Wise Up Wednesday: Bad Things Happen At Pre Contract Meetings!
You’ve won the order? Watch Out. Bad Things Happen At The Pre Contract Meeting!
Won the order? That’s great, but as part of the contract negotiation process you may be invited to attend a pre contract meeting in one form or another, and that’s where the problems can start!
A pre contract meeting provides an opportunity for you and the Client or Main Contractor to discuss the requirements and expectations of a construction project and how the works Subcontracted to you are to be carried out.
And whilst there is a tendency for the euphoria of having won the order to colour your approach, you need to understand that what happens at that meeting can have a significant impact on your contractual obligations! So, you need to temper that euphoria and proceed with caution.
If you’re not careful, bad things happen at Pre-Contract Meetings…
Pre Contract Negotiations
It’s very important that the right person attends the pre-contract meeting as they often provide the link between your tender and the final agreement, so always request agendas in advance of any meetings and/or make sure you know the exact purpose of the meeting, so you know who you should send to represent you.
Beware of being invited along ‘for a chat’ or ‘to discuss your tender’ only to find yourself in a full pre-contract meeting where the Client or Main Contractor expects to discuss every aspect of your bid including commercial, technical and practical issues.
Meetings can be intimidating for you or your team who could be pressured into agreeing to things beyond their authority or expertise.
To avoid any problems, make sure the team are fully briefed, understands exactly what the objectives of the meeting are and ensure that the team representative, who attends knows the limits of their authority regarding varying the agreed objectives.
Pre-contract meetings are a great opportunity for you to negotiate the best possible commercial and contractual terms, so make sure you make the most of it by being prepared and having a plan.
Pre Contract Meeting Minutes
It is quite common for Main Contractors to use pro-forma sets of minutes containing pre-printed statements (relating to insurance, requirements, the withdrawal of sub-contractor standard terms, and other critical matters), which they ask you to sign at the end of the meeting.
These ‘minutes’ can have a significant impact on your rights and obligations under the potential contract and you should always take the time to review them and preferably take them away for checking before signing. You could find yourself in serious difficulties when you are halfway through the job and haven’t been paid because of something you didn’t know you had agreed to.
As a rule, no documents should be signed at pre-contract meetings and you should not be afraid to say no to signing the minutes at the meeting even if pressured to do so.
Some Key Agenda Items
There are many project-related items to discuss during the pre-contract meeting, but here are some of the key ones to watch out for and think carefully about;
The Terms Of The Contract
• If the contract has not already been prepared and provided for review. You will need to gather as much information about the form and terms of the contract at the meeting.
• Agreement of the terms of the contract should not be discussed in detail (unless you are of an authority to do so. If you are in a position to discuss the contract, focus on areas or subjects that likely will not be covered elsewhere within the context of the meeting agenda.
• This includes requirements for warranties and bonds, insurance, requests for modifications to the terms, completion dates, extensions, weather delays, etc.
• The Liquidated Ascertained Damages (LAD’s) need to be discussed where applicable and the extent of liability to the business properly limited so that it is proportionate to the contract works being undertaken.
• Make sure the contract requirements for this item are fully understood, and unless in a position to do so, seek the correct authorisation before making any agreement in respect of LADs
• In the absence of a proper limitation clause, General Damages (which include LAD’s between Contractor and Employer) are unlimited!
• Discuss the terms and conditions of payment as defined by programme requirements or in the contract documents and ensure they are in line with company policy and the Construction Act.
• Ensure that the application date, due date and final date for payment are clearly set out, and that retention release mechanisms are understood and acceptable.
• Ensure that your costs schedule, activity schedule, cost breakdowns, contract sum analysis, pricing schedule is clear concise, correct and will be an effective means of valuing any variations that may become apparent during the works.
• Unless already requested, do not agree to any discount on the tendered price unless you are in an authorised position to do so.
• Make sure you know what is required under the terms of the contract.
• Several items could possibly be required here including information regarding progress schedules / programme updates / drawings & design requirements / CDM & H&S requirements
• It is essential that start and completion dates are fully understood, agreed and recorded including any programming key dates.
• If the dates are not yet confirmed this must be done before commencing any work or signing any document NEVER agree to “work in accordance with the Main Contractor’s requirements” or anything similar!
Scope Of Works/Specifications
• It is extremely easy to get this wrong and the Main Contractor knows that and will exploit it if possible
• Do not rely on your tender exclusions to protect you as these could easily be negated by the terms of the contract
• Yes it is a pain to carefully check that what you have agreed to do is properly incorporated into the contract but it MUST be done!
Resolving Pre Contract Meeting And Other Problems
Because we only work with Specialist Contractors you can be sure that we know the kind of problems you face, and the solutions that work best, which saves a lot of time, and a lot of money.