Let Me Explain - Why you need to be in control of your own construction program
Updated: Aug 13, 2020
There are many subcontracts that you will be asked to sign, from simple Association contracts to highly risky purpose-written subcontracts. Association and Standard subcontracts tend to be fairer than purpose-written subcontracts, but they all come with obligations and risks.
Most modern subcontracts tie your performance, including your completion, to the main contractor's construction program. Your contract will (or should) include a copy of the master or target program. You may be asked to prepare a programme for your own work. This is what you have signed up to for your tendered price. It is your plan for time, supervision and labour resources. Even the simplest standard contracts require you to notify the main contractor if you believe your work has been delayed by anything outside your control, including instructions, variations, delays by other contractors, latent conditions, bad weather, industrial action and more. It's important for you and the contractor to be able to plan ahead.
A extension of time notice must give details of the cause of the delay, the duration of the delay, and any extension to your completion date.
The time for you to give notice is short because the main contractor may have to react quickly to prevent or minimise further delay and make its own upstream extension of time claims. A 5 day notice period is common. You will never comply with a complex notice in less than a week without timely site intelligence and a new way of thinking.
More sophisticated standard contracts, such as the Australian Standard Subcontract (often modified) require more detailed information in a delay notice that can include:
The effect of any delay on a critical path in the program;
Taking concurrent claimable and non-claimable delays into account;
The main contractor can usually vary the program to avoid other delays. You need to know what the effect of these changes are on your contract, and if you need to understand and claim for the cost of these changes.
The main contractor can ask you to accelerate your work. You can usually claim the extra cost, as long as you can show any delay was not your fault and you can properly calculate the extra cost.
Purpose written contracts are likely to have even more stringent requirements.
Here is one example from a major head contractor:
You must prepare a construction program for your own contract, showing all on and off-Site activities necessary to permit weekly comparisons between the Works as programmed and the actual progress of the Works with activities (dates and times) for:
supply of drawings and information from the head contractor;
approvals from Authorities the main contractor;
provision of samples, opening up for inspection work covered up and testing of materials or executed work;
provision and approval of shop drawings and as-constructed drawings allowing for the times required for the head contractor's review and approval as stated in the Appendix;
provision and approval of safety procedures;
procurement and supply of materials;
off-site manufacturing (if any);
sequences and labour requirements for commissioning;
provision of quality procedures; and
all other activities, including those of other subcontractors, which have a bearing on the Date for Substantial Completion or the Subcontractor’s ability to complete the Works in accordance with the Subcontractor’s Programme;
provision of all maintenance and operations manuals including drafts thereof;
Your program must:
allow for the activities of other subcontractors on the Site which may affect your Works include labour forecasts (resources) for each programmed activity and expected labour productivity rates;
indicate the critical path of the Works;
You must give notice of your intention to make an extension of time claim and weekly reporting until the delay episode is over.
Killer Contracts Some contracts include provisions that you can not possibly manage at all. These are Killer Contracts. If you see a killer contract, run a mile, because it will kill your business if the slightest thing goes wrong. it does not have to be your fault.
Things to look out for are:
You become responsible for everyone’s mistakes (consultants, head contractor, site supervisors and other subcontractors) You take full responsibility for everything that you are given to tender on and work with;
The contra-preferendum rule does not apply. A complex legal idea, but meant to pin responsibility on a person providing information. Don’t give it away. Clauses that “indemnify” everybody (but you). Do not agree to protect everyone against financial loss, including clients, head contractor, architects, engineers, and employees of the builder.
If the contract says you can’t claim under the contract, in a court or on any other basis. Remembering that this applies to employees, consultants - EVERYONE, whether they have been dishonest, made a mistake, are incompetent. There is NO fallback.
You guarantee that you have not relied on anything given to you for tendering and you guarantee that everything you are given is correct; You must work in any sequence required with no entitlement to extensions of time or delay costs.
You take responsibility for any materials or facilities supplied by others; You guarantee the suitability of materials, even if specified by others; You are required to increase resources at any time, for any reason;
You can be required to accelerate the work and IF you meet the accelerated date, the head contractor MAY (not must) pay ‘reasonable extra costs.
You are responsible for any discrepancies and errors in documents;
Your extensions of time are tied to granted head contract extensions of time;
The head contractor can extend or delay your contract period for any reason with no delay costs for any reason;
It just goes on and on. Remember, if you see these terms in a contract, RUN A MILE. They are setting you up to fail, often in a spectacular way.
Medium, Short Range and Finishing Programmes Head contractors often issue short-term programs, refining the program to fit progress on the site. These programs can be a helpful management tool, but they often are not tied back to the Target Program that you relied on when you priced the job.
The consequences of not giving notices within the contract notice period are:
You lose any entitlement to extensions of time;
You may have to accelerate at your own cost;
You risk being charged with liquidated damages, where you are likely to lose final payments AND retentions.
How to protect your entitlement to be paid
It is common for head contractors to fail to update target or contract programs or to use programming to proactively manage progress. Once on site, they are only interested in getting finished, not what you might be entitled to. Site management is more often than not reactive, that is, responding to what is happening on site.
Remember, it is not the head contractor's job to look after you You have to do it yourself. For these reasons, you can not rely on the head contractor to manage your contractual rights. You must do this yourself if you want to protect your entitlement to be paid.
If you wish to dispute a rejected progress claim in adjudication, you will not have the time or money to re-create an as-constructed program to make your case. Recent experience tells me that a string of email correspondence may not be good enough to demonstrate your case.
You must be able to relate your progress, including all delays and extensions of time to the master program that you signed up to. That is the basis of your price.
To protect your contract price, you must:
Establish a program for your own work taken from the target or contract program that you have signed up to.
Include all the milestones and activities that can affect your progress, including site measurement, shop drawings and approvals to proceed, approval of samples and tests, materials procurement, off-site manufacturing, all site work, commissioning and completion items, including providing manuals and warranties;
Include your planned resources;
Save this program as your baseline (tender) program;
Implement procedures and systems to allow your staff to immediately alert your contract management (in real-time,) of any changes to your work. This will include wet weather, industrial action, latent conditions, variations, delays to your approvals, start dates, access to areas and disruption where you have been instructed to change your plan for any reason and delays caused by upstream contractors and consultants. Immediately notify your head contractor or client of any possible extension of time and delay claim.
Update your program with all reported delays, including any changes you make to resources;
From you updated program, calculate any claimable extension of time and any delay or acceleration cost.
Give the head contractor notice of your extension of time claims, with costs, in accordance with your contract. (The cost of delays to variations may go with the variation or with the extension of time, depending on your contract).
This procedure will not only protect your right to payment, but it will also help your client, the head contractor, because you will fulfill your contract obligations well within the contract time frames. A head contractor does not need surprise claims at the end of the contract. The head contractor will be able to proceed with the confidence that you know what you are doing and are up to date with your contract.
These processes might look daunting, even impossible, but the risk of not doing it is high. There’s not much worse than being wiped out or knocked down every few years. It will also help you to avoid bleeding money that you may be entitled to.
Every person working in your business MUST understand that their responsibility goes well beyond their technical/trade qualification. To achieve this you need to develop a clear, concise Payment Policy so that every person on the site and in the office knows what they are required to do. Training and mentoring your management and site team may be required, but it should not be substantial to secure your business.
We have identified a number of simple, economical and easy to use programs and processes to not only help this process, but to make your contract management much quicker, simpler and more accurate.
"It's simple, but it's not easy -Why? Because you've got to do it" (Walter Dickman)
Please contact us for more information.
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