The suspicion is growing that public authorities are using their dominant position to impose onerous conditions on consultants’ appointments. It’s the last thing the industry needs
Why is the phrase “time is of the essence” not used in most consultants’ appointments? The answer is that if it were, a failure by the consultant to meet any of the times specified would entitle the client to terminate the appointment and seek damages for breach of contract.
On a construction project, the fact that drawings have been produced a day late is unlikely to make the client want to throw the consultant off the project and find another one. So why is this phrase being used in consultants’ appointments with some local authorities?
Public authorities do (sometimes) make an effort to be a good practice client. For instance, the Office of Government Commerce encourages government departments to pay in 10 days. But there is a growing suspicion that public authorities are taking advantage of their dominant position to impose harsh or oppressive requirements when it comes to the terms and conditions of consultants’ appointments. A quick review of current public authority appointments illustrates the variety of clauses which are causing problems.
Appointments often state that the authority has no liability for any information it provides. This does not, however, protect it from a breach of the the Construction (Design and Management) Regulations 2007. The approved code of practice for these regulations is clear: “It is not acceptable for clients to make general reference to hazards which might exist … clients should carry out the necessary surveys in advance and provide the necessary information to those who need it.”
Even if it has elected that another organisation will take on the role of client, the public authority remains obliged to provide informationin its possession, which may involve searching its archives. Breach of this obligation is a criminal offence.
A fitness for purpose obligation or a duty to carry out the services “to the highest professional standard strictly in accordance with this agreement” is not insurable, thus giving far less protection than the authority may expect.
There is a recent trend of requiring consultants to provide performance bonds, which merely adds to the cost of the project or creates an unnecessary burden on the consultant.
Public authorities are passing their risk on to organisations desperate enough for work to accept it
Liquidated and ascertained damages (LADs) are sometimes imposed for pre-contract delays by consultants. In the post-contract (construction) phase the consultant is then required to pay all LADs not recoverable from the contractor.
This approach does not begin to address the complexities of delay to a construction project or the fact that consultants are professionals, not contractors.
It is now more common to ask consultants to provide a parent company guarantee, which is usually pointless as most consultants do not have a parent company.
One standard form extends the statutory limitation period to a “guarantee period” of 20 years. In one form of appointment the consultant is required to comply with all instructions, including alterations to the services. It does not state what happens if, as a result, the consultant is asked to carry out services beyond its competence. It is hard to see why any client would want to force this on a consultant.
Sometimes clients are permitted to recover losses which “in the opinion of the client” have been incurred as a result of a default by the consultant. It is not clear why the usual objective test for loss is being abandoned.
The government recognises that construction is hard hit by the recession, but the examples above (and there are many more) suggest that little is being done to restrain public authorities from passing their risk to whichever organisation is desperate enough to accept it.
Paying the consultant in 10 days is all very fine, but if the fees are so low that the consultant is making virtually no profit and is meanwhile required to work outside its areas of expertise and competence with no PI cover, what has the public authority actually achieved? This will inevitably lead to claims that will bankrupt the consultant and will not give the authority best value. The government should be assisting consultants in their attempts to survive the recession, not making it more likely that they will fail to do so.
Gillian Birkby is head of construction at Fladgate