The perils of perfection

In January this year, a fascinating case came before the courts concerning a waste-to-energy plant near Horsham in West Sussex. MW High Tech Projects, the design-and-build contractor constructing the plant under an engineering, procurement and construction (EPC) contract, had employed Haase Environmental Consulting as its consultant to undertake the design. As readers will know, the normal reason for a consultant to get sued in such circumstances is because its design is inadequate and the plant fails to perform. But in this case the situation was exactly the opposite - the consultant got sued precisely because its design was too good! Seems difficult to believe, doesn’t it?

The crux of the dispute was the contractor’s claim that the detailed design which the consultant produced was over-engineered. The contractor’s case was that, as a result, the cost of building the plant was greater than it should have been. It alleged that Haase could have stuck to a straightforward vanilla (and cheap) development of the outline design but instead it added unnecessary bells and whistles.

The question of whether the consultant could be liable for such additional construction costs arising from the alleged over-engineering depended on the interpretation of the design duties contained in the appointment document.

Before the dispute saw the inside of a court room, it was first battled out in adjudication - with first blood to the consultant. The adjudicator placed emphasis on the fact that the appointment stipulated that the consultant must produce the design using reasonable skill and care. He decided that provided the consultant’s design fulfilled that overriding objective, then it could not be in breach of its design duties.

Understandably, a consultant will often act quite conservatively in developing the design

The contractor was unhappy with the adjudicator’s analysis and asked the court to re-assess. The judge disagreed with the adjudicator and found that he had not adequately considered some of the consultant’s other design obligations under its appointment. Other clauses in the agreement stipulated that the consultant was required to develop the design in accordance with certain technical documents that formed part of the contract package, in particular the output specification and the delivery plan. The judge found that, in breach of contract, the consultant had developed the design in such a way as to go outside these technical specifications.

Importantly, therefore, the judge found that the consultant had a contractual obligation to comply with both of these design duties. It had to design with reasonable skill and care but it also had to design within the remit of the technical specification. The aspects of the detailed design that were over-engineered involved situations where the consultant had departed from the technical specification.

The judge felt that it was only reasonable for the contractor to hold the consultant to its second obligation, to stay within the technical specification. After all, an over-engineered solution represented a very real additional cost for the contractor. The consultant could therefore be in breach of its design obligations even though the design worked perfectly.

In many ways, this appears to be a perfectly logical analysis. But in practice what represents over-engineering is never that straightforward at the time.

One point on which the parties agreed was that the contract required the design to be produced with reasonable skill and care, and that the consultant was entitled, and indeed obliged, to depart from the technical specification in order to achieve that overriding standard. In these circumstances, the consultant will principally be focused on ensuring that the design works and that it fulfils the “reasonable skill and care” standard. Understandably, a consultant will often act quite conservatively in developing the design. It will be wary about cutting corners and running the risk that it will end up with a design that is inadequate and a facility that does not work.

It may be easy to say with hindsight that the design is over-engineered and something simpler (and cheaper) would have been sufficient. But during the course of the design development process that will often be far from clear and a risky call to make.

A consultant is more likely to be safe than sorry. But as this case makes clear, it equally risks being accused of providing a design that is too good.

Michael Sergeant is a partner in the construction team at HFW and co-author of Construction Contract Variations