Quality Assurance - How accurate is your documentation?

Robust supervision and training of staff will help them to understand the significance of accurate documentation. Organisations should not lose sight of this, particularly in the current economic climate

Source:www.anarsolutions.com

In previous articles I have discussed the importance of drawings and the consequences that are likely to occur in a construction project if they contain inaccuracies or omissions. Drawings are one of the main components of tender documents, however, as important as they are, they are only a single component of the documentation. Drawings must reflect precisely the detail contained in the specification, and vice versa.  Any conflict between the two will lead to confusion from contractors during the tender period, (assuming that the contractors have read the documentation fully, which does not always happen!), and possibly disputes on site when the selected contractor realises any inconsistency. This can then lead to an embarrassing explanation to the Client, particularly if the contractor tries to claim that his tender price did not include for the inconsistency and ultimately in a dispute for which the Consultant may be held accountable.

Consequently, the process of preparing tender documentation and in fact any documentation that is to leave the office, should be undertaken with care and attention, with organisations having robust quality assurance processes to ensure that the documentation is checked at various stages. Junior and new members of staff need to be trained and supervised throughout the whole process so that they understand the significance of preparing tender documentation and that each component cannot and should not be prepared in isolation. Experienced and senior members of staff should not be excluded from the quality assurance process as they too are likely to make errors or omissions. The point is that through the supervision and quality assurance processes, any errors or omissions are identified before the documentation leaves the office.

Source: builtintelligence.com

In today's challenging environment where profit margins are tight and staffing levels have been squeezed, it would be very easy to allow documentation to be issued as a result of sometimes poor or non existing supervision and quality assurance procedures. One of my former organisation's quality assurance procedures was that no documentation could leave the office until it has been signed off by a senior manager. I can remember many days when members of staff would pile drawings, specifications and all sorts of other documentation onto my desk for checking. Now considering I still had my own workload, reading through and checking all of this documentation was challenging, however because I was signing the  information off I had to take the time too look at it properly, which often meant working long hours, or taking work home. I am sure many reading this article will understand, having been in similar situations themselves. Although it was sometime tempting to skim read documentation and drawings I was always aware of the implications to my organisation and to me personally, if inaccurate documentation was issued. Inevitably, errors in signed off documentation would sometimes be identified, however by adopting robust procedures we kept this to a minimum, and after all we are only human and we will sometimes miss something.

Those who prepare the documentation often do not appreciate the time that is necessary to read through and check what they have produced. In some circumstances members of staff would bring documentation to me for checking and expect me to look at it, there and then and sign it off immediately, because of an imminent deadline (mostly down to their own poor time management!). This is where mistakes can be made, and any organisation that works in this way or allows this to happen, even in isolated cases, are likely to keep their solicitors very busy! Organisations must have clear policies in place so that everyone understands and complies with quality assurance procedures and also has respect for the time of those who will be checking it.

As stated previously robust supervision and training of staff will help everyone (not just technical members of staff), to understand the significance of accurate documentation. Organisations should not lose sight of this, particularly in the current economic climate. Client's are much more likely to cultivate relationships with those who they feel confident will deliver a project effectively and in a professionally manner. Allowing inaccurate documentation to leave your office is not professional and gives a very negative impression. There is a lot of competition out there and it will not take long to sour a relationship, 'you're only as good as your last project', comes to mind, so ignore this at your peril.

Above, I have used the example of tender documentation, as from experience I know the problems that can result from in inconsistencies in documentation. Tender documentation is a topic I will cover in more detail in a future article.

Please feel free to share this article and other articles on this site with friends, family and colleagues who you think would be interested

Information/opinions posted on this site are the personal views of the author and should not be relied upon by any person or any third party without first seeking further professional advice. Also, please scroll down and read the copyright notice at the end of the blog

The Reality of Framework Agreements - Have You Been Framed?

Frameworks are generally poorly understood by Clients and are often not the lucrative cash stream that they initially suggest, unless of course you are one of the chosen few!

Source: www.zemaitis-uk.com

Under EU legislation all contracts from the public sector which are valued above a certain threshold (Link) must be published in the Official Journal of the European Union (OJEU, formerly OJEC). Many OJEU's advertise framework opportunities, and whilst working in Professional Practice, particularly as a Senior Manager I was often involved in preparing framework consultancy submissions.  

A framework agreement is essentially an ‘umbrella agreement’ which sets out the terms under which individual contracts (call-off's) can be made throughout the period of the agreement. Frameworks can vary in duration, however these are typically for a four year period. The principle of a framework is to establish and develop long term relationships between Clients, Consultants and Contractors etc. and to work together to achieve continuous improvement. This is measured in different ways, however the overriding objectives would be to improve quality, look for efficiencies and at the same time reduce costs.

An invitation to submit for a framework will only be given once the Client is satisfied that the Contractor or Consultant have the track record and resources needed.  This will be established from information submitted in a Pre-Qualification Questionnaire (PQQ).  The main submission will then require a whole host of different information relating to details of relevant projects, an organisational structure highlighting key personnel, health & safety policy and record, environmental credentials, numerous answers to all sorts of different questions and scenarios and obviously fees that will be charged. After assessment of the documentation and if successful, the Contractor or Consultant will be invited to an interview where eventually the Client will select a number (typically 4 to 6) to appoint to the framework.

Source: www.linkedin.com

Anyone who has prepared documentation for a framework submission, whether as a Contractor or a Consultant will be aware of how much work is involved. Typically, it will take a Senior Manager with administrative support a significant amount of time to pull the information discussed above, together.  When you consider the hourly rate of a Senior Manager and support staff, together with the bulky printing (if needed) and preparation of the documentation, the whole exercise is a real cost to a business, and is completed on the principle that if successful, there will be a continuous flow of projects for the duration of the framework.  This however is rarely the outcome.

The initial euphoria of receiving confirmation of an appointment to a framework is often quickly tempered with frustration.  In reality what tends to happen is that a Client will call off work disproportionately, with some on the framework being allocated a high percentage of projects and others being allocated very little. One factor that may contribute to this is the mandatory nature of the OJEU procedure which many Clients do not really want.  Having this procedure imposed on them means that they can no longer just invite those Contractors and Consultants who they have probably worked with for many years to tender for the framework, in fact by advertising through OJEU they are actually inviting submissions from all over the Europe Union, not just the UK.  Obviously, these 'familiar' Contractors and Consultants can tender for the framework, but will have to go through the same selection criteria as everyone else who applies.

I can think of a number of examples where my company (Property Consultants), were appointed onto frameworks, having attended numerous meetings, passed the submission and selection procedure, and then not given anywhere near the volume of work to justify the costs.  Clients do not always appreciate that part of the fee calculation is based upon the likely value of work that will be allocated through the framework. Therefore, a much more competitive fee can be included if projects of a reasonable value are called off to your company or organisation. Clients who 'throw you the scraps from the table', by allocating the odd small project here and there, do not appreciate that the fee that has been submitted will not work for this extremely low volume of work, however the fee is expected to honoured because this is what was tendered with the original submission.

There are two particular frameworks which come to mind, one with a Local Authority in the Midlands and one with a Housing Group in the North West, where my company were appointed onto the Framework, and when attending monthly framework meetings (which again is another cost to the business), it was clear that bulk of projects were being called off to the Consultants who had worked with the Client for many years. This was totally unacceptable, and despite some 'honest and frank' discussions with the Client, nothing changed. I am sure that this will be the same in certain situations for Contractors.  Consequently, my company took a commercial decision to be much more selective of which frameworks to apply for in the future.  
  
Frameworks are generally poorly understood by Clients and are often not the lucrative cash stream that they initially suggest, unless of course you are one of the chosen few!

Please feel free to share this article and other articles on this site with friends, family and colleagues who you think would be interested

Information/opinions posted on this site are the personal views of the author and should not be relied upon by any person or any third party without first seeking further professional advice. Also, please scroll down and read the copyright notice at the end of the blog. 

Law of Contract – Part 2 - How a contract is formed - Construction & Built Environment

As long as all of the relevant elements are in place a verbal contract can become legally binding in just the same manner as a written contract. Of course trying to prove that a verbal contract exists is far more difficult that a written contract by the very nature of no written evidence

Source: http://howng050.articlealley.com/

Within the law of contract the term ‘legally binding’ is actually very significant as it means that a relationship has now been formed which brings with it obligations. The point at which a contract becomes ‘formed’ and legally binding is therefore crucial to understand so that those involved do not inadvertently bind themselves to obligations without realising.  You may think to yourself that anybody should be aware of whether they have entered into a contract or not, however if you do some research it will not take you long to discover that a vast amount of disputes relate to whether a contract exists or has been formed in the first place. So this begs the question, ‘at what point is a contract formed and becomes legally binding?’


Firstly, it is worth being aware that most contracts take a written form however it is also possible to form a contract verbally.  As long as all of the relevant 'ingredients' are in place (which will be discussed below) a verbal contract can become legally binding in just the same manner as a written contract. Of course trying to prove that a verbal contract exists is far more difficult that a written contract by the very nature of no written evidence.  You may have heard the term ‘a verbal contract is not worth the paper it is written on’, which really demonstrates the difficulty that will be encountered for anyone who wants to take any form of action on the basis of a verbal contract.  Other evidence such as recordings may be used however there is no substitute for a written contract in the event of a disagreement or a dispute (although written contracts can often be poorly drafted, resulting in disagreement in interpretation).   

In order to form a legally binding contract there are four elements necessary.  These are; Agreement (which consists of both an offer and an acceptance), Consideration (something of value, which is not necessarily financial), an Intention to create legal relations and a Legal capacity to make the contract.

Source: http://theodoreempsonlaw.com/

As detailed above the first ingredient ‘agreement’, requires both an offer and an acceptance, and unless both are in place then there obviously cannot be an agreement, and therefore no contract. There is now well established precedent for what constitutes an offer, how an offer is made, how the offer is communicated etc. In terms of what constitutes an offer it is worth briefly exploring the distinction between an offer and something referred to as ‘an invitation to treat’. If we take an item displayed in a shop window or goods displayed in a supermarket as an example, then at what point is an offer being made?  It clearly would be inappropriate if it were possible to create a binding contract by a shop keeper or a supermarket displaying goods.  The display of goods with a price ticket attached in a shop window or on a supermarket shelf is not an offer to sell but an invitation for customers ‘treat themselves’ or to make an offer to buy.  When the item is taken to the checkout and money is exchanged (this is consideration which is another of the ingredients required to form a binding contract), this then has all of the ingredients necessary and a binding contract is formed at this point.

There a number of examples which demonstrate the distinction between an offer and an invitation to treat within case law, none more so than Fisher v Bell (1961). This case relates to the display of a flick knife in a shop window.  The wording of  the Restriction  of  Offensive  Weapons  Act  1959,  section 1(1), stated: ‘it was illegal to manufacture, sell, hire, or offer for sale or hire, or lend  to  any other person, amongst other things, any knife which has a blade which opens automatically by hand pressure……..’ The shopkeeper argued that he was not offering the flick knife for sale by displaying it in his window, merely inviting people to treat themselves. The court found in favour of the shopkeeper who was therefore deemed not guilty of the offence. An Invitation to treat leaves both parties free to change their minds, so a shopkeeper can decide to refuse to sell to a customer who he does not want to (for example, somebody who is under age or drunk). Also, a customer who puts something into their basket has the option to put it back or change their mind before proceeding to the checkout

Think also about auctions.  At what point in an auction is an offer made?  The auctioneer’s call for bids is and invitation to treat, which is a call for offers.  Bids that are then made are offers which the auctioneer is at liberty to accept or reject at any time, before the hammer goes down.  Likewise, a bidder is at liberty to withdraw their offer at any time before the hammer goes down.  We do not see this happening very often because it is likely that most people are not aware of this, however, if you make a bid and for some reason change your mind you do not need to sit silently and hope and pray that somebody else puts in a higher bid.  As long as you communicate your withdrawal clearly so that this is heard by the auctioneer and acknowledged, before the hammer goes down then that will effectively withdraw your offer, Payne v Cave (1789) demonstrates this well. The point at which the auctioneer’s hammer goes down is the point at which a binding contract is made, because there is an offer (from the bidder), an acceptance (from the auctioneer) and consideration (the sum of money agreed). An auction transaction will general assume an intention to create legal relations and as long as both parties have a legal capacity to make the contract, then a binding contract is formed.

Law of contract is a well developed area of UK law which has evolved over many hundreds of years. Therefore, there is no shortage of case law to refer back to in respect of both the formation of contracts as well how a contract may be brought to an end.  There are also many books and other literature that are available on the subject which discuss contract law in great detail.  In such a short article I can only really scratch the surface of this area of law and provide an introduction to the subject however, it is well worth researching contract law in more detail to help develop a greater understanding.  I always tell my students that the most effective way of understanding the main principles of any area of law, in addition to reading the legislation and/or previous cases themselves, is to refer to the details and decisions of these previous cases.  Whereas some of the legal principles may seem at first to be rather complicated and confusing, they often become much clearer when the details of the case and the rationale for the decision are understood.

Please feel free to share this article and other articles on this site with friends, family and colleagues who you think would be interested

Information/opinions posted on this site are the personal views of the author and should not be relied upon by any person or any third party without first seeking further professional advice. Also, please scroll down and read the copyright notice at the end of the blog.

Law of Contract – Part 1 - What constitutes a contract? - Construction & Built Environment

After entering into a contract it is no argument or defence to claim the terms are ‘unfair’ as under the doctrine of freedom of contract, there is no requirement for the terms to be so.  The lesson here is to be fully aware of the terms of your contract and your contractual obligations before signing the contract, which will actually mean reading it, including the small print!

Source: http://www.holcomb-law.com/

I am sure that many of us have previously entered into a contract without fully understanding the terms of what we have agreed or indeed the implications of being in a ‘legally binding’ contract.  This may be because we are so keen to get our hands on whatever it is want/need that we often do not read the details of the agreement and particularly the small print.   Typical examples may include mobile phone contracts, tenancy agreements or commercial leases or where we have purchased something such as a house or a car. In fact the term ‘exchange of contracts’ is generally well known by those buying and selling property, however contracts are also formed for purchases of items for much less value, even single low cost items that you may not realise.  The actual price or value of something does not influence whether a contract is formed, as long as there is an exchange of something of value, something known as consideration, which does not necessarily have to be money.  I will discuss this in more detail in next week’s article.

Source: http://www.arabianbusiness.com/

Construction contracts can be particularly complex and many disputes that occur revolve around an argument of whether there is a binding contract in place or not. Solicitors and their legal representative will expend an enormous amount of time looking at the conduct of the parties, reviewing correspondence between the parties, looking at the wording of a contract and reviewing decisions of previous cases to try to establish legal precedent, in order to prove or dis-prove that a contract actually exists.  As you would expect this can prove to be very expensive and proof of the existence of a contract will have very different implications for the plaintiff (the person or party who brings the action/case) and the defendant (the person or party whom the action is brought).

In order to understand the basic concepts of English contract law it is worth being aware that many of the principles were developed in the eighteenth and nineteenth centuries under the doctrine of ‘Freedom of Contract’. This means that parties to a contract can enter into whatever terms they want, without any interference, influence or input from the courts or the government, with the exception of illegality, fraud or other legal wrong. The terms that are agreed within a contract may sometimes appear to be more in favour of what party over the other however, as the parties are free to enter into whatever terms they want this will still result in a legally binding contract once agreed and signed.  Therefore, after entering into a contract it is no argument or defence to claim the terms are ‘unfair’ as under the doctrine of freedom of contract, there is no requirement for the terms to be so.  The lesson here is to be fully aware of the terms of your contract and your contractual obligations before signing the contract, which will actually mean reading it, including the small print!

Source: http://www.sutherlandsurveyors.co.uk/

Most contracts are made in writing and in fact there are many suites of standard forms of contract available for all types of construction related projects such as JCT, NEC, ICE, FIDIC and others.  These provide ‘off the shelf’ solutions for a whole range of different types of projects and procurement methods, and are regularly updated to reflect industry and legislation changes by the bodies that draft them.  Although they include their own standard clauses these can be amended or deleted or even have new clauses added, to suite the requirements of the parties.  As these types of contracts have evolved, in most cases over many years, they are now well established within the UK construction industry and clearly saves time and money in writing and preparing bespoke contracts from scratch.

Although standard forms of contract are used extensively in the UK construction industry, they are not always as easy as you would think to get agreed and signed. A number of years ago I was involved in large new build housing development where I was acting as Employers Agent for a large Housing Association, a Registered Social Landlord (RSL). Before I drafted the JCT Design and Build contracts I asked the RSL whether they had any specific contractual terms which they wanted amending, adding or deleting from the contract.  About a week later, I received a document in the post from them which had obviously been prepared by their solicitors which gave almost a clause by clause narrative of amendments that they required. As I started making the amendments I started to wonder why they had bothered with the use of a standard form of contract as the amount of changes they required was so comprehensive.  I persevered with the changes and then eventually sent the contracts and documentation to the Contractor for signature, at which point the fun really started! I can only imagine what the Contractor thought when they noticed all of the amendments and all I can tell you is that they were not impressed. As the Contractor objected to some of the amendments and wanted other terms re-worded and others removed, the contract negotiations became very protracted, in fact after a number of meetings and endless emails and telephone conversations, both parties signed the contracts, however this took over two months to achieve from when I first drafted the initial contracts.

Whatever the nature of a contractual relationship, be it a multi-million pound new build housing development as described above or even something much simpler, it is worth understanding the fundamental ingredients that are required to form a legally binding contract, which I will discuss in next week’s article.

Please feel free to share this article and other articles on this site with friends, family and colleagues who you think would be interested

Information/opinions posted on this site are the personal views of the author and should not be relied upon by any person or any third party without first seeking further professional advice. Also, please scroll down and read the copyright notice at the end of the blog.

NEC Contracts – Who is Responsible for Managing Defects?

Guest article from John Peel BSc (Hons) – Assistant Lecturer at Coventry University

....when things go wrong between other people named in the Contract the natural reaction is to look in the direction of the Project Manager (PM) to resolve the issues. It could therefore be argued there is almost an implied duty on the PM under the NEC to attempt to resolve conflicts before they get to adjudication

Source: http://www.saice.org.za/

As a Project Manager (PM) under the NEC I was always glad that the role of defect management was essentially allocated to the Supervisor. Having been party to many long winded arguments over defects under other forms of contract such as the JCT it came as a breath of fresh air to pass the duty of notifying defects, carrying out tests and inspections and issuing the defects certificate etc. to the Supervisor.  Indeed simply not having to draft pages and pages of snagging was enough to make me want to embrace the new procedure under the NEC when I started working with it.

The role of the Supervisor defined by the NEC is that of essentially ensuring the works are built in accordance with the works information. The role of the PM whilst broader in overall scale than that of the Supervisor is essentially limited (when it comes to defects) to the actions of the PM under clause 40.6 and 43.4 as well as the duties when accepting defects under clause 44 and dealing with uncorrected defects under clause 45.

Why then have I recently been involved in long winded protracted arguments over defects under the NEC option A contract? Something must be amiss!

The alarm bells first started to ring when the Supervisor and Contractor could not agree if a defect actually existed. The issue related to an element of the works being designed by the Contractor. The works information contained a specific thickness of material on a drawing but an overall requirement in specification to build to a specific standard of thermal efficiency. Both drawing and specification was included in the Works Information. The Contractor had altered the thickness of material but achieved the required thermal standard. The Supervisor notified a defect when he measured the thickness of material and found it to be not the same as stated in the Works information. The Contractor pointed to the fact the standard had been achieved and that the difference in material thickness had no adverse impact on the building. The issue had not been apparent in any design the Contractor had submitted for acceptance.

Source: http://www.ty-newydd.com/

The relationship between the Supervisor and Contractor was already strained at this point and the Supervisor was adamant that the change in material thickness was not “in accordance with the Works Information” and as such it was a defect. The notification was duly issued for the Contractor to correct it. The Contractor then made the argument of “inconsistency between the documents” under clause 17.1 as the specification was a performance specification allowing the contractor a degree of flexibility and the drawing gave a specific thickness thus conflicting with the flexibility in the specification. The Contractor then sought an instruction from the PM resolving the inconsistency. One interpretation of the apparent inconsistency was that both documents are read in conjunction with each other. So the Contractor has the flexibility of the specification to select products and comply with the standards but the thickness shown in the drawn information should be adhered to as a minimum and thus there is no inconsistency. However, playing devil’s advocate one might also look at the above scenario and think that as long as the Employer is not in any way at a loss as a result of the change and the performance standards are complied with then the process of achieving the end result is the Contractor’s to manage. After all that is essentially part of the process of design and build.

As PM I could see both sides of the argument. I suspect that had relationships on the project been better, an amicable solution could have been found. However, no agreement was reached and with the defect correction period nearly up the Contractor and Supervisor were becoming more animated in their dealings with each other. Eventually, I was asked to decide who was right and who was wrong which brings me to the crux of the matter from the perspective of the PM.

Contractually there is no role in clause 40-45 for mediation by the PM in disputes over defects. The only negotiation the PM need actually carry out is that related to agreeing to accept defects. We could not reach any such agreement in this case because clause 44.2 requires both the PM and Contractor to agree to consider a change to the works Information to correct a defect. The Contractor did definitely not agree to any such change! Ultimately the process would have been to wait until the defect correction period expired and then apply clause 45 to the matter (dealing with uncorrected defects). If the Contractor is unhappy with the results he has the option of Adjudication under the Contract.

However, there is the concept of a spirit of mutual trust and co-operation to consider. In this instance should the PM acting in such a spirit mediate between the parties to find an amicable solution before the matter gets to Adjudication? This is a difficult point because you cannot “force” co-operation. However, I do believe that all parties have a duty to co-operate and also foster co-operation in others. When one can clearly see parties are not co-operating someone should probably step in to point this out. The onus on the PM to administer most aspects of the Contract also means that when things go wrong between other people named in the Contract the natural reaction is to look in the direction of the PM to resolve the issues. It could therefore be argued there is almost an implied duty on the PM under the NEC to attempt to resolve conflicts before they get to adjudication.

However, there are areas of the NEC where the duty of the PM to determine if actions are reasonable, or unnecessary are expressly stated. For example clause 40.5 require the Supervisor to carry out tests and inspections without causing “unnecessary delay” to the Work. If the Contractor believes that in doing tests and inspections the Supervisor has caused unnecessary delay then he can notify the PM of a compensation event under clause 60.1.11. It then falls on the PM to determine if the delay was necessary or unnecessary.  The PM must also decide if other failures by the Supervisor to act in accordance with the Contract are compensation events although these are far more objective (clause 60.1.6 for example is easy enough to determine simply by looking at the period for reply and the date of a communication).

In conclusion, the PM takes a backseat to the Supervisor when it comes to the process of defects management and the role is strictly speaking limited to a specific few functions. However, the PM might well become more heavily involved in defect management if the process breaks down and the parties are no longer able to co-operate or begin to act unreasonably or cause unnecessary delay. It might well therefore be wise for the PM to take an active role in overseeing defects management to be able to proactively head off issues before they deteriorate. This is certainly the lesson I have learnt the hard way.

Please feel free to share this article and other articles on this site with friends, family and colleagues who you think would be interested

Information/opinions posted on this site are the personal views of the author and should not be relied upon by any person or any third party without first seeking further professional advice. Also, please scroll down and read the copyright notice at the end of the blog.

The Importance of having a Written Contract for Household Building Work

Hindsight is a wonderful thing and it is usually only after a dispute has occurred that a householder will reflect on why they did not enter into a written contract in the first place. By this point however it is usually too late!

Source: http://www.thehomeguru.net/

In general terms we are very trusting folk here in the UK and we often rely on good will as well as blind hope, in the expectation that work being undertaken to our homes will be done to a high quality, within agreed costs and without any problems.  In an ideal World this would no doubt be the case, however the reality is very different.  TV shows such as Rogue Traders, Cowboy Builders and the like highlight some rather stark examples where the initial excitement of building works have quickly evaporated and been replaced with anger, stress and worry, as the relationship between a building contractor and householders turns soar. I published an article about this time last year (link), which provided some practical suggestions of how a householder can avoid this scenario happening to them.  One of the suggestions I made within the article was to ensure that everything was recorded in writing (I mainly focussed on costs), however for this article I want to consider a more formal arrangement, such as the use of a written contract.

If a householder requires work undertaking within their homes, a usual first port of call would be a telephone conversation with a building contractor, followed by a visit.  During the visit the householder will outline what works they propose and the building contractor will give an initial assessment and invariably the conversation will come around to costs.  Very rarely, particularly at this point will the issue of a written contract be considered and in fact it is likely that the vast majority of works carried out within UK households, are completed without any written contract at all. Even in the absence of a written contract, a householder can enter in to a legally binding verbal contact with a building contractor, however, as you would imagine, in the event of a dispute, it will be much more difficult for either party to prove that particular terms and conditions were discussed and agreed. 

Source: http://easyplanbuildingsolutions.co.uk/

It therefore seems to make sense for householders and building contractors to enter into a written contractual agreement, which will clearly set out the various terms and conditions that they agree, but crucially however provide written evidence of the agreement.  Through the UK doctrine of freedom of contract, both parties are free to enter into whatever terms and conditions they want, without interference from the courts.  These terms and conditions could be written in whatever detail and format both parties are comfortable with and can range in complexity from a single sheet of A4 paper to a standard form of contract such as a Homeowner Contract or a Minor Works Contract.  There are many other standard forms of contract available, however, the nature and complexity of the vast majority of householder’s works will not require anything more complex than those contract types indicated above. Standard forms of contract can be ordered on line and vary in costs depending upon the selected contract.  For example a householder can purchase a JCT Homeowners Contract at a cost of around £20 (link), which given the disputes and costs that can be avoided is money extremely well spend.  These types of contract are written in a very understandable way so you do not need to be an expert in order to use them.  Also, standard forms of contract allow for adding and deleting of clauses, sections and words as deemed necessary by each party, prior to signature.  Just remember to undertake amendments carefully, as once the contract is signed, both parties are legally bound by the terms.

In the event that a dispute arises during or even after the works have been completed both parties can refer to the written contract to help them to resolve the dispute.  All too often disputes occur and indeed escalate because there is a difference of opinion about ‘what was said’, or ‘what was agreed’.  A simple written contract can therefore set out terms for costs, payment dates (and amounts), timeframes. More detailed contracts will stipulate procedures for variations, dispute resolution, insurance provisions, procedures for termination etc. Without a written contract both parties are exposing themselves to unnecessary risk and uncertainty should a dispute arise. This is something that householders often choose to ignore when undertaking building works in their homes, possibly as a result of lack of awareness, possibly ignorance, possibly not wanting to be viewed as ‘unfriendly’ by the building contractor and even possibly just plain acceptance that there just will not be a written contract.  Hindsight is a wonderful thing and it is usually only after a dispute has occurred that a householder will reflect on why they did not enter into a written contract in the first place. By this point however it is too late!

The lesson here therefore has to be that once a householder discusses work (and costs) with a building contractor, they should ensure that they also make the building contractor aware that they plan to ask them to sign a written contract prior to the works commencing.  In order for this to happen the householder should be satisfied with the scope of work proposed, the timeframe suggested and of course the overall cost of the works, are what they expect and therefore what they are prepared to agree too.  This may require a number of weeks (possibly longer) of negotiation between both parties in order for them to arrive at mutually agreeable terms.  Once this happens both parties will understand what is expected of them and this will help to eliminate any uncertainty.  This in turn will reduce the possibility of disputes occurring and in any event, will provide a way of dealing with disputes should they arise.  If you are a householder planning an extension or a refurbishment or in fact any other building works to your home, in the immediate or near future it is worth taking the time to prepare and negotiate a written contract with your building contractor prior to works commencing for all of the reasons discussed above.

Please feel free to share this article and other articles on this site with friends, family and colleagues who you think would be interested

Information/opinions posted on this site are the personal views of the author and should not be relied upon by any person or any third party without first seeking further professional advice. Also, please scroll down and read the copyright notice at the end of the blog.

Asset Management - Building Asset Value in Difficult Markets

Guest Article from Matt Bigam – Partner at Bidwells

Building owners should review their options in the current, challenging market. Active asset management can enhance value considerably and broaden market appeal subject to careful analysis and a full evaluation of local market circumstances. It is worth exploring different, accurately costed options.

Source: Google Images

In a flat market, characterised by limited demand, above average availability, and subdued activity in the investment sector, it can be difficult to create asset value. This can be especially challenging for older properties or buildings constructed in the last development cycle. Dated format and specifications can deter potential tenants who, in the current market, will typically have a relatively high degree of choice and strong leverage in lease negotiations. Similarly, outmoded or tired formats will deter potential investors who remain both scarce and cautious in today’s market.

When considering how to maximise asset value in a challenging economy, careful analysis of building options can improve both market prospects and investment value. Whilst detailed local market research is essential and capital expenditure needs to be very carefully considered, there will always be selected opportunities to create value via coherent asset management and enhancement initiatives.

As an example and for the purposes of analysis, let us assume a 30,000 sq ft office building which is approximately 15-20 years old. The net to gross ratio is 80/20 and the accommodation is divided over three floors, accessed via a lift and supported by basic air-conditioning. The property is assumed to have a single void floor. This property has been subject to a hypothetical asset review, placing particular emphasis on marketability and end investment value under three different scenarios.

Scenario 1 – Basic Core Refurbishment

Under this scenario, the following is assumed:

• No upgrade to building shell

• No external works

• Lift service and repair (but not replacement)

• Service and testing of existing infrastructure

• Basic refurbishment of reception areas and common parts

• No consequential requirements under Building Regulations

The cost of these works in today’s market on core only will be in the region of £10-£15 per sq ft, creating a potential improvement budget of £60,000- £90,000



Scenario 2 – Core and Basic One Floor Refurbishment

Here, the following has been assumed:

• Refurbishment as per Scenario 1

• Redecoration of one floor plate

• Service and upgrading of internal doors and review of fire  strategy

• No consequential Building Regulations adjustments

Under this scenario, refurbishment costs will equate to £15-£20 per sq ft. This produces an indicative refurbishment budget of £180,000 - £220,000, comprising approximately £60,000 for building core upgrade and £120,000 - £160,000 for the refurbished floor.

Scenario 3 – Core and BCO Cat A Floor Refurbishment

(The British Council for Offices' (BCO) mission is to research, develop and communicate best practice in all aspects of the office sector)

In this scenario, the core and one floor of the property are stripped back to shell and refitted to current BCO Cat A Standard.

Key aspects include:

• Mechanical and electrical services likely to require replacement or major upgrade

• Some consequential works arising from Building Regulations

• No external works

• Existing plant space is deemed to be adequate

In this example, refurbishment costs would rise to £40-£60 per sq ft with an approximate core upgrade cost of £60,000 and £320,000-£480,000 floor plate improvements. This produces a total potential budget of £380,000-£540,000.



In considering the above scenarios, it is of course imperative that detailed account is taken of local market conditions, particularly with regard to competing supply and the likely profile of tenant demand in the locality in question. The product clearly needs to fit the market and it is of course essential to avoid unnecessary capital commitments.

Source: Google Images

With regard to value and the attractiveness of undertaking asset improvement works, it is helpful to consider real-world situations. When this analysis is reviewed, factoring in current demand trends and net equivalent yields by building quality in the current market, in the case of a Scenario 2 refurbishment (Core and One Floor) would probably be sufficient to move the net equivalent yield on the asset inwards by around 75 basis points to approximately 7.75% based on today’s pricing with a good covenant. This produces a resultant rental uplift of circa £6-£7 per sq ft with a potential valuation uplift of approximately £700,000-£725,000. Thus, for an expenditure of £180,000- £220,000, the resultant uplift in value is considerable and clearly beneficial.

Under a Scenario 3 option (Core and BCO Cat A Floor Refurbishment), a yield of 7.00% and a rent of circa £25 per sq ft, producing an uplift of circa £5-£7 per sq ft, creating an overall potential value uplift of around £850,000-£900,000. This is also clearly beneficial, although less so in proportionate terms, than a more basic asset overhaul.  Further benefits include a more attractive reception and core areas for all tenants, which will help further rental negotiation and retention levels. Additionally a refurbished building will shorten the void period therefore speeding up time taken to recover rent, and reducing empty property rates responsibility.

In summary, building owners should review their options in the current, challenging market. Active asset management can enhance value considerably and broaden market appeal subject to careful analysis and a full evaluation of local market circumstances. It is worth exploring different, accurately costed options.

Information/opinions posted on this site are the personal views of the author and should not be relied upon by any person or any third party without first seeking further professional advice. Also, please scroll down and read the copyright notice at the end of the blog.

Established over 170 years ago, today Bidwells is one of the UK's leading property consultancies and employ almost 500 people in 11 offices across England and Scotland and provide a full range of services across the Commercial, Residential and Rural sectors.

Bidwell's provide commercial and residential property owners, as well as occupiers, developers and investors with a comprehensive range of services  combining a deep understanding of the strategic objectives of our clients and the marketplace, with the resources to deliver holistic property services. Clients include developers, institutions, land owners, owner occupiers, education institutions, government bodies and private individuals.

 

Quality Assurance - How accurate is your documentation?

Robust supervision and training of staff will help them to understand the significance of accurate documentation. Organisations should not lose sight of this, particularly in the current economic climate.

Source: http://www.pm-primer.com

In a recent article I discussed the importance of drawings and the consequences that are likely to occur in a construction project if they contain inaccuracies or omissions.  Drawings are one of the main components of tender documents, however, as important as they are, they are only a single component of the documentation. 

Drawings must reflect precisely the detail contained in the specification, and vice versa.  Any conflict between the two will lead to confusion from Contractors during the tender period, (assuming that the Contractors have read the documentation fully, which does not always happen!), and possibly disputes on site when the selected Contractor realises any inconsistency.  This can then lead to an embarrassing explanation to the Client, particularly if the Contractor tries to claim that his tender price did not include for the inconsistency and ultimately results in a dispute for which the Consultant is likely to be held accountable.

Consequently, the process of preparing tender documentation and in fact any documentation that is to leave the office, should be undertaken with care and attention, with organisations having robust quality assurance processes to ensure that the documentation is checked at various stages. Junior and new members of staff need to be trained and supervised throughout the whole process so that they understand the significance of preparing tender documentation and that each component cannot and should not be prepared in isolation.  Experienced and senior members of staff should not be excluded from the quality assurance process as they too are likely to make errors or omissions.  The point is that through the supervision and quality assurance processes, any errors or omissions are identified before the documentation leaves the office.

In today's challenging environment where profit margins are tight and staffing levels have been squeezed, it would be very easy to allow documentation to be issued as a result of sometimes poor or non existing supervision and quality assurance procedures. One of my former organisation's quality assurance procedures was that no documentation could leave the office until it has been signed off by a senior manager. I can remember many days when members of staff would pile drawings, specifications and all sorts of other documentation onto my desk for checking.  Now considering I still had my own workload, reading through and checking all of this documentation was challenging, however because I was signing the information off I had to take the time too look at it properly, which often meant working long hours, or taking work home. I am sure many reading this article will understand, having been in similar situations themselves. Although it was sometimes tempting to skim read documentation and drawings I was always aware of the implications, to my organisation and personally, if inaccurate documentation was issued.   Inevitably, errors in signed off documentation would sometimes be identified, however by adopting robust procedures we kept this to a minimum, and after all we are only human and we will sometimes miss something.

Those who prepare the documentation often do not appreciate the time that is necessary to read through and check what they have produced.  In some circumstances members of staff would bring documentation to me for checking and expect me to look at it, there and then and sign it off immediately, because of an imminent deadline (often down to their own poor time management!).  This is where mistakes can be made, and any organisation that works in this way or allows this to happen, even in isolated cases, are likely to keep their solicitors very busy! Organisations must have clear policies in place so that everyone understands and complies with quality assurance procedures and also has respect for the time of those who will be checking it.

As stated previously robust supervision and training of staff will help everyone (not just technical members of staff), to understand the significance of accurate documentation. Organisations should not lose sight of this, particularly in the current economic climate.  Client's are much more likely to cultivate relationships with those who they feel confident will deliver a project effectively and in a professionally manner.  Allowing inaccurate documentation to leave your office is not professional and gives a very negative impression.  There is a lot of competition out there and it will not take long to sour a relationship,  'youre only as good as your last project', comes to mind, so ignore this at your peril.

Above, I have used the example of tender documentation, as from experience I know the problems that can result from in inconsistencies in documentation. Tender documentation is a topic I will cover in more detail in a future article.


Information/opinions posted on this site are the personal views of the author and should not be relied upon by any person or any third party without first seeking further professional advice. Also, please scroll down and read the copyright notice at the end of the blog.

You've Been Framed - The Reality of Framework Agreements

Frameworks are generally poorly understood by Clients and are often not the lucrative cash stream that they initially suggest, unless of course you are one of the chosen few!

Source: Google Images

Under EU legislation all contracts from the public sector which are valued above a certain threshold must be published in the Official Journal of the European Union (OJEU, formerly OJEC).  Many OJEU's advertise framework opportunities, and whilst working in Professional Practice, particularly as a Senior Manager I was often involved in preparing framework consultancy submissions.  

A framework agreement is essentially an ‘umbrella agreement’ which sets out the terms under which individual contracts (call-offs) can be made throughout the period of the agreement. Frameworks can vary in duration, however these are typically for a four year period. 

The principle of a framework is to establish and develop long term relationships between Clients, Consultants, Contractors etc. and to work together to achieve continuous improvement. This is measured in different ways, however the overriding objectives would be to improve quality, look for efficiencies and at the same time reduce costs.

An invitation to submit for a framework will only be given once the Client is satisfied that the Contractor or Consultant have the track record and resources needed.  This will be established from information submitted in a Pre-Qualification Questionnaire (PQQ).  The main submission will then require a whole host of different information relating to details of relevant projects, a organisational structure highlighting key personnel, health & safety policy and record, environmental credentials, numerous answers to all sorts of different questions and scenarios and obviously fees that will be charged. After assessment of the documentation and if successful, the Contractor or Consultant will be invited to an interview where eventually the Client will select a number (typically 4 to 6) to appoint to the framework.

Anyone who has prepared documentation for a framework submission, whether as a Contractor or a Consultant will be aware of how much work is involved. Typically, it will take a Senior Manager with administrative support a significant amount of time to pull the information discussed above, together.  When you consider the hourly rate of a Senior Manager and support staff, together with the bulky printing and preparation of the documentation, the whole exercise is a real cost to a business, and is completed on the principle that if successful, there will be a continuous flow of projects for the duration of the framework.  This however is rarely the outcome.

The initial euphoria of receiving confirmation of an appointment to a framework is often quickly tempered with frustration.  In reality what tends to happen is that a Client will call off work disproportionately, with some on the framework being allocated a high percentage of projects and others being allocated very little. One factor that may contribute to this is the mandatory nature of the OJEU procedure which many Clients do not really want.  Having this procedure imposed on them means that they can no longer just invite those Contractors and Consultants who they have probably worked with for many years, to tender for the framework, in fact by advertising through OJEU they are actually inviting submissions from all over Europe, not just the UK.  Obviously, these 'familiar' Contractors and Consultants can tender for the framework, but will have to go through the same selection criteria as everyone else who applies.

I can think of a number of examples where my company (property consultants), were appointed onto frameworks, having attended numerous meetings, passed the submission and selection procedure, and then not given anywhere near the volume of work to justify the costs.  Clients do not always appreciate that part of the fee calculation is based upon the likely value of work that will be allocated through the framework. Therefore, a much more competitive fee can be included if projects of a reasonable value are called off to your company. Clients who 'throw you the scraps from the table', by allocating the odd small project here and there, do not appreciate that the fee that has been submitted will not work for this extremely low volume of work, however the fee is expected to honored because this is what was tendered with the original submission.

There are two particular frameworks which come to mind, one with a Local Authority in the Midlands and one with a Housing Group in the North West, where my company were appointed onto the Framework, and when attending monthly framework meetings (which again is another cost to the business), it was clear that bulk of projects were being called off to the Consultants who had worked with the Client for many years. This was totally unacceptable, and despite some 'honest and frank' discussions with the Client, nothing changed.  I am sure that this will be the same in certain situations for Contractors.  Consequently, my company took a commercial decision to be much more selective of which frameworks to apply for in the future.  

Frameworks are generally poorly understood by Clients and are often not the lucrative cash stream that they initially suggest, unless of course you are one of the chosen few!

Information/opinions posted on this site are the personal views of the author and should not be relied upon by any person or any third party without first seeking further professional advice.