The thing that will make or break your case in the event of a disagreement is your ability to actually prove that something happened.
A sadly common state of affairs is this:
- Steve the Subby gets told by a site manager to change from XYZ pipes to ABC pipes;
- Steve tells the manager that will increase the costs;
- Manager says “no worries, we’ll sort that out”;
- Steve proceeds to spend money on ABC pipes;
- Down the track, after the pipes are installed, Steve puts in his claim for the additional cost;
- Manager doesn’t work there anymore, and New Manager denies the claim on the basis the contract procedure for variations wasn’t followed, and denies that Steve was told to change pipes in the first place.
We hear this story, or something close to it, nearly every week.
Contractors and sub-contractors here have two main concerns to balance:
- Getting paid;
- Maintaining an effective commercial relationship.
This article will deal with both.
Get a Good Contract Review
A bad contract review is a long, expensive letter that you receive from your lawyers, don’t read, and put in a drawer.
A good contract review is one that helps you ask questions, identify high risk areas, and put in place procedures for your project to ensure you and your staff know what to do to maintain your contractual rights and communicate well with your upstream and downstream parties.
Get a good contract review.
Understand the Direction and Variation Process
Projects usually come with a few unknowns, the risk of which is spread between the parties in the contract.
That risk to you increases significantly if you don’t understand:
- What kinds of events might trigger a contractual process;
- When you need to commence that process;
- How you are supposed to commence that process;
- What happens to finalise/deal with the commenced process.
So, for example, if there is a design change along the way then that’s going to have some flow on effects. The contract will tell you whose problem that design change is, who has to prepare the revised design, whether you get paid for any additional costs incurred and/or receive an extension of time, and how you go about ensuring that you do.
If, however, you’re busy on the job and don’t identify the trigger point for that process then you’re inevitably going to be having an argument later about failing to comply with the contract.
That is an argument that can be easily avoided by good preparation before commencement.
Confirmations In Writing
We get it – for many contractors, the moving parts of a project are more than enough to keep a handle on without being “that person” who sends an email confirmation of verbal discussions.
But you should do it anyway.
In later negotiation, discussion, adjudication, litigation or claim there will be one thing that plays a critical role: whose version of events is more reliable?
And from a litigator’s perspective (and, generally, any reasonably impartial bystander) the person who has habitually kept written records of events is going to be the person whose story is more reliable.
Even outside an actual argument about the facts, memories are fragile things and people move on from jobs regularly in the construction industry. Having a paper trail dramatically increases your chances of maintaining claims and avoiding claims.
That said, there are a few different categories of confirmation you might want to consider:
- Site Diary – for many years, a well-kept site diary was the mainstay of building project evidence. Unfortunately with electronic management the site diary seems to have become less popular, having been swapped out for a fairly random decision to keep notes sometimes. Whether it’s electronic or paper keeping a day to day record of your involvement in the project, what occurred, discussions had, and tasks achieved on any given day should be a key part of your record keeping armoury.
- Email Confirmation – while a site diary will hold a lot of information, sometimes it’s important to ensure that the other party to the project understands things the same way you understand them. Often a later dispute arises simply because people interpreted a discussion different ways. This is, again, avoidable. For some discussions that take place on site, a short email to the relevant people confirming the contents of the discussion and the actions to be taken (or ceased) should be circulated. This will flush out any misunderstanding and also form a good record of the events.
- Requesting a direction – the difference between sending a confirmation and requesting a direction is going to come down to the earlier point: understanding your contract. You need to know when you can simply document the discussion, and when you need a formal contractual direction to do something different. If the contract says you need a direction, then get the direction. Otherwise you risk not getting paid for anything that follows.
Doesn’t All This Ruin Commercial Relationships?
The biggest impediment many of our clients have to sending email confirmations, contractual notices and the like is the concern about its adverse impact on the commercial relationship.
First and foremost, we think that concern is overstated. Put it this way: does your superior contractor EVER miss an opportunity to send a notice protecting their rights? Probably not. Then why should you? Large projects and major companies are well acquainted with good record keeping. Sending a notice or an email, unless its contents are inflammatory, is not very likely to cause any real damage to a relationship. If someone gets concerned about an accurate and friendly confirmation email because they wanted to keep everything verbal, then frankly you’ve got bigger things to worry about.
Next, remember it’s probably their contract you’re complying with. If they don’t like the nature or quantity of notices they get, then you can always discuss a variation of the requirements. Until then though, they really have no argument to tell you that you shouldn’t be complying with the conditions they imposed on you.
That doesn’t mean the way you communicate things needs to be stodgy and formal – just communicate in the way you normally would, just like you were having a discussion on site.
Here’s an example: “Hey Sue, thanks for the site meeting today. It was good to clarify the issue around the widgets. Just confirming our discussion that we’ll go ahead tomorrow and order blue widgets instead of orange ones. We don’t think that will cause any delays or increase costs at the moment, but if that changes I’ll come back to you. Any concerns just let me know.”
If it’s for contractual notices, the easiest way to get these done is to do up a few compliant templates right at the start of the project. That way you just need to fill in the details and send them off – no need for extra commentary along the way, it’s just a form.
Of Course, You Can Always Pick Up the Phone
Sending things in writing and complying with your contract aren’t alternatives to normal conversations.
Sometimes if you’re sending an unexpected notice, picking up the phone to give the recipient a heads up is a good idea. That way you can keep the lines of communication open rather than looking like you are resorting to formal tactics.
The ability to have a frank discussion with your counterparts is always valuable, and nothing in this article is suggesting otherwise.
What we are suggesting, though, is that with some simple steps towards documentation you can make sure that you’re well protected and prepared should there be any confusion or disagreement later about what took place.
Start Your System Today
This kind of protection doesn’t need to be over-complicated.
All you need is to decide on a simple system. What kind of records will you keep, where will you keep them, what will you document along the way?
Finding a sensible, commercial approach to managing your paper trail is ultimately going to improve your projects, minimise your risks and maximise your potential returns along the way.
Need help navigating a complex contract or understanding how to improve your systems? We’d love to help.