How the West was won...

In 1993, Plymouth and South West Co-operative Society (Plymco) decided to redevelop its flagship store, Co-operative House, in Plymouth. It chose Architecture, Structure and Management (ASM) to carry out the design, implementation of tenders, contract procurement, cost control and certification procedures and liaison with the contractor on programming/cost planning matters.

Plymco's priority was that the budget costs should be limited to £5.5m. In May, 1996 ASM prepared a budget estimate of £5.65m for the works but stated it could tailor the development to meet the budget.

During this initial phase, Plymco had secured just one tenant - Argos. Its store would be the first to be started and be ready by the end of April 1997.

ASM proceeded with the design, opting for a two stage tendering process, and in September 1996 sent out first stage tenders to potential contractors. Unfortunately, at this stage ASM had not finalised any part of the design and a significant element of the detail had yet to be started. The bulk of the first stage tender documents were described as ‘provisional' and the only detailed design undertaken at this stage related to the Argos store.

Tenders were received and a preferred contractor was chosen. In November 1996, ASM issued the second stage tender document, but nearly 90% of the works still remained as undefined provisional or prime cost sums. The contractor duly submitted its (largely provisional) second stage tender and ASM issued a letter of intent while it prepared the formal contract.

Plymco expressed its concern to ASM as to the amount of provisional sums within the bills of quantities. ASM reassured Plymco that provisional sums would be monitored against actual expenditure and if it transpired that greater costs were being expended then savings from other allowances would be made.

Plymco had difficulty in establishing what levels of additional costs were incurred

The works progressed but, due to the high volume of provisional work, over 7,500 variation instructions were issued and costs soared. Although the project was completed on time, the final cost increased to nearly £7.8m. Plymco instigated proceedings against ASM alleging that much of the additional cost could have been avoided had ASM performed its services professionally and with reasonable skill and care.

Plymco claimed ASM made a fundamental error in advising Plymco that it could safely enter into a contract with the contractor. It said there was no real prospect of the project being delivered for the budget sum and ASM should have realised this and warned Plymco.

Putting Argos first

Plymco also said ASM could, and should, have divided the works into two separate contracts. This option, dubbed the ‘Argos first' solution, would have involved ASM procuring the project in two distinct parts. First, a contract for the construction of the Argos store, for which the design had been developed. Second, the remainder of the units would be procured six months later once the design was advanced. Plymco maintained during the case that this was the only viable means of completing the project at a reasonable cost and had it received this advice that course of action would have been followed.

The case was referred to the Technology & Construction Court, where the judge found the ‘Argos first' solution to be both a commercial and technical possibility. The case then turned to the question of loss and quantum. Plymco had difficulty in establishing what levels of additional costs were incurred as a result of not adopting the ‘Argos first' approach. The judge said there was a "complete absence of relevant documents", documents that ASM should have produced.

Plymco instigated proceedings against ASM alleging that much of the additional cost could have been avoided

So here's the rub. Plymco can demonstrate ASM was in breach of its duty but, because of ASM's other failings, it faced difficulties in proving its loss. However, the judge said Plymco could not be "reasonably blamed for any failure to produce a more detailed case as to its loss since the documents it would need to do so were not available due to ASM's default in undertaking its professional service".

Given the absence of documents, the quantum exercise carried out by the quantity surveying experts turned upon the hypothetical evaluation of what cost would, or would not, have been incurred had the project been divided. In finding ASM liable for over £1.3m of Plymco's loss, the judge acknowledged the expert's hypothetical method of assessing the loss.

So if the employer has cause to pursue a claim against one of his professional team, or the contractor, he will look to his QS for the records and documents to support the loss he has incurred. If those documents are not available it will not necessarily extinguish the claim, the courts can assess the loss on the basis of expert opinion alone. Especially when the finger of blame turns upon the record-keeper and he is found wanting.

To download the full case study, including all of the judge's comments, go to www.qsnews.co.uk