Jacob Austin 00:00:00 Hi all, Jacob Austin here from QS.Zone. And welcome to episode 72 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 72, is a deep dive into the contract documents that will make up a typical subcontract. And to do that, we're focusing on the JCT standard building subcontract from 2016. So let's dig in. This might seem like a bit of a dry subject at first glance, but it is absolutely vital for people working in the construction industry to understand the nature and the makeup of your subcontract documents. So I've picked the standard building contract SBC16, which is a widely used form in the UK. And whether you're preparing for a tender or you've just secured that big job. Understanding your contract documents is what's going to keep you safe, profitable and hopefully headache free down the line. It was once described to me that juggling contracts alongside the pressure of getting the actual job done, is a bit like wading knee deep through quicksand whilst juggling chainsaws.
Jacob Austin 00:01:27 It's tedious, stressful, and certainly not something you choose to do on a Saturday night, but trust me, a solid grip on these documents is a powerful tool for you as a subcontractor. It's like having a map in a maze. You still have to do the walking, but at least you won't bang your head into the same wall ten times before finding the exit. So in today's episode, I'm going to demystify these documents, what they are, where they fit in, and how they interrelate with each other. We'll cover everything from primary subcontract form to the contract documents as they are defined in the subcontract. Plus, we'll look at activity schedules, BIM protocols, design responsibilities, and what happens when there's an inconsistency between your drawings, bills and specifications. We'll also touch on some of the other bits that you're likely to find, including bonds, warranties and third party rights. So by the end, you'll not only know what goes into that big stack of paper, but you'll also feel confident in navigating it whilst avoiding the landmines lurking inside.
Jacob Austin 00:02:32 So let's dig in. So what makes up that contract when you're dealing with the project setup under the standard building contract, you can be looking at a pretty hefty package of documents. Most of what you'll see, you'll hopefully have already seen at Tender Stage. And essentially, the contract is not just the piece of paper that you sign at the end to do the deal, but it should encompass the whole deal itself, and that deal needs to be in place before anybody lifts a trowel, puts a spade in the ground, or brings a paintbrush anywhere near a wall. Once signed, it essentially erases any conflicting bits from the original tender and takes retroactive priority so that formal contract becomes the sheriff in town. That dictates the rules, and anything that doesn't align with it is now relegated to the bench. In an ideal world, all these documents will be sorted for you long before you start doing any physical work. But on some jobs, that seems as realistic is expecting unicorns to deliver your first batch of materials.
Jacob Austin 00:03:38 But the point stands. Get the contract right, get it signed, and get everyone clear before any heavy lifting begins. It reduces risk, rework and nasty unforeseen risks and variations that you might have to foot the bill for and butcher your profit margin later. Now, the starting point for your standard building subcontract is the printed form itself. This includes your recitals, your articles of agreement, the actual conditions that you'll be working under, and then various schedules for things like third party rights and bonds. But it also references a myriad of other documents that can be bolted into it. Some are formally defined as subcontract documents, while others are mentioned throughout a supplementary, but they can become binding. It's also crucial to note that the chosen version of the standard building subcontract matters as well. There is a with quantities version, A with approximate quantities version, and a without quantities version. Each of these documents define the contract documents that go within it slightly differently, so you need to know which one you've got on your desk.
Jacob Austin 00:04:52 So moving on to those contract documents that we've just mentioned, if you're working with a subcontract with quantities, contract documents include the contract drawings, the contract bills, the agreement, the conditions, and if relevant, the contract is requirements and the subcontractors proposals. An analysis of any subcontractors design portions and possibly a BIM protocol. Different versions tweak this definition slightly. For example, if you're working without quantities, contract documents will likely hinge on a price document or a specification, depending on which option has been chosen. If the project involves a contractor's design portion, the documents potentially change again, and this introduces those contractors requirements and subcontractors proposals. And you ideally want subcontractors proposals that dovetail into those contractors requirements so that they fill in any necessary blanks and remove any risk. So first off, you've got the agreement and conditions. This is the heart of the subcontract and the front end part of the document that will be signed by both parties in the standard form. This includes the recitals, the articles of agreement and the contract particulars which have to be completed accurately because once these are signed and witnessed, in some cases, these confirm that all of the documents included are correct and you're happy to build to them, and they form the basis of what you'll build when you build it and how you'll get paid for that building.
Jacob Austin 00:06:30 And this is vital that you check these because, as I say, by signing it, you're signing to say that you both agree that these are the documents pertinent to your subcontract. So that means an extensive review of all the interrelated documents, starting with your contract drawings. These should be listed out with reference numbers and revision numbers. They're typically attached to a recital in the contract, and the contract doesn't have to explicitly say who prepared these drawings, but the list must be accurate and complete, and this is your chance as a subcontractor to check that the drawings included in the contract are those that you've priced against, because these drawings will be your visual roadmap to completing the work. And it's these drawings that you need to check and keep up to date with. Registering any potential variations with your contractor under a with quantities contract, you've got contract bills that define the quality and the quantity of the work. The bills must be carefully prepared, and they're typically measured in accordance with recognized industry rules like num2. Ensuring these bills matched to the drawings and specifications is key.
Jacob Austin 00:07:42 Discrepancies can cost you time and money. If you're working without quantities, you'll rely largely on a price document or a price specification. Either way, the contract sum is put together using these documents. In many cases, a specification also forms part of the package, defining the quality and standards that you need to work to good practices for the specification to become the heart of the core document, with both the drawings and the bills making reference to it. That makes sure you're always singing from the same hymn sheet, and it removes the potential for errors where the bill describes one thing, but the specification might say something else in a refurbishment. This might differ slightly, and you might see a room by room schedule of the work that you're going to complete. And in this scenario, we're describing potentially what you're going to find when you get into the rooms and then what you need to do about it. And these can be tricky to price at times, because two people might look at the same piece of work and know what the end result needs to be, but have a different way of writing down how to get there.
Jacob Austin 00:08:48 So remember with this clarity is key. And if you don't know what something means, get your RFI schedule going and ask questions about it. If there is a subcontractors design portion, the contractors requirements will set out what the contractor and hopefully this aligns with what the employer wants. Also, and this is what you need to design, think of this as the contractors shopping list, and the level of detail can range from quite high level concepts to really quite detailed and specific specifications and performance criteria. And what you're looking for here is that the requirements are tight and that they leave little room for interpretation. Gaps might lead to costly variations that you need to fund at a later date. And so to plug those gaps, you need to make good use of your subcontractors proposals. These should follow the format that the contractor requests, and they should Ideally line up nicely with the contractor's requirements and fill in any gaps. And it's sort of. The rule of thumb is that if the contractors requirements are really detailed, then the subcontractors proposals can be a relatively slim document.
Jacob Austin 00:10:00 That just confirms a few minor details to supplement it. But if the contractors requirements are quite high level and a more performance related, then your proposals need to be really detailed to get across exactly what you're going to provide and how that meets the initial requirements. And provisional sums are a bit of a no go within subcontractors proposals. If something is uncertain, it's the contractor that needs to provide the provisional sum, not the subcontractor. The next key part is the CDP analysis, and this can vary in format, but it's basically a breakdown that will be used to value variations to your designed elements. It's in your best interest to make this analysis as logical, as transparent as you can. You ideally want there to be enough information there to be able to value any variations to your work, and lack of transparency here is more than likely going to land you in dispute territory down the line. If there is design there more than likely in the current age, be a BIM protocol. These are becoming more and more common.
Jacob Austin 00:11:10 These will often flow all the way down from the main contract through to you as a subcontractor, and it will set out how the model is produced, shared and maintained. If you're working in a BIM environment, make sure that you and all of your team understand the rules of that BIM protocol. This can impact how documents are shared, what formats are acceptable, and who takes responsibility for the final coordination of the BIM model. BIM is a great tool, but it needs to be used correctly to get the best out of it and to avoid digital chaos. A couple of other things you might see are activity schedules and information release schedules. So activity schedules are typically used in a without quantities subcontract. And it offers a simple way to break down your price for the purposes of valuations. Essentially, the activities that you execute get a price put against them and it makes it easy to value then the work that you do in a given period. But be careful with these, because less detail might mean less accuracy, and it might lead the contractor to underpay you if you haven't provided enough information for them to value the work in a given month.
Jacob Austin 00:12:21 The other thing I mentioned was information release schedules. This is where the contractor is going to set out, when key pieces of information will be delivered to you, and when key pieces of information from your design, if you're completing some, will be required to be presented to them. And the idea behind this is that it sits in line with the program. And if everybody provides their bit of information at the right time, it prevents delays. This is, of course, something to be monitored, because you can't be seen to be falling down on providing information to the right time scales yourself. And you also need to measure the contractor, because it may be that they're delaying you by providing their information late. Health and safety documents. These arguably form part of the scope. The contractor should be telling you how they're going to build the job in the form of the construction phase plan, and then they will often include here a list of policy documents, standard operating procedures, and safety requirements that define how they want you to execute the work.
Jacob Austin 00:13:24 Some of these documents can contain some hidden nasties. So as much as you might look at them and think it's just the same old, same old, some standard operating procedures can be quite onerous, and they're worth a glance through just to make sure that nothing stands out and it's going to come back and bite you later. Contractors will expect you to work in line with these documents, but they are there first and foremost to try and get the job done in a safe manner. Because nothing kills profit margins and reputations faster than a health and safety failure. Next, we've got some optional bond forms. These might include advance payment bonds, bonds for offsite materials, performance bonds, and retention bonds. If your contractor wants any of these from you, they have got to tell you before you execute the contract. Now we're starting to get some of the fine print. Your standard contract spells out how to interpret the document, and it carefully defines key terms clarifying how notices should be served and who they should go to.
Jacob Austin 00:14:25 Importantly, the agreement and conditions rule the roost. Nothing in the other documents can override them. If you want amendments to the terms and conditions, it's absolutely critical that these go into the base document, rather than relying on qualifications or little hidden adjustments in the bills of quantities. If there's a discrepancy, maybe a drawing size one thing and the bills say another. The contract has rules for resolving that. Where there are bills of quantities, usually the bills trump the drawings for quantity and scope issues, meaning that you might be entitled to remeasure or a variation if there's a difference. But this will depend on who's taken the quantity risk and whether you've got a remeasure subcontract or a subcontract. Based on the adjustment method, it's best practice to raise discrepancies as soon as you spot them. You don't wait until you've built something to tell anybody about it, and certainly not twice. Prompt notification can protect you from non-payment for extra work later on for contractors. Design portions if there's a clash between the contractor's requirements and your subcontractors proposals in an unamended form, The subcontractors proposals usually went out, but there is a catch.
Jacob Austin 00:15:41 You're still on the hook to ensure compliance with design obligations and statutory obligations. This can be tricky, so take the time as best you can to try and align these documents prior to signing. Your subcontract and statutory requirements are a key place for you to pay attention. The contractor has got to issue an instruction to resolve any issues that they cause. But if the conflict is between statutory requirements and either of the contractor's requirements or your own proposals, you have to fix that at your own cost. Unless, of course, that is due to a change in legislation after you've signed the contract. And importantly, when your contract is signed, the contract documents are only for use on the project at hand. You should be given a copy of the final contract by your contractor, and you should keep that safe and keep it Private documents that are for use on that contract should only be used on that job. And when you get to the back end of that site, there will also be certain documents that you have to provide to feed into the operation and maintenance manual and the health and safety file.
Jacob Austin 00:16:49 These are there for future maintenance and potentially even the onward sale of a building, which will likely rely on there being a proper trail of documents to inform what the building is, what it's made from, how safe and secure it's going to be for an onward purchaser. One thing that we haven't mentioned yet is collateral warranties. Now, if these are required, they should be stipulated to you at the start so that, you know, you've got to provide one. And they're typically there to provide cover to the employer or another third party, which might be a funder or potential tenant of a constructed building. These will only be relied upon if the main contractor that you're working for has ceased to trade. But they are important documents. I did an episode of the Subcontractors Blueprint a little while ago on collateral warranties, which you might want to listen to if you want further information on that, there are some key things to look out for to make sure that extra obligations aren't being forced upon you as a subcontractor. If warranties are a requirement of your subcontract, you must provide them.
Jacob Austin 00:17:53 Otherwise you'll be in breach of your contract with all the lovely things that goes along with that. So at this point, whilst I've been waffling on for some 18 minutes or so, you might be thinking this is complicated and who's got the time to memorize all of this? But the truth is, you don't have to be a walking encyclopedia of contract clauses, but you should understand the structure. The printed form sets out the main rules. The definition of contract documents tells you what counts as part of the contract, and specific schedules, protocols, and recitals. Flesh out all the details. If something feels unclear for you, Get it clarified before you sign your document. This might cost you a few hours of your time now, but save you bags of money and a massive headache down the line. Make sure that the obligations that are being passed on to you are realistic and you can achieve them. You also need to make sure that what you pass down to sub subcontractors doesn't conflict with your own obligations to the main contractor.
Jacob Austin 00:18:57 Passing down risk to smaller suppliers might seem like a clever idea, but often the smaller suppliers are ill equipped to deal with the issues, and sometimes accepting a level of risk is the best way forward, because these things all seem clever. Until something goes wrong and you're left holding the steaming pile of that stuff. And finally, clear documentation equals fewer disputes when everyone knows what they're supposed to do, when to do it, and how they get paid. Surprises are minimized. Yes. Changes happen, designs evolve, market conditions change, clients change their mind and issue instructions. But the well structured contract that we've just spoken about lays out some ground rules for how to deal with these changes fairly. Now, if all this talk of recitals and clauses has got you dozing off, let's talk about your contract through the eyes of a food metaphor and you might call it a carefully assembled sandwich. The bread is the formal agreement and the conditions that go along with it. Without that bread, what you're left with is a messy pile of bacon, lettuce and tomato sat on your kitchen top, the drawing bills, specification and requirement.
Jacob Austin 00:20:13 And sure, you know that's food, but you can't just pick it straight up and get on and enjoy it. The contract form that bread holds it all together and keeps all your tasty filling from slipping out. And if you find some mold on your bread, like a discrepancy in a drawing. Call the chef, or you might end up biting something off that you'll regret later, so hopefully that helps you. Contracts shouldn't be something to fear. Think of them as a framework that, if used correctly, they protect all parties involved. For subcontractors, knowing these documents inside out is part of your professional toolkit. You can't always rely on trust and goodwill when you're dealing with main contractors because, as I've said before, contractors contract when things go wrong, they pull out the black and white. And with so many parties, complex designs, evolving technologies, that contractual structure is there to set out clear expectations. Tell you what takes precedent over what and what to do if things go wrong. So I hope you've enjoyed today's episode.
Jacob Austin 00:21:20 My mission with this podcast is to help the million SME contractors working out there in our industry. If you've taken some value away from today's show. I'd love it if you'd share that value and pass it 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 www.QS.Zone 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 will cost you less than a cup of coffee per day and you can cancel any time. We're also on all your favourite socials at @QS.Zone. Feel free to reach out, give me some feedback, give me some abuse or an idea for a future show. Thanks again! I've been Jacob Austin and you've been awesome.
