This blog is the second in a series which Constructive is running on refurbishment projects. Part one examined insurance issues when carrying out major works in existing buildings. Part three will look at recent case law involving refurbishment contracts.
The gloss has rather worn off construction management in recent years perhaps as a consequence of a failure to adequately control development costs on such high profile projects as the Scottish Parliament building and the London’s Great Eastern Hotel.
When used carefully by an experienced developer, it can be an effective way of completing a project quickly without a full design being in place and, in theory, of reducing cost by ensuring that each discrete works package is separately tendered to specialists (rather than appointing a main contractor who will invariably sub-contract the same work to specialists and charge a margin on top).
A form of construction management can still be encountered in refurbishment projects. In such developments, employers can often precisely identify the work packages required and hence tender them accordingly. The need for a main contractor to take responsibility for all specialist construction may be lessened or may seem less axiomatic. For example, in refurbishing a floor of an office building, one contractor may be required to carry out strip out and Category A fit-out works while a second contractor is required to install a new air conditioning system.
Issues commonly found on refurbishment projects include different contractors having to work in the same areas at similar times, limited space to establish a construction compound and the risk of wasted costs in having one contractor undo another contractor’s work in order to install its own works. Since the building’s access footprint may be limited, delivery of materials should also be co-ordinated; having each contractor’s supply vehicles all turn up at the same time could cause difficulties. It’s the same with ferrying away construction spoil. Delay and disruption to a contractor may lead to extra costs to its employer and late completion of the project.
One solution for an employer would be to make one contractor the principal contractor and require it to appoint the second contractor as its sub-contractor, leaving it responsible for co-ordinating and managing the second contractor. For the employer, this solution would solve the issues of two contractors on site at the same time. However, the works packages may be of a similar value making it less obvious which contractor should lead. Moreover, being specialists, neither contractor may be ideally placed in terms of experience and expertise to manage and co-ordinate the other duties. Either one may, nonetheless, be willing to accept the responsibility but most likely in return for a material uplift to its contract price.
It is therefore not uncommon for employers to choose to manage and co-ordinate multiple contractors themselves on refurbishment projects or to delegate this task to a consultant such as a construction manager. An employer may be best placed to manage such risk, particularly where it is a developer-occupier and needs to phase the various works in order to minimise disruption to its business.
If it chooses to perform the role itself, it should consider the following points:
- How does it mitigate the risk of contractors disrupting each other’s critical path, for instance, through working in the same space at the same time, one contractor shutting down utility supplies required by the other or both receiving deliveries at site on the same day?
- How does it ensure that the provision of welfare facilities and other preliminary items are not unnecessarily duplicated between contractors, leading to avoidable costs?
- How does it ascertain which contractor is responsible for a defect in the project where both contractors have worked in the same area?
- Does it have sufficient experience and understanding of construction in order to perform this role?
Ultimately, the employer’s aims are – as ever – to see that the refurbishment project is completed on time, to specification and on budget. Without a main contractor or a construction manager, an alternative means of dealing with these issues to require the contractors to co-ordinate between themselves through the use of a contractor co-ordination agreement entered into by all the contractors and the employer.
Under a contractor co-ordination agreement, each contractor would owe duties to each other to co-ordinate with the others. Rather than look to the employer for additional monies for any delay, each contractor would claim against another, to the extent that such contractor has caused it delay through a breach of its obligations. Each contractor would also be liable to another contractor if there are defects in its works which causes the other loss.
Nonetheless, such an agreement is not simply about attributing liability. It’s important that it addresses practical issues such as setting out the information, documentation and/or works which one contractor requires from another in order to carry out its own works on schedule. Moreover, the development and adoption of a master programme on which each contractor’s activities and critical path is carefully plotted is vital to each understanding how its work impacts on the others.
Regardless, regular communication, openness and understanding between the contractors and employer remain important. As Henry Ford said, “If everyone is moving forward together, then success takes care of itself.”