Project Risk – what causes failure?

with 6 Comments

Avoiding Risk – The Importance of Licensing

– by Jacon Parry [QBCC 1217287]

project management

when it comes to Project Management there is a risk that few people realise or take into account – what is it??

Risk – 3 major causes of project failure

Three of the biggest causes of property development failures  can be summed up below, but there is another ‘little known risk’ that can prove to be equally devestating or sometimes even more so and that is unlicenced Project Management. If that sounds surprising or even unbelievable – we explain the reasons for this below

  1. Inappropriate feasibility – failure to accurately ascertain costs or sale prices [or both
  2. Delays – frequently leading to cost blowouts, disputes and/or loss due to changes in the prevailing market
  3. Chasing the cheapest price/tender – usually starts early leading to poor or wrong design & compounds as the project proceeds leading to no’s 1 & 2 above

The Legality – why unlicenced Project Management is so risky

It is not widely known or understood by many in building services and support industries here in Queensland that Project Managers are required by law to hold the appropriate QBCC  licences. The Queensland Building Services Authority Act 1991 states that Project Managers must be licensed under the Act. Most will be surprised when they come to understand what constitutes ‘Project Management’ under the Act as we will outline a little later and the adverse implications on such areas as insurance claims and SMSF’s that being unlicensed can lead to.

The QBCC Act provides that it is unlawful for a person to carry out, or undertake to carry out, building work or building work services unless the person is appropriately licensed. The Act defines ‘Building Work Services’ as the provision of administration, advisory, management or supervisory services for building works.

Any contravention of this provision can lead to prosecution and significant financial penalties. What’s more, any offender is not entitled to any profit. Recovery of expenses may be possible that that does not extend to recovering of any money to cover their own time or profit. Furthermore, contraventions can and will likely lead to insurance policies being voidable, meaning that losses sustained that otherwise were insured may no longer be recoverable.

SMSF’s – your Super, Insurance and Pre-Sale contracts at risk.

A significant number of people these days carry out projects using their super in one way or another usually involving an SMSF. 

Did you know that unlicenced project management can have major implications when it comes to making insurance claims under a wide range of covers such as professional indemnity insurance or contract works policies? Few people read the fine print in these policies but they would be horrified if they did.

Of particular note these days is work being carried on behalf of or by an SMSF, where even the trustee is not permitted to carry out any works on behalf of the SMSF unless they hold an appropriate licences. SMSF’s have a further layer of legislative requirements laid out in the SIS Act prohibiting them from carrying out ‘Development work’ the definition of which we will not detail here but it’s wide ranging – suffice to say, penalties for non compliance can be substantial and long lasting.

project management
You may as well roll the dice

In respect to Pre-sale contracts where the contract is entered into before the project is complete, typically contracts provide for settlement after construction is complete but often rely on works outside the building contract being completed by the developer who often is not licensed to carry out such tasks, prior to settlement. The provisions of the Act can have a serious impact on the developer if the developer is not licensed, such as the sale contract being voidable or worse still, awarding of damages.

Legislation in these areas are generally State based and what we have outlined here applies inQueensland for projects located in Queensland. We are not able to advise on what applies in other States but given the potential for wide ranging severe financial implications it would pay to find out, if your project is elsewhere.

So… the question is….”Is it worth the risk?”     Go on….roll the dice

Question – Is your consultant licenced to Project Manage?

Checking this is well worthwhile as we frequently see people touting as Project Managers or undertaking tasks defined as Project Management. You can soon find out by checking the QBCC website. You may be very surprised because we more often than not see specialist building industry consultants such as Surveyors, town planners and others attempting to perform this role for unsuspecting clients

What constitutes “Project Management”?

Following is a list compiled by QBCC of some of the sorts of things a person carrying out the task needs to hold the appropriate QBCC licence for.

If a person or firm  performs any of the following tasks in relation to building work then they are required to hold the appropriate BSA licence for the work. (This will generally be a Builder class of licence.)
• Acts as Superintendent under a contract (for further information see the Information Statement on this topic)
• Co-ordinates the scheduling of building work by contractors including as agent for another person
• Prepares tender documentation or calls and selects tenders
• Arranges and conducts on site meetings and inspections or
• Arranges certificates, including certificates from a local government, to be issued.”

If your project manager is not licensed and  insured you are at risk – further more he is too – –  it’s that simple!

Click here – What exactly does a Project Manager do – the role of a Project Manager

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6 Responses

  1. Peter
    | Reply

    What are the monetary penalties for being an un licensed project manager?

    • Adrian Stagg
      | Reply

      Not sure Peter – it’s not something that has bothered us as we are fully licensed, however a check with QBCC will probably provide an answer. The big problem is that the client is not covered for faulty works if they are using unlicensed personnel.

  2. Phil
    | Reply

    Ooops, I’m a surveyor & I didn’t know this either. Thanks guys. We occasionally do bits and pieces like this for clients which frankly is a bit of a distraction – we’ll send them your way next time
    Phil

  3. Graeme Barrell
    | Reply

    Wow, reading this has put me into mild panic. I didn’t realise that a licence was required for this stuff. I’ll have to inform our staff & by the way it’s called the QBCC these days

    Graeme Barrell

  4. Louisa
    | Reply

    What type of license is required for project management of a subdivision? The QBCC site is a little vauge.

    • Adrian SCM
      | Reply

      As a minimum in Queensland you need a Building Supervisor Licence – issued by QBCC. We have that as well as a full building licence. To avoid a conflict of interest you need the PM to be different to the contractor – ie, no connection

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