Member Article

A Wonderful World? Working with the realities of the new era of construction

The construction sector is on a roll – but there are still plenty of traps savvy commercial directors need to avoid.

What’s the worst way to manage a contract?

“Just allow it to run its own course…”

Why? Because even in this exciting new resurgent era for construction, sometimes our ideas about how things will work out aren’t realistic. Dozens of changeable factors mean a contract that isn’t proactively managed can go very wrong at any point, right from the very start. So it’s not yet a wonderful world – and astute commercial managers should be prepared. What’s ahead for the construction industry? Watch Prof. Chris Gorse’s predictions.

We’ve got a signed contract – what can go wrong?

PLENTY. For instance, you could be hit for six by:

• Suicide bids
• Inefficient contracts
• Badly-tracked retentions
• Relationships with customers
• Outdated contract management software

So let’s just remind ourselves…

“Contract management is the process that enables both parties to a contract to meet their obligations in order to deliver the objectives required from the contract.”

You don’t have a crystal ball.

In March 2013, an underground rail route between London and Welwyn Garden City used by two million passengers every year was closed when two huge piling rigs from a construction site above crashed into a tunnel – just ahead of a train. “Whoever is responsible for this must be held to account.” – First Capital Connect Managing Director, Neal Lawson.

Does that make your blood run cold?

Risk management and construction management software can help you plan for what might seem unforeseeable. If the worst happens, it can help you to recover quickly by having suitable contingency and insurances in place.

Top tips for successful contract management:

1. Build on firm foundations.

Good data held in an efficient software system can help you tender effectively, manage procurement by tracking prices, and source reliable suppliers and subcontractors by monitoring best practice. FACT: Only 45% of construction projects are completed within budget.

2. Build good relationships with customers.

Construction projects typically evolve as customers change their minds. Construction management software can help keep your contract variations up to date and help in negotiations.

The Duke and Duchess of Cambridge refurbished a kitchen in Kensington Palace as part of a £4.5m redevelopment. They then decided they also wanted a private family kitchen added.

3. Be up to date.

Over a long project, it can be easy to let data slip away. Retentions are a classic case. It can be difficult to keep track of their status and that can be costly. Once again, good construction management software can take the strain.

4. Be aware.

In one recent case…

Contractors changed their payment terms so the subcontractor would get 2% less if they were paid now – or they could get the full amount in 120 days. This is still within the fair payment rules. If you do need to resort to litigation, it’s crucial to have robust data at your fingertips to support your case.

This was posted in Bdaily's Members' News section by Wes Simmons .