The standard bearers

The maze of legal complexity, leading to a mire of paperwork and disputes over legal agreements, is a depressingly familiar scenario in all too many construction projects.

Much of this stems from the confusing array of consultancy agreements clients use when appointing a project team. Most have bespoke contracts drawn up for each consultant – and each of these comes with a heap of amendments, based on original standard agreements drawn up by the relevant profession’s institution. Not only does this create unnecessary bureaucracy, it can also create gaps and inconsistencies between the individual consultants on a scheme.

One QS working on a planned office scheme in the City sums up the difficulties this creates. “We have found a gap between, say, what the architect is supposed to provide and what the M&E designer is responsible for,” he reveals, pointing out this is far from ideal as it can leave question marks over individual responsibilities.

It is usually only when the job is up and running that the problems become apparent, he adds. “You don’t see the other agreements until the job starts. Every contract is signed in isolation and that's where the problem lies.”

Given the key role of QSs or project managers in co-ordinating the project team, this set-up creates the potential for problems later on – problems that may affect not only team relations, but the entire building programme or cost.

Obviously, this situation creates a headache for clients as well as consultants, and both groups have identified the need for a new agreement to try to reduce both paperwork and disputes.

First off the block with its form is the British Property Federation, which launched a new agreement for all types of consultant this week (see box below).

Roger Squire, chairman of the BPF working group that produced the 11-page agreement, says there were two main factors behind its creation. Firstly, he explains: “Our perception was that the agreements were not always in the clients’ favour.” Second was the current plethora of client’s agreements. “We wanted to create a generic client standard,” he says.

One concern likely to be raised by consultants is the amount of responsibility or liability this new agreement will hand over to each particular consultant. This could affect whether consultants would be covered by existing professional indemnity insurance under the agreement.

Squire admits the agreement does put more responsibility on professionals, compared to the existing institutional agreements, but he claims that the clauses go no further than the individual ones already used by developers. He adds: “It’s not just about putting more responsibility on the firms, but also about filling in the gaps that exist in current agreements.”

Squire would not be drawn on the reaction of professional institutions to an agreement that may compete with, or even supersede, their own.

The professional institutions’ response to the BPF initiative is utterly predictable

Ann Minogue, partner, Linklaters

Ann Minogue, however, had no such qualms writing in QS News’s sister magazine, Building, this week. A lawyer and partner at Linklaters who worked on the terms and conditions of the agreement, she claims the institutions’ response will be “utterly predictable” – that is, set against the BPF document. She is still hopeful that the institutions’ members will react to the agreement positively, saying: “it is to be hoped that their members are prepared to look more pragmatically at this attempt to introduce some sort of standardisation to the industry”.

Liability concerns

This wish is unlikely to be fulfilled. One legal expert at a large QS practice has already raised concern over the fact the agreement has no net contribution clauses (which aim to limit the proportion of loss or damage payable to a just and fair amount), caps or limits on liabilities.

“I don’t think the BPF adequately recognises the position of the professional and the team,” the expert says. He adds that when a problem arises on a scheme, it is more likely the blame is shared, rather than down to just one team member. “The QS may be just 1% liable when a problem arises, but that could move up to 100% if other team members disappear or go bust,” he complains. “All we are asking is to be held responsible for what we should be responsible for.”

On balance, the industry is likely to feel that the BPF agreement leans too far towards the client’s interests and may be relieved to hear that there will be a second form published later this year – from the consultant’s point of view.

The Construction Industry Council (CIC), the umbrella body that cover institutions such as the Association for Consultancy and Engineering, the RICS and RIBA, is in the middle of drawing up its own consultancy agreement and is due to publish a draft shortly for consultation.

Frances Paterson, chairman of the CIC’s liability panel, says the body has been working on its agreement for around 18 months. Like the BPF, it wants to reduce the number of forms in circulation and aims to produce a clear and easy to use document. She claims their version will be better balanced between client and consultant.

Paterson also argues that the CIC’s version will fit a need for major projects. “There is a gap in the market for a form aimed at experienced consultants and clients on major projects that is acceptable to consultants and their professional indemnity insurers,” she says. Her contention on the BPF one is therefore that insurers may not accept it. “We will be very interested to see the BPF document,” she adds.

Paterson explains that the CIC has a multi-disciplinary team of consultants working on its agreement as well as a “very experienced solicitor” in John Hughes D’Aeth, a partner at Berwin Leighton Paisner. “We believe we have the advantage,” Paterson says. “We have thought very carefully about how to draft it. We think we will produce a contract that’s good for the market, that’s acceptable for both sides, for clients and funders as well as consultants.”

So, expect some competition between the two bodies as the attempt to create a new standard agreement eclipses the current chaos.