An Instruction to Contract

  • Building Design Expert
  • 8 years ago

Building contracting is an art form that uses brushes that would never be made by Winsor and Newton, for the simple reason that W&N just don’t make them that wide. It is the broad brush that the majority of contractors set out with as their default applicator, because if you think about it even the most experienced of estimators can only ever do just that – ‘Estimate’.

The most valuable commodity any contractor has to put a cost against is usually ‘Time’. Of course, this is an individual commodity because every one works at a different rate. So not only is our estimator trying to guess how long any given operation will take, they are also using an average rate of working constructed from past similar projects that are close but really not quite the same. Deep breath, carry on.

Under the rules of contracting and tendering and contracts, and the like; the contractor is duty bound to present a break down of the total bid price to the contract administrator (CA), or quantity surveyor, whose existence will usually depend upon the type and size of the contract. Referee blows the whistle for the start of the games.

It is the bottom line figure that is the highest ranking in a tender bid. All the constituent sums that make it up are secondary, but this is what the contractor may use to what might just be a financial advantage. All other things being equal, our contractor wins the tender on lowest price. However, particularly in these troubled economic times the tendency to commence a process of ‘value engineering’ post tender can often prevail. The sharp edged contractor will have recognised those elements that could be cut or lost, and gambles attributing less money to them (perhaps only cost price – no profit) in his cost break down, so that when it is cut there is no, or minimal loss of profit. It’s like any form of gambling; if you’re good at it you can win big time. If you’re not ‘You Lose’.

In an effort to simplify matters, the formal contract system (JCT and the like) often provides some dead ends without turning heads. No matter how many times you tell the client and the contractor that the only instructions to be accepted and acted upon during the project, are those issued by the CA; it’s as though the words have been uttered through a bad interpreter. The client still thinks it will be okay if I just tell him this…… – because it’s only a minor change. No, no, no, no – because now we have a claim from the contractor for additional works. But the additional works have not been authorised under the contract, and therefore theoretically are not eligible for payment. Although there remains a strict case that if the contractor has carried out work as part of the contract he should be paid for it. Aaaagghh!!

A recent case had the contractor down to ‘make good’ residual disturbance to retained fabric and finishes. No problem there. The contractor takes his stab at it during tender stage, and he lives or dies by that cost. Enter the client who is not satisfied with making good, and requires it to be renewed, and makes noises in that direction to the contractor. The contractor does not consider he has enough time to seek formal approval from the CA, because the CA will want to know silly details like ‘How much?’ – The contractor is falling behind on programme and can’t afford to lose any more time, so decides to take a flyer and argue it all later.

It turns out that the money the contractor had in for making good wouldn’t have paid for the coffee that morning, so you can imagine his delight at being able to now record his hours and submit a ‘Daywork’ rate as part of his final account. It’s at this point the CA wishes he had taken up his first choice career of Insurance salesman.

Now day works are generally not acceptable, unless agreed before the start of the contract. The perfect world of contract requires that all variations are agreed before they are carried out. So now we are down to a situation where the contractor has carried out work, that was required (in one form or other) under the contract. He is therefore eligible to receive payment for that work. But in this case it must come down to what is ‘fair and reasonable’, particularly when the comparison is against a wholly inadequate sum for making good. Profiteering is one thing the CA is not going to be party to.

We must remember that the CA is obliged to be impartial in the process of administration, and this is where that process is tested to the letter. If he adopts the stance that the work has been carried out without authorisation, so the contractor gets only what he originally allowed in his tender. The contractor in theory could reclaim the proportion of the installation that he considers has not been paid for. – Very messy, and we don’t really want to contemplate that one. So the most expeditious way out is usually to try and agree a compromise sum based upon ‘fair and reasonable’; which might be somewhere between the two.

Who loses? The client loses because in issuing an instruction independently of the CA, it has cost more money. The CA loses because invariably this is going to take more time to sort out and will more than likely be set against a fixed fee. The contractor however might just gain, because although he is unlikely to receive his day works claim in full, he will probably receive more than the meagre amount he priced for ‘making good’ essentially forming an instruction to contract.

Want to know more about Construction Contracts?