5.0 NSW Owner Builder CONTRACT ADMINISTRATION
5.1 OVERVIEW
The administration of your owner builder project contract will ultimately determine the level of success you achieve in the construction of your project.
Careful planning and following the directions provided in this manual and the Abacus Training Project Management System will go a long way to realising great savings and satisfaction.
You need to be above all, disciplined in the organisation and administration of your owner builder project.
Owner Builders need to be aware of what a contract is and what their obligations are under the various contracts that will be entered into during the course of their construction:
What is a contract?
A contract is a mutual agreement created between two or more parties that documents and records what the parties have agreed to do for each other. Contracts can be written or oral. They should outline the commercial relationship between parties and document the terms of the agreement. In the building and construction industry, there are many different types of contracts depending on who the agreement is between and the size and complexity of the project.
The forms and instructions included in this next section, provide simple, well constructed tools to establish accurate records for your project.
The file structure suggested and included on the disk is a system that has worked for us in the past, and can be used on a project of any size or monetary value.
It provides easy access and recall of all records and project information.
The old adage “information is power”, was never more true than when running a construction project.
Each of the forms included in the system is described in this manual.
You can refer back to the instructions for use at any time if you need to reacquaint yourself with the principles and use of the form.
An important responsibility as the owner builder, is the guarantee of payments to contractors and suppliers.
The Building and Construction Industry operates under various legislation that helps to ensure contractor payments.
The legislation establishes a statutory based system of rapid adjudication for the quick resolution of the payment dispute.
Significantly, decisions by an adjudicator are enforceable as a judgment debt if a contracting party fails to pay monies to a contracted party as determined by the adjudicator.”
Owner Builders fall under the provisions of this legislation and should be aware that:
- If a contractor or supplier is experiencing payment problems with an owner builder, they may lodge an adjudication application with an Authorised Nominating Authority
- The Authorised Nominating Authority will appoint an independent adjudicator with relevant expertise and register to hear such disputes
- An adjudicator must make a decision on the dispute within 10 business days from either receiving the respondent’s (owner builders) adjudication response or the expiry of the specified time frame for receiving an adjudication response. The adjudicator has the power to call for further submissions, hold a conference and view the relevant construction site.
- An adjudicator must provide to both parties reasons for making a decision including the adjudicated amount and the payment date. If the payment of the adjudicated amount is not made, the claimant can request an adjudication certificate, which can then be lodged in a court of competent jurisdiction as a judgment debt.
The important benefits of the adjudication process are that it allows for a prompt interim decision on disputed payments, encourages communication between the parties about disputed matters and provides parties with a much faster and cheaper alternative to resolve the dispute without entering the court system.
Following are screen shots of the forms included on the disk relevant to Site Administration.
The associated text provides a brief outline of the function and use of the form or letter.
5.2 SITE INSTRUCTIONS
As we always try to impress upon our students, all instructions given to trade contractors or suppliers must be in writing, agreed to and signed by both parties.
Ensuring this is done, will reduce the possibility of dispute and miscommunications between the Owner Builder and their contractors or suppliers.
The instructions should be numbered, clearly identify the instructions, signed by both parties and recorded in the site diary, a register of site instructions or simply placed in the appropriate trade contractors file.
Where the site instruction constitutes a variation to the contract, the appropriate variation documentation should be included and similarly recorded.
5.3 SITE DIARY
Two distinct schools of thought exist in this area..
Not in respect of the importance of maintaining an accurate site diary (this is a given) but we do have differing opinions of the best format.
Both methods require the owner builder to establish a consistent record of day to day activities on the site.
One is based on a computer form which is completed and retained either in an electronic or hard copy format (preferably both), the other is the use of a Collins or similar A4 sized bound diary which displays one page to a day.
Which ever format you use, make certain you record the following information as a minimum:
- Brief outline of the days activities (point form is adequate)
- Any site problems occurrences or disputes
- The issue of site instructions or variations
- Any delays including:
- Weather
- Materials
- No show of tradespersons or contractors
- Record of all phone calls and any correspondence sent or received
- Any other significant site activity
Keeping a well organised, complete and accurate site diary is a great start in ensuring your project runs smoothly, on time and on budget.
5.4 PROGRESS CLAIMS
Timing of progress claims will normally be detailed in the contract and agreed to prior to signing or engaging any contractor or supplier.
The progress payments will generally be identified as a percentage of works competed or a stage of construction such as:
- Slab poured
- Frame stood
- Roof on
- Lock Up
You should use the information collated from all contracts, together with your construction schedule and determine a rough cash flow for the project.
This will assist you in transferring funds at appropriate times or organising loan draw downs in time to meet cash demands.
Before making a payment, you need to consider:
- Is the claim for payment consistent with the works competed and the agreed terms of the contract?
- Is the work completed to a satisfactory standard?
- Is there a certification or inspection required for the completed works?
- Is there any retention amount allowed for or specified in the contract?
The following screen shot illustrates a portion of the Progress Claim Proforma included in the Project Management System, it has been produced to include all information as required by industry standards.
Owner Builders - Progress Claim
Retentions if applicable should:
To make certain your records are complete and easily followed:
- Not be of an amount that exceeds 10% of any one progress claim
- Once practical completion is achieved, the total retention should not exceed 2.5% of the total contract value
- Retention amounts should be held for a maximum of 6 months as a defects liability protection.
To make certain your records are complete and easily followed:
- Do not pay by cash
- Pay by cheque or money order only
- Only pay upon receipt of a Tax Invoice which includes an ABN if applicable
5.1 VARIATIONS
The following extract is of the Variation Document included in the Project Management Disk.
The Variation Document must:
- Be numbered and recorded against the relevant trade contract
- Indicate who requested the variation to the contract
- Identify the Owner Builder and the Site details
- Detail the Extent of Works covered by the variation
- Include changes to the contract price including a breakdown of the costs involved
- If more than one variation is included on the document, each item shall be initialed
- The variation document must be signed by the contracted parties (the owner builder and the contractor or supplier
NSW Owner Builder Course - Variations
5.2 CASHBOOKS
The cash book and your site diary are arguably the most important records you will keep in respect of the project.
The cash book is divided up into several columns, each identifying the details of all transactions and disbursements made during the construction of the project.
The following extract shows the layout of the .xls spreadsheet solution provided in the Project Management System.
It has been “dumbed down” to allow manual entry and calculations.
A more sophisticated solutions includes the required formulae to make the spreadsheet “automatic”
A video screen presentation detailing the use of the cashbook can be found in the following file on the disk:
Cashbook.wmv
NSW Owner Builder Course - Cashbook
Our cash book solution includes a petty cash book on the same sheet, this helps retain all financial record in a common location.
Additionally you must retain:
Additionally you must retain:
- Cheque Butts
- Sales Invoices
- Petty Cash Dockets and Receipts
- Bank Statements
- Progress Claims
- Progress Payment Details
5.7 TRADE CONTRACTS
The Home Building Act 1989 no longer requires contracts for work valued under $5,000 (including labour and materials), although it is recommended to have a written agreement.
In fact: Legislation obliges a contractor to give a copy of the Consumer Building Guide to consumers before entering into a home building contract.
We advise our owner builders to have a contract whenever works exceed $3000.00
Where a project has a value between $5000.00 and $20,000.00 there is a simplified specific contract recommended for use: (click here to access)
Contracts requires the following elements:
- Name of both parties
- Contractor License Number
- Identify associated plans and specifications
- Contract Price if known
- Statement indicating the works are to be of a quality consistent with the Building Code of Australia and Relevant Australian Standards or Codes
- Limit of Liability where design or specification is provided by the owner builder or their agent.
For projects over $20,000.00 follow this link to download: (Construction Contract)
Visit the Department of Fair Trading website for more information on the applicability of Contracts for domestic construction projects and their relevance to owner builders.
NSW Owner Builder Contract Checklist
5.8 PRE-LIMINARIES CHECKLIST
Preliminaries form an important part of the project, not only from an organisational aspect, but also as a monetary consideration.
The provided Preliminaries Checklist, provide a detailed form for ensuring that all the general considerations for a typical domestic construction project are completed and documented.
It will provide quick access to the amount spent on the preliminary stage of the construction and fiscal information to be included in your project budget.
NSW Owner Builder Preliminaries Checklist
5.9 CERTIFICATIONS CHECKLIST
It is important to keep all copies of any certifications that are issued in respect your construction.
These should be retained in the relevant trade contract file for future reference.
It is a good idea to establish a Certification Checklist as a quick reference of the inspections completed or certifications received.
Ideally this would be retained in the Project Master File (Hard Copy) or in the front of the Project Diary.
A proforma is included and accessible from the resources download page on the website.
5.10 FILE STRUCTURE
We have included a basic file structure that can be copied and pasted onto your computer and will form the basis of your electronic retention of financial and administrative records for your project.
The file structure is accessible from the resources download page on the website, and we have included a tutorial viewable in windows media player on the use and structure of the filing system.
Whilst it is generic, it is appropriate for most domestic construction projects.
Special or unique projects may need some modification to the system.
If you have any problems or questions, enter our web based forum and ask the questions of other Owner Builders or of the Owner Building Australia staff.
NSW Owner builder - Typical File Structure
5.11 REGISTERS
Registers are an important source of project information, particularly in respect to the contact information of various suppliers, contractors and consultants.
In addition to details on the contracted service providers, several other registers may need to be produced and retained separately to allow easy access to specific information including site safety induction etc.
These are handled and discussed in the relevant sections of this manual.
For each of the Project Participants below, the appropriate details as indicated should be included in the register.
The Screen Shot Tutorial access from the resources download page on the website provides further instruction on entering data into this register.
5.11.1 OWNER BUILDERS and SUPPLIERS
- Contact Details
- Insurance Details
- Tender Receipt
- Other Documentation
- Safety Induction
- Work Methods Statements
- Comments
5.11.2 ONWER BUILDERS and CONTRACTORS
- Contact Details
- Insurance Details
- Tender Receipt
- Other Documentation
- Safety Induction
- Work Methods Statements
- Comments
5.11.3 OWNER BUILDERS and CONSULTANTS
- Contact Details
- Insurance Details
- Tender Receipt
- Other Documentation
- Safety Induction
- Work Methods Statements
- Comments
5.12 Owner Builders PROJECT PARTICIPANT REGISTER
This important register provides you with a means of documenting and maintaining contact and professional details about all tradepersons, consultants and suppliers who are engaged on your project.
It should be you primary reference point for day to day contact with those persons contracted to provide you goods or services.
If you are working from hard copy files, it should be readily available at the front of your project diary or if possible hung on a wall in a prominent easily accessible location.
Of course, like all project documents it must be amended and kept up to date.
NSW Owner Builder - Project Participant Register