Risk Avoidance for the Building Team

Basil Sawczuk

• Publisher: Routledge
• Year: 2002
• Print ISBN: 9780419208105
• eBook ISBN: 9781135818319
• Edition: 1
• Topic: Architecture
• Subtopic: Architecture Methods & Materials

Risk avoidance has to be addressed not only at the outset of any building project but throughout its lifespan and by all parties involved in the contract. This book covers each stage of the construction process in turn and examines potential problem areas from the point of view of each of the three main parties involved: employer, consultant and contractor.

By a thorough examination of each topic covered, using checklists, suggested agendas, briefing notes, risk assessment charts etc., the author has provided:

* a practical guide on how to react to many difficult situations which arise

* strong focus on risk avoidance techniques and how to apply them

* a balanced approach, looking at problems from all sides to promote understanding of adversaries' viewpoints.

SECTION ONE
THE SELECTION OF THE BUILDING TEAM

When an individual or an organization want to put in hand some building work they have many decisions to make. Perhaps the most important decision is one of selecting people to assist in that building project. The employer, as termed in construction contracts, may well have friends in the construction industry and may therefore seek their advice. However, advice and opinions received by a building contractor may differ from that received by a consultant. Often advice is given with self-interest in mind, which is not surprising in the competitive world in which we live today. Irrespective of ‘friends’ in the construction industry, the employer should have some knowledge of the various factors which may influence the selection of the building team. Even if only to reinforce their adviser’s advice.

Many traditionalists believe that the employer should first appoint a consultant to prepare a brief then have that consultant advise on contractor selection. The counter argument is that the employer might just as well approach a contractor direct and let them appoint the designers, thereby providing the employer with one point of contact and responsibility. Both alternatives have their place, but how does the employer decide? Perhaps the first task is for the employer to consider the project against various criteria and determine how much risk to retain or pass onto the contractor. Bearing in mind of course that the contractor will often compensate the extra burden of risk with an additional cost within the tender.

It would be wrong to consider the employer as the only member of the building team who needs to consider their position and exposure to risk. The other members, being consultants and contractors, will also need to make commercial evaluations. Consultants, for example, may not wish to work for a contractor in a design and build contract. Contractors may equally not be prepared to take on board the employer’s consultants. Even in the more traditional contracts the consultants and contractors may have reservations about each other. Alternatively where a building team has no experience of working together there may be a need for some pre-contract investigation. The employer will not be beyond investigation. The consultant and contractor will need to be satisfied that the employer has sufficient funds to go through with the project.

One of the first and key issues to address is the method of procurement which is the most desirable for the employer’s project. Arising from this evaluation will be the selection of the appropriate building contract.

1.1 THE APPROPRIATE CONTRACT

The procedure for the selection of the building team can be influenced by the proposed procurement method. Therefore it is important to consider in broad terms the various options available. It cannot be over emphasized that the procurement of a building can be a very complex matter with so many organizations coming together, often for the first time. There will be the employer who might be a developer, an end user or a purchasing department within a large organization. There will be the building contractor who might be a main contractor with a series of subcontractors, or acting as a managing contractor. Alternatively the employer might decide to deal direct with subcontractors and omit the main contractor. There will also be consultants which may include architects, quantity surveyors, civil, structural and services engineers. These consultants may be individual consultancies, single multiprofessional organizations or they may be part of the employer’s or contractor’s organization.

With so many participants and inter-relationships it is important to choose the appropriate contract to suit the project and the employer’s objectives. The choice of contract is for the client to decide, although if they are not experienced or expert in contract selection they should seek advice. One of the main considerations in selecting the contract is the employer’s preferred role for the contractor. The decision is not simple and there should be an evaluation of the options available.

One of the fundamental aspects in contract selection is the apportionment of risk between the employer and the contractor and this is influenced by a number of factors.

(a) The complexity and uniqueness of the project

Different employers will have different perceptions of project complexity and uniqueness. The inexperienced employer may perhaps think the project is more complex and unique than it really is. Complexity is often linked to the building function. For example a process plant might have specific environmental requirements where a small divergence from specification may make the whole process inoperable. A unique design feature may therefore require research and development time with no guarantees of meeting programme dates. Alternatively the feature may be so specialist that there is a need for specialist subcontractors to be introduced early into the team so that they can be involved in the design and installation of their specialist work. These specialist subcontractors can also advise in good time of the impact of their installation on the building fabric and internal environment.

(b) The employer’s involvement with the design process

The employer may wish to appoint and retain their own designers. In this case the employer will take on board the responsibility for their consultants as far as the main building contract is concerned. Within this relationship the employer will look to reduce the risk under the building contract by having a separate contract with the consultants. This consultancy contract will incorporate provisions to protect the employer’s exposure as far as design and contract administration is concerned. Alternatively the employer may pick consultants to design the building concept and put in place quality standards. Thereafter the consultants are retained as advisers or handed over (novated or switched) to the contractor. The employer must also consider the possibility of a change to the requirements during the building process—some contracts create more vulnerability than others in this respect.

(c) The client’s involvement with the construction process

Some experienced employers may wish to manage the construction process and dispense with the role of the managing contractor. Alternatively once the consultants have produced their designs and specifications the employer will terminate their involvement and use their own skill to manage the project. Other clients who are not so experienced or do not have the internal resources may decide to select a contract which demands minimal input from themselves and thereby reduces their exposure to risk.

(d) The required speed from inception to completion

Quite often the employer’s internal decision-making process or allocation of funding within financial years, results in the need for a building to be designed and built in the shortest time possible. The requirement for speed often results in having to pay a cost premium and introduces an added risk of mistakes occurring. Speed may result in a poorly defined employer’s brief, mistakes in the design or a greater knock-on effect due to mishaps on site during construction. The availability of time is one of the key factors to consider when selecting a contract. Because the building procurement process is essentially a linear process going through the stages of briefing, design and specification writing, tendering, manufacture and finally construction, the obvious method to save time is to overlap the various procurement stages. There are standard procurement methods which enable this overlap but the employer must also be aware of the potential disadvantages that this process may bring. Therefore the employer and their advisers must evaluate the benefits against the potential added risks that these procurement methods bring.

(e) The required degree of price certainty

A large proportion of employers need to have a degree of certainty about their financial exposure when procuring a building. Some clients however may value other factors such as speed more than price certainty especially if making a large investment in equipment and plant. Sometimes the building enclosure may be only a small proportion of the total package. In these circumstances the employer is able to accommodate a degree of price uncertainty in return for an earlier completion date. It should be noted that certainty on price should not be confused with total cost. Total cost is concerned more with having a choice from a range of priced options whereas certainty on price is concerned about when the final cost is known.

There are many standard building contracts available but generally they can be grouped together under four main procurement methods which are outlined below.

1.1.1 The traditional contract

One of the aims of the traditional contract is to spread the risks equally between the employer and the contractor. Under this contract the employer will select a team of consultants (which will usually include the architect) to prepare the designs and specifications based on the client’s brief. The architect will later go on to administer the building contract on behalf of the employer and inspect the works during ...

Table of contents

• COVER PAGE
• TITLE PAGE
• COPYRIGHT PAGE
• FOREWORD
• INTRODUCTION
• SECTION ONE: THE SELECTION OF THE BUILDING TEAM
• SECTION TWO: THE BRIEF
• SECTION THREE: TEAM PROBLEMS
• SECTION FOUR: FINANCE
• SECTION FIVE: SETTING AND MONITORING CONSTRUCTION PROGRESS
• SECTION SIX: INFORMATION
• SECTION SEVEN: VARIATIONS
• SECTION EIGHT: POOR WORKMANSHIP AND DESIGN FAILURES
• SECTION NINE: RESOLVING DISPUTES
• SECTION TEN: MANAGING THE RISK
• TABLE OF LEGAL CASES
• BIBLIOGRAPHY