Solicitor Matthew Bell argues that Holyrood was always going to be a problem – but at least it is in good company …

There is an old adage about the three key risk areas in construction contracting: time, cost and quality. It holds that an owner cannot expect a certain outcome in all three of these (a compressed programme might cost more; a cheaper price could mean skimping on finishes, and so on), but that – as the song goes – two out of three ain’t bad.

The adage doesn’t always hold true, and experienced owners, contractors and other members of the project team devote much of their energies – in contract negotiations and throughout construction – to ensuring the owner’s and contractor’s expectations are delivered.

Having said that, observers could be forgiven for thinking that parliament projects are in a category of their own when it comes to delivery of these risk areas. Quality almost always will be paramount – civic buildings have traditionally been seen as an expression of the community’s collective pride and aspirations, and are expected to have a long lifespan. The desire for exceptional quality places often irresistible pressure on time and cost. This can lead to real conflict, especially as there is often a desire to open the building to commemorate a significant historical anniversary (examples abound, including the need to finish the parliament building in Budapest for Hungary’s millennium celebrations in 1896 – it eventually opened in 1902).

Cost and time overruns on parliament buildings are the stuff of construction legend. Rebuilding the “mother of all parliaments” at Westminster Palace in the mid 19th century cost nearly three times the original estimate and its 30-year construction period meant than neither Charles Barry nor Augustus Pugin, its lead architects, lived to see their greatest achievement completed. More recently, Parliament House in Canberra cost more than four times its original budget, and remains Australia’s most expensive building.

One wonders what the managers of these projects would make of what happened at Holyrood. They might well say that the project comprised a unique public building, deserving of exceptional design and quality, but should not have cost £431m, nor been delivered three years late.

In a nutshell, this is what Lord Fraser said in his 300-page report. While he did not blame any one individual, he said that some “catastrophically expensive decisions” had been made. Chief among these was the choice – without the project team having a full appreciation of the potential risks (as well as its benefits) – of construction management (CM) as the procurement route. This mistake was compounded, in his judgement, by the failure of the team to advise MSPs properly about those risks, both at the outset and throughout the project as costs spiralled out of control.

Rebuilding the 'mother of all parliaments' at Westminster Palace in the mid 19th century cost nearly three times the original estimate

Lord Fraser was particularly critical of the fact that CM had been adopted apparently without a firm appreciation that most of the risk lies with the owner rather than the contractor. Typically, under CM, in return for obtaining the benefit of an early start and the flexibility to alter the requirements throughout the project, the owner relinquishes the single point of responsibility which underpins traditional contracting relationships. Without this protection, the owner needs to be capable of skilful and decisive interaction with the project team (including the construction manager), and management of its stakeholders’ expectations, if it is not to see its expectations for the project drowned in cost and time blowouts.

In the final analysis, Lord Fraser said that the “unique one-off” building probably should have cost somewhere in excess of £200m; less than half the amount ultimately paid by taxpayers, he regarded it as a more realistic estimate than the £40-50m originally set aside. He also recommended that CM only be used “sparingly” for public projects. This caution in respect of CM is appropriate, as is Lord Fraser’s refusal categorically to rule out its use. CM, like other non-traditional forms of contracting, has been used successfully on many projects in both the private and public sectors.

Holyrood provides a timely reminder that all available procurement methods must be fully assessed before the point of no return is reached on a project, and that project participants and their stakeholders must be fully aware – by reference to the parties’ contractual and wider relationships – of how their interactions are likely to impact the ultimate outcomes.

Matthew Bell, construction group, Clifford Chance