The Construction Leadership Council (CLC) has raised concerns about clients in construction amending industry-approved forms of contract to introduce terms that are “onerous and/or difficult to insure”.
The CLC believes this “ongoing practice” makes contracts unviable, reduces competition, increases risk and leads to unnecessary legal costs required to review legal liabilities as a result of the amendments.
The industry body advises that construction clients use instead standard form building and engineering and professional services agreements issued by contract-producing bodies without amendments, except when project-specific risks and relationships require it.
A simpler approach
The CLC said that a simpler approach to contractual liabilities and a clarification of roles and responsibilities, particularly around fire safety design, would help meet the recommendations of the final Grenfell Inquiry report.
It may also protect contractors and consultants from having to pay more than their “fair share” in the event of a professional indemnity claim involving a contractor or consultant that has gone into administration or has inadequate professional indemnity insurance (PII) cover.
Many PII policies only cover claims for contractual liabilities to the extent that those liabilities would exist in the absence of the contract.
The CLC’s PII working group has identified that standard form contract terms are often amended to include liabilities and obligations that are disproportionately onerous for the nature of the work and the contracting party and its subcontractors. They also don’t fall within the scope of the contracting party’s PII cover.
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The issue here is that Contractors need to be held to account. The exposure of ISG and their contempt for clients is typical. It is the Contractors that need a paradigm shift both towards their clients and their Sub-Contractors.
While I accept Contractors have to held to account for their works, the use of design and dump, and amending terms to make us fully responsible for everything that the Employer and his team have provided shows a lack of integrity. Dumping all the risk onto contractors, where if such risk could be priced, would mean that we’d never be competitive! Why can’t the contracts be left as they were designed to be used to bring a fairer outcome and balance for all.
There is proven success in using contracts which incentivise Clients and Contractors working together to manage risks and deliver on budget, right quality and of course safely. All contracts need rights and remedies but these need to be smart, not aggressive and the onerous special clause put in on the lawyers advice to “protect” the Client can have detrimental impacts on behaviours and cost the Client dearly. Many believe that the best offer a Client gets is pay the audited cost, have shared incentives and objectives and work together.