The quarrel centres on who carries the risk of cleaning up contaminated land. If it is not decontaminated properly, future occupiers could seek recompense for health problems to staff or the cost of replacing buildings. Clients that wish to develop or sell the land want consultants to carry most, if not all, of the risk. Consultants say they cannot afford to do this unless they are paid higher fees.
This stalemate is forcing some of Britain's most skilled consultants to be very selective about whom they work for. Halcrow and Mott MacDonald, two of the industry's leading players, are refusing to work for BG (formerly British Gas) because it asks for unlimited professional indemnity insurance. Other large consultants are balking at clients' requests to increase PII cover from £1-2m to £5m.
Pushing beyond the boundaries
BG calls its unlimited liability request "good business". Land is easier to sell when unlimited insurance is available. A BG spokesman says: "We try and broker the best deal we can." Halcrow and Mott have walked away from BG, but others cannot afford to ignore the biggest player in Britain's brownfield market. Nine "framework" consultants, including WS Atkins and Edmund Nuttall, are confident that the risks are rewarded by repeat work because of BG Property's partnering philosophy. But other clients, concerned about the risks in this relatively new market, are starting to follow BG's lead.
Construction law firm Masons is pushing for a large increase in consultants' insurance cover. "Many consultants are underinsured," says Karen Cooksley, a partner in the property, planning and environmental department. She said some consultants were insured only for their fee. That means if things go wrong, the client just gets the original fee back. Masons recommends that clients only work with environmental consultants that have a minimum PII cover of £5m. Law firm Berwin Leighton also recommends £5m PII cover. Typically, PII cover is set at about £1m.
Inevitably, higher PII cover costs consultants more. One insurer said: "Most consultants can't afford a £5m cover package that can cost as much as £100 000 a year." Cooksley says: "A few companies have responded, but we would like more." Environmental law specialist Steven Francis, a partner with lawyer Dibb Lupton Alsop, believes that clients' bids to bump up PII is a knee-jerk reaction to some big claims. He argues that clients have brought trouble on themselves. "There are a lot of environmental consultants out there and fees have been cut to the bone, so clients aren't getting much of a survey for their money." Francis is also critical of clients' attempts to raise PII. "The risks and rewards are out of kilter," he says. And big engineers are finding more lucrative work for their environmental experts to do. This means expertise is draining away from the sector. "I can see planners turning developers away at the door because they've never heard of their environmental team, or they have no track record." Perceived inconsistency among regulators that scrutinise plans for decontaminating sites is adding to the confusion. "Clients and consultants are nervous because of inconsistency of guidance from the Environment Agency," says one insurer.
Plans are presented to the local planning office, where they are studied by an Environment Agency official. But consultants say different officials interpret the law in different ways. Consultants also complain that Customs and Excise, which grants exemptions to the landfill tax, sometimes differs from the agency in its view of what is and is not contamination. This determines how much waste has to be cleared and so has a large bearing on cost.
Laying down the law – consistently
Inconsistencies in interpreting the law can make tendering tricky, says Lawrence Waterman, managing director of consultant Sypol Environmental. Most contractors factor in a large budget to cover this risk, so clients end up paying extra.
The Association of Geotechnical and Geoenvironmental Specialists is surveying its 1500 members to see how much inconsistent interpretation is costing the industry. AGGS spokesman Roger Clark says: "Clients need to have more trust in specialists about what can be left on site. This worry over inconsistency is stopping some developments going ahead." A spokesman for the Environment Agency says the agency appreciates that "clarity of interpretation needs improving". It plans to publish guidelines in the next few weeks so that all of its officers are "reading from the same hymn book". But, says Waterman, "that's what they've been promising for the past two years".
If you have experienced inconsistent interpretation of decontamination plans by the Environment Agency, contact Roger Clark at CL Associates, Prospect House, Prospect Road, Mucklow Hill, Halesowen, Birmingham B62 8DU (0121-585 959).
