Fee enterprise

For some years, the JCT has been working on a new contract between the consultant and the client – the JCT consultant agreement. The idea, originating from Sir Michael Latham’s 1994 report Constructing the Team, is for this to be part of the family of JCT contracts and for it to be used for all consultants, whatever their discipline.

One of the principal reasons behind Sir Michael’s recommendation that the JCT develop this agreement was, as with all of the points flowing from his report, to reduce conflict within the industry. On the basis of the draft agreement, which is now out for consultation, it is not clear that it will achieve this aim.

There are two points arising from the draft that would change the way the industry works.

The first is a clause entitling the consultant to more fees. The JCT agreement quite properly sets down a series of cases in which consultants are entitled to more money.

It is the length of this list that causes the eyebrows to edge upwards. Altogether, there are 14 scenarios in which the consultant can claim more fees. Most of these are clearly reasonable, but the list in its entirety is heading towards the point where clients and their legal advisers will think hard about whether to use the agreement at all.

These cases include:

• Failure by a specialist or other consultant to perform

• Failure by a contractor to perform

• Client instructions that change the brief, the programme or the budget.

• The agreement may result in consultants being rewarded for underperforming

• The client is given an explicit right to impose set-off penalties

Although these may be reasonable, the first two points do not suggest that the consultant will be enthusiastically pushing the team, contractor and subcontractors to perform. In fact, if they fail to perform, the consultant gets more money! The last starts to raise questions about whether the QS, for instance, is entitled to more fees when the project runs over budget – not a great incentive for the QS to control the project cost.

It is worth looking at other consultant appointments to see how the JCT agreement compares. The RIBA’s Conditions of Engagement, for instance, has three brief clauses dealing with additional fees.

Although the RIBA document is seen by many on the client side of the industry as being written in favour of its authors, it is interesting to note that not even this document specifically entitles the architect to more money because another consultant fails to perform.

Having said this, it does allow for an increase in fees if delays occur beyond the control of the architect. The equivalent RICS clause is even more brief.

The other contentious clause in the JCT agreement is ominously named “Other amounts to be allowed to the client”. This allows the client to deduct from the consultant’s fee any costs incurred as a result of the consultant’s failure to perform.

This is not, of course, entirely new. Common law allows a right for the client to set-off amounts due under this sort of agreement. It is seldom, however, that the mechanism is spelled out so clearly. The RIBA conditions, by comparison, does not allow set-off.

So, where has the JCT gone wrong? The standard consultant appointments give limited reasons for claiming more and they tend to be global. The JCT, presumably in an attempt to try to get a degree of commonality between its building contracts and the consultant agreement, has included a long and involved list of “claim” items.