Renovation - St Kilda (Budget $750,000)
We were engaged once this project was underway when the client encountered issues with the contracted builder. The builder was on-site and had completed approximately 25% of the renovation which was mostly fit-out. The project was technically at lock up stage.
A standard building contract was used, which stipulates certain percentages of the contract value must be paid at specific stages of the project.
See the below graph.
STANDARD BUILDING CONTRACT PERCENTAGES (%)
The client had paid the builder 65% of the value of the contract as required. The builder received this payment but determined there was not enough money remaining in the contract to finish the project, so he abandoned the site. This left a financial gap between the cost to complete the project and the available finance remaining.
The client came to us to help determine the cost of the builder’s completed works, the cost of work that was outstanding and the costs needed to rectify any defective work.
THE CHALLENGES
During the project, we faced several challenges, including:
The client had overpaid the builder: Unfortunately, due to misuse of the standard building contract for the project, the client did what they were contractually obliged to do. However, in this case, they had unwittingly overpaid the builder.
Not enough finances left in the budget to finish the project: The client had inadvertently overpaid the builder and the builder had walked off-site, leaving a shortfall in finances left to complete the project.
Additional costs to rectify defective work and certify completed works: The builder had left some defective work on-site and other work incomplete. There were additional costs associated with rectifying the defective work and certifying the completed works.
THE SOLUTION
This project required a thorough analysis of the current state of the project, the works completed and the work yet to be completed, including:
Visiting the site and preparing a report clearly stipulating the cost of works completed, works yet to be completed and cost of defective work. This helped outline the outstanding amount owed by the builder for reimbursement to the client.
Providing contractual and project advice to help get the project back on track and moving towards completion.
Providing ongoing contract administration and management services as well as progress claim and variation assessment services with the new builder throughout the remaining duration of the project.
Providing expert witness advice and consultation during the client’s legal proceedings to recover the outstanding amount.
FINAL RESULTS
Unknowingly, the client had entered into a high-risk contract which inevitably exposed them to a scenario where the remaining balance for the project was far less than required to complete the project.
Our report documenting the project position and remaining balances formed the basis of the legal claim against the builder, and which the client used to recover the outstanding balance.
For project security and peace of mind for the client, we provided our contract administration and management services for the remaining duration of the project; this ensured the remaining balance outweighed the cost of work to complete.
Unfortunately for the client, the standard building contract had exposed them unknowingly to the above-mentioned risks. These risks could have been avoided with sound contractual advice before signing the contract as well as continual contract administration to further prevent any undesirable scenarios.
For more information about quantity surveyors, call us on (03) 9068 3950 or email us at info@melbourneqs.com.au
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