I’ve seen my share of Australian
Standards contracts. Here are some common peeves from a commercial contractor’s
perspective.
Size
1.
Have you seen the size of those
things? They are thick. And the devil is in the details for any commercial
contractor.
Terms
2.
Ok, so the thickness doesn't
scare you. What about the compliance terms then? Take the insurance clause for
example. It requires joint insurance and a waiver of subrogation. You may just
find yourself in BREACH of contract before you even start work!
Special Conditions
3.
Fine then, you've updated your
insurance policy and spent the cash on all the compliance requirements, or at
least you think you have. Let's dig deeper. What are the key terms that
protects your interests?
Contracts
are supposed to be fair. Australian Standards contracts are used a lot in
commercial contracting and the building and construction industry is renowned
for contractors being ripped off. The Australian Standards templates are not
written for the sole benefit of the commercial contractor. Special conditions can
make the contract worse for the contractor.
Time Bars
4.
So you've priced in the risks
with the risk allocation. If you have gotten to this stage, then you are either
an awesome contractor or you're kidding yourself. Read the terms and conditions
in that Australian Standards template, the devils in the detail I say. Two
words - time bars!
You
somehow can understand all the terms and conditions, you somehow can write like
a lawyer to make a Compliant Notice, BUT you must send those notices in within
limited time. How long does it take to price a variation? Time is of the
essence!
Oh, you must have a full time contracts administrator and estimator.
Fine then, I guess it’s fair to say you've allocated another $200k+ to your
project.
This list obviously can go on-and-on
but you get the drift. I have experienced firsthand on many, many occasions
what it's like to be on the commercial contractors’ end of an Australian
Standards contract. So I'll suggest some basic things you can do to manage the
above risks.
Tips for Commercial Contractors to Manage Australian Standards
Contracts
1.
Voila, it’s probably the most
commonly overlooked step when you are excitedly awarded a large contract from a
new client! Often you’re dreaming of how you will spend the profit from your
estimation. Well let me tell you, Due Diligence! You must know who you are
sleeping with. We are talking about high value transactions here, not pennies!
2.
Implement systems into your
business. Obviously your systems need to be contractually compliant with
Australian Standards but just as important your systems should also add value
to your business's bottom line. What I mean by this is that the value can be an
efficiency or reduction in head count.
3.
Negotiate the contract terms
and surround yourself with experts in commercial contract administration. Let's
face it, you may be a great at your trade and everyone on site might love you.
BUT when the differences in opinion come about, as they often do with project
work, then you better be sure you have excellent paperwork.
4.
Site diaries for all staff is a
MUST! Put simply, Site Diaries can help you track the life of the project. But
they do so much more. They can be a powerful tool for future work and disputes.
For example: They provide support with tracking your cost to complete, assist
with future estimating, provide evidence for allegations with disputes, and
much more. This is a simple but effective thing that any commercial contractor
can do. A site diary can even help manage time bar risks if the person
responsible for preparing the notice can easily track the diary notes.
5.
Walk away from the contract if
you don't feel good about it. We have so many insolvencies in our industry. Be
prepared to walk away.
6.
Australian Standards contracts
are detailed yes, but the single best thing I think any commercial contractor
can do is COMMUNICATE. Collaboration can help reduce the need to look at the
contract in the first place.
My view is that Australian
Standards contracts are too difficult to comply with. If you are a commercial
contractor wanting to build a successful AND sustainable business, then I want
to hear from you.
John Dela Cruz
Small Builders – Building Software
Founder and CEO
