Jacob Austin 00:00:00 Hi everyone, it's Jacob Austin here and welcome to episode 146 of the Subcontractors Blueprint, the show where subcontractors will learn how to ensure profitability, improve cash flow and grow their business. Today's episode is all about the art and the science of serving. And notice we're covering what contracts actually require, how to find who to serve on, and critically, how to do all of that without torching your working relationship. So let's dig in. The word notice can be associated with complaining emails mentioning problems to the site manager over the phone, raising issues at a progress meeting, but none of these are an actual notice. It might be a sensible way to talk around an issue, but it's not going to get the contractual ball rolling to get you an extension of time and additional cost. If you fail to serve a notice when the contract needs one and serve it correctly to the right person, in the right form within the right time. You can lose your entitlement entirely, not partially altogether. That means no adjustment to your price and no extension to your program.
Jacob Austin 00:01:31 That is the consequence of getting the contractual facts wrong and muddying the science of submitting a notice. But there's another side to the coin. And this is where a lot of commercial advice stops. You can serve the notice perfectly and hit every contractual requirement and still make a big commercial mistake if you fire it across without any warning. If the language is aggressive, if you copy in extra levels of management who didn't need to be involved. You're going to trigger the contractors defensive response. What could have been a sensible commercial conversation becomes a dispute and disputes are expensive whether you win or not. So this episode is here to cover both the science what the contract says, how to find the right submission details for the job that you're on, and the art, how to serve that notice in a way that protects your position without immediately poisoning the well. So let's look at the different contracts and what they require you to do. Starting with NSG because NSG has the more aggressive notice regime. And I mean that mechanically the clock is always running on an NEC project and if you misfire your timing, you can lose your entitlement altogether.
Jacob Austin 00:02:47 The foundation of how NEC handles all its communications is clause 13. Every communication must be in a form that can be read, copied and recorded. Electronic communications are perfectly valid if the contract specifies them, but you need to check your contract data before you make that assumption. NEC doesn't allow you to pick up the phone and decide that counts as warning your site. Team notices have to be formal, recorded, and critically, it has to go to the person named in the contract data on an NBC four contract. The contract data schedule comes in two parts. Part one identifies the main contractors, representatives, and who you're submitting a notice to. Part two is about you, and that's why you confirm who you want your notices to be received by. Critically, you want to make a note of who you should be submitting notices to. On an AEC job, you're going to be doing this a lot, and they have to be served to the right person. Otherwise they're not valid. The big two notices on NBC are early warnings and compensation events Under an NEC subcontract, you have a duty to notify your contractor as soon as you become aware of anything that could increase the prices.
Jacob Austin 00:04:03 Delay completion. Delay a key date, or impair the performance of the finished work. In other words, anything affecting time, cost or quality you need to raise and discuss with the contractor. Some people think of early warnings as a sign of weakness, but they're not admitting failure. There are contractual obligation. If you don't give them the contract, you can actually reduce a compensation event. If you failed to give an early warning when you should have. This is the contract forcing you to engage with the contractor and collaboratively deal with risks. And early warning notices are how you participate in that process. Compensation events differ from early warnings because they are about events that have actually happened or are guaranteed to happen. Then one of the trickiest parts of any subcontract for that is for two reasons. Firstly, the time bar. If a compensation event hasn't been notified to you by the contractor, you have to notify it yourself and you've got to do that within eight weeks of becoming aware of it. Eight weeks is the standard timescale that is often shortened by contractors in their standard amendments.
Jacob Austin 00:05:16 If you miss that eight week window, you're not entitled to any adjustment to the price of the completion date. The contract is really clear about that. It doesn't say the contractor can still consider it at their discretion. It says you lose entitlement. The other reason why it's so dangerous is because it's a single bite at the cherry approach. You get one chance to put on your table your full assessment of time and cost. That means you don't get to wait and see whether an event is actually caused you a delay in the first place. You need to have a guess at it, and you need to put that on the table in a one stop shop. All encompassing quotation. And it's that, coupled with the time bar, that makes it a particularly difficult mechanism to deal with. Another important thing about neck notices and communications is that the contract says that all notices have got to be served separately from each other, so you can't, at a project meeting, say you've delivered a compensation event. Equally, the contractor can't say they've issued an instruction.
Jacob Austin 00:06:18 They can discuss the instruction for sure, and they'll say I'll issue you one later. Or they can issue you one via some contract management software during that meeting. But they must make a separate communication. And the same applies when you're submitting a compensation event. That means you don't send your application for payment with three compensation event notices alongside it. Each time there is a compensation event, you send that as a separate email to the specified person so that there's a clear record of it, and that's what the neck is trying to do. It's saying things that are changing the price, things that are changing the scope of this project. They're too important to get muddied up and lost in the middle of some 15 page long meeting minutes. They're too important to just tack onto an email about four other things in case it gets missed or forgotten about. And that's important to you, because if you don't follow that part of the process, your compensation event notice and the same applies to an early warning, is going to be invalid.
Jacob Austin 00:07:20 Now, the final thing to say about compensation events is that you must identify which compensation event you're triggering. And I'm not going to list them out here, but I have covered that detail before, so I'll include a link to that episode in the show notes if you want to listen, but that is the recipe for submitting a compensation event. Do it in the right timescale. Identify the event. Send it to the right person. Send it separately for the JCT notice process. There's less mechanics to it. There's no hard eight week time bar with yes no outcome consequences, but that doesn't make a notice optional. The notice requirements under JCT subcontracts are still preconditions to entitlement. That means if you miss them, the contractor can legitimately argue that you failed to engage with the contractual process. You failed to tell them about issues, and so you don't have any entitlement to time or cost because of that. And so what you need to do to gain that entitlement, to gain the right to claim time and cost is to submit a notice.
Jacob Austin 00:08:23 And what the contract says is, whenever it becomes reasonably apparent that either completion is going to be delayed or that your regular progress is being affected. The key phrase within that is reasonably apparent. That doesn't mean when you're certain, when it's a cast iron event, that you've done a program analysis on, waiting for certainty is too late. It means when a reasonable person in your position would think that the completion date is at risk or it's going to be delayed. That obligation comes sooner than you might think, and it's akin almost to an early warning, probably somewhere in between an early warning and a compensation event. And the whole point of it being early is to try and give you a contractor some opportunity to do something about it before it properly bites them. Now, clearly, not all things the contractor is going to be able to do something about. You're not going to notify them in advance about some bad weather and then change the forecast. But if they've changed their sequencing and not thought it's going to impact anybody, if they've changed the access strategy and you're dependent on getting materials in a certain way, if it looks like they're going to hand over a key elevation to your light or a section of works or whatever, it's when it becomes clear that that's going to cause you an issue that you should be notifying about it.
Jacob Austin 00:09:41 When you're serving a notice, it's either going to be for an extension of time or for an extension of time and loss and expense. Now you can get loss and expense without time, but that's a rare situation, so we'll gloss over that one for today, as there are some conditions to it that just don't happen very often. But you'll notice should be identifying what event is going to cause you some delay or disruption. These fall into two camps in the JCT. These are either events that are nobody's fault, such as the weather that are dealt with just on the basis of time only, and issues that you're typically entitled to cost for tend to come out of either the contractor or the client's actions. This might be changed. Information access issues instructions that change your sequence. So you need to identify what that issue is and let the contractor know about it. The written notice is how you open the claim. Without it, there's nothing to value. The GC process requires that the notice come first, then once the costs are able to be ascertained.
Jacob Austin 00:10:46 You can value it properly. Skipping, giving the notice and going straight to a figure is not how the subcontract works, and the contractor is going to push back on that, especially if you're doing something like including a period in your application for payment that hasn't gone through the process of notifying the issue and communicating your entitlement first. It's not uncommon for disputes to start like that. You think you've got an entitlement. There's some clear issues that everybody knows about it. You start claiming for amounts of money for it, but without the paperwork, you're not on a good footing contractually. And when it's as simple as writing a letter, there's no reason to not do it. To make that notice valid, it's important that you also serve it in the way that the contract tells you to. So for more recent contracts, your JCT. 24 they're recognizing electronic communication as a route to submitting notices. But crucially you've got to send it to the right address. It's no good emailing the contract manager if it needs to go to the commercial director.
Jacob Austin 00:11:49 If the contract says a written notice, then the safest thing you can do is once you've written and signed your letter, scan a copy in and email it over saying that you're posting it later today. Critically, then you have to post it. And the best way to go about that is a recorded delivery. You want to be able to evidence that you've issued that notice and that the contractor has received it. The details for this are found in the contract particulars. Now this is going to differ on every job. And what you're looking for will likely differ as well. Some contractors write out their particulars in a table, and some others may refer you to things like the pre start meeting and specify all of the information that would have been in the particulars somewhere within that meeting minutes. These are going to differ from contractor to contractor and from job to job. So there's no way around. You need to pick up your subcontract and look for that information. If you don't do that, you'll lose your entitlement on a technicality, which, if you've gone to the effort of writing a notice already, is the worst way to lose out.
Jacob Austin 00:12:53 It's going to take you minutes to get it right and do it properly. And that leads us on to some common failure points, the first one of which is sending a notice bid compensation event or a notice to the wrong person. You're emailing the site manager that you've been working with instead of the person named in the contract. Familiarity with a particular face on site isn't a substitute for following the contract, and all you're doing by sending your notice to the wrong person, you're making a site manager aware of an issue, but not the person who's going to settle the claim, and you're invalidating your notice contractually. The second thing is treating conversations as if they were notices themselves thinking. I told the site manager when I was on site last Tuesday why I brought that up at the progress meeting. Those aren't notices. They're good context, but it's not a contractual notice. By all means, have those conversations and we'll get to that in a little bit because they are important. But you have to record your position in writing an email or a letter that refers to the conversation that you've already had.
Jacob Austin 00:14:00 That is absolutely the right way to go about it. The third regular failing is waiting until the issue is sorted before you notify it. A lot of money can get lost this way, particularly if we're on an NSF contract and you've got an eight week time bar. Bear in mind the contractor might have shortened that to six weeks in your case, I don't know. But that detail you do need to know for your specific contract and then you need to comply with it. It's not a case of, oh, we know we've got this issue. The site manager knows we've got this issue. Once we've resolved it, then we'll put the claim in for it for sure. Once you've resolved it, you've got the cost information to settle up. But particularly if it's a long, ongoing event. You'll have completely missed your window for submitting a notice or a claim. The safest way that you can deal with that is to send that notice in as soon as you possibly can. The next important thing is about delivery.
Jacob Austin 00:14:55 So let's say you're an electrical subcontractor and you're working on some commercial office fitout. And six weeks into the program, the structural engineer has revised some drawings and to work around some existing structural issues is changing the penetration philosophy through the reinforced concrete floor. Now your containment routes have to completely change. You've done some abortive work, and you're also going to have additional runs and additional materials. It's a change. It's not ambiguous, but the site manager tells you, don't worry, we'll get it covered. We'll sort it. And because the drawing issued to you is acting as an instruction, you're cracking on with it. Everybody's been straight with you throughout. So you start adapting the works, keep the job moving. Your SHS starts looking at the costs almost straight away. And as he's doing that, he starts thinking, actually, if this is going to be an abortive works, we're going to lose program time. So he quickly checks the contract, works out who to issue a notice to, and prepares a short factual notice.
Jacob Austin 00:16:00 This is the event we became aware when this drawing was issued, and it has the potential to delay the completion of the job. The notice doesn't have to be long. It needs to be clear, correct, and served in the right fashion. That's the science of submitting your notice. But critically, before it goes out the door, you pick up the phone to the site manager and address the art of submitting the notice. Dave, I need to talk to you about this floor penetration change from last week. I've got a contractual obligation to notify you because we think it's going to delay the job. So rather than run out of time, I'm going to send you a written notice this afternoon. Really, I've got to send you that because, you know, we've got pretty big liquidated damages on the job. And if I don't send you this in writing, I'm not doing what I need to do to get an extension of time. And I need to do that because I can't risk having LEDs at my door once I've sent it.
Jacob Austin 00:16:53 We'll have to have another chat later about how much it's worth, and we probably won't know that until we finish the strip out and reinstall. But I just wanted to make you aware of what we're doing so it doesn't get you in trouble or come as a surprise. I've got to cover my own back and the chat carries on. The call takes three minutes. All in all, when the notice now lands, Dave knows what's coming. He's not surprised, he's not defensive, and the commercial conversation is open. That scenario captures the core of the art of the human factors around submitting a notice and doing it so you don't destroy your relationship. The pre notice phone call is the single most underused asset in managing your subcontract Before you serve any formal notice. Pick up the phone to the person. It's going to brief them on it. Tell them it's coming. Tell them why you're doing it. Use language like the contract tells me. I need to do this because it's true. And it removes the personal element.
Jacob Austin 00:17:54 You're not blaming them. You're not attacking them. You're complying with what the contract needs you to do. The notice isn't an act of aggression, so frame it that way from the start. And particularly if you're able to serve a notice at a time when something can be done about it and write that language into your notice, it really makes a difference and it really changes the tone of what you're writing. It's really important when you are writing to state facts neutrally what happened, when and why it falls under this contractual category. Keep the language factual and direct. Avoid using phrases even if they might be true. Like you have failed to do X, your team is Was consistently neglected to do X. That's not language that needs to be in a notice. It's language that's making a personal attack. Offer your help to try and mitigate the issue. You don't have to do any of that for free. But if you can do something for five grand, that's going to save a month of program time that costs 200 grand.
Jacob Austin 00:18:53 You can work together to solve the problem like that. Then everybody's a winner. If you close your written notice with a collaborative sentence, something like, we remain committed to resolving this matter and are happy to discuss it further at your convenience. It costs you nothing, but it shows that you want to resolve the issue together. Next. Be really deliberate about who you write to and who you copy in. The contract needs you to issue your notice to the right people, which is non-negotiable. So follow that. But beyond that contractual requirement. Think carefully about what each additional person you're copying in does to the dynamic. If you're copying in the contractor's commercial director. When you've still got a good relationship with the site team, that's likely to escalate the matter in a way that's going to be difficult to reverse. So copying who the contract requires and who you're directly dealing with about that issue, but no more unless the relationship is already broken. And escalation is a deliberate choice rather than a side effect. Avoid language that reads like a legal threat.
Jacob Austin 00:20:00 The notice is the mechanism already. It doesn't need to be accompanied by a long declaration of consequences and pinning the blame on the donkey. The contractual remedies exist whether you list them or not, and a notice that states the facts and the clauses is more commercially effective than one that closes with warnings about adjudication. The first version shows a professional who knows their contract. The second version shows somebody who's trying to get a fight. The next thing to do is to speak about it after it's happened. Confirm the receipt. It doesn't have to be two minutes after you've sent it. Have you got that email that I sent this last week? I sent this a couple of days ago. How do you want to deal with the next steps? What you want here is to keep the conversation open, keep it collaborative, and work together to solve the problem. As I said, working together doesn't mean working for free, but it means finding the best outcome for both of you so that you can move forward successfully. There is something to add here if it's a compensation event.
Jacob Austin 00:21:01 Notice you've submitted. If the contractor responds and they say they want a quotation. You're going to have to forecast all of your costs associated with it. If that doesn't seem like a practical way to do it, you can agree with the contractor that you'll carry on working, that you'll get through the issue, but that you'll prolong the compensation quotation period for that particular event. That will mean if you genuinely got no way of knowing how much something's going to cost, that you can agree to get to the end of it and settle up with the fact later. If the contract is sensible, what they'll do is appreciate what you're saying to them and agree to a later quotation date, because the alternative to that is building in a load of risk for the things you don't know about, for the duration of an activity that you're struggling to put a handle on. You're naturally going to take an overly pessimistic view to that. And this is where sometimes it's better for both of you if the contractor takes that bit of risk.
Jacob Austin 00:21:59 The final final thought on submitting notices is never write a notice in anger. If an event has made you absolutely furious, and sometimes it will then draft the notice, put it down, revisit it in the morning, edit it, and pare back anything that a reader could interpret as aggressive, accusatory, or emotionally driven. Take it out. Let the facts do the work. Your feelings shouldn't appear in the written document. I know I said that was the last thought, but this is the last, last thought. Anything that you sign, you should keep a copy of. So if you've written a notice, you've signed it. It's going to go in the post before it gets there. You take a scan of it or you take a photocopy. You need that record. Personally, I like to email a copy of everything that I send. It creates the online record, and you write in the email as you're sending it that you're also sending it in the post to the contractor's nominated address. That takes away the doubt that it's been served properly.
Jacob Austin 00:23:04 And it also creates an easy online record that you can use as a point to chase up from. Okay. I hope that helps you successfully deliver notices as a subcontractor. What we've covered today has been the science, the facts around what you've got to do to successfully trigger the contract, as you are sure notice, but also some of the tactics that you can deploy to deliver that notice whilst maintaining your working relationship. My mission with the podcast is to help the million SME contractors working out there in our industry. If you've taken some value away from today's episode, then I really need your help to share the show and pass that value on to somebody else who'd benefit from hearing it so that I can help as many people as possible. And thanks for tuning in. If you like what you've heard and you want to learn more, then please do find us at www.SubcontractorsBlueprint.UK and we're also on all your favourite socials @SubcontractorsBlueprint. And remember, miss the contract detail and the commercial risk falls on you.
Jacob Austin 00:24:10 Thanks all. I've been Jacob Austin and you've been awesome.
