Jacob Austin (00:00:17) - Hi all. Jacob Austin here from QS.Zone. And welcome to episode 43 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 43. I wanted to share with you an important lesson learned by a subcontractor known to me on site instructions, and hopefully by understanding the situation, you'll be able to prevent the same from happening to you. And before we dig in, if you are new to the show, please subscribe for more user friendly advice on all things subcontracting. And now that's out of the way, on with the show and to set the scene. I'm setting my site office, waiting for a visit from a contractor who I'm expecting to come and price a couple of extras and give us a couple of options on how we do a piece of extra work that my client wants. And eventually the contractor turns up and he was in a right foul mood. Now, this wasn't a particular surprise for this particular chap, but he did seem to be in particularly bad spirits today.
Jacob Austin (00:01:23) - And as I started poking a bit of fun at that, asking him if somebody run over his dog, he started telling me what the problem was and happily, his dog was perfectly fine. But unhappily, in his words, he was being shafted. And the situation was that he was being held accountable for a delay that he'd caused on a site that he was working on for another contractor, and he couldn't get his head around that. It was his problem and how it could possibly be that something that he'd been instructed for, and that wasn't part of his original subcontract, could be held against him and him to be charged for an associated delay. So my first reaction to this was, hold on. So you've been instructed for a piece of extra work and then you've done the piece of work, but because you finished late, you're now being fingered for a delay. But that wasn't quite the case. And it transpired that what he'd done, inadvertently, I might add, is cause a significant delay to the project.
Jacob Austin (00:02:19) - And he'd also caused the contractor to lose some money in sourcing another contractor to do the same piece of work, and he was really pissed off about it. Now, just to elaborate a little bit further, what had happened is he'd been issued a site instruction and that was to add some work to his package, and he essentially said, no, I'm not doing it. He'd been polite, there hadn't been any fallout, and it wasn't a commercial argument. They hadn't requested a price from him up front, and they were then refusing to agree it or negotiating on that price and couldn't reach an agreement. What he'd got was an instruction to get on and do a piece of extra work, and it was reasonably critical to the programme when it was being instructed, as in, it needed starting within the next week or two. I didn't really go into the reasons why he didn't want to do the work. Sometimes it's a case of you can't get agreed variations. You haven't been paid for this in that piece of extra work, so you get an instruction and you feel him reluctant to do anything with it.
Jacob Austin (00:03:18) - But this is where you've got to be incredibly careful, because holding out for agreement on a price or refusing to do something because of you've not been paid the full amount that you thought a previous variation was worth, isn't a valid reason to reject an instruction. So to be clear, the contractor is empowered to give instructions or directions to the subcontractor, and the subcontractor is essentially cut to carry them out. Now, there is a caveat to that, because the contractor has got to issue a reasonable instruction. And what that means is if it's a reasonable item for the subcontractor to complete under their scope, so they don't really turn what reasonable is. And that is because it's quite difficult to do because there are some subcontractors out there who carry out more than one trade and who might be willing to do a different kind of scope of work to the scope that they've been employed to do. So. The contract in writing can't rule out that that situation might arise. So insofar as scope is concerned, as long as the contractor is being sensible about asking you to do something that you're capable of doing, then there isn't a reason under that grounds for you to refuse it.
Jacob Austin (00:04:29) - So if you're appointed on a site as a bricklayer, you wouldn't be expected to go and carry out ceramic tiling indoors. But if it's discovered that there's a retaining wall required on the site and you receive an instruction for that, then it's reasonable that you carry out the brickwork on that retaining wall. The other way that reasonable might come into play is around timing. If the contractor instructs you to do something, and let's say that involves you ordering in some new materials for it, and those materials might be on a, say, six week leading period, then the contractor can't just expect you to honour an instruction that he's given saying to start next Monday, when it just wouldn't be possible for you to get the materials and get to site and get the work started. There may be other reasons why something is not reasonable, so you would have to have a think about that. And hopefully those couple of examples give you a pointer. You can also reject an instruction that requires you to do something that is either illegal or that would prevent you from.
Jacob Austin (00:05:32) - Applying the CDM laws properly or something. If you're designing that would adversely affect the design of your work. Now, in those situations, you've got five days to notify the contractor of the reason why your work or that change shouldn't be carried out. And you have to explain that to the contractor whilst you're doing it. Then the contractor has a decision to make because he can either instruct you to carry on anyway. I would hope that he wouldn't do that with something illegal, but perhaps in the case that your design might be slightly compromised, he might not have another choice, and in which case his instruction will then stand and you'd have to crack on with it. Another thing that the contractor can do is take an instruction that they've been given under the main contract and issue that onto you as a subcontractor, and then that must be treated as if the contractor has issued you with that instruction. Now there is another way around issuing instructions for the contractor to consider, which is he can ask for a variation quotation and then instruct that variation at a later time.
Jacob Austin (00:06:43) - And in that scenario, the instruction doesn't get implemented until the quotation is agreed. But you've got to appreciate that that is down to the contractor to decide whether he wants to issue an instruction in that fashion. And sometimes there just isn't the time to implement that process. It can get to a point where a piece of work needs instructing. They've realised there's a need, so they issue you an instruction to get on and do the work. So if you get an instruction that says carry out incomplete X, you're expected to get on with it. If you get an instruction that says please provide a quotation, then you would go through that different process of agreeing your quotation and then implementing the work if you get instructed to complete it. Now, there are grounds for challenging an instruction to provide a quotation. They are fairly limited, but if you don't have enough information to provide a quote within the period, then that would be a valid objection. Or also, if the contractor is directing you to provide your quotation using a particular method, as in, I want you to value the work in accordance with the bill of quantities, and then you don't think the bill of quantities should apply to this work, then you've got a valid reason to challenge it.
Jacob Austin (00:07:59) - And in that scenario, the contractor can then tell you to crack on anyway and then apply the valuation rules. I did do a detailed episode on applying the valuation rules, which was episode 18, if you want to refresh your memory on it, and the final note on when you could object to an instruction. If the contractor issues an instruction, which is to change your access, change your conditions, or change the working space that you would have, or also the working hours or the order of working, and then you have a reasonable reason why that shouldn't apply. That is a further valid reason why you can go back to the contractor and say, hold on, I can't implement this yet. So you can see that the reasons for rejecting an instruction are quite small. And in some instances, in spite of you objecting to the instruction, the contractor can then instruct you anyway. So what happens next? Well, this is the part that my subcontractor should have paid more attention to, because he'd actually received a seven day warning notice from the contractor after he'd not implemented the instruction, and not appreciating the significance of that, he got further annoyed and said, I've already told you I'm not doing this, and he carried on anyway to ignore that instruction.
Jacob Austin (00:09:16) - So now if the contractor can see after a reasonable amount of time that you're not complying with an instruction that he's issued, he can give you a seven day warning notice that you either need to crack on with that work or on the expiry of that. Notice that seven day period, he can appoint somebody else to do the work, and if it costs him any more money and if there are any delay costs associated, he can recover that from you. And this is exactly what was happening to my subcontractor. I forget now how long the period of the delay was, but he'd been sent a calculation showing if you carried these works out at your contract rates, which is what I could instruct you at, it would have cost me, say, 15 grand. And now to get somebody else to do that as a standalone piece of work, it's going to cost me 20 grand. So I'm recovering that extra five grand from you. So this is your warning. If you've already failed to action an instruction, and you then receive a seven day notice telling you to get on with it, if you don't, then make some effort to arrange for the work to be completed and as a minimum, liaise with the site manager to say this is when I can start.
Jacob Austin (00:10:27) - When I get the materials in, then it's going to start costing you money and you've got to think about that because these costs will add up by the time the seven day notice is issued. The contractor will probably already be losing money because they don't like issuing contractual notices. It's done out of necessity. And for somebody else to come on to a site and do a standalone piece of extra work, it is, by and large, always going to cost extra money. And that's before you start thinking about the costs that the contractor will incur to complete all of their tendering process, the time that will be lost whilst they're doing that tendering process, the resource that then has to be committed to programming in some extra work with somebody new, the pre start meeting that the project manager attends and so on, extra time vetting somebody else's Rams instead of yours, which is already vetted. All of these little bits are extra loss and you could be looking at a fairly hefty bill. And that's before we even think about.
Jacob Austin (00:11:27) - And that's before we start thinking about if any liquidated damages are going to start being charged because of this delay. Now, some further thought instructions should be given to you in writing, and they can be either given to you as the person in charge on the site. So if you've got a site foreman and they are given a physical piece of paper to say, this is what you need to do, that will count as issuing the instruction. And the same obviously applies if it's emailed over to whoever the management team is sat in your office. There are times when instructions are given verbally, and the phrase in the contract is directions other than in writing, and there is a slightly different process to follow if you are given a verbal instruction. So if a verbal instruction is given and you don't receive a paper instruction shortly thereafter, then what you have to do is confirm that instruction back to the contractor in writing within seven days of that verbal instruction happening, then what happens is the contractor has got seven days to descend from that.
Jacob Austin (00:12:31) - I.e raised his objections, if there are any. Presumably you've been asked to do something which is a change, and what he will then do is confirm in writing that this is a change, and these are what we want you to do. So the best thing for you to do if you receive a verbal instruction to protect yourself, is issue a written confirmation of verbal instruction. It's something that you don't see very often anymore, probably because of the ability to just drop somebody an email. But there used to be a confirmation of verbal instruction pad in the site office, and various subcontractors would have the same. And when the site manager had walked the site, sometimes the employer's agent would walk the site and start issuing directions out to a site manager. The first thing that would happen is you'd get back to the office, scribble out a quick verbal instruction confirmation and send it off. And it's something that we've got out of practice of doing, I think, as an industry. But it is a necessary way to protect yourself and make sure that you establish your right to a variation.
Jacob Austin (00:13:34) - If you don't get that, or you've then got to hope is that when you appeal to the project manager, the site manager, whoever it is at a later time that they will issue a confirmation retrospectively. And a further clause under directions in writing says that if neither party confirms a verbal direction at the time, but you as the subcontractor, carry on and complete it, then at any time the contractor can confirm that verbal instruction with retrospective effect. And whilst we're talking about instructions, the contractor also has the opportunity to issue instructions to open up the work. And this could be its own whole episode by itself, and I may well do that at some point in the future. But just to remind you, the contractor can instruct you to open up the work that you've already finished. If they suspect that you've built in a defect, or that something isn't working in accordance with the requirements, and when you carry out that instruction, it will either show that the works are compliant, in which case you can then charge the contractor for the costs involved, which would include any costs of making good if, of course, that was necessary, or if that uncovers a defect or something that isn't as per the subcontractor requirements, then the cost of that testing will fall to you.
Jacob Austin (00:14:52) - Then there is a whole can of worms to start talking about, about what happens next, and we'll leave that for another day. Now, I've spoken about the processes involved from a JCT standpoint, and just to remind you that under NEC some of the principles are the same, but there are a few differences. So there is no procedure under NEC for verbal instructions to be given. So in that instance, if somebody doesn't confirm to you in writing something that they've asked for, then there is no change and there's no compensation event. There is one exception to that, which is if an instruction verbally is given to correct a health and safety issue that must be complied with. So in an NEC contract land, you have to insist that you get a written instruction for everything. And you do get some people that say, well, that's all well and good, but in the real world, blah, blah, blah. And what you've got to think is you need the real world to align with the contract.
Jacob Austin (00:15:50) - You're not being contractually aggressive to ask for something that the contract requires you to have. There isn't any room for ambiguity in this respect under the neck contract. It's written instruction or nothing. And arguably, if you're doing something that isn't instructed and that changes the scope, then you could potentially be building a defect until it's confirmed in writing. And there is an important distinction in NEC contracts as well, that a compensation event can be raised without the need for an instruction in the first place. And what this offers is the opportunity to price the compensation event in advance of the instruction being confirmed. But there is also the facility which is given under clause 61.1, that allows the contractor to instruct you as a subcontractor to get on and do something that they know they want. And then the compensation event process runs in tandem with you completing the work. And this is the same situation where you're obliged to get on with it, irrespective of whether you've agreed the price or not. And then any delay that is caused as a result of you not actioning that instruction straight away becomes a delay that is laid firmly at your door.
Jacob Austin (00:17:05) - And that is a really important distinction to be aware of. And now that you are aware of it, you know what to do. Okay, that wraps up pretty much everything I want to say on instructions for this week's episode. My mission with this podcast is to help the million SME subcontractors out there working in our industry. If you've taken some value away from today's show, I'd love it if you'd share this episode and pass that value on to somebody else who'd benefit from hearing it. And of course, subscribe yourself if you haven't already. And thanks for tuning in. If you like what you've heard and you want to learn more, please do find us at exon where you can subscribe to our training and support system for like minded subcontractors. In there you'll find templates, 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. We're also on all your favourite socials at QS.Zone. Thanks again! I've been Jacob Austin and you've been awesome.
