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Greg: So, have you ever been bitten badly by a contract that went against you In construction? Things can go wrong sometimes when you get into a contract and if you are not commercially savvy, it can be really painful experience. I’ve experienced that myself. There was a few contracts that I got involved with when we started.
Winning bigger projects, and because I didn’t fully understand those contracts, I signed away, and it was only later on as I got into them that I realized I probably shouldn’t have signed those T’s and C’s, or I should have negotiated a little bit better at contract negotiation. Well, if that’s ever been the case for you as well and you’ve been bitten badly, or maybe you’re not as commercially savvy as you’d like to be, then this podcast is gonna be exactly what you need.
We’re talking to Raine Gerber. Who runs an international contract solutions business where they’ve analyzed over 7,000 contracts and they know exactly what terms and conditions should and shouldn’t be in there and what you can negotiate on, it’s gonna be a real eye-opener. So pay attention, take some notes, and hope you enjoy it.
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Greg: Raine, great to have you on the podcast. Appreciate you being here today.
Raine: Thanks Greg. It’s good to be here as well.
Greg: Raine, where are you based at the moment?
Raine: I am actually currently in South Africa. I’m busy helping a, a project here assisting with some of their project management, but I work primarily for an Australian entity.
Greg: Awesome. Love that. So it is great on our podcast we’ve had people from all over the world, Dubai, South Africa, UK, US Awesome. It’s amazing what we can achieve over Zoom. Yeah, great to have you with us and appreciate It’s pretty late for you at the moment there. Is it? Or is it actually No, it’s not.
It’s early. Is it?
Raine: It’s early in the morning. Yeah, it’s early in the morning. Sun has just come up.
Greg: Great stuff. Alright, so Raine. Maybe you’d just like to give yourself a little bit of an introduction to our listeners. Let us know, currently what you’re doing.
Raine: Yeah, sure. So at the moment I am the CEO for a company called Quantum Contract Solutions.
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Essentially what we do is we help subcontractors with their contracts administration. We give them contractual firepower to help them win, protect their profits, stay in the game long term. That’s what we’re doing currently.
Greg: Awesome. That’s great. Now, you haven’t always been there, have you, so you used to have your own subcontracting firm, didn’t you?
So do you wanna tell us a little bit about your experience with, with that in the construction industry? How, how did you get that started and what happened with that?
Raine: Yeah, so I’ll give you the, the elevated pitch version. I’ve had a I’ve, I’ve dabbled in many things in my life. Studied law, then immediately decided I didn’t want to do that anymore. Much to my parents’ horror and disdain. I went into construction. I started off working for a construction company and ultimately ended up opening a civil and steel assembly business subcontracts in business. We were involved in large scale infrastructure, 400 kv transmission lines for government projects, things like that.
We had great crews. We had great delivery. One of the contracts we signed had a hidden clause and that was that we didn’t have to wait for variation approval prior to commencement of variation.
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And by the time we cottoned onto this information, it was too late. We were accepting work that was beyond our scope that wasn’t yet approved.
We weren’t getting paid for it. And it’s there that I learned that it, that’s. What kills businesses, right? We were profitable on paper. We were making money, but I had no cashflow. The paperwork drowned us. We got strangled by our own cashflow. I had to close the doors because I just didn’t have money to pay anyone.
We had money coming in later, but later doesn’t pay rent this month. So eventually we had to close the doors. And then I met the founder of Quantum Contract Solutions Keyan Breden. Him and I partnered, and I joined Quantum There. Because I knew that other subcontractors were walking into the same traps as I was, they didn’t have the commercial firepower or the understanding, the technical knowledge.
I had a law degree would think I would know better, and I still miss this.
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And today we offer fraction alliance contract administration, negotiation and services to help other subcontractors, especially smaller ones who don’t have the budget to do it themselves, but they need the support.
Greg: You’re not the only one that’s been through a business failure.
I know, I’ve certainly experienced that myself, as have many of our listeners. It’s hugely stressful, hugely painful, but sometimes it just teaches you the best lessons, doesn’t it? You really absolutely. Take something out of it. What would you say if there, if there was, a, a single biggest lesson that you could draw from that failure that you’ve probably taken over into Quantum’s business, what would you say that lesson would be?
Raine: The biggest lesson looking back at it now is you can be the best of the best. Delivery isn’t enough. You can finish on time. You can keep your client happy, and you can still lose. You can lose money, you can lose your business. The biggest lesson is your risk is quantifiable, and you should know what it is before you even begin.
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So it’s not enough to do a good job. It’s not enough to keep your client happy. If the paperwork is not aligned, then you are in trouble and you don’t know what your risk is going to be. Subcontractors are flying blind most of the time. If you don’t have a system, you are in trouble. And if something hasn’t happened to you yet, it’s going to.
Greg: Hmm. That’s interesting because that is the reality, isn’t it? Sometimes we don’t deal with these issues until. Something happens. It’s the same with health and safety, isn’t it? You think you’re fine with your absolutely. Health and safety, and so someone has a huge accident and you’re like, oh, wow, I didn’t have that in place.
And then you’re potentially in trouble, aren’t you? Yeah, I think that’s, that’s pretty wise. So just, just so our listeners’ understand exactly what Quantum Contract Solutions do, just just give us a brief rundown of the services you’re offering as a, as a business and how that’s gonna help shape this conversation.
Raine: So essentially what Quantum does is we will come on as a commercial partner.
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So it’s a retainer service akin to a law firm, but not a law firm. And we will help manage your commercial, commercial portions of your contract. So from the time of tender, we will review, we set up your, what we call your commercial principles.
We’ve got. 27 of them, which is your baseline commercial sort of status. Every time you have a contract, we send it across to Quantum. We will review it and see if it’s in alignment. If it’s not in alignment with your baseline, what your, what risk you are comfortable accepting. We will give you points to negotiate.
We will give you the wording, we’ll tell you exactly what needs to change. We will sit in and assist on those meetings to try and get it as palatable for you as possible. And. When and if usually when the contractor signed, we then support you in the post award. So we help maintain all of that commercial compliance, filing notices, making sure that your payment claims are up to scratch, et cetera, so nothing gets lost or missed between the cracks.
You stay on top of your compliance all the way through.
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And unfortunately, the reality is sometimes all the way through to dispute resolution, making sure that you get through mediation, et cetera, all those things. We help you build a body of evidence. So it’s like having a in-house commercial team without having an in-house commercial team that you paid for.
It’s a fractionalised service. Mm.
Greg: Yeah. Really, really useful. So maybe some of my listeners are listening to this. They have contracts that they get, whether that’s, maybe a JCT contract in the UK, it’s a standard contract. So they’ve got their standard contracts and they think I just, that that’s the terms, I’m just gonna sign that.
Why would they be engaging you before signing, or why should they be engaging you potentially before signing that contract?
Raine: I’ll tell you a little secret industry secret. I have to date. Never seen an actual standard contract used. So it will have the standard contract heading at the top.
It’ll say standard contract, whatever the, in Australia, it’s the a s 2000 series, et cetera, and there’ll be a little tiny box at the bottom.
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These amendments have been made, and you’ve gotta go through and you’ve gotta dig out all of those things. If you are a hundred percent comfortable that this is a standard agreement, then maybe you don’t need to engage our services.
But not all standard contracts are made the same, and some of them favor the client more than the contractor. And it’s not to say that just because it’s a standard agreement, you can’t negotiate it. Just a pro tip. If something looks like a standard contract, in all likelihood it’s not. So be very, very mindful of that and engaging in services upfront, even if it is right, let’s just assume it is a standard contract.
Is that in line with your commercial baseline principles? Is it a risk you are prepared to take on? So different, different levels of standard commercial standard contracts. The US has got the worst version of them. Australia, not too bad, the UK not too bad.
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But there are some risks shifting that we can do to make sure that you’re more protected than you typically would be.
And that is, even if we don’t take into account the amendments that shift the risk onto you.
Greg: Mm. Yeah, that’s, that’s really interesting. What are the sort of red flags, if, if someone’s looking at a contract or you are looking at a contract, what particular things are you looking out for as those red flags or those clauses that maybe, shouldn’t be in there, or, or things that just have to be, the builder needs to be aware of before they end up signing them?
Raine: So we’ve got a extremely comprehensive list of, of these things, but I’ll give you. Off the top of my head. Let’s go with the top five.
Greg: Mm-hmm.
Raine: Payment terms. You need to know what your payment terms are. And it needs to be in alignment with what your business needs in order to survive. Termination clauses, right?
Limitation of liability is a big one. So third one.
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So making sure that you’re not signing onto uncapped liability liquidated damages without a cap. So if your project runs over, even if it’s not your fault, are you still paying liquidated damages for forever? And the other one that I’ve seen come up recently that’s trickled up to my list is reoccurring warranty periods.
So defects, liability periods. Usually they cap sort of 12 months, 24 months, which we’ve seen recently had a client come in a couple of months ago, a roofing client. He had signed onto a reoccurring warranty that every time something broke his warranty period restarted. He was in year four. Every time a roof tile fell down, his defects liability period was warranty period restarted.
So you’re signing yourself on potentially for a lifetime of fixing something for free. So those are the ones that bubble to the top of my head. Payment terms, termination, limitation of liability, liquidator damages, and making sure that your warranty period is capital. Those are the big five that I would have a look at.
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Greg: Yeah, interesting. Okay. And yeah, liquidate damages always interesting. I haven’t done this for a long time, but I know I was warned once about sometimes. If you saw liquidated damages in there, if you’re a little bit new to contracts, you think, oh no, there’s a liquidated damages clause in there and it says that they’re gonna deduct me whatever, 500 pounds a week if I go over.
But sometimes it’s more dangerous if that isn’t actually mentioned because you mentioned it before about agreed, the uncapped or the, the I can’t remember what the actual term is, but if there isn’t a cap on there, it could be even worse, can’t it?
Raine: No. So liquidated damages, and this is what I always advise to clients, is it’s not a bad thing, right?
We want to give the client. The comfort of being able to reclaim some of their lost funds, right? So we, we want to have that sort of check in balance in place. If I have delayed you, you should be able to claim something back. However, we need to know at the start, how much is it going to be. So we put, usually what we do, it’s either a fixed rate per day or a percentage rate.
It’s capped off at a total amount of the contract industry standards 10%.
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They can’t charge you more than 10% of the contract value and liquidates the damages because you know if everything goes wrong, your total liability for liquidate damages. Is going to be this much. It’s not just gonna run on and on and on and on.
You need to know what, what the cap is. It’s a bit of a comfort for your client because they’ve got a way to recover money. But it’s a comfort for you because if you know that something has terrible has happened, you know what that cap is. So liquidates, the damages in and of itself is not a bad thing, but the cap is the important bit.
Greg: Mm-hmm. Yeah, that’s really, really valuable. Let’s imagine we’ve got a contract in, we’ve got someone like yourself to come in and review this and you’ve suggested a few changes. Can we really negotiate contracts? Is the client not just gonna go, no, sorry, I’m just gonna go with the other contractor ’cause you are pushing back and they’re not how do we, how do we get around negotiating with, with a client on a contract?
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Raine: So there’s different strategies and these different approaches, but the main thing I want to just tackle off is. It’s called contract negotiation phase for a reason. Negotiations are, that’s the phase. It’s not contract agreement, it’s contract negotiation. There is, and I’ve spoken to many tier one contractors and many clients.
The contract typically that you are offered is their worst version. They have four or five backup clauses in their back pocket that they’re prepared to accept if you push back. And something that we try to do when we look at a contract. So if I, for example, if I’ve got Greg, if I’ve got 50 things on your commercial baseline that’s important for your business, and I get a contract that has all 30 of those items that are mismatched, I’ll say to you, if we are going to win this work, we are going to look at your top 10 risks.
These are the things we’re gonna negotiate. We’re not gonna go after all 30 because some of them are not as important as the other ones. What are the ones that are going to cost you the most money, potentially sink your business? Those are the ones we’re gonna negotiate.
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And there is a particular phrase that I use, I’ve got a here, hold on.
That when you get pushed back in a contract negotiation, what you can always say, especially if you’ve already priced the job right. Is we are happy to carry that risk if it is priced in. If there is a particular clause that they will not let go of, no problem. I need to adjust my insurance, I need to adjust whatever the particular thing may be.
We need to price it in and then I’m happy to carry the risk. But there is no such thing in my experience as a tier one or a client turning around and saying, no negotiations. You take it, all of it. It has never happened to my experience. We’ve done over 7,000 contract reviews and it’s never happened.
Greg: Hmm, that’s good.
Yeah. ’cause I think sometimes that’s the, that’s the worry, isn’t it? With, with maybe smaller contractors that are not used to dealing with this. They just think, oh am I just gonna completely put this client off and they’re never gonna use me again? But, you, you don’t realize that actually it’s the, it’s the standard thing.
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You can, you can go back. The
Raine: re the reality is if you don’t negotiate your contract, a couple of things happen. The first is that you are deemed less valuable. You’re deemed to be more new to the industry and you get bullied more because they know that your compliance isn’t up to scratch. So your chances of losing money on a contract you haven’t negotiated are much higher because you’ve accepted more risk, but also because they know you don’t have the compliance capabilities.
If you go in with carefully worded, constructed negotiations, ah, these guys are very sharp. We’ll do business with them in the future. They’ve got their compliance under control. That’s how you build better relationships. It’s not about aggressive hostile fighting between lawyers. It’s a very practical, this is a risk for me.
It’s gonna cost me this much. It’s, if it’s a key item for you, let’s find a compromise and meet somewhere where it’s not a risk for either of us.
Greg: Hmm. That’s interesting. And just on that if.
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That you realize, let’s imagine you’ve submitted a cost, and then as you’re looking at contract negotiation, you realize that actually there’s a few risks here that hadn’t really taken into account.
It could be the liquid liquidated damages and other things. Can you go back and change the price or amend, before you’ve signed contracts? Is there a way of saying, actually, I’ve realized there’s too much risk here, so I need to amend my price, or I can lower my price if you agree to these terms.
Is that, is that a standard thing that’s done or not really? It’s
Raine: often done. No, it’s often done so as long as the contract hasn’t been signed. If we’re still in this negotiation stage, it’s one of the, so what we will do if, if you partner with Quantum is we generate what we call a list of departures. And these will be all the suggestions and, and phrase changes.
We, you take that to your clients and you’ll go back and forth on these things. And I’ve done this, I’ve done this a number of times with attorneys and with clients, attorneys, et cetera, and we’ll say, okay, I’m happy to accept this, but it’s going to cost you more money. We need to change this, or we can amend the terms that serve them more favorable.
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And one of the important things here is if you have a set of established baseline commercial principles that you know we, we can prepare for you, but you can also prepare in-house your minimum operating thresholds. Submitting that at the time of tender with your pricing opens the door for that discussion a lot easier.
What we often see happens is people will submit a price at time of tender. They’ll get invited into contract negotiations, and then they will bring up this list of stuff, and then the client kind of goes, but you didn’t tell me about your list of stuff beforehand. You submited at the time of tender with your pricing.
It at least opens the door for the discussion.
Greg: Yeah, no, that makes sense. Okay, so let’s imagine we’ve got contracts, we’ve negotiated it. We, we now feel, we are pretty comfortable with the, the terms and conditions of that, and we, we’re ready to sign. As far as what you, the assistance you offer with clients.
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Are you ending it there or are you then moving through to post-contract stage, once they’ve been awarded the contracts, are, are there any ways that you then help enforce that contract or, or help run the project so that the client is staying contractually compliant?
Raine: Yeah. So first, first thing, prior to signing a contract, the first thing you need to check is that all changes and amendments have been incorporated into the contract.
50% of the time, and I’m not making up the statistic. It is true 50% of the time the changes you have negotiated do not appear in the final agreement. Wow. So first and foremost, right? So if you work with Quantum, we will check that. We’ll make sure everything’s incorporated and we’ll give you the go ahead to sign.
Once you’ve signed, what we then do, and it’s a, it’s a frame control. We set up a, a what we call a kickoff meeting. We tRaine our clients’ teams on how to be commercially compliant and how to use our services and the things that we do to support them. Imagine you, you’re doing a job and it’s Raineed for the last three days, okay?
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And you wanna put in a extension of time because you’re not gonna get your civil works conducted. Send an email through to us. We will prepare all the documentation. We’ll make sure that it gets in within the notice time by et cetera. So we tRaine the teams of. How to contact us by what timeframe you need to, ’cause most contracts have a notice period time bar in them.
So if something happens today, we need to know about it as soon as possible. How to put together a body of evidence, all of those things. And we support them all the way through to the end. And right at the end of the contract, we then do what we call a lessons learned debrief. Where we lost what, where the, our clients lost money, missed opportunities, et cetera, where quantum could have assisted better, all those kinds of things.
So it’s a full, I don’t wanna call it handholding, but it’s a full commercial support from time of tender to close a project for every commercial compliance step along the way.
Greg: Mm-hmm. That’s good.
Raine: And if you end up, and if you end up in a dispute, we’ll also be there to support you because we have all the information.
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Greg: Hey, can I just ask a quick favor? We are constantly trying to bring on the best guests on this podcast so we can deliver as much value as possible, but the only way we can do that is if we get more subscribers, more likes, more comments, and more reviews. So subscribe to this channel and click notifications so you know, every time we’ve got a new video coming up, give us a review if you’re getting any value from it, and give us a thumbs up.
We’d really appreciate that.
Yeah, so let’s talk about that because that can be the reality on, some contracts you can do your best to do the build well, and then , something happens. Yeah. We, we, either could be a client out to get you deliberately, which happens. Or it just could be a job’s gone wrong, your way, your end.
Let’s talk about that. Let’s imagine for a minute, hypothetical situation. Clients, you, you’ve put your payment notice in, clients decided not to pay. Where, what happens then, , the client hasn’t paid you, do you carry on work in, and then take them to, arbitrational mediation or whatever it’s gonna be.
Obviously the first thing they’re gonna do is contact you. But , what are you then advising in a hypothetical situation like that where money’s not come through?
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Raine: Best case scenario, right? And this is what we, we always recommend is. One, we need a, as part of your commercial baseline to negotiate in is a suspension tools.
So at what point can we suspend works? The other thing, and this is a, and this is a, a pro tip, if you take away nothing else from today, a clause that never gets rejected but has saved so many people is internal dispute resolution clauses within the body of the contract. What does this mean? This means that prior to escalation, to mediation, arbitration in Australia, the security of payments act, whatever the case may be, everybody that’s involved has to get around the table.
And have a discussion of how do we resolve this issue? And typically about 80% of the time we manage to get it resolved around that table before you incur costs outside of the contract. So if you are wanting to take away one thing today, it’s make sure that in your contract, nobody ever pushes back against it because it makes sense.
[00:22:00]
Why would you incur costs to go to mediation arbitration if you haven’t had an internal dialogue? And what you want is a structured. In the contract internal dialogue because the last thing anybody wants to do is wake up in the morning to an email from a lawyer to say, mm-hmm we’ve taken this to the arbitration.
You wanna have a conversation first, not a generic chat between project managers. A formal dispute resolution conversation that’s got mapped outcomes. And if you concept that there, then we go through to mediation, then arbitration sorry, mediation, adjudication, and then arbitration. Those are the steps that we, we will, we typically would go through and Ty, what we normally find is somewhere between the internal dispute resolution, conversation and adjudication.
We will manage to resolve this issue. There’s very few cases that go past that.
Greg: Yeah, that’s good.
[00:23:00]
So it obviously gets a little bit emotionally challenging at that stage, doesn’t it? Because at that point, if someone’s holding back funds, client’s holding back money, the, the main contractor’s annoyed, client’s, annoyed as they wouldn’t be holding back money.
To have that internal dispute resolution may feel like it’s a challenge, to get those people around the table and to talk. Is it best that this is, I, I guess probably answer my own question here, but if you’ve got a company like yourselves coming in at, at that stage, why do you think that’s better to maybe have an outside party to, to deal with that rather than the main contractor and client themselves?
Raine: Two things. One, the phrasing of this dispute resolution clause is that it must be senior decision makers of the company that are a party to this conversation. And obviously we recommend a third party in involvement, and this is for a couple of reasons. By the time you get to dispute resolution, I’ve been a project manager, I’ve been there. By the time you get to dispute resolution.
I wanna kill you and you wanna kill me, and we are never going to settle anything, right?
[00:24:00]
So we bring in the senior management or the people above them who are more impartial because they haven’t been in the day to day bickering back and forth, and a third party that contains or holds the body of evidence and can sit and consistency.
And we have a model for this. It’s called the Grow Model, right? The main thing about the Grow Model is that we get everybody aligned on the goal. We get everybody aligned on the reality. We present the options. What are the options that we can go, we can go full legal on this, we can compromise, or we can settle this however, and then we determine a way forward.
The beauty of having a third party is that they control the frame of the meeting. Because remember, the people who set up the dispute resolution meeting are the ones who hold more power. They have the agenda, they have, if you have a third party that runs this, it’s now. Two people sitting across from each other with a mediator.
It’s almost like mini mediation without calling it mediation.
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And having a, a third party that’s just saying, look, let’s get aligned on the goals, the reality body of evidence. This is what it looks like. Here are our options. This is what we’re looking at doing. Let’s discuss a way forward. Having that structure in place solves a ton of issues.
Greg: Yeah, that makes sense.
Raine: We have no ego, we have no pride involvement. We just wanna get this resolved.
Greg: Yeah. And ultimately that’s what everyone wants to do, don’t they? Get it, get it resolved and just gotta take the emotions out of it. Yeah, that, that’s interesting. So you mentioned a few times about, gathering a body of evidence together.
And I know from personal experience when I’ve had to go into mediation or get solicitors involved on contracts that have gone sideways. That body of evidence, just gathering that as a business can, if you haven’t done it the right way, can be absolutely. Painstaking, searching emails and whatever else.
Yeah. Are you advising clients, before they even start contracts on how they should be doing their record keeping or or, or is that just something that you just expect them to be, to be on top of when, so it could, because that, that body of evidence is pretty crucial, isn’t it?
[00:26:00]
And I can imagine that’s where it can go wrong.
Raine: It, it it’s critical. And in the cases where things have gone wrong, it is because the body of evidence hasn’t been up to scratch. So one of the things that we do is when we set up with a client is we ensure that. Different clients have different options. They’ve got different ways of managing things depending on their size.
So we plug into whatever existing services you are, whether it be a Procore you’ve got a specific OneDrive where you save all your documents, et cetera. And the other thing we do is we set up a contracts at email address, whatever your business name is, email address that auto forwards to my support desk.
So we have a running record and you just copy in that contract’s email. All the time. So that we have as much information as possible. We do weekly sync calls with project managers. Hey, what happened this week? Do you have photos? Do you have, can you send me the screenshots of the WhatsApp conversation?
Can you send me this information?
[00:27:00]
So constantly keeping in communication. We obviously have our own record keeping systems, but the main thing is we plug into your existing systems. And if you don’t have one. I can advise you on how to create one that plugs into my one essentially. That’s, that’s the main thing.
But making sure that having email be your body of evidence source is not a good function. You want to make sure that you’ve got the stored securely somewhere, and if you copy it across to us, we will store it and have it available. You can set something up like this for yourself in your own business.
If you don’t wanna use quantum services, have a dedicated email where you copy in pertinent conversations so that they all live there and once a month or so you go and you pull out the relevant, extract, the relevant information and just store it. I promise you, especially quarter four projects the the close out of projects and post projects, when you’re fighting for that last payment, that information becomes critical.
[00:28:00]
So you don’t need the quantum system, but you do need a system. Yeah. And we’d be happy to coach you through that.
Greg: Really interesting. Funny enough, we had a workshop the other day we did with our members and we were talking about roles of a project manager and one of those daily roles was writing the daily site diary on, on the projects, making sure that they’re just capturing that daily site information.
And it was when we did a little poll of, or just ask. The members who was actually running this or how many project managers were running, it was actually scary how many weren’t doing a daily site diary. But it’s crucial, isn’t it, just to, just to actually understand timelines of when things were happening and.
When was that picture taken, to prove that the crack was already there before you actually, started installing the steels or whatever it was. Little, little things like that. I think if you just had someone from the outside just advising you on how to set that up the right way, you’re gonna save yourself some real headaches further down the line for sure.
Raine: Absolutely, and, and I think clear daily logs.
[00:29:00]
Sometimes I, I’ve seen site diaries where site diaries only contain site conditions, weather, psych conditions. It was hot today. Fantastic. That helps. No one who said, it’s when they said it, what they said, what changes were made.
Any photographs, any outstanding issues, all of those things need to be. Kept up to date and it can be as simple as writing an email to yourself and sending it to a dedicated email address, but it was probably, when I worked in construction, one of my biggest frustrations was lack of paperwork.
Greg: Yeah,
Raine: paperwork management.
It is boring as, excuse my language is full health, but it is the make or break for everything.
Greg: Yeah. Yeah. Okay. So let’s imagine, yeah, we’ve got the the, the contract hasn’t gone sideways. It’s all, it’s all going fine. I think one of the big issues with starting larger contracts is the cashflow and the, the payment terms.
[00:30:00]
One of the, the big things is starting projects and bankrolling them for a long time, or, potentially it could be, a couple of months before you actually get paid. Just walk us through any amendments that people can make potentially with payment terms that might get them some cash a little bit sooner.
What are some of the tactics people can use to get a bit of cash through the door?
Raine: So first and foremost, when you review your payment terms. Things to watch out for 60 day payment terms, 30 day end of month payment terms, and paid when paid payment terms. Those are ones that you need to pay when paid is your client will pay you when they get paid.
Very, very dangerous. You’ve got no control. What we always try to do is payment 14 days from invoice approval. And to go one step further is to define what constitutes approval. So typically you would submit your payment claim, you would get a payment certificate back and then you would issue an invoice.
So defining that on issuance of the payment certificate, that is approval and then [00:31:00] you send your invoice through, right? 14 days from that date is ideally what we want to do up to 30 days. 30 days is where we wanna cap that all. If 30 days is too much for you to handle, you can do things like push for milestone payments.
So making sure that you’re getting routine cash injections as you get to particular milestones. And then the big one, the one that I think is underutilised the most is upfront payments, at least to cover the cost of your materials. So things like tariffs, transports, logistics, et cetera, be amount of risk you can offset if you have your materials covered upfront, because you can then.
If you don’t, you don’t need to come up with a million dollars to buy material it’s paid for. You can get going. You can stop moving. So if you don’t push for upfront payments hard enough. Not only are you bankrolling the work for 60 days, but you bankrolling the material. And that is a massive risk because what we often find with material is it only gets paid for once it’s installed, that could be in a year’s time.
[00:32:00]
And you’ve now cash flowed that entire period. So making sure you get upfront payments, at least as far as materials go. Push for milestone payments every time you achieve a block of work, if you can demarcate your work like that. And so that could be an example of if you’re building for example, I did transmission lines.
So I used to do the civil foundations per tower. So I used to get paid per tower, not per day, per whatever the case. I had milestone payments. And when we achieved a a section of the work. That’s when my defect liability period kicked in. That’s when I got 50% of my retention back because we’d moved on to the next phase of the project.
So having those little cash injections all the way through is important, but making sure that your payment terms align with what your business needs is very, very important. If you have to come up front with a million dollars worth of materials and pay your staff for 60 days and all your plant equipment, et cetera, you are looking at.
[00:33:00]
What could be $2 million, $3 million, pounds, et cetera, depending on the size of the project that you’ve gotta come up with and sit with for 60 days at least. And you will not recover the full amount back immediately. You will recover back slowly over a period of time. You don’t want to do that any costs you incur upfront.
So we, what we used to do or we used to push for, was upfront payments of materials plus, I forget the phrase now, but essentially the cost of getting to sight.
Greg: Yeah. Mobilisation,
Raine: Mobilisation. Thank you. The word just escaped from me. Mobilisation. So making sure we can get there and we have everything we need.
Greg: Yeah. And that makes sense.
Raine: Then I can, and then I can get paid as soon as possible. Those are the important things.
Greg: The amazing thing is we hear this a lot actually from our members, is that often contract administrators will push back and say let me just use the JCT as an example.
’cause that’s the one I’m familiar with. But they would say, there’s no provision in the JCT contract for receiving a deposit before work start. And, can you just dispel that myth for us now?
[00:34:00]
Is that a myth? How do we get around that? Is it just simply what you said about asking for materials to be covered?
Raine: Just because there’s no provision made does not mean you cannot request one, right? Like I said to you previously, it’s called contract negotiation. And one of the pro tips is, or I’ll say pro tips, one of the tips we used was, if you give me a cash advance payment, I will be able to discount this by one to 2%.
And on a big project, one to 2% is actually quite a significant amount of money, but I’m saving that in risk. I’m saving that in cashflow. I’m prepared to discount my rates if we can secure an upfront payments. So just because it doesn’t explicitly say it when you receive the contract does not mean you cannot request it.
And I think that’s the main myth to dispel. And, and just to go back to your previous thing of we can’t negotiate payment terms of the primary thing you negotiate.
[00:35:00]
I find that our clients, typically, that’s what they want to negotiate only as payment terms and they forget about everything else.
So yeah, just because there’s no provision made or there’s no specific outline does not mean, and I think this is very important, if something’s not outlined in the contract, it doesn’t mean you cannot add it. Those special terms and conditions, clause an action or whatever the case may be, it’s there for a reason.
It’s to incorporate things like this.
Greg: Perfect. Yeah, that’s great. No, really useful. We’re gonna do a little bit of a lightning round for some snippets for me now, Raine, if that’s okay. Of course. Quick, quick answer questions to some of these. The worst clause that you see weekly,
Raine: Unlimited liability.
It’s always slipped in like it’s no big deal. UNC Unlimited liability a hundred percent.
Greg: Great. Okay, one myth about contracts you wish would disappear.
[00:36:00]
Raine: Nothing bad has ever happened to me before, so it’ll be fun this time. Famous last words, trust me, it only has to happen once happened to me once. I had to close my whole business.
Greg: Love that. Yeah, that’s really good. A must have tool in your tech stack.
Raine: I’m not chained to Procore, Microsoft Projects, et cetera. Do it works best for you. Must have tools is a financial management software, whatever it is that you’re using to manage your invoicing and unconventional a really good CRM. You want to be able to manage all of your contacts, notes, client details, all of that information you can plug in.
There are a million project management platforms, but there are not as many good CRMs to manage your client communication and the very good CRMs at Body of Evidence discussion we’re talking about.
[00:37:00]
It can all live in your CRM attached to the client, the, the, the client, the specific personnel. You can cross tag it across projects.
A very good CRM and a very good financial software will take you very far.
Greg: That’s great. Good advice there. Okay, so just before we wrap this up then, if we were just gonna try and summarise this in some real practical takeaways for builders if you’re maybe gonna give your, your top three things that they should really be looking out for, what would you say those things should be, Raine?
Raine: Top three things that they need to be looking out for.
I feel like I, I am I’ll, I’ll be repeating myself. The top three things that we need to look out for, payment terms, making sure that you’ve got cashflow right. You need cashflow to sustain your business. Otherwise, it doesn’t matter. Delivery doesn’t matter. Your quality of work doesn’t matter.
[00:38:00]
Termination. How do you get out? Termination and suspension, let’s maybe put those into the same bracket. If something goes wrong, can you suspend the works and can you terminate? And the big thing is when you walk into a project, you have already quantified in numbers, in dollars, in pounds and euros, in whatever the case may be.
If everything went wrong, how much money do I have to pay? What is your risk? So making sure that there is a cap on everything. That your risk is cut off. You know exactly what your risk is when you are walking. Those are the main things. It’s awareness. It’s awareness on your cashflow. It’s awareness on your risk, and it’s awareness on your termination.
Can you get terminated? Can you terminate them? Those are the main things to know.
Greg: That’s very useful. I think one thing that I’ve taken away from this that I think the listeners will have a lot of value from too, is that early engagement with a specialist like yourself, rather than just going into these contracts blind if you like.
[00:39:00]
And that was probably a mistake I made in my business early on, is that I was taking on larger and larger projects. I wasn’t commercially savvy enough to actually understand the contracts I was signing. And then we got bullied a little bit by, contract administrators that knew more than we did and we didn’t know how to push back.
I think it’s actually just a brilliant service that you’re offering. That fractional. Contracts advisor that can just come in and just hold your hand a little bit when you don’t know what you’re doing in these particular areas.
So I think early engagement with a company like yourselves is crucial. Really just make sure, because a project can be, make or break from the beginning, can’t it? If you get that contract wrong, absolutely. Completely destroyed before you’ve even got going. So that’s yeah, something I think is.
Raine: There are some contracts where I have advised clients not to take them.
Before signature. This is because, it was difficult to negotiations and there has been, every time a client has gone against that advice, they’ve ended up in trouble.
You can tell from the beginning. Stages right from the beginning stages if this is going to work out or not in your favor.
[00:40:00]
And I think one of the things to be mindful of, and something I wish I knew before I knew earlier is if you don’t understand something in a contract, it doesn’t mean you’re stupid. It doesn’t mean you’re a terrible business person. It doesn’t mean you’re bad at the job, it doesn’t mean any of those things.
You’re not dumb. It’s because the person who wrote that doesn’t want you to understand it. Ask someone, get somebody who does understand it to explain it to you so that you know what you’re getting yourself in for. That I think is the most crucial, but don’t let pride or ego get in the way there.
Greg: No, that’s good advice.
So Quantum Contract Solutions what’s a typical project that you would work with? You’re someone you know who’s listening to this and thinking, oh, I’d love to work with you guys. You sound awesome. What’s the minimum value contract you’d really get involved with?
Raine: We do, when I say there is no minimum value, so the, the only sort of sub minimum that we put in for our clients is it’s gotta be a commercial contractor.
[00:41:00]
We don’t handle residential builds and things like that. So the guy who came to paint your house, we probably won’t evaluate that quote or things, any commercial contracts because sometimes the small contracts, the under $25,000 contracts carry just as much risk as the million dollar contracts. So there is no cap on the amount in terms of the service or the industries we support.
It doesn’t matter. Scaffolding, steel engineering, civil engineering, civils transmission lines. We’ve done it all and we’ve seen it all because the contract’s all the same. So the industry doesn’t matter what size of the contract doesn’t matter, it’s about the risk. How much risk does it carry?
And if you haven’t been burnt yet, you’re going to be. That’s my, main thing. So if somebody wants to get involved with us, it’s really the main cut threshold is do you do commercial contracts? Because if you do, you’re at risk.
Greg: Yeah. And what countries are you covering?
Raine: We have a capability because we’re an international team and we work remotely, primarily.
[00:42:00]
We have the capability to work in any English speaking country in the world. We cover as currently our services are available, Australia, New Zealand the US parts of Europe parts of the UK and South Africa. Those are our main sort of client threshold, but we can, and then we are pushing up into Southeast Asia as well at the moment.
Any English speaking countries because my team works in English. Unfortunately, translators are expensive. Any English speaking country in the world or where we deal with English contracts, we can assist.
Greg: Great. And I just wanna clarify one thing. So when you said you don’t deal with residential, you like, you only deal with commercial contracts.
If someone was taking on like a lot of members of my community, they may take on a 500K, A million pound residential contract, as in, it will be a like a JCT contract. But for a residential, client with a, with a contract administrator, this Yeah. What are, are you covering that or not?
Just so we’ve got some clarity on that.
Raine: No, no. We we’re, we’re covering that one. So I think let’s just draw the key distinction here.
[00:43:00]
The difference here is you have got commercial contracts and then you’ve got residential contracts. Commercial contracts can be for residential purposes, they can be for residential builds.
They can be for. Painting the entire complex block. But if you asked your buddy to paint your house and he sent you a quote that’s got some T’s and C’s on it, or the plumber or whatever the case is, those residential contractors, those are typically people we don’t engage with because they don’t have commercial contracts.
They have quotes, we operate on purchase orders, those types of things. There’s nothing really for me to review, but for commercial contracts. The output can still be full residential, but it’s a commercial contracting agreement. And that’s where the discrepancy is, or the, the distinction is rather.
Greg: Yeah. No, that’s awesome.
Just to, to clear that up. That’s really great Raine. I really appreciate all your time and valuable wisdom that you’ve been able to give us today. If someone wanted to get hold of your company or learn a little bit more about connecting with you guys, where would they do that?
[00:44:00]
Raine: So you can find us pretty much everywhere at Quantum Contract Solutions LinkedIn Instagram, Twitter Facebook, et cetera.
Pretty much everywhere. YouTube Construction secrets we will provide. Greg will give you a link as well. If you wanna book a call in, book a call in, and have a chat to one of our experts and we can see how we can help you.
Greg: Fantastic. Really appreciate it, Raine. Thank you very much.
Raine: Thanks, Greg.
Appreciate your time.
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