Designing Buildings - User contributions [en]

Will your tender sink or swim?

2023-03-14T13:44:35Z

Hawk Surveying: Created page with "Tendering is expensive business. Research* has found that of a construction industry worth £110bn per year in project turnover costs, the cost of bidding for work was roughly 2%..."

Tendering is expensive business. Research* has found that of a construction industry worth £110bn per year in project turnover costs, the cost of bidding for work was roughly 2% to 3% of total revenue, with the average cost per contractor to win each bid being 0.57% of the project value[https://hawksurveying.co.uk/will-your-tender-sink-or-swim/#_ftn1 [1]].* The extent of work involved in a tender may not reflect the final size of the project. Each tender is individual requiring significant input in time and resources. With no guarantee of success, tendering must be undertaken carefully and strategically so that maximum input is put into those tenders that you really want to win and consider that you can have a realistic chance of winning.

Hawk, as a RICS regulated quantity surveying practice, has undertaken many tender reviews for clients. This has given us a great insight into the quality of tender submissions and the issues that can adversely affect them when being reviewed. Many of these are not to do with the adequacy of the submitted price or the undoubted competency of the contractor, but rather issues that demonstrate a lack of care, failure to answer the questions or failure to comply with the specific requirements set out by the Client in the tender documents. The tender says everything about your company and, given that many tenders are not simply won on lowest price, if it doesn’t provide the information required in a professional manner your chances of winning may be compromised. This article provides some suggestions which may help improve the overall quality of your tender once you are collating and reviewing prior to submission.

Firstly ensure that you have a tender review meeting prior to submission. Ideally meetings should be held regularly during the tender period to ensure all is on progress but a final review meeting is essential. It should include all relevant parties and be held so that there is sufficient time after the meeting to deal with any issues that may arise. If the tender process has been effectively managed then issues should be minimal, however be aware that last minute problems can arise, particularly if you are waiting on information from others such as subcontractors, suppliers or designers.

Ideally a draft of the complete tender should be available for review. This helps to give an overall impression of the completed document whilst allowing each section to be reviewed in turn and in relation to the rest of the document. This can highlight presentation and consistency issues as well as areas which are incomplete or not as strong as desired.

Tenders generally consist of much more than just the pricing document. Design proposals, health and safety information, and other such documentation, along with extensive supporting narratives may be required. Consequently the package has to be pulled together into a consistent, organised and logically set out submission. First impressions really do count and subliminal biases are easily created particularly from a negative perspective. If your tender, for example, doesn’t have a cover, have each volume clearly identified, or an accurate table of contents, the reviewer will not get a good first impression and the review process may be more difficult.

Many contractors use external consultants and bid writers to improve the quality of their submissions. This could be something to consider if you feel unhappy with the style and content of your submissions. Bid writers have an understanding of what clients require and may be able to articulate this more accurately and succinctly than your own team. Proportionality is a major consideration here where smaller size projects or those of lesser importance may not require external assistance, but if there is a really important tender, it may be an option.

Review the consistency of information in your tender, particularly that supplied by different parties. It is not just consistency of presentation that matters, but also consistency in the use of project information. Confusion may arise if different sections of the bid give conflicting responses or, for example, different risk assumptions have been made by different parties. All parties should give a consistent message, and this must be checked thoroughly once all sections are collated.

A full set of checks should be undertaken once everything is collated in draft. The RICS guidance on tendering[https://hawksurveying.co.uk/will-your-tender-sink-or-swim/#_ftn2 [2]] advises that clients will check for errors and conflicts including arithmetical checks, logic checks, errors in programme dates, qualifications that may render a tender null and void and conflicts of interest. If the client will be doing this to your tender, then you must make sure that these have been checked prior to submission and you don’t fall at the first hurdle.

Apart from an arithmetical check of your pricing document, consider the rates and prices that you have used. Clients will be looking out for any rates or prices that may look out of place, either abnormally high or low. Loading of tenders for cash flow purposes is generally high on the client’s radar.

Check the balance of the tender and how it compares to any scoring system the client will use. If the bid is based on say 50% quality assessment and 50% price, then ensure that your tender is weighted accordingly. Non price-based criteria must not be glossed over and should be given sufficient consideration.

Carefully consider any qualifications or exclusions that you may have included. Make sure that these are drafted in clear and plain English so they are easily understood. The client will be looking carefully at these so ensure that they do not invalidate your tender. Clients will prefer to avoid tenders with qualifications as they make comparisons more difficult. They also like to ensure that the tendering process is scrupulously fair. Litigation by disgruntled contractors is not uncommon so it is wise to try and avoid qualifications where possible and remember for next time that if there is any ambiguity raise a query during the tender process.

Review carefully the form of contract along with the bespoke amendments that have been made. Ensure that you are comfortable with the operation of the contract and that your bid has been prepared in alignment with those rules. For example an NEC contract is significantly different from a JCT and that your approach to pricing will be very different.

Use the final tender review meeting as an opportunity to review those areas of higher risk and that you are satisfied your responses suitably protect your company. Look at issues such as provisional sums and the risk that you are taking on. NRM2[https://hawksurveying.co.uk/will-your-tender-sink-or-swim/#_ftn3 [3]] section 2.5.5 Non Measured Works explains the implications of defined and undefined provisional sums. Although NRM2 or SMM7 for that matter, may not apply, the use of the term “defined provisional sum” has become fairly standard. Carefully check whether the provisional sum that you are pricing complies with the definition and, if it does, you have taken full account of this in your programme, planning and pricing of preliminaries.

Carefully consider how your preliminaries have been put together, particularly site resources. Think ahead such that there is clarity as to which resources are part of the project pricing and which will be considered part of the overhead. Far too often disputes arise on these issues where clarity at the start could have prevented a problem occurring.

Make sure that you have answered all the sections. Given the amount of information required in some tenders it can be easy to overlook or miss a section, so ensure that answers are provided to all that is requested.

The above items only give a few suggestions, but by the time of the final tender review meeting, there will be limited time left to make wholesale changes. At this point focus on the big issues; completeness, presentation, clarity and make sure that the documents are structured in a way that makes it easy for the client to follow and understand. Make your document look professional such that it stands out from the rest, or at least stands up with the other tenders. Shoddy and poorly presented documents are not acceptable these days and will give a negative first impression.

If you are confident the tender has been thoroughly checked and everyone is aware of the pros and cons, as there will always be areas where you know your submission is not as strong as it could be, then make sure you submit it on time. Don’t risk missing out by being late. There may be subsequent interviews and presentations but hopefully you will have done all that you can to allow your tender to float to the surface.

*Research undertaken in by MarketingWorks in association with myConsole and Reading University

[https://hawksurveying.co.uk/will-your-tender-sink-or-swim/#_ftnref1 [1]] [https://www.transport-network.co.uk/3bn-annual-bidding-cost-for-construction-sector/14046 https://www.transport-network.co.uk/3bn-annual-bidding-cost-for-construction-sector/14046] quoting

[https://hawksurveying.co.uk/will-your-tender-sink-or-swim/#_ftnref2 [2]] RICS Guidance Note, UK Tendering strategies1st edition; section 3.10.2.1

[https://hawksurveying.co.uk/will-your-tender-sink-or-swim/#_ftnref3 [3]] New rules of measurement Detailed measurement for building works 2nd edition UK October 2021

[[Category:Construction_management]] [[Category:Contracts_/_payment]] [[Category:Cost_/_business_planning]]

What use is a contract programme?

2023-03-14T13:43:33Z

Hawk Surveying: Created page with "Over recent years the use of contract programmes has become increasingly common. The increase in computing power and the availability, at affordable prices, of sophisticated plan..."

Over recent years the use of contract programmes has become increasingly common. The increase in computing power and the availability, at affordable prices, of sophisticated planning software has allowed contract programmes to become the central management tool for most construction and civil engineering projects. In tandem has been the acknowledgement in modern forms of contract, principally the NEC, that a contract programme should be a contract requirement and is central to the effective management of the works. Why is this the case? This article sets out a range of key reasons why a contract programme is so important and provides genuine benefits, particularly for contractors and sub-contractors.

Firstly, its worth considering what a contract programme is. Essentially it is the agreed baseline programme for the project, typically shown as a bar chart of activities of varying complexity. It sets out the planned sequence and timing of activities from commencement to completion. However, it can include much more, including logic links between activities to show what activities are dependent on others, the critical path or paths, resources, delivery dates, information requirement dates and much more. As it is agreed between the parties, an accepted baseline exists from which progress and any deviations from this baseline can be measured.

Probably the most obvious reason to use a contract programme is to monitor progress. In days past, the nearest to achieving this was by interim valuations where “progress measurements” for each BQ item were taken. However, this was notoriously unreliable frequently using “finger in the air” assessments of work done to derive value, and which did little to establish the true progress of the project. Nowadays progress can be based on the percentage completion of specific activities and when this is entered into a logic linked programme which is then rescheduled, monthly progress reports can be produced to show how far each activity is ahead or behind the plan, as well as the overall project progress against the completion date and what activities are driving completion (i.e. the critical path).

The benefits of progress monitoring are invaluable as the contractor has accurate, up to date progress information that can be used for many purposes. Often people think that this is just ammunition for preparing claims, but this information can be used in a far more collaborative way which can help to reduce the need for, or impact of, claims. For example, if progress is delayed, the contractor has the information to establish why. It can look at individual activities to see what has caused delay, when and by how much, and what effect any delays have on the overall completion date. If the [https://hawksurveying.co.uk/how-does-a-quantity-surveyor-keep-a-project-on-time-and-in-budget/ delay] is the fault of the contractor, it knows the effect as soon as possible after the delay has happened and gives it the maximum opportunity to take remedial action. If the delay is caused by the employer, the contractor can notify the delay at the earliest possible opportunity, giving it a similar chance to take appropriate remedial action. Either way, by identifying delay early, both parties have the best opportunity to reduce the impact of the delay in a manner that is collaborative and less confrontational.

If a delay claim does have to be submitted, the process should be less confrontational as the employer is made aware of the delay at the earliest opportunity rather than having it sprung on it late in the day. The contractor also has accurate data upon which to make its claim and can demonstrate the delays through accurate progress and delay programmes. Progress monitoring therefore allows delays to be managed more effectively and earlier in the project which facilitates collaborative working for the benefit of all parties.

Contract programmes however are much more than just claims tools. The amounts of various resources, such as labour, can be input into the programme allowing the accurate monitoring of labour manhours. Activities can then be checked to see if they are being installed efficiently. Apart from being able to investigate and take corrective action to reduce productivity issues, the data gives further information which contractors can use to improve future estimating.

Resource loading also allows activities to be reviewed and amended in order to optimise resource usage. The visual production of labour histograms allows contractors to clearly see where peaks in labour occur and whether these can be smoothed to avoid potential labour shortages. Failing this it allows site management to focus on these pinch points so that resources can be managed more effectively.

It is not only labour that can be included in the programme but also information regarding materials and plant deliveries. The ability to review delivery dates based on actual progress allows the contractor to be far more efficient in its ordering. This is particularly important when working in small and logistically complex sites where space is at a premium. Ordering materials on a “just in time” basis is more efficient and helps improve cash flow.

Monitoring the provision of information is also more effective when based on the contract programme. The dates when information is to be provided by both employer and contractor can be clearly identified and appropriate notices issued if that information isn’t forthcoming. This forms part of the overall programme management where specific interim milestones and dates can be monitored and tracked. A well-structured contract programme allows a complex project to be broken down into smaller sections (and this doesn’t have to mean formal sections as in sectional completion) allowing it to be managed more easily. It also helps the contractor to deploy site supervisory and management resources to specific areas of the site with greater precision and in appropriate numbers.

The management of subcontractors is a further advantage of a contract programme. It allows the overall scope of the subcontract works to be incorporated into the contract programme to whatever degree of detail is appropriate and allows subcontract activities to be monitored and reported to the employer. Separately, the contractor and subcontract should agree their own subcontract programme, which can be produced in a greater level of detail if necessary, particularly for complex trades such as M&E. Subcontract programmes and their incorporation into the contract programme helps focus attention and manage the interfaces between different trades and subcontractors which is always an area rife with problems. The important thing is to ensure that any agreed subcontractor programmes are incorporated into the contract programme so that there is no conflict between them.

The impact of change can be shown effectively if using a contract programme, such as the benefit it had on our [https://hawksurveying.co.uk/projects/chalk-lane/ Chalk Lane project]. If variations are issued, or if the effect of a potential variation is to be established, the changed work can be incorporated into the programme and rescheduled so that any change in the completion date can be shown. The various assumptions upon which a variation is carried out can be amended so that various scenarios can be identified and the best one chosen. This prospective assessment of change is essentially how the NEC forms of contract operate and is becoming far more common.

Another area where different scenarios can be helpfully modelled is acceleration and establishing the expected results of any acceleration measures. A contract programme allows an employer and contractor to set a baseline from which the effects of utilising additional resources can be measured. Without such programming, acceleration is far too imprecise and the employer is frequently unsure exactly what it is buying or even if the acceleration measures are successful. If the parties can see the effect of deploying additional resources this allows for clearer acceleration agreements to be implemented which can be monitored far more effectively.

There are also other financial management tools that can be generated from the programme such as cash flow management and earned value analysis, which, put very simply, establishes whether your project is within budget based on your current progress.

The importance of a contract programme cannot be understated, particularly when so many modern forms of contract (like those needed for the [https://hawksurveying.co.uk/projects/cornerstone-cat-a-b-plus-multistorey-car-park/ Cornerstone] project) require the use of a programme. Although there are many benefits, much of these are derived from the use of quality planners who are capable of obtaining accurate progress information. As with all things, if the data used in the programme is inaccurate the results will be unreliable. Be aware that good planners command good salaries and can be an expensive overhead to employ full time. They are also a limited commodity. So carefully consider how you obtain and utilise your planning resources. Often it can be more cost-effective to outsource a planning position as the project may not require a full-time resource. However, once you have the services of a quality planner the benefits they bring through the effective use of a contract programme can be significant.

[[Category:Construction_management]] [[Category:Construction_techniques]]

Tendering is not just pricing

2023-03-14T13:41:24Z

Hawk Surveying: Created page with "Over recent years the variety of construction procurement methodologies have increased considerably, opening more procurement options but especially for complex projects that req..."

Over recent years the variety of construction procurement methodologies have increased considerably, opening more procurement options but especially for complex projects that require much more attention and precision than standard projects. (See our [https://hawksurveying.co.uk/projects/out-of-gauge/ Gatwick Airport] case study). Consequently the manner of tendering for projects has had to change accordingly. The traditional emphasis on price as the principal evaluation criteria has evolved whereby clients generally consider far more variables affecting not only the quality of the final building but also its performance over time.

[https://hawksurveying.co.uk/invitations-to-tender-potential-for-profit-or-recipe-for-disaster/ Tendering procedures] can be long and complex, and contractors have to be geared up to follow the rules strictly in order to produce often comprehensive and technically detailed submissions. Deviations from the rules may disqualify your bid, so it is vital that if you choose to tender, your work is not wasted simply by failing to adhere to procedural requirements. Any tender must also demonstrate to the client, and the contractor’s senior management, that the contractor is capable of undertaking the project in accordance with the stipulated conditions and the parameters that the contractor has set out himself, such as design considerations, resource availability, timescales etc.

This article sets out some of the issues contractors may want to consider when preparing a tender submission aside from completing the Pricing Document.

Firstly always ensure that you thoroughly read the tender documents before you start work. As Simon Tolson of Fenwick Elliott states:

“Whilst it may seem an obvious precaution to read tender documents very carefully, in my experience it is surprising how, time and again, contractors get into difficulties because they do not follow this basic rule.”[https://hawksurveying.co.uk/tendering-is-not-just-pricing/#_ftn1 [1]]

This initial stage is vital as it not only identifies the tendering procedure to be followed but also various other criteria which need to be considered by the contractor, for example the programme of works, design solutions, life cycle criteria etc. This stage will also help identify any immediately obvious issues, such as those we found in our [https://hawksurveying.co.uk/projects/chalk-lane/ Chalk Lane project], which could raise red flags or even lead to a contractor withdrawing from the process. These could include overly burdensome contract amendments, risks associated with existing buildings, unrealistic technical requirements or tolerances etc.

The contractor should pay particular attention to the tendering rules and evaluation criteria. Given that price is not always the principal evaluation criterion, the client’s evaluation methodology must be fully appreciated. The scoring system should be reviewed carefully so that if, for example, life cycle considerations form a major part of the final evaluation, the contractor has dedicated sufficient time and resource to developing satisfactory proposals for this aspect of the bid.

There are a variety of different evaluation and award criteria used today including:

* MEAT (Most Economically Advantageous Tender) which considers not only price but also quality in accordance with predetermined assessment criteria[https://hawksurveying.co.uk/tendering-is-not-just-pricing/#_ftn2 [2]]
* Life cycle / whole life cost which considers whole life costings, such as acquisition, operation costs, maintenance, decommissioning etc.
* Quality, whereby scoring is based on predetermined quality criteria.
* Price

The evaluation methodology selected may comprise one or a hybrid of the above and be based on a variety of different award criteria[https://hawksurveying.co.uk/tendering-is-not-just-pricing/#_ftn3 [3]].

Understanding the evaluation and scoring system will help contractors focus their efforts accordingly such that the final tender is structured and balanced in alignment with the evaluation weighting. Typical areas, apart from price, where clients may focus their evaluation and scoring may include:

Design proposals: (particularly if design and build or a design portion is required). Contractors must ensure that their proposals meet the requirements and standards set out by not only the client but also current legislation or rules of other applicable bodies. The rafts of legislation affecting building is significant and contractors must ensure that they devote sufficient expertise to demonstrating that they understand, and have considered, such matters as BREEAM, CDM, The Disability Discrimination Act etc.

The design proposals must be sufficiently comprehensive to ensure they meet any stated requirements for aesthetics, functionality, operating standards, maintenance, innovation etc. Contractors must ensure that they play a full role in understanding the design process with their design consultants, especially with new and innovative solutions, so that the contractor is confident it can provide what is required within the parameters of its bid.

Technical solutions: This can encompass such matters as standards of materials and quality checks, how the proposals achieve the client’s stated needs, management of matters such as health and safety and CDM, quality of documentation, flexibility in carrying out the works, sequencing and logistical arrangements etc.

Organisation of the Works: This includes a multitude of factors which affect how a contractor proposes to organise the works on site. The programme of works is typically one area where clients have specific requirements and expect to see a well thought out and logically sequenced flow of works. Contracts such as NEC specifically include planning requirements requiring tenderers to produce detailed, logic linked programmes which include for such matters as float and time risk allowances, the starting date, Key Dates, Completion Dates[https://hawksurveying.co.uk/tendering-is-not-just-pricing/#_ftn4 [4]] etc. The days of a hastily worked up Excel bar chart programme are long gone. The Contractor will also be required to show that he can implement suitable on-site planning procedures, typically requiring dedicated planning resources.

Other issues to consider here may include identification and management of risks, organisation of subcontractors, materials deliveries, the supply of plant, and management of the working area generally to demonstrate efficiency of operations.

Management and Staff Resources: Clients frequently set out requirements to ensure the contractor has sufficient and suitably experienced staff to carry out and manage the works. This requirement may also extend to validation of key subcontractors. Certain forms of [https://hawksurveying.co.uk/10-top-tips-for-a-robust-construct/ contract specifically include requirements] regarding personnel. For example NEC contracts require in “Contract Data Part 2 – Data Provided by the Contractor” details of key people, which identifies their name, job, responsibilities, qualifications, and experience[https://hawksurveying.co.uk/tendering-is-not-just-pricing/#_ftn5 [5]].

Clients frequently want to see how management resources are organised on site, typically by way of an organogram. This may also identify any head office management resources who are involved. Contractors need to give careful though as to how their site and management resources are to be deployed and how lines of authority and reporting, particularly back to the client, are to be implemented.

Tendering contractors should also devote sufficient time reviewing any amended terms and conditions, which we found benefitted us in our [https://hawksurveying.co.uk/projects/cornerstone-cat-a-b-plus-multistorey-car-park/ Cornerstone project]. They should be sure that they are not obligating themselves to do what cannot be done or taking on undue risk for example unlimited liabilities, responsibility for unseen ground conditions etc which may make the project too risky to undertake without amendment.

[https://hawksurveying.co.uk/will-your-tender-sink-or-swim/ Modern tendering] can be a lengthy, complex and costly exercise. If contractors are looking to put in a genuine bid, they should focus on all the requisite matters and not just price whilst emphasising those sections which carry higher scores in the client’s scoring system. Contractors should look to come out of the tendering process with as much confidence as they should be giving the client, that they have fully understood the project and are able to deliver in line with the client’s expectations. If they overlook any aspect, particularly one which ranks highly on the client’s scoring and evaluation system, then the time and cost spent tendering is likely to be wasted.

[https://hawksurveying.co.uk/tendering-is-not-just-pricing/#_ftnref1 [1]] Tolson S “Procurement and Supply Contracts in the Construction Industry 2007

[https://hawksurveying.co.uk/tendering-is-not-just-pricing/#_ftnref2 [2]] See for example “Construction Procurement Handbook” Scottish Procurement and Property Directorate; 21 December 2018 [https://www.gov.scot/publications/construction-procurement-handbook/pages/7/#page-top https://www.gov.scot/publications/construction-procurement-handbook/pages/7/#page-top]. This sets out various tender evaluation criteria and rules for various types of projects.

[https://hawksurveying.co.uk/tendering-is-not-just-pricing/#_ftnref3 [3]] As above, see for example; “Construction Procurement Handbook” Scottish Procurement and Property Directorate; 21 December 2018. Annex C Award Criteria.

[https://hawksurveying.co.uk/tendering-is-not-just-pricing/#_ftnref4 [4]] NEC 3 Clause 31 “The Programme”

[https://hawksurveying.co.uk/tendering-is-not-just-pricing/#_ftnref5 [5]] NEC 3 Contract Data Part 2 – Data Provided by the Contractor

[[Category:Construction_techniques]] [[Category:Contracts_/_payment]] [[Category:Cost_/_business_planning]]

So, you're the preferred bidder

2023-03-14T13:39:48Z

Hawk Surveying: Created page with "After an extensive and expensive tender period on the project that could be the centrepiece of your project portfolio, you’ve been informed that you are the lowest tenderer and..."

After an extensive and expensive tender period on the project that could be the centrepiece of your project portfolio, you’ve been informed that you are the lowest tenderer and sit in pole position to be awarded the contract. Everything in the garden is rosy, isn’t it…well, maybe. There are still quite a few obstacles to overcome and the post tender/pre-contract period can be quite lengthy and protracted. Depending on the tendering procedure adopted, there may be further negotiations, interviews and possibly presentations to give in order to win and finalise the contract.

There are numerous matters that may still need to be resolved. Anything from resolving technical proposals to explaining why your bid is too low may be issues that stymie being awarded the contract. So what should you do at this stage in order to progress effectively towards a successful conclusion. This article puts some suggestions together which may be of some assistance.

Initially it may be useful to review the tender rules to confirm your understanding of the post tender process. Establish exactly what rules are being followed, what the procedure is and the timetable. To be prepared you must understand what is to come and be able to recognise that due process is being followed. If there is a procedure all parties must stick to it to ensure fairness. Do not allow your bid to be compromised by a client’s failure to stick to the stated procedure.

Another initial exercise would be to go back and [https://hawksurveying.co.uk/will-your-tender-sink-or-swim/ review your tender]. Tendering is typically fraught, with bids often submitted at the eleventh hour and with last minute changes. Given these circumstances, there will probably be some errors or inconsistencies in your tender which you are unaware of. The client’s team will no doubt have picked these up so you will need to ensure you are similarly aware and appreciate the possible implications. Some inconsistencies may put you in a position you had not anticipated requiring you to choose between options. Make sure you are fully aware and have considered the ramifications before you are put on the spot to answer.

You may also wish to consider any tendering instructions and how they state errors in tenders will be dealt with[https://hawksurveying.co.uk/so-youre-the-preferred-bidder/#_ftn1 [1]]. Depending on whether alternative 1 or 2 is included you may be required to stand by your bid despite the error or amend the error and accept that you may no longer be the lowest tenderer. Either way the consequences of any errors should be carefully considered in advance.

Your tender review should also give you an opportunity to summarise all the issues that you are aware of and will want to raise with the client. You may have a number of queries or uncertainties where you have made assumptions and should seek clarification. Typical issues may include pricing queries and assumptions, alternative solutions, contract amendments, programme issues etc. You may also want to assign a risk level to these (a traffic light system for example) so you can focus on the priority queries during any meetings. You do not want to enter into the contract without fully understanding the client’s perspective of high risk issues.

Prior to any formal discussions, go back and re-evaluate the client that you may be working with. Are they public or private sector? What projects have they procured in the past and how have they been administered? Do you know any other contractors who have worked with them and what were they like to work with? What type of issues arose? Much of this should have been looked at previously but it is worth reviewing as you are much nearer to actually working with the client. Also, try and run any financials again to see if all is in order. Hawk can recount from its experience one contractor who, for its size, was lowest tenderer on a major project. However trading circumstances changed and after delays and procrastination, the client eventually decided to not go ahead with the project leaving the contractor on the brink of administration.

If you are called to interviews or meetings to discuss your proposals, carefully consider what your approach and attitude should be. It is still common for contractors to adopt a deferential approach to their potential client. It is reasonable and expected to be respectful, but always approach these discussions on an equal footing. Remember that you too have significant bargaining power. Most projects are set out on extremely tight timescales, particularly commercial buildings, where there is an imperative to start generating revenue as quickly as possible. The tender process can be long and drawn out and clients do not want delays in the post tender period. There is no advantage for a preferred bidder to drop out, particularly if it means going through further negotiations, or worst case, retendering. So always remember that you have significant bargaining power and should not roll over and accept everything that is thrown at you.

With this in mind, some clients have been known to use these discussions as an opportunity to seek to impose changes and amendments onto the contractor in a variety of ways. For example, forcing price reductions, changing scope, imposing onerous terms, reducing programme durations all at the contractor’s expense and at the threat of not being awarded the contract. Be prepared to stand your ground. If this is how a client acts pre-contract consider what it could be like post contract. Not all projects are worth winning in the long run.

When it comes to discussing the practicalities, the following, in Hawk’s experience, are typical matters that should be looked at:

* Pricing queries: Ensure that you are aware of the basis of your pricing so that you can answer typical questions. Clients may want to understand how your site and off-site overheads are calculated and what is included in each; something that is essential in the event of prolongation. Also ensure that you raise and clarify any pricing assumptions that you have made as these may have major implications during the works. Be particularly aware if the contract is design and build and where the client is seeking to pass all possible risk of change onto the contractor.
* Programme: Always ensure that you have total clarity over programme dates and other fundamental issues such as sectional completion and any preceding enabling works by others. Another area which can cause problems is the understanding of defined provisional sums. Clients typically have a “looser” definition of a provisional sum for defined work expecting the contractor to have made “…due allowance in their programming, planning and pricing preliminaries”[https://hawksurveying.co.uk/so-youre-the-preferred-bidder/#_ftn2 [2]] despite only providing a threadbare description of such work that does not comply with the requirements of NMR2[https://hawksurveying.co.uk/so-youre-the-preferred-bidder/#_ftn3 [3]].
* Contract amendments: Ensure that you have carried out a full review of contract amendments prior to any discussions. Be clear as to what your red lines are and ensure that you are clear how much and where you are able to accept amendments. Matters such as unlimited liability, ground conditions and full design responsibility should be fully understood as once you are tied in, you may be fully responsible.
* Technical solutions and alternatives: Make sure that you have full details to hand of your technical solutions as well as any alternatives, be those materials, suppliers, subcontractors or technical solutions. Quality considerations play an ever-increasing part in contractor selection so make sure all proposals can be explained in detail, so preferably take with you suitable consultants to help explain your proposals.

There are many other matters that could come up for discussion such as collateral warranties, performance bonds, method and sequencing of works, contractor’s personnel, insurances etc. Make sure that you cover those areas that you consider are most important to you to try and minimise the extent of risk you are taking on. Take minutes for all meetings and check that these are accurate as usually they will be incorporated into the contract documents to confirm agreements.

Always remember that these are negotiations so do not simply accept all that the client wants. If there are changes introduced at this stage, be prepared to advise of any cost, programme and other implications. A win at all costs mentality may just be that; the costs and risks become too great. Contracting is a risky business where even one bad project can result in a company failing. The post tender discussions should be your opportunity to satisfying yourself that you fully understand the client’s position and, in turn, the client fully understands the basis of your bid. All projects start with good intentions, but a lack of clarity and understanding pre contract can cause serious problems post contract. If in any doubt as to what to look for or how to prepare for any post tender discussions, contact Hawk as we’ll be able to point out many of the pitfalls which have unfortunately beset other contractors. Success during this stage however, gives you a much better chance of a smooth and hopefully profitable, post contract period.

[https://hawksurveying.co.uk/so-youre-the-preferred-bidder/#_ftnref1 [1]] JCT Tendering Practice Note 2017

[https://hawksurveying.co.uk/so-youre-the-preferred-bidder/#_ftnref2 [2]] P22 NRM 2: Detailed Measurement For Building Works; RICS 2nd edition UK October 2021

[https://hawksurveying.co.uk/so-youre-the-preferred-bidder/#_ftnref3 [3]] See 1 above

[[Category:Construction_management]] [[Category:Construction_techniques]] [[Category:Contracts_/_payment]] [[Category:Procurement]]

How to keep the cash flowing

2023-03-14T13:38:59Z

Hawk Surveying: Created page with "Cash flow, as they say, is the life blood of any business. You may have a business which produces great construction work for what should be a healthy profit, but if there is a s..."

Cash flow, as they say, is the life blood of any business. You may have a business which produces great construction work for what should be a healthy profit, but if there is a slow down in money coming in, or it stops altogether, then your company is at severe risk. Construction companies have a reputation for being undercapitalised. Getting to a position where you have large cash reserves is extremely difficult in a high-risk industry where both main and sub contractors have to lay out large amounts of cash to get projects going. Ensuring you get paid on time and what you are due is therefore vital for survival. So, what can you do? There are many ways to help with cash flow, and Hawk has put together the following which give contractors and subcontractors some ideas on managing their cash position.

Check contract payment terms

This tip is part of the generic “read your contract” tip which is applicable to almost everything in construction. In respect of cash flow, the contract, in conjunction with any supporting legislation, principally the Construction Act[https://hawksurveying.co.uk/how-to-keep-the-cash-flowing/#_ftn1 [1]] provides the specific details regarding what you can be paid for, when you are paid and how to apply for payment. Each c[https://hawksurveying.co.uk/10-top-tips-for-a-robust-construct/ ontract is different and even standard forms get amended] by bespoke conditions, so make sure you read and know what payment terms apply to your project.

Comply fully with all terms

Contracts are generally complex documents often with many inter-linked terms and conditions. So read all the contract carefully and look out for those terms which place a restriction on the amount of money you can get paid if you do not comply with some, often unrelated, matter. Hawk typically sees bespoke amendments stating that a client can withhold some or all of a payment if, for example, a collateral warranty is not put in place. (See some of our case studies as examples: [https://hawksurveying.co.uk/projects/cornerstone-cat-a-b-plus-multistorey-car-park/ Cornerstone]; [https://hawksurveying.co.uk/projects/beckenham-primary-school-academy/ Beckenham Primary]; [https://hawksurveying.co.uk/projects/high-voltage-recoveries-for-national-rail/ National Rail] and [https://hawksurveying.co.uk/contact/ get in touch] if you’re in a similar predicament). NEC contracts also permit money to be retained until the contractor has submitted a first programme for acceptance.[https://hawksurveying.co.uk/how-to-keep-the-cash-flowing/#_ftn2 [2]]

Know your dates

When reviewing your contract identify all relevant payment dates. Since the introduction of the Construction Act “due dates” and “final dates for payment” have become common enough terms, but when these dates occur may not be immediately obvious. Set up a payment schedule, or check the content if one is provided, so that you are clear what the payment dates are. Also include dates when applications must be made and when you should receive any payment notices or pay less notices. There is a lot to keep on top of so make sure you are organised and know exactly what is due from you, the paying party and when.

If you are not sure what a payment schedule should look like or simply don’t have one, just [https://hawksurveying.co.uk/contact/ ask us].

Co-ordinate your subcontractors and suppliers

With main contractors and subcontractors typically having an extensive supply chain, make sure that you optimise your payment timetable to best suit your cash flow. Obviously try and ensure that you receive your client payment first and then subcontractors and suppliers are paid subsequently from the cash you receive. This will also require you to carefully management the dates of applications from those in your supply chain so that you receive the necessary information to include in your application in good time. A consolidated payment spreadsheet will help so that you are clear what information is needed by when, when you should receive payment and when you need to pay others.

Issue an application for payment

Under a standard JCT contract, the Architect issues an Interim Certificate, based on an interim valuation made by the Quantity Surveyor[https://hawksurveying.co.uk/how-to-keep-the-cash-flowing/#_ftn3 [3]]. Notwithstanding the QS’s obligation to value the works, make sure that you have provided the QS with your valuation by way of your Payment Application[https://hawksurveying.co.uk/how-to-keep-the-cash-flowing/#_ftn4 [4]]. Leaving a valuation to the QS alone is not advised whilst issuing a Payment Application has a number of benefits. You are able to advise of all matters which require payment, some of which the QS may not be fully aware of. Also, if the Architect does not issue a Payment Certificate, the Contractor’s Payment Application becomes the Payment Notice[https://hawksurveying.co.uk/how-to-keep-the-cash-flowing/#_ftn5 [5]], i.e. the amount due for payment (subject to any subsequent Pay Less Notices).

Price variations and claims as quickly as possible

Carrying out additional work or work under prolonged or disrupted circumstances is costly. Make sure that you are aware of all additional works and use the contractual procedure for notification and evaluation. Price and submit variations and claims as soon as possible. Don’t leave them until the end as you will be financing additional work which you should be getting paid for. And remember, some forms of contract (for example JCT) allow reimbursement of loss and/or expense without deduction of retention[https://hawksurveying.co.uk/how-to-keep-the-cash-flowing/#_ftn6 [6]].

Chase invoices immediately

Sounds obvious, but far too often late invoices are left and not chased up. If you are due money and have not received it, then chase immediately. Hawk has heard this justified on the basis of “not wanting to upset a client”, or “we don’t want to be a nuisance”. This is unacceptable, it’s your money. Chasing invoices does not have to be confrontational or aggressive. It allows you to find the “official” reason for why payment hasn’t been made so that the late payment can be resolved or you can get a feel for whether there are issues to be concerned about. Chase both the accounts department and the person responsible for authorising payment and follow up regularly.

Forecast cashflow

Cash flow management is as much about forecasting what is due, both in and out, as it is getting money in on time. If you are aware of the inflows and outflows of cash over the coming months you are in a better position to forecast the likely pinch points and take pre-emptive action. This could include various actions such as liaising with your bank to ensure a sufficient overdraft, with suppliers to extend payment periods or rearranging non-essential payments until later. Unless you know what is going on, you cannot take appropriate action.

Chase outstanding retentions

Retentions are a thorny issue but are still widely used. And too often clients and main contractors in particular, make no effort to pay retentions when they should be released, particularly the final percentage. If you are due a retention, apply for your money. Ensure the matter is dealt with rather than forgotten. Releasing a retention may be as simply as a phone call, but if it requires more work, then find out precisely what the reasons are for non-payment and challenge these if they are spurious.

Research and be prepared to take action

If you are in cash flow difficulties, then you must take immediate action. Analyse your accounts to see what is causing the problem. Carry out some research to establish the financial status of those not paying you. Find out if other contractors or subcontractors are also not being paid. Your cash flow management should give you an idea of how long you can manage without further money. Take action promptly. Do not be afraid to contact the paying party, enter into negotiations, consider suspending the works or potentially start formal action, e.g. adjudication. Be clear, if other parties are similarly not being paid someone will lose out, so don’t delay taking action. If you are unclear regarding any of these options, please do not hesitate to [https://hawksurveying.co.uk/contact/ contact us].

Do not underestimate the importance of being paid on time and managing your cash flow. There is a lot to cash flow management and it needs sufficient time devoted to it. Accurate and frequently updated forecasting is essential for effective decision making whilst prompt action is always advantageous. Think of it like steering a ship. Small adjustments once you stray off course are easier, quicker and more effective to implement than drastic action when you are miles off course.

Hawk, as a RICS regulated practice, has worked with many construction organisations helping them improve their cash flow position. Our track record stems from our calm professionalism, commercial and contractual acumen and enthusiasm for our work. We give the reassurance organisations require when establishing what they are due and help ensure that such money is paid within agreed timescales. If you have any queries whatsoever, just [https://hawksurveying.co.uk/contact/ give us a call]. We’d be delighted to discuss.

[https://hawksurveying.co.uk/how-to-keep-the-cash-flowing/#_ftnref1 [1]] The Housing Grants Construction & Regeneration Act 1996 as amended by the Local Democracy, Economic Development and Construction Act 2009.

[https://hawksurveying.co.uk/how-to-keep-the-cash-flowing/#_ftnref2 [2]] NEC3 clause 50.3

[https://hawksurveying.co.uk/how-to-keep-the-cash-flowing/#_ftnref3 [3]] JCT 2016 Standard Building Contract With Quantities clause 4.9.1 & 4.9.2

[https://hawksurveying.co.uk/how-to-keep-the-cash-flowing/#_ftnref4 [4]] JCT 2016 Standard Building Contract With Quantities clause 4.10.1

[https://hawksurveying.co.uk/how-to-keep-the-cash-flowing/#_ftnref5 [5]] JCT 2016 Standard Building Contract With Quantities clause 4.10.2

[https://hawksurveying.co.uk/how-to-keep-the-cash-flowing/#_ftnref6 [6]] JCT 2016 Standard Building Contract With Quantities clause 4.14.2.3

[[Category:Contracts_/_payment]]

Potential for profit, or recipe for disaster?

2023-03-14T13:36:25Z

Hawk Surveying: Created page with "After much marketing, prequalification and hard work, [https://hawksurveying.co.uk/so-youre-the-preferred-bidder/ you are finally invited to tender] for that major scheme you hav..."

After much marketing, prequalification and hard work, [https://hawksurveying.co.uk/so-youre-the-preferred-bidder/ you are finally invited to tender] for that major scheme you have been researching over the last year or two. Everything in the garden seems rosy. Winning the project could provide a significant amount of profitable work, allow the company to improve its financial position and be the start of a long and fruitful relationship with a new client who could provide further work long into the future. What could possibly go wrong?

Most construction projects start off on an optimistic footing, and rightly so, but as we all know, construction is a high-risk industry and the potential for failure is significant. It only takes one bad project and a successful business can be seriously affected. Remember John Laing and the Cardiff Millennium Stadium? As The Construction Index reported “…it was losses on the Cardiff Millennium Stadium that led to the fall of the old John Laing Construction”[https://hawksurveying.co.uk/potential-for-profit-or-recipe-for-disaster/#_ftn1 [1]]. Not all the problems associated with the Millenium Stadium were obvious at tender stage, but the diligent contractor will want to go into any project with eyes wide open, aware of the risks at the start and how these should be managed. If you have any reservations about a project at the start, it is highly likely that these will compound as the job progresses. So [https://hawksurveying.co.uk/will-your-tender-sink-or-swim/ what should you look out for] even before you’ve started the [[Tendering|tendering]] process? The following provides some thoughts based on Hawk’s many years of [https://hawksurveying.co.uk/projects/ experience], which you may want to take into consideration.

Do your due diligence on the Employer (or main contractor if you are a subcontractor). This is particularly so if you have never worked for them before. Your prior marketing and business development work should already have carried out a thorough review of the company when identifying them as a potential client, however things move quickly in construction and companies are always worth reviewing. Check up to date financials (Companies House, Dun and Bradstreet etc), look at other projects they have procured, how have they worked out? What type of issues have other contractors had? Do they have a good payment record? Do they have a claims reputation and are they involved in any ongoing proceedings? All companies have an ethos, a culture in which they behave, so try to get a feel for this and see if they are a good fit for your business. Some matches are not made in heaven.

Although it sounds obvious, carefully consider the type of project. Again, much of this should have been identified in advance, but sometimes tenders come out of the blue and you may not have much in the way of prior warning (this in itself may cause you to ask why.) Ensure that the type of work is a match for your company. If you are a new build specialist, then refurbishment work may present a whole host of new challenges. Similarly, if you are a traditional general construction company, be wary of work which may fall outside your main area of expertise, for example works with a higher than usual civils content or specialist works. Your existing workforce may not have the technical experience to adequately manage specialist works, so you may need to consider resourcing options.

Be very wary of the “sprat to catch a mackerel”, or “loss leader” scenarios. If you are being thrown one of these or think this may be a way forward for your company, then consider the risks very carefully. Firstly, why is the Employer offering you chance of the work? Whose benefit is this really for? Usually, contractors think these approaches are the chance to get in with a new client, but, based on a number of practical experiences, the projects offered can be those no one really wants. They can be difficult, bitty and with little opportunity for a contractor to come away with anything but a significant loss and an unhappy experience. Maybe they are being thrown your way precisely because their usual contractors realise they are too risky.

Consider the type of work if it is outside of your usual sector experience. Moving into specialist sectors can be enticing but is filled with risk. It was not just John Laing that suffered when contractors entered the stadium construction market. Consider the litigation around the rebuilding of Wembley and the costs overruns at the new Tottenham Hotspur stadium. Branching out can be good for business but the risks involved and the timing of entering a specialist market have to be carefully considered.

The type of procurement route should be given due consideration. (See some of case studies where we’ve taken specialist [[Procurement_routes|procurement routes]]: [https://hawksurveying.co.uk/projects/out-of-gauge/ Gatwick Airport]; [https://hawksurveying.co.uk/projects/battersea-power-station/ Battersea Power Station]; [https://hawksurveying.co.uk/projects/high-voltage-recoveries-for-national-rail/ Nation Rail]). If you are not familiar with, for example, design and build, tread carefully as the risk profile is far different from a traditional build. Riskier still are the novel, less tried approaches. Although these can bring new advances any procurement route that is still immature and poorly understood is filled with risk for those willing to proceed.

Other practical project issues to consider include:

* Location: Are you able to provide staff and management resources to the area? Consider the motivational effects on trusted staff of long travelling times.
* Region: Is the work outside of your usual geographical region? Do you have a network of suppliers and labour that you can call on if needed in the area?
* Staff and resources: do you have enough labour for the project? Do your staff have the right experience?
* Site management: Do you have enough available site management resources to adequately manage the project. Delays and productivity issues frequently arise from a lack of adequate management and supervision.
* [https://hawksurveying.co.uk/10-top-tips-for-a-robust-construct/ Type of Contract]: Are you familiar with the type of contract being used? When the NEC form was first introduced, many contractors treated this in the same way as a JCT form, looking to claim extensions of time and additional costs as separate submissions from compensation events. Hawk is aware of many projects where contractors have lost entitlements through lack of experience with administering the contract correctly. See our case study: [https://hawksurveying.co.uk/projects/chalk-lane/ Chalk Lane].

Finally, carefully consider your company motivation for wanting the work. There should be a completely different mindset and approach if you are in the unfortunate position of needing to win the project to keep cash flowing as opposed to the job being part of the planned portfolio. Similarly, be wary of “buying” your way into a new market or the favour of a new client. Such approaches are often laden with risk so you need to be sure that these are identified and can be managed effectively.

The type of projects you are invited to tender on should ultimately be a result of effective company management, planning and foresight. Careful research, marketing and business development should all have led to the invitation to tender. As such you should not be surprised as to the type of work you are being offered. Similarly, your company should be geared up and ready to carry out such work. The invitation to tender should effectively be the culmination of a process which has been well defined and structured so that there are very few surprises with the type of work you are offered. Problems unfortunately seem to occur when companies either voluntarily or are forced to veer from their planned approach. The former can occur when they seek short term growth and look to effectively “buy” contracts regardless of the risks, the latter when they are forced to buy contracts simply to stay afloat. Although easy to say, the guiding principles should always be to set out a clear plan and vision as to the type of work that you want your company to carry out and focus your efforts accordingly. This way you’ll be working to your strengths and reducing the potential for risk. The right projects will come your way and the chance of heading into a potential disaster from the beginning will be reduced. Once you start to receive the right type of invitations to tender you then have to [https://hawksurveying.co.uk/invitations-to-tender-potential-for-profit-or-recipe-for-disaster/ implement the tender process effectively,] and that is a whole new story…

[https://hawksurveying.co.uk/potential-for-profit-or-recipe-for-disaster/#_ftnref1 [1]] [https://www.theconstructionindex.co.uk/news/view/laing-orourke-agrees-price-for-everton-stadium https://www.theconstructionindex.co.uk/news/view/laing-orourke-agrees-price-for-everton-stadium]

[[Category:Procurement]]

Invitations to tender potential for profit

2022-11-15T12:00:06Z

Hawk Surveying: Created page with "After much marketing, prequalification and hard work, you are finally invited to tender for that major scheme you have been researching over the last year or two. Everything in t..."

After much marketing, prequalification and hard work, you are finally invited to tender for that major scheme you have been researching over the last year or two. Everything in the garden seems rosy. Winning the project could provide a significant amount of profitable work, allow the company to improve its financial position and be the start of a long and fruitful relationship with a new client who could provide further work long into the future. What could possibly go wrong?

Most construction projects start off on an optimistic footing, and rightly so, but as we all know, construction is a high-risk industry and the potential for failure is significant. It only takes one bad project and a successful business can be seriously affected. Not all problems associated are obvious at tender stage, but the diligent contractor will want to go into any project with eyes wide open, aware of the risks at the start and how these should be managed. If you have any reservations about a project at the start, it is highly likely that these will compound as the job progresses. So what should you look out for even before you’ve started the tendering process? The following provides some thoughts which you may want to take into consideration.

=== Do your due diligence on the employer ===

(or main contractor if you are a subcontractor). This is particularly so if you have never worked for them before. Your prior marketing and business development work should already have carried out a thorough review of the company when identifying them as a potential client, however things move quickly in construction and companies are always worth reviewing. Check up to date financials (Companies House, Dun and Bradstreet etc), look at other projects they have procured, how have they worked out? What type of issues have other contractors had? Do they have a good payment record? Do they have a claims reputation and are they involved in any ongoing proceedings? All companies have an ethos, a culture in which they behave, so try to get a feel for this and see if they are a good fit for your business. Some matches are not made in heaven.

=== Carefully consider the type of project. ===

Although it sounds obvious, again, much of this should have been identified in advance, but sometimes tenders come out of the blue and you may not have much in the way of prior warning (this in itself may cause you to ask why.) Ensure that the type of work is a match for your company. If you are a new build specialist, then refurbishment work may present a whole host of new challenges. Similarly, if you are a traditional general construction company, be wary of work which may fall outside your main area of expertise, for example works with a higher than usual civils content or specialist works. Your existing workforce may not have the technical experience to adequately manage specialist works, so you may need to consider resourcing options.

=== Be very wary of the “loss leader” scenarios. ===

If you are being thrown one of these or think this may be a way forward for your company, then consider the risks very carefully. Firstly, why is the Employer offering you chance of the work? Whose benefit is this really for? Usually, contractors think these approaches are the chance to get in with a new client, but, based on a number of practical experiences, the projects offered can be those no one really wants. They can be difficult, bitty and with little opportunity for a contractor to come away with anything but a significant loss and an unhappy experience. Maybe they are being thrown your way precisely because their usual contractors realise they are too risky.

=== Consider the type of work if it is outside of your usual sector experience. ===

Moving into specialist sectors can be enticing but is filled with risk. It was not just John Laing that suffered when contractors entered the stadium construction market. Consider the litigation around the rebuilding of Wembley and the costs overruns at the new Tottenham Hotspur stadium. Branching out can be good for business but the risks involved and the timing of entering a specialist market have to be carefully considered.

=== The type of procurement route should be given due consideration. ===

If you are not familiar with, for example, design and build, tread carefully as the risk profile is far different from a traditional build. Riskier still are the novel, less tried approaches. Although these can bring new advances any procurement route that is still immature and poorly understood is filled with risk for those willing to proceed.

=== Other practical project issues to consider include: ===

* Location: Are you able to provide staff and management resources to the area? Consider the motivational effects on trusted staff of long travelling times.
* Region: Is the work outside of your usual geographical region? Do you have a network of suppliers and labour that you can call on if needed in the area?
* Staff and resources: do you have enough labour for the project? Do your staff have the right experience?
* Site management: Do you have enough available site management resources to adequately manage the project. Delays and productivity issues frequently arise from a lack of adequate management and supervision.
* Type of Contract: Are you familiar with the type of contract being used? When the NEC form was first introduced, many contractors treated this in the same way as a JCT form, looking to claim extensions of time and additional costs as separate submissions from compensation events. Hawk is aware of many projects where contractors have lost entitlements through lack of experience with administering the contract correctly.

=== Finally, carefully consider your company motivation for wanting the work. ===

There should be a completely different mindset and approach if you are in the unfortunate position of needing to win the project to keep cash flowing as opposed to the job being part of the planned portfolio. Similarly, be wary of “buying” your way into a new market or the favour of a new client. Such approaches are often laden with risk so you need to be sure that these are identified and can be managed effectively.

The type of projects you are invited to tender on should ultimately be a result of effective company management, planning and foresight. Careful research, marketing and business development should all have led to the invitation to tender. As such you should not be surprised as to the type of work you are being offered. Similarly, your company should be geared up and ready to carry out such work. The invitation to tender should effectively be the culmination of a process which has been well defined and structured so that there are very few surprises with the type of work you are offered. Problems unfortunately seem to occur when companies either voluntarily or are forced to veer from their planned approach. The former can occur when they seek short term growth and look to effectively “buy” contracts regardless of the risks, the latter when they are forced to buy contracts simply to stay afloat. Although easy to say, the guiding principles should always be to set out a clear plan and vision as to the type of work that you want your company to carry out and focus your efforts accordingly. This way you’ll be working to your strengths and reducing the potential for risk. The right projects will come your way and the chance of heading into a potential disaster from the beginning will be reduced. Once you start to receive the right type of invitations to tender you then have to implement the tender process effectively, and that is a whole new story…

[[Category:Education]] [[Category:Construction_management]] [[Category:Contracts_/_payment]] [[Category:Cost_/_business_planning]] [[Category:Roles_/_services]]

Effective contract reviews

2022-11-15T11:53:01Z

Hawk Surveying: Created page with "Construction contracts are inherently risky. Over the years standard forms of contract have been drafted and revised to spread those risks reasonably fairly between Employer and ..."

Construction contracts are inherently risky. Over the years standard forms of contract have been drafted and revised to spread those risks reasonably fairly between Employer and Contractor. However, no one likes accepting risk, so what happens? Contracts get amended and risk is moved from one party to another. Consequently, tendering contractors within their bundle of tender documents usually have a sizeable document containing amendments to the standard form.

These can range from reasonable amendments to reflect the specific nature of the project, to the wholesale transfer of every possible risk, cunningly undertaken as an exercise in contract drafting by an overzealous solicitor. Unless these are picked up and challenged, you will be responsible for the consequences. Contract reviews are therefore vitally important, but often undertaken as a last minute, cursory exercise. Do not fall into this trap, or you may miss cleverly hidden, highly risky clauses. These Ten Top Tips provide some ideas as to how you should approach your Contract Reviews.

=== Understand the Basis of Your Review ===

Before starting your review, be clear as to your level of expertise. Typically, reviews are undertaken by the commercial or quantity surveying department, so the basis of your review will be looking at the commercial risks, i.e. how do the amendments affect the financial and commercial operation of the project. So as a QS, stick to your area of expertise as there are usually plenty of commercial risks carefully woven into bespoke amendments.

=== Allocate Sections to Specialists ===

Be prepared to split your review and allocate to appropriate professionals. If the review identifies legal or insurance matters, then ensure these sections are reviewed by a lawyer or insurance professional. Further, amended or bespoke documents such as Bonds or Collateral Warranties are typically not drafted in “plain English” and unless you are extremely knowledgeable about these they should be reviewed by respective experts.

=== Read the Amendments Carefully ===

Sounds obvious, but unless you read slowly and carefully, risks will be missed. Contract amendments are seriously dull reading, and it is easy to speed over dense but important text. So give the task plenty of time, read through all the amendments and highlight anything that looks in the slightest bit risky. Come back to these later for further consideration.

=== Compare the Amended Clause with the Standard Form Clause ===

Ensure you read relevant amendments against the unmodified standard form clause. Contract Documents usually only include the amendment and not the whole amended contract, making interpretation more difficult. Consequently, have both the appropriate standard form and the specific version. Do not assume an Employer is using the latest version as its baseline. Frequently they will use older versions which they are more familiar with and where their amendments have been tried and tested.

=== Set Up a Review Proforma and Risk Analysis Process ===

Contract reviews should be approached in a consistent and methodical manner. Set up a standard proforma that allows the specific clause to be identified, the risk against it stated and the desired solution proposed. Ideally a risk analysis process should be included e.g. 1 – 10, or perhaps, more simply, a traffic light system, with green as low risk, yellow as moderate and red as not acceptable in its current format.

=== Establish Your Risk Profile and Priorities ===

Each client has a different risk profile, where some risks are acceptable and others are definite no goes. Be clear as to what these are from a company perspective and schedule these out in advance so that they can be used as a standard for all subsequent contract reviews. If you are clear about what is and what isn’t acceptable, it becomes easier to identify whether an amendment has transgressed your company policy.

=== Be Aware of Typical High-Risk Areas ===

Through carrying out numerous Contract Reviews, Hawk is aware of the areas which are typically rife for risk transfer and for which contractors should be aware. Pay particular attention to the following areas, which frequently may be subject to more than one amendment:

* Exclusion clauses and unlimited liabilities (particularly damage to works, property, equipment etc)
* Other uncapped liabilities (consider trespass, malicious acts, anti-bribery, confidentiality, data protection etc)
* Indirect and consequential losses
* Uncapped liquidated damages
* Fitness for purpose obligations
* Ground conditions and site risks
* Termination rights
* Hidden design obligations

The above list is not exhaustive, yet within it contains significant areas where a contractor can, unknowing, take on extensive liability.

=== Transferring Risks onto Supply Chain ===

A main contract amendment can effectively be a hot potato. No one wants to be left holding the risk. Consider if and how you transfer any unwanted risks onto your supply chain. For example, design risks are often passed on, however consider carefully the mechanism by which this is done. Do your subcontract clauses effectively transfer the risk and is any bespoke drafting required? Consider the implications carefully.

=== Review Your Review Carefully ===

Once your review is completed, review it carefully. Have you clearly established what is acceptable and what isn’t? The review should give a clear indication of the level of risk involved allowing fundamental decisions to be made, for example, is it simply too risky to take on? If you intend to proceed what are you going to do about higher risk amendments? The usual options are to manage risk internally or propose amendments and negotiate an acceptable change. Be clear as to how you intend to do this.

=== Communicate Results to Site Team ===

If risks are to be managed at site level (for example there may be specific time bar provisions for notices) ensure that these risks are communicated to site level personnel. There is no point identifying a risk and leaving it on a piece of paper. Ensure the site team are aware and the risk is actually managed.

In summary, review all contract amendments extremely carefully and do not simply accept them without question as doing so may give the impression you are not contractually astute. Don’t be a pushover and stick by your company red lines. If an amendment is unreasonable, identify it and seek to change it. Remember all things are up for negotiation and don’t be burdened with unwanted risk.

[[Category:Construction_techniques]] [[Category:Contracts_/_payment]] [[Category:Cost_/_business_planning]] [[Category:Operations]] [[Category:Roles_/_services]]

Interim valuations and payments

2022-11-15T11:51:09Z

Hawk Surveying:

Whether you are involved in administering hundreds of payments each month or just a few, these simple tips and guidance should help or provide a simple refresher.

Payments are simple once you get your head around the time-frames and the contractual process. Issuing applications in line with the contract terms in addition to being proactive with information is a big step of the way to ensuring payments are made on time.

This guidance is based on an unamended JCT D&B 2016. In most cases, the contract will be amended and worth reviewing to check for slight tweaks to the below.

=== Payment Application ===

The Payment Application under JCT D&B 2016 will be required to be issued no later than 4* days before the valuation date which may require a forecast up to the valuation date. Setting out the format of the application, in particular the detailed breakdown should reflect the Contract Sum, giving the same level of breakdown within the Contract.

Agreed variations are to be included and valued up to the valuation date. Where variations are unagreed or perhaps on a fast-moving project where changes have yet to be agreed, we recommend providing a detailed breakdown to the variation (including invoices, measures and photos) as well as a detailed justification for the variation including any reference to the contract.

We should add, that providing detailed breakdowns and justification for entitlement within a valuation does not relieve you of any contractual requirements for notification of changes – i.e. if the contract stipulates a specific change control process, this should still be adhered to. (We will detail this in a future article).

=== Payment Notice ===

Following a Payment Application, an assessment will take place to value the measured contract works and variations applied for. On reviewing the application there may be a disagreement with the works completed to date, the PQS should detail their assessment with the reason for any differences (including any photos or marked-up drawings to support the justification) in the assessment. This will then form your Payment Notice and under JCT D&B 2016, must be issued before 12 days* following the Valuation date. (The payment notice may also be referred to as the payment certificate).

=== Pay Less Notice ===

If after the Payment Notice is issued and something comes to light (for example incomplete works) which the PQS deems a deduction is to be made against the Payment Notice, a Pay Less Notice can be issued. This is required to be issued no later than 5 days before the final date for payment. The deduction should be broken down with justification for rates applied and clear reasoning for the deduction.

=== A few things to remember: ===

* The days stated above are calendar days not business days so, don’t get caught out.
* Where payments are scheduled out to a defined date, any application/valuations past this will not be due until the Final Account Payment.
* 7-day notice can be issued if payment is not made in line with the payment terms to suspend works until full payment is paid in line with the Payment Notice or Pay Less Notice.
* Where a Contract does not state payment terms, the Housing Grants Construction and Regeneration Act 1998 applies.

* These timeframes are based on the standard unamended JCT D&B 2016 – please check your contract for any amendments.

If you are unsure with any of the above or would like some assistance with interpretation of your contract and/or its amendments, contact your trusted quantity surveyor for help.

[[Category:Contracts_/_payment]] [[Category:Cost_/_business_planning]] [[Category:Products_/_components]] [[Category:Roles_/_services]]

Interim valuations and payments

2022-11-15T11:50:35Z

Hawk Surveying: Created page with "Whether you are involved in administering hundreds of payments each month or just a few, these simple tips and guidance should help or provide a simple refresher. Payments are s..."

Whether you are involved in administering hundreds of payments each month or just a few, these simple tips and guidance should help or provide a simple refresher.

Payments are simple once you get your head around the time-frames and the contractual process. Issuing applications in line with the contract terms in addition to being proactive with information is a big step of the way to ensuring payments are made on time.

This guidance is based on an unamended JCT D&B 2016. In most cases, the contract will be amended and worth reviewing to check for slight tweaks to the below.

=== Payment Application ===

The Payment Application under JCT D&B 2016 will be required to be issued no later than 4* days before the valuation date which may require a forecast up to the valuation date. Setting out the format of the application, in particular the detailed breakdown should reflect the Contract Sum, giving the same level of breakdown within the Contract.

Agreed variations are to be included and valued up to the valuation date. Where variations are unagreed or perhaps on a fast-moving project where changes have yet to be agreed, we recommend providing a detailed breakdown to the variation (including invoices, measures and photos) as well as a detailed justification for the variation including any reference to the contract.

We should add, that providing detailed breakdowns and justification for entitlement within a valuation does not relieve you of any contractual requirements for notification of changes – i.e. if the contract stipulates a specific change control process, this should still be adhered to. (We will detail this in a future article).

=== Payment Notice ===

Following a Payment Application, an assessment will take place to value the measured contract works and variations applied for. On reviewing the application there may be a disagreement with the works completed to date, the PQS should detail their assessment with the reason for any differences (including any photos or marked-up drawings to support the justification) in the assessment. This will then form your Payment Notice and under JCT D&B 2016, must be issued before 12 days* following the Valuation date. (The payment notice may also be referred to as the payment certificate).

=== Pay Less Notice ===

If after the Payment Notice is issued and something comes to light (for example incomplete works) which the PQS deems a deduction is to be made against the Payment Notice, a Pay Less Notice can be issued. This is required to be issued no later than 5 days before the final date for payment. The deduction should be broken down with justification for rates applied and clear reasoning for the deduction.

=== A few things to remember: ===

* The days stated above are calendar days not business days so, don’t get caught out.
* Where payments are scheduled out to a defined date, any application/valuations past this will not be due until the Final Account Payment.
* 7-day notice can be issued if payment is not made in line with the payment terms to suspend works until full payment is paid in line with the Payment Notice or Pay Less Notice.
* Where a Contract does not state payment terms, the Housing Grants Construction and Regeneration Act 1998 applies.

*These timeframes are based on the standard unamended JCT D&B 2016 – please check your contract for any amendments.

If you are unsure with any of the above or would like some assistance with interpretation of your contract and/or its amendments, contact your trusted quantity surveyor for help.

[[Category:Contracts_/_payment]] [[Category:Cost_/_business_planning]] [[Category:Products_/_components]] [[Category:Roles_/_services]]

How does a QS add value?

2022-11-15T11:40:12Z

Hawk Surveying:

Quantity Surveyors are commonplace in construction, but what exactly are they? Definitions are many and varied, but modern Quantity Surveyors are responsible for the effective financial management of the construction process.

Effective financial management may result in a project making money, however this is a somewhat simplistic view given that many of the factors the QS must consider are beyond its control (defects for example). However, the nature of construction works and the contracts and procedures by which they are administered mean that there is ample opportunity to maximise opportunity whilst minimising risk. “Adding value” may be a better way to judge the effectiveness of your QS.

So how do you know if your QS is “adding value”? A project that has lost money may have been managed extremely well whilst a project that returned a healthy profit may not. What factors should you consider?

A good QS should possess sound technical skills and requisite soft skills to appreciate the big picture with all its potential future risks. Technical skills should be up to date with modern techniques and practices, whilst professional accreditation demonstrates a QS has achieved a suitable level of competence. The RICS, as the principal professional body, sets out the rules and conduct of its surveyors and regulated companies.

Professional membership demonstrates that a QS has undertaken structured training maintained through Continuing Professional Development whilst technical skills generally cover the following areas:

* Cost planning, budgeting and analysis
* Estimating and tendering
* Procurement types and strategies
* Contract law, including standard forms of contract
* Value engineering
* Cashflow forecasting
* Cost and value reporting
* Change control (Variations)
* Interim valuations
* Extensions of time, money claims and acceleration
* Final account procedures
* Termination of contract
* Dispute resolution procedures

A QS must have a strong knowledge of the design and construction process and understand its role in the design team. This gives the foresight and “nous” to be able to look ahead and anticipate problems and opportunities.

Good technical skills however are not enough. Combined with effective “soft” skills, a good QS can provide proficient and supportive services that engender trust. Such skills include:

* Time management
* Communication skills
* Foresight
* Leadership
* Empathy and understanding
* Trust

The effective blend of solid technical skills and evolved soft skills allows a good QS to deliver services that enhance the value of the project. For example, by understanding the contract in detail, a QS may identify a variation which has been overlooked by the Client, whilst sensitive reporting may help reduce the potential for dispute where a Client may not have budgeted for this eventuality. The QS has also gained the opportunity to enhance value by pricing the Variation in accordance with the terms of the contract whilst appreciating that different contracts have different pricing regimes. An NEC contract, for example, being entirely different to a JCT form.

Generally Clients and Senior Management do not like surprises. A good QS will be able to set up an effective project cycle (payment dates, meeting schedules, reporting dates etc) and work to these, providing information that takes full account of project specifics with assumptions stated and alternatives evaluated. Costs are thereby managed, value enhanced fairly and clients and senior management kept fully informed. In other words the QS is adding value.

Good QSs are hard to find and may not come cheap. Although you may employ a QS, workloads often fluctuate and obtaining additional support can be challenging. Smaller companies however may question the benefit of employing a full time QS. The key consideration is how much value can the QS bring. Carefully consider what you expect from your QS, what skills it has, and what your budget is. This allows you to deploy resources effectively, possibly using [https://hawksurveying.co.uk/services/ outsourcing for specialist areas] such as claims or to manage short term peaks in workload.

A good QS is a major asset to any organisation, bringing an abundance of skills and knowhow to effectively manage the financial performance of the construction project. Do not overlook the importance of the QS in enhancing the value of your project.

[[Category:Articles_needing_more_work]] [[Category:Construction_management]] [[Category:Contracts_/_payment]] [[Category:Cost_/_business_planning]] [[Category:Roles_/_services]]

How does a QS add value?

2022-11-15T11:39:26Z

Hawk Surveying: Created page with "Quantity Surveyors are commonplace in construction, but what exactly are they? Definitions are many and varied, but modern Quantity Surveyors are responsible for the effective fi..."

How does a QS keep a project on time and on budget?

2022-11-15T11:34:40Z

Hawk Surveying:

Keeping track of all areas of a project is a big job, and any new build, refurbishment or extension could really benefit from a quantity surveyor being involved at the start to plan and manage the commercial aspects of the project.

Even the most organised of projects that are well progressed can suffer from a loss of control over the timescales and figures, but a QS can help to regain some sense of control to minimise any further losses and/or reduce any further risks.

=== Financial & commercial: ===

<br />
A QS will make sure that every cost is accounted for and your budget is not over-spent. They will compare quotes and scopes of work to identify the best contractor(s) for the project at the best value.

Missed elements of a build, scope gaps and poorly managed risks are common pitfall for projects. A QS uses their skills to help bring finances back on track if the unforeseen things do happen or if costs are higher than budgeted.

=== Contractual & Legal: ===

<br />
Contracts are key – and a quantity surveyor will ensure your contracts with suppliers, contractors and consultants are drafted correctly and reflect the agreed scope of services to avoid things being missed and/or charged for outside of the budget.

A QS will also make sure that signed contracts are stuck to – what is agreed upon is undertaken and parties understand their responsibilities. They also ensure responsibility for every aspect of the project lies with someone, so that in the case of a dispute or a claim, contracts can be used to reach a resolution.

In the event of a disagreement or dispute, a QS would also pursue and settle any claims to a point of resolution.

[[Category:Construction_management]] [[Category:Contracts_/_payment]] [[Category:Cost_/_business_planning]] [[Category:Roles_/_services]]

How does a QS keep a project on time and on budget?

2022-11-15T11:33:02Z

Hawk Surveying: Created page with "Keeping track of all areas of a project is a big job, and any new build, refurbishment or extension could really benefit from a quantity surveyor being involved at the start to p..."

Keeping track of all areas of a project is a big job, and any new build, refurbishment or extension could really benefit from a quantity surveyor being involved at the start to plan and manage the commercial aspects of the project.

Even the most organised of projects that are well progressed can suffer from a loss of control over the timescales and figures, but a QS can help to regain some sense of control to minimise any further losses and/or reduce any further risks.

Financial & commercial:<br />
A QS will make sure that every cost is accounted for and your budget is not over-spent. They will compare quotes and scopes of work to identify the best contractor(s) for the project at the best value.

Missed elements of a build, scope gaps and poorly managed risks are common pitfall for projects. A QS uses their skills to help bring finances back on track if the unforeseen things do happen or if costs are higher than budgeted.

Contractual & Legal:<br />
Contracts are key – and a quantity surveyor will ensure your contracts with suppliers, contractors and consultants are drafted correctly and reflect the agreed scope of services to avoid things being missed and/or charged for outside of the budget.

A QS will also make sure that signed contracts are stuck to – what is agreed upon is undertaken and parties understand their responsibilities. They also ensure responsibility for every aspect of the project lies with someone, so that in the case of a dispute or a claim, contracts can be used to reach a resolution.

In the event of a disagreement or dispute, a QS would also pursue and settle any claims to a point of resolution.

[[Category:Construction_management]] [[Category:Contracts_/_payment]] [[Category:Cost_/_business_planning]] [[Category:Roles_/_services]]