Advice on a few of the headings to look out for on the Terms & Conditions of a supply chain…
Prior to starting this blog, it is important to point out that this is as the title suggests, not a company’s terms & conditions of business, but solely when placing orders with their relevant supply chain. The key purpose of a business to make money by providing a service that has more value than physical cost. Something that has a highly value, but low cost reverts to making a business margin/profit.
A key part of this is to mitigate as much risk as possible. From a construction companies point of view, one of their main risks is with their supply chain (I.e. Subcontractors or suppliers). The last thing they want is for a supply chain member coming back looking for more money, when there will be no more value coming from the ultimate client (commonly known as a non-recoverable).
Obviously the best way of doing this is to issue a professionally produce order, which passes down the same amount of risk recieved from the ultimate client. This ideal situation would be deemed as placing an order “on a like for like basis”. This in turn would mean that if there is a variation or additional cost it should be the end client loosing out (the reason for having contingency monies) and not the contractor.
However, this risk can be reduced again (as long as the order is tight) by introducing a set of Company Terms & Conditions to with the order. This document should contain headings as follows:
• Terms of payment
• What is deemed to be included/excluded
• Supply chain obligations
• Extensions of Time
• Site Specific Matters
• Termination
• Level of insurances
• Programme requirements
• Company protocol/standards that the supply chain should follow at no additional cost (I.e. Safety, quality etc..)
Please note this list is not exhaustive by any means. Also document like this needs to be updated on a regular basis to take account of changes is construction/general law and legislation.
Should you wish to discuss the above in more detail or need assistance with any commercial aspects of your construction projects, please don’t hesitate to contact me via e-mail grant@qsadvisor.com.
