Jacob Austin 00:00:00 Hi there all Jacob Austin here and welcome to episode 158 of the Subcontractors Blueprint, the show where subcontractors learn how to ensure profitability, improve cash flow and grow their business. Today's episode is all about the building safety regulator putting subcontractor quality under the spotlight and what that means for your competency evidence, your records, and even your payment applications. So let's dig in. I bring you this episode because on the 22nd of July, the chair of the building safety regulator, Andy Rowe, gave a press briefing. And in that he said the regulator is going to look very closely at the way main contractors manage their subcontractors on higher risk building projects. He said that a design approved at gateway two can still be undermined by poor installation, weak supervision or inadequate checks across trades. And he said that if a main contractor hasn't got someone with the professional expertise to understand what quality their subcontractors should be delivering, they're probably not doing their job. On the face of it. That message is aimed at main contractors, but in reality it won't be.
Jacob Austin 00:01:30 When a regulator tells a main contractor to police its supply chain harder, the main contractor doesn't absorb that pressure. He passes it down. It passes down in the subcontract wording and the amount of paperwork you're expected to produce, and in the point at which your money gets released. And here's where money actually moves up to now, your interim application has been an argument about measure how much work is done on the ground, what it's worth, what's been agreed. That's a commercial conversation and you know how to have that now. But on a higher risk building that's going to change. Your application is becoming an argument about whether the work is done properly and your record pack is complete. The difference between those two things is enormous, because you can be 100% right on the measure and still get nothing. If your paperwork that the subcontract demands isn't attached. The second place this can cost you is at the back end. If a main contractor gets held up at gateway three because it can't evidence the quality of installed work, it will come looking for evidence.
Jacob Austin 00:02:39 It will come looking to the subcontractor who did the work. Maybe even 2 or 3 years after the subcontractor left site. If you haven't kept your own copy of the records, you're now defending your workmanship with nothing in your hand, and that could lead to all kinds of costs to open up the works and examine. Thirdly, under the BSR act, you've got your own statutory duty. This isn't something that the main contractor is cascading down to you. It's part of the law and the regulation and that sits on you to deal with. There's a fourth cost as well, and that turns up in your order book rather than your bank account. Competent evidence is becoming a gate at pre-qualification, so you now need to be able to produce that evidence in the shape and form that the tier one contractor wants it. If you can't do that, you don't get on the list and maybe you don't even find out why. That's not a payment problem, but it's a pipeline problem that will hurt you in the form of turnover.
Jacob Austin 00:03:39 Then there's insurance. Underwriters have been tightening on fire related work for a while now. If you install anything with a fire performance requirement on one of these buildings, you're going to get harder questions at renewal about how you evidence installation quality. That could either cost you in premium if you give a weak answer, or the underwriter excludes certain parts altogether, and you might not even notice that until the day you need to rely on it. Now let's talk definition of what this applies to. A higher risk building in England is broadly a building of at least 18m or seven stories, that contains at least two residential units. There are some specific carve outs, including hotels and care homes, but if you're working on a block of flats, that's that height. You assume that you're part of the BSR regime until somebody proves otherwise. The building safety regulator is a specific building control authority for those buildings. Since January this year, it's been a standalone public body sponsored by the Housing Ministry. Rather than sitting inside the Health and Safety Executive, that there may signal that this is going to get bigger and morph into a single construction regulator with a much wider interest in competence across the whole industry, not just tall residential blocks.
Jacob Austin 00:05:03 There are three gateways. Gateway one sits at planning. Gateway two is building control approval, and construction can't start until the regulator is approved. That application and gateway three is completion. That prevents the building from being occupied until the regulator is satisfied that what got built matches what got approved now. Andy Rose point, in plain terms, is that a lot of projects have now cleared gateway two and are heading for gateway three, and that gateway three is where installation quality gets tested rather than design quality. Now the part that applies directly to you, the building regulations as amended for higher risk work, set up a duty holder regime. You've got a client, principal designer, principal contractor, and then designers and contractors underneath them. If you're carrying out building work on one of these buildings. You are a contractor for these purposes. That includes you even if you are employed as a subcontractor. A contractor duty holder has to satisfy itself that it's competent to carry out the work before accepting the appointment. Competence here means having the skills, knowledge, experience and behaviors to do that specific work.
Jacob Austin 00:06:19 And for an organization, it meets the organizational capability to manage and supervise it. You have to be able to demonstrate it, not just assert it. The principal contractor for these regulations is appointed by the client responsible for planning, managing and monitoring the building work and coordinating everybody else. Every other outfit carrying out building work is a contractor. You don't get any less duty for being further down the chain. Arguably, you get a narrower scope but of the same duty. And notice that the test is up front. You have to satisfy yourself before you take the work on which is an active check rather than an assumption. In practice, that means having a written basis for saying yes, and that means being prepared to say no to a package that sits outside what you can evidence. That might be a hard conversation to have with a main contractor that you want to keep on board with, but it's much easier than the conversation you'll have to have if it goes wrong. Sitting alongside all of that is the golden thread.
Jacob Austin 00:07:25 Information about the building has to be created, kept and handed on in a structured and accessible form. Your part of that is the record of what you actually installed, and to where and to what specification and who checked it. There's also a change control regime running through construction. Once gateway to approval is in place, changes to that to the approved design don't just get built depending on how significant they are. Some have to be recorded and some have to be notified to the regulator. Some also can't be built at all until the regulator has approved them. The categories and thresholds are set out in the regulations and the detail has moved around, so check the current position rather than relying on what somebody told you on the last job. Then of course, there's the contract. The JCT. 2024 suite carries building safety provisions through from the main contractor into the subcontract forms, including obligations to cooperate with duty holders and to provide information. Clause numbering varies between the forms, so I'm not going to give you a number to write down and check out, but open your own subcontract and look for the building safety regulations, definitions and the information obligations.
Jacob Austin 00:08:43 Those obligations are the part that have teeth. One more thing on the scope and application of BSR, and it matters if you're sitting there thinking none of this touches you on your job. This statutory regime applies to higher risk buildings, but the expectations of bleeding outwards anyway. Clients and main contractors are applying the same evidence requirements to buildings that aren't part of the scope. I've seen firsthand evidence of that. Partly this is because running one system is easier than running two, and partly it's because nobody wants to be the organisation that applied a lower standard on a job that later goes wrong. So before you decide this is somebody else's problem because you don't do it already. Go and read the information obligations in the last subcontracts you signed. So where does this go wrong in practice? The first one is assuming the competence duty belongs to the main contractor, because they're the ones who submitted the gateway application. But it doesn't work like that. You've got your own duty, and the regulator or an insurer starts asking who is competent to install that fire.
Jacob Austin 00:09:54 Stopping pointing at the main contractor isn't going to be a defense. It's a shared regime, not one that's delegated. The second one is treating quality records as if they're just a handover job, something you'll magically pull together at practical completion when there's time. On these jobs, the records are being written into the payment mechanism, and once that happens, they stop being nice to have bits of admin and start hitting you in the pocket. Thirdly, and this is quite a dangerous one. Building what the site team tells you rather than what you got approved. I've worked with some subcontractors in the past that say site managers tell you how to build the job. Sometimes they tell you, oh, this detail won't work. Do it this way instead, on a normal job, that's a variation concern on a higher risk building. It's also a compliance event at the same time. And if it turns out to be a change that needed approval before it was built, You've installed something that shouldn't be there. Taking that instruction verbally leaves you carrying both problems and leaves you potentially at risk.
Jacob Austin 00:11:03 Fourth is not keeping your own copy. Almost every main contractor now runs a common data environment. Your assets, your Trimble, your viewpoint, and almost always subcontractors lose access to it when the package finishes. That means your sign up sheets, your photographs, your material assets, all of it sitting on somebody else's server. And if you haven't kept a copy, then you can't get to it the day you need it. Fifth is signing a subcontract where information deliverables are dressed up as a condition to a valid application. That's not the same as an obligation just to provide information, an obligation you can breach and then probably argue about later and sort out. This is saying submit your application without evidence, without quality control sign off and it's not valid and therefore there's no notified sum and no money. Sixth, pricing the package without the paperwork. If the subcontractor wants photographic evidence of every penetration and signed inspection and test plan for every single zone, somebody has to produce that information. Somebody has to collate it and file it in sensible order.
Jacob Austin 00:12:18 In the contractor's approved system, there's a real resource cost, one for the lads doing the work, but two for the person in your office who sorts through it or labels it and files it properly. You need to cover that cost in your tender, not in your overhead. We will end up losing. Seventh is assuming CDM paperwork answers the question. The CDM regs and the BSR regs are definitely related when it comes to high risk buildings, but they aren't the same thing. A CDM focus prequel pack is not automatically sufficient to answer a building safety competence request. So the thing is to read what you're being asked for, rather than just sending what you sent last time. Eighth, and finally forgetting that design responsibility travels with you. And I mean by that, if your package carries any design portion and plenty of specialist packages do, then you've picked up designer duties on top of contractor duties. That design has to be checked, and whoever checks it has to be competent to do that. You have to be really clear about what you're designing to avoid liability, landing on you without noticing.
Jacob Austin 00:13:32 Now let's play a scenario. Take your fire stopping and passive fire subcontractor. They're working on a 12 story residential block. It's a higher risk building gateway. TOS approved package value around 480 grand. There's a lot of penetrations. The subcontract is a JCT subcontract form with amendment, and one of those amendments says that an interim application is only valid if it's accompanied by the signed inspection and test plans, and photographic evidence for the work being applied for. Application seven has just gone in for ÂŁ66,000. The work's done, genuinely done properly to the approved details, but three of the inspection sheets are unsigned. The main contractors site manager, who usually signs them, has been off for a fortnight and nobody's covered it. The main contractor issues a payment notice at nil, not because he disagrees with the measure because the application wasn't valid in the first place. Think about where that leaves you under section 111 of the Construction Act. The notified sum only rises out of a valid application. If the application never became valid, there is no notified some to enforce.
Jacob Austin 00:14:50 There's no payment. Pay less process and even a smash and grab adjudication has nothing to bite on. So you're not in a dispute about being paid. You're in a dispute about whether you ever made a valid claim. That's a much worse place to be. It's the direct result of somebody signing a clause at all the stage without either reading or understanding the implications. So you resubmit the following month. The sheets are now signed, but you've lost a payment cycle. And that meant on 30 day terms, ÂŁ66,000 of your working capital is funding somebody else's job for a month because the site manager took his holiday and nobody else picked up the pen. Now let's play the phone call, because this is where it's actually won or lost. You ring the contractors cuz you say, look, the work's been done, you've walked it, you know it's done. And the sheet says, I'm not disputing that the work's done. I'm saying your application isn't valid, so there's nothing to value. That answer is cut and dry.
Jacob Austin 00:15:55 It refuses the argument that you've turned up to have. So what can change that? Two things. And both of them have to already exist before that call happens. The first is an email that you sent three weeks earlier on the day that you noticed the sign off sheets weren't going back, forwarding your work and all of your evidence onto the project manager, confirming everything's ready for inspection, and asking the project manager to either step in and inspect or identify somebody else that can sign your work off. That email now changes the story from you. Fail to provide the records into something else. You've now provided everything within your control, but the main contractors failed to inspect. That's the prevention principle, and in effect, the contractors prevented you from getting sign off, so they shouldn't be able to benefit from the cash flow. Upside of keeping your money. Only if you sent that email, though. The second thing is what happened on the previous applications. Go back and check them. If applications 1 to 6 went in with exactly the same gaps and got valued and paid without a word.
Jacob Austin 00:17:05 Then the main contractor has spent six months treating that requirement as something other than a switch that turns your application off. Now, you don't want to push that one too far, because conduct doesn't rewrite the clause and nobody can tell you it does. But what it does do is make their position a great deal less comfortable. They're now arguing that one of their requirements they've been happy to overlook all year now invalidates one application that they've decided not to pay. That would be a difficult thing to say out loud in front of an adjudicator, and it's a difficult thing to say to your own commercial director. It's also a point you can only make if you go back and look at the history, but that 20 minutes spent might get your hands on your cash. Now roll forwards 18 months. That package is now finished and your operatives are off working on another job. The main contractor is now preparing its gateway three submission. The regulator wants evidence of installation quality across the fire protection scope. And because the main contractor sublet that to you, they're coming back to you and asking for the full record set.
Jacob Austin 00:18:17 Your access to their document system was switched off after you're demobilized, and your project manager is now left along with the photos on his phone. You can produce some of the evidence, but not all of it. And now the conversation isn't about whether you did the work properly. It's about whether you can prove it. And the gap between those two things is where a defects allegation will grow. Protecting yourself against these issues takes three steps, but two of those come before the job. First off, you need to comb through your subcontract or your proposed subcontract, searching for words like valid, accompanied by condition, evidence. And what you're looking for is every clause that ties information to money, and in particular, anything that turns a document into a precondition of payment. When you find those, try and soften them. You don't want to escape the obligation altogether because the contractor just won't have that. But if you can reduce it from something that's going to invalidate your application altogether to a standalone obligation, that's got a timescale with it that turns an application where you've got a missing signature on a piece of paper from invalid to something that you can argue about, rather than a switch that purely turns your application off.
Jacob Austin 00:19:37 So let's say the wording says the application shall only be valid if accompanied by X document. You want to turn that into. The subcontractor shall provide within ten working days of the application. The ultimate obligation is the same. One it gives you some wiggle room and two the consequence for failure is reduced. If they won't accept that, then argue that as long as you provide the document, sign off by a site manager could happen at any point. So once you've provided it, if it takes their site manager two weeks to go and walk around the site to check everything off, that's not your problem. We shouldn't be punished for it. The second thing you need to do before you start the job and whilst you're pricing the job is to price the paperwork. That means inspection records, photos, certificates, and how many hours all of that takes. You can put that in the tender as a line if the main contractor wants a regulatory grade set of records. It knows how much it's going to pay to buy one.
Jacob Austin 00:20:37 It's also one of those things that helps to straighten out the running order for the contractor. If they go to four contractors and one of them is really clear about it. Look, it's going to cost this much money to complete the extra paperwork that this job needs that can go into the comparison as a guide price against the other contractors as well. It levels up the playing field and from time to time that will help you win a job. The third thing that you need to do is to build your competence. Pack things like your third party accreditation for the trade, training records, cards for the operatives, name supervision with experience behind it, and a written process of how you check and record work before it's covered up. These are often requested at pre-qualification, but can also be requested as the job unfolds. Having it ready could be the difference between winning the job and scrambling around looking unprofessional when it gets to start stage. The discipline is really simple. You build up your records as you go and keep them saved in a logical format on your own server.
Jacob Austin 00:21:42 You upload copies to the contractors and you maintain your own copy. If somebody asks you to change from the approved detail, don't build a new detail off the back of a conversation. You need to confirm that in writing the same day, and you ask in that same email whether the change has been through the project's change control process, then you wait. That email is doing two jobs at once. Is protecting your variation entitlement, and it puts the compliance question on the record with the person whose job it is to answer it. Finally, as you exit the project, if you've been using the contractor's snagging system or their kind of portal that asks you to save inspection records and photographs as you go, make sure you get your own copy of it. You need to keep that as long as your liability period. So key points to take away from today. You are a contractor duty holder in your own right on a high risk building. The competence duty is yours, not the main contractors to carry for you.
Jacob Austin 00:22:46 Search your subcontract for anything that makes a document a condition of a valid application. That clause can turn a missing signature into a nil payment notice under section 111 of the Construction Act. No valid application means no notified sum, so you would lose smash and grab adjudication entirely. So it's worth trying to water this wording down. As I suggested earlier, price the record keeping and the paperwork as a cost in the tender. The evidence pack that you need for these regulations isn't going to be free. Never build a deviation from approved details off the back of a verbal instruction. Fire safety is being taken seriously, so you need to take the paperwork that goes alongside it seriously as well. Even for minor tweaks. It needs to be confirmed in writing, and you need the contractor to confirm whether any regulatory update is needed as well. Otherwise, you're building defective work. I hope that all helps. My mission with this podcast is to help the million SME contractors working out there in our industry. If you've taken some value away from today's show, 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 I can help as many people as possible.
Jacob Austin 00:24:06 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 again at @SubcontractorsBlueprint. And remember, miss the contract detail and the commercial risk falls on you. Thanks all. I've been Jacob Austin and you've been awesome.
