As first published in RIBA Journal, August 26 2021

How will the proposed reforms under the Building Safety Bill affect the certification of construction materials and how can the supply chain be better engaged, so that products are appropriately developed and deployed?

Architects must be sure that the products they specify satisfy the performance criteria, required for their projects. Traditionally, architects have relied on manufacturers’ technical literature and information published by independent certifiers such as the British Board of Agrément (BBA) and Local Authority Building Control (LABC) for assurance that the materials they select are appropriate. However, the Grenfell Inquiry exposed alarming evidence of spurious marketing in relation to the fire-safety performance of cladding and insulation products. It also uncovered widespread ‘gaming of the system’ with manufacturers making repeated attempts to get their products to pass prescribed tests.

In addition, the Hackitt Review highlighted that over the last 30 years the construction industry has become increasingly fragmented, with a widening split between those who manufacture products and those who specify them.

Many architects will have experienced the results of this fragmentation on Design and Build contracts. Meetings are held with specialist suppliers to discuss project specific requirements during the initial design stages, and production information is then developed based on the technical information provided. Products are then specified on an ‘equal or approved’ basis to maintain an open and competitive tender, allowing contractors to propose alternatives from their preferred supply chain once appointed, so as to protect their limited profit margins. Works packages previously completed for tender then have to be redesigned and re-coordinated working alongside alternative suppliers who have no prior knowledge of the scheme.

Not only does this process leave architects doing work twice, for no additional fee, it also tends to make suppliers reluctant to go the extra mile when assisting architects during the initial design stages because of the likelihood that their products will be substituted by those of their competitors. Also, the commercial pressures of value engineering can lead to last minute changes where products are ‘swapped out’ immediately prior to contract award without the implications being fully considered. This increases the potential for errors in design coordination, or worse, lapses in building safety.

Over time, these processes have eroded relationships between architects and the supply chain, and have reduced the quality of design outputs at the pre-construction phase. These problems are not unique to the UK construction industry. According to HKA’s 2020 CRUX Insight Report, the top causes of construction claims and disputes globally were scope change, incorrect or incomplete design, and poor management of sub-contractors, suppliers and their interfaces. So, how can manufacturers be encouraged to develop and market their products appropriately, and how can supply chains be better engaged by architects to restore confidence, increase efficiency and maintain design continuity?

Product Safety
The Construction Products Association (CPA) will launch a new Code for Construction Product Information (CCPI) later this year which aims to set a new benchmark for how product information is presented by manufacturers. The CPA recognises the urgent need to restore trust and confidence within the industry and the new Code will feature 11 key clauses underpinned by five core objectives to ensure product information is clear, accurate, up-to-date, accessible and unambiguous.

These developments should be welcomed by architects as they will provide greater clarity for specifiers of construction products, particularly in relation to fire-safety performance. However, with the Building Safety Bill still to complete its parliamentary journey, it remains to be seen when these much-heralded changes will begin to take effect.

There are more immediate challenges for manufacturers to face over the coming months, however, regarding the certification of construction products following the UK’s departure from the European Union. CE markings were due to cease being recognised from 1 January 2022, but due to industry concerns the government has recently extended this deadline for a further 12 months. After this, all products sold in the UK will require UKCA marking (and UKNI marking in Northern Ireland), which will require testing and certification by a UK accredited body. The British Standards Institute recently raised concerns that significant numbers of manufacturers had yet to apply for UKCA marking. This is likely to cause significant disruption to supply chains given the high proportion of products being imported from the EU.

At the RIBAJ Fire Safety in Practice webinar earlier this summer, Peter Caplehorn, Chief Executive of the CPA, noted there is currently insufficient testing capacity within the UK to meet these demands and urgent discussions are underway with the government to seek agreement on a more practical regime for the fire testing of construction products for 2022 and beyond. This will further compound the challenges presented by worldwide material shortages generally and the increased demand for cladding materials in the UK to accommodate the widespread remediation programmes being undertaken post Grenfell.

Improved Engagement
In order to fully realise the Golden Thread’s objectives, there will need to be increased collaboration between designers and supply chains. An example of this is architects and manufacturers working alongside the NBS (National Building Specification) to develop NBS Source, which is intended to provide structured, high-quality product data, to include all relevant performance criteria and certifications.

The Golden Thread is being seen as a catalyst for wider industry adoption of BIM with opportunities to link NBS Source data (and specifications aligned under NBS Chorus) to the BIM model to create a fully integrated ‘digital twin’ for the building’s lifecycle. HKA’s 2020 CRUX Insight Report has observed that whilst the global Covid-19 pandemic has had many negative impacts on the construction industry, the consequent increase in remote working and use of cloud-based technologies, has accelerated the digitalisation of construction workflows, and increased productivity. The NBS 10^th Annual BIM Report 2020 confirmed that, whilst BIM adoption has grown substantially over the last decade, the lack of client demand and perceived unsuitability to certain project types continue to act as barriers.    

Embedding digital technologies through the adoption of the UK BIM Framework is one of 14 key policies summarised under the government’s Construction Playbook, which promotes delivery excellence across public sector procurement by harnessing the potential of best industry practice. The Playbook focusses on establishing key project outcomes from the outset and seeks to foster behavioural change from delivery teams by employing a more balanced approach to risk allocation.

Other policies include encouraging the use of early supply chain involvement, effective collaborative contracting and ‘modern methods of construction’ (MMC) to utilise offsite fabrication and minimise greenhouse gas emissions. By engaging teams much earlier in the design process under framework agreements, the Playbook promotes the use of early contractor involvement (ECI) with a preassembled team of consultants, sub-contractors and suppliers of construction products to develop the scheme design collaboratively while minimising wasteful design changes later in the programme.

It remains to be seen how architects will adapt to these proposed reforms and whether the drive for increased collaboration and standardisation will be seen by some as a restraint on creativity. But it is clear the profession must adapt to embrace this widespread cultural change if it is to rise to the challenge of constructing safer and more sustainable buildings whilst delivering real value for clients and communities.  

If you require any further information, please contact Paul Jolly at pauljolly@hka.com.       

As published in the RIBA Journal, 6 July 2021.

The Building Safety Bill was introduced to Parliament on 5 July 2021 by the Secretary of State for Housing, Communities and Local Government Robert Jenrick.  Once the Bill has passed through the parliamentary stages, it is expected to become law towards the middle of next year.  The resulting Building Safety Act will bring extensive reforms to the regulatory system governing UK construction projects. The aim of the Building Safety Act is to implement the recommendations set out by Dame Judith Hackitt’s Independent Review of Building Regulations and Fire Safety following the Grenfell Tower tragedy on 14 June 2017. It will represent the most significant changes to building safety legislation for over 40 years and heralds the advent of “a new era of accountability” for those who design, construct and manage “higher-risk buildings”.[1]  

Architects are central to the proposed reforms for building designers. The Building Safety Act will give further powers to the Architects Registration Board to regulate the competency of architects by ensuring they have the necessary skills, knowledge, experience and behaviours (“SKEB”) to perform their services. The ARB Competency Guidelines for Fire and Life Safety Design were published in March and comprise 16 core competencies expected of architects.[2] The Act will also include amendments to the Architects Act 1997 to enable the ARB to impose tougher sanctions on those who fail to meet the required criteria.[3]

The RIBA has gone beyond these minimum standards set by the regulator in unveiling its own plans to implement a regime of compulsory testing for UK Chartered Members. From 2023 onwards, architects will be required to demonstrate an understanding of seven core areas including fire safety, design risk management and personal safety in order to renew their RIBA membership. The plans for implementing “Mandatory Competence in Health and Life Safety” will be subject to further consultation with members until mid June.[4]

In addition to these significant advances for raising competency standards, the Building Safety Act will impose further statutory obligations on architects, under the new dutyholder regime proposed for the lifecycle of higher-risk buildings. The Bill implements Dame Judith Hackitt’s recommendation to replicate the existing titles assigned to dutyholders under the Construction (Design and Management) Regulations 2015 (CDM 2015) to achieve what she described as “consistency and clarity across all regulatory requirements, to avoid unnecessary confusion”.[5]

The new Principal Designer role in particular, is likely to have far reaching implications for architects.      As with CDM 2015, the Principal Designer can be an organisation or an individual, and is described as being the Designer “in control of the pre-construction phase”. The PD dutyholder is described as being a suitably qualified “guiding hand” empowered to ensure the design intent in relation to building safety is understood, maintained and delivered to the point of handover through “The Golden Thread” of building information. In response to the Hackitt Review’s criticism of fragmented project teams under Design and Build procurement and the widespread use of “siloed” subcontracting, the Principal Designer role is intended to enforce a “robust ownership of accountability” for the responsibility of managing design. Under the Building a Safer Future Consultation, the MHCLG stated:

”The PD HRRB should be part of the role of the lead designer, who will

often be an architect but should always be the designer with the most appropriate professional background for the project.” [6] 
[PD HRRB is the Principal Designer on a High-Risk Residential Building].

It has been suggested the Principal Designer role could mark a significant turning point for the architectural profession which has become increasingly marginalised over the last 30 years due to the rise in project management and the dominance of Design and Build procurement. The enhanced competency requirements could serve as a positive declaration of quality and professionalism when compared against other designers. The RIBA has endorsed this position and stated in a professional practice feature published in March 2021:

”An architect is the best person to fulfil the Principal Designer role.  When the Building Safety Bill becomes law, architects should rise to the challenge of increased responsibility”. [7]

But in the post-Grenfell climate, which has seen architects’ Professional Indemnity Insurance (PII) premiums increase by as much as 300% over the last three years, it is not clear whether there is much appetite within the profession for taking on the significant liabilities associated with the Principal Designer role. Many architects have also found they are now unable to obtain PII cover for issues relating to fire safety and increasingly seek to exclude this area of design liability from their appointments. Concerns were raised with the Draft Bill published in July last year over the lack of clarity provided for dutyholders with much of the detail for the new regulatory regime yet to be determined under unpublished secondary legislation. The final Bill introduced this week will now be subject to further scrutiny to determine whether these concerns have been allayed. Previous consultations have suggested the Principal Designer’s duties will include obligations to:

• Plan, monitor and manage the pre-construction phase and coordinate all matters relating to building safety with Designers and the Client;
  
• Satisfy themselves that those involved in supporting the Principal Designer are competent and have appropriate organisational capability;
  
• Take reasonable steps to ensure that Designers are discharging their statutory duties and promoting the statutory objective;
  
• Liaise with the Principal Contractor and share information relevant to the planning, management and monitoring of the construction phase and the co-ordination of building regulations and building safety during the construction phase; and
  
• Co-sign a declaration of compliance confirming that, to the best of their knowledge, the building complies with Building Regulations and that an appropriate handover of information to the occupation dutyholder has taken place.   

There remain fundamental questions concerning how these duties could be performed in practice.

• The dutyholder framework established under CDM 2015 has been criticised for presenting an overly simplistic and linear approach to design which does not adequately address the more complex and overlapping relationships experienced outside of traditional procurement. The HSE’s defined splits in responsibilities between the pre-construction and construction phases, and the notion that the Principal Designer role mirrors that of the Principal Contractor, were intended to capture a variety of project types including small scale domestic works. However, this rarely reflects the contractual arrangements involving multiple parties on more complex schemes.
  

• When architects are engaged as lead designers, they carry additional responsibilities for coordinating information with other designers and managing the process of design. However, they are rarely able to influence the choice of designers employed by the client or contractor, determine at what stage in the design programme they are appointed and have limited contractual powers to compel their performance. They are also not required to carry detailed knowledge of design work carried out by other parties or be responsible for approving information “by others” outside of their defined scope. It is therefore difficult to see how an architect could be expected to satisfy themselves as to the competency of other designers or sign a declaration to confirm their work complies with Building Regulations without employing a host of other specialists with the relevant skills, knowledge and experience to advise them. It is also unclear whether the declaration of compliance would be confined to building safety aspects or extended to cover all parts of the Building Regulations. This suggests the role may be more suited to larger multi-disciplinary companies and preclude smaller practices where the cost of engaging sub-consultants is likely to be cost prohibitive in terms of PII.
  

• The CDM Principal Designer role remains problematic under Design and Build procurement where much of the design remains to be completed by specialist subcontractors employed by the Principal Contractor during the construction phase. This has led to D&B contractors often taking on the CDM Principal Designer role themselves or engaging a health and safety specialist to perform the role on their behalf. This process of engaging peripheral health and safety consultants or “Non-Active Designers” is exactly what the HSE had intended to phase-out by introducing the Principal Designer role in CDM 2015. Their intention had been to instigate a cultural change to ensure the “Active Designers” best placed to influence and control design on construction projects were responsible for managing risk. The HSE had intended that by 2020, the lead designer (typically the architect) would automatically be taking on the CDM 2015 Principal Designer role without additional support. Although the RIBA introduced a standard form of appointment for the CDM Principal Designer under their 2018 suite of Professional Services Contracts, there remains a reluctance for widespread adoption by the profession to take on these additional liabilities which are now subject to tougher enforcement measures.[8]

Conclusion
It remains to be seen how chartered architects will respond to the RIBA’s call to rise to the challenge of the Principal Designer role for Building Safety. Two key questions will need to be addressed during the transition period following the introduction of the new Act:

Will the secondary legislation offer much needed clarity over the dutyholder’s obligations?; and,

Will there be an insurance market to support architects wishing to take on the Principal Designer role?

If you require any further information, please contact Paul Jolly at pauljolly@hka.com.

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[1] The definition of “higher-risk buildings” is yet to be finalised and may be subject to the building’s size, design or purpose. The Bill suggests the scope will encompass buildings with a top storey of 18 meters or more above ground (or more than six storeys) that contain two or more dwellings or two or more rooms for “residential purposes” (including student accommodation, boarding schools, care homes, secure institutions, hotels, hospitals etc).   

[2] The ARB Safety and Sustainability Guidelines were published 25 March 2021.
www.arb.org.uk/architect-information/guidance-notes/arb-safety-sustainability-guidelines-architects/

[3] The MHCLG’s consultation on proposed amendments to the Architects Act 1997 was published 4 November 2020.  www.gov.uk/government/consultations/consultation-on-proposed-amendments-to-the-architects-act-1997/proposed-amendments-to-the-regulation-of-architects

[4] RIBA Mandatory Competences survey is available online for members until 17 June 2021.                       www.architecture.com/knowledge-and-resources/resources-landing-page/mandatory-competences

[5] Building a Safer Future – Independent Review of Building Regulations and Fire Safety: Final Report, p34, Recommendation 2.1. Building a Safer Future: Final Report (publishing.service.gov.uk)

[6] Building a Safer Future Proposals for reform of the building safety regulatory system, A consultation,
Ministry of Housing, Communities & Local Government, June 2019,  p153, para 6.0
BSP_consultation.pdf (publishing.service.gov.uk)

[7] ‘Who should be responsible for the safety of a building?’ article published by the RIBA for members on 18 March 2021. www.architecture.com/knowledge-and-resources/knowledge-landing-page/who-should-be-responsible-for-the-safety-of-a-building

[8] The Sentencing Council’s Definitive Guideline for Health and Safety Offences, Corporate Manslaughter and Food Safety and Hygiene Offences was published on 1st February 2016 which has seen significant increases in fines and custodial sentences for convictions brought under CDM 2015 in order to “secure compliance”.

First published in Construction Law Journal, Volume 37, Issue 4 2021.

In a recent article[1] the well-known and respected barrister Paul Darling QC gave this advice to disputants when selecting expert witnesses:

‘Get the best expert you can. He (or she) must be highly expert in relation to the issues upon which he has been asked to give an opinion.  He must fully and properly understand the role of an independent expert, study the rules about giving expert evidence and be both willing and able to comply with them…Over the years I have seen some expert witness disasters…And I have seen some absolutely brilliant ones. Thorough, fair, balanced, courteous and assured and who did not put a foot wrong.  At the risk of repetition, get the best expert you can, ensure he understands his role and complies with the rules and jealously guard his independence. He will be your best weapon.’

I could not agree more.  And that is exactly the type of expert that a judge or arbitrator wants before them.  I could stop there, but this would make for a very brief paper.  Instead, I shall explore in more detail what is required of party-appointed quantum experts in particular, after first briefly considering the legal framework underpinning the above guidance.

When I first testified in court as an expert witness in the mid-1990s the oft-recited judgment relating to the duties of an expert witness, The Ikarian Reefer[2], had only recently been handed down.  In that case, Mr. Justice Cresswell identified the following requirements[3]:

1. Expert evidence should be and should be seen to be the independent product of the expert uninfluenced by the exigencies of litigation.
2. An expert witness should provide independent assistance to the Court by way of objective unbiased opinion in relation to matters within his expertise and should never assume the role of advocate.
3. An expert witness should state the facts or assumptions on which his opinion is based. He should not omit to consider material facts which detract from his concluded opinion.
4. An expert witness should make it clear when a particular question or issue falls outside his expertise.
5. If an expert’s opinion is not properly researched because he considers that insufficient data is available, then this must be stated with an indication that the opinion is no more than a provisional one.
6. If after exchange of reports, an expert witness changes his view on a material matter such change of view should be communicated to the other side without delay and when appropriate to the Court.

• Where expert evidence refers to documents these must be provided to the opposite party at the same time as the exchange of reports.

These requirements have stood the test of time and remain valid.  Recently, in ICI[4] Mr. Justice Fraser confirmed that:

“No expert should allow the necessary adherence to the principles in The Ikarian Reefer to be loosened.”

In England and Wales, the Civil Procedure Rules (“CPR”) Part 35 confirms[5] that it is the duty of experts to help the court on matters within their expertise and this duty overrides any obligation to the person from whom experts have received instructions or by whom they are paid.  It also confirms that an expert’s report must comply with the requirements set out in Practice Direction 35 (‘PD35’), which broadly reflect the principles set out in The Ikarian Reefer[6]:

1. Expert evidence should be the independent product of the expert uninfluenced by the pressures of litigation.
2. Experts should assist the court by providing objective, unbiased opinions on matters within their expertise, and should not assume the role of an advocate.
3. Experts should consider all material facts, including those which might detract from their opinions.
4. Experts should make it clear: (a) when a question or issue falls outside their expertise and (b) when they are not able to reach a definite opinion, for example because they have insufficient information.
5. If, after producing a report, an expert’s view changes on any material matter, such change of view should be communicated to all the parties without delay, and when appropriate to the court.

Many (but not all) jurisdictions have similar standards.  Unfortunately, however, too many cases are still being reported in which experts have fallen below the required standard.  There are likely to be many more examples in arbitration awards which, for reasons of confidentiality, remain outside of the public domain.

The declarations and statements of truth required of expert reports filed in the Civil Courts of England and Wales[7] have changed over the years in an attempt to focus the minds of experts (and those instructing them) of their duties, with the aim of improving the quality of expert opinion evidence before the courts.  The most recent change to PD35—which took effect on 1 October 2020—illustrates just how seriously the issue is being taken. Experts are now required to include the following at the end of their statement of truth:

“I understand that proceedings for contempt of court may be brought against anyone who makes, or causes to be made, a false statement in a document verified by a statement of truth without an honest belief in its truth.”

Only time will tell if this latest requirement results in a lower number of experts who are subject to judicial criticism in the courts of England and Wales, although it certainly ought to focus the mind of any expert who may be tempted to depart from the required standards.

With that background I shall now explore in more detail what a court or tribunal wants from party-appointed expert witnesses and quantum experts in particular, based on relevant authorities and my experiences, under the following sub-headings:

1. Independence and compliance with ‘the rules’.
2. Relationship with instructing party.
3. Parity of instructions.
4. Access to the same information.
5. Addressing the cases of both parties.
6. Dealing with disputed fact or law.
7. Joint statements and the narrowing of issues.
8. Sampling.
9. General attributes.

Independence and compliance with ‘the rules’

The primary requirement of a court or tribunal must be for the expert to comply with the applicable rules and, crucially, provide independent opinion evidence.  In the Civil Justice Council’s ‘Guidance for the instruction of experts in civil claims’, it states that[8]:

“A useful test of ‘independence’ is that the expert would express the same opinion if given the same instructions by another party. Experts should not take it upon themselves to promote the point of view of the party instructing them or engage in the role of advocates or mediators.”

Expert evidence which falls below the standard required is of no assistance to a judge or arbitrator, and ultimately it is of no assistance to the appointing party.

Let us look at a few extreme cases—or ‘disasters’ Mr. Darling QC bluntly puts it. 

Just two years after the judgment in The Ikarian Reefer Mr. Justice Laddie handed down his judgment in Cala Homes[9], in which he referred to an article that had previously been published by an expert instructed by one of the parties, in which he wrote:

“…the man who works the Three Card Trick is not cheating, nor does he incur any moral opprobrium, when he uses his sleight of hand to deceive the eye of the innocent rustic and to deny him the information he needs for a correct appraisal of what has gone on.  The rustic does not have to join in: but if he chooses to he is ‘fair game’.  If by an analogous ‘sleight of mind’ an expert witness is able so to present the data that they seem to suggest an interpretation favourable to the side instructing him, that is, it seems to me, within the rules of our particular game, even if it means playing down or omitting some material consideration. ‘Celatio veri’ is, as the maxim has it, ‘suggestio falsi’, and concealing what is true does indeed suggest what is false; but it is no more than a suggestion, just as the Three Card Trick was only a suggestion about the data, not an outright misrepresentation of them…”

Suffice to say the judge did not accept that expert’s interpretation of the rules, or his evidence.

If you require any further information, please contact Mark Dixon at markdixon@hka.com

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[1] ‘Experts – Triumph or Disaster?’ (https://pauldarlingqc.co.uk/fourth-article-experts-triumph-or-disaster/)

[2] National Justice Compania Naviera SA v Prudential Assurance Company Ltd (‘The Ikarian Reefer’) [1993] (No.1) 2 Lloyd’s Rep 68

[3] At 81

[4] Imperial Chemical Industries Limited v Merit Merrell Technology Limited (No. 2 Quantum) [2018] EWHC 1577 (TCC) (at 237)

[5] Part 35.3

[6] Practice Direction 35 [2[ (‘Expert Evidence – General Requirements’)

[7] Practice Direction 35 [3] (‘Form and Content of an Expert’s Report’)

[8] At 11

[9] Cala Homes (South) Ltd and Ors v Alfred McAlpine Homes East Limited [1995] EWHC 7 (Ch)

‘As first published in DecomCONNECT, June Edition’

Nuclear Decommissioning is huge with a spend of circa £3.2bn per annum.  By way of comparison, the UK Construction output in 2021 is projected to be £4bn according to the Office of National Statistics.  In terms of that Nuclear Decommissioning spend, it is clear that the safe and secure storing, handling, and decommissioning of our nuclear waste is critical and certainly not something I grudge some of my hard earned taxes being spent on!

However, the complex nature of decommissioning works can lead to inadvertently adversarial commercial arrangements. To address this, is there more we can do as an industry to ensure greater value for money by avoiding unnecessary disputes?

As an experienced quantum expert and commercial advisor, I believe there are many areas open to significant improvement.  Claims and disputes in the construction sector are prevalent, and the nuclear decommissioning sector, in my experience, is no different.  We waste public money on disputes where I think there are measures we can take to mitigate these risks. Primarily this means getting things right at the inception of a project as well as using fair and transparent commercial management across its lifecycle. 

Procurement

The first line of defence in resolving disputes is to get the procurement strategy and implementation right from the early stages of project delivery. I have great empathy with procurement teams that are put under pressures to ‘get projects moving’ by letting contracts.  However, this can lead to contractors being appointed at a stage where there is little more than a “concept” design with inadequate supporting detail to ensure accurate delivery. By expediting progress, but leaving specification ambiguous or incomplete, this has the potential to brew up commercial problems that will return downstream. This is particularly true where margins for error in design are so small in order to meet stringent safety standards.

Budgets and programmes (with some degree of risk) are then aligned to the “concept” to form the contract price and contract programme. The inevitable then happens: the concept is then developed via a series of iterations into a final design which is then built. Despite having to make substantial changes to the “concept” to arrive at a final design, the contractor can sometimes tend to give insufficient consideration to associated commercial changes. That is, the scope of the final design may have a very different risk profile, cost and programme to that for the “concept” design as originally agreed in the contract with the end employer. Desperate to maintain a good business relationship with the employer, yet already operating with tight profit margins, contractors may not seek entitlement to change under the contract, thereby brewing up further commercial issues.

So how can such hypothetical scenarios be addressed? 

Early Contractors Involvement (“ECI”) is being used more frequently and would, in my view, be an effective means of making sure that there are proper discussions regarding the outputs and outcomes to be delivered from projects. This would help flush out a far greater mutual understanding of design, commercial and delivery risk, and agreement as to how such risk may be mitigated. Critically, it would also help establish agreement over who is best placed to own and manage the risks. This sort of transparency, though

giving rise to a greater amount of planning time to get design agreed between all parties, would help ensure such programmes are properly thought out and reconciled with the real scope and associated risks.  In addition, up-front agreement on the contractual mechanisms that can be used to align changes in “concept” design to risk, programme, and cost need to be in place, so that uncertainty can be dealt with in an equitable way. The days of passing risk on in ‘stealth mode’ from employer to contractor and then down to subcontractors should be a thing of the past. But such improvements require a shift in ways of working to proactively deal with such problems.

Productivity and Incentivisation

In my experience, the decommissioning sector commonly sets damages clauses for delays and penalties for poor performance on schemes.  Is this the right way to do it? Does this ensure productivity?

Delay damages clauses have a tendency, from what I have witnessed, to have an adverse effect on productivity.  When there are changes, the focus ought to be on resolution and ensuring Employers, Contractors and Subcontractors are working towards ways of mitigating the risk.  However, what tends to happen is that parties dig their heels in and resort to a ‘contractual’ mindset and positions become entrenched; when there is a threat of a financial penalty, productivity is diminished, as all eyes are on the commercial position, as opposed to the delivery of works.  Additionally, where main contractors are faced with harsh delay damages clauses, they may seek to extend liability for these down to subcontractors and suppliers.  It is extremely difficult to pass these clauses fairly from a large main contractor to a subcontractor of a substantially smaller size. Whether fair or equitable, such damages are often passed downstream to businesses ill-equipped to understand and deal with what they have signed up to.  In addition, if there are also delays, the compound effect is that the main contractor may even benefit financially from recouping these delay costs from their subcontractors.  Ultimately, such actions and behaviour do nothing to serve the employer’s needs. To address this, employers, main contractors, and their supply chains would benefit from learning and applying lessons from past projects to avoid the escalation of costs, the occurrence of disputes and associated reductions in project productivity.

To assist such change and boost productivity, maybe the industry needs to focus more on incentivisation rather than penalty. For instance, contractors could reduce margins at the outset but have the opportunity to generate more profits when programme risks are resolved by the party best placed to do so.  Incentivisation to focus on innovative value engineering is also crucial to improvements in the sector. Advances could be achieved by letting those parties capable of bringing innovation

do what they are best at. By turn, contracts could reward these businesses instead of generating contracts and subcontracts containing onerous penalties encouraging the need for more unnecessary claims.

If Disputes Happen

As stakes are often high in decommissioning, disagreement over costs can be inevitable.  What happens next?  NEC3 and 4 and some other forms of contract aim for disputes to be resolved at the lowest level.  In my experience a lot of these issues can still lead to costly adjudication, which itself can be a gamble in terms of the outcome. Litigation and arbitration are yet more costly but perhaps provide a more certain and concise process, especially with higher value and complex disputes.

Could expert determination be considered as an alternative? Here, both parties agree for an expert to review the facts of the matter and provide an independent assessment of Quantum, Engineering liability, Delay and Damages or ‘QED+’ as we call it in HKA.

Please note that this article provides opinion only and does not constitute advice. We would, however, be delighted to discuss any of its content or discuss issues requiring advice in dispute avoidance, delay, engineering expertise, quantum and damages capabilities, as provided by HKA. 

If you require any further information, please contact Andrew Drennan at andrewdrennan@hka.com.