Chapter 5 Getting buildings off the ground

final outcome of a project. In construction almost all issues are tangible; and depending on the size of the project it can be a long and laborious journey to materialise the design intent.

How to physically get buildings off the ground was a mystery to me. Sometimes I would walk past building sites and observe people on the tools, but I couldn't fathom how the different elements were coming together; or how some design features were accomplished. I would also be dazzled by some amazing structures and wonder how something so beautiful had been assembled. The Bell Tower in Perth was one of those buildings. Fast forward a few years and the process that got this building off the ground is less of a mystery.

Many developers are not interested in the construction process. Once the Development Application has been obtained, the contractors take care of the building. Knowing how to manage a contractor properly is the only skill a developer needs to master, especially if they have secured a cosmic price for the project. That's not to say that I haven't met developers who don't want to get their hands dirty. On the contrary, some developers understand the trades and the construction process and are able to transfer less risk to the builder and secure a better price from the contractor.

In the previous chapter we looked at the typical structure of a construction contract and the clauses that are most commonly negotiated before a contract can be awarded. Once the contract is signed, the parties' representatives manage the contractual relationship until the work is completed. The status of the relationship is often challenged throughout the life of the project. These challenges take the form of progress claims, requests for information, variations and extensions of time. In general, the quality of the documentation will play a role in the challenges that will arise along the way. Unfortunately, no matter how watertight the contract and how good the documentation is, there is still a risk that construction won't go according to plan. The purpose of this chapter is to highlight some of these issues.

In my experience, given that construction contracts can be worth many millions, even billions, on some projects - think of the Sydney Metro - no matter how good the documentation, disputes will arise as soon as one or more parties start losing money. For reasons we shall see, it is not always easy to ensure that construction is a win-win situation for all parties involved. At the same time, the nice and pleasant Mr Hyde I described in the previous chapter tends to turn into Dr Jekyll during the construction phase, although there are exceptions to the rule, or so I am told.

The construction process creates a web of contractual relationships that is very different from the management of consultancy contracts. Previously, the developer was more or less in contract with everyone involved in the project. This is no longer the case during construction. Most of the work is contracted and coordinated by the contractor. Information flows up and down the supply chain. Since commercial information between subcontractors and the contractor is treated as confidential in most jurisdictions, understanding what is actually happening on site can be a real challenge for most developers.

The majority of contractors I have dealt with have never actually built anything. The majority of the work is subcontracted, hence the name contractor. It is fair to say that a main contractor is only as good as his subcontractors. This is an important feature of the construction industry. I will discuss the relationship between a contractor and the subcontractor in more detail later in this chapter.

Almost every subcontractor has an area of expertise. It could be roofing, concrete, carpentry and so on. The bigger the project, the more manpower we need. As a result, it's not uncommon for subcontractors to subcontract some of their work, if not the whole package, to another subcontractor.

Some of my projects have been very labour intensive. Remember the project I mentioned in the introduction where we had 500 workers on site? One of the headaches I had to go through was negotiating a contract variation with the subcontractor who was responsible for letting workers and visitors in and out of the site. In their quotation the job was priced with a maximum peak of 300 workers. The surplus, according to them, was a variation. I could accept a higher level of equipment depreciation, but I was struggling to understand how this could affect their scope of work. My position was that the number of people they had on site had remained the same, the only issue we had was more people going through the turnstiles. The subcontractor, of course, was of a different opinion.

Variations in the construction industry can have a significant impact on the financial outcome of a project. Extensions of Time (EOT) are also contentious issues, especially when accompanied by a claim for delay damages. We tend to argue a great deal about anything that puts pressure on the contract price, sometimes without understanding the factors and variables that created the claim in the first place.

To better explain the root problem of most variations and EOTs I have decided to narrate my life as a Contracts Administrator in one of my projects. I have compiled a handful of contract issues in one working day together with the dialogue I had with the subcontractors.

The project I was working on was in Chatswood and it was a big project. I was looking after 2 buildings within the precinct. One was a 20 luxury apartment low-rise block with a construction cost of about $20 million and close to practical completion. The other was a 150 apartment tower, aka the tower, with a construction cost of $70 million and one year to practical completion. My role as a Contracts Administrator consisted mainly in procuring, negotiating and managing subcontractors.

One day in the life of a Contracts Administrator

The sun was already above the horizon line and about to start damaging the most delicate skins while I was cycling to work. I arrived at the site at eight o’clock in the morning. The parking lot was packed with SUVs. It was fair to assume that the majority of my colleagues were already at their desks. We were about 30 people in total, including site managers, construction managers, supporting staff and Contracts Administrators. We also had a team of architects and engineers working with us, but they were not based on site.

My working day always started with several ‘Good mornings’ and several ‘G’days’ in return. I always had to sign in at the reception. A few more ‘good mornings’ and I was off to my private room. My office space was rather small and it was a running gag to call it the janitor’s room. I didn’t mind the office banter. I loved the privacy of my room.

Today, the running gag had reached an all time high. When I got to my office, I noticed that some funny soul had decided to chuck a bunch of mops and buckets in there and put a big sign on the door saying 'janitor's room'. I sighed and removed the mops and buckets. I left the sign on the door, since it didn't affect me at all, and I didn’t mind working in the janitor’s room. My decision was not generally well received, as my colleagues kept asking why I hadn't taken down the sign in the days that followed. A few weeks later, one of them in an act of madness, removed it himself, despite my efforts to keep it on the door.

But let’s go back to the beginning of my working day. I scanned my notes from the previous days and noticed two words in bold letters circled in red pen: cost report. It was that time again, once a month, when I had to update the previous cost report in line with the latest cost developments in the project. This could mean converting budget figures to actual costs. Moving the balance to the contingency, or vice versa. Overall, the main focus was to ensure that the Return on Investment (ROI) on the project would stay at 10%. Since none of my projects was experiencing major cost overruns, the cost report was a breeze to complete, but it was still a consuming task.

I prepared a mug of coffee and went through my emails. Minutes later, I called Ron from Glazing Solutions and asked him to drop by my office. I knew he was working somewhere on site and I needed to have a word with him about the splashbacks for the tower.

Unfortunately, his contract had already been awarded, but it didn’t include the installation of the splashbacks. The previous Contract Manager didn’t notice the omission at the time and the contract sum was reported to the upper management team. Adding the splashbacks as a variation would eat through the contingency of the project.

I started working on my cost report and expected Ron at any moment.

9.15AM

Ron popped into my office. He had that I-don’t-want-to-talk-to-you look on his face. It was either that, or he was trying to make me feel afraid of him.

'Ron, where are the splashbacks?' I asked.

‘Not included. I told you already.’ Ron replied.

'Ron, for how long have you been working with us? I just don’t buy it. Your rate for the tower is more or less the same as your previous job and splashbacks were included back then.’

‘They were excluded from the tower.’

‘Yes, I’ve gathered that, but I can’t understand how that is possible. It’s going to cost a lot more than what we paid for similar jobs.’

‘It’s the logistics.’

‘Logistics my ass. How many years have you glazed for us? If you want to increase your rates just say so. This is how it reads to me. The contract sum has already been reported. If you want us to change it, fine, but Rob won’t like it. I won’t like it either.’

Rob was my boss.

‘What do you want me to do?’

‘What I want you to do? Mate, just do what’s the right thing to do. If you want to increase your rates just say so. Be honest about it. You cannot say that the splashbacks were not included when you always priced the splashbacks for us. The least you could do was to inquire about it when you were pricing the job, which I don't think you ever did.’

Ron didn't answer. Instead, he walked out of my office. I wanted to resolve this contractual situation as quickly as possible, so I sent Ron the following email: 'Ron, following our meeting this morning, please review your scope for the tower. Please confirm the additional cost to include the splashbacks. Please note that we do not expect your rates to increase more than the current inflation.’

After sending the email, I went back to my cost reporting. The software that I was using reminded me of a time when computer screens had only sixteen colours, but it worked fine nevertheless.

9.36AM

Out of the blue, Paul, the plumber from Plumbing Solutions, walked into my office. People were always popping in and out of my office and I was used to unexpected visitors.

‘G’day,’ he said.

‘What do you want?’ I replied.

‘Can’t I just drop by to say hello?’

‘Yes you can, and you can tell me what you want afterwards.’

‘How is everything?’

‘Good, what do you want?’

‘Did you go through my variations?’

‘Not yet, but since you’re asking, we need to adjust your contract in line with the latest events,' I said.

'No worries. We have more variations to put through anyway.'

Paul was the funny guy type who has never left Australia. He knew that I was from overseas and he used to come around to my office to talk about Europe. I always felt he had a genuine sense of curiosity about how people lived in other countries, but at the same time, I always assumed he was building rapport in order to have his variations approved quickly.

He liked to brag about being the best plumber on site, until days earlier, when the plumbing commissioning was going on, and no one could make it work. Several inspections later, the site manager said to Paul, 'I bet you forgot to connect your pipes to the main.'

‘That’s impossible. What do you think we are? A bunch of wannabes?’ Paul replied.

We looked at the drawings. The sewer connection was right under the terrace of one of the ground floor apartments. We had to cut the concrete slab with specialised labour to reach the pipes. I was asked to be present during the concrete cutting. As the site manager suspected, after we lifted a square metre piece of concrete, we all looked down below and saw a pipe hanging loose and dripping. Paul could no longer say he was the best plumber on site after that. The site banter went on for a long time on that one. You are only as good as your previous job.

'Paul, if you are telling me that you are fishing for variations to recover your loss, please be my guest, but don't waste my time. I can charge you with more costs, did you know that? For affecting the Practical Completion of the project, for example.'

'Hey, I wouldn't do such a thing. Our variations are genuine, you know that. Am I still your favourite plumber, or am I not?'

‘Seriously? Paul, have a look at this first,' and I turned around and pointed to several marks I had scribbled on the wall next to me.

Paul looked at them curiously.

'What is it?'

'It's a performance scale mate. Best subbies at the top. The poor performing ones at the bottom. It is also a variation approvals checklist. I tend to prioritise the subbies at the top.'

'Who is at the top?'

'The sparkies, who else?'

'What about us?'

'You are right here,' and I pointed at a line I had scribbled above the skirting.

'How come?'

'If you can explain how you let us pour concrete when you weren’t finished with your work, I might move you up a few inches, but not before.’

Paul left my office unsure if my scales were real or not. They weren't. It was just my way to let subbies know, politely, if they were annoying me, or consuming too much of my time. I do admit that I always liked to talk to Paul. When I look back at this project, he is one of the individuals I remember with a smile, but I had to return to my cost report that day.

11.05AM

Greg, the site manager for the low rise block, popped in. With the date for the practical completion looming ahead I could sense he was worried, busy, and in need of care and attention.

'G’day mate, how are you?'

'Good, good.’

‘Who put this sign on your door?’ I could sense from the look on his face that he didn’t find it amusing.

‘Some funny guy that never left high school. No big deal. I quite like it. What's up anyway?'

'We have a problem. You need to come with me to see it.'

'Do I have to? Can't you just tell me what it is? I am doing my cost report.'

'Better for you to come with me. You can't be stuck all day in this office anyway. The cost report can wait. Get your PPE and follow me.'

I got my PPE and we walked across the site. It probably took us 30 minutes to walk 500 metres as Greg had to stop and greet anyone that walked past us. “G’day mate, did you watch the Aches last night?’ was the trending topic that day.

Eventually we got to our destination, which looked rather busy. We made our way to the roof.

'Look at this,' Greg pointed to small ponds on top of the air conditioning system. Greg was right. We couldn’t have water on the roof. A great deal of building defects are caused by water infiltrations. Water corrupts everything, even the most stubborn material.

‘The insurance company will go bonkers. These rain protections should be in the shape of a pyramid. These boxes won’t work. Call HVAC Solutions. They have to come back here and fix this mess.’

‘They won't. They are still fighting to get their variations approved. I have also heard on the grapevine that they are going under.’

‘Someone has to fix this, even if we have to pay for it.’

‘We have some contingency left. I can escalate it to Rob and see what he says. Can I go now?’

‘Yes, you can.’

On my way back to the office Greg shouted from the roof.

‘Have you approved Levent’s variations?

‘Yes, why?’

‘He went on holiday. Left two men in charge to work on the tower. They won’t come here to patch the final works unless you approve his variations.’

Levent was the painter. One of the problems we were up against was the ducting for the air conditioning system. It was dripping due to poor workmanship. Drilling holes in the suspended ceiling to rectify it was almost an ongoing task. Once the job was done someone had to patch it. Levent was already finished with his work, so everything came as an extra. He liked this arrangement, but he wouldn’t do anything without ensuring his variations were approved first.

Back at my office I called Greg.

‘Get someone else to do painting,’ I said. ‘We can't afford to wait. I’ll deal with Levent when he is back. His men should have known better.'

Later I started to put an email together regarding the ponds on the roof. It was not my decision to make.

12.30PM

One of my colleagues dropped in. ‘Why are you keeping this sign on your door,’ he asked.

‘Doesn’t bother me, are we leaving?’ I asked.

‘Yes.’

We were four Contracts Administrators on site. We always went out for lunch together, but we never ate at the same place twice in the same week. Although today we had a different arrangement.

‘Where are we going?’ I asked.

‘Jack will pick us up. It’s a surprise.’

Jack, from Sprinkler Solutions, had invited the four of us out for lunch. He was the kind of guy that liked to build strong and lasting relationships with people in charge of his payments.

The restaurant that he took us to was one of the best in the city. Jack also liked his share of gossip and most of our conversation was related to Lewis, the site manager on a different project, albeit from the same company as the four of us.

This particular site manager managed to stock a lot of construction materials at his place, without paying for it. Suppliers would drop the goods in his backward and somehow invoice the project instead. One day a subcontractor was asked to crane some prefabricated concrete elements into his garden. When Lewis asked him to write his project address on the receipt, the driver told him to ‘f--- off’ and reported him to the company. He was now facing charges.

We were all uncertain about his fate. My colleagues couldn't stop talking about him. It was a recurring theme around the site. Personally, I never understood how someone could harass the subcontractors the way Lewis did without considering that he would eventually get caught. Somehow his brain didn't care or consider that possibility.

Back in the office, I prepared another mug of coffee and I finished the email I had started before lunch. There was still some contingency left, but it was unclear how much it was going to cost to rectify the work from HVAC Solutions. I pressed the send button and continued working on my cost report.

2.25PM

Charlotte, from Cleaning Solutions, popped into my office while I was well immersed in my cost reporting. Charlotte was from the UK and the owner of her cleaning company. She had a strong British accent and always referred to her employees as ‘the girls’, which I thought was quite funny in a heavily male dominated industry such as the construction industry.

‘You have to help me,’ she said, sounding unwell. ‘The Castle Hills job is killing me.’

‘What’s wrong?’

‘I don’t know what to do,’ she said and started crying.

Although I had to listen to all sorts of sad stories to get variations approved quickly, Charlotte sounded genuinely worried. I had never seen her in such a state. I found a tissue and gave it to her.

‘What’s going on?’

‘It’s that job in Castle Hills, it’s killing me, it’s killing me. It takes more than one hour to get there. We all travel in one car, the girls and I, but I’ve never allowed for so many site visits in our quotation as I have been asked to do here. I am already in the red. I don’t get paid enough.’

‘Why not?’

‘The contract was signed ages ago. They just can’t finish the job on time. The market rates have changed since then, my girls want more money, but that wanker of a Contracts Administrator doesn’t allow me to adjust my hourly rate. I think I am going under.’

She started crying again.

I knew the job in Castle Hills was a disaster for the company. Finding out that Lewis was defrauding the subcontractors didn’t help either. The Contracts Administrator working on that job was under a lot of pressure. The company was losing money on every trade. As a result variations were unlikely to be approved. The management team had only one mission; finish the job quickly and move on.

‘What do you need from me?’

She wiped her tears from her face. ‘You have to give me the contract for the tower. I’ve already spoken to Rob about it.’

‘What did he say?’

‘To speak to you.’

I tried not to laugh. I did understand and respect Charlotte’s problems, but I also knew that Rob couldn’t care less if he told her to speak to me about it.

‘I will talk to him,’ I replied.

‘You promise me?’

‘Yes, I do.’

Charlotte wiped another tear from her face and left my office. I returned to my cost reporting. I also had a meeting that day with Fred, from HVAC solutions, to discuss his contract variations.

2.55PM

Leigh, from Tillig Solutions called me. They had been working around the clock and Brett, the site manager for the tower, a real treat of a human being, never stopped asking for more men. Anything below eight men would infuriate him.

When Leigh’s name appeared on the screen of my mobile, I already knew what was coming.

‘Leigh, how are you?’ I asked.

‘Good, thanks. One question, why didn’t we get paid? We have been working around the clock, why haven’t we been paid?’

‘When did you put your progress claim forward?’

‘Last week.’

‘Sorry mate, but did you think I was going to pay you in one week? We pay concreters on 14 days, everyone else gets paid on 30 days.’

‘Why can’t I get paid?’

I sighed.

‘Listen Leigh, I am not going to teach you how to comply with your contract. Submit your claim before the end of the month, I will assess it and you will get paid in 30 days. It’s that simple.’

‘Can’t I get paid earlier?’

‘I don’t think so.’

‘Can I drop by your office?’

‘Anytime you like. My door is always open.’

3.01PM

Our receptionist called to let me know that Fred, from HVAC solutions, was waiting for me at reception. Greg was going to join us too. I got my notebook and walked towards the reception. I could sense the tension in the air when I shook Fred’s hand.

Greg joined us straight after. Ten minutes later, when we were just warming up, Fred started shouting. ‘Why can’t you approve my variations? I have finished my work. Why can’t I get paid?’

‘Because your work is faulty,’ Greg said in my defence.

‘I am not going to rectify anything before I get paid.’

‘I can’t pay you, Fred, I wish I could, but I can’t. Your variations don’t make sense, but even if they did, and we were happy to entertain them, the supporting documentation is pretty bad. Either you redraw or substantiate further.’

Fred, who was a big guy, stood up and smashed a stack of papers onto the table.

‘Here it is, c--t.’

Greg, noticing that the meeting had become offensive, decided to put an end to it.

‘I’m sorry Fred, but you can’t talk like that. We’ll be in touch,’ he said and Fred was invited to leave the room. As I suspected, his documentation was the same as before and just as faulty. HVAC Solutions went under one week later.

Every so often I find myself thinking about this meeting. It was the first time I felt physically threatened. I started sensing the tension in the room, one inch away from my nose, as soon as we started talking about money. Word went around on site that I stood my ground, but it was Greg who had the good sense to cut the meeting short. He knew how to behave in similar situations. I grew as a professional that day.

As time went by, I also started thinking about what had put Fred in that position. Personally, I don’t remember seeing any merit in his contract variations, but I hadn’t been involved in the contract negotiations of his package. Whatever his struggles were prior to our meeting I took a very contractual position on the matter. Weeks later, when the liquidators knocked on our door, I had a better understanding of his finances. Financially, Fred’s misfortune had only a minor impact on our project, since we still had some contingency left. We used it to remedy the poor workmanship and some poor design solutions. However, similar situations can be a lot different if the subcontractor is not yet finished with most of their work and sits on the critical path. Because this is such an important topic, we will return to it later in this chapter; after we have reached the end of my working day. So not to deviate from the focus of this section.

3.25PM

Back at my office an email from the steel supplier came through. Steel prices were increasing 10% for the next quarter. I sighed and returned to my cost reporting.

3.42PM

My phone started ringing. It was Greg, ‘What’s up?’ I said. ‘Can you get Ian to work on Saturdays?’ He asked.

‘Ian who?’

‘The carpenter.’

‘What do you mean?’

‘He doesn’t want to work on Saturdays. He doesn’t want to employ chippies either.’

‘Can’t do much about it.’

‘He needs to work on Saturdays. Otherwise, we can’t make it on time.’

‘Mate, I can email him and attach an extract from his contract where it clearly says that he is obliged to work on Saturdays, but do you think he is going to care?’

‘Well, he should.’

‘And what are we going to do if he ignores my email? Taking him to court?’

Ian was a local carpenter that had been working for us since the beginning of the job. He was probably in his fifties and more keen to go fishing than to work on Saturdays. As he pointed out one day, ‘I have paid my mortgage. I have a boat, why should I work on Saturdays?’

‘Because your contract says so’, I thought, but contracts didn’t mean much to Ian. It was just a piece of paper that he probably didn’t remember signing. The only contract management he cared about was to come by my office, at the end of each month, to drop his progress claim on my desk with that don’t-forget-to-pay-me-or-else look on his face. His variations were sometimes hard to understand, but it was a lot harder to negotiate them.

Greg thought for a while. He said, ‘Okay, leave it up to me. I will find someone else to do some of his work.’

When I was about to hang up, Greg asked, ‘What about Concrete Solutions?’

‘What about them?’

‘Gary doesn’t want to do the concrete wash.’

‘Why not?’

‘They are too busy.’

‘Can’t we use someone else?’ I asked.

‘Can’t find concreters. Not these days. Besides, he was the concreter on this job anyway.’

‘Are you sure you can't persuade him to do the job? Can't you talk him into it?’

‘He doesn’t want to talk to me. He wants to talk to you.’

Gary, from Concrete Solutions, was a difficult person. He talked to everyone on site like he was the man in charge. Brett didn’t get along with him either. Their relationship was so sensitive that I was not allowed to call Gary without telling Brett about it. ‘I will deal with him, not you,’ Brett once told me.

Gary was the kind of subcontractor that would walk off site if things weren’t to his liking. Program wise his work was on the critical path. He could deliberately delay the job. Personally, I have never come across a subcontractor that could pull such a stand, but everyone knew, or suspected, that Gary would not hesitate doing it, and would deal with the contractual consequences later.

I called Gary that day because we needed someone to do the concrete wash and unfortunately I couldn’t think of anyone else to do it on such short notice.

‘Gary, how are you?’

‘What’s up?’

‘Concrete wash, why can’t you do it for us? Greg told me you wanted to talk to me. We need your help, man. We need you.’

‘I’m busy working on the tower.’

‘Mate, what difference is it going to make to send 2 guys in the morning to sort us out. How many men do you have on the Tower? 20 or 30? I’m sure you can spare 2 and help us out.’

‘It’s going to be expensive.’

‘Just do it. We need you.’

‘I’ll see what I can do.’

I always had to approach Gary as if he was doing us a favour. Eventually he did the concrete wash for us, for twice the market rate, but we got the job done.

3.57PM

Leigh popped into my office. He seemed worried, but he always seemed worried to me; and his questions always sounded the same.

‘I wasn’t expecting to see you here so quickly. What’s up?’

‘Why haven’t we been paid?’

‘Leigh, come over here please.’

Leigh leaned over my desk. I found a sample of our contract and explained to Leigh the payment procedures. Progress claims were to be submitted latest on the 28th of each month. I would then assess everything and process the payment. Four weeks was the normal turnaround for most subcontractors to get paid, which was also in accordance with the NSW legislation. In the end I looked at Leigh and said, ‘This is not a Mum and Dad contracting company; and you are not the only one putting your progress claims forward. You just have to stick to the process.’

Leigh looked at me and said, ‘But why can’t I get paid this week?’

I sighed.

‘Leigh, I am doing you a favour explaining how the contract works. If you don’t want to listen, fine, but don’t waste my time.’

‘How do you want me to explain to my men that they have to wait 6 weeks to get paid?’

‘Leigh, this is how the construction industry works in this state. I thought you knew it by heart.’ I was being sarcastic.

‘I have been in the construction industry for decades and never experienced anything like this.’

I sighed.

‘Leigh, do you mind letting me work on my cost report?’

‘I’m going to talk to Brett about this. He can’t push us this hard for no pay.’

‘Please do. If you can convince him to pay you this week, I will cut the cheque for you myself.’

Leigh left my office with a smile on his face. Somehow he believed that Brett was going to approve the earlier payment. But he had felt the same way the month before, and the previous, and so forth.

I returned to my cost reporting.

4.25PM

Brett came to see me. The two of us never got along. I never felt he respected my work.

‘Gary told me you called him.’

‘Gary from Concrete Solutions?’

‘Yes, who else.’

‘I had to. We needed someone to do the concrete wash.’

Brett started to steam like a locomotive. I already knew what was coming. Seconds later he started shouting, ‘Didn’t I tell you not to speak to him unless you talked to me first? Didn’t I?’

‘Take it easy, man. We only need two men.’

‘Two men for f------g what? Can’t you get someone else to do it? Gary can’t be distracted. The tower is more important than that shitty job you’re doing.’

It was pointless to remind Brett that we were working together on the tower.

‘It’s too late to get someone else to do it. Besides, his contract is already in the system. It’s easy to process extra work.’

‘Can’t you f------g get someone else to do it?’

The shouting was just ridiculous.

‘What for? What difference does it make?’

‘It makes a hell of a difference. I don’t want him to say he is helping us with another job. The Tower is his ONLY f------g job.’

‘Brett, that’s fine. I’ll see what I can do.’

‘Don’t you f------g talk to him again,’ he said and left my office abruptly. I didn’t think much of our exchange of emotions. I always looked at Brett as a person that liked to mark his territory, but didn’t have the brain prowess to keep it. Concrete Solutions did the job in the next few days and he had already forgotten all about it.

The end of my working day

At around 5 pm I finished my cost report and emailed it to the management team. When I was about to start cycling towards my home, two site managers started to have a go at each other and the end result was that Bruce punched Nick in the face. In line with company policy Bruce was dismissed straight away. What the argument might have been between those two, generated a fair amount of gossip the next day, but all was forgotten days later.

As one contractor once told me, looking after subcontractors requires expertise in caretaking, mental support, mateship, lots of patience, empathy and so forth. As the illustration of my working day as a Contracts Administrator attempted to show, I fully agree with his observation.

Subcontractors

Almost all, if not all, of the most amazing buildings I have had the opportunity to visit were built by individuals. In recent years, I have begun to realise that we may be entering the next stage of evolution in the construction industry, led by robotics, but until now, and in most cases, the heartbeat of the construction industry has been kept beating by people on tools.

The size of the project and the time for completion, will dictate how much manpower is needed. Big jobs require loads of people. Managing people is not an easy task, and in that sense the construction industry has a layer of complexity that tends to increase with the size of the job. Some site managers, like Brett, seem to believe that shouting at people helps to get the job done, but it depends a great deal on whether the individual that is being harassed can absorb that kind of treatment. Otherwise it can backfire.

Some site managers can be very attentive, but relationships are often tested when the project starts losing money. I took the liberty of describing one day in the life of a Contracts Administrator to better illustrate what happens on site after the tender phase. However, had the job been under financial pressure, most likely my illustration was going to have a different flavour.

As I argued earlier in this chapter a contractor is only as good as its subcontractors, but in case you disagree with me, let me expand on this argument. In my professional experience buildings are erected by subcontractors. In most instances, the contractor is mainly responsible for coordination. Although I have seen situations where the contractor could deliver a great portion of the work, in countries like Sweden or Latvia, in Australia, in my experience, the majority of the work is contracted. No matter how much contractors try to regard their subcontractors as replaceable, subcontracting is the backbone of any project; and since almost any subcontractor needs a construction contract to perform works on site, it can also be argued that managing contractual relationships are therefore essential to deliver a successful project.

Unfortunately, most subcontractors win work in the same fashion as contractors do. The contractor will tender the works and award the contract to the cheapest tender, majority of the time. This normally means that subcontractors need a concise scope and to be able to work without interruptions. Somehow, most subcontractors have a tendency to believe that the contractor will coordinate the job on site well, which is surprising, since in my opinion jobs that go according to plan are an oddity in the construction industry. What we need to register here is that most subcontractors will price their work assuming everything on site will turn out fine, at least the cheapest tenderer. Which is all well and good, if it wasn’t for the fact that this assumption, and a few others, in their cost estimate are outside their control.

Most of the time, when the construction market is buoyant, prices will go exponentially high, but when the conditions are tough, the common practice is to underprice the job. In these situations, speedy completions are essential to keep the company financially sound. If a job can be done in 12 weeks rather than 13, then the profit margin will be much higher. However, most of the time, the reality is that 12 is better than 13 weeks because beyond 13 weeks the subcontractor will make a loss on the job.

On top of all variables at play, payments are also an important issue. Most subcontractors will price their jobs assuming they will be paid on time, but the reality is that many jobs run on a negative cashflow. Meaning that some subcontractors will have to sell a portion of their revenue to the financial markets, further dilapidating their profit margins and putting more pressure on their liquidity. This is assuming the financial markets will rescue them for a fee, otherwise subcontractors will struggle to pay their bills, and start trading on the brink of bankruptcy.

If there was something that my day in the life of a Contracts Administrator tried to illustrate, was the on-going discussion about being paid. Lord Denning once said, ‘cash flow is the lifeblood of the building industry’, and although this will ring true to most industries, as we have seen in my illustration, it is of paramount importance in the construction industry that payments flow down the supply chain and reach the people on the tools, who are at the end of the day, the people erecting the building.

In my illustration contractors were paid on time, and yet, subcontractors not being paid on time is one of the most common, recurring themes in Australia, despite being in most instances unlawful to do so. In Australia, thanks to a myriad of security of payment acts, it is mandatory to pay subcontractors when the payment is due, unfortunately there is also a great body of research that shows how frequent late payments are.

If we reconsider the initial argument that contractors are only as good as their subcontractors, it is sometimes mesmerising how much they need to endure to get the job done. There is a great deal of professional management that only cares about getting the subcontractor to sign a construction contract, without doing their homework. So when issues between the subcontractor and the contractor arise, the contractor can always point at the clause in the contract that saves them; but getting a signature on a piece of paper is a lot easier than trying to enforce it, as more often than not, subcontractors don’t know what they are signing up to.

I was once working on a project where we couldn’t find a concreter to carry out the works for the price we had on the budget. Until Hussein from Concrete Solutions came along. His price was so cosmic that we gave him another 2 jobs very quickly. The scope was quite straightforward, but a few weeks later Hussein emailed me a long list of Variations. The majority of the variations had no merit, but entering into an argument with a trade sitting on the critical path was a risky move. We could negotiate with him, but we had to be cautious.

In our opinion the negotiations were going to be easy when most of the concrete work had been completed, but Hussein knew that too, so he kept pushing for a meeting to settle our differences. We tried to delay it as much as we could, but eventually I had to run through his variation list. There was no merit in his variations. Even if I could find some, the pricing was just ridiculous.

But Hussein didn’t care. We had to approve and pay for his variations, or else he would take his men from the site. In most cases, contractually, a subcontractor, or even a contractor, is not allowed to stop working on site if there is a dispute going on. This tends to be the case in most jurisdictions. I tried to explain to him that despite the absence of a dispute resolution the work on site couldn’t be stopped; but Hussein didn’t care. ‘Pay or face the consequences’, he argued. He was so adamant that I considered the possibility that maybe Hussein was on the brink of bankruptcy. So I asked him a simple question, ‘I don’t get it, Hussein, are you losing money on this job?’

His reply was disturbing.

‘I don’t know,’ he replied, ‘how can I know? When we get to the end I will see how much is left in the bank account.’

My hopes of having a proper conversation with Hussein vanished at that moment, because I don’t think it is possible to have a constructive conversation when one of the parties doesn’t know where it stands. Hussein's understanding of contractual matters and simple accounting was rather poor. His advantage was that his works were on the critical path and he could use it to bargain for extra money, rather than focus on the work at hand, which I am guessing we would, if he had the means to know how financially sound the job was.

I used to think that any subcontractor signing a contract should know what they were doing, but Hussein made me rethink my assumptions. The reality is that understanding the scope and risk profile of a construction contract can be a difficult exercise. It can be argued that most subcontractors don't have the profit margins to employ the right skills to negotiate and manage a construction contract when we consider that in most cases the cheapest tender wins..

My argument here, albeit without the academic research to back me up, is that we ought to help subcontractors as much as possible by reducing their administration burden. Needless to say, they also need to be paid on time.

With this argument in mind, we can deduce that the most important issues to discuss when awarding a contract to a subcontractor is to ensure that the scope is well understood and defined, the delivery schedule is realistic and the payment terms are agreed. These are fundamental issues that need to be discussed and clarified. Quality is also important, but that is a discussion for another book. Misunderstandings can lead to delays that eventually affect the work of other subcontractors, and suddenly the job becomes a real headache for everyone involved. Headaches can escalate into real dramas; and a real drama can put a real pressure on all the cosmic prices that were secured for the project. From the developer all the way down the supply chain.

Which brings me to the topic of insolvencies, and the question ‘How come Fred from HVAC Solutions found himself in such a dire financial situation?’ Personally, I don’t know the details of his liquidation, but I think we should be able to second guess it at this point.

The Australian Taxation Office (ATO) publishes regular reports on the number of insolvencies in the construction industry. The numbers are alarming. The ATO also provides a list of the main reasons for insolvency, which makes it easier to guess what might have happened to Fred. Underpricing and mismanagement are the leading causes of insolvency in Australia.

The root of the problem is often underpricing or underestimating the complexity of the job, but underpricing is only half the story, because I don't think it's that easy to predict at the tender stage how all the project variables are going to play out. There are a number of variables that are out of the subcontractor's control, and even if the contractor gets everything right, the subcontractor is still at the mercy of another subcontractor that might have grossly underpriced the job and put the whole project under pressure.

HVAC Solutions may have underestimated the cost of our job. It could also be that our contract was fine, they just happened to mis-price another job and were unable to recoup the loss. Or Fred got bored and started spending the company's reserves on fast cars. We don't know. What I do know is that his company went under a few weeks after we handed over our project. We were lucky in that respect. Their bankruptcy didn't affect the profitability of our project, but if HVAC Solutions had become insolvent before completing the work, the financial outcome of our project would probably have been different.

Contractual variations

In my experience, no one likes to pay for extras; yet not one project goes by where I don't see someone, either a consultant or a contractor, trying to bend a contract clause and ask for more money. Contracts can't be watertight; no matter how much we try to account for all the unknowns. Sometimes we can be proud of a job well done during the design and tender phases, with a great start on site, but there is always the passage of time, which tends to bring a surprise with every turn of the wheel.

Some projects can suddenly take a very long time or be put on hold, but no one wants to adjust them for inflation when they come back on track. Incremental weather can turn a work schedule upside down, but no one wants to pay for the delay. There are also the random situations; e.g. someone finding an artefact buried in the ground and the archaeologists have to be called in.

Once, I was travelling on the underground in Berlin when my journey came to a halt. Later, I was told that a contractor working on a construction site had miscalculated the excavation work, resulting in the collapse of a wall that was part of the underground line. Berliners weren't happy to see the line disrupted for many years, but for those involved in the project the issue was mostly about the extra costs associated with the accident. Someone had to fork the bill.

In general terms contractual Variations are extra works that are necessary for the completion of a project. Because these extras were not included in the initial construct often need to be assessed and priced. Since not everything is straightforward in the construction industry, negotiating Variations is not an unusual occurrence in most construction projects.

If I had to pick a section of a chapter in a book of this nature that would be read more often, I would pick this one. After all, development projects that cost more than originally contracted for are the worst nightmare of any developer. So, anyone flicking through this book out of curiosity would probably read this section first.

So, what do I have to say about this peculiarity of the construction industry? Well, I will cover the basics and try to finish this section on a positive note.

Negotiating extra work when the job is ongoing may lead to intense fights. Someone needs to be paid for the work that was or shall be carried out, and someone needs to assess if the claim is legit or not. The party cutting the check often has the upper hand, since the work is normally paid in the end. But the party doing the work also has some cards to play. Despite how ridiculous the claim might be, no one wants to contest it in court, risking further delays on the project.

I have been at both ends of the table. Either evaluating Variations on behalf of the client, or trying to get paid for the extra work performed. With so much money at stake, unfortunately, during the construction phase, the nice and pleasant Doctor Hyde we met during the tender phase is now fully converted into a Mr Jekyll. In my experience most contractors suffer from the doctor jekyll and mr hyde syndrome, but they are of course exceptions to the rule, or so I have been told.

As I mentioned earlier, we often argue about changes, sometimes without understanding what caused the extra work in the first place, or the root of the problem. I have written about managing relationships with subcontractors because this is often where most problems start, but experience also tells me that even on a project with good attention to detail, things can get out of hand.

I once worked on a project that had over 300 Variations. The project documentation was concise and well put together, but halfway through the process someone made a political decision to change the scope of the project. The end result was that preparing, submitting and arguing variations was literally all I did during the day for almost 2 years. When I finally moved on to another project, the person who took over my job continued to work on the variations for a few more years.

Switched on subcontractors like to claim variations. Sometimes some of these variations are also a variation to the client. In fact, with construction sites being as hectic as they are and managers always falling behind, most contractors rely on subcontractors to pick up on the variations that are outside their contract. If a subcontractor finds a gap in the documentation, this will likely lead to a variation to the Employer too.

Some variations, such as omissions in the documentation, are usually easy to price, but not always. The contractor notices the missing information in the documentation. After much moaning, the client agrees to pay the extra cost because it's difficult to ask a contractor to do work that is not in the contract. However, as the mistake was caused by the designers who produced the documentation, the extra cost paid to the contractor may be chargeable to them.

So far so good, but the biggest challenge in assessing a contra-chargeable claim is calculating the amount that can be recovered by the client. Let's consider the following scenario: the hydraulic consultant forgot to document a trench drain in the drawings. By the time the missing drain is identified, the concrete slab has already been poured. As the drain is quite important, the client instructs the contractor to install the drain and submit a variation for the extra work. When the variation comes in, it is approved fairly quickly. The client doesn't challenge the cost that much. Why bother? As I mentioned, since the documentation is faulty, the extra cost can be contra-charged to the consultant who prepared the documentation.

The contractor carries out the work. The existing concrete slab needs to be broken to make room for the drain. Once the drain is installed it needs to be connected. When everything is in working order, it is time to backfill, concrete the trench and make it look good. Was all this an additional cost to the project?

Not necessarily, all things being equal, the reality was that the tender price was wrong from the start. The installation of the drain should have been included in the original documentation. Meaning that the Employer ended up awarding a construction contract for a little less than the correct value of the work. In other words, the consultant's liability to the extra cost is the difference between what should have been the cost during the tender phase and the contractor’s variation. However, what could be a simple mathematical exercise can often turn into a lengthy discussion. More often than not, clients like to throw another variable into the mix, arguing that the costs were more competitive at the tender stage, which adds a layer of complexity to the assessment of the counter-charges.

Variations like the one described above are at least clear from the onset. Assessing variations can become a real headache when the project documentation is unclear. Or, when a client decides to change the scope of the object halfway through construction. I once worked on an industrial project that started out as a freezing warehouse and became a logistics centre for postal services during construction.

We should not award a contract for a warehouse and halfway through the process ask the contractor to build a boat instead. Contractually and hypothetically, a client can do it through a variation, but for obvious reasons, this is something I would not recommend. But what about changing the scope of an object from a freezing facility to a logistics centre? Since the know-how and skill-set is more or less the same, the contractor I was working for agreed to do it, and priced the extra work at roughly 1 million.

The client, who was in a big hurry, said ‘sounds lovely! Let’s go for it. We can assess the cost of the variation as we do the work as we have no time to wait.’

The construction work did go against the clock, but the client, who was an experienced developer, also knew how to deal with the extra cost. So instead of approving it, they appointed a quantity surveyor who did a great job of challenging as many rates and quantities as possible. With so much money at stake, negotiating this variation led to endless meetings. A lot of time was spent arguing the finer points of the claim. In the end, I realised that it was better to break the variation into smaller ones, so that some could be approved more quickly and provide cash flow to the contractor. That way we could focus on the contentious issues without breaking the bank. In this particular case, the final difference was settled in court. I found out later that the contractor was experienced in solving disputes in this fashion.

There is a lot of academic research, and common law cases, that define how to measure and price most variations, which probably helps a lot when disputes end up in court; which might be the most normal course of action when jobs are run by lawyers, but rarely a solution to consider when we are trying to complete a project on time.

In my long experience of evaluating variations, I have reduced my work to a 2-step evaluation process. The first step is to determine whether the claim has merit. As mentioned in the paragraphs above, this can be a straightforward task, such as missing information on the documentation, a so so task, such as changing the scope of a facility, or a challenging task such as the following:

I was once involved in the construction of a large tower in Sydney. When we started building this tower, Sydney had not built a skyscraper in a long time. So let's just say that everyone went about building the tower like we normally do, brick by brick. We put together the project documentation in the usual way and started awarding packages. The project documentation was a good piece of work, but one particular natural element was underestimated: wind.

On most construction sites wind is normally not a problem, but when we are building towers, this is not an element to toy with. It can create a lot of downtime. Downtime is a construction risk, but construction programmes can allow for it; and agree who takes the risk for it. But in my story it was a different scenario. The subcontractor installing the structural steel starts the job well. The structure is well on schedule and is being erected with the crane at ground level. Eventually the floor slabs catch up with the crane and the crane jumps up. The crane is now several storeys up and we realise that the wind is causing a problem.

Above a certain height, the wind moves much faster. This wouldn't be a problem if we didn't have to operate cranes. If the wind blows above a certain speed, the cranes can't be used for safety reasons. The operator has to get out of the cab, go down the stairs, which can take up to 30 minutes depending on the height of the crane, and wait for better conditions. It can take several hours before operations can restart, and an extra 30 minutes to go up the staircase again. So we are talking about a lot of downtime.

In our project the cranes were often moving like metronomes. The situation was new to us, and therefore not covered by the construction contract. It had never been discussed during the tender negotiations. The client felt that the contractor should have known better, but the contractor didn't share the same argument. They had never worked on a tower before. In fact, we were all speechless. Although we were good professionals, wind was a new beast to us.

Suddenly the project was 3 months behind schedule. Cladding Solutions was about to catch up with the structure. This means that they would have to stop their work to allow the structural team to finish a few floors. No subcontractor likes to have men at the table watching youtube films outside lunch hours, so a delay claim is put through the system. They based their claim on the argument that their price structure was based on continuous work. As the management team, we already knew that this was going to be the start of a chain of delay claims, as all the other trades would eventually suffer the same problem. We also knew we couldn't stop the wind. We all came to the conclusion that the programme was wrong. Years later, when I discussed this claim with colleagues, the reaction was often the same: 'But surely the management team should have known about it.’

Well; we know now.

However, back then, the question was not so much how to move forward, but who was going to pay for the delay? The subcontractor thought it was us and sent us a claim for 15 million. We looked at the claim and decided to retaliate with a claim for delay damages of 17 million. Soon, both parties were poring over the project documents for details that could strengthen their case. But the most important point, the merits of both claims, was up for grabs. There was not a single reference to wind in the contract or in any of the meeting minutes.

As it is often the case, discussing claims of this magnitude at the negotiating table is like watching a bunch of artists argue about who has created the most beautiful work. No matter how much we discuss it, most of the time both parties will stand their ground. We could try adjudication or arbitration to get out of this stalemate. In fact, we were very close to pursuing one of these avenues when something else happened.

Two directors had a long dinner and settled the claim over a handshake. The developer promised to drop the claim as long as the contractor did the same, and in return the contractor would get a contract for 'another' project plus 1 million. The office gossip described the deal as a win-win situation. It worked for this developer because they had other projects, but that is not usually the case.

However, as the gossip was circulating, I was the first to realise that while the deal had solved one problem, it had also created another. I was the cost manager in letting the structural package for the 'other' project, which was worth more than 45 million. A few weeks later, when I received their latest price update, their rates had suddenly increased significantly and I had a large budget overrun. I had to spend several weeks travelling between Sydney and their factory to understand the cost drivers behind the sudden price increase and how to minimise it.

The above examples illustrate the complexity of agreeing the merit of each variation. Once the merit has been established, which doesn't have to be 100% as sometimes it's easier to agree on a shared fault, then the price has to be agreed.

Agreeing on the price is another challenge. Sometimes the price is so ridiculous that it takes a lot of energy to put up with the most pathetic arguments to justify it. There are two documents that play an important role when it comes to contract negotiations. These are normally discussed during contract negotiations, and if the tender phase was done properly, these documents should be part of the contract documentation.

One document is the schedule of rates, which sets out the costs to be paid for labour hours, equipment and other key activities. The other document is the Bill of Quantities. We talked about this in the previous chapter. Bills of Quantities often contain a lot of data that can be used to price variations, but because the work we are looking at is often extra, it is rarely itemised in the BQ.

In the absence of both, there are official reports that can help to price a variation, but these are not always as up to date as the speed at which the construction industry moves. In boom times, prices rise; in times of shortage, the opposite is true. As construction books are only published once a year, it can take a while for these reports to reflect current market trends.

In the past, when I was struggling to agree on a variation, I would approach subcontractors directly and ask them to price the extra work for me. This can work, but the reality is that when a contractor prices a variation, they are under no obligation to offer a competitive price. There is no competition in that sense. The case law is complex. While the contractor has taken on risk during the tender phase, they are not necessarily under the obligation to take the same risk during the pricing of variations, and assessing the risk margin of a variation is a complex exercise.

Time-barred variations (sketch)

In most common law jurisdictions, changes can't be time-barred. This is based on the concept that no one should benefit financially from something they haven't paid for. These are what lawyers like to call Quantum Meruit forms of dispute resolution. I think the principle is logical, but it can become a real headache to agree on the merits of a variation that's several months old, especially if it's poorly documented.

Personally, I don’t think I will be in my best mood, if I am charged extra for something that should have been reported when it happened. I have been in situations where more than 6 months have passed before I find out about the extra costs.

One of the biggest issues is perception. Few people will remember what was agreed, if anything at all. A few months later, we may have someone who knows all the parties involved in the project, and they were just told to seek compensation for this and that. Research also shows that the brain has a tendency to embellish or diminish past events in order to fit in. Something that may have been a minor incident can suddenly be introduced into the discussion as a major event, and vice versa. Unfortunately, the construction industry is full of useless discussions.

In most cases, if there is no written evidence of the agreed price and what actually happened, site diaries are one of the most important documents to rely on. Contractors sometimes don't take note-taking seriously, not realising how crucial these notes will be if we can't agree on the merits of a variation. These days there is no real excuse for not doing so, as any site manager with a mobile phone can write site diaries on the move.

We have already seen the importance of communication in keeping a development project on track. In short, whether we are dealing with a time-barred variation or not, my recommendation is quite simple: deal with it as soon as it materialises. As annoying as it may be to agree on the merits of a variation, or even the price, doing nothing for a long time will only exacerbate the annoyance and turn it into a potentially long headache.

Finally, it goes without saying that if we take the time to cover all the details of the project during the contract negotiations, then most of the issues that arise during construction can be easily dealt with. Experience tells me that there will always be variations, but none of them should affect the project financially. In this industry, it is very difficult, if not impossible, to predict everything that can go wrong in a development project, but it is rather easy to be prepared for the most annoying eventualities.

An experienced developer should set aside a percentage of the construction budget as a contingency, but we will discuss contingency in more detail in the final chapter when we look at the business case.

The construction programme (sketch)

As the saying goes, time is money. We have a limited amount of it during our lifetime, and even less during the construction of a development project. Days can turn into weeks, weeks into months, and yet we are still far from seeing the outcome of our endeavours.

In construction, we recognise the passing of time as walls, roofs and windows start to take shape on site. No matter how efficient we aspire to be, construction cannibalises time. We just do the best we can while we can. The speed at which the scope is installed is often plotted against the construction programme.

We have previously discussed the design programme in the context of dealing with consultants and local authorities, but during construction we are dealing with a programme that contains many more interfaces and milestones. Depending on the project's complexity, construction programmes will usually follow the order defined by gravity and layers. For example, we can’t build roofs without a structure, or a structure without a foundation, or a foundation without some sort of excavation. Similarly, we can’t paint if we haven’t plastered the walls, and we can’t plaster the walls if we haven’t brick them up.

The construction programme is often provided by the contractor two weeks after the contract is awarded, although the practical completion date is usually agreed between the principal and the contractor before the contract is signed. It is usually a detailed document showing all the activities necessary to accomplish the project.

A good construction programme will also plot the project's critical path, essentially a line connecting tasks that cannot start before a precedent task is completed. Despite how experienced the contractor is, the Construction Programme is only a forecast. It is an educated assessment of how much time each task will take to complete.

Write in here about the critical path and the early works package.

Contractually, the contractor is expected to deliver the project by the agreed completion date, or before it. In my experience, property developers often request unrealistic practical completion dates without fully understanding the complexities of working against a tight deadline. To shed some light on this issue, I have decided to recount another day in my life as a project manager.

The job I have chosen to illustrate my point was a fit-out project on 324 Parramatta Road. My task was to construct a marketing suite for a major property developer looking to market a development comprising 200 luxury units.

Our showroom was about 140 square metres. It included a kitchen, a living room, a balcony, a bathroom fully fitted with wardrobes, and a private area for the sales agents. The reception area, which was by the entrance, was a mix of curtains and the display of a physical model of the development right in the middle.

Finishes, fittings and fixtures employed throughout the fit-out were of high quality. The program was 9 weeks from start to finish. According to the client we had to deliver on time otherwise our working relationship would cease to exist. One week after starting the project we submitted a claim for an Extension of Time, with delay costs.

In the project documentation the aircon system was supposed to be installed on top of a timber structure above the kitchen. We warned the client that when the machines start to blow at full blast it builds pressure on the structure, and timber structures were known to have collapsed in the past. The client didn’t care to listen before contract award. When the job started, HVAC Solutions came to site, they looked at the structure and said, ‘not in a million years’. The structural engineer had to change the design overnight.

The client followed our advice and agreed to pay extra for a structural steel structure in lieu of timber and we were granted one week Extension of Time. The client also noted down that ‘our relationship had been severely shaken.’

6.30 AM

I was on the road driving to Castle Hill when Mac, from Tiling Solutions, called me.

‘I’m still waiting outside the door, where is Lloyd?’ he asked.

‘He is on his way. Shouldn’t take long,’ I said and hung up the phone.

I texted Lloyd.

Lloyd was the site manager on site. He lived in the blue mountains. It would take him around one hour to drive to the site, depending on the traffic. The site was open at 7am.

Yesterday I asked Mac if he could finish his job today. Mac said he could, but he wanted to start early since he wanted to go to another job in the afternoon. I told Lloyd to open the site at 6.15am, who agreed to do it. Mac was happy about it, but not so much this morning.

Lloyd texted me back. ‘Stuck in traffic. In Strathfield at the moment. Shouldn’t take long,’ he texted.

I felt sorry for Mac, but there was nothing I could do about it, apart from texting Lloyd to hurry up.

7.30 AM

I was driving to see the joinery subcontractor. Jake, the company’s project manager, was waiting for me. After seeing Jake’s shop drawings for the kitchen island and cupboards I had feeling we were not going to get what the architect wanted; and at the same I wanted to make sure he was working on this job, as the last thing I wanted to experience was a subcontractor committing to a date and not being able to deliver.

Jake didn't have a happy face when he saw me. Our job was not big enough to justify seeing me early in the morning. It was a kitchen and some office space, nothing more. He took the job because he wanted to increase his chances of winning the joinery work for the 200 units the developer was planning to build later.

‘G’day,’ I said.

‘Not really,’ he replied.

‘Show me the drawings,’ I said, after popping into his office.

The architect had at the last minute decided to combine the kitchen island with the dining table. The design looked great on drawings, but I knew that the transition from the benchtop caesar stone to the timber table was not going to be easy to solve.

The drawings from the architect were showing a seamless transition, but both materials have a different edge finish. I had a feeling we were not going to achieve the end result the architect desired.

I asked Jake what he thought, but he shivered his shoulders instead.

After a good 30 minutes looking at our options, we felt the best way to go about it was to chamfer the edges equally rather than trying to deliver a squarish finish as the architect believed we could do.

The architect was picky, but so was I, and in the end I was happy with the design solution Jake and I had accomplished. He prepared another set of shop drawings and emailed everything to the architect for his review and approval. He would probably try to reject our proposal, but what were the alternatives? He simply didn’t understand how his materials of choice were processed at the factory.

8.30 AM

Gary, the contracts administrator for this job, called me. He was a young chap, working on site.

‘Can’t find a local supplier for the tactiles,’ he said.

‘What do you mean?’

‘I am not sure. It seems a great deal of these tactiles are coming from Melbourne and might take several days before we can have them on site. Can’t find anything similar to that silver finish the architect wants in Sydney,’ Gary said, and added, ‘also, we might even have problems with the final certificate.’

‘What do you mean?’

‘The specs are wrong. These metal finishes have almost the same colour as the concrete floor. The certifier won’t allow it if he doesn’t see enough contrast between the tactiles and the concrete. We need to get the architect to approve something else.’

I breathe in and out, ‘listen the architect is going to be on site today. I will have a chat with him and let you know later what we have agreed.’

‘Sounds good.’

Gary was about to hang up when I stopped him. ‘What about the lights, any news?’ I asked,

‘I chased them yesterday. Nothing has arrived yet. Cameron reckons we should be fine.’

‘Cameron is an idiot. He promised us the lights two weeks ago. We are three weeks away from practical completion. If the lights are not on the docks next week we have to start looking for an alternative. And tell him that we will charge LADs.’

‘Don’t think he cares that much.’

‘Why are you saying that?’

‘I don’t know. It’s just the feeling I get everytime I call him. He probably doesn’t think that our order is that big to bother.’

‘Probably. Also, it never made any sense from the beginning to put lights in the specs that have to travel from Germany, when we have such a tight program.’

‘It was easier to pick something more local.’

‘Yes, it was if the architect and the client would play along with it. According to them we read the spec we should have known about it. Still, it would have been a lot easier to swap them. The end result would look the same. Did we send Cameron a contract or a purchase order?’ I asked.

‘Purchase order.’

‘Tell him we will charge LADs anyway.’

‘Do you think charging him LADs will help the boat to sail faster to Australia.’

‘Listen, chasing them is better than doing nothing.’

‘It seems like nothing to me.’

‘Not to me.’

Gary was about to hang up the phone, when I asked, ‘and what about the timber sample? Have you asked the supplier to send us one?’

‘Yes I did.’

‘Good stuff. See you soon, then.’

9.30AM

I arrived on site.

The door manufacturer was about to install the sliding doors. These were going to be the doors between the terrace and the kitchen. The frame was white. It felt wrong to me. It didn’t seem to match the architectural design, but no one seemed to have noticed it.

I went upstairs. Where our site office was located. We had the luxury of having a mezzanine room just for us.

I spread the drawings over my table. The specs were clear. The frame was meant to be painted with a brownish colour.

I checked our contract with the supplier, which was mostly a purchase order the supplier had sent us, and it did say “white frames”. I was not sure if I was going to blame the CA or the supplier for the mistake. But it made no difference. We were working around the clock. It was more important to move forward and replace it with the correct one.

I went downstairs. I approached Serg and told him, ‘that’s the wrong frame.’

‘What do you mean?’

‘That’s the wrong colour,’ I said.

‘No it’s not,’ Serg said, ‘that’s what we had on the contract.’

‘Yes, I have checked the contract too, but it’s not what we asked you to price, isn’t it?’

‘What do you mean?’

‘Here, have a look at the spec.’

Serg, had a look at the drawings. He scratched his head seconds later.

‘Bugger,’ he said, but there was nothing we could do about it.

‘You need to take this one with you and come back soon with the correct one. When can you be back here?’

‘I am not sure. I have to go back to the office.’

‘Please do.’

Serg left the site with his men back to his office. He didn’t seem happy. He was going to back charge us for the mistake, which made no difference. As I told him, ‘we will sort out the payment later. We need to get it right first.’

10 AM

Steve, the structural steel guy, popped in. He didn’t look happy.

He had been on site two weeks before to rig the steel structure. We didn’t have a laser on site to accurately position the steel pieces, but they didn’t bring one either. One week later when the subby working on the feature timber wall came to site we noticed that one column was 50 mm of the thumb. The timber pieces simply didn’t fit.

Initially I felt it was better to ask the carpenter to cut a few more timber pieces, but he was clearly not happy about it, and then he mentioned that the timber was going to take several weeks to sort out as they didn’t have it in stock.

We could use another material, but that was also going to take several weeks to organise. I called Steven. He said he could fix it, but he wanted to be paid first.

‘You are lucky to be paid at all, if you don’t come to site to rectify this mess,’ I said.

Steve started his round of moaning, which I was able to cut short when I told him, ‘I will have to employ someone to rectify your work and back charge you. You don’t give me any other option.’

Steven started banging the column several times. He banged the columns hard. The noise was hurting my ears. He welded everything later and went off 20 minutes later.

10.30 AM

I sat with Gary to run through the outstanding items of the job.

We often spent a great deal of time looking at the drawings trying to figure out what could go wrong. Trying to forecast problems before they actually happened, but these happen nevertheless.

‘Can you make a note and call Serg this afternoon. We need to know as soon as possible when the sliding doors are going to be installed.’

‘I can’t believe he put us in this mess,’ Gary said. I could notice he was a bit nervous. Most likely afraid I would blame him for signing the contract with the wrong specification.

‘It doesn’t matter anymore,’ I said, ‘it was good that we spotted it. It could have been a lot worse. What else should we be worrying about?’ I asked.

‘Well apart from the tactiles everything else is ordered.’

‘Did you get the timber for the sample board?’

‘Yes, I did, although I am not quite sure why the client wanted to use american timber if it’s not on the specs,’ Gary wondered.

‘They want the showroom to look amazing. Way above the specs they are planning to fit the units with.’

‘You kidding me? Are they planning to cheat the buyers just like that?’

‘I do admit that if I enter a showroom I should assume the unit will be similar, which most likely will be, just the quality of the materials won’t be as good.’

‘That’s so sneaky.’

‘Maybe, but we haven’t been asked to build the units, have we? As far as I know we are only required to build this showroom. Our responsibility ends here. What about the timber veneers, how are we looking?’

‘We are running out of timber veneers the carpenter told me. Whoever did the calculations was pretty bad in maths,’ Gary said with a grin on his face.

I had done the measurements, and Gary knew about it. There was no time to lose and after so many design changes I ended up drawing the shop drawings myself. We couldn’t be waiting two to three weeks for the carpenters to show up on site to do their own measurement. I was not sure where I went wrong, but we ended up 5 panels short. These days, since we do everything in 3D, most likely this situation wouldn’t happen.

‘Do they have more timber veneers in stock?’ I asked.

‘They should have. Shouldn’t take more than 2 days to get the extra panels on site. Although I reckon we have to pay beforehand.’

‘Can you please sort it out as soon as possible, both the payment and the veneers.’

‘Yes, I can.’

‘Call the office to fast track payment,’ I suggested.

12PM

The print man called complaining that the ceiling was too low.

‘It can’t be,’ I said.

‘It bloody is,’ he replied.

‘Let me check it,’ I said.

I asked Lloyd to measure the FFL to the ceiling.

‘It’s on the drawings,’ Lloyd said,

‘Well, the print man has a different opinion. Can you please check and come back to me.’

Lloyd did. He came back to me 15 minutes later.

‘It's not 5,20 metres as shown on the drawings.’

‘How much is it?’

‘4.80 metres.’

‘S--t,’ I said.

The print man was right. The ceiling was lower than shown on the drawings. It wasn’t a major problem. We could print another board, but we had to pay the supplier twice and he couldn’t back charge the client as it was our mistake.

As it turned out, the architect had decided to design the showroom without a proper survey. He surveyed the floor, but failed to notice the concrete beams going across the ceiling. When the suspended ceiling was installed the supplier felt it was a lot easier to push the ceiling down, and install it below the beams.

We assumed that no one was going to notice it, but the print man did. His board didn’t fit the wall. It didn’t take as long to realise that the carpenters, who were about to install the feature timber frame, were going to notice the same in a few days. I asked Lloyd to get in touch with them and explain the situation.

12.30 PM

The tiler came to see me. He was furious.

LUNCH TIME

I left the site. I went to Leichhardt for a cappuccino and a sandwich. Somehow my Italian looks and accent always translated into a good service in this part of Sydney.

1.30 PM

I started preparing for my site meeting with the client.

I had a list of variations that needed to be discussed and agreed with the client. These were variations to the contract, although the client had asked for the extra with the intention of not paying for it, or at least was quite content to avoid the conversation.

2PM - CLIENT MEETING

The client arrived with two sales agents and the architect.

Everyone seemed happy with the progress so far. I approached the architect and asked, ‘how are we going to fit the bath?’

The bath that had been specified only allowed for a 25 mm tile on the side and our tiler was unsure how to cut the tiles. Even more unsure if he had understood the design as it looked odd to him.

The architect had a look at it. As we suspected, he didn't like it. He wanted a perfect fit. He said it was our fault but we measured the distance between the walls and we were spot on as per the drawings. The bath just didn’t fit the way he expected.

‘Can you squash the walls?’ the architect asked.

‘We can, but it will cost some precious time, and money.’

‘What do you suggest?’

‘It’s better to use a smaller bath. A few centimetres less will make a difference.’

The architect didn’t like my suggestion and went for a random walk on site. He came back 5 minutes later and agreed to it.

‘How do you want us to cut the tiles?’ the tiller asked.

The architect looked at him and did a sketch on the bath hob. He knew that the sketch was going to disappear after the first paint, so I took a picture and emailed it to him. In case he didn’t like it later, I had evidence that it was his suggestion.

We also had to send the bath back and hope that they had something else on stock, ‘and this is a variation,’ I said to the client.

‘A variation? For what, to change the bath?’ The client said.

‘Yes. The tiller was pretty much done with his work. He needs to come back to finish it.’

‘We shall see about that,’ the client mumbled in disdain and continued, ‘let’s finish the job first and discuss the extra costs later.’

‘I don’t think so, now is the right time to do it so that we don’t land in arrears,’ I argued.

‘What do you mean, ‘in arrears’? If we don’t like the cost or there’s a problem with it, you have to rethink, reposition and return it, mate.’ Suddenly, the tone of his voice changed. ‘I don’t see any reason to have these discussions right now.’

I felt there was no point in continuing to argue. It was quite obvious that the matter would be decided contractually.

We took another tour of the site, and five minutes later, the client left. The architect stayed behind for a few more minutes. Just as he was about to leave, I stopped him and said, ‘We need to talk about the tactiles.’

‘What about them?’

‘There isn’t enough contrast between the concrete and the tactiles,’ I said.

‘Bullshit. The tactiles are perfectly fine.’

‘So you are comfortable that the stuff you put in there will be certified.’

‘Yes.’

‘And what if we don't get a pass?’

‘I am not responsible for achieving OC, you are. If you want to change something you better get the paperwork ready and send it to me,’ and the architect left the site with a smile on his face.

I went upstairs and told Gary to order the tactiles from Victoria.

‘Did he agree to it?’

‘No, he didn't, but if he spots the difference we change it later. It's cheaper that way, and by the way send another variation to the client for re-doing the bathroom.’

‘For how much?’

‘3 days should be enough for the tiller to finish the work. Don’t forget to chase him for approval.’

‘Will do.’

3.00 PM

The carpenter came to see me. He was curious about the detail we were going to have underneath the timber screens.

‘What do you mean?’ I said

‘Come here and have a look.’

We went downstairs. He pointed at the ceiling and I sighted.

Once again if a proper survey had been carried out, the design would have picked up this detail. The timber screens moved along the wall nicely with a bulkhead detail at the end. The drawings assumed a continuous bulkhead, from end to end, which was wrong.

Two minutes later. ‘What should we do?’

‘I don’t know. How I am supposed to know.’

The answer was not on the architectural drawings either.

We could send a RFI to the architect, but we didn’t have the time to do so. I had another look around. Grabbed a piece of paper. Five minutes later gave the carpenter a half done sketch,

‘Do this instead,’ I said. The main purpose of your work was to deliver a show room that needed to stay put for 6 months only. No one was going to spend that long looking at the ceiling. I knew that the architect would dislike my design solution, but his drawings were wrong too.

3.30 PM

I heard a strong bang. One minute later someone was in my office looking for the 1st aid case.

‘What happened?’ I asked.

‘Lloyd was lucky.’ The subbie said.

I went downstairs and saw Gary cleaning Lloyds face with cotton balls. Apparently one of the timber sheets had fallen and hit Lloyd.

Luckily, Lloyd was wearing his helmet and safety boots. Having someone seriously injured on site would put the program under pressure.

4PM

Lloyd and Gary had left, together with most of the labours. Only the tiler was still on site finishing off the bathroom. I stayed behind to clean my inbox.

I called the electrician.

‘Josh, I need you back on site at the end of next week.’

‘Is the site ready for us?’

‘Yes, it is.’

‘Do you have all the lights.’

‘Yes, we do.’

‘Okay then. I will send someone on Monday to see how things are going. Speak soon,’ Josh said and hung up the phone.

5:30pm

I walked downstairs. Asked the tiler if he was planning to work late.

‘I need two more hours to finish the rest of the bathroom,’ he said, ‘and I can’t come back next week to finish the bath,’ he added.

‘Why not?’

‘Too busy.’

‘Too busy my ass. It won’t take you more than half a day to do it.’

‘Too busy.’

‘Listen, I am happy to let you work now and you close the door when you leave. If you want to work after working hours next week, that’s fine, but that bath needs to be done before the end of next week.’

‘Too busy.’

He will see about that. I walked off and left the door ajar. Health and safety regulations ask for a site manager to be present on site all the time, but it had been a long day and I was feeling tired. I went home to spend some quality time with my children.

As my daily life has tried to illustrate, a tight programme is a bitch. Even more so with an unsupportive client and architect. The client was supposed to provide the design, and although it worked on the plan, it was flawed at the ceiling level. It was an extra layer of complexity that nobody asked for. The survey, which is essentially a foundation document for any design phase, hadn't been done properly. The architect went to the site with a tape measure and measured what he could, but he couldn't measure the ceiling accurately. Any proper surveying company could have done that for a few thousand extra, but it didn't occur to anyone at the time to do it.

At the same time the client kept asking for design changes, which is always a tricky situation for the contractor to play along with. In most construction contracts, a contractor cannot refuse to carry out a variation, however, in most instances when everyone is fighting against time, it's unlikely that the job can stop so that the variation can be properly discussed. Majority of variations add complexity to a project and it’s always a fight to get an extension of time for it.

244 Parramatta Road was still completed on time, albeit a few weeks later than the client wished. He was not in the best mood when we reached the end. We probably won the job because we were the cheapest tender; and our construction programme was probably the most attractive too. We promised to deliver faster than the competition, however, jobs not moving according to plan are not an oddity in this business.

Extensions of time (draft)

In most of the projects I have worked on, time is of the essence. Since it's not something we can buy off the shelf, discussing delays and seeking compensation is not unusual. However, as my story tried to illustrate, keeping a project on track is no easy task. Some of the major challenges that a contractor is up against include subcontractor interfaces, lead times and commissioning.

Generally speaking, the contractor is only obliged to hand over the project by the agreed date. In some jurisdictions, the contractor may have to pay liquidated damages if a construction milestone — for example, the completion of the roof — is missed. I don't personally see how this can be justified since the completion date hasn't changed. However, when I negotiated a construction contract in Finland, I was surprised that this particular feature of the contract wasn't challenged.

The norm in most construction contracts is that if practical completion is missed, there is a serious possibility that either the client or the contractor will have to compensate the other party for delay damages. As we saw in the section on variations, no one likes to pay extra. Therefore, seeking extensions of time is common practice in the construction industry.

There are a number of things to consider when assessing the merits of an extension of time. One is to understand who owns the float. The float is the contingency, or extra time, allowed for the completion of each task. In most cases, this is zero, since clients prefer to award contracts to construction programmes that promise the fastest delivery times. Nevertheless, the contractor usually owns the float, regardless of what has been allowed.

Situations in which the principal has delayed the contractor, for example by taking too long to review documentation, can also lead to extensions of time and the possibility of the contractor claiming delay damages.

Awarding the contractor an extension of time opens up the debate as to whether the contractor is entitled to claim for delay damages. It is not unusual for site overheads to cost 10% or more of the contract price. Unsurprisingly, extending the completion date by even one day can put the project under financial pressure. While some situations, such as adverse weather, automatically lead to an extension of time, they generally do not qualify for delay damages. The contract must specify when the contractor can seek compensation. If this is not specified, it can lead to a costly dispute over who is at fault.

In my experience, the timing of the delay affects the actual cost, as site overheads can vary greatly during construction. A crane is an expensive item for a contractor to carry, but it is rarely an expense from start to finish of a job. It is often dismantled once the lifts have been installed.

Therefore, it is important to include a schedule of rates for preliminary items in the construction contract, such as site sheds and hourly rates for site managers. This means that, when a delay claim goes through the system, the second stage of the variation has already been agreed. The discussion can then focus on the merits of the claim instead.

Liquidated and ascertained damages (sketch)

In most cases, it is the contractor who is late. What can the client do in these situations?

Contractually, there are two ways to approach it. One option is to elaborate on the acceleration clause. When included in the construction contract, this clause gives the client the right to force the contractor to accelerate the work at their own expense if it is clear that the work is going to be delayed. It is important to specify the conditions under which the clause can be enforced. Although we may suspect that the contractor will be late, the most important thing is to have documentation to prove it.

The second option is to threaten the contractor with liquidated and ascertained damages (LADs). We discussed LADs in the previous chapter. As I mentioned previously, I have negotiated this clause numerous times in the past, but I have only enforced it once in practice. It was a project with an extremely tight programme. The contractor was keen to move into a new market. When the practical completion date arrived, the contractor was nowhere near completing the project. The client was facing a loss and used LADs to recover some of it. The result was not what we expected. The contractor started rushing things, which resulted in poor workmanship and several defects that they tried to argue their way out of. Their argument was flawed, but establishing this took a long time.

While the above contractual clauses can provide a sense of financial security, experience has taught me that assisting the contractor yields better results.

Managing contractual relationship vs. the propagation of bullshit (sketch)

My illustration of a day in the life of a project manager was intended to show the challenges of keeping a project on track. I was also keen to show the position the client had taken. In retrospect, I feel that if the client had collaborated with us from the beginning, the project would have been completed much more quickly and cost-effectively.

When problems start to arise during construction, clients tend to behave in one of two ways. They either behave cooperatively and supportively, seeking to find a solution to the problem, or they behave oppositely, often making statements such as, 'this is not my problem'.

Write about my experiences managing my own projects.

Supervision (sketch)

I have visited some amazingly constructed buildings. The Nezu Museum in Tokyo was mesmerizing. One of my projects in Finland featured some of the most beautiful structural steel I have ever seen. However, telling contractors that their work does not meet my expectations is rather common.

Quality is a complicated issue. Firstly, we need to consider the purpose of the building and the available budget, but it is frustrating to pay a high price for poor workmanship, as well as to pay a low price and expect a high-quality build. Supervision during construction is therefore extremely important.

As the saying goes, 'trust is good, but control is better'. In places like Sweden, contractors receive little supervision, but supervision is required in most other places I have worked.

Poor supervision can lead to defects later on, meaning subcontractors have to return to the site. Often, they are not paid for this work, and the relationship can become contentious.

I will write about the Helsinki project and the lessons I have learned.

Defects liability period. The Schofields School story and key lessons learned (sketch)

Defect liability periods vary from country to country, but typically last several years. In Australia, they are normally two years for visible defects and five years for latent defects, such as those affecting the structure, which may take several years to become apparent.

Latent defects can be difficult to spot and costly to fix when they materialise.

I became involved with the Schofields School project after its completion. It was rather odd to be working on a completed project, but I soon realised what a challenge it would be. The project had a long list of defects that needed fixing. A very long list. The following are the lessons I learned.