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Are Quantity Surveyors Needed In Construction?
0 Playsin 4 hours
In this episode, Jason and Carlos are joined by Thomas Schultz and special guest Peter Fitzpatrick, Project Commercial Director, to explore a role that's either fundamental to how construction projects work or potentially unnecessary, depending on where you stand.
The conversation examines how quantity surveyors and commercial teams operate on major projects, unpacking the significant differences between markets like the UK and Australia. The team debates specialised roles versus the generalist engineer approach, discussing what gets lost and gained when responsibilities shift between team members.
he discussion moves into the relationship dynamics between engineers and QSs, bridging technical knowledge with commercial reality, and how contract structures like NEC shape collaboration on major infrastructure projects. Peter shares insights on disputes, contract administration, and whether the burden of process actually prevents bigger problems down the line.
The episode wraps with each guest proposing one change they'd make to contract structures or delivery models to drive better outcomes.
Timestamps:
04:46 - How the QS role differs between the UK and Australia
22:25 - Do disputes cost more than prevention?
30:53 - Can contracts force collaboration, or is it all about culture?
39:59 - If you could change one thing about contracts, what would it be?
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Transcript
Introduction and Engineering Success
00:00:00
Speaker
Carlos, i'm goingnna make you lose this argument and it might be played back in the future. But the best engineer I've ever had has been an Australian engineer who came over and said, I want to become a QS. They knew the steelwork drawings inside out and they could argue totally against the supply chain, totally against the the the contractor, the client, because they knew the drawings. They knew it. And ive I've not known a QS to have that level of detail.
00:00:22
Speaker
Shout to Lynette Shackles in australia back in Australia.
Role of Quantity Surveyors and Commercial Teams
00:00:26
Speaker
because she absolutely smashed it and it but she had that knowledge i've not known qs's on the major projects that have that
00:00:39
Speaker
Welcome back to the Offsite Podcast episode 102 today and we're diving into something that is super interesting to me and I guess it's either fundamental to how projects work or maybe at the other end of the spectrum completely unnecessary depending on your perspective and that's the role of quantity surveyors and commercial teams in major construction projects and there's a lot of difference in how that model operates in different parts of the world or different sectors so to have this conversation in a educated and qualified way i'm going to be joined as per usual by carlos cavallo famously quantity surveyor in a former life ah thomas schultz joining us again from the apex team who would
00:01:25
Speaker
I argue he's a project manager and engineer, but once a QS, always a QS. And then the real brains of the operation, Fitzpatrick, project numerical director. Thank you very much for taking the time to to have the conversation.
00:01:41
Speaker
No, it's all right. Thanks for having me. I'm probably the only real one out of the free. ah oh That's actually true. That hurts because it is true. Yeah. yeah We'd have such a ah terrible conversation if you weren't here because it's just two XQS's in it, engineer.
00:01:59
Speaker
That means three people that are not good QSs basically. Is that? Yeah, yeah. There you go. I think there's a lot to cover and there's a lot of depth to the conversation. So maybe we just like cut the banter, dive straight in and maybe like just to set the scene, Carlos, if I go to you, if you could, if you, from your perspective and if you've got a good enough long-term memory, can you describe what a quantity surveyor like does on ah on a major project?
Commercial Management in Construction
00:02:29
Speaker
Is this like one of those awful wedding speeches when you open up with what the definition of love is and you go to the RACS and read out the first line? That's funny because someone literally is in a way. Hopefully they don't listen to this podcast.
00:02:42
Speaker
Yeah, if we think about the quantity surveyor is ultimately looking after the commercial interests of a project, right? And then you kind of got this typical traditional quantity surveyor role.
00:02:53
Speaker
which maybe you were taught at university and maybe is sort of standard on a smaller project, but it's pretty much everything from forming contracts, procurement contracts, um managing those organizations through the life of their contract, everything from sort of co commercial or cost forecasting, ah notices, yeah, variations.
00:03:14
Speaker
So you're kind of administering the contract from beginning to end. But I guess from a major project point of view, our background is sort of ISP2, Crossrail, that sort of contract. It's very, very heavily skewed towards contract administration notices, variations, rather than actual cost control, which I think I personally saw a lot less less of. It was kind of this once a month exercise where you pull together a forecast rather than it being sort of front of head every day. The thing that you're actually thinking about most of the time was looking at upstream, downstream compensation events or variations and making sure that you're getting your notices in on time and administering the contract so basically is.
00:03:53
Speaker
I think that's the exact summary. Now, Peter, as a tech, what was the QS actually?
Global Differences in QS Roles
00:04:00
Speaker
Do you know what? Surprisingly, Carlos did tick off most of the items. I saw you chat to the team looking at it. I probably say there's a lot more reporting. I think you alluded to it being almost reporting like once a month, whereas I feel on major projects, especially like HS2, you are in a massive reporting cycle.
00:04:18
Speaker
ah By the time you finish reporting one month, you're into the next month on reporting and that's reporting to the client and reporting internally to your business. So you're in this continuous cycle of reporting outside of which year you do the variations and all that good stuff that Carlos just mentioned.
00:04:32
Speaker
In different markets ah or different parts of the world, the that set of responsibilities gets kind of distributed differently to different people on the team. Thomas, if you can remember back to when you were not a quantity surveyor and maybe back in back in Australia as an example, and i know I know in different parts of North America, this is is similar.
00:04:55
Speaker
Where does that set of responsibilities typically live? My own memories are that bad, Jase. I do remember being an engineer. That's good. That makes one of us. Yeah, it's really interesting that difference in roles set between the QS in the UK and the engineer Australia. Like in Australia, 100%, I remember raising downstream variations to contracts all the time. That was a pretty regular thing, you know, writing out those scopes of work documents, making sure the financials, the forecast, all that kind of stuff aligned downstream. And you did a lot more cost control, I found, back home as an engineer when you're in charge of your financials in terms of like, you know, your earned value, your cost phasing, all that kind of stuff.
00:05:33
Speaker
Whereas I found on the major projects here in the UK, that wasn't done by the QS, that was done by the cost control team. so there's a whole separate team that sort of does that other bit of responsibility in terms of, you know, financial tracking and cost controls and all that kind of stuff, which is kind of interesting to see. So yeah, pretty big difference in how that role is split up.
00:05:53
Speaker
Yeah, so you end up kind of, if I was to play back, Thomas, like from, and again, I'm remembering back a lot further than you are, but this like, for one of a better label, this kind of like full stack engineer person who's doing like what you would class as a project manager engineer role is doing kind of cost forecasting and tracking yeah And is also doing procurement, right, in Australia. Like I've never, I've almost never had a separate procurement team. 100%. I mean, there may be fewer frameworks, but there'd be zero value contracts and things like that. It'd be up to you to actually yeah like develop the scope, all that kind of stuff. Yeah, and then even that procurement function from what you described, Carlos and Peter, that's like ah that's a separate thing altogether on most major and projects in in the UK? Or do QSs ever dabble in that? A loose touch on it. So so you'll love it you have a set of procurement professionals who will...
00:06:51
Speaker
push the procurement process. But in terms of the the high level procurement strategy, a QS will be involved in that and we'll be checking the contracts and making sure all the right T's and C's are in there. And then the procurement team take that and run with that and do the whole tender the process.
00:07:04
Speaker
Yeah. Yeah. sounds So I guess if I think through, or we think through pros and cons of that, those two different approaches as the engineer that has like forgot to send a notice to a subcontractor, like four months in a row, I can think of a couple of obvious, um,
00:07:19
Speaker
benefits to specializing in the role. But ah yeah, I don't know if if people have thoughts on like the the pros and cons um of the the specialization um versus kind of generalist approach.
00:07:33
Speaker
Remembering back two of the probably the most challenging parts as a QS, really understanding not just scope but progress on site. It makes total sense if you think through a perfect world.
00:07:44
Speaker
Having a deep understanding of that makes everything else slightly easier that you're meant to be managing. And also, if even if you're procuring a package, the thing that you spend a
Complex Projects and QS Importance
00:07:53
Speaker
lot of your time getting your head around is to think commercially about a piece of scope.
00:07:57
Speaker
You really to understand that piece of scope, otherwise you're kind of shooting in the dark a bit with the realities of how it's delivered and assessing what subcontractors are claiming the process will be or what they need and the equipment and everything else. So i can i can see why there's a massive benefit from being an engineer and managing that process because you're closest to that detail and you're not gonna, you probably wouldn't have the wall pulled over your eyes as much as fresh faced QS would have. But at the same time, there's no way on a major scheme under NEC, you would have engineers with the time to do it.
00:08:31
Speaker
Every engineer we speak to every day is saying they have no time. Engineers should be on site more in the office and are already spending too much time in the office. So if you throw in what is effectively a full-time job on top of their scope, then you would end up just needing twice as many as ah engineers because they could only deal with smaller packages of work because they're doing both sides.
00:08:50
Speaker
There's definitely pros for both. My experience is all NEC and that's definitely not the whole the whole industry and how it operates. So my perception of it is skewed towards something that is admin heavy, which is why it's hard to sort of grasp it.
00:09:03
Speaker
Yeah, I don't know what your thoughts are, Peter. i I agree with Carlos in terms of the the engineer has too much on his plate to be able to do it. I think in previous podcasts, you guys have talked about the program. It's like...
00:09:15
Speaker
From an engineering point of view, just about managed to update the program on a monthly basis. I wouldn't want from ah from a commercial point of view, I wouldn't want to be dropping the ball by not issuing that right notice on time. And then somebody in two years time going, hang on a minute, the contract says you didn't issue that notice. So I'm penalizing you for X, y and Z. So I would i would want to have i'd want to have a separate team that I know is issuing those notices and getting those notifications in on time.
00:09:40
Speaker
And also, in terms of NEC, it builds up that contemporaneous record. So at least I know in two years' time when there is a dispute, there is a whole load of early warnings that have been raised and maybe responded, maybe not responded to. But there is those records so that you can overcome the dispute.
Collaboration Between QSs and Engineers
00:09:55
Speaker
I definitely do think, though, in terms of on major projects, the QS does not have – they don't take the time to get that technical input about what's actually been built. Carlos, going make you lose this argument, and it might be – played back in the future. But the best engineer I've ever had has been an Australian engineer who came over and said, I want to become a QS.
00:10:12
Speaker
They knew the steel work drawings inside out and they could argue totally against the supply chain, totally against the the the contractor, the client, because they knew the drawings. They knew, and I've not known a QS to have that level of detail.
00:10:25
Speaker
Shout out to Lynette Shackles in australia back in Australia. Uh, cause she absolutely smashed it. And it, but she had that knowledge. I've not known QS is on the major projects that have that.
00:10:36
Speaker
The only thing you get, you get close to it is where they're sat near to each other, where you have your planner, your engineer, your QS all sat in a little, little huddle together and they sat day in day out. And they're living and breathing that job. And the QS then starts to understand like the engineer and the engineer starts to understand like the QS.
00:10:52
Speaker
That's where this this process that we have in the yeah UK and other other places works when they're all together. You put them in two different offices, i guarantee won't talk to each other in the QS will never go inside. Yeah, this is ah a great topic because I think like we've probably all seen examples where the QS kind of is chasing the engineer for info. They're a little bit in the dark. They're maybe always maybe a step or so behind.
00:11:12
Speaker
The engineer also on the other side doesn't want to get involved in the commercials in a way outside. where they'll they'll kind of like offload everything to a QS. ah So they'll be talking to a subcontractor trying to like get them to do something.
00:11:26
Speaker
And that's usually an inherently commercial conversation. The subcontractor has to pull resources or ah adjust something. And when the engineer is either not wanting to engage in the commercials of that or maybe and intentionally kind of trying to distance themselves, you end up with this disconnect where we're telling them to do something and you know, then payment disputes and blah, blah, blah, blah.
00:11:50
Speaker
What's your advice and how do you, you know, coach junior, you know, QSs? How would you coach young Carlos to bridge that gap? Difficult question that is. Coaching Carlos, not just a general question. Yeah, yeah, yeah.
00:12:03
Speaker
and That actually did happen as well. The only thing I can say is just the constant communication between the two. It's going for that breakfast on a Friday and getting to know the person. I'd use the word intimately, but getting to know getting to know them inside out and building that relationship where there is that rapport between each other.
00:12:23
Speaker
And there's that shared learning. the The engineer is learning the why. Why is he constantly being chased by the QS to work out what the meat additional meter cube, the concrete is gonna be? um Why is that important for the QS? And then also to learn from the engineer as to why the engineer might might not be top of their list or what but their workload is or the priority.
00:12:42
Speaker
Just physically taking them out and them around site and showing how things are actually built. that's That's what I would say to a junior QS you can't, especially when you're in your first three to five years, that's where you learn the most. but you Once you get gray-haired like me, you yeah you struggle more to get that constantly going out on site and understanding the technical nature of everything.
00:13:01
Speaker
It's those informative years and you you keep that with you for the rest of you career. Would you say start as an engineer? Would you go as far as that or would you? Yeah. I'm not sure. I've been playing this over my mind. Like, I don't think I'd wish that for anybody.
00:13:17
Speaker
No, no, no. I wouldn't say start as an engineer because because because then you've got to do how many years would you need to do as an engineer? And is' quite a lot of it's quite a time-consuming process to go right go and get to the same level as a site engineer, which is, what, two, three years on site. yeah Plus, you'd have to have all the schooling before that.
00:13:33
Speaker
But definitely think it should be more than what we do it at the moment. I think in... In terms when you go to university, you'll learn a module on how to build a house. A foundation. Yeah, and how to do some foundations and some really basic stuff.
00:13:46
Speaker
Companies have good graduate schemes, and you'll do a week away, and you'll do some like build a wall out of bricks and blocks or whatever. That's it. Then there's nothing else. it's There needs to be more to that. It could be a placement for six months or something on site where you just shadow an engineer. It'd be really annoying having a QS to shadow it. It might not be any different to what usually happens, is it?
00:14:04
Speaker
this qs in bright orange shadowing you but it needs to be something like that where where they get that understanding of how construction works yeah or they could maybe go to australia for six months and then just get put in the deep end yeah set out to the bush i do think it's quite interesting uh the relationship because there's definitely a case of each side under appreciating the other yeah like construction's very much ah you always think your problem is the biggest problem on the on the project and i think i think that's definitely the case of like engineers not appreciating what QS is actually have to do and vice versa, probably to the more extreme for the engineer, because there's way more, it's kind of a much broader role, which means you you really have to master more trades. You're all the same more important. I thought, I felt like you're all not.
Commercial Role Distinctions in the UK and Australia
00:14:48
Speaker
But he completely lost my train of thought. Thanks, mate. I've got a question for Thomas while you think about it. um so It was actually a really good point as well. We we talked... We were talking before, Thomas, about like the engineers ah that might not have the commercial...
00:15:09
Speaker
grounding um and they um I've seen in my my own experience is kind of like distancing from the the commercial process. Is that something you've witnessed, you know, in your time, maybe in the in the UK? And is that a pattern that you've seen?
00:15:25
Speaker
I'd say definitely more in the UK, the engineers keep commercial at arm's length because obviously in Oz, the engineers ultimately responsible for So if it's, you know, not being there, not getting delivered, then yeah, you find out pretty quick when your commercials are,
00:15:41
Speaker
behind But yeah, 100% I'd agree. The engineers in the UK do tend to keep it a little more at length of, oh, that's not my problem. But they also play the good cop, bad cop with the PM in that case as well.
00:15:52
Speaker
So that's something you can play in the UK that doesn't necessarily work in Oz where the good cop and bad cop are necessarily the same person. You know, we've talked before about from a perspective of like planners where, you know, sometimes you see examples of construction managers or engineers, you know, distancing the planner or distancing a quantity surveyor.
00:16:13
Speaker
And we talked about how like it's probably not best for project and not getting the best outcome. Would you would you agree that that's like the the case for them? Yes and no. Well, yeah, I think, you know, you're not having that communication, then yeah, I'd say that's probably the worst case scenario. Like when you're deliberately pushing someone away and not giving information, then yeah, I think that's fundamentally a flaw.
00:16:32
Speaker
I think there is something to be able to play there when, you know, I'm not going to get involved unless I really need to. um And, you know, you have the PM that comes in. bangs the hammer down, bangs the shoe down on the subbie, telling them to get back in line. There's definitely that play there, but you sort of need to have a good amount of communication between and understand the underlying issues before we can do that kind of thing.
00:16:52
Speaker
So I think, yeah, i think the whole team's just putting it at arm's length, then it doesn't work. If you think through, like, if you imagine a world where like a major scheme that we've been like the ones we were part of, let's assume that Let's take the QS example and engineer engineers were doing the commercials in their package.
00:17:08
Speaker
I think it's one of those things that would be fine until it's not. and And by that, I mean the simple day-to-day QS sort of routine could be managed by an engineer. But then if you imagine you've got 20 engineers in a project and then maybe you've just got one or two commercial managers set above them, which you would probably still have in a world where the engineers manage their own.
00:17:28
Speaker
yeah It's probably fine until you have major issues. And then you've got this much bigger gap on competency where if you've got a tough problem, the commercial managers would then be in a difficult spot of,
00:17:39
Speaker
okay, now I don't have any QSs to really think and focus about this one thing for the next day, week, month. You can kind of make do until it would be like immediately too difficult because engineers can't drop everything and just focus on this one commercial matter that's just unlikely to be the case in terms of, yeah, time and responsibility. So you could see it getting by until there's a real problem.
00:17:59
Speaker
Yeah, I think one thing that I had described to me ah number of years ago from like a forensic like quality surveyor schedule team was that that world where like the construction team run everything in the in Oz can tend to result in a higher percentage of disputes.
00:18:18
Speaker
And like, does it go does it the problem might go on longer as opposed to, you know, because yeah I can get to a spot where I don't send notices because I'm too busy as an engineer or or things kind of build up, or we might discuss things informally and I forget to send the letter, or that whole, there's this argument that says having the team that are gonna be, ah you know as you said, Peter, administering the process can result in fewer disputes. as the
Legal Disputes and Contract Administration
00:18:42
Speaker
kind of Is that the like North Star of the process is probably a good question. What do you mean, sorry?
00:18:46
Speaker
Yeah. Said another way, i guess, um, the, I can't remember the source of the data, so I'll have to find it and stick it maybe show notes, but, ah the, there was research, which, uh, uncovered that certain markets specifically, I recall Australia being exceptionally high on the list.
00:19:07
Speaker
had a ah ah high degree of large projects ending in legal dispute. So going all the way to ah an arbitrated or mediated um outcome as opposed to something that gets settled between the two parties.
00:19:23
Speaker
And part of that that was put to me was that that because there aren't folks administering the contractors consistently. that Yeah, that could be the case. so so So I've done a bit of research on this one.
00:19:35
Speaker
but so like So, so,
00:19:43
Speaker
um um what it said is it had two two two two key areas is one is the average dispute value ah one was the average dispute length ill pickout europe and the u k um So Europe had, the average dispute was 57 million US dollars um and the UK was 37 million US dollars.
00:20:03
Speaker
And then the length to resolve that dispute was 17 months in Europe and it was 11 months in in the UK. um It's a similar story with North America. um The value is closer. the value was $30 million ah dollar' worth of dispute um and 16 months worth of time to resolve that dispute.
00:20:22
Speaker
So there's there's probably two things at play in that. It doesn't go into any more deep detail than that. So there's 35% difference anywhere between Europe. two One thing would be adjudication. Someone makes a call in your on your dispute.
00:20:34
Speaker
It's done within 42 days, can be extended. So that's probably quite a lot at play. But the other part would probably be, and I know we don't like it, but it's the NEC contracts. Because as much as it's a burden to administer, at least you've got those contemporaneous records. And it's not like a JCT where there's obligation to talk to each other and say, you know hang on, there's an early warning for this. Or put your notification in for your compensation event.
00:21:00
Speaker
You can just leave it right to the end. And so... This world that we're operating in, whilst it's really difficult to administer at the time, the aim of the game is to try and resolve those disputes as quick as possible so we're not spending loads of money with lawyers as opposed to with quantity surveyors at the time during the job. So I would i would spend my money on quantity surveyors during the job to stay spending the money on lawyers at the end of the job.
NEC Contracts and Collaboration
00:21:23
Speaker
yeah i think this is uh we yeah for those that aren't don't know um the the acronyms uh nec is a form of contract that's popular in in the uk specifically there on a lot of infrastructure projects and jct is another form of contract that that maybe is uh maybe smaller or build type contract i'm not mistaken and i don't think i've seen any data on this but I wonder whether anyone has a view on whether this like is preventing the dispute and all the legal and the delay in that comes with a cost under say an NEC, which is usually ah resource to administer the contract. the the
00:22:01
Speaker
The counterparties then also have a set of resource to administer the contract. So the supply chain need quantity surveyors, the client need quantity surveyors. There's almost like an overhead or a cost to avoiding the dispute.
00:22:13
Speaker
And I don't think I've ever seen anyone do any kind of like comparative research. This would be asking a ah kind of gut field view on whether the um the prevention is worse than the ah the the disease or whatever.
00:22:28
Speaker
But it feels a lot like negligence to just go, and let's just all not have quantities of airs and we'll just hope that we get to the end of there's no major dispute. There's got to be something in it, which is like audit trail because all of these major schemes that we've referenced in the UK, they're big public funded projects that are under so much scrutiny that If you could just get to the end and you screwed up the project and and you did that because you didn't agree anything and you just ignored the contract and and got on with it, that seems like a really bad place to be.
00:22:57
Speaker
I'm not sure how the other option is an option without changing the contract. Public scrutiny in this country is so extreme on major projects. Maybe that's one of the biggest drivers for being you. Everyone wants to be absolutely bulletproof in the contract admin.
00:23:10
Speaker
And we've always driven that into us that it's all about getting your noticing and getting everything in on time. Don't leave any area. or opportunity for for scrutiny so i wonder if that's part of it and maybe there's not a history of these big public overspend projects in some places which doesn't really drive this need and urgency to have a certain way of working or a certain form of contract like it feels like it's not a real option on the other side but again based on my uk only experience It's different, I think, because obviously in Australia, I don't i don't think it tends to run that way a fair bit. Like I'm thinking about, you know, NEC, very administrative, you know, upstream, downstream notifications, left, right, center. Every every week you're raising early warnings.
00:23:54
Speaker
something along those lines you know is obviously we never really had that kind of uh i guess notification period with subcontractors or at least as the client from from my my role as the engineer on site um whether some of the cas are doing that in the background potentially but i don't know any of them just like cost plus fee though because then it doesn't really matter if you're just going to There's incentivized target cost, which obviously does matter then because then that changes how everything works. um Otherwise, there's a lot of cost plus fee or... I haven't seen a very cost plus fee in a very long time.
00:24:26
Speaker
There's a lot of hard dollar. There's a lot of hard dollar contracts. So it's... Which also doesn't really matter then. do you know what i mean? Because it's yes everything's your risk. Build the job as quick as you can in the most efficient way that you can.
00:24:38
Speaker
Then it doesn't really matter. jobs where yeah exactly so it's your it's your risk you a lot of the contractors in australia do take on a lot of that risk is probably what i would say there How much, yeah, I guess what people's thoughts on, you know I guess some of the the idea of NEC is this kind of, don't contractually forcing collaboration between the counterparties in an agreement.
00:25:01
Speaker
I don't know, there seems to be a higher percentage of, let's say, target cost style contracts that in the in the major infrastructure projects, I can never remember which option that is under NEC.
00:25:12
Speaker
Because I guess my experience from from Australia was like contracts that you might look at on face value and say, that's not very collaborative because that'll be typically a hard dollar style contract. But the resulting delivery model is we all just want to get out of this thing as quickly as we can.
Client-Contractor Dynamics and Contract Impact
00:25:27
Speaker
We sign the contract, we put the contract in the bottom drawer and we only pull it out if we have a big old falling out. How feasible is contractually forced collaboration and how much it is it culture? I think is the million dollar, probably even more than a million dollar question.
00:25:42
Speaker
I'm coming up. You could be in some pretty awkward working environments which are contractually collaborative, but absolutely not collaborative. It's contractually collaborative to try and put in place the right sort of processes to facilitate collaboration.
00:25:58
Speaker
Like you have to have the sort of team who are mutually trying to make the project successful. You need a client that's not just sort of beating down on the contractor. You need a contractor that's fair with the supply chain. There's a lot of things that need to stack up to make a very like open and fair project.
00:26:13
Speaker
And a lot of that also does rely on contractors and supply chain looking like they're making money. Back to Pete's point earlier with like NEC, that contract's designed that you're ah commercially agreeing the project as you go. So you know that at the end suddenly all this massive claims come out of nowhere and everyone's screwed.
00:26:32
Speaker
you' You're agreeing your defined cost as you go, you agree change as you go. And it's it's it's like almost a peace of mind to maintain that culture of open sort of fairness as you're going through it.
00:26:43
Speaker
Not to call bullshit, but have you ever seen the cost get agreed as you go? That's NEC 4, which started after we were but I think i think if you're if you're if you're on a project where client, for whatever reason, has got constraints on them, so whether that be money or it's going to be time, i think I'd rather be in a situation where there's something there that I'm in a contract that gives me some form of protection so from the big... fault yeah from forness as's not as my state It's more just ah a protection than to be able to go in the future when there is a dispute to go, hang on a minute, we we're in this collaborative contract and this person didn't play ball. And this isn't just looking up the line then we use the term of HS2 there.
00:27:23
Speaker
But even down the line with the subcontractors, because they probably get harder, they have a harder gig than what we do. So we, at least, at least the contractor can team up and and not man for man mark, but we can, we can have the right level of resources.
00:27:34
Speaker
You have a subcontractor turnover of 50 million a year. They might have one QS looking after three different projects. So they want, they want those teeth as well. So I think the, I think I'd rather be in a place where you're potentially going to be in a bad place either way.
00:27:48
Speaker
I'd rather be in there with a contract that at least gives me some protection. So I think, I think I'd like the but then I'm a QS and I love contracts. Yeah. he did that um Is that kind of like contractual obligations in lieu of collaboration is almost what we'd, because I think one person described this to me as like, to the degree that you can get your marriage to work by getting written contract agreements of how you'll send each other early warnings when you have a disagreement, it will work. But like, yeah, is it is it effectively like,
00:28:19
Speaker
contractual obligations in lieu of actual collaboration. I'm not sure. yeah I'm not sure. i think I think even though like a lot of these major schemes that the client is still not even the client, the client's representative or whoever's been employed to manage that role.
00:28:36
Speaker
it's It's that marker, that level that's expected from them as well as as the ah general contractor. Imagine a situation where they're just not doing what is expected. If you don't have that in a contract, they can just laugh you out of the rim.
00:28:49
Speaker
but Not to suggest they would, but there's nothing that there's no rules to abide by. i think it's protection at both levels because both should be accountable. It shouldn't just be this downward pressure from the top. There should be expectation and um a level of professionalism you expect from above. And if there has to be in a contract so that you can quote that contract, but actually it's a totally unfair environment, I think that's quite important.
00:29:11
Speaker
from what we've seen in you know yeah there is definitely some degree of like you need some protection from a maybe a totally delinquent uh counterparty even in australia recently over the last two years we've seen a lot of contractors walk off of projects there is some power held by ah the contractors you know at the end of the day the client wants the project delivered if anyone what everyone's thoughts are thomas i don't know if you'd have thought on this like uh try to think there because, yeah, you can think about a few big jobs, really big jobs in Oz where the contractors, yeah, walked off because the original, from their perspective, that they they're completed their side of it as they can and therefore it's gone.
NEC Standardization and Contract Practices
00:29:51
Speaker
Ooh. Yeah, it's an interesting one. I think, to be honest, I quite like NEC. I think the collaborative approach were little bit. Don't hold it against me, but I did quite like having a standardized contract that the industry somewhat understood, I think is a really good approach versus maybe back home where each head contract is a bit different, different terms from one job to the next.
00:30:15
Speaker
You know, having everyone on NEC, having that understanding of how it works is actually quite handy. I agree. That does. Yeah. Sorry, Peter. Go away. No, no. I think even some of it with the NEC. So when NEC first came out, it introduced early warnings.
00:30:27
Speaker
And then probably about five years later, every other contract you looked at was like, yeah, we make an amendment. We're going to put in early warnings as well. So like early warning wasn't an industry thing. and And for every other standard form to have picked it up, it can't be a bad thing. As much as it's annoying when you're in the thick of it, it's like, ah geez, got 10 early warnings coming today that got to do.
00:30:45
Speaker
10 meetings next week all the standard forms have actually gone do you know what this is quite a good process that there's some bits that they will pick and choose that early warnings is one that so just that there is good bits have come out of the nec which has been adopted ah across the board i bet chat gpt writes a good early warning these days they're not a music car
00:31:05
Speaker
Sorry, Jason. ah I was just going to say, this probably was bringing back some some flashbacks. And I wondered whether, Peter, you've got any tips here for, I guess a lot of people have probably been in that spot where they've received the early warning from what seems like the keyboard warrior that has has written it in a way that um you probably wouldn't label as particularly collaborative. Is there anything you do like coach your team in terms of like how they should write those sorts of documents?
00:31:37
Speaker
ah The infamous keyboard warrior that every project has. yeah um I think it comes down to, again, trying to understand the individual who's sending them out, trying understand what's, but what where why Why are they sending out these ah what seems menial um early warnings and actually having that discussion with them?
00:31:55
Speaker
If they do keep firing them out, I probably would go and speak to someone above them and go, look, I've got these five early warnings. They're not really adding. It's not doing what the process is supposed to be. It's supposed to be let's have a meeting. Let's discuss and see how we can mitigate the impact on cost or time or health and safety or whatever it may be.
00:32:11
Speaker
This person is just giving me pretty much nonsense. And I'd probably would just escalate it above them and try try and see whether you can get it sorted that way. Or it may be that it's systemic to that company who is sending them in into you. And then you may have a ah wider
Enhancing Collaboration Through Contract Changes
00:32:24
Speaker
problem. I'd probably just then start keep going up the chain and going, guys, this is not is not a good spending time.
00:32:30
Speaker
We've got bigger issues. We've got bigger fish to fry. like to To go around the horn with ah quite a big question. So I'll let whoever wants to grab this first, Cam, but I'll swing around to everyone.
00:32:42
Speaker
if you could do If you could make any change to either like contract structure or the the the contents of NEC to drive better collaboration in in major project delivery,
00:32:57
Speaker
You know, you could think about how the the the economic incentives works or how some of the mechanics work. What would it be? This is the example of a question that you should send before the podcast. by the way Yeah, we're going to pause for two minutes while we think. I would probably i would probably put, so yeah ah for the program, um if you don't submit your first program, you get you get penalized by 25%.
00:33:23
Speaker
I probably we would extend that to the revisions of the program because that's where the NEC tends to fall down, where somebody doesn't submit a program on a monthly basis. And and it's where people don't understand the program about how it's planned completion.
00:33:36
Speaker
ah You have your plan completion and your completion and you show your terminal flow and all that good stuff. um I probably would encourage people to do that. And it hasn't worked at the moment. Why not? Maybe that's a way forward. I know there's a of people who shouting at the podcast now saying you can't do that.
00:33:51
Speaker
Yeah, nice. the The one that was always the biggest frustration, not actually getting your defined costs signed off as you went. But am I right in saying, Pete, that the NEC4 allows that to be done on a monthly or quarterly basis through the contract?
00:34:04
Speaker
it It does. It does. how how How it happens in practice. With a few caveats. Well, I haven't seen it in practice yet. I'm not on many NEC4 at the moment.
00:34:14
Speaker
One of a lot of these clients would on a very sporadic or interim basis go and disallow a load of cost, which completely changes your position and being very woolly on the labeling and categorization of disallowed costs. So i think having that bedded down and approved on a monthly basis, just like you do ah program or something else,
00:34:35
Speaker
feels like a safer place to be because people are very guarded. you're You're constantly worrying about your commercial position. And the example of firing notices, if actually we knew each month that, right, what you spent, you've spent and we're not going to put it later.
00:34:47
Speaker
I feel like would be a better place to be. But it sounds like it's slightly improved from back when I that. Thomas. oh i would find a way to incentivize the actual agreement of change events a lot faster and quicker i think that's one of the big things that some of those ce's can drag out for months and months and months while people just escalation time-bound escalation yeah like you know there's a back and forth that goes on and the amount of stuff that gets added to ce's it's not really relevant to that work and you know it's just that whole process i think can drag out
00:35:18
Speaker
well belong beyond what it should. I think the last project where i think some of the CEs open before I arrived are still open and probably still there. So I think there's something that needs to be done in that space. What that solution is, I don't know. Yeah, it's interesting how much like the incentivization of things like early warnings and compensation events through NEC drives like a volume problem, which then itself drives the lack of agreeing them, which then, so almost goes back to this like a forced this contractually enforced process can sometimes have this unintended consequences.
00:35:57
Speaker
But then the supply chain don't mind it. so talking so so so So recently, and this is my own bit of study that I've done on this yeah for a dissertation. So I've just made this stuff up like around in my local area.
00:36:09
Speaker
But I interviewed people from the supply chain and I thought they would be negative about the amount of change that was coming through and the constant churn of paperwork. And they weren't at all. They were like, do you know what? At least compared to JCT, they were like, at least I know where I stand from a financial point of view in terms of what the total cost is looking like.
00:36:29
Speaker
but and And you try and get bits of greed as you go along and and you'll get a feeling from the from the the employer or the client or the contractor. as to where this is going. And they liked that because on JCT contracts, they don't have that at all. And they're like, I'll get to the contract and I won't even know if they're go if I'm going to get paid a million quid for that CE or 50K for that CE. And I was surprised by that. I thought the supply chain would like, man, you guys just constantly beat us up and um hammer us with all these clauses and that.
00:36:57
Speaker
Definitely, they've they've become smart to the NEC. They understand how to to to administer it, but they don't they they weren't they weren't against it, which I was surprised with. Yeah, well, this is probably going to show my ignorance as to what I was going to think about changing because I was probably in the same same boat, Peter. what i Like the thing that i observed that I would have i would probably change is maybe some of the mechanics of like an NEC make sense between ah maybe a principal or a general contractor and a client.
00:37:25
Speaker
um But observing, say, the like program acceptance cadence or the early warning cadence that then happens between general contractor and client and then observing how that then propagates into 14 contract acceptances and any and early warnings to each of the supply chain. There's like a an order of magnitude increase in the the admin. I was going to suggest some way of like a simplified, like NEC Lite for that you can kind of bring the... the supply chain into the into it in a way that there's like alignment between contractual positions but maybe they're more part of the general contractors delivery team that are that are totally separate you're lucky if you get your as a general contractor your con your program accepted but you know what's happening which is you're not accepting any of the supply chains contract ah programs forever you're not agreeing any of the c's until so there's this like propagation problem that
00:38:21
Speaker
which feels like we treat 3 million pound subcontract the same as a 600 million prime
Incentivizing Productivity in Construction
00:38:28
Speaker
contract. Yeah. Another one, which um now that we've had three minutes to speak, think of this very deep question is um There's lots of forms of contract where you're basically paying a schedule of rates, for installing an item or whatever that might be.
00:38:42
Speaker
I've not seen contracts yet where the rate paid per item is increasing with the productivity of of the output. So actually incentivizing people to finish earlier. No one really prices that time saving into those calculations to think actually how can we better be better off as a project? Everyone just wants to hold the end date and pay as little as possible to hit that end date.
00:39:02
Speaker
so um we we have a downstream contract there where it was actually you know for various volumes of concrete poured so obviously they get paid more but it's more efficient for them so obviously the bigger the volume the more money they get but the more efficient it is for them so that we did actually have a dance being downstream contract that did involve that kind of that's what happens we get engineers to write contracts ah
00:39:29
Speaker
Yeah, fair enough. Yeah, I think it's functionally, it's not a lot different to incentivize milestones on you know delivering milestones earlier or or later.
00:39:40
Speaker
um But you don't take the risk that you've incentivized the wrong thing, maybe, Carlos. Yeah, yeah. There's plenty of stories of like, you know you incentivize getting concrete installed. Quality reduces. you just get concrete you just get well You just get concrete and nothing around the concrete that you were shooting.
00:39:56
Speaker
Yeah. It was also going to be built ah logically. Yeah. but yeah etc ah Going into what i my statement of why do we want to finish earlier is that because there's ah there's all that one package finishing earlier.
00:40:09
Speaker
But if to all the rest of the packages around it aren't, then you've got something that just sat there that you probably don't need to maintain. If you take something like a Crossrail project, They want them for them projects finished bang on time.
00:40:20
Speaker
They don't want them finished six months earlier because then you've got to maintain all of that
Conclusion and Farewell
00:40:24
Speaker
structure. You've got to look after a load of mean MEP that's been installed. All the batteries start expiring. You want to finish it on time. You don't want to finish it way too early. So maybe that's the industry that we're working in where there isn't incentive to, as you say, you guys say from Australia, you like you want to butt you're to bust the program.
00:40:41
Speaker
ah'd I'd like to just defeat ah finish on time and and get what I signed up for. Yeah, well, given given the the stats around mega projects, think a lot of people would be happy with on time as well. Yes, exactly exactly that. Consistency.
00:40:55
Speaker
I know we're very much out of time, but thank you very much, everyone, especially to you, Peter, for bringing some smarts to the conversation. and thanks some like Thanks for having me, Jason.
00:41:06
Speaker
Awesome. Thank you, guys. and Thank you very much, everyone, for tuning into today's show. If you did enjoy the episode, please think about liking this video or following us on your chosen podcast platform. We appreciate your support and we'll see you soon.
00:41:18
Speaker
by Bye bye.