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Tenders & contracts

Make a contract!

Optimist? – Pessimist? – try Realist!

We all have our dreams of the perfectly built house. This is called optimism

We have all heard of nightmare scenarios involving builders. This might lead to pessimism and negative attitudes

Experience suggests we hope for the best and plan to avoid the worst. Hey presto – Realism.

And this involves having contracts which clearly spell out what is wanted and what happens if it is not achieved.

With anything but the smallest of jobs it pays to have a contract with any builders, contractors and possibly sub-contractors you may employ:

Tenders differ from estimates in that they are a firm quotation based on clear information rather than being vague prices which can get changed as the work progresses.

Now it may be that an estimate is fine. This might be true if:

  • it’s a small job under about £5000
  • you have a very good working relationship with a particular builder
  • the work is uncertain and you are likely to change your mind about a lot of it as it goes along
  • money is no object!

The tendering process

However for any substantial building work it is normal to get written tenders from several builders; at least three, maybe more. If you are employing an architect or building consultant etc. then you can ask them to carry this out, possibly including the selection of the companies to tender.

If you do this yourself then it is important that they are all provided with the same clear information so that you can compare their quotations properly.

Essentially they will need to be sent:

  • a schedule of work
  • drawings of the work (possibly including some detailed drawings)
  • specifications regarding the quality of the work
  • details of what sort of contract you want with them (such as one of the JCT contracts or the self builders’ contracts from Contractstore)
see more on types of contract
The JCT produce various contract forms depending on the scale and type of the job:

JCT 05 Building contract for a home owner/occupier who has not appointed a consultant to oversee the work HO/B: Revised 2009

In Scotland see the SBCC Homeowner Contract

For building or modifying/repairing a single house when a consultant has been appointed to oversee the work, one of the minor works contracts would probably be appropriate and the consultant would make the choice:

  • Minor Works Building Contract (MW)
  • Minor Works Building Contract with contractor’s design (MWD)
  • Minor Works Sub-Contract with sub-contractor’s design (MWSub/D)
  • Short Form of Sub-Contract (ShortSub)
  • Sub-subcontract (SubSub)
  • Possibly a Design and Build contract would be appropriate for a kit house
  • Management Building Contract may be suitable if a management contractor is used to oversee the works

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Provisional Sums

The more carefully the drawings and specifications are prepared the more likely you are to end up with the results you wanted. Occasionally there will be items you want included in a contract and you are not exactly certain about their details before you go to tender. An example might be a stove. You might not be sure what model you want. In this situation you can include a Provisional Sum in the tender. This informs the builder that a stove worth approximately £x will need installing. The builder will then allow for that amount and price for it’s provision and installation (along with profit and overheads) based on that value. If the price of the stove is eventually different from the Provisional sum then the builder will adjust their cost pro rata.

Prime Costs

You will probably also come across Prime Costs (pc sums). This is somewhat similar to Provisional Sums but is used to cover such things as services or works to be carried out by a statutory authority or a nominated sub contractor or for goods to be obtained from a nominated supplier where it excludes any profit due to the main contractor.  The point here is that whichever main contractor wins the tender they must use the same sub contractor / supplier without adding their own profit so in effect the Prime Cost is removed from the competitive tendering as it will be the same for everyone tendering.

Invitation to tender

After you have checked with each prospective builder that they are indeed interested you can send out tender packages with a letter stating by when you want the tender returned. Two or three weeks should give them time to price.

When you receive the tenders it is worth checking through them to make sure there are no obvious mistakes, misunderstandings or omissions. If there are then it may be worth contacting the builder to allow them to make a correction.

Problems between builders and clients are much more to do with misunderstandings than with dishonesty and that is why it is so important to make everything completely clear at the outset. Building work should not be confused with other types of consumerist activity. If you are buying a car, a dress, or a lawnmower it is usually a fairly standard item which you can inspect beforehand. With building work it is much more open-ended and everything needs to be made completely explicit. Particularly important is the clear division of responsibility between the various members of the building team. An interesting report in an AECB article on low energy houses at the Greenoak developments indicates the sort of problems experienced in achieving air tightness.

Disputes

Obviously, the better the terms you are on with the various members of the building team, the easier it is to resolve disputes, but if and when they do occur there are various approaches to sorting things out.

Disputes tend to be of two distinct types

  • when the builder has done a bad job
  • when the design was flawed in the first place. This is usually down to the architect, engineer etc.

If a serious design problem shows up then you could try to sue your architect, engineer etc. They will most likely have professional indemnity to cover this eventuality.

If it is the builder’s fault then the retention money is an incentive for him to come back and remedy the work. However this is only intended to address relatively minor problems at the end of the job. If it is after the retention period then you must rely on the good will of the builder, and, failing that, take the builder to court.

However it is not usually as clear cut as all this, especially around disputes with builders.

The first thing to do is consult the documents which make up the contract. These will probably involve drawings (some of which have been approved by Building Control and have a legal basis), specifications which relate to the drawings and any other documents and notes which may have been agreed as work has proceeded. Verbal agreements can be difficult to pin down.

Sometimes, on the discovery of a problem, the builder will offer to make up for it in some other way.  It may be important to not agree to anything on the spur of the moment. Rather get advice on whether the suggestion is a helpful and appropriate one rather than simply a way of avoiding a serious problem which needs remedying.

Builders are often juggling several jobs at the same time and a dispute on your job may be an incentive for them to move their labour onto a different job. This can slow things down or even lead to the work stalling for a period. Depending on several factors this can range from a minor inconvenience to a virtual disaster for you.

If the problem is very serious then the builder may simply walk away from the job. This is not uncommon, especially if relationships have become soured. The builder may have calculated that it will be cheaper to do this than remedy the work, even at some cost to their reputation.

More difficult to deal with can be a chronic low quality of workmanship. This can feel almost like attrition. Short of sacking the builder (which contractually may be difficult anyway), this is best dealt with by the prompt and regular issuing of snagging lists and agreements about a time scale so that problems don’t get forgotten or covered up.

Mediation and conciliation

Rather than taking a builder to court or to arbitration it may be sufficient to bring in a mediator. Their job is to take the heat out of the situation and suggest ways of resolving a problem. Not only technically but also psychologically it can make a big difference.

They may be a building professional such as an architect, clerk of works, self build consultant etc. They don’t have to be an expert in the field: they may simply bring in outside experts. The support of a building inspector may also be useful but remember that their ambit is restricted to the parts of the work covered by the Building Regulations.

Arbitration

Another alternative to litigation is arbitration and it is often included as a part of the building contract. The arbitrator will be an expert in construction, which may be a better situation than with a general judge in a court. Both parties have to agree on arbitration and also on who the arbitrator (or appointing body) is. The arbitrator’s decission is then binding. It can only be challenged in court over a point of law.

Litigation

Taking a builder to court is a civil law matter. The NBS have a useful section on legislation along with arbitration, mediation and conciliation.

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