Please Sir, Can I have Some More?
Change Management, Variation's and Claims are unfortunately synonymous within the Construction Industry. All standard contracts have clauses to deal with events that ultimately change the original agreement. They state what they are, how they should be implemented and how they should be valued. In some case we even get some options on how to value the event. Each contract is different, so be careful there really is no "one size" fits all here!
Over the years there have been numerous books and articles written to explain how to manage and administer claims and variations from a contractual context... however, in the real world, the utopia of everyone following the rules is sometimes really hard to achieve, even with the utmost professional of professionals involvement.
The Oliver Twist novel (and many films) by Charles Dickens, with that infamous scene of Oliver approaching the wardens in the workhouse and uttering the immortal words "...Please Sir - Can I have some more?", in many ways depicts the state of our industry. Begging! I suppose food and drink is very important but where contracting is concerned not being paid for variations and changes can ultimately amount to the same thing.... no money - no food!
So, my last post was a little bit of a dig at the Contractor's in the world, lets even the playing fields and let me tell you another small tale of woe. Again from experience, but with the names, of course, changed to protect the innocent!
Imagine the scene, the Contractor is involved in the construction of a new factory, a mill (lets keep it period-ish). The mill Owner employers an agents to prepare and manage one of them standard contracts. The Contract is shiny, has lots of pages, even includes a full design (remember one of those?), a fully priced Bill of Quantities, a schedule of rates and prices and a programme. Wow what a great start!
As with any contract both parties obligations are laid out. In this instance the mill owner has a number of obligations under the contract. One of which is to make sure that the land is purchased, available and open to allow the Contractor to actually start work in line with the agreed programme. In this tale, both parties plod on, there is a polite exchange of news and views at weekly project meetings, (and a exceptional coffee machine) even before construction (wow this agent is good), and the Contractor continues his organisation so that the building works can commence as planned. Day one arrives... shock horror....... the gates are locked and the Contractor can not gain access to the site! Doe - but don't fear the mill owner can resolve this in the next six months.... its a glitch with the ownership, legals, blah, blah, blah....
Why should the Contractor fear? If the land is not available and the site can not be provided then how on earth, can there be an expectation that the mill will be built in the same time periods and ultimately, not cost anymore than what was originally agreed. After all, the mill owner will see the error of his ways and will see clearly that the machines and labour queuing around the block will need to be paid for! Don't they? Won't he?
So begging bowl in hand, the Contractor approaches the mill owner. "Please Mr. Mill owner - can I have some more?". Our Contractor even goes to the time and expense of having a professional Q.S. ascertain the quantum of the claim with a fair, reasoned and diligent demeanor. Wow this should be an easy no brain-er.... we got a contract to tell us what to do, we have a clear default by one party (not as if the Contractor could have started the construction of the mill in a neighbours field!), we have a professional assessment of the costs incurred, the rates are all pre-agreed..... what could go wrong I hear you ask?
Upon receiving the documentation from the Contractor, the mill owner, now aware of a potentially big bill, employs some help to assist him in this little quandary - to pay or not to pay! The mill owners consultant in their wisdom, mobilised to the site themselves to witness the jam of machinery and labour waiting to get to the site. Unfortunately by the time that they did arrive the majority of people, realising sensibly the mayhem being caused, had disembarked to the coffee shop! "Wow" the consultant thought.... their is no cost as their is no labour and machinery all queued up to enter the site. Really!
The Consultant went back with his wisdom to tell the mill owner. He was overjoyed and instructed the consultant to write to the Contractor saying that in their opinion there had been no costs incurred! If the Contractor wanted the monies he had to prove, demonstrate with all sorts of substantiation, records, records and of course more records, to simply demonstrate what any professional will have already known..... the agreement had the costs, the time sheets had the time..... one multiplied by the other and logic should prevail!
However unfortunately in our tale no logic prevailed.....
And so from that point forward a raging battle ensued, the Contractor wanting his money, needed his money, the mill owner, not trusting that he had actually incurred those costs - after all he did have that one simple, but inaccurate statement, from his consultant..... was not paying for fresh air - there was nothing on site when "I visited" he proclaimed!
The above tale of woe does include some key facts from true situation we have experienced. In any project, it is important to ensure that everyone plans and talks openly and honestly. In this example, if the mill owner had told the Contractor of a delay to the start then risks could have been avoided and managed. After all why would a Contractor spend money, deploy his own resources if he could not recover the costs? That just would not make any sense at all!
As the owner did not communicate the issues in a timely manner, the fact is that all parties, the Contractor and owner all end up at the edge of a precipice together. The Contractor probably in a worse position having to cash flow the unexpected costs. In our experience, complex projects need an openness and an integrity to ensure that everyone in the process can plan and manage the situation accordingly. It is not appropriate to shy away from the hard truths and then as in this tale expect the other party to manage the outfall at their cost. Projects need communication, lots of it... and NOT E-MAIL, to manage change and risks.... our advice is therefore simple talk to each other..... don't just meet for coffee!