is-poor-contract-administration-costing-you-money

Is Poor Contract Administration Costing You Money?

By Ryan Ashworth, Civil Engineer at PEAKURBAN

Poor contract administration can lead to lower development profits, protracted disputes, missed settlements and sub-standard infrastructure.

Whether it’s a lack of site experience, a poorly constructed contract or just a lack of understanding of what’s required, it seems to be a common problem we hear throughout the development industry. At PEAKURBAN, our approach to Contract Administration is different. We think about it more as Contract ‘Management’ rather than ‘Administration’. Whilst both are important there are key differences between the two functions and these differences can significantly influence the outcomes on a project.

Contract Administration (or CA) is a more transactional based, ‘post box’ function. Tasks performed are predominantly process based, i.e. process progress claims, receive contractor reports, process variations, maintain the contract documents, issue drawings and organise meetings. Often, it seems the CA role is performed by unsupervised, junior staff members being thrown into the deep end and working it out as they go along. There is no need for a relationship with the Contractor in the CA role.

What we believe Developers expect is senior, experienced people performing a Contract Management (CM) role i.e. a driven person that actively leads and manages the project. They are responsible for relationship management, dispute resolution, investigation and assessment of variations raised by the Contractor or as a result of design changes, monitoring of KPI’s, quality auditing, escalation of issues as required, contract reporting and the chairing of regular meetings with all stakeholders. This role is an assertive, solutions focussed role.

With this clear delineation of roles, we can now further assess some of the issues that cause projects to run poorly and identify a few ways to reduce poor project outcomes.

  • Right People, Right Role: The right people with the right experience need to run contracts. Too often the organisation administering the contract appoints whoever is available or whoever has spare capacity rather than match the task at hand with the skill set of the individual. The right balance between experience, technical and interpersonal skills are essential to successfully manage contracts;
  • Balancing the risk: Applying a standard risk approach to all contracts is risky. Without the right balance of risk e.g. transferring all risk to the contractor, inevitably leads to a higher contract price, potential shortcuts and often costs the developer significantly more. For instance, often geotechnical certification of filling operations is transferred to the contractor. If they do not employ a competent geotechnical engineer, or implement only part time site supervision, then potentially non-compliant fill is placed, compaction not achieved and the development platform not fit for purpose. This risk then generally comes to light when developers are trying to settle lots and site classifications differ amongst stakeholders resulting in delays, contract terminations and reputations being tarnished.
  • Assertively Manage Contracts, Don’t be a Post-Box: When representatives are onsite they shouldn’t be just enjoying the sunshine and undertaking site inspections. They should be looking ahead, troubleshooting issues, identifying potential causes of additional cost or delay and developing solutions to mitigate them. Planning the works program in reverse, starting from the plan sealing date and working backwards, ensures construction milestones are continually monitored and have the best chance of being achieved;
  • Senior People Actively Involved: Senior people with greater site presence during high risk activities reduces risk of cost blow outs and time delays. For example, when high risk / high cost activities such as earthworks and pavement works are being undertaken, more time should be spent on site monitoring and inspecting the work. For example, the contract might call for 150mm of topsoil stripping but in practice, only 50mm needs to be stripped. Unsuitable material might just be wet, not unsuitable. Prioritising better quality material for road boxes to minimise pavement depth is another big cost saving opportunity;
  • Contract Management from the Start: Gone are the days of simply pushing out designs, preparing a Bill of Quantities and tendering the works for a lump sum price. Construction and contract issues need to be considered from the day that design commences. Recently we worked on a site to design an efficient bulk earthworks and retaining wall strategy by collaborating with a civil contractor and geotechnical engineer during the design process. We implemented a topsoil blending strategy, determined depth to rock and designed the site with excess spoil, knowing that a nearby project required significant import fill. The earthworks outcome being more export but at a low cost with substantially less retaining wall costs; and
  • Efficient Accurate Records Are Your Insurance Policy: Its essential to maintain accurate records of all site meetings, inspections and site directions. Unfortunately, there will be a time that these records will need to be accessed quickly and efficiently. What was the status of construction, who was on site, what instructions were issued? These are all very good questions neck deep in a problem and having this data at your fingertips will be important. We’ve commenced using a customised mobile site inspection app to enable the accurate capture, sharing and reporting of all site activities in real time. This allows for faster communication, transparency in process and improved management of issues.

Contract Administration is not Contract Management.

Next time you are seeking the services of a consultant to perform a ‘Contract Administration’ role, it might be prudent to ask about their level of Contract Management experience. It might make all the difference in delivering a project on time, within budget and to the quality standards that you expect.

Updated EDQ Road Standards – What’s the impact on your project?

EDQ have released a new version of their ‘Street and Movement Network’ guideline. The new guideline can be accessed here. There are some significant changes included in the latest revision which may adversely affect development yield and cost. Some more notable changes include: Road reserve widths and pavement widths have changed for all road types, … Continue reading Updated EDQ Road Standards – What’s the impact on your project?

Launching PEAK Ai – Improving Project Design, Planning and Execution

The engineering and construction industry is at the cusp of a new era, with new applications and tools that change how companies design, plan and execute projects. At PEAKURBAN we are always trying to maximise the value and improve the level of service we offer to our clients. Quite often this involves developing smarter infrastructure … Continue reading Launching PEAK Ai – Improving Project Design, Planning and Execution

Changes to the Security of Payment Act

By Troy Schultz, Principal Engineer, PEAKURBAN At PEAKURAN, we aim to stay on top of key changes so that we are equipped to continue protecting our client’s interests. You may be aware that the Building Industry Fairness Act 2017 (Qld) (BIFA) commenced on 17 December 2018. This replaces the Building and Construction Industry Payment Act … Continue reading Changes to the Security of Payment Act

Managing Costs and Value in a Slower Market

By Andrew Ngo, Principal Engineer, PEAKURBAN There’s a lot of media articles about slower sales and a tighter credit market across the country, especially in Sydney and Melbourne. Having been through a couple of ‘challenging’ times previously, this inevitably affects market confidence with developers attentions more sharply focused on finding cost reductions and optimising value … Continue reading Managing Costs and Value in a Slower Market

PEAKURBAN Turns 2

It’s hard to believe that it’s been 2 years since we opened the doors at PEAKURBAN. You never really know how things will turn out but the journey thus far has been both exciting and fulfilling. We started PEAKURBAN believing that the old way of doing business (at least in engineering circles) was fast disappearing … Continue reading PEAKURBAN Turns 2

PEAKURBAN Planning and Survey

We are delighted to welcome Tim Connolly (Director – Planning) and Nathan Wilson (Principal Planner) to the PEAKURBAN Planning and Survey team. Tim has over 30 years’ experience in statutory and strategic planning and has worked on many large and complex projects including Warner Lakes, Riverbank, Riverparks, Park Vista, Capestone, Brentwood, The Meadows and Ridgeview. … Continue reading PEAKURBAN Planning and Survey

How to Get Your Survey Plans Sealed Earlier

A key milestone for any urban development project is plan sealing, that critical event that facilitates registration of titles and settlements, and the trigger for project revenue to be realised. In talking with several developers, they describe an increasingly arduous and frustrating process of back and forward, multiple inspections, delays and inefficiencies. Whilst there’s always … Continue reading How to Get Your Survey Plans Sealed Earlier

Can’t get stormwater discharge consent? You may not need it.

Whether or not a Legal Point of Discharge (LPOD) exists has been for a long time, a very grey and murky area. The consequences of this ambiguity have meant stalled projects, refusal of development applications, cost over-runs and quarantined development sites. We have heard of some developers even needing to store or pump out stormwater! … Continue reading Can’t get stormwater discharge consent? You may not need it.

Conversion Applications – Get the credits you are entitled to.

In talking with several developers recently, it seems that the issues around trunk and non-trunk infrastructure and what’s creditable v. non creditable is alive and well. A few developers that we’ve spoken with are quite frustrated in having received development approvals imposing conditions that require them to deliver (without credits) what they believe to be … Continue reading Conversion Applications – Get the credits you are entitled to.

Infrastructure Agreements: Negotiating the Right Deal.

By Andrew Hunter, Civil Engineer at PEAKURBAN Negotiating the right deal in an Infrastructure Agreement (IA) is critical in ensuring the commercial viability of a project. On too many occasions we have seen IA’s that are one sided, impose excessive infrastructure standards and as a consequence result in works or financial contributions that stall projects … Continue reading Infrastructure Agreements: Negotiating the Right Deal.

Is Poor Contract Administration Costing You Money?

By Ryan Ashworth, Civil Engineer at PEAKURBAN Poor contract administration can lead to lower development profits, protracted disputes, missed settlements and sub-standard infrastructure. Whether it’s a lack of site experience, a poorly constructed contract or just a lack of understanding of what’s required, it seems to be a common problem we hear throughout the development … Continue reading Is Poor Contract Administration Costing You Money?

Engineering value in a tough market – the site acquisition challenge

By Andrew Ngo, Principal Engineer at PEAKURBAN 2017 so far has been an intensely competitive year when it comes to buying development sites. Despite this, over the last couple of months we’ve helped four clients successfully acquire new projects – three residential development sites (1,830 lots) and one retirement project (145 sites). So, what have … Continue reading Engineering value in a tough market – the site acquisition challenge

Giving up too much land?

A number of clients have come to us recently raising concerns about losing too much developable land, due to easements and wider infrastructure corridors being imposed by Authorities.  The reason, they advise, is for future maintenance requirements.  What many clients may not be aware of is the maintenance method of “pipe bursting” which in many cases, means the … Continue reading Giving up too much land?