An Important Conversation About Contract Administrators In Construction

Hi, Construction Legends. So today we're going to have a conversation about construction contracts administrators. If you are one, we're going to talk about what you can do to become a better one. And if you're looking to hire one, we're going to tell you what you need to look out for in contracts administrators. So, hi, my name is Cian Dillon Brennan. I am the CEO of a company called Quantum Contract Solutions. The reason we make these videos and podcasts is because there's loads of construction companies out there that are making mistakes in their contracts. They're leaving money on the table. Losing money, all due to the commercial contract side of things. And we hope that by watching these videos and also the podcast, that you're going to learn from the lessons learned, you're not going to make those mistakes, and you can implement them into your business, grow as a construction company, and make more profit. And that's what we want. Okay, so I firmly believe that in the construction industry, it is the individual trades, so you're kind of tier 2 companies, that are the real constructors in the construction industry. They're the companies that actually do the work. You know, we've got this whole contractual hierarchy of just, you know, you got the guy who wants to work and he subcontracts to a main contractor and then he subcontracts out all the work. And then even sometimes they subcontract it down. Eventually someone has to do the work. And so if you're one of the guys doing the work or you're a company that's a civil company or a scaffolding company or rebar or excavation. You're the guys that I believe are the guys that actually make the difference in the construction industry. You guys are constructors. And so hopefully if you guys listen to this, you're going to learn from it. Okay. So contracts administrators are very important and it depends on where you are in the world and where you listen from. If you're, you know, it can be called a commercial manager, it can be called a contracts manager, it can be called a contracts administrator, seniors, even quantity surveyor is another term that can be used. Now the roles all differ. Slightly. Okay. But there's a couple of key things that you need to look for if you want to be good at your job or if you want to hire someone that is important. Right. So I'll tell you, here's what can often happen. You can hire a contracts administrator who has lots and lots of contracts administration experience, and these tend to be a little bit cheaper. Or if your earning capacity, if this is you, this is potentially why your earning capacity is limited. And what you've taken in is you've got someone who puts together contracts, sends them out the door, like if you're bidding on tenders, or maybe puts them down the line for your subcontractors, submits payment applications, does some of your variations and EOTs, and does it in such a way that it's just a paper-pushing exercise. Okay. Now, all of these things need to be done. Okay. But if it's just a paper-pushing exercise, then the value that you're going to get for your business, you could really just have an administration person do that for you. But, and then if that's what you want as a business, that's fine, but it's not going to get you the value that you really want, right? So what you're really looking for from a contract point of view is, you know, we always talk about, you've got to be able to deliver on site. If you deliver on site, you're going to get a good reputation of getting the work done. You're going to get, you know, referred work and you're going to get repeated work. Okay, that's one half of the equation. The other half of the equation is delivering commercially. Contractually. Okay, so this is what you want this person to be doing. So if you value, if you think about how much you pay your project manager or your supervisor, this contracts person needs to be in line with that as well. Okay. Because they're going to drive the commercial aspect. So if you just have someone that's just paper pushing, that's not really what you want in a contracts administrator. A contracts administrator is someone who understands a contract inside out. He understands what you're signing. He understands liquidated damages, indemnities, termination clauses, wants to make sure that you have a rise and fall clause in the contract. And we're not looking at the contract from any sort of legal perspective. We're looking at the contract from a commercial perspective in that what is the impact of this clause in the contract on our success commercially, right? If we have a defects liability period of 12 months, or if they're asking for 24 months, what level of risk is that giving us to the business? Is that too much? We could be called out for 24 months. What are the chances in the work chance that we're doing that something's going to happen in between, say, month 12 and month 24? It's high. Okay, well, then we don't want to agree to that. Okay, so you need someone who understands a contract inside out. That's the first thing. But also understands construction to say that, you know, this particular thing is not risky for us because it's not a thing, right? So an example, if you're a scaffolding company, you know, defects liability periods, that's just not something you need to worry about because all your equipment is going to be taken away at the end of the project. You've delivered get rid of it. And so if there's a huge defects liability obligation, like, just, you can tell them to get rid of it. Or sometimes you can even say, hey, that just actually doesn't apply to me. I'm not even going to bother. Right. So once you understand, so that's the first thing is understanding the contract inside out and the implication of each individual term, what each one means and how it impacts you as a business, understanding the construction methods and what you do as a business and what your risks are. You could be the type of company that has huge latent conditions, site condition issues. Every time you get to a job, you never do any greenfield, it's always brownfield. Every time you get to a job, you've got issues, right? Which means that that part of the contract is going to be really important that you don't sign up to taking any sort of risk with regards to site conditions, right? You see this time and time again, people sign up to site conditions and the contract says, hey, anything you find basically is your problem. They dig down, tons of rock, your problem. Cost you a fortune. Okay, that sort of stuff is where it starts to become valuable. When you have someone on your team that understands construction, understands the actual contract itself, and puts them together, then you got, you know, someone with good commercial acumen. Okay, now we're talking about actual— that you're in a project. So you've signed a much better contract in the front end now because this person knows the contract, he knows how your construction relates to it. You've signed a better contract. That is less risky. You've been able to negotiate with the client because you know how to word all of these things when you're trying to negotiate them. You're only really picking the things that are risky to you. You're not trying to change something that doesn't really matter to you because it's not a risk. And therefore you get the things that you need across the line. And then you're in the post-award space, right? So now this is where you come into your own again. It's about risk and money and reducing costs and making sure that you're always looking at your company's profitability. So are you someone that understands about the contract that we need to have a notice and a variation within particular time limits because that's what the contract says. So now you mightn't be on site, but if you are on site, you can walk around, you can see the changes yourself. You can talk to the project managers, the supervisor. Okay, here's all these changes and you can just drive it. If you're at the headquarters, you got to have someone on site who's feeding you that information. You got to be pushing them for the information. Are you the type of person that is confident enough to ring up the supervisor and give him an earful for not telling you about XYZ change? Let him know that if you don't tell me about the change, we're not going to get paid for it. Are you the type of person who can do that? Right? That's the type of person that you want in your business that has control over essentially the finances, not the finances per se, sorry, I mean the commercial side of it. Letting people know that if you don't tell me that there's been a delay, if you don't tell me that we have a change to our scope, we're not going to get paid for it because we're not going to be able to get it through the system, right? If you got someone who can understand that if we have too many variations outstanding that haven't been approved, that's going to affect cash flow, right? That's the type of person you want in your business. And if you're listening to this video, you should have a whole string of questions from listening to me that you want to be asking someone that you're potentially interviewing for a role, okay? They need to understand all the terms and conditions upfront. They need to understand how it impacts the business. They need to understand how your construction and how your business works and what the risks are there. And a really good person will be able to know pretty much every industry, right? With a little bit of training, a bit of asking questions, they'll know to ask the right questions. Then in the post-award space, you got to understand cash flow, how by not getting variations and EOTs approved, how it can impact cash flow, how it can increase your risk that you're going to get hit with liquidated damages unless you get get these things across the line, conveying that information to site and extracting. Sometimes it's like pulling blood from a stone sometimes from getting information from site, but it's conveying that, hey, this is really important for us as a company that if you don't tell us the changes on site and you don't tell us all this additional stuff, then we're not going to get paid for it and then we're not going to make money on the project. Okay? And if you can convey that, if you can be the type of person that does that, That is what a real contracts administrator, contracts manager, commercial manager pays for himself very, very, very quickly. And that's essentially a high-level overview at that contracts administrator role. If you want to be a good contracts administrator, implement those things into your skillset. If you need to go and learn and get skilled up to do that, that's what you want to do. And similarly, if you're looking to hire someone, make sure that they have the commercial acumen. You don't want a paper pusher. Someone who just moves paper around the business. If that's the case, if that's all you're actually looking for and you've got a project manager who is able to do the commercial side of things, which are hard to get a PM who's really good at delivering on site but also has the time to deliver contractually. And if that's the case, you just want to get someone who is generally just an administrator and can just push the documents around. You can probably train them up in a week or so to be able to do that. That's it for this video and I'll chat to you next. Take it easy. Bye.