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Contracts focus holds key to resilience during construction slowdown

A Leeds-based construction specialist is urging contractors and sub-contractors working in the construction industry to pay extra attention to their contracts as headwinds gather pace to avoid the risk of financial loss.

The Quantum Group, whose team of six consultants specialises in providing outsourced quantity surveying and construction commercial management services, believes a slowdown in the construction industry is likely to see more businesses facing difficulties. This has the potential to severely impact the bottom line of even the strong, successful businesses right along the supply chain, according to the company’s MD, Stephen Pilling.

“The UK construction sector is undoubtedly experiencing a slowdown after several years of strong growth which, given the cyclical nature of the industry, is no surprise,” said Stephen.

“What we’ve learnt from previous slowdowns, however, is that we see more disputes and difficulties in periods like this. And this is why it is more important than ever for contractors and sub-contractors to ensure they don’t leave themselves exposed to circumstances that seem completely unrelated to their work, otherwise their businesses could be harmed or even destroyed.

“This could be a major event, such as a main contractor suddenly going into administration due to cashflow issues, or something as simple as a change in personnel at a main contractor or employer that means verbal agreements are no longer recognised. These kinds of things happen all the time and often we see sub-contractors losing out as a result – but that is heightened in periods when the sector dips.

“Whilst it is impossible to protect your business from every eventuality, there are two really simple steps that construction sub-contractors can take to protect their business.

“Firstly, make sure you have a written contract in place – don’t agree to work on the strength of a friendly existing relationship or promise of future work. No matter how good a relationship is, it is never going to protect you as securely as a signed contract.

“And, secondly, if you do have a written contract, ensure you have negotiated a balance and be clear about what you are agreeing to. Deadlines for submitting claims for costs or additional time must be done by specific deadlines and in the correct way, otherwise they can be rejected. That often results in financial loss and sometimes reputational damage as you will be blamed for delays.”

The Quantum Group’s range of services is designed to enable contractors and sub-contractors to outsource their contract administration and management obligations in a similar way to how they may appoint external accountants to look after financial matters.

These services range from contract vetting, where Quantum’s consultants review contracts before they are signed to check for any onerous terms, to retention fund management to ensure retention payments are not unfairly held back on completion of the contract.

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