#WiseUpWednesday: Finding Those Hidden Profits
Sometimes it’s necessary for Specialist Contractors to squeeze every drop of income out of its projects.
There has never yet been a construction project devoid of variations, therefore this is a good place in which to look for those hidden profits.
Most contracts incorporate the requirement to produce a schedule of rates for use in pricing variations. The natural reaction is to price the variations at the rates in the schedule without giving that any further thought.
Where Are The Opportunities
The wording in the contract is the starting point in deciding if there are opportunities to enhance the rates in and prices in the schedule of rates.
The JCT contracts clearly state that the contract rates should only be applied, when the work described in the variation is;
- of a similar character
- the conditions under which the work is carried out are the same,
- and there is no significant change in quantities.
There are a few ifs and buts here that need to be considered.
Concrete in columns and beams cannot be classed as similar in character to concrete in foundations.
Undertaking work in soft and watery ground conditions cannot be regarded as the same conditions as working in firm ground conditions.
And as for a significant change in quantities, even a small increases or decrease can be “significant” if it affects the manner and timing relating to the ordering of the goods and materials and hence the unit price.
That is not all. The JCT contract provides for payment of an extra, if other work is affected by the variation, such as a knock-on effect which causes disruption. For example, an alteration to the specification part way through a job may disrupt your follow up works.
Finally, if the variation causes delay, then the delay costs are also recoverable
So, come on, every additional pound secured in respect of variations, is a pound added to the bottom line.
Records Records Records
One of the most important tools to help achieve the objective of increasing your recovery from variations is the keeping of good records.
The contract will usually say that you won’t get paid if you action variations without proper written instructions.So, please don’t fall into that trap and make sure you comply with whatever the contract says.
If verbal instructions are allowed make sure you have a system of confirming these instructions, usually referred to as CVIs (confirmation of verbal instruction).
In the case of each instruction or CVI, it is important for proper records and detailed breakdowns to be produced and issued to the Contractor as soon as possible.
Very detailed records need to be kept of all work covered up, or altered such as foundations, drainage or scaffolding. Where there are problems of access to parts of the site, it is necessary for a proper record to be kept.
Stoppages of work, due to weather, lack of instruction and the like should always be the subject of comprehensive records, indicating the times involved and the number of operatives and plant affected.
A proper note should always be retained of all operatives employed on site and those of any sub-subcontractor and where on site they are working.
A proper system of record keeping needs to be developed by every subcontractor and its importance stressed to all concerned. The keeping of good records is often regarded as a bind by many but if you want to get paid what your hard work is worth, you must have those records, records, records.
It’s Easier With A Little Help From Your Friends
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And, “I wish we had spoken to you sooner” is something we hear a lot.
So,please don’t be shy, or afraid to ask. Just pick up the phone and have a chat with our friendly team on 01773 712116 or email us email@example.com.