Tighter margins increase contractual disputes

“The GFC has had a rippling effect throughout the economy, and not surprisingly, the construction sector has been the barometer of this economic downturn,” he said.
Generally, as it gets harder to secure payment at the top of the contractual pyramid, it becomes even more difficult for those further down to get paid, he said.
“But disputes in the construction industry, are more often than not the result of unbalanced contract relationships, or inadequate contract administration. When everybody is ‘mates’, we often overlook the important things like fair and reasonable contracts, written instructions to vary works, written agreement to the cost of variations, and all the other verbal agreements within the construction sector that should be in writing, but often are not,” Welsh said.
All too often, well meaning actions on behalf of subcontractors result in delayed or non-existent payment for work carried out in good faith. “There is nothing new here. Subcontractors will continue to be used and abused unless they start to help themselves, but it is not as difficult as it may seem,” he said.
Welsh has a few golden rules:
1. Don’t confuse business with pleasure – ‘She’ll be right mate’ is not good enough.
2. If you are in Queensland where RICS is based, ensure you have the correct Queensland Building Services Authority licence before you sign any contractual agreements.
3. Insist on a written contract before you undertake the work.
4. Make sure that you understand and agree with the terms of a subcontract before you sign.
5. Insist on written instructions before you undertake any work and written variations before you undertake any variation work
6. Don’t let disputes fester. Try and resolve any issues as and when they occur.
7. Know your dispute resolution legislative mechanisms, for example the Building and Construction Industry Payments Act (“BCIPA”).
8. Don’t be afraid to use adjudication under the relevant security of payment legislation, e.g. BCIPA, to pursue payment.
RICS DRS offers free (or pro-bono) adjudications for simple matters, where the payment claim is up to $1500 including GST, so it costs you nothing to give it a go. For claims over this amount, a range of competitively priced options is available.
Welsh said, “There are a myriad standard subcontract terms readily available to use. Many developers and contractors have their own standard terms of subcontract, but be wary of these since they generally seek to protect the developer or contractor at the expense of the subcontractor. “Too, always review the terms of the subcontract before signing. Be sure that you understand what you are letting yourself in for and if in doubt seek professional advice.”
More information: 1300 953 459, www.ricsdrs.com.au