How good Contract Administration can Make you Money

If you’re an Aussie Subbie, chances are you think of paperwork as a succubus on your precious time that could be better spent on charge out work. 

It’s not.  

Here’s the thing.  

There is a difference between being busy and making progress in your business that will make you more money. 

Business coaches talk about taking meaningful action that will move the lever towards more profit and lower overheads. If you hang around those folk long enough you’ll start saying things like “that which gets measured gets improved.”  

The thing is, they’re absolutely right.  

But it’s a hard sell to talk a subcontractor into spending money on administration when they’ve been ‘getting away’ without it for years. So true to form, we usually meet you guys for the first time when there has been an oopsie daisy and you need help to get out of a hole. 

Once we dig you out, one of the most common questions I get asked in my line of work is “Michelle, what should I do in the future to stop this from ever happening again?” 

…as if the answer involves just one thing. 

Don’t shoot the messenger, but the answer is that it is not just one thing. It’s all of these things:  

• It starts with your pre quote due diligence processes.  
• It helps if you qualify certain aspects in your quote documents. 
• Ideally you never start work on site without a written contract with terms that you understand and genuinely believe you can deliver on. 
• You reinforce the protections when you negotiate contract terms that you can deliver on. 
• You need to be willing to walk away if the terms are unachievable for you, or are so onerous that you’ll never make a profit. 
• You should always mitigate the risk of any residual terms you couldn’t eliminate during contract negotiations.  
• You need to watch your customers like a toddler on monkey bars and predict any painful stacks.  

In fact, just on that last one, I firmly believe that you need to listen to your gut instinct. I’m not talking woo woo crystal ball type stuff – I’m talking about street smarts. If you have survived in business as a subcontractor for longer than three to five years without losing a crack of cash and limping back to the tools, chances are you’ve got the gift. 

You will know you’ve got the gift if your subconscious sends you nudges about seemingly normal situations that just don’t add up. Street smarts is the voice in your head that says, “that seems strange, doesn’t it?”  

But having the gift doesn’t mean you’ll skate through business life completely unscathed. Even worse, you might feel so confident you think you are invincible.  

If you are relying solely on street smarts, by the time something goes bad (and you are willing to admit it) by the time you take any action to protect yourself you have probably missed the boat.  

You see, retrospective Contract Administration stands out like a band aid stuck to your forehead. Adjudicators, judges and builders can see it from a mile away and nobody can take their eyes off it to focus on the real issues. 

If you do your contract administration retrospectively, two things happen: 

1. When the builder starts raining nasty notices on the subcontractor, you freeze. By the time you get some help or work out what to do, so much time has passed that you start to look guilty, or weak. Neither is helpful. 
2. You are leaving money on the table, and in some cases, you might have to throw more money on the table to get out of the mess.  

Good practice contract administration starts paying you dividends from the very beginning. If the answer to any of the following questions is a no, chances are, you’re not claiming everything that you’re entitled to claim under your contracts: 

• Do you know how much margin you are entitled to claim on variations? 
• Are you entitled to delay costs under your contract?  
• Have you claimed an extension of time with each of your variations? 

Even if you have no intention of claiming any additional amounts under your contract than the dollar value written on your quote, you’re still exposing your business to unnecessary risk by saying no to administration. 

If you enjoyed this blog, or if any of what I have said resonates with you, please leave a message in the comments.