Jacob Austin** ((00:00:17)) - - Hi all. Jacob Austin here, owner of QS.Zone. And welcome to episode 35 of The Subcontractors Blueprint, the show where subcontractors will learn how to ensure profitability, improve cash flow and grow their business. Today's episode, number 35 is going to be about avoiding disputes. Thanks for tuning in. If you're new to the show, please do give us a subscribe for more user friendly advice on all things subcontracting now.
Speaker seem (to) - be an inevitable part of any major construction project, particularly those that are overly complex or overly long, and they arise from all manner of reasons, but typically down to delay valuation or quality issues. And sometimes a combination of those factors. And for a dispute to end in a court case or a lengthy arbitration can spell disaster, because we're talking of throwing thousands upon thousands of pounds down the drain for somebody else to review, come up with a case, present it to a judge or an arbitrator, not to mention all of the time that is lost whilst you're waiting for all of that to happen.
Jacob Austin** ((00:01:26)) - - Then we've got periods of time whilst we're waiting for notices to be served, or waiting for dates where all the parties are available and all of this, you're having to put your hand in your own pocket for up front, and God only knows how long it could actually take and how much it could cost. When you don't even have an ounce of certainty that the outcome is going to come your way. And this is before we think that even if things do go your way, there's still an appeals process.
Speaker so (the) - contractor can then have a second bite at the cherry with more and new evidence to try and overturn any outcome. So none of this helps you as a subcontractor. It doesn't help you get your hands on money that you feel is due, and it doesn't get you certainty of outcome until perhaps a long time after completion of the job. So all of this points at it being something to avoid, and quite rightly as well. When you consider another cliche that the only winner when the lawyers get involved is the partners of the law firms who rack up those humongous bills, and with the Construction Act stipulating that all contracts must offer an adjudication as a fast means to settling disputes, disputes that make it all the way to court or to an arbitration are actually few and far between these days.
Jacob Austin** ((00:02:39)) - - But adjudication has become as big a deal in itself, because the adjudication period is designed to be quick and cost effective with a 28 day turnaround period. But that said, adjudicators can be costing 3 to £500 per hour and the adjudication might be on the basis of documents only. Or it might be agreed that each party represents themselves in person and presents their case to the adjudicator, and sometimes that is done by solicitors or barristers as well. And of course, on top of that, you could be using claims consultants to develop a claim. Your contractor, your client may also be doing the same, almost certainly even. And they've more than likely got some roving director of no fixed abode that goes from job to job, sorting out problem issues and getting his hands dirty on adjudications up and down the business. And as a subcontractor. And you've got to stand in front of these people and make your claim your argument, in spite of it being designed to be that quick process to turn around a resolution within a month and get the money flowing back out to the people that need to have it, it is still a potentially relationship damaging process, and one that's going to cost you a small fortune to get ready for.
Jacob Austin** ((00:03:55)) - - For again, something that somebody is either going to make a flip decision on, on the balance of probability, or perhaps come up with some arbitrary split and award you only a portion of what you're looking for, if anything at all. And so rather than take that risk and go to your adjudication to only be the beneficiary of a snap decision, there are some useful steps that you can take to try and avoid that. And it just so happens that even if you do end up in adjudication or in any other form of dispute resolution for that matter, that these things will stand you in good stead to get a positive outcome anyhow. And essentially they stem from proactive management and dealing with things at the right time. There is a temptation as a subcontractor to focus on delivery and to leave any contractual arguments until final account stage. But the risk with that approach is that by then, it may be too late to take the steps to recover anything that you might think is due, you might have missed the boat, or notice periods, missed out on the collation of some all important records and also, as inevitably seems to be the case, missed out on the people being there who know about the issues.
Jacob Austin** ((00:05:02)) - - It seems all too often that people are moving on within the construction industry, whether it's jumping to another organisation or promotion, or a change of heart and working in a different department. How often are we met with, oh, that site manager? Didn't work here anymore. Or I'd love to say I've got the records for this, but they are no longer with the business. And so item number one, dealing with things as and when they come about, or as soon as you become aware of them, becomes such a simple and powerful thing to do. It's all too easy to ignore things and hope they go away. And maybe in nine times out of ten they do. I wouldn't like to say, but if you can see an issue on the horizon and it's got a serious impact, then it's best not to ignore it and you need to notify the other party as soon as you can. At the very least, this ensures that there is a current record at the time of events happening, and it more than likely will prompt the other party to respond to you so that you at least get their argument down on paper.
Jacob Austin** ((00:06:02)) - - If you do have that bit of paper back and forth about an issue, then you know whether you've got a good case or not by the response that you get back from your contractor. But just as importantly, the notice is there to do exactly what it's supposed to do. It's to give notice is to make somebody aware that there's a potential problem, and hopefully they can mitigate the issue, reduce the impact, and everybody goes away a winner. And sometimes it's a case of there's more than one way to skin a cat. And it just happens. That method three can be adopted in this situation and it gets everybody out of jail, erasing the notice at the right time. It means that the contractor is going to start taking the issue seriously. And even if they can't do anything about it, they're more than likely going to respond to you. And that will help boil the issue down between the two of you so that you know what the real argument is actually about. And perhaps you don't get a response from the contractor, but that lack of response might be something that helps you in your arguments down the line.
Jacob Austin** ((00:07:02)) - - Item number two is maintaining good records. Now, I've said a few times records, records, records. It is near the top of the list. You could actually say that issuing a notice is a record as well, but you can rely heavily upon records from the time when you're building a case. And this, again, is only something that you can do when you've got the people in the know, they're unable to write the records down. It's no good trying to cobble things together retrospectively when your site manager has moved on to another business. So a regular control that you can have is to make sure that the daily site diary is being completed, that all of the issues are being recorded on the site diary, and that they're submitting it to you. Once those records are adding up and showing that day after day, this same issue is cropping up, then if you've got multiple records showing the same problem, it paints a really powerful and clear picture, and it really helps to underpin any arguments that you've got.
Jacob Austin** ((00:07:59)) - - So you perhaps might put in place some controls so that by 230 on each working day, you receive a copy of today's working diary and you check that that has got all the relevant information on it. Item number three understand your subcontract. Even when there is a standard form being used, there are quite often heavy amendments to that standard form. So it's therefore very important for you to understand what the amendments are, what they do to the standard form, and so that you can work out how the risk has been changed and reallocated, particularly with key issues such as ground conditions, design and provisions that entitle you to extensions of time and extra costs. Simply put, if you can't identify the clauses that entitle you to more money when you're putting your claim together, then your claim is quite likely going to fail. So it's very much worthwhile reading your subcontract as an absolute minimum. And the next step on from that would be reading it together with your delivery team, and perhaps having a workshop so that all of the key members of your team are fully aware of what they need to do, what kind of records they need to take, when and how to submit a notice, what the risks are that you hold as a subcontractor, and your plan for holding those risks, particularly if you've already identified some mitigation routes for those risks, bearing in mind that some of those might be standard to an unamended subcontract, but that the main contractor or even the client organisation might have stipulated some amendments to those standard clauses.
Jacob Austin** ((00:09:35)) - - You need to know what they are so that you can operate within them. Now, there might be, on a particularly large contract, some kind of project management system in place, and that might well be cascaded down from the client at the top through the main contract, down to key subcontractors who fall within the contractor's remit. Now, having used a few of these project management softwares myself, I found them to be absolutely invaluable, particularly working under the NEC suite of contracts, because the timescales for submitting your events are really quite limited, and having that electronic system in place helps you to understand the timescales. It helps you to see when notices have been submitted to you. And of course, when you've submitted notices to anyone else, it's a really reliable source of data because you can't corrupt the system. It's like having a computer program that's bespoke, really written to administer your contract. And as long as the dates have been accurately set up at the start, then things such as the notice windows are predetermined, and then there may be some slight variation within that whereby on occasions, if you know that some investigation is required, then you would ask for an extension against a particular compensation event to allow for the time for that investigation to take place, and then allow the time for the related quotation to be formulated, giving some time for the downstream pricing from the supply chain.
Jacob Austin** ((00:11:00)) - - And the great thing about those kind of project management tools is they do things like give a running final account. They also give a running risk register. So every time an early warning is raised, the risk register is updated to show new early warnings that have been added and at a regular interval a risk review meeting is held and all of these early warnings get discussed. Then it's decided as to which of these might form compensation events, which ones could be mitigated. Sometimes the mitigation method might be its own compensation event, or sometimes the client is quite happy to let things lie and see what happens. In the knowledge that a risk has been notified. They might not be able to do anything about it, but at least they're aware from a budgeting perspective that things might change. And then the final couple of things about avoiding disputes. It should go without saying that the better you can articulate your position and demonstrate your contractual entitlement alongside any records, the better your claim is going to be, and therefore the more likely it is going to be resolved without resorting to any kind of dispute resolution.
Jacob Austin** ((00:12:04)) - - So what I'm saying is you need to put some effort into writing up a proper narrative. You need to tell the story of the events so that it's clear, and you need to refer to the contractual mechanisms that entitle you to extra money. So if you're going to rely on a delay this is being caused by the contractor, then you need to be able to adequately demonstrate that that delay has been caused by them. You need to have submitted your notice at the right point, ideally before the thing has happened, so that you've got evidence from the time that you are thinking about things, that you are thinking with the best interests of the project in mind, and it gives you a really strong moral argument that says, look, I didn't want this to be a bad outcome. I notified you as soon as I could even foresee this was an issue for us, because I wanted to give you the chance to do something about this, and unfortunately, you didn't do anything about it. The problem has been caused, but I've tried my best to stop it.
Jacob Austin** ((00:12:58)) - - And particularly then, if you've attended any kind of risk reduction meeting or a meeting with the contractor and brought up the issues to try and dispel them, then articulating this in your claim to demonstrate, look, I've tried to do all of the right things here, but it still caused a problem. It puts you in the best possible position. As I said, you can table that notice as evidence. You can take your meeting minutes. If you attend a meeting and it's not minuted, then the best thing to do is to send an email following the meeting to recap on things that were agreed, things that were stated, and to set a marker in the sand. And these are the kind of things that you want to refer to when you're generating your claim. Claims for extra time and cost are often rejected because they're poorly presented, or they don't have sufficient backup to them. They're seen as being a bit of a wing and a prayer or a bit of a try on. So sometimes they will require additional investment, additional resources to be allocated, particularly in the case of programming.
Jacob Austin** ((00:13:55)) - - If you don't have that kind of facility, in-house programming doesn't always have to be overly sophisticated, and even an Excel template will do if you're able to logically demonstrate the activities that you were programming and then put some logic into how they've been impacted by the delaying events. Of course, if you've got photographs of things that you've encountered that weren't supposed to be there, if you got records from test organisations that show that conditions were different, if you've got weather records, all of these things need to be referred to and woven into the document that you're producing because you're trying to make the document watertight, you want to try and cover all the reasonable questions that you can think of, and it may seem that it takes time to put together your claim in a credible format and put together the body of evidence that you've got to support it. But doing that upfront puts you on the front foot from the start and preparing a credible claim document from the outset, I think will save you time in the long run compared to retrospectively trying to find all of the evidence and using it to support something that you've already submitted that might have been poorly thought through.
Jacob Austin** ((00:15:02)) - - And basically, the more effort you can put into it upfront, the more likely you are to come to a sensible resolution. And my final thought on how to avoid disputes is to get around the table if you can. First of all, deliver your claim by sitting across the table from your contractor and talking them through the issues that you've encountered, telling them why they've come about, telling them how you've notified these events previously and you've tried to do something about it in a time and in a space where it wasn't going to cost anything. But now you're suffering because you're bearing extra costs that you could never have predicted. And he now need the contractors help to cover the losses that you've incurred because of their problems. This personal way of delivering these kind of claims goes a long way to trying to keep the bridges intact, and particularly if you've got a long standing working relationship with a contractor, to go into bat against them can be a daunting process. And if it's handled badly, it can be the end of a good stream of business for you.
Jacob Austin** ((00:16:02)) - - And if you're missing some of the things that we've already spoken about the records, the timely issued notices, then getting around the table and having a frank and open conversation about these things could be the only thing that sees you get any kind of payment. And as I said before, if you've got a long standing relationship with the contractor and that they know you wouldn't ordinarily be trying things on, you wouldn't ordinarily present a claim to them. But this is exceptional circumstances. And you can sit around the table and talk about those circumstances and come up with your compelling arguments and convince them of them, then this strategy might be the one thing that makes a difference. Now, whether or not any of these steps can be taken on a project depend on the individual circumstances, and sometimes these will require additional investment, additional resource, and you need to weigh those up as a subcontractor against what you're trying to recover, and for the heartache and pain that you might be causing. If we're talking of tiny little sums, then perhaps it's not worth rocking the boat for.
Jacob Austin** ((00:17:03)) - - But if it's a big and significant issue, it might well be. But only you can assess everything and make that decision. And it goes without saying. It might well be worth seeking some legal advice or seeking some advice from a claims consultant, particularly if you can get some advice at a minimal cost, just to establish whether you've got a good basis to make a claim in the first place. And overall strategy will be based on collating all of the evidence that we've already mentioned and a good proactive approach to commercial management, particularly emphasising doing things at the right time that's likely to help resolve issues and provide the certainty that you need and you need to create your compelling case. Because a claim should never come as a surprise to a contractor, they should be aware that you've been suffering issues throughout the job, and that upfront discussion with your team about how to record things, how your contract needs to operate, the timing requirements of various elements, be it notices, be it submissions, be it the tabling of variations, getting that right early doors is your best route to success because you don't know when things are going to go awry.
Jacob Austin** ((00:18:11)) - - You don't know when the bad job is going to creep up on you. Certainly, I've never set out to have any particular bad job. These things just develop as time goes on, and one problem causes the next problem, and then it all spirals out of control. So I'd encourage you to do exactly what I've already mentioned and read your subcontract, understand the changes that have been made to the standard form, and understand where that leaves you with the risks that you're holding and what you need to do about them if they happen. I hope that helps. My mission is to help the million SME contractors working within our industry. If you've taken some value away from today's episode, I'd love it if you'd share the show and pass that value on to somebody else who would benefit from hearing it. And of course, subscribe yourself if you haven't already. 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 That's the Letters, Q and S dot Zone Z-O-N-E where you can subscribe to our training and support system for like minded subcontractors.
Jacob Austin** ((00:19:13)) - - And now you'll find templates, how to videos, interviews and more. And it's less than the price of a cup of coffee per day. You can cancel any time. We're also on all your favourite socials at @QS.Zone. Thanks again! I've been Jacob Austin and you've been awesome.
