8 July 2019

 

Building Dispute Management

 

Someone once asked me how to avoid a dispute. I thought about the answer for a while and eventually said something like

“…in the building industry disputes are almost inevitable…”

There are always things we can do to minimise the opportunity for disputes to take hold and when or if they do, to manage them to reduce the collateral damage.

The definitions of “dispute” and “disputable” talk about disagreement, argument and things that are open to question or uncertain.

Building is a complex process that a lot of us in the industry take for granted sometimes because we are exposed to it every day and it has become second nature. There are usually many trades involved, many suppliers, several locations or sites, and worksites are largely uncontrolled when compared to a factory. For many consumers of building work, it will be their first building experience or a repeat of an infrequent process.

The first step in avoiding a dispute is to make sure the contract documents properly describe the works to be undertaken. Plans need to be clear and comprehensive and show the shape, size and location of the work. The specification will describe the materials, inclusions and finishes. The general conditions of contract will set out the contract sum and how it is to be paid and how long the work will take. In some form or another these elements need to be included in any contract. The clearer the contract documents means less uncertainty or matters that are open to question and hence disputable.

The other most important factor in avoiding disputes is the make sure the contract price adequately reflects the risk. To do that you will need to know what all the costs of the work are and who you are entering a contract with. In this regard costs include and on-site costs and any off-site costs such as head office overheads. Lock your sub-contractors and suppliers into contracts as soon as possible after signing a head contract. Make sure your margin or profit reflects the risk you have purchased by signing the contract. To properly evaluate the risk, you should know something about the person or organisation you have contracted with. Is there any likelihood of a delayed or disputed payment? What might it cost to pursue an outstanding debt? In most cases the risk of non-payment is minimal but should that occur the impact on your financial position could be devastating so I always suggest thinking about that risk carefully before finalising a tender bid.

The other major factor in avoiding disputes is to do good, defective free, work that is compliant with the contract documents. Be good at what you do.

Because building is often carried out in an “uncontrolled” environment and there are many aspects to coordinate, mistakes will happen. When they do it is always best to recognise what has happened and discuss straight away with your client. Provide solutions, don’t argue or ignore, and resolve as soon as possible. A small cost absorbed early may prevent something escalating.

Remember we are in building as a business because we love it and because we can make it profitable. Any dispute will impact that profitability so avoid disputes at all cost.  

 

 

 

 

14 March 2019

 

Contracting Traps

A simple new house build contract that I was asked to assist with recently raised what I thought was an easily avoidable problem for both the Builder the Owner.

The Builder was the holder of a franchise with one of the national firms that have such arrangements. I assume that the franchise arrangements include assistance with standard estimating and specification packages in addition to the buying power of collective bargaining. There is nothing wrong with such arrangements however a more complete understanding is required by the franchisee of the jurisdiction in which the contractor is working and the necessary adaptability of the standard estimating, and contracting documentation offered as part of the franchise arrangements.

The house in question was a new build to be constructed on a slightly sloping block with approximately 1.5 meters of diagonal cross fall. The Owners particularly wanted a timber framed, or bearers and joists, floor frame with particleboard flooring to receive other finishes.
My involvement was towards the end of the contract when the Owner had been presented with a Provisional Sum adjustment for “Site Works” of an additional $22,000.00. The original Provisional Sum was $30,000.00. After some initial investigation the Contractor advised me that his estimate for all works below floor level was $30,000.00 which was his standard allowance of $25,000.00 for a slab on ground on a flat site with $5,000.00 added for the brick base and the slope. The Contractor then simply transcribed this into the contract document as a $30,000.00 Provisional Sum with the title “Site Works”.  Under the QBCC legislation in Queensland a provisional Sum must be a reasonable estimate of the cost of the work utilising all the available information at the time.  

When I asked the Owners what they thought “Site Works” meant in the contract they said it was for excavation and removal of any surplus material from the site. A google search for “Site Work” or “Construction Site Work” demonstrates what a vague term it can be. The most accurate I found was:

“All work regarding the earthwork for a project. The scope of the site work package can vary considerably, however the term ‘site work’ normally references all excavation, backfill, etc. for the project.”

The issue was clearly that both parties to the contract had a different understanding of what was included in the contract for “Site Works”. There was no definition in the contract for “Site Works”. The matter eventually reached a negotiated outcome where the contractor conceded a large proportion of the initial claim as an alternative to going through Litigation. 
The take out from this experience for Contractors is not to take anything for granted. The move from estimate to contract requires careful consideration particularly with Provisional Sums. A broader description of “Site Works” in this case to include all works below floor level would have avoided the conflict and payment of the adjustment in full.  
 
 

 

21 October 2014

"The Devil is not in the detail, God is in the detail"

I recently came across an article that referred to a common saying; “less is more” which led to some further research on the Architect Ludwig Mies Van der Rohe. (1886 – 1969)

He was a notable German/American Architect who significantly influenced the development of the Glass and Steel Buildings after World War 1. He was particularly interested in creating the 20th Century Architectural Style for buildings of this type that are so common today.

Apart from his considerable body of Architectural work he is best known for these dictums:

  • “Less is more” and
  • “It’s not the Devil in the detail, God is in the detail”

There is a lot to learn from these terms.

  • Be tempted to overthink but be conscious to focus on the task at hand and not introduce unnecessary complications. Perhaps this can be extended to the more common KISS principal “keep it simple stupid”.
  • It is a timely reminder to appreciate the need to understand and get across the detail of whatever we are doing. It will be rewarding in the long term.

 

18 September 2014

Apprentice support changes and red tape reduction for RTO’s

It is heartening to see the recent announcements from Ian Macfarlane, Minister for Industry, about reforms to apprenticeships and the VET sector.

The Commonwealth Government will invest $200 million each year to establish and maintain an Australian Apprenticeship Support Network from 1 July 2015. The objective is to raise the completion rate of apprenticeships which in the construction industry in Queensland is just over 50%. Amongst other things this new network is intended to provide assistance to apprentices, outside the workplace, with career advice and mentoring. It will also engage in community employment outreach to better match the needs of employers. The term used in the Ministers press release was this Network will provide a one-stop-shop for employers. I hope the next stage in the conversion of this policy idea is not lost in the service delivery. The Commonwealth does not have a good record in this regard.

Reform in this area is long overdue so it is hoped it will provide a positive outcome. If all goes well there will be a reduction I the red tape of administrative process and procedures and a focus on the employer and apprentice needs.

This comes on top of the already introduced Trade Support Loan Scheme which provides a loan of up to $20,000 over the life of an apprenticeship to encourage young Australians to take up apprenticeships.

Perhaps more significantly though, there is to be a shake-up of the VET sector in an attempt to better provide job ready skills and training.

The focus will be to elevate trades to the centre of the economy. Once again the focus will be to reduce the red tape and administrative processes of the Australian Skills Quality Authority (ASQA) to allow those highly performing training providers to get on with training by allowing the trainers to train rather than be burdened with reporting and administrative process. In the words from the Minister’s press release “ASQA should be a regulator, not a book keeper.”

By allowing RTO’s to concentrate on the provision of high level training and service ASQA will focus its attention on the unscrupulous operators in the training chain.

The Commonwealth Government also intends to move to a more contestable model for the development and maintenance of training packages. This may well see the demise of the current 12 Industry Skills Councils who undoubtedly will tender along with others to provide the service.

The risk with this proposal to allow industry free access to controlling training packages is that the quality of training, which has waned over recent years, will become fragmented. Full trade qualifications could be eroded and replaced with skill sets that may not be readily transferable when a particular part of industry experiences a downturn. The traditional full trade following the completion of an apprenticeship should provide comprehensive a set of broad based skills that can be readily transferred across industry sectors.

I will follow with interest the development of both the reform of the apprenticeship system and of the VET training that accompanies it.

 

11 September 2014

 

'Preventative Justice' like 'Preventative Medicine'.

 

I read an article recently that proposed the notion of ‘preventative justice’ in much the same way as the practice of ‘preventative medicine’.

In building disputes, particularly in the residential sector, there is often a high emotional charge with one party or the other, often with either wanting their day in court. The courts and tribunals do a good job with managing building disputes but it should be remembered that a court or tribunal decision usually involves a winner and a looser. Generally tribunals start from the premise that each party will bear their own costs. Costs can include Solicitors and Barristers fees and fees for the various experts needed to inspect and report and then attend hearings as witnesses. Even if costs are awarded they rarely include all the expense gone to in pursuing a matter.

Court and tribunal cases can take a very long time, often more than twelve months, to reach a decision.

‘Preventative justice’ includes all those checks and balances that minimise the opportunity of things going off the rails. The essentials are:

  • Good quality of documentation including:
    • Accurate plans,
    • Sufficiently detailed specifications and
    • General Conditions of Contract.
  • Good communication:
    • Regular meetings between client and contractor.
    • Documenting any departures from the original documentation.
  • Good administration:
    • Keeping accurate track of positive and negative variations. This includes full details of the additional work to be done or deleted, the effect it has on the contract sum and how the time for completion will be impacted.

If a dispute does occur remember that the courts and tribunals will usually decide who the winner is and therefore also who the looser is. The ‘winner’ may still lose financially if costs are not awarded.

There is an alternative to litigation when disputes occur and that is ADR or ‘Alternative Dispute Resolution’. This is essentially where the parties get together usually with the assistance of a technical expert or a Solicitor so that all the cost and energy can be directed to resolving the dispute in the shortest possible time.

If one or both parties still want their day in court it is important to understand the time and cost implications.

 

 

18 July 2014

 

The need to reform apprenticeships.

 

This is the next in my series on how the value of work has changed.

To a certain extent the move away from traditional Master and Apprentice working in close proximity, slowly translating the knowledge of the Master to the skills of the Apprentice, to the more common group training scheme is a reality of our times. The challenge with such a development is the transfer of the non-technical life skills that were so often part of the Master and Apprentice relationship.

We need to find a way of better providing for the complete needs of apprentices. The non-completion rate of apprenticeships in the building and construction industry is indicative of a broken system. In the current Construction Skills Queensland Training Plan 22% of its annual budget of $52M is allocated to retaining apprentices where the industry seems to be proud that for the first time in five years more people complete training than do not complete. Perhaps 51% completing and 49% not completing is an acceptable statistic.

It seems a shame that the industry has to put so much time and money into encouraging apprentices and trainees into completing their training. Blame needs to be shared equally across the community. Governments have perhaps been swayed by interest groups to change the policy settings rather than undertaking proper independent and impartial analysis. The building and construction industry itself has contributed to the policy settings and the education system has produced a complex and arguably unsuccessful training system perhaps not suited to the current market.

Perhaps consideration could be given to an overhaul of the apprenticeship and traineeship system for the building and construction industry. This might take the shape of an abandonment of the current apprenticeship system and the competency based training program that accompanies it. A new training system that was run in Trade Schools for one year full time could teach a single curriculum and provided the basic trade skills. “Apprentices” could then embark on a “Journey” with various employers over the next three years logging their work against a standard benchmark. On completion of the logbook and stipulated time the candidate could be conferred with a qualification.

With the present competency based training system, trainers across the country spend inordinate amounts of time attending to administrative and currency tasks just to keep up with the ever-changing training packages. It would seem much more efficient if these trainers spent their time on a standardised curriculum of basic skills that could transfer to the workplace for practical application and experience logging and building.

Such a transformation would need to be accompanied with a more generalised community acceptance of trade work being as admirable a career as office or other professional work. The personal satisfaction of producing tangible goods as opposed to what might be achieved after a day at the office is something the building and construction industry sells itself short on.

 

 

11 July 2014

 

Trade skills are essential and satisfying.

 

I have recently read Matthew Crawford’s “The case for working with your hands” and it has caused me to reflect on how we live and work in 2014.

Over the next few weeks I will include a few of my thoughts.

This book questions the value we put on work today and the skills base that work is founded on. In these times of rapidly developing technology it is easy to forget some of the fundamental formation skills that were necessary before such technology was readily available. A Carpenters tool kit was once his or her collection of hand tools and a few powered tools such as saw, planes and drill that could fit into the boot of the family car. Now a Carpenter needs to fill a trailer or van with the tools that have become necessary to ply his or her trade, compressors, nailing guns, compound saws, and specialised battery tools for every occasion. For this former Carpenter it is an interesting excursion to the local hardware supermarket or perhaps specialty trade tool store to explore the possibilities.

I acknowledge that to master this expanded array of more sophisticated tools and equipment a different level of skill is required, however the principles of the Carpentry trade have not changed. It still remains one of the only structural trades in the building and construction industry with Carpenters responsible for forming concrete structures, building timber and steel framed buildings so that they are level, plumb, straight and square and most importantly safe and compliant. Carpenters also install windows and doors so that buildings provide weatherproof places for people to live and work. Finishing Carpentry provides the final trim to the interior of buildings so that they can form pleasant and appealing environments.

Yet as technology has developed and what were once exotic tools have become part of the standard tool kit the training system seems to have lost its way. A Carpenter is not taught (in the available training package) anything about the properties of timber or steel, the two major materials with which he or she will spend a lifetime working with. Perhaps it is not considered significant in the early learning stage to impart some knowledge of materials but rather how to identify the markings on material provided by a machine that indicate the appropriate use of the material. I would suggest a rudimentary understanding of the properties of materials is essential in all trades not just Carpentry and this would be best included in the trade training system. 

I acknowledge that society needs to develop and progress however we need to keep an eye on the things that we do to ensure that core and transferable skills are not abandoned in the process. How often do we hear in an often panicked tone “there is a skills shortage”. Construction Skills Queensland does a good job at analysing and planning so we have a very good base to work from, but perhaps it is time to reconsider how we train people in the building and construction industry. 

Pride in our trades is a valuable thing.

 

 

 

 

 

 

 

 

 

Practical Guidance and Advice with Experience and Wisdom