Plumbing Connection 4-2015

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1 0 2 P L UMB I N G CO N N E C T I O N S UMM E R 2 0 15
TIPS
T he Australian economy is being
drained of $7 billion annually, and
it’s due to a number of factors
weighing heavily on construction
projects throughout the nation.
Payment disputes, contract disputes,
lack of transparency and mistrust
are to blame, according to a CRCCI
report detailing the effects of these
causes on the industry. For exmaple.
you’ll have likely heard of the payment
claim demands plaguing the Perth
Children’s Hospital, with John Holland
facing claims of $8.6 million from
subcontractor Yuanda Australia, as
well as similar claims from two other
contractors. The dispute is one of the
reasons the project is now experiencing
delays, and the construction company is
experiencing backlash from their client,
the West Australian Government.
Disputes like this are rife in the
construction industry, and stretch
from the miniscule to the major.
They can arise from simple
misunderstandings among colleagues,
which can often be resolved internally,
to the more serious payment claims
for work completed or not completed.
Outdated, manual processes are
at the root of the majority of these
issues. Relying on invoices, emails
and spreadsheet reconciliation makes
claims incredibly difficult to track and
means mistakes can and are easily
made, leading to needless legal rows
and hold ups on site.
As a former CFO of a residential,
commercial and retail builder, I’ve
seen how damaging the fallout from
disputes can be for all involved,
particularly disputes over payment.
Despite their varying levels of severity,
all disputes are a waste of time and
money, particularly when there are
modern ways to reduce or avoid
them altogether.
We call the payment dispute issue
‘The $7 billion problem’, and it’s not just
me who has noticed it. The CRCCI report
points to the fact that “disputes also
contribute to inflation of future project
costs through higher tendered prices
based on previous experience in similar
work”, often unnecessarily raising prices
for clients.
Master Builders Association of NSW
executive director Brian Seidler has said
that as construction projects grow over
the next few years, “how contracting
parties deal with various payment
processes needs to be resolved”.
Similarly, an article in the Sydney Morning
Heraldindicated that “law and accounting
firms look to be the big winners of
wrangles between producers, contractors
and sub-contractors”, with some disputes
reaching claims of over $1 billion.
The good news is that there are plenty
of new ways to streamline processes
within construction projects which
can minimise the risk of disputes
and optimise project outcomes. More
importantly, these solutions involve
everyone on the build: financiers,
developers, consultants, prime
contractors, subcontractors and all
other parties to the supply chain.
ǩ Collaboration. Encouraging and
cultivating collaborative processes
in a work environment is at the
heart of ensuring a project moves
along smoothly without any dispute
roadblocks. Rapidly expanding
technology like multi-dimensional
Building Information Modelling
(BIM) is changing how buildings,
infrastructure, and utilities are
planned, designed, built, and
managed.
answers the problem of streamlining
the payment approval process for
everyone involved in a build – from
clients to subcontractors. By enabling
all contract parties to administer
payment claims in seconds over the
web. saves users
time and money while minimising
dispute risk. At the end of the day, it’s
about involving everyone to find easier
and more efficient ways to do things.
ǩ Buy in. Having your team involved in
the project from the get-go ensures
that they are across all phases of a
build and know exactly what’s going
on. According to the CRCCI report,
it’s the hierarchical structure that
often excludes many parties from
contributing in an optimal way.
However, if you can get over the social
order, increasing their integration can
actually significantly reduce whole-
of-life cost, while early collaboration
means that problems can be solved
from the outset instead of further
down the line, diluting the need for
formal dispute resolution.
ǩ Trust. With every project made up of
people from different disciplines and
organisations doing different parts
of the same build, it’s obvious that
trust needs to be built from the very
beginning and maintained throughout
the build. A report by the Centre for
Construction Innovation explains
that “trust is considered to be a vital
ingredient in the management and
delivery of construction projects”, and
can make substantial savings in cost
and time.
To revamp the backend of the
construction industry and minimise
the risk of disputes, old methods of
communication need to be revitalised
to be more inclusive from the beginning
of a project, incorporating collaboration,
buy in and trust. The adoption of new
technologies will help streamline
processes and avoid disputes and
help eliminate the economy’s
$7 billion problem.
Lincoln Easton is the founder
of , a cloud-based
contract billing and approval software
for the Australian construction industry.
SOLVING AUSTRALIA’S $7 BILLION
CONSTRUCTION PROBLEM
Paperwork could very well
be killing the industry, writes
Lincoln Easton.