Jacob Austin 00:00:00 Hi all Jacob Austin here from QS.Zone and welcome to episode 88 of The Subcontractors Blueprint, the show where subcontractors will learn how to ensure profitability, improve cash flow and grow their business. Today's episode is all about good quality contract management. One of the core foundations for delivering a successful project of any size. Let's be honest. Contracts aren't exactly the fun, flashy part of construction, but they are the glue that holds everything together. From setting clear roles and responsibilities to defining how much you get paid and when done well. Contract management leads to trust, transparency, and smooth execution of your project with fewer disputes and on poorly. Well, let's just say your project might turn into games of email, tennis with compensation, events, notices, and legal threats flying back and forth. Not fun. So in this episode, we'll be covering some key themes of how to establish good clarity and collaboration from the start, how to ensure robust systems, records and data are captured, navigating risk and cost control, and the importance of leadership, capability and personality in contract administration.
Jacob Austin 00:01:23 But before we dig in, if you are new to the show, then please subscribe for more user friendly advice on all things subcontracting. So let's start with the basics of good contract management. And when we say that phrase, what do we really mean? Well, according to multiple industry experts, it's all about clarity on obligations. Everybody should know exactly what they've promised to do. Scope wise timescales, payment schedules and the requirements to communicate in fixed timescales as well. It's about accountability and transparency. The contract should be a document that you use daily, not stuffed in a drawer. It's a document that is brought to life by the project that you're working on, and you should be able to refer back to it when inevitable questions arise. It's about collaboration. If something goes off track, you raise it early. Communicate openly. Find an equitable path to moving forward using the contracts framework, rather than letting little issues fester until it becomes a big problem and an inevitable meltdown. Also, having appropriate risk allocation, understanding who owns which risks, how costs for deviations or unforeseen issues will be shared, and ensuring that neither side is forced to swallow unmanageable liabilities.
Jacob Austin 00:03:01 And this in particular is something that many of the experts emphasize. A well crafted contract is intended to be fair and balanced. The off the shelf industry standard contracts do a good job of replicating that, so that both parties can deliver the project as agreed. And if something changes, then there's mechanisms there in place to solve the issue and handle it quickly and fairly. You could think of it like instructions for flatpack furniture. We've all been there trying to assemble that cupboard from Ikea and thinking we can do it in the dark without reference to that little booklet. But if you read the instructions from the start, you can assemble your furniture and therefore the project with minimal confusion. If you only check after you've jammed a piece in the wrong slot, then you could be in line for big amounts of rework and you covered up or down. So the moral check the instructions early and often. Why does it matter for you as a subcontractor? Well, you're often working in a fast paced environment, juggling multiple jobs, multiple designs, and therefore multiple chances for the scope to change.
Jacob Austin 00:04:09 If you're relying on trust and verbal instructions, you're risking scope creep that you don't get paid for and perhaps late payments. Conversely, if you rigidly rely on the contract clauses without forming good relationships, then you risk tension and delays in resolving issues. So the sweet spot is to truly understand the contract risk profile. Your obligations keep good records. Communicate changes fast and maintain a fair approach to your commercial partners. Remember, a large chunk of disputes can arise from either incomplete or misread obligations. Someone saying, oh, that wasn't in my scope. And another says, well, yes it was. Didn't you read clause 7.2? Well, good. Contract management starts with reading that document and understanding those gray areas before they explode into big claims and disputes. So let's take a look at some key pillars of good contract management. First and foremost clear contract documentation and early expectations set. It's about establishing clarity from the start. Multiple industry experts refer to seeing robust contract documents, accurate data and communication early on, for instance, having accurate specs and deliverables spelled out for you.
Jacob Austin 00:05:32 If your contract says sustainable materials per standard X, then you need to ensure that both you and your contractor and maybe even the client if it's not clear upstream, understand exactly what that means so that it can be delivered and meet expectations. Also, knowing who to talk to in terms of the contract and the sequence involved is vital before you get started, and usually main contractors will do this via a pre start meeting. This is your time to put pen to paper and make note of your meaningful contacts. But also it should be a time to discuss scope, deadlines and how the risks are developed and shared out on the contract. And this is something that I've said many times. The best time for you to get really clear, in order to protect yourself and thoroughly establish what you're providing, is before you start. Ideally, you'll clarify things during the inquiry phase. So even at the point of getting to that pre start meeting, both you and the contractor are confident that you've priced the right scope. And are you going to deliver what is needed to fit the wider scheme.
Jacob Austin 00:06:35 Of course discussing and agreeing meaningful and achievable timescales is an absolute must as well. You do this before you put pen to paper because once you do, you're bound to it. But signing that contract shouldn't be the last time that you see it. You should be referring to it regularly. Good client side project management teams will use the contract daily as their guide as to how to manage the work, and they talk about ensuring contract compliance from the onset. It's not just pulling out the contract if something goes wrong, but using it as a management tool. And that approach has some mileage, because if everybody does it, we're all on the same page about deliverables, about timescale and cost control. Another recurring theme is people's competence. The contract is just paper, unless the people managing it have got the skills and the systems to back it up. And that means you have the right lads on site to do the work. It means you've got the right manager or supervisor overseeing it. That's got the right level of capability and capacity to deliver not just the work but your contractual obligations.
Jacob Austin 00:07:40 It also applies to the commercial side. If you or a Shaz working for you doesn't know how to handle a dispute under NEC, and that's the contract you're working under, then you're likely to land in trouble. How robust are your systems? Do you have a good record keeping strategy? If you contracts cost plus, then do you have consistent ways to record time and materials? If you're relying on ad hoc records, then you are likely to be drowning in confusion and probably disallowed costs by the end of the contract. And don't just leave this to chance. A good practice would be to get either third party audits carried out on your processes, or to have peer reviews carried out. Let's say if you've got two exes working on different schemes that they each refer to the other one's job to check for missed opportunities, issues or fall downs in your procedures. This can be especially relevant when you're working on NEC based frameworks or public contracts, because the procedures in those contracts are particularly rigid, and you've got to be really steadfast about approaching it in line with the contract requirements.
Jacob Austin 00:08:48 Missed dates equals missed opportunities. Another theme is understanding your contract inside and out, over and over. Experts repeat. Know your contract thoroughly. It might sound obvious, but many folks only half read it or rely on what people have told them, or perhaps even memories from a previous job. But you can trust me on this. Different contractors will have different amendments. And you can't just treat every job the same. It can lead to big trouble. If you don't realize there's a time bar requiring you to submit notices within X amount of time from a delay event. Then you could risk your extension of time being struck out if you're unclear on the scope. You could risk under-delivering or even Overperforming carrying out tasks outside your contract and then struggle to get paid for doing them. If you assume that the contractor is responsible for a certain risk, and then the contract says that it's down to you, then failing to manage that risk could see you stuck with cost overruns. If the contract is particularly large or complicated, then a good approach would be to gather your project leads, say your QTS, your site manager, and do a contract kickoff session where you talk through major clauses, due dates, risk items and timescales for things like submitting your applications for payments, notices or compensation events.
Jacob Austin 00:10:10 Summarize them on a project one sheet so that they are to hand for day to day reference. That is often going to be much more user friendly than handing out a couple of hundred pages of legally worded text that's just going to gather dust on site. The next interesting point that's regularly raised is how a good contract manager or project manager needs to have some personality. It's not just about memorizing clauses and reeling them off. They also need to have diplomacy, knowing when to push for what the contract says versus when to compromise and find alternative solutions. They need to be an effective communicator. A tricky part of managing a contract is remaining compliant with the clauses and following things such as notice requirements, whilst preserving relationships. The art of how you deliver things can help you keep your contract procedures on track, without alienating the contractor or client with an overly heavy handed approach. They also need strong organisation being able to handle multiple tasks at once, including good record keeping. Because let's face it, none of this is overly easy.
Jacob Austin 00:11:16 Moving a project forward while following correct contract provisions if relationships are breaking down is a really tough challenge. If you let the contract take too much precedence over all the practicalities, then you can hamper the process of a job. Yet if you ignore the contract altogether, you can be ignoring opportunities or risks, both of which could see you missing out. So you need to find the sweet spot. Flexible, but consistent with the agreed terms. Another strong message is that the contract is not just a backup plan, and it's there to be used day to day. I've heard it said many times that the black and white only comes out when people start falling out, but doing that, you can not only miss out on obligations and risks, you can find yourself losing out on things like extensions of time, variations or compensation events. And that means that the contract needs to be more of a day to day reference point for decisions or scope clarifications and cost changes. Adopting this approach not only avoids those missed opportunities or even worse than that, claims coming in from your contractor or a client.
Jacob Austin 00:12:24 But it fosters a fair and equitable environment. It can actually avoid arguments because you're not there, tabling changes for things that are within your scope, setting your expectations too high because you expect to be paid something that you're not, but you also pick up on things that you might be doing or might have been asked to do that are beyond your scope, and you're clear about what things should be an extra and that you should be paid for. And doing that on both the part of the contractor and the subcontractor means that both of you feel treated fairly, and neither of you thinks the other is trying to weaponize the contract against them, because you're both living it from the start. If you're working on target cost contracts, then risk and cost management is something you need to collaborate with your contractor on. You should be seeking early clarity on how costs are recorded. Which items are reimbursable, which items are part of a fee, and what systems are used to communicate the cost and to communicate changes and notices and the likes.
Jacob Austin 00:13:21 Communications about changes are required as soon as they arise, allowing both of you to understand what's going on, what's changed, and perhaps to go and visit the changes as they're unfolding, so that both of you can understand the magnitude of the change and the operations that are involved in making it happen. Try also to be proactive about identifying risks. For example, if there's a certain scope item that's a little bit uncertain, then you might agree to put in a provisional sum for it or in any key terms. You might put it in a risk register with allocated cost, so that no one is shocked if the cost is then realized at a later time. And also regular reviews sitting down monthly or even quarterly to check actual costs against the forecast discussed variations and risks helps to keep everything Being transparent. This approach can drastically reduce friction because people only tend to get upset about cost if they feel like it's a surprise, or if they feel like the other side is trying to game the system somehow. So while structured approach from the start really does help that trusting relationship.
Jacob Austin 00:14:27 So with everything I've spoken about, what are the key steps that you should be taking as a subcontractor to protect yourself and manage your contracts? Well, starting at the beginning. Plan early and document. Seek clarification early on, preferably at a pre start meeting assuming there's one held, and talk about key clauses, especially notice periods payment processes, scope responsibilities, risk allocations. Your goal here is to have no ambiguities left behind. That way you both know what you're getting yourself into. Create yourself a contract one sheet. Highlight critical deadlines. Time bars. Valuation dates. Key clauses that you've got to comply with and conditions precedent key deliverables if you've got to achieve section or completion dates or key dates. Distribute that to your team so that everybody's informed and ideally store your contract digitally so that people can review it, search through it, and understand for themselves what they need to do. Try and standardize things. So for cost management, have standard templates, time sheets, site diaries, record logs, templates for early warnings and compensation events.
Jacob Austin 00:15:35 If you're on NEC jobs and templates for variations for your JCT contracts. Build your internal capability. You might want to bring in external trainers for a bespoke session. If you've got a particularly complicated contract, or if you're working under a new contract that you've got no experience of. If you're reasonably confident, then maybe a short internal workshop on how to manage this particular contract effectively covering big clauses, relevant forms, how to track variations, some of those things that you are putting down on your one sheet for the contract. Assign clear roles within your business. So who's going to be responsible for submitting contractual notices? For recording cost. For managing submissions of variations against the time bars in the contract. You can't just assume that it's going to get done, put something in place to manage it, to make sure you get it right and you don't lose out. If you have procedures from a previous job, then you can't just assume that they're the same laws and standard contracts evolve. And as I mentioned earlier, every main contractor in the land will have their own standard amendments and sometimes even bespoke amendments specific to a contract.
Jacob Austin 00:16:47 You might need to update your procedures and tweak your processes to align with those amendments. Next, communicating often and early leaving issues to fester creates bigger problems than nipping in the bud, so don't wait until a valuation to start, including extra cost. Get it on the table as soon as you know about it, and it's most likely your contract will require you to do it in a different format to just submitting it as a variation within an application. So comply with that. If the contract says x, then do x. If there are routine meetings on your site, then attend them. Take part in them. These can be the project heartbeat. They're there to keep the project on track. And inevitably, bits of coordination issues, potential changes, risks and so on and so on are all discussed at these kind of meetings. If you don't bother going to them, or even if you just turn up and you only half heartedly pay attention, then you're bound to miss things that could be important to you later.
Jacob Austin 00:17:48 That might be important things that delay your work, or introduce extra scope that you need to be promptly notifying to make sure you get your hands on the money for it. Next, if the contract that you're working on is big enough, then you will need to manage risk. Proactively identify key risks, be it scope uncertainty, design changes, hidden site conditions, potential supply chain issues. List them at the start and note whose responsibility they are. Maintain that as your project risk register. This isn't something you bury in a dusty file. You want to revisit it? Add to it. Close things off that are no longer relevant and try and address things if you see that they're about to materialise. That is the time when you need to act. Not after it's caused big time and cost blowouts. And be transparent with it. If something is going to cost more, or take more time or spoil the quality of the job, then the best approach is an early warning. Now, if you're working on JCT, you can take the same approach by either writing a notice or communicating your issues if it doesn't have to be done via a formal channel.
Jacob Austin 00:18:57 The key thing is to do something. Surprises at the 11th hour never go down well. It sabotages trust, and if you want to be treated fairly, then you've got to start by being fair with your contractor or your client. So in showing up what I've spoken about today, Managing the contract well. Starts with clarifying and understanding upfront. That means reading the documents, discussing gray areas, scopes, risks, and deadlines with your contractor or your client so that you're both on the same page and so that you know what you are performing to. You need to have decent systems in place, both in terms of collecting the right data and for communicating with your client or contractor as well. Then the rest of it comes down to the personal effect equipping the right people with the right training to be able to manage the contract properly. Having the right mindset about communicating issues promptly using the contracts procedures, but doing it with a constructive tone. Recognize that things change on projects and being prepared to adapt as well. The contract is there as your framework, as the line in the sand, as to what you've agreed, and the ultimate record of the bargain that you've struck with your contractor.
Jacob Austin 00:20:11 And it's then about the people, the process is the collaboration and treating each other with fairness and respect. That gets you over the line successfully so that you can build a lasting working relationship. Okay, well that just about sums up what I wanted to say today. My mission with the podcast here is to help the million SME contractors working out there in 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 someone else who'd benefit from hearing it. And of course, subscribe yourself if you haven't already. And thanks again for tuning in. If you like what you've heard and you want to learn more, then please do find us at. And of course, we're also on your favorite socials again at Shark Zone. Thanks again. I've been Jacob Austin and you've been awesome.
