Dispute Avoidance and Resolution Services
Is it a Dispute or Lack of Vision?
Daniel Roberts is a Chartered Quantity Surveyor and has over 17 years experience within the professional consultancy services sector in relation to building and construction management. Daniel Roberts has performed a variety of roles including contract administrator, financial certifier and has a detailed understanding of both contract and costs which has been attained through academic experience and practical hands on experience from live projects.
Daniel is tertiary qualified in Quantity Surveying and has studied at post graduate level via Aberdeen University in Construction Law. Whilst most building projects are a success, complete without significant complications or disputes, occasionally, some projects fail and a dispute arises over some essential term.
Building contracts can be some of the most attractive contracts in the world to entrepreneurs and investors, this is because they make provision for 5 to 20% profit and the out of pocket expenses (working capital) is often as low as 5 to 20% of the project contract. This is enabled by monthly or periodic payments where contractors can clear their debts and continue to move forward with their enterprise. Essentially a building firm can double their working capital, making 100% return on capital by successfully completing a contract, using their skill and capital to invest and reinvest in their own company and contracts. Most contractors therefore hold a long term vision for themselves, do not seek to take advantage or short term gains. A good well managed building company can grow exponentially over the medium and long term overcoming cost overruns and risk by spreading their capital over multiple clients and sources of income. This is also evident with the high level of qualifications required to own and manage a building company, builders are required to attend tertiary institutions, gain experience from mentors and apply their skills over the long term. Most builders are visionaries and hold a vision from themselves and their business that span many years and decades. Builders are some of the most trusted and resilient members of a community, providing jobs, training and expertise for relatively low profit / premium (5 to 20%).
In the construction industry suppliers, contractors and professionals are essentially in the business of providing goods or service to a consumer. They may have direct contracts with the end user or may be supplying to a subsidiary such as a sub contractor to a head contract. Many construction projects are contracted between the end user (owner) and a head contractor that distributes opportunities accordingly to labour, direct or contracted suppliers. Some contracts are include labour and other include labour and materials. This can be on a fixed price basis or under some form of joint venture agreement. Considerable trust is placed between the parties when entering into these agreements, owners seek to impress their "attractive" nature such as advertising availability of finance to make payment for the works on a periodic basis and contractors equally promote their capacity to deliver by highlighting pervious experience, future capability and insurances. Sub Contractors also work to showcase their areas of expertise and specialised technical skills they have honed for short term contract that may take a head contractor years or decades to build inhouse. On the front end, owners, builder, sub contractors and suppliers are all friendly, inspired, focused and willing to perform and enter into any form of contract providing they believe it is mutually rewarding and they shall make a profit.
There are many successful relationships within the construction sector and here are Quantus Solutions we have personally witnessed harmony between end users / owners and suppliers over the long term. The most successful contracts have been framework agreements. These are whereby owners have a pre-determined invitation to tender packages over an extended period and contractors are supported by commitments over the medium term. This allows contractors to secure reliable, high quality sustainable suppliers, staff and manage inhouse resources efficiently, plan their affairs and get ahead of "tails" such as insurance liabilities that are historically more difficult to obtain over the long term. By holding a medium to long term vision, all parties can get ahead of issues and resolve day to day matters from a position of overall ongoing success.
Sometimes framework agreements may be referred to a preferred contractors lists or a panel, this is where contractors are tendered or invested to become part of a short or limited list of preferred contractors that are capable and willing to commit to a range of contracts for a stakeholder. It is therefore accurate to state that the longer term the vision for the relationship, i.e. multiple projects or long term agreements such regular tenders or maintenance contracts provides a reduction in the likelihood for a dispute. Successful long term contracts are also identifiable within the public sector where contractors can bid for public tenders and become panel members and preferred contractors for public works and improvements.
When we look to the long term we seek to consider flexibility within our agreements and a process for adapting to change. All construction projects are a journey, from point A to point B. Just like any journey, these require careful planning, if you were to jump in a vehicle and drive aimlessness you wouldn't arrive anywhere and along the way you would feel continually lost. Whereas if you plan your trip, select the correct vehicle for the likely terrain, stock up on supplies, fuel, find a route map, ensure your vehicle is road legal, find a qualified driver (builder) that you has the required licenses, you can forecast with confidence the probability of arriving safely at your destination and on time.
We have all seen cars broken down, out of service, abounded, confiscated and met individually utterly lost and disorientated on their journey or wrapped in legal issues and fines due to their lack of vision. In construction this is no different. When a dispute arises there is always a breakdown of an essential vision by either the stakeholder (owner) or the driver (contractor/sub-contractor) or both!
This breakdown may have been prior to entering into the contract or be a change in vision such as deceptive conduct, this is where an owner or contractor seeks to change their position to take advantage of a third party or where a contractor (driver / vehicle) miscalculated the destination or failed to manifest the project through lack of capacity or in some instances as a result of third parties (such as sub contractors) failing on their commitments. Such activities have a compounding affect on the head contractor and ultimately the end user. All failures gravitate upward in construction and they are either resolved or end up owned by the stakeholder. Ultimately, the end user stands to benefit and lose the most. A good professional (driver) builder can hold a project together for the stakeholder, (owner) and prevent complications and issues hurting the end user / beneficiary, however, this is only possible when both parties have a shared long term vision for themselves and each other.
Therefore it is clear that a construction journey is no different to any normal everyday journey. Moreover, when we take this approach, we can easily identify that we are all masters of travel, most people can plan a path from where they are to where they want to go. If this is a natural talent we all share, we are all aiming creatures and can focus and aim at our goals, take action, learn and bring the results to ourselves consistently. If this is true (which it is) why do some projects end up off track, in dispute, court, crash or end up in the weeds offering totally negative outcomes for everyone involved?
The answer is simple, if you are experiencing a dispute, it is always a lack of vision. There is always a lack of preparation and planning, here at Quantus Solutions we have a vision that goes beyond all disputes, our founder, Daniel Roberts believes that all projects can be a success through sound quantity surveying principles, if the end user has sufficient money / resources / finances and the suppliers, contractors and sub contractors including labour are less then the owners payment, everyone does their job professionally without gossiping, delaying and disrupting a project. Doesn't expect to be paid unreasonably for something they have not done or done incorrectly, then everyone can be compensated properly, fairly, reasonably and there should be no disputes. When we have a long term vision, do not seek to take advantage of another, do not expect to be paid for something that is not sufficient or do not seek to avoid our responsibilities, why should there ever be a dispute?
We must hold a larger vision for ourselves, surround ourselves with qualified people with a shared vison and concentrate on the implications of our thoughts, beliefs and immediate contacts. Most people are now aware that we are all connected, everyone is affected by our actions positive and negative. Nothing GOOD comes from bad. Good only comes from good, right thinking and right action. We must defend the bad away from our lives, like weeds from our own garden as they move in without invitation. If we want decent reliable builders and projects we must first promote long term thinking and a vision for ourselves, no-one is excluded.
In 2020 there is no longer a safe ivory tower in the building sector, we can't pass the buck and shift the blame to to others and think it is satisfactory for people to go out of business, lose their company and reputation as a result of individuals living out their insecurities, lack of vision for themselves and selfishness to their own cause. We have to protect our builders, educate and promote long term relationships within ourselves or businesses and the planet. If one obtains an unfair advantage, another has equally suffered an unfair loss, but both have equal blindness of vision. Here at Quantus Solutions we don't believe in taking advantage or allowing others to take advantage either. We must lift our conciseness out of the weeds, plan long term relationships, plan and discuss our finances properly, work with and celebrate individuals, entrepreneurs and leader that can bring teams, projects and communities together. It is easy to manifest any project we can imagine in the built environment, only our individual lack of vision is holding us back, it is time to remember that anything is possible, especially a sustainable, dispute free industry.
Identifying Problems and the Different Types of Disputes
Unfortunately, in construction some people without sufficient vision seek to obtain a commercial advantage over another, this can be directly or indirectly. Directly is when a party to a contract seeks to purposely avoid payment for services rendered and indirectly is when a product fails to meet a standard after it is completed, these are called defects.
Direct disputes have various manifested from ranging from owner deciding to cancel a contract prematurely to seize financial gains from the contractor. This would be like a customer jumping out of an uber or taxi before the destination if they noticed the meter was not showing the correct rate or they can walk the rest of the way without the driver (builder). When this happens a builder may be focused on completing a project and unaware that the client was planning to abandon their commitments at an earlier stage. Sometimes this happens when a project is poorly priced by a head contractor or insufficient pricing is within the contract to allow payment of actual costs to be made. This is common when financiers insist on milestones or trade summaries on a binding basis. As the project proceeds, sometimes early trades such as inground works, superstructure, and internal fabrics are under priced or go over budget leaving the client with larger sums of money to complete a project (contingency and profit being left to end of a project for the builder). Clients then seek to terminate a contract and avoid paying the builder their entitled sums to complete the project including their contingency and profit. Dropping the builder once the hard work is over and keeping the profit and contingency for themselves. This can be a traumatic experience for a builder who may have made long term commitments to suppliers and contractors and may have used own funds to carry a project to this stage.
Another example of a direct dispute may arise when a client changes the contract during the journey, this may be directly or indirectly. When a client directly changes a project this is referred to a variation, this can be an instruction to the builder to complete extra works than they originally agreed to perform. Occasionally clients / stakeholders may instruct negative variations reducing the scope. This can give rise to potential disputes as the scope of works is fundamentally shifting and contractors are required to adjust to items and experiences they did not envisage or plan for when they entered into an agreement. This would be like driving in a car to a destination and then the passenger changing the route or destination, extending or shortening the journey. Had the driver (contractor) been aware of this change prior, they may not have elected to take the journey or may have charged a different tariff. Some variations arise out of deficiencies in the documents used to plan the project, this can be design documents or specifications that come to light during a build. Sometimes information is contradictory and clashes, this may occur when services are compared to structural elements which make it impossible to build to the plans, this gives rise to variations and the potential for disputes. Again, this would be like a map to destination requiring you to drive over a bridge that was not built yet or meeting roadworks along the way to a planned destination.
Another category of direct dispute may arise when one party decides the agreement was not what they wanted or it did not turn out how they wanted it to. For example, if a sub contractor decides that they cant make sufficient profit or that they would rather work elsewhere for better rates or that their contract is not performing. They then decide to change the pricing, walk away or disrupt a builder in order to obtain a commercial gain.
Other indirect disputes arise after the contract is completed and relate to defects. A defect is only a defective once the contract is fully completed, because a contractor is always entitled to fix errors within work in progress as the works proceed at their own cost. Everyone is entitled to fix their errors, no-one is a perfect. However, if a contract is completed and a contractor has been fully paid, owners may realise the errors in the work months or years later, this can result in disputes to recover replacements building elements and components. This would be like the wheels falling off our new car once you have purchased, defect disputes can be very disappointing and frustrating for clients that have paid fairly for a product and service and do not receive what they paid for.
Quantus Solutions Dispute Avoidance Services
Cost to Complete Reports
Here at Quantus Solutions we understand that the best time to resolve a problem is before it happens. Because we have experienced a broad spectrum of projects, successes and failures we can identify the essential matters early and work to assemble all the correct components in the correct order. Our philosophy is, people lie but numbers do not. There is no perfect person here on Earth but all numbers should add up. Through numbers we can apply sound financial controls to report, forecast, plan and schedule a project at any point in time. When managing a dispute it is essential to have accurate, meaningful and reliable costings. This can be in the form of cost to complete reports where reasonable values are accurately calculated to forecast the end value of a project. This gives an insight at all times to what the future looks like financially and how that compares to where the journey began, the scope of works, variations and implications of the essential matters.
Once we have identified where the costings are at, ideally prior to commencing a project but this can be done at any stage. We seek to identify opportunities and anomalies through sound quantity surveying principles to manage and resolve a dispute. When emotions run high, numbers are always a sobering reminder of what really matters and where the opportunity for mutual and fair gains resides.
Variations and Claims Services
Here at Quantus Solutions we are contract experts and provide independent advice relating to contractual issues such as entitlements to variations, substantiation of evidence for variations, quantification of variations, pricing of variations, enforcement of variations and recovery of the cost entitled for variations.
We work for all industry participants from owners seeking help resolving variations issued by a contractor to sub contractors that require their entitlements to be paid for changes to their contract.
At the heart of any variation is the requirement for sound reliable and accurate costings. We always review the original documentation and work to identify areas of most impact for resolution of entitlements.
Adjudication Claims Management
Cashflow is the lifeblood of the construction industry and we offer reliable, fast and resilient services to help contractors obtain their entitlements to payment. We are aware that some owners and some contractors don't pay. Some owners and contractors purposely avoid payment as smaller companies going out of business may give them commercial advantage. This is wrong and unfair.
The damage and implication of not being paid (especially head contractors) results is expediential damage to supply chains, reputation and is a drain on recourses. Many contractors and builders go into business because they have skills to work with their hands, organise third parties, a vision of collaboration and service. When these skills are exploited and payment is unfairly delayed, this is damaging and easily puts contractors our of their area of expertise, they lose control of their company and priories overnight, they can't continue with other none related contracts. It is a negative and draining spiral, none payment is a ruthless and entirely selfish activity performed by a few selfish individuals that lack vision and education.
Here at Quantus Solutions are experts in the enforcement of payments via Adjudication under the Security of Payment Act and can assist both owners rebut unreasonable claims from a contractor or enable contractors and sub contractors to prepare applications under the Act to force payment. If you are entitled to payment, we can help you secure an application and restore your enterprise from the shock of negative cashflow. If you are in receipt of an unreasonable payment claim, we can help you prepare a reasonable defense based on the contract facts and our own assessment of costs that give you the capacity to avoid unreasonable applications for payment.
Recent Adjudication Success
Please check out our case studies into successful adjudications and capabilities to overcome even the most challenging matters within the industry.
If you need help or support we can be contacted anytime to discuss your matter in confidence.