Copy of NZACS - NZ Architects Co-operative Society

Kia ora
The Grenfell Tower Inquiry recently issued its Phase 2 Report, and it is particularly critical of the architectural practice Studio E, noting that it bears “a very significant degree of responsibility for the disaster”. We will cover some of the report’s relevant content in more detail in an upcoming Communique but in the meantime, the key message that members should reflect on is the critical importance of ensuring that you and your staff have the appropriate level of knowledge and skill to carry out a project – particularly if you are in the usual role of lead consultant. Sometimes we don’t know what we don’t know and so it is imperative to fully upskill yourself for the task at hand, or team up with someone that has those skills.
In the Aotearoa New Zealand context The NZRAB Code of Minimum Standards of Ethical Conduct also requires that you must exercise reasonable skill, care, and diligence (rule 49(1)); advise your client if the failure to follow your advice might lead to significant harm, damage or financial loss (rule 49(2)); or advise an appropriate person or authority if you are involved with an architectural matter that could put the safety of any person at risk (rule 50). If these are properly observed, then something like Grenfell Tower will hopefully never happen here.
Here are some links for those that want to read more about the inquiry and its impact.

Ngā mihi

Scholarship Reminder

A reminder of our earlier announcement about NZACS’s new annual scholarship that is available to employees and principals of currently insuring NZACS member firms. The scholarship is aimed at building commercial and risk management skills and providing funding for further education, research, conferences and training in this area.
The scholarship value is up to $25,000 (excl GST) and applicants can apply for all or part of the funding. Applications are due by 30th November.
The application form contains more details and can be found on our website here.

Website Log-in Reminder

Many of you responded to the 29^th July Webflow email invitation (see image above) and have set up your log-ins to get access to the Members’ area of the website. This provides access to previous issues of Communique and has a useful search function. We will send out another invitation next week to prompt those that haven’t already done this.

Design and Build Procurement

Thanks to Board members Peter Marshall and Melanie Lochore for this contribution to this edition of Communique.
Procurement of a project is always a critical part of the design and construction process. Whilst the traditional procurement path of tendering at the end of detailed design remains strong for many clients and many sectors, we are seeing an increase in the ‘design and build’ (D&B) procurement pathway whereby a contractor takes the full responsibility of delivering the building.
There are potentially many advantages:

It can provide more cost certainty in an escalating market and allow contractors’ efficiencies to be adopted during the design stages.
If managed properly, a collaborative team approach can be adopted that establishes design and documentation responsibilities, programme goals and priorities. It can avoid the somewhat adversarial context that can occur under traditional tendering and award procurement paths.
Engagement and management of a design team by a contractor can result in a reduced number of design and documentation queries during construction. Early engagement of subcontractors to produce shop drawings can provide improved coordination and innovation as well as the production of accurate BIM models that can lead to greater accuracy and regular clash detection processes.
Any issues that do arise can get resolved without client involvement and minimal variations on a project.

However, there can be issues for the architect to be aware of:

A fundamental premise is that the client is very clear as to what they want and that this is represented in a comprehensive brief. The architect has a key responsibility to ensure that the design meets this brief.
A contractor can increase their profit margin by reducing the quality of materials including the selection of fixtures and fittings. They can further increase profits by carrying out work too quickly. All of these aspects can result in a less than optimum outcome for a client, and the architect can be deemed partly responsible. Claims might ensue.
D&B often implies a high level of trust and ‘forgiveness’ on all parties. The ability to negotiate some aspects of the design process including level of documentation, specification of materials and quality of the end product is essential. This can lead to issues should the parties involved disagree over a construction detail or end result. Be aware that whilst these issues are not necessarily a problem if all parties agree, the member is reminded that there may be instances where the end result may not be exactly as intended. Be prepared to compromise.
Be aware that your design responsibilities remain undiminished, so also be prepared to document and record design issues forced upon you and which you may later have to defend long after the construction phase is completed.

There are variations on the pure Design-Build procurement model, for example tendering the project at the end of Preliminary Design or after a Resource Consent has been obtained – sometimes known as ‘Develop and Construct’ contracts. In this case the consultant team typically gets novated (i.e. a ‘new’ services contract) to the contractor. This approach can be advantageous in that it takes some of the risk away for the tendering contractors whilst also giving more certainty of what the project entails, and therefore what the client is getting. The downside is that some key design decisions will not have had contractor input.
Members need to look carefully at the Consultant Agreement or any Deeds of Novation etc with bespoke clauses that take responsibilities, deliverables, liabilities etc beyond the norm of what might be deemed reasonable and therefore insurable.
It is also important for members to do their due diligence on any contractor and/or likely key subtrades that they team up with, to ensure a good working relationship.
The member is reminded that ensuring compliance with the NZ Building Code is non-negotiable and any material selection or build practice which compromises building integrity, overall weathertightness or durability are to be resisted.
When the relationship between D&B parties is positive and respectful, these issues are almost always resolved amicably. If they aren’t resolved then please bear in mind your NZRAB ethical responsibilities (see above), or what may be contained in a Deed of Duty of Care back to your original client. By way of recent example, the Grenfell Tower Inquiry is particularly critical of the architect’s lack of review of specialist sub-trade design work’s compliance with the relevant Building Regulations.

Due Diligence on Contractor Selection

A number of claims, particularly for residential projects arise from situations where the client has selected the builder – for example a friend, an in-law, someone they know from a sports club etc – with often disastrous results.
It is very important for your own protection and that of your clients to ensure that a rigorous due diligence process is carried out to assess the competency and capability of any selected builder to properly manage and construct an architecturally designed project. This assessment should ideally be carried out early in the design process by you, and so your services agreement should have some wording to ensure this happens and that you get paid for it. An assessment could consider:

Experience with projects of similar scale, quality and complexity.
Talking to architects that the builder has worked with recently.
Visiting a recently completed project(s).
Assessing the skills of the key personnel who will be assigned to your project.
Experience with working with or engaging a QS for independent cost reviews.

If the client doesn’t want you to carry out this process, then you need some wording to limit your liability in that situation, and to cover the additional site observation fees that usually result from working with poor contractors.
If the client is insistent about using a particular builder – despite concerns that you raise – then record your concerns in writing, and if possible endeavour to simplify the design to something within their capability.
We have also had several claims where the “friendly builder” has been over-optimistic in preliminary estimates – sometimes done ahead of the designer being appointed. Later, when it becomes apparent that the budget is inadequate, one or both of two things happens: either the builder suddenly becomes unavailable, or the cost over-run is blamed on the design process. We would strongly recommend that a QS be engaged at an early stage to minimize such risks.

Employment Practices Liability Insurance

Our insurance partners Aon have received a few notifications recently from member firms restructuring as a result of the market downturn, and wish to remind members of the following condition in the standard policy:

5.11 Reasonable Precautions
The Insured shall take all reasonable precautions to comply with and ensure that the Insured’s principals, partners, directors or employees comply with all statutory obligations. It is expressly agreed that the Insured will not undertake any disciplinary investigation nor terminate any Employee’s employment for any reason without first seeking legal advice from a qualified employment law practitioner or recognised professional body. [emphasis added]

In other words the policy cover is conditional on receiving and acting on advice from a suitably qualified employment law practitioner, as opposed to an HR firm or a lawyer who doesn’t usually handle employment matters.
The risk is that by the time a personal grievance claim is made, triggering a notification, disciplinary action or termination is likely to have already taken place. If this has happened without the required legal advice in accordance with the policy wording, the insurer would be entitled to consider if they have been prejudiced by that omission.
If you have any questions about this or any aspect of the policy please contact your broker.

Advise of a Possible Claim Early

Just a reminder that if there’s a hint of a potential claim against you, your policy requires you to notify as early as you can so as to not adversely impact on the insurer’s ability to settle a claim. Making a precautionary notification does not count against you in any way.
In the meantime should the matter develop, please ensure that you do not admit liability in relation to any allegations made against you, or enter into any communication with your client or any other party in respect of those allegations or any other issues in dispute without prior referral to Aon (Call 04 819 4000 or Email nzacs@aon.com).
And please, do not respond to your client with “I will notify my PI insurer”, as this gives the impression that the client’s position is favourable or justified, and that there is a bucket of money ready to meet their expectations. The proper response is along the lines that you will "need time and further advice to gather and assess the necessary information before responding". Remember - your PI policy is fundamentally for the benefit of your business, not your client’s.

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