My monitor in Cheshire recently came across a copy of Cheshire-based main contractor Styles & Woods' subcontract order. Interestingly, the subcontract conditions fill one side of A4, but the typeface is so tiny that I had to photocopy them onto a side of A3 to have any hope of reading them.
My monitor has highlighted the adjudication provision. Here is the "nasty": "The party referring the dispute to adjudication shall bear all of the costs and expenses incurred by both parties in relation to the adjudication, including but not limited to all legal and experts' fees."
So, Styles & Woods expects its subcontractors to write a blank cheque for all its costs and expenses in any adjudication. But what if Styles & Wood is the referring party? It could be hoist by its own petard. In fact, my friend Peter Aeberli, a barrister at 3 Paper Buildings in the Temple, recently informed me of a case in which this had happened.
Alfred McAlpine is more crafty. Its special projects adjudication rules state: "The referring party shall be responsible for all of the costs of the parties incurred in the adjudication (including those of the adjudicator) on a full indemnity basis, save in circumstances where the referring party is McAlpine, in which case the parties shall bear their own costs and expenses …" Well done Alfred! You tell it as it is. One law for McAlpine, another law for everybody else.
The referring party shall be responsible for all costs incurred in the adjudication, unless the referring party is McAlpine
I must thank Styles & Woods and Alfred McAlpine for providing yet more evidence to help us persuade the government to amend the Construction Act to outlaw nonsense such as this.
And now for something completely different. My monitor in Lincolnshire sent me this clause: "For every OSHA recordable incident, and for every OSHA first-aid case caused by a person employed by the subcontractor that comprises our safety key performance indicators, a sum equal to 0.5% of the final account value of the subcontract works will be deducted. This will not effect any contractual or legal liability the subcontractor may have in respect of health and safety or in carrying out the subcontract works."
This clause carries a serious health warning. Do not touch with a barge pole! First, I am always troubled when KPIs are turned into contractual obligations. KPIs are what they say they are: indicators. They are tools to help both parties, particularly when partnering, to measure continuous improvement. KPIs are a means of reinforcing that relationship; they are not torpedoes for blowing the other side out of the water. And since they are indicators, they are not amenable to incorporation into contracts as precise and strict obligations. But, unfortunately, these days there is a tendency to throw all kinds of guff into contracts without much thought about whether it is appropriate for enforcement. The guiding principle appears to be whether there is a chance that such guff might help in ensuring that all risk is transferred downstream.
Anyway, back to the wording of the clause. What does OSHA mean? In the USA it is the acronym for the Occupational Safety and Health Administration, which sets and enforces safety standards. Fairly meaningless, you might say, in a subcontract over here. There is another ambiguity. The clause refers to recordable incidents and first aid cases comprising the main contractor's safety KPIs. Presumably, it is the other way around?
But the real "nasty" is the 0.5% penalty for every incident or case. One can almost imagine a situation where a catalogue of minor cuts and abrasions leaves the subcontractor in the position of paying the main contractor for the privilege of working for him.
Rudi Klein is a barrister and chief executive of the Specialist Engineering Contractors Group.