Len Bunton, Owner of Bunton Consulting Partnership and the President of Conflict Avoidance Coalition, shares insights on contractual and commercial challenges, along with suggestions for addressing them.

Len Bunton, Owner of Bunton Consulting Partnership and the President of Conflict Avoidance Coalition

It is hard to believe that the first quarter of this year is done, it is never good news for the industry when I’m busy.  I have to say last year ended in a whirl with many FIS members entering the Christmas break with commercial and contractual challenges, and these included:

  • Suddenly realising that a contract’s Payment Schedule stated no payments would be made by the contractor in December.
  • Payments expected on 24 December did not materialise, and no one in the clients’ offices was contactable; phones and computers were switched off.
  • Receiving instructions to correct defects, with the warning that if not completed within seven days, someone else would be instructed, and our clients would be responsible for the cost.
  • I received a letter requesting additional information on an extension of time claim by 6 January, while all staff were on holiday, with a warning that the claim would be rejected if the information was not provided.
  • An adjudication commenced on 24 December, with the Adjudicator proceeding without regard for the holiday period. Inevitably this has carried on into the New Year

And so it went on

Since returning to work, the pressure has not eased, and each day has become a battleground for our clients – our Consultancy has had instructions on over 20 issues where a contractors/subcontractors have not been paid, or are being paid less than they think they are due since the 27th December. Each case causes considerable anxiety, stress, and frustration. We are also continuing to see high levels of business failures in the construction sector, leaving behind significant debt that severely impacts the supply chain.

So, is there an answer?

I continue to be hugely impressed by the work of Finishes and Interiors Sector (FIS) and the efforts of CEO Iain McIlwee and his dedicated team. I speak with Iain every day, and each week FIS provides its members and the wider industry with updates on the many technical challenges they are facing. What I have outlined below are some suggestions for addressing the increasing contractual and commercial challenges, as well as examples of how some FIS members we work with are adapting the way they run their businesses on a day-to-day basis.

  • Choose who you work for: We are now seeing contractors being more selective about who they work with. They are focusing on developing long-term business relationships. If you have had a negative experience, remember that leopards do not change spots. Always check the reputation of the organisations requesting you to bid for a job and remember the FIS’s Responsible No.
  • Contract reviews: I will keep banging this drum: have your contract reviewed at the tender stage, not the day before you start on site. A thorough review will highlight high-risk clauses, giving you three options: try to have the clauses removed or modified, walk away and say “No thanks,” or accept them and hope you do not run into trouble. Improve the way you manage your contracts. Read the CICV Best Practice Guide and follow its recommendations to help prevent potential difficulties.
  • Keep on top of your cash flow: If you are not paid by the final payment date, take action promptly. The most powerful tool at your disposal is giving notice of suspension. Follow the contractual procedures, issue the required notices, and, in most cases, this approach gets results.
  • Retentions: I have recently been staggered by the number and amounts of uncollected retentions that clients have. If you are reading this, set up a schedule of retentions showing when they are due, and make sure all defects on your projects have been corrected.
  • Make sure your applications are tight – sadly in about 70% of payment cases I’ve dealt with contractors have left themselves exposed to delayed payment due to shortcomings in their own processes.

Now for something positive

I want to turn to a project I am heavily involved in. We have received excellent support from FIS and many of its members, and I am referring to the Conflict Avoidance Process (CAP). This is an early intervention process to prevent project challenges from escalating into costly and time-consuming disputes.

The process is straightforward – if you notice a potential challenge emerging on a project, identify it, discuss it with your client, and try to find an acceptable solution. If a solution cannot be reached, involve an experienced CAP Professional to work with both sides and develop non-binding recommendations. It really works in practice.

I suggest you take a look at the website of the Conflict Avoidance Coalition (CAC) by visiting: https://conflictavoidance.org/, where you can also sign the Conflict Avoidance Pledge. A number of FIS Members have already done so. The Coalition now includes over 100 organisations, with clients such as the Environment Agency, Transport for London, and Network Rail among its Pledge Signatories. The Coalition is an excellent example of collaboration within the UK construction industry. A major conference is coming up soon, and I will provide details at the appropriate time.

 

Resolving payment and cash flow issues in the industry remains a significant challenge. I hope that by following my suggestions, you will be able to run a more profitable business with less worry and stress.

 

Responsible NO – https://www.thefis.org/about-us/fis-campaigns/responsible-no/

Webinar: Contract Reviews – https://www.thefis.org/project/webinar-contract-reviews-lessons-from-the-front-line/