Contracts : Robert Merry
Contracts are a minefield that Robert Merry MCIOB, a stone consultant and project manager who ran his own company for 17 years, has been helping readers negotiate in his column. It is a complex subject and this month he takes some extra space in order to compare three types of contract.
Robert Merry, MCIOB, ran his own stone company for 17 years and is now an independent Stone Consultant and Project Manager. He is also an expert witness in disputes regarding stone and stone contracts. Tel: 0207 502 6353 / 07771 997621
[email protected]. www.stoneconsultants.co.uk.
General building contracts as we know them today have only been around since the 19th century. Before this, contracts tended to be either for a series of skilled trades directly employed by the client, similar to today’s construction management contract, or for design and build.
Before the Industrial Revolution, technologies for building were basic and there was little requirement for design-led contracting. Work was organised by a single architect or master mason. There were fewer skills and co-ordination between them was relatively simple. On-site adjustments were made between trades. Unlike today, where changes require a veritable bookcase full of instructions, drawings, samples, and approvals.
In our modern building trade the complexity of building technologies, the number of specialist trades and a plethora of regulations make it impossible for this type of co-operation to exist. Hence the rise and rise of the building designer, who’s primary function, beyond the aesthetics, is to co-ordinate the design – does it all fit together and, if so, how?
Building Information Technology (BIM) is our modern response in many ways. It uses computer modelling to integrate technologies and warn of incompatibility, creating what is called a ‘common data environment’.
Looking out of the window of the Victorian house I live in, the frontage of the houses are identical for street after street. Interior layouts are the same. The differentiation between builders is marked by a variation to the detailing around doors and windows only.
Compare this with buildings today. Variation in style, materials and incorporation of new technologies is celebrated. No two developments are the same.
Modern building design has been the catalyst for the creation of two professions where there used to one – contractors and architects.
The nature and type of contracts under which modern construction is managed and the risks and responsibilities are divided reflect this division.
There are three types of contracts that deserve some explanation: Traditional; Design & Build; Construction Management.
What we call the ‘Traditional’ building contract is a direct reflection of what is, in fact, a relatively modern building scenario and clearly makes the separation between the architect and the contractor. The Architect will design for the client under one contract. The contractor will build for the client under a traditional building contract, such as JCT (Joint Contracts Tribunal).
Often the architect will act as the contract administrator, signing off the work and payments. This type of contract provides for relatively simple mechanisms for the pricing of variations, but is still controlled by quantities and rates.
There are advantages to this when used in refurbishment contracts in particular, where there are likely to be numerous undiscovered problems and therefore variations.
Design and Build (D&B)
This is a throw-back, perhaps, to pre- Industrial Revolution construction. The contractor takes responsibility for all the build and the design. This requires the client to make some decisions about the type of building they want prior to appointing the contractor. It should also allow for some cost certainty.
With the responsibility of both key elements of the build and design back with the constructor, there should be no need for the client to pay to remedy any design issues or any changes of design. However, any attempt by the client to make changes to the design in the form of variations can prove much costlier than in a ‘traditional’ contract.
The aim of a Design and Build Contract is to simplify the arrangements. Primarily this is a form of contract used for new buildings.
There are two recognised forms of D&B among many variants.
The first is Extreme A, where the client completes the majority of the design prior to the appointment of a contractor using an architect or other specialist. As part of the contract conditions the contractor is then expected to employ the client’s architect directly. This part of the contract is completed by ‘novating’ the architect to the contractor. This gives the client some confidence (not to mention some often unwanted influence) over the outcome of the build.
The second is Extreme Z, for standard or system building. The actual design work may be minimal, having been carried out at some point in the past by someone other than the contractor. This is where the contractor supplies a pre-designed building to a client’s standard specification.
There are various financial incentives built into the execution of the works, including a guaranteed maximum price (GMP). Clauses are often inserted into the contract dividing any savings made on the GMP between the client and the contractor.
As with Design and Build, Construction Management is a modern version of a pre-19th century building contract. The client employs each of the specialist professions directly – architect / engineer, QS, structural engineer, trade contractors and construction manager. This method of procurement is mostly suited to one or all of the following scenarios:
1. The employer (client) has constructed before and knows the construction team. An element of trust already exists.
2. The project risks are dominated by time and cost and an early start is required on-site.
3. The technology is complex and diverse.
4. The client wants the option of making variations to requirements as the project progresses.
5. Value for money is more important than low cost.
To be successful, this form of contracting needs the client to be an effective communicator and co-ordinator and to be involved with the project regularly. This is usually achieved by appointing a project manager.
The popularity of different types of contracts ebbs and flows. Construction Management is not currently popular, whereas Design and Build is increasingly used, even for refurbishment projects, where it is least suitable. This may be tied to clients’ increased aversion to financial risk and the cost of design.
There are, of course, other forms of contracts used in modern construction, which I have not included here.
Whichever type of contract you are involved in, it is certainly true that the complexity of 21st century buildings requires two distinct skills – designers and builders. They used to be one and the same. This separation, some would argue, is the root cause of conflict in modern construction.