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Subcontractors should get contract variances 'in writing', urges Bibby construction MD



In an exclusive interview with Development Finance Today, Jim Davis, managing director for construction at Bibby Financial Services, implored subcontractors to get any variances to originally agreed contracts in writing, so that everybody is on the same page with regard to what has been decided.

Earlier this month, Jim declared that subcontractors were entering “the most challenging time” of the Covid-19 outbreak, as construction sites started to reopen.

Jim explained that, with cash reserves used up, the reopening of construction projects could pose a significant threat to the financial viability of many subcontractors.

Many sites have reopened this month and have implemented stringent procedures to comply with the restrictions imposed by social distancing and health safeguarding requirements

In a follow-up interview, DFT asked Jim how subcontractors can manage contracts which were written before the pandemic changed the way sites are now run.

From a cashflow point of view, he stated that they will need to calculate what they can afford to cover for the period until they’re able to raise applications or invoices — which may mean having less people onsite, or buying materials in stages, rather than upfront.

He also highlighted that there will be inefficiencies created by social distancing at work.

“…Now, you'll only be able to have one worker in [a] confined space doing a job, and the subcontractors need to have excellent communications with the main contractor about who’s done the risk analysis onsite,” he said, adding that, in addition to distancing, there would be also be rules and regulations in terms of entering the site, parking, and transport.

He questioned who would cover the cost associated with these inefficiencies.
 
“If a contractor is supposed to go from date ‘A’ to date ‘B’, where does ‘B’ finish now?
 
“Is that going to be two, three, [or] four weeks later and, if there is any cost incurred, whose cost is that? 
“Our fear [is] that some of that cost will fall on the subcontractors.”

Jim also stressed that it was important to find out who was going to cover the expenditure of PPE equipment.

He emphasised that subcontractors should agree these issues with the contractor before they get back to work.

“They'll be dead excited at the moment, they'll be wanting to get back on site, the main contractors will say, 'Right, the doors are open we want you here', but have you actually had those discussions about the safety [and] social distancing aspects, the working environment, and, really importantly, the costs and time of completing each stage of that contract? Because they will differ from the originally agreed contract.
 
“…It always comes down to that communication between subcontractor and main contractor and, if there [are] variances to the contract, get those variances in writing so everybody knows exactly what has been agreed.”

DFT also asked what small things subcontractors might not realise are important now.

Jim believed that subcontractors may neglect to take into consideration the overall dip in efficiency on site.

“So, the subcontractor may well be able to fulfil their part very successfully, but it’s all the other moving parts of a site that may cause them to not be able to complete the work that they're contracted to do,” he explained.

As a result, he thought a conversation needed to be had around third-party influence, whether that is further lockdown if we experience a second peak, or if subcontractor ‘A’ can’t do their work to allow subcontractor ‘B’ to do theirs, even if the latter is ready to do so.

“…That’s a very difficult conversation to have, and very difficult to put parameters around, but at least if they're having the conversation with the contractor, they're thinking about that potential issue.”


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