And these are always different.
Jacob Austin (00:13:20) - Some changes are known about far in advance, and they are simply just a drawing exercise and a calculator exercise. But you always get some changes where things have already happened, and it can completely change the nature and the value of a change. And that's it. The five steps to complete. And what you've now done is you've created a bullet proof document that tells the whole story of the change, why you're valuing it, how you are. It gives the price and the build up to the price. And it also evidences what's changed, what the status was before the change was instructed or came about. And the contractor can read that and you're effectively walking him through why it's costing, how much it's costing. And you want to prepare these and send them in as and when they come about, don't wait till the end of the month and submit them all with the evaluation. Present it, have it discussed, known about, and even perhaps agreed before your valuation comes in. Then you contractor has got absolutely everything they need to value the change themselves and come application time, you can then just put it on your variation sheet, safe in the knowledge that you've done everything you can to get your hands on the money.
Jacob Austin (00:14:31) - And hopefully you'll see that that bit of time is well spent and it will turn into you getting the amounts of money that you're due when you want them, rather than then having to go back and argue, oh, this variation, that variation. And instead of that, you're helping the contractor to help you. So there we have it. Five simple steps to getting paid for variations. If you found that valuable, I'd love it if you'd share the show and pass that value on to somebody else who would benefit from hearing it. My mission is to help the million SME contractors working out there in our industry. So thanks for tuning in. If you like what you've heard and you want to learn more, please do find us at WWW.QS.Zone where you can subscribe to our training and support system for like minded subcontractors. In there you'll find templates, one of which, we've discussed today! How to videos, interviews and more. It's less than the price of a cup of coffee per day, and you can cancel any time.
Jacob Austin (00:15:24) - We're also on all your favourite socials at @QS.Zone. Thanks again! I've been Jacob Austin and you've been awesome.
