by Nigel Blanchard and Andrew Harnett
As interest rates increase and the property market tightens, developers are looking for ways to cut margins and reduce project overheads. The practice of employing a full design team under the control of a project manager is proving too costly for some developers, with the result that professional staff are being employed on a reduced services basis. A project manager working on several developments rather than being committed to one site may become overstretched. If the members of the design team are also engaged on a partial services basis, site problems may arise which are not always properly resolved. The result is a dissatisfied freeholder or tenant and possibly a delayed completion.
To avoid problems and to maintain a streamlined operation, general practice development surveyors are turning to the building surveyor to provide a pro-active project monitoring service.
This is not just a reaction to the state of the market but also reflects the growing complexity of the building process, especially the advent of the shell-and-core development where specialised fitting-out contracts have to be fulfilled.
The general understanding that building surveyors have of all aspects of the building process means that they are well equipped to provide a comprehensive monitoring service. The monitoring surveyor complements rather than replaces the project manager, who is still the key decision-maker and controls the whole development process, co-ordinating the design team and contractors throughout.
Traditionally, building surveyors have been employed by banks and funding institutions to monitor developments and comment on costs. The majority of financial institutions require this close monitoring during construction to assure them that their investment in the project is being optimised.
Towards the end of the 1980s, however, there was a growing use of project monitoring by all parties involved in the development process — not just institutions but also developers or industrialists buying a freehold and tenants taking on a lease.
The building surveyor’s involvement formerly focused on giving the client a view on the quality of a development and its potential for purchase. This role has now evolved so that the monitoring surveyor is expected to attend site meetings, receive copies of all documentation, monitor the quality of materials and report on progress to the client. The monitoring surveyor does not have direct control over the design team, but can be a useful troubleshooter on a project by pointing out potential problem areas and suggesting feasible solutions.
Project monitoring can be a valuable service for even the simplest constructions. For example, we have worked on a wide range of developments as project monitors — a chain of supermarkets, a modern industrial complex, and even a listed office and retail unit in Bond Street. A supermarket chain, for instance, may require different systems from unit to unit but the overall corporate image must be maintained — a role for the project monitor to fill.
The building surveyor’s closer involvement is often prompted by problems found early on in a project. For instance, the client may require an urgent structural survey of a building which they intend to lease or buy and believe is near completion. The surveyor arrives on site to find that construction has only just started and therefore a full survey cannot be carried out until the project has progressed. The surveyor then tends to remain as a monitor for the project, helping to nurse it through to completion on the client’s behalf. This situation was the catalyst for our monitoring role in the development of Windsor Plaza, a London office building.
In an ideal world the fitting-out architect is appointed at an early stage and it may even be possible for fitting out works to be phased to begin before completion of the shell-and-core development. However, the client’s architect is often not appointed until much later in the development and the monitoring surveyor thus becomes a vital link between the project manager and the architect, having been involved in the development from its inception. The surveyor can pre-brief the architect on potential problem areas in the light of a client’s particular specification and needs.
Some developers may consider the role of the project monitoring surveyor to be passive, in the sense that monitoring represents observation rather than control of the development process. But the extent of a monitoring surveyor’s role in the development process is largely dependent on the early legal negotiations. When acting for a lessee or freeholder, it is important that the monitoring surveyor meets the development surveyor and the client’s legal representatives and studies the agreement for sale or lease. There should be a proviso for the monitoring surveyor to make formal representations to the design team, since if representation clauses are not negotiated and inserted into the agreement at an early stage, the monitoring surveyor’s role will be severely restricted.
The key representation clauses entitle the monitoring surveyor to request and receive all drawings, specifications and bills of quantities and any tenders or contract documents. He will be able to ensure that all site investigations have been completed, and, in addition, will examine the necessary statutory consents and study any legal agreements such as party wall awards.
It is important that the monitoring surveyor reviews the insurance arrangements between a developer and the contractor and also attends any pre-contract meetings with the development team. This move has sometimes been resisted by the project manager and the design team, but it is only by attending these meetings and also the formal site meetings which take place between the design team and the contractor that the surveyor is able to report fully on progress and any other matters affecting the client’s requirements.
The agreement should ideally allow the surveyor to make periodic visits to the site to monitor progress and point out any tasks which are not being carried out as planned.
The monitoring surveyor also needs to understand the various forms of collateral warranty. Most astute developers are insisting that both their project managers and members of the design team complete such warranties or “duty of care” agreements, although the actual clauses within these warranties must be looked at closely.
We recently became involved in a number of developments which were being bought for a client’s portfolio. We were assured by the lawyers that the design team and main contractor had agreed to enter into such warranties, but when the warranties became available it was clear that the nominated subcontractors providing a “design and build” package for the installation of the services had been overlooked.
It is also a problem when the warranty can be given only to the tenant or purchaser but not both — the monitoring surveyor has to advise the client whether the agreement is sustainable in this case. For instance, we acted for a client buying the freehold of a prestige office and found that the client’s warranties provided only for duty of care between the contractor and incoming tenant. However, since the incoming tenant was a blue chip covenant who would be occupying on full repairing and insuring terms, we advised the client to proceed.
Any comments or suggestions on the progress of the development are made in writing via the project manager. Problems may include the use of materials which are deleterious or are not in line with the original specifications.
If the monitoring surveyor is involved at an early stage, any technical problems can be spotted and sorted out quickly with minimum disruption to progress. Since the surveyor has the greatest awareness of the buyer’s or tenant’s needs he is one step ahead in assessing where potential problem areas may lie.
For example, on a modern office development in the West End the original developers’ package included high-performance air-conditioning. Quite late in the day a decision was made to “refit” the building. As we had been involved in the development from the start we were able to confirm that it would be possible to partition some of the floors with an unusual configuration of different sized cellular office spaces. We appointed services consultants to evaluate and commission HVAC and other mechanical and electrical installations.
The nature of self-contained modern office buildings means that the project monitor’s early involvement is vital to ensure that the client’s needs are fulfilled.
Early representation, although becoming more common, is not always guaranteed. A client may have taken on an agreement after another party has dropped out and this may allow for only limited representation rights.
Depending on the situation it may be necessary for the monitoring surveyor to advise the client not to proceed with further negotiations. For instance, we were involved in a project where we were unable to negotiate a “reasonable agreement” and our advice to the client was to consider carefully his commercial decision to proceed. Neither the developer, nor contractor nor any member of the design team had completed such a large development, and the representation clauses inserted in the agreement allowed only for a passive input from the monitoring surveyor. It was eventually agreed that we should be allowed additional visits by the developer and the project continued.
This example clearly demonstrates the value of employing a monitoring surveyor to liaise between developer and client. If the market is dull, the developer is keen to secure an end-tenant or buyer, and if the market is booming the tenant will be anxious to secure the best site for a development as quickly as possible. We have acted for clients keen to secure an industrial site which was the only one of its kind in a 20-mile radius. Although the site was just right, the building had to undergo extensive alterations to meet the client’s needs and project monitoring was therefore a vital addition in this case.
Contrary to slowing down the development, as is often feared, the involvement of a monitoring surveyor can speed things up. Taking corrective action at a later stage is costly and leads to time delays — indeed it may not be feasible at all. Invoking a default clause because of a delayed completion should be avoided if possible.
The increased employment of monitoring surveyors is not just a short-term reaction to the need to cut costs. The fitting-out process in shell-and-core buildings is becoming more complex and the project monitor is proving to be a useful and knowledgeable contact point for both developer and prospective lessee or freeholder.
It should be made clear that the monitoring surveyor will never replace the project manager. The roles are separate but complementary and the busy project manager more often than not welcomes liaising with someone who talks his language, thereby ensuring that informed decisions are made quickly. The project manager can be overburdened with client or design team inquiries which divert attention from the job in hand.
There is a fear that the employment of a project manager and a monitoring surveyor is a duplication and a waste of resources: this is no longer true, as the project manager takes on responsibility for an increasing number of sites and may thus rely on a consultant from the design team working to a partial services brief.
This consultant may well argue that he is not in a position to carry out more than his allocated number of site visits and any problems are dealt with by correspondence, which may lead to delays.
Nowadays, if the developer is completing a building for a client considered to be a good covenant, then he will expect a project monitoring surveyor to act on their behalf. The relationship between monitoring surveyor and developer can be strained because of the worry that the development may be slowed down, but the more experienced developers know that this is seldom the case.
As well as keeping the tenant or buyer represented and informed, effective project monitoring will leave the developer free to deal with pressing business matters, such as acquisitions and disposals, while being confident that developments are running to time and to budget.
In conclusion, the project monitoring surveyor gives specialist advice and provides full reports on cost, time and quality irrespective of whether he is acting for the financial institution or mortgagee, or the incoming tenant. Project monitoring is pro-active in that potential problems are foreseen and solutions found that ease their impact, thus helping the potential of the development to be achieved and money to be saved.
