EP 117

Paul Heming: Hello and welcome to episode 117 of the Own the Build podcast with me, Paul Heming. We are continuing our free download giveaway for the own the builders that we know and love. Attached to the podcast description, or better linked, are two documents. So this time around, we’re giving away a pre-qualification questionnaire for subcontractors and a project execution plan template. Thanks to everyone again for reaching out and saying that you’re enjoying the templates. Feel free to give me a shout out and suggest some others. We are here to help. In the studio today, though, let’s get onto the show. Let’s get into the juice. My guest is smiling from ear to ear. We have got Richard Braxton. Richard is a QS turned consultant whose unique consultancy has an innovative approach, providing specialist executive-level support to construction companies with a real focus on commercial best practice and risk management. We’re going to get onto all of those things shortly. Before we do, welcome to the show, Richard. How are you doing?

Richard Braxton: Hi, Paul. I’m good. Thanks, mate.

Paul Heming: You seem happy.

Richard Braxton: Yeah, I am. Yeah, and I’m sure the listeners are thrilled about the subjects we’re going to talk about.

Paul Heming: Yeah, I mean, trust me, I mean, don’t take this the wrong way, listeners. I think the majority of you are as sad as I am when it comes to construction and commercial best practice risk management. That’s kind of what we’re here to do. We’re all interested in commercially minded things.

Richard Braxton: They’re vital issues, but not necessarily sexy. But they’re certainly vital, that’s for sure.

Paul Heming: You’re tell me that provisional sums and undefined and defined provisional sums aren’t sexy, Richard. What planet are you on?

Richard Braxton: Yeah, yeah, I wrote a paper about them, but they’re not sexy, mate.

Paul Heming: I can’t believe this. I personally find them quite something.

Richard Braxton: Oh, well, there you go. 

Paul Heming: We’re going to get into the meat of the topic, if you like. And as I said, guys, it’s provisional sums. Before we do that, I always like to ask a little bit about you and who you are, to set the tone, if you like, for the conversation. So just talk to us about your experience.

Richard Braxton: Well, I fell into construction by pure chance, and I’ve been in it ever since. Forty years now. 

Paul Heming: How did you fall into it?

Richard Braxton: By a careers officer saying to me, “Have you ever thought of being a surveyor?” 

Paul Heming: Really? 

Richard Braxton: Yeah, literally. And I had not a clue really what she was on about.

Paul Heming: Same thing for me.

Richard Braxton: Yeah. I had this idea that I thought, “Oh, surveyor? Yeah, I think they earn. Okay, that sounds all right.” And I said, “What’s that involving?” She said, “Well, you spend half your time. Yeah, kind of easier. You spend half your time in the office and half your time out on site.” And I thought, “Yeah, that sounds about right,” because I knew I couldn’t be stuck in an office doing an admin job, selling insurance or whatever. No offense to those that do, but I also knew I couldn’t work with my hands. I’m absolutely useless. So I needed something that was kind of a balance between the two. And commercial and management in construction has given me that over the years.

Paul Heming: Yes. It is really great for that balance, isn’t it?

Richard Braxton: Yeah. And it was so, it was a great call from her, but I didn’t know what I was getting into at all. She sent me off to see the head of construction at the local technical college. 

Paul Heming: Really? 

Richard Braxton: Yeah. He assumed that I wanted to be a quantity surveyor. I don’t know what he was talking about, but again, it sounded like they might earn all right. And then he described them as being a bit like the accountants of the building industry, and I was a child. 

Paul Heming: How? Did that scare you?

Richard Braxton: Well, no, I was a child of the late sixties and seventies with loads of sitcoms, you know, based in suburbia, you know, “The Good Life” and things where there were accountants, you know, living quite an affluent suburban lifestyle. So I thought, “Yeah, that sounds all right.”

Paul Heming: I’ll have a bit of that.

Richard Braxton: Yeah, exactly. Yeah.

Paul Heming: I’ve told this story before, but not a dissimilar thing happened to me, albeit I was, I came out of school and I was just looking in the local paper for jobs that would put me through like an apprenticeship almost. And I found one for a training quantities surveyor. I had no idea what it was. I turned to my best mate and I said, “I’ve got this job interview for a training quantities surveyor.” He was like, “Oh, you do not want to be doing that, pal.” “That is counting bricks. Literally, you count bricks first.” And I was like, “Really?” And then he said, “Quantity surveyor.” I was like, “Yeah, it does sound kind of right.” But actually, the way you’ve described it there so eloquently, it is quite true, isn’t it? You know, the balance between site and office, the ability, it’s quite a varied job, isn’t it? And it has given me a lot as well. 

Richard Braxton: It’s a hugely varied job. And of course, coming into the industry, you don’t understand the difference between contractors, Qs, and PQs and all the rest of it.

Paul Heming: So what kind of QS were you?

Richard Braxton: I was contractors’ QS, through and through.

Paul Heming: Yes. Good man.

Richard Braxton: Yes. Never ventured over to the dark side. 

Paul Heming: Yeah. But you were on the dark side of the contractors’ QS, though, weren’t you?

Richard Braxton: No, no. I’ve seen the game from all perspectives. I’ve worked for various main contractors. I’ve worked on the subcontract side. I’ve even run my own construction business. So, you know, I’ve seen the industry from all different perspectives, and it’s given me a really balanced all-round view of the industry. So I’m passionate about trying to improve the industry, but I have a very balanced view of it. So, you know, you get lots of people slack enough main contractors, you know, and yes, there are lots of things wrong with main contractors, but there’s lots of things wrong with subcontractors as well. Overall, there’s lots of things wrong with the industry, so I’m just trying to do a bit to try and improve it. 

Paul Heming: I mean, so you’ve obviously gone on a journey from like trainee assistant QS, commercial manager, commercial director. You’ve seen all sides. You’ve been involved at different stages, right? Where you are now. Just talk briefly about what it is that you are doing right now.

Richard Braxton: So after forty years in the game, I decided I wanted to set up my own consultancy business. And I wanted to do something positive. I didn’t want to just get involved in sorting out disputes and all the rest of it, although quite capable of doing that. And I do love a bit of contractual argument and all the rest of it, but I decided I want to try and do something more positive in the industry. And it came off the back of a conversation with a business coach that I was working with, who was talking about to me about what I wanted to do. And, and he knew nothing about the industry. So trying to explain the industry to someone that’s not in it is, it’s never easy.

Paul Heming: Exactly. [Inaudible] thing for a business coach. I mean, you could take that one or two ways to have a business coach who doesn’t know about the industry, you could see as a negative, but perhaps you could also see it as a real positive because totally different angle.

Richard Braxton: Well, he comes at things from a pure business perspective and not, you know, an industry-specific perspective with jaundiced views or biases or whatever. And I got him involved because, you know, I hate sales and all the rest of it. It’s not me at all. Love talking to people, but I hate the kind of sales side of things. So that’s why I got him involved to help me on that side. But out of the discussions with him, I kind of had this eureka moment thinking about risk management and the fact that companies don’t measure their risk management and how good they are at it. And so, from that thought process, I then came up with a solution to that problem. But we can come back to that later if you want.

Paul Heming: Yeah. We are going to come back to that later.

Richard Braxton: I thought you might, yeah. After we’ve talked about these sexy provisional sums.

Paul Heming: Exactly, exactly. Yeah, it’s really interesting. We’ve been doing quite a lot this year. We’ve done quite a few really interesting episodes on risk management, and we are going to talk risk management later on. Because I think you’ve got a very interesting take on it. Like you said, first, let’s get a bit saucy, a bit sexy with these provisional sums. Now, don’t try and make me seem like the odd individual who wanted to talk about provisional sums. The only reason we’re talking about provisional sums, Richard, is because –

Richard Braxton: Cause I wrote a paper about it.

Paul Heming: You wrote a paper on provisional sums. So first things first, why did you write a paper? Provisional sums.

Richard Braxton: Why are you such an [inaudible]? Yeah, I wrote a paper, right. I’ll tell you, I wrote a paper on provisional sums, and you’re like this because they’re a microcosm of what’s wrong with the industry. Now that’s not an answer you were expecting, isn’t it?

Paul Heming: No, but I can consider where that’s going, but I’m interested to hear.

Richard Braxton: Okay, so right, provisional sums should be fairly straightforward, but they’re constantly misunderstood, misused, and abused. And it’s that abuse of provisional sums that is the microcosm of the problems in the industry as far as I’m concerned. And that’s what prompted me to write the paper because people write contracts, write contract documents where they misuse the provisional sums and deliberately. So not just a question of people misunderstanding them, but far too often I’ve seen them deliberately misused, and it just reflects the wise elements of the industry. Of trying to stitch people up, of trying to make contracts overly onerous, trying and trip people up, you know, without them realizing, instead of being open and upfront with your contract documents. 

Paul Heming: I mean, I think you hit the nail on the head. What I would like to ask you used three words there to describe.

Richard Braxton: Only free your.

Paul Heming: You used three words that stood out to me as what you want to, how we could break this topic down, right? You said misunderstood, misused, and abused, right? So I think that there’ll be people listening saying, yeah, provision of sums. I know what they are, and I reckon I know what they’re, but I also know that I have probably, I don’t do this now cause I’m not tendering as much personally, but in the past, I would’ve put stuff in contracts where, you know, oh, I haven’t got enough time, let’s bang in a provisional sum for that, right? So I’m sure at times I have misunderstood and misused. I’m not sure if I would’ve abused.

Richard Braxton: No, I’m sure you wouldn’t.

Paul Heming: The way I want to break this down, and we’ll go deep into this cause why not is first misunderstood. So how do we make it so that people don’t misunderstand provisional sums? Let’s talk about what they are. So first, at the very basic level, what are provisional sums?

Richard Braxton: Okay, so provisional sums are a financial allowance included in contracts for an item of work which cannot be fully defined at the time the contract is tendered and let, and there can be –

Paul Heming: Why can’t it be defined?

Richard Braxton: Okay. There can be numerous reasons for that. So it can be an absolute true provisional sum in terms of being for a pure contingency. So you literally might have a provisional sum for a hundred thousand-pound contingency, or it may be for something that people haven’t decided on yet. So they know what they want to have veneered doors, but they haven’t chosen what veneer they want to use yet. Or it may be for something that they might have if they’ve got enough budget left and the job’s gone well, or it might be for something that the client very specifically wants to go and choose himself. There’s all sorts of reasons why people use provisional sums. And it could be that they don’t want to make design decisions to a later part of the job. Perhaps when, you know, space has been opened up or excavations have been done, and you know what the existing foundations or whatever are like, so there’s loads of reasons why they get used.

Paul Heming: What I would’ve used them for in the past would’ve been, so you might, I might be procuring, I don’t know, like a 5 million-pound installation-only contract for curtain warning. And, you know, you go into great detail on the 95% of the work, and then you’re kind of almost thinking to yourself, oh, maybe we could put that in their package. Maybe we could put it in their package. I’m not sure that there’s a couple of things I’m going to keep the door open, right? I would almost use it as like either where we didn’t know what we were going to do because the client wasn’t yet sure. Or where we didn’t know what we were going to do because we hadn’t quite defined our own strategy internally, and we had two options, let’s say for this scope. And we’re kind of, I guess if we’re misunderstanding it, but they’re maybe misusing it, kind of just like throwing them into both.

Richard Braxton: Well, okay, so I think there’s a distinction between where you were at with a, you know, a specialist cladding company, you know, employing an installation company to do part of the work for you. I’m more talking about the provisional sums that start at the top of the chain from the client side and come down because they’re the ones that are defined specifically, you know, in the rules of measurement. But you’re right. And I’ve done exactly the same thing myself in the past. You’re hedging your bets almost on is package A going to do this work? Or is package B going to do it? And we’re not quite sure yet. And there can be, again, numerous reasons for that. And you don’t want to be in a position of letting work to package A and then trying to take it out and contractually you can’t and all the rest of it. So yeah, you’re right, those situations exist, but from the top down, you know, the rules of measurement define the provisional sums and then, you know, they follow down for the procurement chain from that point. And it’s those provisional sums that are defined and get misunderstood and or misused that my paper was more aimed at.

Paul Heming: Okay, let’s talk about that then, because that will make a lot of sense for a lot of our listeners as well. I think. So provisional sum, you’ve got a provisional sum in your contract, what do you do with it?

Richard Braxton: You don’t do anything with it.

Paul Heming: I thought on day one you instructed it, you emitted it well.

Richard Braxton: Ah, so hang on. It depends. So if you are the contractor and there’s a provisional sum in your contract, you don’t do anything with it because you can’t. Sorry, let’s clarify this a bit. We need to get a bit technical. Let’s assume JCT contract and let’s assume.

Paul Heming: You are the client. I’m the main contractor.

Richard Braxton: Okay? I’m the client. I got promoted, okay. 

Paul Heming: So, and I did as well, actually, I’ll take it.

Richard Braxton: Yeah, there we go. We’re all moving up in the world. I’ve got this provisional sum, I have to instruct you to do the work. You can’t just do it. So apart from asking for information about the provisional sum, you don’t do anything with it. You can’t do anything with it. And if you do anything with it, you’re doing it at your risk. So that’s absolutely –

Paul Heming: Is it included in my program?

Richard Braxton: Ah, so it depends. There’s two types of provisional sums. Just ask the question. 

Paul Heming: He’s rolling here guys. He’s loving this.

Richard Braxton: I know where you’re going to ask and I know where you’re trying to go, but you weren’t asking me the direct question. There’s two types provisional sums defined and undefined, and this is where the misunderstanding and the abuse starts happens.

Paul Heming: Okay.

Richard Braxton: Yeah. So the difference is a defined provisional sum. The contract documents have to include the same level of information as if the PQS was going to measure that piece of work and put it in the bill of quantities. But there may be, as we said, some reason why they can’t actually do that yet. You know, the client might want to go, as I’ve done in the past, out to Austria and select veneers, you know, actually look at the logs and choose that, log those slices, veneer for their doors, and they want that specific control. So that’s a defined provisional sum, has to have that level of detail. An undefined provisional sum doesn’t. And this is set down in the measurement rules issued by the RICS. And what’s absolutely critical is that if you haven’t got all the information to make it a defined provisional sum, it cannot be a defined provisional sum. It has to be an undefined provisional sum. Now, the next question is, why is this important and why are we even bothering with it? And the reason is a defined provisional sum, you have to make allowance within your program for the work, and you have to allow within the pricing of your preliminaries for that work. So you know you’re going to have these doors, you know, when they’re going to be in a program, you know, from experience, how long it’ll take to get veneer and get it made in the doors and all the rest of it. So you can allow for it if you’ve got the right level of detail. And then you need to wrap and protect those doors. You allow for it in the pricing, your prelims or whatever depends how the prelims are priced. That gets slightly more complicated, but that’s the basic gist of it. You need the full detail for it to be a divine provisional sum. Now what happens is that people far too often, far too often state things as being defined provisional sums when they’re not –

Paul Heming: They’re undefined. I reckon I’ve done that, I reckon I’ve done that. But can I ask you, can I ask you just for 100 gazillion percent clarity, how do I know 100% I’ve defined a provisional sum?

Richard Braxton: Because NRM two section 255 tells you what you have to give. And it is basically if you could measure the piece of work, quantify, put it in the bill, but for whatever –

Paul Heming: Drawings in detail. 

Richard Braxton: So yeah, you’ve got all the details, you’ve got the spec and all the rest of it as you would to measure it. But for some reason, you just –

Paul Heming: It’s still uncertain. 

Richard Braxton: Yeah. Pin it down for some detail. That’s how you know if you can define it. If you haven’t got that level of detail, the rules are quite clear. It cannot be a defined provisional sum. So people call them defined provisional sums when they’re not defined provisional sums because they want to try and make the contractor responsible for the program and the prelims costs associated. And when you get those drafting contract documents, I don’t want to tar the PQS profession with this brush because [Cross talk]. But I’m fortunate I have to because it is them that puts together these documents more often than not. When you get them, say things like, I’ve seen a contingency and it’s a defined provisional sum, it simply cannot be.

Paul Heming: Okay. So I understand that, but just perhaps we’ll go into that in the second half of the show. But just so it is clear, we’ve got that first phrase, misunderstood for it to be understood. The definition, the importance of that definition is between defined and undefined. Defined is as per NRM. And in simple terms, if it is something that you could measure in detail and put on a bill, it’s definable. If it is something far more ambiguous that you can’t measure, it’s undefined. And the key difference is that if you put it in as defined, if I’m the contractor, which I am, and you’ve given me a defined provisional sum and I sign the contract that defined provisional sum, the management of it is theoretically already in my prelims and the delivery of it is already in my program. So if you’ve defined a provisional sum, I’ve accepted it, I’ve got to deal with it in my current program and contract.

Richard Braxton: Perhaps yes, in theory you’re right. Obviously, you then get into a potential contractual argument about the legitimacy of that. And you know, you could be arguing ultimately in court about whether something actually was or wasn’t a defined provisional sum.

Paul Heming: And so let’s talk about the misuse and the abuse, but let’s talk about it right after this break.

Such a sexy topic.

Richard Braxton: I know it’s great. 

Paul Heming: So much to talk about! Picture this: you know, I just had to take a bit of a breather there on the halftime break. So provisional sum, we’ve understood, we’ve got the misunderstanding. I believe we’ve got misuse and abuse to talk about now, which probably sounds a bit odd, but that’s what we’re going to talk about. So let’s just exemplify. I would like to talk about that misuse and abuse. You were touching on it before. And then I would like to talk about how you can recognize this and what you can do as a contractor.

Richard Braxton: Yep. Well, there’s a classic link here between this and risk management, and we’ll come onto that. But as a contractor, if you are pricing a job and you get presented with provisional sums that aren’t right, and in fact, if anyone that’s ever worked for me is listening to this, they’ll be laughing their socks off because whenever we were pricing jobs –

Paul Heming: Was that like a rail rack to a ball? Was it? 

Richard Braxton: Absolutely, yeah. I’d be railing about abuse of provisional sums, which is what prompted me to write the paper because it’s always wound me up because of this microcosm of people abusing the process. So when you get, for example, someone putting in a provisional sum for a contingency and calling it a defined provisional sum, it cannot be, and that’s abusing the system because, well, it’s either abuse or it’s a complete misunderstanding. And you’d like to –

Paul Heming: Why would they do that?

Richard Braxton: Well, because they’re trying to stitch the contractor up. That time and the prelims are down to the contractor. So they’re going to try to…

Paul Heming: What’s a contingency?

Richard Braxton: Well, why else are they doing it? Why are they describing a contingency as a defined provisional sum when it absolutely cannot be, unless it’s to try and get a pecuniary advantage or even not granting an extension of time or, you know, not paying.

Paul Heming: When they spend that contingency on whatever they want to spend it on.

Richard Braxton: Not paying for the prelims. Yeah, absolutely. So they get a contingency, decide to sell it, and the contractor says, “Oh, we want an extension of time and we want X prelims.” And they say, “Oh, no, it’s defined provisional sum, mate. It’s down to you.”

Paul Heming: Stop in there, Richard. Sorry. So, you defined provisional sum, they’ve included it in the contract sum. It says define provisional sum contingency, but I can’t measure. I can’t measure.

Richard Braxton: It’s abuse of the system. 

Paul Heming: I can’t measure that. It’s not like nowhere, according to NRM, could I measure it. So how can it be defined?

Richard Braxton: Well, it can’t, it simply can’t. And the rules tell you it can’t.

Paul Heming: So if I took it to court, if I took it to court, I would win. I would say that’s not, you are my client, I’m the make charge. I’d say that isn’t a provisional sum.

Richard Braxton: So you can proceed into the job with the provisional sums there and then have a bum fight when it comes to it. But why would you want to do that? And this is where the risk management thing comes in because it’s far easier at tender stage to go back and say, or certainly pre-sign under a contract. These are not defined provisional sums. We’re not accepting them as defined provisional sums, rename them. And the other thing that people have to be cautious of is that if buried in the preambles of prelims somewhere, there’s wording that says MRM or NRM two or for old farts like us SMM seven back in the day.

Paul Heming: Throw me in there with you, are you?

Richard Braxton: Yeah.

Paul Heming: Yeah, to be fair, I did do SMM seven, but come on. 

Richard Braxton: You go. You see, wait, ah, come back. SMM seven.

Paul Heming: SMM three.

Richard Braxton: No, no, five was kind of around still when I started, but it was six and seven. I’ve always been at sixes and sevens. Yeah, But it’s far easier to go back and say you won’t accept them as being defined than risking, you know, ending up in a TCC and arguing and get the TCE upholding your case that they could never have been.

Paul Heming: Yeah. I guess the point I’m trying to get to, and maybe I’m really making it layman’s here, and it seems blindingly obvious to you, right? So I am going to receive a tender as a main contractor from you, my client, and within that, in the preambles or wherever or in the pricing document, it says “define provisional sums contingency,” blah and blah. What you are saying is that in the contingency example, sticking with it, clearly you would never be able to measure that under NRM, and therefore it’s clearly not defined. And if you went to court, you would win by saying that’s not defined. However, I’m the main contractor. You as the client are doing that so that later we can, if I don’t pick it up, you can have some commercial leverage and say, “I put that as a defined provisional sum, it’s included.” And I go, well, obviously it’s not defined, is it, because I can’t measure it? And you could say, “Well, let’s go to court then,” and obviously I’m not going to want to do that and therefore this is the misuse or the abuse.

Richard Braxton: This is the misuse and abuse. Yeah, because no competent PQS, you know, should not understand the rules of provisional sums. And so if they clearly detail them as being defined when they clearly can’t be, to my mind, that’s deliberate. It can only be deliberate. You know, we are not talking about the odd typo here. Somebody forgets the “you” in the end of the front of it, you know, we’re talking about where you got two or three provisional sums or whatever and they’re all listed as defined and they can’t.

Paul Heming: So what’s your process? It comes through, it lands on your, let’s flip it. I’m the PQS, I’ve sent you the tender, you are the main contractor and it’s got these silly, let’s call them defined provisional sums. What are you going to do?

Richard Braxton: So, you’ve got various options, and it always depends on the circumstances, the relationships, the nature of the tender, and all the rest of it. But one of the obvious things you can do is raise a tender query and say, “Okay, there are these provisional sums here, they’re listed as defined but clearly they don’t meet the criteria for NRM. So can you please confirm that they are, in fact, undefined provisional sums?” And that puts them right on the spot then cause they’ve either got to answer it in some way, they’re going to justify they are defined. That’d be interesting. And if not, they’re going to go, “Yes, they are,” and the problem’s resolved. But if people don’t have the due diligence and risk management to check these things and challenge them at the time, then they potentially…

Paul Heming: It’s that misunderstanding, isn’t it?

Richard Braxton: Contracts, yeah. Some people just kind of think, “Oh, that’s provisional, it doesn’t matter.” You know.

Paul Heming: That’s definitely what people say, you know? Because the clue is in the name, isn’t it? You think? “Oh yeah, whatever.” Yeah. It’s a bit like what I was saying at the top of the show where I was saying, you know, 95% is absolute detail, absolute gravity certainty on everything. And there’s little bits and pieces you’re like, throw it in. Right. And it is provisional, we’ll sort it out. Right. 

Richard Braxton: I think there’s another really important aspect to provisional sums cause we want to really, you know, warm up to it is when you put JCT, again, when you put a provisional sum in a contract, it’s part of the contractor’s work. So you cannot omit a provisional sum and give it to somebody else just because you feel like it or you’re not getting on with a builder. So you’ve got a provisional sum for the landscape, and you think, “Stuff it, I’m not going to give it to this builder, I’m not going to get on with, I’m going to employ a landscaper direct and I’m going to omit the provisional sum for the landscaping and give it to this landscape subcontractor.”

Paul Heming: So you could argue that it’s a good thing that you put it in if you are the person buying, you are the client because you are buying that prelim and buying that program in inverted commas. But actually, yep, if you then want that flexibility as I was talking about at the top, which package should I put it in? I’ll put it in both, right? Don’t all of a sudden you fixed up. Yeah, maybe I was abusing the system, I think I was misusing the system. Come on, don’t throw me. 

Richard Braxton: I think you were misusing, you weren’t abusing, you were misusing. But obviously when you get into the subcontract level, then you get into all sorts of other discussions about, you know, well, what does a provisional sum in this subcontract mean? Is it defined and all the rest? So the arguments just get wider and wider and bigger and bigger. But you’re absolutely right. You can’t chop and change your provisional sums. And that’s an absolute mistake that people make all the time. And it’s one of the things that I wanted to flag up to those in the industry that weren’t aware with the paper was to say, don’t put up with this abuse, don’t put up with people omitting provisional sums and given somebody else because they can’t do it. Not unless they’ve amended the contract to allow them to do that. And if they have amended the contract to allow them to do that, you should have picked it up as part of your due diligence and risk management in the star and said, “We’re not having that yet.”

Paul Heming: No, I think absolutely right. And what I will do is I will link that paper actually to the podcast description as well so everyone can see it.

Richard Braxton: Yeah, please do. 

Paul Heming: Yeah. I think we’ve covered it really nicely. You know, half an hour on provisional sums and people said it couldn’t be done. I feel only just scratch the surface. 

Richard Braxton: Ah, we have, we could have gone on longer. 

Paul Heming: I know you’d like to, but I have to reign you. 

Richard Braxton: No, no.

Paul Heming: So I want to talk briefly now about, you touched on it at the start of the show, your business. You touched on it at the start of this half as well. How effectively, you know, having a process in place where you receive a tender, you look at for one thing, you look at provisional sums, undefined defined, etc., it’s a risk management process. Your business now is predicated on improving the risk management of contractors. Talk to me about this.

Richard Braxton: Okay, so my business, you can actually go one step further and say it’s predicated on helping contractors improve their performance. And one of the key ways we do that is by helping improve their risk management and understand it more and focus on it more. And construction is an inherently risky industry.

Paul Heming: Is it? 

Richard Braxton: Oh yeah. Have you heard? And if you don’t understand that and if you don’t like that, you are in the wrong game, you know because for a start, you’ve got the eternal triangle of time, quality, and cost. So they all come with risk. The time risk is obviously if you don’t finish in time, you’re going to have problems. The cost risks are many and varied. The quality risks are also many and varied. And people don’t understand that there are risks like, you know, fully understanding the specs and making sure you build what you’re supposed to and all those kind of issues. And in an industry that’s getting increasingly technical all the time with the technology that goes into buildings and, you know, airtightness and all the environmental stuff now it’s, you know –

Paul Heming: Types of risk. Yeah.

Richard Braxton: Yeah. The days of, you know, you’ve got partitions now with deflection heads and all the rest of it and sound bars and god knows what else. You know, it’s not just four B [inaudible] studying and sticks and plasterboard on it now. So you really got to be all over the details, and construction’s all about detail. So I’ve gone off track, haven’t I? I’ve wandered off.

Paul Heming: No, no, not at all. Not at all. What I wanted to bring it back to, though, is obviously you can have technical risk, commercial risk, legal risk, finance. There are so many different types of risk categories, right? 

Richard Braxton: Yes, HR, all sorts.

Paul Heming: Exactly. Health and safety. Exactly.

Richard Braxton: And safety. Yeah.

Paul Heming: If we stick with provisional sums, because I know you want to talk about it more, but let’s sense the conversation on Provisional sums, right? Because yes, it probably falls into, I don’t know, either the legal or the commercial risk management category. So your business is about providing structure and data around risk management, as I understand it. Well, let’s do that with provisional sums.

Richard Braxton: Yeah. So I say it is about, it’s about helping contractors improve because, you know, I’m keen to try and improve the industry, and one of the ways the industry can improve is A, reducing the abuse that we’ve spoken about. And b, improving the, how people go about doing what they do. And risk management in the industry is incredibly mixed and frankly is quite often poor. And so a lot of the problems in the industry are created by people themselves by not managing their risk properly, not understanding their risk.

Paul Heming: So how should we do it?

Richard Braxton: So how you should do it is, well, the first thing you do is you get us into assess how good you are. 

Paul Heming: That’s managing goes right saying you are already in, yeah.

Richard Braxton: So, well, this is where he came from talking back earlier. We touched on it with a business coach. It suddenly struck me that companies don’t actually have any way of measuring how good they are at managing risk, how risk averse they are. And so we created this concept, this report. We’ve given it an extremely sexy title of construction company risk appraisal. I’m open to better suggestions if somebody’s got one. But anyway –

Paul Heming: Put into Chat GPT.

Richard Braxton: Yeah, we weren’t overly worried about the name, we were more worried about getting to do what we wanted to do. It’s about analyzing how well a business manages risk in its day-to-day operations and actually giving people a tangible measure of that. So, we go into businesses and we test them on four key business pillars: health, safety and environmental, corporate governance, operational performance, and commercial management. And we ask them loads of questions about all of these issues that I, like a sad hat sat down and spent two months writing, and we harvest all this information, we take it away, we pile it into some scoring matrix that I produced, and that actually produces scored results against a whole sway of –

Paul Heming: So they would say out of 10, you are a 7.1 for risk management, or this is how risk averse?

Richard Braxton: Kind of. Yeah, we do it. We do it on a percentage basis. And just to confuse everyone, we do it on a reverse score in matrix. So the reason we do that is high score, high risk. So you kind of like if we came in and did it and you scored 60% on, so then that’s in the high-risk category. Well and truly.

Paul Heming: What are the things that generally stick out? There’s main contractors listening here today. What other things?

Richard Braxton: Well, it applies to main contractors and subcontractors and specialists. 

Paul Heming: Call it contractors generally, right? What are the things?

Richard Braxton: The principal is common.

Paul Heming: What are the patterns that you see in businesses that have that score of 60% plus, which you are high risking?

Richard Braxton: Well, it depends. It depends on what business pillar it is that you know, you’re looking at. So it will vary, but the risks are so many, you know, you try and sit down and think about do this for a little game of yourself later. Try and sit down and think about every risk you can think of in the construction industry. And there are hundreds and thousands.

Paul Heming: That’s why I took two months to write that, to schedule.

Richard Braxton: Yes, yeah. And quite frankly, after two months, I just thought that’s enough. You know, you just can’t, you just carry them. Right? And also we had to temper it. So the way we do it is we spend two days with people and we basically kind of have half a day in each one, but it’s a bit more biased towards operational performance and commercial management. But we have half a day with whoever’s in charge of that section within the business. We ask all these questions, as I say, and that’s a two-day process, and we get a lot of information out of it so that the scoring and the metrics have come out of it credible and tangible. But you can only take up so much of executives’ time. So that’s why we kind of limited it to the two days and however many questions. And the idea is it gives a snapshot across the business, but it gives a snapshot, which is detailed because of the amount of questions we’ve asked, but we’ve tried to make it a fast process to get a lot of info quickly to make it meaningful rather than spending weeks trolling all over a business. 

Paul Heming: Understood. And for people listening, you are someone with abundant expertise in all kinds of risk management. You’re now doing this. What would your single piece of advice be, Richards, for people listening with regards to risk management?

Richard Braxton: You’ve got to focus on it. If you don’t understand that running a construction business and successfully is largely propagated on managing risk and how well you manage risk, then you are unlikely to succeed unless you’re very lucky because it is a really technical, really complicated high-pressure industry that does fabulous things, loses fabulous legacies. But the only way you’re going to be successful in it is managing risk. And then obviously someone in the business has got to have some entrepreneurial flare, and you’ve got to have that commercial best practice and maximize your opportunities when they come along. So that’s why we focus on the two things, risk management, commercial best practice, and try to use that to improve the performance of businesses. 

Paul Heming: Fantastic. Okay. 

Richard Braxton: And it’s doable. It’s doable.

Paul Heming: It’s the same as anything, you need to measure it to be able to better it, to be able to.

Richard Braxton: Ah, yeah. Well, so that is where this came from. It was when Brenda, my business coach, said to me one day, “Everything that gets measured gets better.” And you know, initially I thought, “Oh cut, there’s a sound bite,” you know, and then I went away and thought about it afterwards. I thought, “Do you know what? He’s absolutely right.” And that’s where there’s a problem with risk management because firms can’t measure it. And so they don’t understand how good they are in it and how exposed they are.

Paul Heming: So, actually the single point of advice would be to start measuring risk management.

Richard Braxton: Measuring your risk so you can then start.

Paul Heming: To improve.

Richard Braxton: So you can then start to drive continual improvement in it and in your business. And that will inevitably drive better outcomes for you. And that’s what we are about. That’s exactly what we’re trying to sell to people.

Paul Heming: That makes perfect sense. And what I will be doing is obviously sharing your details, the company’s details in the podcast description. I will also put in the podcast description the famous infamous provisional summons paper. I think it’s been, well, it’s been an absolute joy to have you on the show. And all jokes aside with the comments, it’s, it’s, this is what it’s all about and misunderstood, misused, abused. I think a lot of it is actually in the misunderstood and misused category as opposed to the abused category. And hopefully, the depth of this conversation on something as granular as provisional sums has really helped to shine a spotlight on that. So people, don’t have to misuse it.

Richard Braxton: I hope it helps people. Yeah, I hope it helps people. But that’s why I wrote the paper, and I’m really pleased it’s now been picked up by the construction industry collective voice in Scotland, who’s an industry-wide pan-industry body up there trying to improve the industry. They’ve now added it to their website as the useful information, as part of a Bolton to the best practice guide that they wrote, which is about trying to improve the industry. And it’s actually going to be published in an industry trade magazine shortly as well, so people are picking up on it, which is great. And I wrote it just to help people and just to put it out there, you know.

Paul Heming: Not because you enjoy talking about provisional sums at all though, Rick.

Richard Braxton: No, because it is a microcosm of the problems in the industry, you know?

Paul Heming: 100%. Yeah, no, 100%. Well, look, it’s been an absolute pleasure to have you on the show. As mentioned, guys, I will be putting all the details in the link in the episode description. Even Richard, thank you for your time, mate. I’m sure we will do this again sometime.

Richard Braxton: Absolutely, we will. Yeah. Same time next week. Not on provisional sums though. 

Paul Heming: Provisional sums part two.

Richard Braxton: Cool. I think we’ve done that. Cut. 

Paul Heming: Right. Thanks, everyone. I will speak to you as always next week. Take it easy, Richard.

Richard Braxton: Lovely. Thank you. Cheers, Paul.