written by Alan Rutledge
Alan’s background …
I’m a Chartered Quantity Surveyor with some 53 years experience in the Construction industry.
Most of which overseas from my native UK and the last twenty of which were spent in the Lift and Escalator field, with particular emphasis on disputes and their negotiation / settlement.
I’m now retired but, following the current trend, “re-cycled” as I do undertake various specialised missions.
Alan’s experience …
Having worked for construction companies as well as for clients/owners for half of my career, my experience is manifold – that is I can see the contractual/commercial issues which commonly arise from several points of view.
This is important when faced with particular matters to resolve because I believe the arguments can be more easily polarised, given the extent of previous experiences and successes on many other projects.
Donning my Main Contractor hat …
Let’s look at typical problems which arise on various projects where a sub-contractor for lift & escalator has been included.
In case the smarter ones amongst you are keen to correct my views or advice, based on such and such contract conditions, please accept that this article has been generalised to present typical issues which may (and probably will) arise and is not specific to any one contract form.
It is the case however, that contract forms do generally to follow a pattern in terms of various contract provisions contained within. OK so enough of the boring stuff
Me, Main Contract versus You, Sub-Contractor …
So for the purposes of this article I’ll be speaking as the Main Contractor and looking across (down) at all of you Sub-Contractors from my lofty station. You know that almost all Main Contractors take that view!
Straight away, allow me to say that people seldom learn from their mistakes (certainly in the construction industry) and that the wheel continues to be re-invented – amazing isn’t it that the same mistakes are made on almost every project?
On the positive side, it has provided me with a meaningful purpose over many years!
The seven deadly traps and sins …
Please allow me therefore, to give some scenarios which will no doubt be familiar and may just prompt you to smile when they arise on your next project. You might even take the hint and deal with them differently.
#1: Contract programme
Although, on any project, there must be a specific duration to follow from start to finish as well as a completion date, as Main Contractor, I never want you to be allowed to give details, sequences and timing in such a document at time of tender since it might become a Contract document.
The reason, is that when there is a delay (and there will be a delay) you might be able to rely on that programme to stitch me up. All I want you to do is give me a duration and a completion date. And I want to express, with-in the sub-contract, my ability to alter the sequence and timing to suit the progress of the works.
That would be fair to me and would probably give me enough latitude to be able to avoid a disruption claim. Of course, you may refuse to allow this situation and may insist on a Sub-Contract programme…..
# 2: Progress
My first task, as far as Lifts and Escalators are concerned, is to construct lift shafts and/or escalator pits on time so that the chosen Sub-Contractor is able to commence its installation phase; this will be the first real L&E activity on site and is critical to the progress and the eventual completion of the Sub-Contract.
However, it is likely, given the nature of construction, that they will not be completed on time and/or will not have been constructed within the tolerances stated in the Specification (you know how accurate Main Contractors and their concrete Sub-Contractors are!).
So, this is possibly the first instance of delay and, if the Sub-Contractor is sharp, he will have recorded the date of handover as well as the shaft dimensions and verticality in a timely fashion, asked me to sign this record and will have followed up with a possible claim for extension of time, or at least he will have given notification.
Or he may not and/or may not have given it on time; of course I will not prompt him because, if there happens to be a delay in the completion of his work, I will be looking to lay the blame on him. That is what Main Contractors do!
# 3: Delays
Generally – apart from the above example, there will almost always be other delays incurred during a construction project – it is not surprising, given the nature of the task, changes introduced by Architects/Owners, adverse weather conditions, industrial disputes affecting delivery of materials, political effects, Acts of God etc.
The Main Contract conditions foresee this and provide for extension of time (and recovery of loss and expense) in many instances where the fault is not that of the Main Contractor (or the Sub-Contractor). However, those conditions are very specific and need to be followed in terms of timing and details.
As the Main Contractor, I will pass down those Conditions to you in your Sub-Contract (and perhaps make them even more onerous). Such conditions should be very carefully understood and followed by all.
# 4: Payment
After all, this is what it is all about. As Main Contractors, we need to be paid by the client and, as Sub-Contractors, you need to be paid by us. So, we need each other!
We need to apply for regular on-account payments based on work progress and, likewise, you need to apply to us for progress payments in a timely way.
We also need to receive applications for valuation of variations and any other additional claims/ payments on time and per the Sub-Contract Conditions. If you fail to do this then your cash flow will suffer.
# 5: Deductions for various charges
– including Loss and Expense. As Main Contractors, we are always on the lookout for ways to charge our Sub-Contractors for safety violations, errors, additional work which we have completed for the Sub-Contractors, for power consumed, cleaning up charges and all manner of things which we can dream up.
Conversely, if they are smart and contest such charges with proper evidence, Sub-Contractors can avoid many of these charges and subsequent arguments.
We may also compile a Loss and Expense Claim if we believe the Sub-Contractor has delayed us and/or has delayed the completion date for the entire project; this could be substantial and is often used as a reason for non-payment of amount otherwise due.
That can be avoided through completion of sections on time and through diligent and timely correspondence notifications etc. So often the Sub-Contractor fails in this area and therefore misses the opportunity.
There is often a situation whereby the Sub-Contractor can claim for Loss and Expense which he has incurred through delay etc. and he should, therefore be alert to this.
# 6: Insurance Claims
There are Insurance clauses in every Contract and it is often the case that the Owner/Employer takes out a cover for Contractors’ All Risks (CAR) on behalf of all parties.
Whilst I will normally, as Main Contractor, pass this benefit down to all Sub-Contractors and this is seen as positive, there is a caveat: there will be excesses payable for each and every claim made by any party and such excess might well be larger than the claim itself (certainly in the case of a Sub-Contractor).
Therefore, before claiming (as a Sub-Contractor), you may wish to consider first the value and secondly as to whether the claim arises from the default of another.
If the latter can be proven to be the case, then the cost may be claimed from the offending party and such party may well see it possible to claim through the Insurance.
In that event then you might avoid a claim and the resultant excess. I have seen such cases on numerous Contracts.
# 7: Completion
Whilst the Contract (or Sub-Contract) will define the meaning of completion, as the Main Contractor this will be the time or date when all the works have been completed and the Certificate of Practical Completion (PCC) will have been issued by the Architect.
However, in the case of L&E much, if not all, the equipment, will have been completed and tested some weeks prior to the date of PCC and, in many cases I, as Main Contractor, may have used some of the lifts (under agreement) in order that the rest of the finishing trades can complete, since the scaffolding and hoists will have been removed.
They may be an argument, therefore, that, following handover back to the Sub-Contractor for cleaning/repairs and re-balancing, the final handover of the lifts may be delayed.
The Sub-Contractor should, therefore, ensure that the Agreement for temporary use has been signed by the Main Contractor and that the conditions are clear regarding completion and handover.
It is also the case that the Employer, in its haste to take over the building, wishes to use the lifts but finally does not accept handover (PCC) because of frequent breakdowns – which may have been caused by damage during construction use.
Records are therefore essential as any delay to the completion might otherwise result in liquidated and other damages being levied.
The above is only a handful of likely scenarios which might be encountered during the course of a building contract which might affect the L&E Sub-Contractor. Of course there is no ready substitute for experience but, if you follow the simple rules of reading and understanding the Sub-Contract and also follow it, there are millions of dollars to be saved for your company.
Notes from your Coach …
Guilty as charged. As a former Construction & Project Manager I can definitely align with Alan’s comments and suggestions. And time after time we repeated the same mistakes.
Hopefully this short article will provide everyone with some great tips and insights on areas where we can improve.
I’ve had the pleasure of knowing and working with Alan for a number of his years spent in our tribe and thankfully, as he has had to come to our rescue more than once. Fingers crossed, as I’m hoping to interview Alan and learn more on what we can do as a group to better prepare and protect ourselves.
Until then …