In the second of our series on the legal considerations of constructing tall buildings, Jill Hamilton considers what procurement approach is best in the light of the Hackitt report
There continues to be a great appetite for high-rise buildings, and as a result the number being built is growing rapidly. In London alone there are expected to have been 76 buildings of 20 storeys or more completed in 2019, three times the number for the previous year.
Given this pace, what are the issues facing developers in procuring construction for tall buildings? And how might they be affected by proposed changes to regulations for residential high-rises following the Hackitt report?
We anticipate that control and flexibility may start to become more of a consideration for developers, given the additional obligations that are likely to be imposed on them and the uncertainty about those obligations that may exist at the time of procurement.
For example, the regulations may impose “gateway” sign-offs (where compliance with safety regulations needs to be checked at certain intervals during the build process), which could lead to delays or a requirement for changes to the design partway through the build. Additional record keeping may be required to document the “golden thread” of information recommended by Hackitt.
Design and build
Because of the value and complexity of high-rise building projects, design and build is the most common method of procuring such schemes, sometimes as part of a two-stage procurement process. The contractor, by and large, takes responsibility for the overall design and construction of the project following initial design by the developer’s design team.
While developers benefit from the contractor taking single-point responsibility, the counterpoint to this is that the developer loses an element of control. This is because the design and build contractor can (within certain parameters) vary the design and select the materials used and methods of construction to be used. A further disadvantage for the developer is that any additional requirements or variations it wishes to impose after the contract is signed will come at a cost. Therefore, if new regulations come into effect after the contract is entered into, the developer may need to instruct a change to ensure the completed works are in compliance with those regulations – unless the contractor has agreed to take the risk of changes in the law, but we expect that contractors will become increasingly averse to doing so.
Under traditional procurement, the developer retains the design team and appoints a contractor to carry out the works only (although there may be some discrete elements of design for which the contractor is responsible). The developer therefore retains more control over how the design of the building evolves during the construction phase, but the method of carrying out the works is still up to the contractor, and the developer bears the cost of changes being required during the construction phase, as with design and build.
Construction management gives the developer more control over the project. Under construction management, a developer appoints the design team and then separately appoints a number of trade contractors to carry out each of the works packages needed to deliver the project. There is more flexibility for the developer in relation to changes in legislation that occur during the construction phase as the full extent of the works is not set at the start of the project and the trade contractors are appointed as and when required. For example, the foundations contractor will be appointed in the early stages of the project, but a cladding contractor may be appointed months later, so the cladding contractor’s trade contract can reflect the current legislation in place at the time that it is appointed.
Management contracting follows similar principles to construction management. However, the risk of disaggregating each element of design and works leaves risk with the developer for any gaps in the scope of works, as there is no contractor with a full overview of the project to ensure that all risks are covered. In addition, it may not always be clear whether any failures are due to defective design or defective workmanship, so it can be more difficult to identify culpability for any failures to achieve regulations.
Design and build will probably continue to be the predominant procurement route for most developers of high-rise buildings. However, we are likely to see additional monitoring, through the use of a monitoring team retained by the developer or an enhanced clerk of works role, to ensure the works are constructed in accordance with the regulations and that appropriate records are being kept. Developers will need to be aware of their obligations and take them into account at the outset of the project and may need to bear the consequences of any changes in the regulations. Ultimately, developers are responsible for ensuring that safety is never compromised.
Jill Hamilton is a senior counsel in the construction and engineering group at Taylor Wessing
Read more from our tall buildings series: