When contract terms shift the risks and responsibilities
The majority of respondents to a 2018 survey by Russell McVeagh lawyers in our industry thought that there had been more disputes over the past two years, and it would get worse in the next two. That prognosis was more strongly reflected in responses from contractors than from principals. The survey cited those trends arising out of skill shortages, risk allocation and contract terms. To that should be added poor communication and lack of comprehension.
Other recent media reports have highlighted the problems arising when contract terms shift the risks and responsibilities from where they might reasonably fall. Some government procurement bodies and large developers are doing – at a larger scale – what homeowners often do through a lack of understanding: assuming that in appointing an architect (or a contractor) they will devolve all risk onto them.
Stick with NZIA conditions of engagement and contract terms if you can! It is the NZACS experience that cost savings in consulting fees or truncated services bear an inverse relationship to the potential for later disputes. Designers are not motivated to provide thorough documentation at punitive fees, and an underpaid contractor is less likely to provide glowing performance. The designer’s absence from the construction phase seems to result in less documentation (when really it may require more) and contractors are at increased risk if the documentation is not adequate, or is adequate but not understood.
The principal may assume that contract observation and administration by the designer is a waste of money. Then, when it proves it was needed, their view is that the design documentation was deficient. The time to resolve problems is usually as soon as the information is available to do so, but in such cases the contractor is reluctant to call in the designer because that would end up costing him and/or the principal money. So the problem festers, and probably escalates.
In the alternative, if the designer is involved in contract administration, the uniformed principal conflates the role with contract management, and the contractor’s defaults become the designer’s failures.
Yes of course NZACS members already know all this! But what is routine for us is not routine for our clients: prudent risk management requires us to think about things from their perspective, and to communicate with them in such a way that the designer’s – and the contractor’s – risks and interests are recognised and accommodated.