Why Tiny Details Can Lose You Big Money in Construction 2

Monday, August 31st, 2015
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If there’s one industry where small things can lose you big bucks, it’s construction.

Far too many projects include some detail that the contractor ignored, didn’t know about, or underestimated that has led to large amounts of money unpaid. I thought this might be a good time to go through some of those tiny issues that lose money and why.

Not knowing who you are in a contract with

How often do you do work without getting a clear statement of who you are working for? If you are working for a company, get the ABN. If it’s a partnership, then get the names of all the partners. If it’s a person, find out if you’re dealing with them personally or whether they have an ABN.

This is so important because if you are going to run a claim or legal action, you need to know the entity with whom you have contracted. All too often, contractors ignore this and later find out that they have no idea who the work was done for. Amazingly, I find that tens of thousands of dollars or work is done on nothing more than a first name and a mobile phone number.

Forgetting to send the variation details

This one occurs when you send your monthly claim and state on the invoice that the variation details are “as attached” but then you don’t attach them. Your client will argue that they were not put on adequate notice as to what you were claiming and that amount will either be left off the certified amount or will be left off the payment schedule. At this point, you will not be able to add the details in any adjudication if you haven’t first detailed them in the payment claim.

Not understanding the needs of payment claims

Under the Security of Payment Act around the country, one common element is that a claim has to have a claimed amount. Two mistakes are often made here:

1) You forget to add GST to the claimed amount. An adjudicator will not add the GST for you and cannot amend the amount claimed. So if you don’t claim it, you lose it in any determination.

2) You send more than one invoice in at the same time with the intention that you are serving a single claim. That won’t work. Each invoice is effectively a separate claim, so if you send your client three invoices for $10,000, $8,000 and $4,000, that is not a single claim for $22,000. It is three separate claims. Any determination of that matter will only consider the first invoice/claim that was sent and ignore the others.  You just lost $12,000 and will need to start again on those.

No copy of the contract

So you sign two copies of the contract and send them both to your client for them to sign and return…and they never return it. The net result is you are carrying out work and don’t have a copy of the contract! That is madness. You can’t begin to engage with payment disputes under the contract without having a copy. I am astonished at how often this happens. Don’t start work until they send it back.

No signature

A lot of payment will turn on day sheets, dockets, time sheets, load dockets, and the like. Get them signed. Most of the time, I can see that the contractor has signed them, but not the client. This can mean a loss of thousands of dollars, especially for civil works, cartage and day labour. Get those things signed.

Name the revision number

If you are quoting form plans, refer to the revision number in your tender. If your quote is based on Drawing 106 Rev F, then say so. Otherwise you’ll end up having to actually build Rev J for another $30,000 and your client will insist that it was scoped work because it is still shown on Drawing 106. If you get issued a new drawing, put that change in writing to your client along with a variation quote for the extra work that arises out of the revised plans.

Write it down

If your client sends you something in writing that you don’t agree with, reply in writing. All too often the contractor will reply with a phone call and voice an objection. The trouble is that in six months’ time, when you’re arguing about payment, the only thing on the record will be what your client sent you; and without any written replies it can be argued that you accepted what your client was saying or wanting.

Mates may not be mates

If your mate gets you into a job, be careful. Here, you may not bother to get a proper contract or even find out who the actual client is. You rely on your mate to look out for you and if it all goes pear-shaped, your mate is powerless to help you. Worse still, you haven’t got a proper contract and you don’t even know who the end client is. You were relying on your mate to sort that out for you. Only rely on yourself.

There are many more things that can lose you money. The main thing is to realise that those little issues that appear insignificant can really end up blowing a huge hole in your cash flow and you ignore them at your peril. As my dad used to say, ‘You’ll never trip on boulders, only pebbles.’

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  1. Bob Jones

    The idea of commencing work worth tens of thousands of dollars without understanding who the client is borders on the verge of insanity.

    Before you start, you must know and fully understand exactly who will be paying you and who you have a claim against if things go pear shaped.

  2. Dale Morrell

    "Each invoice is effectively a separate claim … " As a practicing Adjudicator in NSW and QLD this is simply not true or at least not true in general. The "Payment Claim" is NOT the invoices; it is the totality of the documents sent at a single time. If 3 invoices are in the envelope, fax or email then the three invoices together are a single payment claim. If they are sent at different times then they are separate claims. That said, it would be cleaner and better if the thee invoices had a covering note to the effect that "Invoices 1, 2 & 3 are our payment claim."