Clients and consultants go to war over project liability

A serious dispute has broken out between consultants and clients over how liability and risk is divided between the two.

Consultants’ representatives have rejected a contract drawn up by client group the British Property Federation, and have called it “a huge step backwards”.

The Association for Consultancy and Engineering and the RIBA both said that the contracts would expose them to unlimited liability.

Meanwhile, Building understands that leading clients are beginning to pool information about the extent to which liability is passed on by consultants. Some suspect that excessive risk is being offloaded onto less experienced clients.

The Construction Industry Council has been drawing up a rival contract document for the past 18 months. This is expected to be more sympathetic to the consultancy sector.

Nora Fung, the legal director of the ACE, said: “There are glaring omissions, including no cap on liability. These are becoming more common, and to have a standard form of agreement that doesn’t cover this is quite shocking – it’s a huge step backwards.

“We couldn’t tell our members to sign up to it in its current form. Effectively, it’s risk dumping.” She added that the BPF form could affect a consultant’s ability to obtain professional indemnity insurance.

We couldn’t tell our members to sign up to it. Effectively it’s risk dumping.

Nora Fung, legal direct ACE

Keith Snook, director of research and development at the RIBA, said that he would advise members to sign up to the council’s agreement instead. The RICS had not yet decided how to advise its members.

Andrew Hemsley, managing director of consulting at Cyril Sweett and a member of the CIC’s liability panel, said that the agreement went back on hard-won advances such as the net contribution clause, which limits the liability that individual consultants incur for mistakes shared with other members of the construction team. It also makes consultants liable not only for the cost of rectifying faults on a building but other losses.

Roger Squire of Development Securities was the chairman of the group that produced the federation’s agreement. He accused consultants of trying to “move the goalposts”.

He said: “It is true that in recent years, consultants have been trying to negotiate caps on liability, but there’s never been any suggestion by them that this is standard. This isn’t a step backwards – there in nothing in this document that the federation’s members are not regularly agreeing in the marketplace. It reflects current practice as far as we’re concerned.

“For a long time clients have felt they needed a document drafted for clients by clients, as opposed to using standard forms produced by each of the professional bodies. There hasn’t been a sensible family of documents that interlocks and makes sure there aren’t any gaps.”

Go to www.bpf.propertymall.com to read the document