First, consider the tender process. The design-and-build contractor, which often has limited time to assess an outline design and put a price together, may ask the consultant to advise on one or both of these matters. Thereafter, the quantity of work or the price may become fixed.
If it turns out that more work is needed, or that the price was inadequate, the contractor will usually be unable to recover its additional costs from the employer and may seek to recoup them from the consultant. These losses will be based on the whole cost of the relevant work or the whole of the price shortfall. However, if a consultant can show that it has been under extreme time pressure and has given appropriate warnings, this may be a defence against a claim for negligence.
Contrast this with the position under a traditional contract. If an element of the project was omitted by a consultant during the course of the design, it can usually be introduced during the course of the works. Generally, the employer would have to bear the cost of introducing the additional item and the consultant, if negligent, would have to bear only the extra cost caused by the item being incorporated at a later date.
Next, consider the terms of appointment. Employers are generally prepared to accept that a consultant should carry out its work with reasonable skill, care and diligence. Contractors' contracts usually contain warranties for fitness for purpose for which they seek "back-to-back" arrangements with their consultants. Consequently, a consultant could be in breach of such an obligation even though it has not been negligent, which may be outside the scope of professional indemnity insurance.
Further, the damages payable as a result of such a breach are assessed on the basis of the costs of making the works fit for their purpose. These damages could be higher than those payable for negligence, which are all those reasonably foreseeable losses caused by the negligence. Unlike in a claim for negligence, a state-of-the-art defence (the consultant correctly used the knowledge available at the time) is not available in a claim for breach of a warranty for fitness for purpose.
Employers are often prepared to accept reasonable limitations in professional appointments. These can include a cap on liability and a net contribution clause. If a valid claim is made against the consultant by the employer, the consultant pays only its fair share of the employer's losses up to the agreed liability limit.
A consultant may be more liable for costing a design Its terms of appointment can lead to unlimited liabilities It can have more responsibility for losses due to delays
Contractors frequently do not incorporate in their contracts clauses limiting liability. If there is a back-to-back arrangement with their consultants, unlimited liability can be passed on to them. Consultants should either resist such arrangements or insist on seeing the terms of the building contract, including any relevant employer's brief, in order to ascertain the risks.
Collateral warranties given by consultants under a traditional procurement route usually contain certain limitations on liability, such as a limit on the type of damages that can be recovered – for example, the cost of repairs.
Collateral warranties given by consultants engaged by a design-and-build contractor may contain similar limitations. Contractors, however, often give collateral warranties without such limitations. A design-and-build contractor sued under such a warranty could be responsible for all losses suffered by purchasers or tenants, including consequential and economic losses. It might then seek to pass those on to its consultants. That the consultant has given a collateral warranty to a purchaser or tenant in a more restricted form will be no protection from a claim from the contractor.
Design-and-build contractors often do not want consultants to undertake the same degree of inspection as employers. Sometimes no inspection is required. Consultants may, however, be asked to certify that work has been done satisfactorily, or to certify the value of the work done. A consultant giving such a certificate without caveats is risking claims on the basis that the certificates constitute warranties or assurances in relation to the quality of the works.
Another area of exposure is the programme of works. A consultant engaged by an employer in relation to a traditional work and materials contract is usually obliged only to use reasonable skill and care to see that the programme is met, and will be liable only if its negligence causes delay. A design-and-build contractor will usually be under an obligation to complete the works in a particular period, unless there are employer changes or unforeseeable events.
Rachel Barnes is partner in solicitor Beale and Company.