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Construction News

Sun April 21 2019

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How a fencing subcontractor recovered an extra 300,000k on a 500,000k contract

20 Aug 10 Subcontractors in the construction industry can often find themselves at a disadvantage when working for a much larger main contractor with the backing of a nationally structured PLC organisation, particularly when a project becomes problematic through factors outside the control of either party.

Subcontractors in the construction industry can often find themselves at a disadvantage when working for a much larger main contractor with the backing of a nationally structured PLC organisation, particularly when a project becomes problematic through factors outside the control of either party. Commercial consultants provide the necessary support to enable the subcontractor to obtain his/her full entitlements in such situations, which are common on many construction projects.

RJH Commercial Consulting provided such support to South Yorkshire based CPC Fencing Services Ltd, a £3M turnover safety fencing specialist contractor; assisting them to overcome the contractual and commercial barriers which the much larger main contractor could potentially raise in order to minimise the ultimate level of payment.

The subcontractor’s works had been subjected to delayed access to the site and fundamentally changed working methods which prevented CPC from achieving anything near a normal level of output. As a result, the costs being incurred far outweighed the value which it was possible to generate from the measured work completed each shift.

The Brief

CPC commissioned RJH, qualified construction professionals with considerable industry experience, to help in resolving the resultant payment disputes arising on two particular motorway projects. The consultancy service was led by Richard Hildrick, a Chartered Quantity Surveyor, Chartered Builder, and Fellow of the Chartered Institute of Arbitrators, with a degree in Quantity Surveying and a Masters in Construction Law and Arbitration.

Offering a range of consultancy services, including dispute resolution, contract advice and all quantity surveying services, RJH subsequently assisted their client, firstly by reviewing and providing a report on the issues arising from the specific sub-contract documentation, which could have potentially had an impact on payment entitlement. RJH then assisted the client in the preparation of compensation event quotations which were both robust and also fully addressed the client's payment entitlement. In total, the two projects as constructed comprised a final value of over £800,000 although the original sub-contract sums had totalled less than £500,000.

The Process

RJH initially reviewed the conditions of sub-contract that were already in place and then devised a strategy to deal with the specific challenges of each individual account.

RJH MD Richard Hildrick said, “We initially arranged meetings with the appropriate decision makers for the contractor to ensure that they fully understood the commercial impact of the conditions under which our client was being forced to carry out his works. Appropriate correspondence and contractual notices were then raised and followed up throughout the course of work on site. Key items of correspondence were put in place and written agreements secured from the contractor which provided the solid foundations upon which we were able to build a successful payment and delay claim.”

RJH worked closely with CPC’s directors and staff to enable them to produce comprehensive evaluations of the many compensation events identified, and subsequently led the negotiation of an acceptable settlement of both accounts, over the course of several months and many meetings.

RJH assisted in the recovery of over £300,000 in payment for additional work, by implementing the following plan:

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1. Identification of the risks and opportunities arising from the subcontract documentation.

2. Putting appropriate correspondence in place and obtaining key agreements in principle from the contractor.

3. Establishing a dialogue with the appropriate personnel within the contractor.

4. Ensuring that the required contractual notifications were issued whenever required, and that the necessary records were being maintained by the site project teams.

5. Overseeing the preparation of detailed payment entitlement claims by CPC’s team.

6. Leading negotiations of settlement discussions, including putting in place all necessary contractual correspondence.

The Results

The final outcome from the project is that CPC are able to use the commercial management learning from these difficult projects, to avert any such potential problems on future projects. In addition, the recovery of over £300,000 in additional payment entitlement was a 60% increase in the original subcontract sums.

Of key importance, the profitability of these projects, which compromised a significant proportion of CPC’s annual turnover, was protected. Ultimately, the client's return on investment was over 1500%, relative to RJH’s fees for the duration of the project work.

Sarah Phillipson, Company Secretary of CPC, expressed how pleased she was with the outcome, explaining that “we enjoyed a very close working relationship with RJH, who ensured that a successful outcome was achieved and we are now in a better position to deal with any problems we may have in the future before they escalate, thanks to the expertise of Richard and RJH”.

Regarding future plans for the partnership between RJH and CPC, the work done by RJH to settle the specific dispute means that further action will be unnecessary. 

MPU

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