The theatre projects that have been late completing and over budget have a common theme: the adopted procurement route has failed to give cost and time certainty. With a theatre project, time and cost are of paramount importance. Revenue from the pantomime season and Arts Council/lottery funding are usually what pays for the project.
What are the problems with construction management on theatre projects? Under the construction management route, the employer would usually appoint its own design team, construction manager and trade contractors.
The emphasis is therefore on the construction manager to proactively manage the design team's production of information and the various interfaces between the trade contractors. However, the CM has no contractual ability to deduct money from the design team if it is in breach of its appointment obligations. The CM has a duty to warn if any of the design team are at fault (see Chesham Properties vs Bucknall Austin, 1996). But usually the CM has to work with the design team and so, understandably, does not want to "inform" on it.
When faced with delays to a project, the CM and employer usually have two options: either to instruct the trade contractors to accelerate, or to omit or postpone elements of the works. Sometimes both options will be adopted. What happens to the client's causes of action that it may have against its design team/construction manager? The onus is on the CM to manage the contractual position. They often do not.
In the event that the trade contractor brings claims against the employer, then the employer is reliant upon the CM to have kept adequate records to defend any claim. Inevitably, the CM will not admit any fault on its part, and the employer is then left not knowing who to believe. It faces the prospect of defending proceedings from a trade contractor, while at the same time keeping an eye on possible claims against the CM.
Theatre owners are not used to managing building projects. Often, when asked by the CM to confirm that works have to be done to keep a completion date, they will readily confirm such instructions. That later becomes construed as an instruction to vary the works, even though that was not what the employer meant. It will then need to find more money. Almost every Arts Council-funded project so far completed has gone over budget.
A further problem for the employer is that when things go wrong, it will often be forced to accept work of a lesser standard than it had originally required, as attempts are made to save costs and time. Elements of the works are often to be carried out at a later date (as happened at the Sadler's Wells Theatre). Occasionally, work will have to continue at the same time as shows are put on, leading to problems with health and safety, insurance and licensing requirements, and inevitably to extra costs.
The difficulties an employer has in bringing an action against a CM is that any claim relies on the CM's own evidence – for example, which trade contractors caused any delay? Or what notices were sent by the CM at the time? The employer is often left with a global claim. The project has cost X. It should have cost Y. The difference is claimed against the CM. Such an approach may be acceptable to the courts in certain limited circumstances, but usually "cause and effect" will need to be demonstrated. The cost of this often makes a claim prohibitive.
What is the solution? Adopt the right procurement route from the start. That would usually mean design and build or some variant on it. The few major projects that have come in on time and to cost have adopted this procurement method – for example, Birmingham's £100m-plus Millennium Point.
The Arts Council appears not to have learned any lessons from its many projects completed to date. For the sake of the taxpayer and the good people of Stratford-upon-Avon, I hope to be proved wrong.
Ashley Pigott is a partner at Wragge & Co, Birmingham.