Michelle Cirson (00:00.59)
Hello, welcome to the Subbies Toolbox podcast. I'm your host, Michelle Cirson construction adjudicator, lawyer, and the founder of the Subbies Toolbox. Today on my podcast, I want to talk to you about the end of financial year contract review runway. And this might sound a bit novel, but it's actually a thing. can tell you from tracking the number of contract reviews that we do every single month in my business for the last 10 years, that the end of financial year contract review run rate
runway is a absolute real thing. Now I put this down to end of financial year reports for the builders camp. And when I was a builder CA, there was definitely an emphasis around those big reporting milestones in the business, not just from a project perspective, but also from a whole of business cashflow perspective. And some builders are big enough in revenue that they actually have to publish their financial reports on ASIC.
So this can be a big deal there in the financial year and making sure that the cash flow and also the liabilities that are committed on their balance sheet for tax purposes are properly recorded. And when you're coming up to June 30, there's often an incentive for CAs to make sure that trades are locked in for the next financial year moving forward.
It makes complete sense if you think about it from your own business perspective. This is part the reason that you're more likely to just blindly sign a contract in June than you are any other month. And that is because you have your eyes on your own financial reports and you're thinking in terms of revenue moving forward. You might be looking back and reflecting on whether or not you made money on your jobs in the last financial year as well. So when it comes to the end of financial year, contract review runway.
you're more likely to just grab those contracts and put them aside while you're over here looking at your own backyard. Builders are banking on that because right now, particularly in the lead up to end of financial year 2026, we have incredibly volatile economic circumstances with fuel, with the possibility that freight and shipping costs might blow out or be uncertain.
Michelle Cirson (02:18.114)
We also have material price increases again, it really, it's sort of flashbacks to COVID in a lot of ways with material price increases. But the one thing that I'm incredibly grateful to COVID for is teaching the building industry about fixed price contracts and what happens when you sign up to a fixed price contract and you don't have any way to get out of it. You actually have to deliver on the goods and services that you promised to provide back at that pricing before the world went mad.
So in the end of financial year 2026, where we are going into a period where we know that we don't have fuel secured for the country and the government's being really shady about it, we've got all of these crazy things that have just come out with a budget release that really shows that the government doesn't care at all what the public thinks. They're just going to implement policy as they wish. And it also sniffs of desperation from a
a country from an economic standpoint and a financial perspective because those policies that are quite drastic and dramatic that are being implemented, it's clear that the government doesn't care about being popular anymore. So this is where we could be entering into a period of complete uncertainty and the builders know this. So at the of financial year contract review runway this year actually started early May and it came off the back of all the fuel prices going up at Easter.
and everybody wondering are we going to be able to sign these contracts and lock in fuel prices. Now some contractors really focused on the fuel aspect of that but we helped our toolbox members in looking holistically at the whole scope of your work and working out what you were actually going to get charged more for in the context of what you're actually doing. So it's incredibly important that you have contract terms that actually fit the circumstances for your trade.
Now the reason I'm telling you all of this is because these conversations have happened much faster this time than they did with COVID. When COVID came along, everyone panicked and didn't want to stick their head up and say, hey, I'm struggling with this or we can't deliver on these prices anymore. They were scared to go back to their builders and say, this isn't going to work. I'm going to go broke before the end of your job if you make me do this. But this time builders have realized very quickly and have gone back to their clients very quickly and said, hey, hang on a second.
Michelle Cirson (04:43.116)
You guys are not going to get the benefit of the work if you push us too hard on this. So you have a window of opportunity here where builders are more likely to negotiate with you because they know it's short-sighted if they don't. It's a very expensive situation if you have a subcontractor go broke on your job when you're in the second, third portion of the construction program and it will hold up delivery. It will interrupt warranties.
It can make the builder look shady if the builder's not paying you properly and causes head contract disputes as well. So in terms of your end of financial year contracts that you're looking at, if the builder's pressuring you to sign up to those, I want you to know this one thing. Don't turn off this podcast and stop listening unless you just take this one little nugget to remember. It's the builder's urgency to sign you up to a fixed price contract.
It is not your urgency to be locked in to a contract that you cannot get out of. So if you're working back from when you're required to be on site or when you've got lead times to start procuring materials and equipment and the builders really jump in the gun and getting you in early, so to speak, think about why that is because every builder's contract has a termination for convenience clause in favour of the builder. So the builder's never really locked in or married to you.
under contract, they always have an off ramp, but you do not have that clause in your contract. And I can bet my sweet Bippy that it is 99 % chance, unless you've negotiated a reciprocal termination for convenience, which I've never seen done. I've never seen it done. Then it is incredibly unlikely that you have a way to get out of your contract once you sign it. So you are in the danger zone. The builder is capitalizing on you being so busy.
in the back end of your business in the lead up to end of financial year that they're dangling this potential revenue under your nose in the lead up to June 30 so that you will sign up, be locked in at that price and give them certainty of expenditure into the next financial year. So what do you do about it? Well, you have a window of leverage. This is your window to get
Michelle Cirson (07:03.918)
clauses across the line or departures in your contract across the line that sometimes the builder if they had more time to do it back and forth with you probably wouldn't accept. So you need to capitalize on that. Take that opportunity and that's going to require you to have the time and the mental capacity to be doing these contract reviews. So last two weeks of May, all of June, you need to have capacity in your workload.
to be able to grab these contracts as they come in, anticipate and plan for the end of year contract review runway, and then have the time to be able to do the back and forth. And the builder is going to have this ticking clock of June 30, but really for you, you don't have that deadline. That deadline for you is actually a problem more than it is an opportunity. making sure that you utilize that window of better leverage to ask for things.
And bear in mind too that if this CA is sending out the volume of contracts that you think they are, so if you're getting 10 times more contracts in May and June than you do every other month in the year, think about how many contract negotiations that CA is doing with other subbies in the same window because they've had to increase the volume that they're sending out as well. Now the other danger of the end of financial year contract review runway for
from the builder's perspective is unlet scope. So this is the window where the CA can get sloppy if they're being pushed to let trades that are not needed on site for six to 12 weeks. That CA now has to do exponentially more paperwork in the shorter period of time. And if you're truly not needed on site for a couple of months, maybe three months, I find what happens with the scopes of work is that the builder hasn't had time to turn their mind to your trade yet.
So one of the things that used to happen to me when I was a builder CA is that it would take me the life of the project to truly see everything on the drawings. Because remember the CA is not the estimator normally. They're not the ones that are measuring everything for the tender process. So when it came to actually letting the trades, I would have to sit down and go, okay, I'm letting the jewelry package. Let's work out from the drawings what we're putting in their scope. It was not clear cut what items
Michelle Cirson (09:27.822)
Of the scope of work sometimes there could be things that might have been in the plasterers package that ended up being wall cladding That we got as a bespoke joinery item or something like that So we would always have to sit down and work out from the drawings and the specification how we would package those trade trade scopes of work Now if the builder's CA has not yet seen everything on the drawings There's a good chance that they may not pick up on everything in your scope of work
So the emphasis on the need for you to absolutely with a fine tooth comb, go through your scope of work at these pressure point periods where the builder CA is doing high volume trade lettings, then you're really going to have to make sure that you do that process properly and have time to be able to go in the back and forth with the builder CA and properly explain to them why they're not picking up on an item in the scope or why something's not apples for apples in the way that they've written in your scope of work.
The other thing that used to happen as well, which only comes from when you are actually letting scopes of work or letting trades in the ordinary course of the construction sequence is that things unfold on site. So you might find yourself in this situation where the builder's CA is trying to sign you up to a scope of work that...
doesn't fit the situation on site and everybody knows there's going to be variations and you could get caught up in a situation where the builder's CA is saying, don't worry, just sign up. I will give you a variation in the moment that we signed for that extra thing because they don't have time to amend your scope of work and properly rationalize and go through the process cohesively of making sure that they've adjusted the scope of work to cater for the variations from the outset.
So you can see why there's a few reasons this is a real danger zone for you in end of financial year contract review runway. I often find that contracts that are signed up in May and June go pear shaped more commonly than contracts that have, you know, sat in your inbox for two months and it's a slow burn and the conversation is a slow burn and you're starting to make plans together over a longer period of time. It gives you more time to get insight into the
Michelle Cirson (11:46.071)
state of mind of the builder's CA as well. So if you sniff desperation and urgency from your builder's CA, stop for a second and remember this is your opportunity to get more contract terms in your favor and get your departure schedule agreed quicker and easier than you would if that builder's CA had no urgency whatsoever, they had time to go back out to the market. So oftentimes subcontractors will say to me well
What do I do about this? Why, why is there a special process that I should do to make sure that I catch these end of financial year contract reviews? Well, the first thing is you have to have the time in your day to be able to properly review these contracts. If you do not have the time in your day to properly review the contracts, consider outsourcing it to somebody who can give you a contract review. But please, please, please make sure that you still thoroughly review the scope of work, the drawing register.
the construction program and the price that is on the front of the contract. So even if you go through all of the terms and conditions with the person who's helping you with the contract review, you need to champion and own and be entirely across all of the details of what is inside your scope of work. Understanding the construction program, knowing whether or not the durations that the builder's given you to actually complete particular tasks are sufficient, or if they're just completely off the heads and there's no way it can be built that
Those are the types of things that somebody who's reviewing your contract probably doesn't have finger on the pulse to be able to give you good advice about that. If you're going to review them yourself, you should follow exactly the same process you follow every other month of the year. And that's all about having a contract review checklist and a procedure for doing your contract reviews thoroughly. So ideally you've been through a process with your team of working out what goes pear-shaped on our jobs.
What are the high emphasis contract clauses that we need to have in our contracts? A good example of that might be if you are the type of trade that puts materials and goods on site before they're fixed. Say for example, there was a fire services subcontractor that was going to put in a fire pump and that might get delivered to the site earlier so the building can be built around it. Or if you're a plasterer and you're just loading out every single floor with plasterboard because
Michelle Cirson (14:12.554)
it's more effective and efficient for you to be able to deliver those goods and load out every single floor in one go. Then if you were terminated because the main contract ended or if you were terminated for convenience, it's very important that you have the ability to be paid for everything you have delivered that is not fixed. That's just one example of where you might look at what does my trade need that other trades don't. If you were a form worker, you shouldn't really have a defects liability period.
By the time all your work is done, all the temporary work has been taken away and there's nothing there. You've literally stripped away and taken all of your work off site. There's nothing to warranty anymore. So these are the nuances that I'm talking about, about understanding what does my trade have that's special about our contract terms? Does the shoe fit with this contract document that I'm signing? Do I have an internal checklist and a process that I undertake? Have I done due diligence on the builder?
have I run the insurance clauses past my insurer to make sure that my policies actually cover me for the things that I have to provide insurance for under this contract. So the idea is do exactly the same process that you would do every other month of the year, but in order to do that, you actually need to have a procedure. So that is where the Subbease Toolbox can come into play. And the format that we have set up for the Subbease Toolbox membership is not just
you get access to a library of resources. When I first developed the Subbies Toolbox, I had intended to put it out to the world as effectively a bunch of templates on a USB stick. And very quickly I realized when I started selling that to subcontractors that they needed me to hold their hand. And so the best model that I've found to be able to make sure you guys have got this under control is to have the ongoing support with the membership model. So two days a week,
Tuesdays and Fridays between 12 and 1, our toolbox members jump into a group Q &A and they ask me questions. And we have breakout room capabilities to be able to look at particular contracts with subcontractors to check to see or do a preliminary sniff test to see if there's anything out of the ordinary with the contract that they're looking at and where they have put together a departure schedule using the toolbox process and the checklist.
Michelle Cirson (16:35.926)
and the guides, they'll bring along the departures that they have put together and we can critique those and give them pointers on what to push for, how to sell it to the builder, what other people are doing with those particular clauses at that particular time. So if you're looking for something like that, consider the toolbox membership. We do have an end of financial year offer on at the moment and I'll let marketing tell you all about that in our show notes. So hopefully that was helpful. I...
If I have one wish for subcontractors in end of financial year It's that you think about how you want to do business for the rest of the fine for the next financial year I don't want you to be standing here at this point in 2027 looking back and going oh that was another Batting cage year of gauntlet and I can't believe I survived that I want you to go no I actually had control of or felt like I could sleep at night knowing that I knew what I would do
would do in each circumstance. I had contract terms that reflected the deals that I wanted to do. I didn't sign up to jobs too early out of desperation to secure revenue. I actually sat back and cherry picked which jobs I wanted to take. And when the builder was unreasonable in negotiating contract terms with me, I just went with the other builder that was really fair and understood that I had certain needs because I'm different in my trade. If you could sit back and look at that next year at this point in business, I think you will be.
are hopefully not as depressed as we all are this week with the budget that has been released and being in business is hard and having economic pressures, government pressures, tax pressures and then also your clients asking you to sign your life away. Subcontractors have a playing field in business that is different to every other industry so
incredibly important that if you're going to kick around in the sand pit that you have a good strategy and a team to support you.
