Fit for Purpose Statements

In short:

If a “fit for purpose” statement is required of the architect, the alarm bells should be ringing loudly. You should not accept that obligation without careful consideration, and it would be prudent to seek legal and insurance advice before doing so.

We have dealt with these issues in past Communiques which are all available on the website: see, for example: “Completion Statements”; “Changes to the Scope of Services”; “Hold Harmless Clauses”; “Limited Services”; “Non Standard Terms Of Consultant Agreements”; “On selling the project and selling out on the architect”.

Scope versus responsibility:

In the normal course of full service commissions the architect will be required to review the work on site for the purposes of certifying progress payments, practical completion, and final completion. Dependent on the project, that role may overlap with other consultants, but the scope of such attendances by the architect is (or should be) as described in the terms of engagement and in the general terms and conditions of the building contract, and the fees agreed accordingly.

The usual risks associated with those arrangements are covered by your PI policy.

We have seen many instances where the involvement of the architect during the construction phase does not match the responsibility assumed for it. A typical situation is when the architect is engaged at an early stage for limited design work, which is then brought to completion by the combined efforts of the project manager and design-build contractor, with the architect remaining for the purposes of finish elements and design intent and with very minor involvement in site observation or contract administration. Other consultants may be brought into the project at various stages. Nevertheless, the architect is required to vouch for the completed product. This usually takes the form of a “fit for purpose” statement.

To what extent do fitness for purpose statements by the architect pick up the responsibilities of those others?

Change in scope v change in responsibility:

A project manager may interpose between architect and client; the arrangement of the building contract may call for some design-build delivery; the consultants may be novated to the building contractor; on-sale of the whole project or parts of it (e.g. apartments) may change “the client”. Some of these changes may be without, or with only very limited input from the architect. They may impose some added role and responsibility beyond the original terms of engagement.

A similar risk arises when the architect is retained for early design stages but others carry out the construction documentation. The extent to which the first architect remains responsible for the later stages of the project will vary dependent on the project: unless the arrangements are clear at the outset, that risk is very largely beyond the control of the first architect.

Funding arrangements can be problematic:

We have had cases where the project funder has changed and the new funder requires assurances from the architect without which the project will stall. Where the sale and purchase agreement includes a requirement for the architect to sign off on each individual apartment and in addition on the whole development. When a monthly certificate must be provided by the architect to the effect that on the applicable date all contract and compliance requirements are being (and have been) met.

If the architect is retained for observation and contract administration, the proper execution of those roles should meet all the assurances a funder requires in seeking a “fit for purpose” statement, and if not, the scope of the assurances must be beyond the role of the architect. Conversely, if the architect is not retained for observation and contract administration, they are not in the position to be able to provide such assurances.

As a general principle, your contract is with your client; not the project funder, nor the project manager. An architect’s scope of services and responsibility is defined in the NZIA AAS (or similar) and the architectural fee is related to this service, responsibility and risk profile. A unilateral change by the client or project manager or project funder may be little different to taking something for no payment. It is even less acceptable when commercial leverage such as “do it or you won’t get another job” is applied.

The funder has a contractual relationship with the client. If that arrangement requires additional services by the architect, that should be by way of a variation to the terms of engagement with commensurate fee adjustment. It is NOT acceptable that the architect be required to accept separate contractual obligations to the funder or to other consultants.

Risk management:

In the calm light of day, these situations are clearly perilous. But they can gently unfold (the “boiling the frog scenario”) or be sprung along with commercial pressures such that the architect may feel they have to take on the risk and just hope that it is never manifested. That would be unwise: there is a prospect that an insurer might argue that you had knowingly taken on a risk beyond that of a normal prudent architect and beyond that for which the policy applies. Especially when, these days, a prudent architect would be aware of the possibility for the developer to have “disappeared”, the building contractor “gone bung”, the project manager having arranged things on an “all care no responsibility” basis, and that joint and several liability may require the architect to pick up the costs to a far greater extent than would be merited by their actual role in later problems.

There is no easy answer other than to make it very clear at the outset what you are required to do, and that any subsequent changes require your explicit agreement in writing as a variation to the engagement terms and at commensurate variation in fees. When considering such changes, you will need to be mindful of – and if necessary seek legal and insurance advice upon – changes to your responsibilities that may be beyond those contemplated in your PI policy cover.

It matters not whether advice is contracted for or not!

In 2020, advice issued by NZIA was that “if you give advice without a contract you may have problems with PI insurance”.  NZACS says that it is even simpler than that:  if you give advice, you are exposed.  It matters not whether that advice is contracted for or not, whether you are paid for it or not, or whether it is given in response to a question asked of you as a professional person or offered as helpful unsolicited commentary.  If you hold yourself out as a professional person, and others rely on your utterances, you must expect to be held accountable for them.

Generally speaking, if you provide advice as a professional, then your PI policy under the NZACS scheme will have you covered for the potential liability.  But if you are asked for an opinion on anything which is within your area of expertise, then you must respond in the same responsible measured and prudent fashion as you would for any other engagement, and view it as “business as usual”. 

Selling your own house could create a conflict between whether your statements are made as the “vendor” or as a professional person providing an unbiased professional opinion.  If the former, your PI policy is unlikely to respond.  Care is required.