Building contract administration

So, I'm in the early stages of planning a 4 townhouse development in Melbourne. I've spoken to a few town planets, architects and draftsmen and we're trying to decide who to go with.

I'm a first time developer, no background in construction but I know one end of a hammer from the other. One of the things that I'm getting conflicting advice about is building contract administration. Some are telling me it's a must, builders are all dodgy and will cut corners and rob us blind every chance they get. Others are saying don't worry about it, it's unnecessary, just make sure the contract and plans are detailed and the bank providing finance will check things over before releasing funds at each stage.

Thoughts, opinions, advice - most welcome! I'm leaning towards going for CA but don't want to throw away money unnecessarily.

What do y'all reckon?
 
I have no experience either way, but I would lean towards getting a customer representative project manager (CRPM) to help me with tendering and subsequent management of the contract. You want someone knowledgeable in the mix who is on your side because everyone else sure has. Similarly, I get lawyers to help me with legals and accountants to help with financials.
 
Thanks Mirbius. We would be getting the architect or draftsman to help with the tendering process. More concerned with the actual construction phase and how we can ensure its on track and being done correctly.
 
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A half way stage (between nothing and full Contract Administration) is to use an inspection service to carry out stage checks on the construction.

Some also offer a review of the contract documentation which I think would be well worthwhile in your case.

For a few thousand dollars it would be a lot better than just hoping!
 
Look into either a design, novate & construct contract (DN&C) or a design development & construct contract (DD&C).
Although lump sum contracts seem like the cheapest and best way to go, the builder can push any design errors and unforeseen risks back onto you. They'll also try and make some more dosh with variations.
With design and construct (D&C) contracts, the builder will be held responsible for any further designing, engineering, construction, etc.
D&C contracts are quite effective for the client when it comes to development, almost all the risk is pushed onto the builder.
My suggestion would be to have a client side project manager help review the chosen lump sum or d&c contract. They'll charge you a fee, but they'll know what to look out for and may save you some in the long run.
I'd also recommend to get ahold of some other contracts by builders, especially project home builders and read through them thoroughly so you can gain a bit of an understanding.
Contracts can never have enough detail, so make sure anything and everything you want included is written, drawn, coloured in, highlighted, then made part of the contract.
Don't forget, the plans, specs, schedules, etc also form part of the contract. So make sure the wording in them are also consistent and detailed too, along with the actual written contract.
Above all, don't pick the builder purely for their price. Meet them, chat to them, see their previous projects and try to chat with their previous clients so you can see whether you'll be able to deal with the builder throughout the entire construction phase.
At the end of the day, builders need to make a living too. If you pick the lowest price, expect corners to be cut, variations, delays and limited resources.
 
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Thanks andini, very helpful post. When I say contract administration, I'm talking about client side project management / keeping the builder honest type thing.

Cheers.
 
Andini covered some good points above

https://www.masterbuilders.asn.au/contracts-and-disputes/contract-administration

If you go D and C its all on them, to arrange the plans and to get it built without whinging for variations if there are errors in plans. I'd only go through a draftsmen then a builder seperate if you can get a could $ saving on the drawings BUT also be able to manage quickly and cost effectvily any design changes or issues.

As for on the job issues, you need to find a builder YOUR confident with and can work with. Progress payments will be based on where they're at with construction, although you have limited experience you should get them to first break down their quote into sections eg slabs, frames, .... then claim against that. So after a month and concrete slabs are all poured show that on the progress claim - Concrete $x,xxx.xx 100%. You should visit site and if the work is complete you can give them the money.

The quality of works is the hard part but they are required to cover warranty and defects for a period. So as long as you find a good honest builder (not the most expensive either!!) they should deliver in those stakes. Best to have regular meetings and phone calls to check how things are running.

Also upfroint ask how long its going to take, what other jobs they have on and if they have their own guys or good access to tradies. The end date should be in the contract and stuck to, remind them regularly to keep an eye on progress and end dates!

I have not done any developing myself but plenty of large scale construction/infrastructure projects so someone else may be able to clarify any of the above that may be different in relation to residential work
 
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I think Bob also raised a few good points.

Ensure a construction program is included into the contract, along with a progress payment schedule (naturally should be anyway).
Regarding progress payment schedules, be careful the builder doesn't increase the earlier progress payments by too much and decrease the later progress payments. They do this to help with cash flow and decrease the chance of you ripping them off towards the end of the project, but it'll cost you more interest.
The 3 most important aspects of the contract are quality, time and cost.
Cost= Schedule with breakdown of costs, progress payments (how much/when/percentage or stage completed), and total sum. The toughest part about cost is when builders aren't clear about what is included and excluded, and what they appoint provisional sums to. So this'll take some of your time to compare apples with apples (other quotes). Also, ensure an amount (%) is retained (retention) until after defects liability period. This'll ensure the builder will return to fix defects, and if not you can pay someone else using the retained funds. If I were you, I'd make it VERY clear to the builder prior to signing the contract that ABSOLUTELY NO, NONE, ZILCH, NADA variations will be accepted, but make sure you say this after they've submitted a tender and when there hanging for you to sign and return the contract. lol
Time= A detailed construction program, completion date, liquidated damages clauses if time has been exceeded. On the contrary to liquidated damages, a bonus clause for the builder is also beneficial for both parties. If the builder completes a month early, it'll save you interest and you could pass on some of those savings to the builder as an incentive.
Quality= The quality aspect can take some time to prepare, but it's where you'll ensure the builder delivers your expectations. Design documentation, schedules, written statements (principal project requirements) outlining fitments and finishes (with make, model, sizes, etc), and any other info you can think of. Above all, make sure nothing is verbal and everything is written from the onset.

From my experience, the client side PMs I've met and worked with have been guys who don't like to dirty their RM Williams boots. They will be able to help contractually, but when it comes to quality inspections, I don't think they'd have the slightest clue. If you were to go the client side PM route, you may have to employ an engineer for site inspections.
I'm not sure if building consultants offer this type of service, but perhaps you could look into them. Building consultants from my perspective have had a more hands on and problem solving upbringing, so they may be able to provide more insight through the entire project, from concept to completion. The ones I've met have come from trade backgrounds, completed projects for themselves and then become consultants due to the pool of knowledge gained from all the damn problem solving. So I think they may be able to help you with design, contract, and inspections.
Depending on which you wish to swing, you can also appoint the PM or the consultant as the superintendent of the contract, which'll give them special powers and enable them to give instructions to the builder.

Otherwise, you could take a risk, same some dosh and find yourself a good, honest builder. They're out there, you just gotta find one. I guess this is where you're ability to judge characters comes in. I've been heavily contemplating on starting my own gig and I think it's about bloody time too!

Good luck $horty.
 
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