Construction Documentation For Development
Construction contracts are by nature complex, and deal with a number of risks which may arise during works. Each construction project is backlit by a set of interconnecting documents that deal with issues such as design liability, cost overruns, and delays. Here, we detail the key components of construction documentation that are required for development.
Consultant appointments
It is rare for a developer to be able to approach potential contractors without first having enlisted the help of an architect or contract administrator, also known as the “Employer’s Agent” in the context of design and build construction. This is the party that fulfils certain executive functions under the building contract such as making valuations or certifying practical completion, but they also usually have an important part to play in putting the project together and assisting in the tender process.
The architect/contract administrator is insured by way of professional indemnity insurance and must ensure that they act impartially when carrying out valuations or certifications, to avoid any risk of challenge by the contractor.
Although the architect will usually be the first design appointment, there are usually a number of other designers to be appointed. Developers will be led by their lead designer in terms of who to appoint, but they can usually expect to need to appoint a structural engineer, mechanical and electrical engineer, quantity surveyors (or “cost consultant” who may also carry out valuations), CDM Principal Designer, and Building Regulations Principal Designer. Their appointment documents may be in a standard form (such as that issued by the RIBA or ACE), but more often than not they will be appointed on a bespoke form, requiring them to carry out their services to a certain professional standard of care, maintain professional indemnity insurance, comply with legislation (particularly building safety legislation), and provide additional assistance if required.
Design defects are costly and the effects are wide-ranging; if the designer or consultant has made a professional error that causes loss, it is the appointment to which the developer should look, in order to seek recovery of damages. It’s important to ensure a robust set of terms are in place from the outset and the scope of work updated where necessary. Otherwise, progressive “mission creep” creates a risk that any claim that becomes necessary may be compromised by inadequate or ambiguous terms.
Construction contracts
The construction contract is the document by which the contractor is held to carry out the works to a certain standard, usually along the lines of “a good, proper and workmanlike manner”, the meaning of which has been well-tested by case law. It deals with what happens when delays or damage is caused to the works for reasons outside of the parties’ control, the contractor’s design liability, building safety (including health and safety), the parties’ rights of termination and suspension, and how the contractor will be paid.
The construction contract permits immediate remedies to be made during the contract duration, which are designed to keep the project on track. Delays and errors can lead to serious costs and in some cases can render the project unviable or threaten the contractor’s solvency, so it is in the parties’ interests to deal with the issues as they arise. The monthly valuation/payment process, the awarding of extensions of time and the adjudication dispute resolution facility are all features that protect the project’s progress from the influence of external factors.
The construction contract will also deal with how the works will be insured. The party responsible for insurance is usually determined by whether the works are to an existing building, or if a new building is being constructed, but this is not the case for all projects and the insurance provisions are often changed to suit the intention of the parties.
It can be some way down the line before the construction contract is entered into, usually because costs or designs have not been fully formed until late in the process. For this reason, the parties will sometimes enter into a pre-construction agreement for minor works in advance of the construction contract being finalised and the parties proceeding into the contract proper. Although this can be a useful way of getting the contractor “on the hook”, this is an imperfect proposition for the developer as it involves postponing the signature of the construction contract, giving the contractor more scope to negotiate the terms and relying on an “agreement to agree” which can be difficult to enforce.
It’s also essential to ensure that when the construction contract is entered into, all of the ancillary contract documents are completed by the professional team. In the case of D&B contracts, is particularly important to ensure Employer’s Requirements and Contractor’s Proposal are clearly defined and any issues are ironed out pre contract to avoid unnecessary complexities arising in any claim.
Collateral warranties
Collateral warranties are frequently included in the developer’s requirements. They serve to create a contract between parties who are not contractually linked, enabling a beneficiary to rely on the warranties in the construction contract or consultant appointment in the same way as the developer, and the beneficiary can therefore claim in contract against the warrantor for any losses resulting from defects or design errors.
They are most popular with lenders, landlords, and other parties with an interest in the project for whom the works pose an element of risk – and can be an invaluable route to pursuing a claim by “leapfrogging” a party who has become insolvent or become uninsured. Our detailed article on collateral warranties can be found here: https://ts-p.co.uk/insights/collateral-warranties-key-requirements/.
If you have any questions about construction documentation for development projects, please get in touch with our expert team. at Thomson Snell & Passmore.