Contracts The BPF’s new consultancy agreement will benefit developers, claims Ann Minogue but overleaf, Alan Erwin points out its drawbacks
Why has the British Property Federation bothered to produce a new consultancy agreement? Many different forms of consultancy agreements are already available to developers.
The Royal Institute of British Architects produces a standard form for the appointment of an architect, the Association for Consultancy and Engineering (ACE) produces a suite of documentation for different engineering disciplines, and even the RICS has standard forms for quantity surveyors. The difficulty for developers is that each of these forms is different. For example, the entitlement to additional fees arises in different circumstances in the RIBA terms and the ACE terms, and the clauses are in different places. The services are not well co-ordinated and things can fall between the cracks.
And the terms of these agreements are, perhaps unsurprisingly, drawn to favour the consultant. Taking the architect’s appointment as an example, the box on p130 highlights clauses on payment for additional payment, notice periods, timetables, liability and other areas that make life easier for the consultant.
Finally, the agreements prepared by these institutions do not take into account the requirements of funders, for collateral warranties/third-party rights to funders, purchasers and tenants and other issues. Indeed, the architect’s contract of appointment prohibits assignment altogether and, in relation to collateral warranties, contains a heavily qualified “agreement to agree”.
But are there other forms of consultancy agreements? It is true that the Property Advisers to the Civil Estate produces a form of consultancy agreement as part of the GC/Works suite. Likewise, the publishers of the Engineering and Construction Contract also produce a consultancy agreement. These documents, though, are tailored for use with GC works contracts and the ECC suite. They do not sit comfortably with the Joint Contracts Tribunal forms used by most of the industry.
Background to BPF consultancy agreement
The BPF embarked on the process of producing a new consultancy agreement almost a decade ago but felt strongly that it would prefer to publish a form of consultancy agreement that was agreed through the auspices of the Joint Contracts Tribunal. This proved impossible. Prompted by a successful collaboration with the Construction Confederation on the JCT Major Project Form published in 2003, the BPF dusted down the consultancy agreement again and amended it so that it could be used with the JCT MPF. At the same time, the BPF also produced lists of services enabling the consultancy agreement to be used with traditional contracts. The consultancy agreement was endorsed by the Construction Confederation for use by contractors under design-and-build forms.
What does the BPF consultancy agreement contain? It comprises a set of terms and conditions that apply to all of the team. Some optional clauses need to be deleted (for example, the quantity surveyor is not expected to perform the duties of a “designer” under the CDM regulations). The optional clauses, printed in bold type, are easy to recognise. All of the “variables” are included in schedules: schedule 1 deals with the fee and the reimbursable expenses, additional fees, the amount of professional indemnity insurance and so on.
Schedule 2 includes the employer’s brief. Schedule 3 defines the scope of the services, the project team, determines whether novation applies and which consultants are to be novated as well as the services. Schedule 4 deals with third-party rights. Schedule 5 contains a form of novation agreement and the appendix contains lists of services.
The services, drafted by Owen Fox at Brewer Consulting, are co-ordinated and are printed in matrix form for the key disciplines: architect, structural engineer, building services engineer, quantity surveyor and planning supervisor. Each consultant can see what the other is doing at each stage. Nothing should fall between the cracks. There are separate lists of services for traditional contracts and for design and build.
And the development requirements? The consultant consents to an assignment by the employer of any of the consultant’s rights under the agreement and of its rights and obligations to any funder or associated company. Also, the consultant agrees to grant third-party rights (rather than collateral warranties) to funders, purchasers and first tenants. Alternatively, the employer may request the consultant to provide collateral warranties in the BPF forms of collateral warranty. So the requirements of most developers are already covered.
Detailed terms of the consultancy agreement
The basic obligation of any consultant is to exercise “reasonable skill, care and diligence” in the performance of his services. The BPF consultancy agreement reflects this by requiring the consultant to use skill and care in relation to the services and in relation to the selection of materials, which must comply with the Good Practice in Selection of Construction Materials guide produced by Ove Arup & Partners in 1997.
In addition, though, the consultancy agreement requires the consultant to comply with the employer’s brief and to comply with the statutory requirements. In addition, the consultant must carry out his duties as a “designer” under the CDM regulations. No excuse is allowed in relation to these provisions. They impose absolute duties on the consultant.
The consultancy agreement contains provisions requiring the consultant to use named personnel on the project; it is precise about the consultant’s obligations to comply with the employer’s instructions and defines in detail the limits on the consultant’s authority so that the employer knows when the consultant is obliged to come back to him for consent.
The consultancy agreement stipulates that the employer must ensure that he has appointed a person to whom the consultant can report and who will issue approvals required to be given by the employer under the consultancy agreement emphasising the need for clear lines of authority.
The consultancy agreement assumes a lump sum fee that adjusts for a defined list of additional services. These include events such as assistance in connection with planning appeals and public inquiries, liquidation of the building contractor and others. There is no general ground for additional fees for any extra work for reasons outside the consultant’s control. It provides for payment on 30 days from receipt of VAT invoices, for interest on late payment and for the statutory right to suspend.
A copyright licence is given that is conditional upon payment of fees “agreed as properly due” being paid, but does not allow the consultant to suspend the licence if there is a dispute as to what is due. Where appropriate, the consultant is asked to waive his rights to be identified as the “author” of the project and his moral rights.
The role of the contracting industry in the design of buildings is anticipated in the BPF agreement in more detail than in other forms of consultancy agreement. The consultant must set out detailed proposals for those parts of the design to be carried out by the contractor or any subcontractor or supplier. The employer must agree to these proposals but the contract provides that the consultant will not make proposals that are contrary to accepted custom and practice within the construction industry. The consultant is responsible for examining designs created by the contractor or subcontractors and suppliers but is not fully liable for it. He is not responsible for examining the detailed design of proprietary products.
The employer may terminate without cause, for example, if he cannot fund the project. The contractor may terminate only for breach.
And what does the form say about novation? The JCT major project form 2003 anticipates that consultants may be novated to the contractor under design-and-build arrangements where the employer wishes to transfer design responsibility usually in conjunction with a two-stage tendering procurement route. The consultancy agreement reflects this and asks the consultant to execute the model form of novation agreement at the same time as he executes the consultancy agreement. This is then signed by the client and the contractor when the building contract is entered into and the consultant’s employment is transferred to the contractor. The BPF form is the only standard form in the market place that contemplates novation.
And why third-party rights? There has been much debate in these pages and elsewhere about the use of third-party rights rather than collateral warranties. The rights are triggered by notice to the consultant in favour of the beneficiary named in the notice and are then validly granted to the beneficiary, provided he is within the class of beneficiary stipulated in the consultancy agreement. This saves the cost and delay associated with having to obtain the signatures of each of the consultants to separate collateral warranties, as the old regime required. The rights themselves are essentially the same as standard collateral warranties. The main difference, and the main point of contention with the consultants, is that the BPF consultancy agreement does not exclude, in the rights given to purchasers and tenants, all losses other than the cost of repair, since the experience of the developers is that these are generally unacceptable to purchasers and tenants on projects of any size.
So why the fuss?
The main point of contention seems to be the fact that the BPF consultancy agreement does not include a net contribution clause limiting the consultant’s liability in the event that two or more consultants or contractors on the project are in breach to what would have been recovered if both of them were solvent and parties to the proceedings. Also, it does not include a cap on the consultant’s liability for breach. The consultants’ lobby has pushed hard for these provisions to become “standard”. In the mid-1990s, the DTI was lobbied heavily to reform the law on joint-and-several liability so that the client ended up carrying any irrecoverable loss if one or more of the consultants or contractors had become insolvent in cases of joint liability. The DTI said that such reform was not appropriate. Similarly, the consultants’ lobby has been trying to argue the that caps on liability are “standard”. The truth is that the consultancy agreement can be amended to provide for them. But they must be negotiated separately on each project. They should not be standard.
For clients of the construction industry and particularly for those intending to use two-stage design-and-build procurement routes, the consultancy agreement represents an excellent starting point. It is to be hoped that the construction industry will be able to look at it as a brave attempt to introduce standardisation into a market place that has become dominated by custom-drafted documents of increasing complexity and severity.
Ann Minogue is a partner in the real estate and construction department at Linklaters
|
In favour of the consultant |
|
The terms of current consultancy agreements are favourably drawn for the consultant. Let’s take the architect’s appointment as an example. Under the consultancy agreement, ● the architect is entitled to additional payment if he is involved in any extra work “for reasons beyond his control”, even where he has agreed a lump sum fee; ● the architect can determine his appointment at any time on 14 days’ notice at any stage of the project; ● even though his services include inspection of the work on site, the architect has no responsibility for the proper carrying out and completion of works by the building contractor or for health and safety on the site; ● the architect is not responsible for carrying out his services in accordance with any particular timetable; ● and the appointment contains a net contribution clause and caps his liability. |