Major build projects are exciting, frustrating, all-consuming, expensive and satisfying. They are a high-risk high reward, long-term investment in the school’s continued growth and standing. Delivery of a good project, like all major undertakings, is mainly down to the people and the communication. However, it is worthwhile bearing in mind the flashpoints and how best to resource and structure the project as soon as the decision to proceed is made at the Governors’ meeting.
My top 5 tips for a successful project are:
- Early bank engagement
At the very beginning of any project where bank funding may be a requirement, find out from the relationship manager what the bank will require. Try to get sign up from your design team and contractors to the development documents and security in the form that the Bank will want (collateral warranties, proper appointments and build contracts) as if they are not acceptable at the point when you ask for draw down on the loan the school can suddenly be faced with significant delay, costs and cash flow issues whilst you try to get them in place retrospectively with at least part of the team who have already been paid in full and no motivation to take on additional liability.
2. Realistic budget and timetable
75% of projects overrun and exceed target costs. Measures to help manage this risk include:
(i) Have a healthy and realistic contingency;
(ii) Get thorough (often forgotten) site investigations, early expert advice on the likely build cost and design fees;
(iii) Forward plan a reasonable amount of float in the timetable; and
(iv) Ensure the contract is a fixed price contract with sensible liquidated damages provisions;
Prior preparation prevents poor performance.
Undertaking investigations into ground, environmental and asbestos contamination help costing and understanding the major risk in all build projects: getting the foundations in and the building out of the ground. But make sure you get “letters of reliance” from the site investigation team otherwise the contractor cannot rely upon their reports and the contractor will have to undertake its own site investigations at your cost. The bank will usually want its own letters of reliance as well. Bear this in mind when instructing your investigation team and make it a requirement from the beginning.
4. “Whilst the builders are here”
This is never the cheapest route to getting work done. It detracts from the main project and is guaranteed to cause delay. It does, however, get the pain of builders (and their clutter) on site over and done with. There are often good reasons why you want to get works done. For example, it is difficult to visual how a build project will look and building works may throw up other problems on your existing school estate that need dealing with at the same time. However, always consider carefully and do not enter into a building contract until your design is fully developed. It is always cheaper and much less risky to get the design right on paper than whilst the builders are already on site.
5. Letters of Intent: just say no
Timetabling is the bane of schools at all levels and a building project can only add to the headache. One issue that arises time and again is that the contract is not ready to sign but the contractor tells you that one of the long lead in items (such as steel frames) needs to be ordered yesterday in order so that the new sports hall can be open in time for the next sports day. In these circumstances the project manager will be badgering you to put in place a Letter of Intent. These are rarely the right choice as they are neither fish nor fowl. At worst they are unenforceable agreements to agree leaving the contractor high and dry and the school with no ability to use any design prepared during the period of the Letter of Intent, or a binding contract which does not bring in to play all of the normal checks and balances that one finds in a building contract such as liquidated damages and the right to instruct variations. As one judge has said, there is usually no good reason why the parties should not wait for the full contract to be signed.
There are a lot of moving parts on a building project both contractually and physically. Ensuring that the school has a robust means of recourse in the event of contractor insolvency, to keep the bank happy, and in the not so unlikely event of there being a defect in the building works, getting the contract papers right means that the build phase will be significantly de-risked and the school has comfort going forward that any major problems can be fixed at little or no cost to itself.
If you need any further advice on what is the right contractual paperwork, please do not hesitate to contact our experienced team. As we act for contractors, funders, schools and designers, we are familiar with and can produce paperwork that requires minimal negotiation as it should be pitched at a level that is acceptable to most parties. Starting from a commercially sensible point can help ensure a smooth transition from a chaotic, delayed and messy overall project to a productively managed procurement that is a joy to report to your governing body.