RICS Construction Journal September 2011

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org/journals
Construction Journal
September-October 2011
Contract administration
traps for the unwary CA variations a contractors view
a clients view contract admin in Australia CA v EA EoTs
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5 In it together
Anne McCann takes the reins of the UK PM
Professional Group Board and discusses the
challenges ahead for project managers
6 Do you have the X factor?
With competition for project roles coming from
different professions, Nicholas B. Jackson asks:
do QSs make the best contract administrators?
7 Did you know?
8 Mind your fingers
From terms of engagement to dual responsibilities
Laurence Cobb discusses the common traps
awaiting the unwary contract administrator
10 Legal Helpline Extensions
of time and variations
11 A hard habit to break
Despite construction being a people business, says
Andrew Kimpton, a lack of trust between parties is
the biggest obstacle in contract administration
12 UK not Aussie rules
Contract administration in Australia shares some
similarities with its UK counterpart but also has some
major differences. Russell Welsh and Paul Roberts
share their views
14 A brave new world
A look at building information modelling and why it
will be a seismic shift in how buildings are designed,
constructed and operated. By Steve Pittard
16 Construction law myths
a CA is the same as an EA
17 Courting controversy
S108 of the HGCRA 1996 has failed to clarify the
situation on Tolent clauses, says Henry Sherman, so
it is a good job the courts are there to prevent abuse
18 A change for the good
Duncan Cartlidge discusses some of the main
issues that contract administrators face when
dealing with variations
20 A stress-test strategy
Mark Roe and Khalid Ramzan look at time and
money claims and dispute resolution under the
Red, Yellow and Silver Books and discuss the
risks in the FIDIC approach to claims
22 False alarm
The judgement in Jones v Kaney should not stop
surveyors acting as expert witnesses, says Vivien
King, but they should check their PII cover first
24 Window pain
Neil Thompson looks at benchmarking and how the
results of a recent exercise can be used to identify
and address cost reduction in the rail industry
18
Construction Journal September-October 2011
Contents
12
4
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he Project Management Professional Group
(PMPG) is relatively new when compared
with others, e.g. QS & Construction and
Building Surveying. As a result, the previous
Chairmen Barrie Tankel, Richard Schofield and Don
Hyslop all invested huge amounts of their time and
energy to ensure that project management featured
highly in the RICS strategic priorities and we owe
them an enormous thank you. It is with these
efforts and future challenges in mind that I take
on the role as Chairman of the UK PMPG for the
2011-2014 term.
While Oceania and the UK already have their
own Boards, RICS aspires to have similar Boards
established in Africa, the Americas, Asia, Europe
and MENEA to support its 31,000 PMPG members
worldwide. The UK PMPG is represented by a Board
consisting of 12 members who were newly appointed
in February 2011 for a three-year term of office.
Members are drawn from a variety of roles and
organisations, e.g. senior management from the
public sector, partners from private practice,
developers, etc, and I am confident that this wide
experience will benefit all members over the coming
years. See www.rics.org/projectmanagement for the
full list of Board members.
Business planning
The mission statement for the UK PMPG is for RICS
to be recognised as the premier professional body
for all project management professionals operating in
the property and construction arena. At the time of
writing, the UK PMPG Board is completing its five-
year business plan and one of its main aims is the
development of relevant technical guidance to
maintain and enhance the high level of professional
standards demonstrated by members.
Guidance notes in development include
Comparative construction and engineering contracts
and Managing the design delivery and I welcome
your suggestions for specific ideas for new guidance
or research. Your participation is crucial in this area
responding to members needs is an important part
of our role and I would recommend that you
communicate and liaise with the Board on a regular
basis via the PMPG Community (see page 7) and
dedicated email address below. The Community is an
internet-based resource for use by project managers
and is an ideal place to discuss professional and
technical topics, and keep abreast of events,
government consultations, etc.
RICS publishes various practice standards and
guidance that are all free for members*. However, I
would encourage you to look at guidance that may
sit outside your own discipline. For example, RICS
has published research looking at the future of public
private partnerships in the UK, Australia, Canada, the
US and India. One of the recommendations to be
drawn from this research is the need to reduce the
cost and complexity of the tendering process, i.e. an
area that will be of interest to members outside of
these regions and the PPP arena (see page 7).
The PM as CA
There is significant upheaval in the property and
construction sector and, without doubt, project
managers are operating in a tough economic climate.
Project managers provide a wide variety of services
and some may occasionally fulfil the role of contract
administrator. This edition of the Construction Journal
has a theme of contract administration and contains
articles on subjects ranging from common traps
(page 8) and variations (page 18) to a comparison
with employers agents (page 16) and how it works
in Australia (page 12). I hope these are useful to
those of you who undertake this often complex role.
The Developing the Skills article published in the
July 1985 edition of The Chartered Quantity Surveyor
described some of the challenges facing aspiring
project managers and the expertise required for the
role. These included keeping up to date with changes
in technology, maintaining technical and commercial
expertise and continued professional development.
Despite the passage of time, these challenges remain
and are relevant today.
As Chairman of the UK Board, I recognise these
issues, including the importance of encouraging
communication and engagement with existing
members of the PMPG and attracting new members
to our industry. I look forward to working with you
in a spirit of partnership so that together we can
ensure that, despite challenging business conditions,
project management remains an exciting and
evolving profession.
Anne McCann is the new Chairman of the
UK Project Management Professional Group
pm.professionalgroup@rics.org
From the Chairman
T
Anne McCann takes the reins of the UK PM Professional Group Board and
discusses the challenges ahead for project managers
In it together
I would
encourage
members
to look at RICS
guidance that
may sit outside
their own
discipline, e.g.
on the future
of PPPs in the
UK, Australia,
Canada, the
US and India
September-October 2011 Construction Journal
5
* Published practice standards and guidance
are available from www.rics.org/guidance
Leader Do you have the X factor?
With competition for project roles coming from different professions, Nicholas B.
Jackson asks: do quantity surveyors make the best contract administrators?
hen I first started in the construction
business some 35 years ago as a trainee
QS, things were a lot simpler. There were
fewer forms of building contract, all being of a
traditional type which generally went unamended,
and collateral warranties were unheard of. The
architect was God it was then a much-respected
profession. To me at that time, most architects
appeared elderly, probably had military experience
(WWII or National Service) and knew how to organise
a team. Planning and building design was also easier,
with most following tried and tested standard details.
The architect would administrate the contract and
all the other professionals, including the contractor,
would report to him. Usually the architect would
appoint the team and he would often be the
only person to speak directly to the client. Most
practices were partnerships, firms could not
advertise and scale fees were followed. It was all
a nice gentlemens clubby atmosphere but times
were changing.
The newer architects arriving on the block seemed
to have been trained purely in design concept the
wackier the better and there was no perception
of detailing and administration appearing in their
curriculum. Building defects and problem contracts
became rife. Also in the US, turnkey contracts were
flavour of the day. The more knowledgeable clients
started to demand design and build contracts to
lessen risk and they were right. The architectural
profession became much derided and the QS rose
in importance after all, this chap looked after the
clients money and would often be asked to explain,
directly to the employer, why costs had risen. It was
only then a small step for the QS to be invited to
become contract administrator (CA) or employers
agent (EA).
Experience counts
In my experience, the best CAs have had a quantity
surveying background but that does not mean every
QS would make a good CA. Similarly, I have also
come across good CAs with a structural engineering
or building surveying background and yes, even
the odd architect. However, on balance, I would
usually look to someone with a quantity surveying
background to take this role, particularly on
larger projects.
Why? I think the QS training covers many facets
and an attention to detail and process that other
professions do not. In contractual terms, a CA or
employers agent is really a post-contract role,
however a successful project hinges on the time,
effort and thought spent on the pre-contract
activities. A QS is used to spending time on preparing
bills of quantities or contract sum analyses, contract
conditions and preliminaries. He is inherently aware
that a good set of documentation and a complete
design, which can be fully visualised and built on
paper, will pay dividends once construction work
commences. I am not sure other professions always
fully appreciate the importance of this fact.
Play to your audience
A good CA needs three principal attributes. Firstly,
they need a good theoretical knowledge of the role,
which comes via his training and qualifications.
Secondly, a practical knowledge, which only comes
with time and experience a wet behind the ears
graduate will simply not have the experience, as real
life is different from the theoretical. The third attribute
is the X factor and being on stage is a good
analogy. A good CA needs character, personality
and gravitas, essential in controlling a sometimes
large and diverse team, with site meetings being
the audience. The building business is still a people
business and a good project is a happy project. A
bit of humour injected into the proceedings can help
considerably. Not all QSs have this X factor, many like
to be backroom boys out of the limelight. While they
know what should be done, they have difficulties
in instructing such; stage fright perhaps. The world
of contract administration is not for them.
So yes, I think QSs do make the best CAs but the
challenge is to get all employers to always think of
the QS (or ex-QS) as the first and natural choice for
the CA/EA role. This can only be done by constantly
delivering on projects and by giving the role additional
emphasis during training and also by improved
marketing of your skills.
And if you dont? Well, there are lots of others
out there who will be more than happy to take
your place.
Nicholas B. Jackson is Development Director of
St Jamess Street Property Management Limited
nicholas.jackson@stjamess.com
W
6
A good contract
administrator
needs three
principal
attributes
good theoretical
knowledge
practical
knowledge
and the
X factor
Related competencies include: T016
Did you know?
7

In
brief
IT business
podcast BIM
The QS & Construction IT Business Group has
produced another podcast to provide members
with practical advice on a range of topical issues.
This looks at building information modelling (BIM),
explaining what it is and what it means for the
surveyor. Other podcasts in the series discuss
e-tendering, social media and the New Rules of
Measurement, and offer a convenient way of
keeping yourself updated.
All podcasts are available to download from the
RICS Online Academy via bit.ly/RICSITpod
Low-carbon construction
RICS has responded to the UK governments Low
Carbon Construction report with recommendations
on where it could play a leading role, including:
carbon measurement, BIM and the Green Deal.
Other items discussed with the Department for
Business, Innovation and Skills (BIS) included:
research into the financial performance of green
buildings in the US and potential UK studies, and
using the RICS Ska Rating tool to introduce more
rigorous requirements for refurbishment and tenant
fit-out projects.
RICS is also liaising with BIS and the Cabinet
Office to respond to governments Construction
For more information on the RICS response
to the Low Carbon Construction report, visit
bit.ly/RICSLCC
Strategy report. This aligns
with its focus on cost data
mining and benchmarking,
carbon-embodied
measurement, cost-led
procurement, facilities
management and BIM. RICS is now represented
on three government task groups and continues
to inform and influence these key policy initiatives.
BEG community sites
The Built Environment Group has a range of online
communities, including: QS & Construction, Project
Management, Building Control, Building Surveying,
Building Information Modelling, Infrastructure,
Dilapidations and Insurance. Joining a community
offers these benefits:
networking with like-minded professionals
discussing and debating technical developments
contributing to best practice
sharing information and obtaining feedback from
other professionals
supporting research in specialist areas
access to journals, articles and reports.
To join a community, or for more information,
email Sophie Mason via sophiemason@rics.org
Over 9,000 members have
now signed up to receive their
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To change your preferences, visit
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RICS has published new
research looking at the future
of public private partnerships
(PPPs) in the UK, Australia,
Canada, the US and India. It
examines the impact of the
financial crisis on PPPs and
their role over the next 10 years.
RICS has also produced some
recommendations to help PPPs function more
effectively across the world and help provide new
infrastructure. An overview of PPPs in various
global markets has also been produced by Davis
Langdon, which outlines some of the recent PPP
issues in global markets and the attitude of
clients and practitioners to their continued use.
For more information, visit bit.ly/RICSPPP
Public Private
Partnerships
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The EU has published the
new Construction Products
Regulation (CPR), which
requires construction products
to conform with basic
requirements and carry the
CE mark. The CPR will come
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Published practice
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Members can subscribe via
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he quality of being impartial can be defined as freedom from
bias or favouritism. The contract administrator (CA) is an impartial
role to an extent that is correct, but is not the whole story.
The challenges facing a CA arise from the basic contradiction in
the role; that of being appointed by the employer to carry out certain
services on their behalf and yet also being appointed to carry out a
decision-making function which requires the ability to act impartially
towards all parties. As a first step, I recommend reading the RICS
Contract administration guidance note*, which contains advice on
the CA role. There is limited case law which applies specifically to
CAs; however, the cases discussed later are likely to be of relevance
should a case involving a CA go to court.
The role of CA runs throughout an entire contract and often
commences in advance of the procurement process itself. From a CAs
perspective, it is good practice to ensure from the outset that the scope
of their services is clearly defined and any changes recorded every
project is different and each client will have different expectations.
Terms of appointment may be bespoke or based on forms, such as
the RICS Standard form of consultants appointment. In all forms of
contractual relationship, the responsibilities under such appointments
can be established more easily when properly documented. Such terms
can address the dual role of the CA and determine the extent of the
agency function (i.e. the legal term used to define the role of the CA
acting on behalf of the employer). For example, a typical CA
appointment may include:
the requirement to keep the employer fully informed or advise them
on risks or concerns regarding quality, cost and time
separately defining the circumstances where the CA is required
to make impartial decisions, e.g. to certify the date of completion or
determine applications for extensions of time from the contractor.
As CA, you may be a participant in the assembly of the building
contract. It is important to ensure the roles that you are given in the
contract match the roles you have committed to as part of your terms
of appointment. If not, problems will follow.
A case usefully addressing this issue (albeit in relation to the role of
the construction manager under a trade contract as opposed to a CA)
was Scheldebouw BV v St James Homes (Grosvenor Dock) Limited
[2006] EWHC 89 (TCC). It was found that an employer was not entitled
to substitute itself as contract construction manager but Mr Justice
Jackson said that as a result of his analysis, for a whole line of
authorities regarding the position of the decision-maker, then:
8
Mind your
fingers
From terms of engagement and matching the requirements of the building contract, to managing employer
expectations and dual responsibilities Laurence Cobb discusses the traps for the unwary contract administrator

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Contract administration Common pitfalls
1. The precise role and duties of the decision-maker will be determined
by the terms of the contract under which he is required to act.
2. Generally the decision-maker is not, and cannot be regarded as,
independent of the employer.
3. When performing his decision-making function, the decision-maker
is required to act in a manner which has variously been described
as independent, impartial, fair and honest. These concepts are
overlapping but not synonymous. They connote that the decision-
maker must use his professional skills and his best endeavours to
reach the right decision, as opposed to a decision which favours
the interests of the employer.
This case demonstrates the need for the CA to be entirely clear as
to the scope of their role and to manage employer expectations and
understanding about the need for impartiality in certain tasks.
This is particularly important regarding any certification role affecting
the distribution of monies between parties. The CA has to be careful
of any tendencies to favour the employer, or indeed the contractor,
concerning certification. While the employers first instinct when suffering
what it perceives to be losses is to attack the contractor, in the current
financial climate it is much more likely that it will widen its viewfinder and
focus its attention on the party with the deepest pockets, which may be
an insured CA.
Lack of expertise
Because of the range of services a CA is likely to have to fulfil, there
may be circumstances where their expertise is stretched to its limit or
beyond and the CA may need to seek additional expert advice. If so,
it is prudent for the CA to admit this either in the original scoping of
their services or whenever necessary during the project. An example
of this from a contract interpretation perspective occurred in the case
of West Faulkner Associates v Newham (1995) 11 Const. L.J. 157
where Lord Justice Brown found an approach to the construction of
a determination provision was one which no reasonably competent
architect could have reached.
He stated: At the very least he should have realised the clause might
fall to be construed differently and in those circumstances should
either himself have sought or asked his client to seek legal advice
specifically upon the point. He never did so. Instead, he left both his
client Council and their lawyers unaware of the reasoning and in
particular the construction which underlay his attitude.
This is a classic example of the potential for a CA to stray outside their
area of expertise and a practical tip when unsure is to report your view
as a CA, the reasoning for this and to advise the need to seek help.
A similar position arose in relation to a contractors duty to ensure they
had secured all insurances required under the terms of the contract. In
Pozzolanic Lytag Limited v Bryan Hobson Associates [1999] BLR 267,
project managers were engaged in relation to a building contract which
stated that PII was required but, in fact, no cover was put in place. A
dome that was built later collapsed due to design defects. It was found
the project manager had a duty of care to the employer to ensure the
insurances required under the contractors contract with the employer
were in place. If the project manager had not felt suitably qualified to
judge the adequacy of the contractors insurance provision then
professional advice should have been sought.
Mr Justice Dyson stated: If a Project Manager does not have the
expertise to advise his client as to the adequacy of the insurance
arrangements proposed by the contractor, he has a choice. He may
obtain expert advice from an insurance broker or lawyer. Questions may
arise as to who has to pay for this. Alternatively, he may inform the client
that expert advice is required, and seek to persuade the client to obtain
it. What he cannot do is simply act as a post box and send the
evidence of the proposed arrangements to the client without comment.
These cases clearly indicate that a CA is at risk if he is not prepared
to pursue the need for other expertise outside his skills set.
Clearly, there should be full reporting of ongoing tasks and progress.
It is important the CA ensures that any site minutes and correspondence
reflect the state of play on site for both progress and delay, and to
ensure relevant contractual paperwork is in place. Failure could leave
them open to attack at a later date, particularly if a contractor gains
entitlement to further payment under the terms of the contract due to
any failures by the CA to properly scope packages or misreport the
causes and extent of delay.
Timing and understanding
As a final example, a common issue CAs face is the timing of practical
completion and its certification. It is usual for the understanding of all
parties to a contract as to what constitutes practical completion to
vary. To be able to certify practical completion it is important the CA
pays due regard to the terms of the contract as opposed to their own
understanding of what constitutes practical completion. This was
illustrated in Menolly Investments 3 Sarl v Cerep Sarl [2009] EWHC
516 [Ch]. Here, practical completion acted as a trigger with significant
commercial consequences, i.e. the purchase of an issued shareholding
by Cerep in Menolly. It was found that the employers representative had
exceeded their authority to certify practical completion on the basis of
their own view of the meaning of the contract as opposed to the actual
wording itself.
These are just some of the examples where pitfalls await the
unsuspecting CA, but they can avoid potential traps if they:
clearly identify and agree their terms of engagement at the outset
ensure these match the requirements of the building contract it is
to administer
manage the employer expectations as to their dual responsibilities
do not overstretch themselves as to their expertise and knowledge.
For those who do not have the Contract administration guidance note
close to hand, together with a large dose of common sense then, rather
like the impartial football referee after a poor performance, you will get
abuse from everyone. But unlike the referee, you may potentially also
suffer financially.
Laurence Cobb is a Partner with law firm Taylor Wessing
l.cobb@taylorwessing.com
* Published practice standards and guidance are available from
For a free 7-day trial to isurv Construction, which contains a chapter on
contract administration, visit www.isurv.com/freetrial
It is important to ensure the roles you are given in the contract match
the roles you have committed to as part of your terms of appointment
RICS Legal Helpline Contract administration
10
Is a contractor entitled to an extension of
time (EoT) if variations are instructed during
a period of culpable delay, i.e. that is after
the contract completion date has passed but before
practical completion has been achieved? If so, how
should the extension be assessed?
These questions were considered in the
case of Balfour Beatty Building Ltd v
Chestermount Properties Ltd (1993) 62
BLR 1. Chestermount employed Balfour Beatty
to construct the shell and core of a London office
building under the JCT80 standard form. The works
commenced on site on 18 September 1987 and the
contract completion date was 17 April 1989.
As a result of various delays, the architect then
extended the date for completion to 9 May 1989. The
works were not, however, complete by this time and
the architect issued a certificate of non-completion
under clause 24.1.
By February 1990, the works had still not been
completed. During the five months that followed, the
architect issued instructions to Balfour Beatty to carry
out fit-out works, as a variation under the contract.
The shell and core works were completed on 12
October 1990 and practical completion of the fit-out
works was achieved on 25 February 1991. The
instructions were, therefore, issued during a period
of contractor culpable delay.
The architect subsequently granted a further EoT
for the fit-out works to 24 November 1989 based
upon his assessment of the time required to carry
out these works from the previously fixed completion
date. This meant that Balfour Beatty was still 15
months late in completing the works and rendered
them liable for liquidated damages of 3.8m.
Relevant event
The first question that the court had to decide on
was whether an architect could, under the terms
of the JCT80, extend the date for completion in
respect of a relevant event occurring during a
period of culpable delay. The court held that such
an extension could be granted on the basis that the
post-practical completion review under clause 25.3
implicitly included a review of delays occurring, as
here, between the contract completion date and the
date of practical completion.
Having decided that such an extension could
be granted, the second question was the correct
Continuing his look at common queries answered through the free RICS Legal Helpline Service, Kevin Joyce
considers the parties respective entitlements when variations are instructed by the architect in a period of
contractor culpable delay
Q
A
method for calculating the revised completion date.
It was common ground between the parties that the
instruction for the fit-out works had caused delay and
Balfour Beatty was entitled to an EoT. Chestermount
argued that the extension should be assessed by
adding the duration of the delay to the existing
contract completion date (i.e. the net method).
This gave the revised completion date certified by
the architect of 24 November 1989.
Balfour Beatty pointed out, however, that the
variation instruction relating to the fit-out works had
not even been issued by 24 November 1989 so they
could not possibly have completed by this date.
Balfour Beatty argued that the architect should
have granted an EoT on a gross basis, i.e. he
should have calculated the revised completion date
by adding the duration of the delay caused by the fit-
out works to the date the instruction was given. On
this basis, although in culpable delay, Balfour Beatty
would have received an automatic EoT for the period
between the completion date previously fixed and the
date the variation instruction was issued. The court
considered that the gross method was contrary
to the architects obligation to certify a fair and
reasonable EoT on the basis that the employer
would be deprived of any compensation for the
contractors failure to complete by the earlier
completion date. This, the court stated, would
be wholly inconsistent with the distribution of risk
[under the contract].
The court confirmed, therefore, that the net
method was appropriate and concluded that: The
completion date as adjusted was not a date which
the contractor ought to have achieved practical
completion but the end of the total number of
working days starting from the date of possession
within which the contractor ought fairly and
reasonably to have completed the works.
This case confirms, therefore, that in the case of
a variation which increases the works, the fair and
reasonable adjustment required to be made to
the period for completion may involve movement
of the completion date to a point in time which
may fall before the issue of the variation instruction
concerned.
Kevin Joyce is a Senior Associate with law firm
Pinsent Masons and runs a free Legal Helpline
Service for RICS Members
kevin.joyce@pinsentmasons.com
To use the free Legal
Helpline Service, email your
query to beg@rics.org
For reference sources go
to www.rics.org/catalogue
and search for extensions
of time
Related competencies
include: M006, T016, T017
11
Contract administration A contractors view
A hard habit to break
Despite construction being a people business, says Andrew Kimpton, a lack of trust between parties is the biggest
obstacle to overcome in contract administration
he contract administrator (CA) is engaged by
the client to administer the contract it does
what it says on the tin. In doing so, they must
act fairly and professionally in applying the terms of
the construction contract chosen.
All standard forms require a degree of adaptation
in order for them to be applicable; however, it should
be similarly recognised that many users substantially
amend the endorsed form of contract such that it
no longer represents the standard from which it
was derived. This can cause many problems with
contractors insurance companies who quite often
insist on approving any contract amendments as
many of these can be extremely onerous.
Unfortunately, instead of removing the risk, many
of these amendments simply pass the risk to the
contractor. Contractors should have to accept some
risk but all risks, dependent on the type, should be
allocated to the party best able to manage them
and price for their consequences. Contracts should
engage the project participants under contractual
arrangements that underpin not undermine
collaborative working.
that the client will not pay for something that would
normally be included, that partnering does not
provide the client with value for money and that
the return will not be as good as a normal project.
This lack of trust is the one issue that seems to
be the most difficult to overcome. CAs, although
impartial, are employed by the client and therefore
contractors in general are viewed as guilty until
proven innocent and are duty bound to record
and collate all information as they will undoubtedly
be asked to provide evidence and proof.
Despite the contract being between the client
and the contractor, the contractor relies on the
CA to relay information back to client, which is
not always the case. Perhaps then, contractors
should set the contracts as in other industries?
Is this not the logical next step now that, under
many contracts, the contractor employs the design
team (except for the CA)?
Resistance to change
So what is the answer? I am not sure if there is one.
New contracts are being introduced in particular,
collaborative contracts such as the JCT Constructing
Excellence or NEC. These are understandable and
adaptable but unfamiliarity with them, as well as the
associated stigmas, must be overcome in order to
get the most out of them. Everyone has some degree
of resistance to change and these forms of contract
do require a leap of faith.
The distinct advantage with these contracts is to
have the contractors input at the design stage with
a view to utilising their knowledge to provide value-
engineering ideas and solutions. This would benefit
clients and CAs who are under increased pressure
with extreme time restraints and directives (e.g. to
go with a lowest price tender) which would often not
mirror the CAs recommendation.
And what are the consequences if improvements
are not made? Well, QSs, other RICS members and
contractors are all trained to accept these issues,
hence why there are so many contractual nightmare
courses available. This means that, unfortunately, the
trend of inevitable claims and over-budget projects
will only continue.
Andrew Kimpton is the Managing Director
of Oakmont Construction
akimpton@oakmontconstruction.co.uk
T
Related competencies include: T016, T017
CAs, although impartial, are employed by
the client and therefore contractors are
viewed as guilty until proven innocent
Experienced construction professionals are an
essential asset for any clients construction project
in order to achieve a successful outcome. The
relationship with the CA is essential for the contractor,
who will communicate and collaborate (formally
and informally) to establish the project actions and
solutions. Contractors and professionals alike will
contribute to this successful outcome by knowing
exactly what they have to do to deliver the project.
Construction is still a people business and an
individuals experience and personality will play a
considerable part in the contracts administration.
In general, CAs will not apply the contract unless
something goes wrong (and by then its too
late!), therefore they will almost certainly take a
collaborative approach whatever the contract type,
as collaboration is much more of a behavioural
issue than a contractual one.
Awareness and application of collaborative
techniques is increasing; however, there is a definite
divide within the industry regarding partnering. Many
CAs embrace this partnering approach, however
many find it very difficult especially given the current
market conditions. Reasons include a lack of trust,
Contract administration An Australian perspective
UK not Aussie rules
Contract administration in Australia shares some similarities with its UK counterpart but also has some major
differences. Russell Welsh and Paul Roberts share their views
he roles and responsibilities of the contract
administrator (CA) in Australia are similar
to any other jurisdiction, i.e. to ensure
compliance with the contract pursuant to their
powers and authority generally, but not always,
in an impartial manner.
Their specific obligations will vary depending
on the contract form and whether the individual is
administering the contract on behalf of the principal
(or project proponent, etc) or the contractor (or sub-
contractor), by what are generally referred to as the
Superintendent and the Contract Administrator
respectively.
Typically, these obligations are set out in the
contract and an example from a commonly used
Australian Standard form (AS2124-1992) is:
Clause 23 Superintendent
The Principal shall ensure that at all times there is
a Superintendent and that in the exercise of the
functions of the Superintendent under the Contract,
the Superintendent
a) acts honestly and fairly
b) acts within the time prescribed under the
Contract or where no time is prescribed,
within a reasonable time
c) arrives at a reasonable measure or value
of work, quantities or time.
If, pursuant to a provision of the Contract enabling
the Superintendent to give directions, the
Superintendent gives a direction, the Contractor
shall comply with the direction.
In Clause 23 direction includes agreement,
approval, authorisation, certificate, decision, demand,
determination, explanation, instruction, notice, order,
permission, rejection, request or requirement.
Except where the Contract otherwise provides, a
direction may be given orally but the Superintendent
shall as soon as practicable confirm it in writing.
If the Contractor in writing requests the
Superintendent to confirm an oral direction, the
Contractor shall not be bound to comply with
the direction until the Superintendent confirms
it in writing.
As with standard forms in other jurisdictions, some of
those in Australia provide for the delegation of some
or all of the CAs obligations to appointed individuals.
Each State and Territory has its own legislation
which must be read in conjunction with federal
legislation. This often has the ability to impact on the
CAs role and, accordingly, they have to keep abreast
of legislation, particularly when working interstate.
For example, several States have Workmens Lien
T
legislation and Queensland has the Subcontractors
Charges Act 1974, both of which can affect the ability
to make payments.
The statutory adjudication process, applicable
everywhere except South Australia
1
, provides further
complications for the CA in that no two pieces of
legislation are identical. Additionally, there have been
several decisions from the courts which impact on
the ability of the CA to perform their duties correctly.
For example, a recent Queensland Supreme Court
judgement
2
addressed the right of a contractor to
make a payment claim after practical completion.
In this case, His Honour Douglas J decided that the
contractors right to make a payment claim (under
the Building and Construction Industry Payments Act
2004) after practical completion was restricted to the
final claim at final completion. This is notwithstanding
that the user guide to the main Australian Standards
contracts specifically provides otherwise.
In at least one jurisdiction (see the Queensland
Building Services Authority Act 1991), the ability to
perform the role of a CA is conditional upon them
holding a Builders License in the appropriate class.
This precondition may be rolled out throughout
Australia within the next few years as a result of
Council of Australian Governments reforms.
Forms of contract
There are numerous disparate forms of contract
typically used in Australia which also makes
consistent contract administration more difficult.
Examples of standard main contract forms
(between principal and contractor) in common
use include, but are not limited to, the following:
1. Australian Standards AS2124, AS4000,
AS4902, and AS4305 typically these provide
for a Superintendent to administer the contract
2. Master Builders Association (MBA) suite
typically these do not have independent
contract administration
3. Housing Industry Association (HIA) suite
typically these do not have independent
contract administration
4. The Australian Building Industry Contracts
(ABIC) suite jointly published by Master Builders
Australia and the Australian Institute of Architects
in which the architect administers the contract.
Most of the standard forms have a corresponding
standard form of sub-contract; arguably, none
of which provide for independent contract
administration. In these cases, similar to the UK,
the administration role is typically fulfilled by one
of the contractors in-house staff, who (especially on
smaller projects), may have little or no professional
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Contract administration An Australian perspective
training or qualifications; sometimes leading to
unsatisfactory results for one or more of the parties.
Government agencies generally have their own
forms of contract some of which are extremely
onerous and biased against the contractor; for
example, the widely used Department of Defence
contract form is recognised throughout the industry
as being particularly onerous for contractors.
In addition to the standard forms of contract
available, many forms are purpose written, usually
by solicitors. It is not uncommon for these to be
branded as an amended standard form, but only on
closer review are they found to be heavily amended
and often bear little resemblance to the original. This
is a significant issue for the industry, e.g. without
reading through every set of terms (often impractical
with the time and resources available) changes to
terms in the standard form at the time a contract is
executed can be missed, possibly leading to adverse
outcomes later on.
Whereas in the UK, amendment to standard forms
of contract has, historically, been avoided (where
possible), in Australia this is often the norm, with all
of the corresponding negative consequences.
CA qualities
Most of the standard forms of contract, with at least
one noticeable exception (see point 4 earlier), leave
it open as to the prerequisites for the person who
administers the contract.
In practice, CAs are drawn from almost the
entire spectrum of the industry, e.g. QSs, building
surveyors, builders, architects, engineers, etc.
The contractors CA, i.e. the one administering
sub-contracts, has a peculiar identity in Australia
and is almost perceived as a separate profession.
These are usually builders or engineers, often with
limited experience and/or formal contract
administration or legal training.
There is certainly a need for rigorous CA training
in Australia and whereas there is a plethora of
courses, seminars and workshops available, there
is no uniformly recognised standard qualification.
In addition, there are no CA practice standards
published in Australia, unlike the UK
3
.
There has been a noticeable increase in the
number of lawyers found in contract administration
teams on large projects recently. This usually, and
not surprisingly, results in a wholly legalistic approach
being taken rather than a practical perspective born
of a combination of knowledge and experience.
Arguably, the UK QS is often the most appropriate
professional to administer the contract. In Australia
however, the standing of the QS is far from exalted.
The QS profession has allowed itself to become a
subservient player, often engaged as a secondary
consultant to other professionals such as project
managers, architects or engineers. The QS does
not have the same level of respect within the
construction industry that it enjoys in other parts of
the world, particularly in the UK.
Some will say that RICS must take partial
responsibility for the perception of the QS profession
in Australia. However, since the establishment of
RICS Oceania some 10 years ago, the influence
of the institution has grown significantly and
consequently the acknowledgement within the
wider community of the abilities and expertise of the
chartered QS; however, there is much work still to do.
This, though, is not to suggest that persons
other than chartered QSs are unsuited to the
role of a competent CA as this is not the case.
Until recently, the QS played a limited role in
Australia in comparison to the UK. Many QS firms
appear content to restrict their practice to core
competencies such as cost planning, bill of
quantities production or tax depreciation, with
a limited post-contract role. Twenty years ago,
very few QS firms offered project management or
contract administration services, whereas today
many firms do.
The market acknowledges the general poor
level of contract administration in Australia. This
was typified recently when a French contractor
was heard to say in a project meeting Give me a
Pommy chartered QS for the post-contract phase.
It shows how much contract administration needs
to improve in Australia when an old enemy requests
the services of a UK professional.
Further information
1
The Building and Construction Industry Security of
Payment Act 2009 (SA) is yet to be proclaimed (as at
June 2011)
2
Tailored Projects Pty Ltd v Jedfire Pty Ltd [2009]
QSC 032 Douglas J 06/03/2009
Russell Welsh is the Oceania Manager for the RICS
Dispute Resolution Service and Paul Roberts is the
National Manager of Contract and Dispute Services
at Aquenta Consulting
rwelsh@ricsdrs.com.au
paul.roberts@aquenta.com.au
3
The Contract administration guidance note is
available from www.rics.org/guidance

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In at least one jurisdiction, the ability to
perform the role of a CA is conditional
upon them holding a Builders License
in the appropriate class
Building information modelling
A brave new world
Steve Pittard introduces building information modelling and discusses why it will be a seismic shift in how
buildings are designed, constructed and operated
magine being able to discover all of the information about a window,
such as its design, weight, size, cost, specification, manufacturer,
colour, maintenance details, lifecycle details, logistics and even its
carbon content. Now imagine this information was in a single place, for
all components of a building and was accessible by the whole project
team. Welcome to the world of building information modelling (BIM).
BIM is a common term in manufacturing and engineering but is now
beginning to make an impact in construction. At a strategic level, BIM
offers the capacity to address many of the industrys failings in areas
such as waste, value creation and productivity.
BIM is a new technology and a completely new way of working. It
moves away from using conventional word processing and CAD as it
creates a digital prototype of the building model and simulates it in a
digital world with increased use of common standards and product-
orientated representations. BIM makes the model itself the primary tool
for project documentation, from which an increasing number of reports
such as plans, schedules and bills of quantities may be derived.
New thinking
However, BIM involves more than simply implementing new software it
is a different way of thinking. This requires a move away from traditional
workflows where parties often use separate information pools using
different (usually incompatible) software to a situation where all parties
(including architects, surveyors and contractors) can share a common
information pool.
BIM combines technology with new working practices to improve
the quality of the delivered product and the reliability, timeliness and
consistency of the construction process. It provides a common, single
and co-ordinated source of structured information to support all parties
to the delivery process, whether during design, construction or operation
providing a single version of the truth. And because all parties have
access to the same data, the information loss associated with handing
over a project between lifecycle stages is kept to a minimum.
I
Often mistakenly referred to as 3D, 4D or nD, BIM should not
be confused with the number of dimensions used to represent
a building. Nor should users think they have to invest in a
single, universally applied system. BIM provides a common
environment for all information defining a building, facility or
asset, i.e. representations of the actual parts being used in
construction, along with geometry, spatial relationships,
geographic information, quantities and properties
of building components. While being able to share
this information is a prerequisite, BIM can be
implemented at varying levels of integration, and
not all information needs to be shared. However,
benefits increase where more information is
available for reuse throughout design,
construction and occupation.
A model view
More importantly, the information relates
to the intended components and
processes, rather than relating to the
appearance and presentation of
documents and drawings. More
traditional 2D or 3D drawings may
well be outputs; however, instead
of generating information in
the conventional way i.e. as
individual drawings, this could
be produced directly from
the model as a view of
the required information.
By making the model
the primary tool for the
whole project team,
BIM survey results
A recent survey of RICS members (primarily partners and directors)
by BCIS and the RICS BIM Steering Group provides an insight into
the professions readiness to embrace BIM. A detailed analysis
of the results will be published shortly but its key findings are:
low use and awareness, with few recognising its potential
benefit to them and less than 5% indicating any frequent use
98% of respondents from the QS & Construction Professional
Group indicated this was largely due to low client demand, while
95% pointed to a lack of training and education
clients, building owners and facilities managers were seen as
benefiting most from BIM with suppliers benefiting the least
while few expected any increase in their baseline fees, only
40% saw a potential for expanded services, with a worrying
30% seeing no benefit for either them or their organisation
when asked what RICS should be doing, the provision of
guidance on the use of BIM and associated training were
seen as priorities.
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Building information modelling
of the current Parliament, with non-complying construction companies
facing exclusion from the public sector programme.
Recent experience also indicates an international trend in large clients
and government agencies to mandate the use of BIM, not only for
delivering a building but also in its operation. BIM is equally applicable
to supporting facilities and asset management as it is to design and
construction. Indeed, the output of the design model may well replace
the need for traditional O&M manuals interrogating an intelligent model
(perhaps linked to interactive guidance on the repair and/or maintenance
process) as opposed to searching through outdated documentation has
obvious advantages.
Industry awareness
Unfortunately, the largest single barrier to exploiting BIM is the lack of
industry awareness (see BIM survey results panel). Clients are frequently
unaware that they can have a major influence on the deliverables from a
project and this presents a major opportunity for surveyors.
BIM has the potential to impact on every aspect of our profession it
has applications for those involved with property, facilities management,
building surveying, civils and traditional building construction. And while
it may automate some tasks (such as the production of quantities,
estimates and programmes) BIM should be seen as an opportunity to
deliver new service streams and extend our professional reach into new
areas spanning the complete asset lifecycle.
BIM is here to stay and so we must either learn to adapt and embrace
it or risk the threat of losing (more) ground to others.
Steve Pittard is a Lecturer at London South Bank University and
sits on the RICS BIM Steering Group. He also Chairs the RICS QS &
Construction IT Business Group and sits on the QS & Construction
Professional Group Board
pittards@lsbu.ac.uk
BIM ensures that all designers, contractors and sub-contractors maintain
their common basis for design, and that the relationships between
systems can be explored and fully detailed. Working with BIM will clearly
require new skills that will have to be acquired from formal training and
on-the-job practice.
However, BIM is not a panacea for all of constructions ills it remains
just as possible to produce a poor model (in terms of its functionality,
constructability or value) as it is to produce poor drawings, schedules
or any other more traditional form of information. Also, in the
absence of any collaborative management effort, models may end
up being prepared to suit the originator and not with all parties
in mind. Ensuring that there is an agreed information structure
and exchange protocol to suit all parties will improve certainty,
confidence and consistency. And by moving to a shared
information model, project failures and cost overruns
should become less likely. BIM means having a better
understanding and control of costs and schedules, and
ensures that the right details are available at the right
time to reduce requests for information, manage
change and limit (or even eliminate) unforeseen
costs, delays and claims.
Client value
Clients are often best placed to lead the
introduction of BIM. Understanding the value
of building information and its impact on
their business is leading many to help
specify the standards and methods used
in its adoption. Some, especially those
operating in sectors such as retail, have
already demonstrated that the capture
and reuse of information delivers
significant improvement in the
development and utilisation of
assets, e.g. Asda now mandates
BIM on new projects.
Clients are clearly beginning
to recognise the importance
of BIM. Indeed, as evidenced
in its recently published
Construction Strategy,
BIM is high on the UK
governments agenda
as it sees BIM as a
prime enabler to
achieve its widely
quoted efficiency
targets of around
20% by the end
RICS BIM Steering Group
Following direct input to the BIS and CIC initiatives to advise
the UK governments five-year plan to promote BIM through
procurement, the Steering Group is developing a programme
to increase the use of BIM within surveying. Given the results
of the BCIS survey, this is likely to have a short-term focus on
communication, education and awareness, e.g. a free BIM
podcast will be published soon via the RICS Online Academy.
In addition to Alan Muse (Chairman, RICS), other members of
the steering group include Joe Martin (BCIS), Steve Pittard (London
South Bank University), Simon Rawlinson (EC Harris) and Simon
Raine (F+G).
15
Related competencies include: M007, T013, T022, T064, T067
For more information about the BIM Steering Group or community, email
Alan Muse, Director of the QS & Construction Professional Group, via
amuse@rics.org
For reference sources go to www.rics.org/libraryblog and search for BIM
The RICS Online Academy is available at www.rics.org/onlineacademy
2011
Modern Methods of Construction conference, 5 December 2011, RICS
HQ, London, www.rics.org/modernmethods2011
16
Continuing the series of articles on construction law myths, Arriel Eder looks at the differences between two
important roles under JCT contracts
he terms contract administrator and employers agent are
often used interchangeably without reference to the procurement
method used. The roles are similar but have distinct and subtle
differences in their duties and loyalty to the employer.
Typically, an employer will engage a professional consultant to manage
its works. The scope of their duties will depend on the terms of its
appointment but they will usually have a dual role as:
administrator and
certifier.
As administrator, the professional represents the employers interest. As
certifier, they use their independent professional judgement in certifying
payments and assessing claims for delay and loss and expense.
This dual role gives rise to an inherent potential conflict between
the employers and contractors interests, e.g. it is in the employers
interest for a certifier to take a narrow view on valuation of works and
assessments of delays as they would then reimburse the contractor the
lowest amount for completed works. A narrow approach is clearly not
in the contractors interest.
JCT Standard Building Contract without Quantities (SBC/XQ)
Under Article 3 of this contract, the employer specifies who is to
be the Architect/Contract Administrator (CA). As administrator, clauses
3.14 to 3.21 empower the CA to issue instructions to the contractor on
various matters including variations, provisional sums and rectifying work
not in accordance with the contract.
As certifier, the CA assesses whether the contractor is entitled to
extensions of time (clause 2.28), issues the certificate of practical
completion (clause 2.30) and issues interim certificates (clause 4.9)
and the final certificate (clause 4.15).
In addition, the courts have held (in Sutcliffe v Thackrah [1974]
AC 727) that the CA role has a duty to act impartially and fairly when
performing assessments and certifications to avoid conflicts of interests
between the employer and contractor.
JCT Design and Build Contract (DB)
Under Article 3 of this contract, the employer elects an Employers
Agent (EA) but the term (unlike the CA in the JCT SBC/XQ) rarely
appears throughout the conditions. Article 3 provides that the EA has
full authority to receive and issue applications, consents, instructions,
notices, requests or statements and otherwise to act for the Employer
under any of the Conditions.
The EA, by virtue of the principles of agency, must adhere to the
instructions of the employer and is more closely aligned with the
employer than a CA.
Under the JCT DB, it is the employer who decides whether an
extension of time is granted (clause 2.25) and who issues the statement
(rather than a certificate) of practical completion (clause 2.27) and interim
payments (clause 4.7). Furthermore, clauses 3.9 to 3.14 provide that
the employer issues instructions to the contractor on various matters
including provisional sums, inspection/testing and rectifying work not in
accordance with the contract. Despite the apparent absence of utilising
the term EA, in practice they will usually administer the contract and act
as the employers mouthpiece on all of these matters.
In determining if the EA is to act impartially in making decisions, it is
necessary to consider how disputes would be handled. Under this
contract, it is the employers decisions that are subject to challenge by
the contractor. Where the EA has issued a statement or made decisions
as agent of the employer, these actions are treated in law as having been
made by the employer. The authority afforded to the agent binds the
Related competencies include: T016, T017

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a contract administrator is the same
as an employers agent
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employer as principal and the employer cannot challenge its agent under
the building contract. Recourse against the EA would have to be sought
under the terms of the stand alone engagement between the employer
and its agent. Accordingly, in issuing statements and making decisions,
the employer (acting through its EA) should, as would the CA, carry
out its duties impartially and exercise its own professional judgement
(i.e. using reasonable skill and care) or they may be open to challenge
by the contractor.
The dual role
While the terms CA and EA imply differing roles, the role of administrator
is present within both. Employers and contractors should expect
professionals who undertake such roles to be impartial in their decision-
making. Where professionals are engaged directly by the employer (as
agent) they cannot be considered truly independent, but by virtue of their
authority to bind their principal they should be expected to act impartially
in the context of carrying out certain functions under the contract, such
as certification.
Arriel Eder is an Associate with law firm Nabarro
a.eder@nabarro.com
The courts have held that the CA
role has a duty to act impartially
and fairly when performing
assessments and certifications
to avoid conflicts of interests
17
Legal issues Tolent clauses
Courting controversy
Section 108 of the Housing Grants, Construction and Regeneration Act 1996 has failed to clarify the situation
on Tolent clauses, says Henry Sherman, so it is a good job the courts are there to prevent any abuse
n the April-May edition*, I summarised the key
amendments to the Housing Grants, Construction
and Regeneration Act 1996 (HGCRA) which I
suggested at the time were likely to come into
force in October this year.
At the end of June, the UK government duly
confirmed that this would happen on 1 October.
In relation to one of the above HGCRA amendments,
however, my powers of prediction entirely failed me.
The change in question was aimed at removing the
disincentive to adjudication resulting from clauses
which made one party liable for all of the costs of the
adjudication, whatever the outcome so-called
Tolent clauses (named after the case in which they
appeared Bridgeway Construction Ltd v Tolent
Construction Ltd). The shiny new s.108A of the
HGCRA was aimed at closing this notorious loophole
in the Act as it stood and, on what was then the
generally accepted view of the wording, this aim
could be said to have been achieved. Over recent
months however, much of the attractive showroom
gloss has been removed from the section by a
mounting chorus of criticism of its terms.
differently. On this interpretation, as long as the
contract provides for the adjudicator to allocate his
fees and expenses as above, the parties are free to
agree in advance whatever they want to as far as
their own costs are concerned.
If such an interpretation were to prevail, it would
effectively legitimise Tolent-style clauses. It would
also, perversely, undo a court decision in the period
since the amendments were passed (see Yuanda v
WW Gear [2010] BLR 435) that such clauses did not
in fact comply with the old HGCRA. The clock would
be put back with a vengeance.
A helping hand
Despite these concerns, the government has hitherto
been adamant that there is no problem. Fortunately,
help is at hand in the shape of the judiciary. When
they are construing ambiguous wording of this kind,
the courts have the power to take into account the
intentions of the legislature and in this case these at
least are clear.
The specialist Technology and Construction
Court (TCC) has long adopted a robustly policy-
driven approach to statutory interpretation. There is
therefore little doubt that, if called upon to interpret
the clause, the TCC judge who is handling the case
will do so in the way originally intended. What is
unfortunate is that an opportunity for Parliament to
sort this issue out once and for all has been missed.
As a result, the law will become clear and further
abuse brought to an end only once a dispute arises
and comes before the TCC. Only if some hapless
party is driven to take on the role of guinea pig and
incur legal fees (not all of them recoverable) will the
TCC at last be able to do what the government
should have done in the first place.
To think there are those, including some MPs,
who are critical of what they see as the excessive
powers of the courts...
Henry Sherman is a Partner with
CMS Cameron McKenna
henry.sherman@cms-cmck.com
* New Act, new responsibilities, page 12,
Construction Journal, April-May 2011,
www.rics.org/journals
2011
RICS Legal Issues in Construction conference,
29 November 2011, RICS HQ, London,
www.rics.org/legalissues2011
Related competencies include: M006, T017
I
Clear intention
The intention of Parliament was clear and it was
expressly confirmed during one of the debates
by the Minister then responsible, i.e. to outlaw
all agreements in advance between the parties in
relation to the allocation of costs except to the extent
that they provide for the adjudicator to allocate his
fees and expenses between the parties. In other
words, the only mechanism for the allocation of
costs which would be permitted in the adjudication
clause itself, or any adjudication rules incorporated
by its terms, would be one which allowed the
adjudicator to split his fees and expenses between
the parties in the normal way.
The wording of s.108A is, however, not as clear
as it should be and as a result it can be read very
Only if some hapless party is driven
to take on the role of guinea pig
and incur legal fees (not all of them
recoverable) will the TCC at last be
able to do what the government
should have done in the first place
Contract administration Variations
A
for the good
Variations make the life of a contract administrator easier, says Duncan Cartlidge, but handling them properly under
JCT05 needs clear communication and a full understanding of their impact
or the contract administrator (CA), life would be far more difficult
if the ability to change or modify the design, quality or quantity
of the works were not incorporated into the conditions of
contract, as once a contract is concluded the terms cannot be
changed unless the:
contract contains provision for variations or
parties make a further valid agreement for alteration.
Consequently, if a change (variation) provision were not included in
contract terms then a fresh agreement would be required each time.
This would be unworkable and is why most standard forms of contract
include variation provisions.
Although the inclusion of these provisions gives the CA the power
to issue variations, this power is not unlimited, and it should be
remembered that a variation (or series of) may not change the
scope of the work, otherwise the contractor is not obliged to comply.
Against this, the main standard forms of contract also contain
a clause which states that variations shall not vitiate the contract,
i.e. that variations of any size or value can be ordered in contradiction
of the point in the previous paragraph. A further issue is whether an
exceptionally large number of variations can be ordered. It should be
borne in mind that on most complex modern contracts it is common for
there to be a large number of variations, albeit of minor individual nature.
What is a variation?
This differs from contract to contract and the following notes generally
refer to JCT05 Standard Form of Contract with Quantities. Clause 5.1
defines a variation as The alteration or modification of the design, quality
or quantity of the Works. Other standard forms of contract use the
terms Change of Employers Requirements or Compensation Event
when referring to variations.
In addition to the physical modification of works as described,
a variation is also the imposition of any obligations or restrictions
sometimes referred to as change in condition for work (e.g. restrictions
to site access).
F
A variation, as an instruction, shall be in writing and can be issued
at any time usually using proformas, but may also be issued by:
amended drawings
a letter
a verbal instruction (subsequently confirmed in writing) or
the contractor.
In addition, the following errors and inadequacies in contract bills
are treated under JCT05 as if they were variations:
errors in the bills of quantities (e.g. an unstated departure from
the method of preparation (i.e. SMM7/NRM2)
any error in description
any error in quantity
items omitted in error
errors in information supplied to the contractor for a defined
provisional sum.
Financial implications
Discrepancies between contract documents are not strictly speaking
variations, but they are included as they may have a financial implication.
JCT05 clause 2.15 states that the contractor must immediately inform
the CA in writing if he finds any discrepancy in, or divergence between,
any two from:
the contract bills
the contract drawings
an architects instruction (excluding variations)
drawings or documents under clauses 2.9 to 2.12
the Contractor Design Portion documents (if applicable).
The CA must then issue instructions in clarification. These may increase
or decrease the contract price although clause 2.15 is silent on this.
Additional items treated as variations under JCT05 include:
compliance with statutory requirements
restoration of work after damage by fire
protective work, etc, on outbreak of hostilities.
18

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Contract administration Variations
Good management by the CA is required to ensure that all parties are
kept informed of the impact of variations on final cost and completion
dates. This includes:
a procedure to indicate authority levels
standard documentation for the issue of variations
requests for estimate forms
requests for variation documents,
an authorisation request form
a variations register.
A clearly defined audit trail should be established and, as soon as
variations are evaluated, their financial implications should be included
in financial statements, valuations and the final account.
Valuing variations
Valuing changes in quantity or quality of work rarely poses problems
but disputes can occur over the disruptive effect caused by variations
1
;
e.g. when the manner or timing of the works is disrupted or altered
by the issue of a variation. Another possible cause for dispute is the
interpretation of the term significant change when assessing quantity
changes. It is widely accepted that if there is a significant variation
to the quantity of work, a fair price should be paid but what does
significant change mean? There is no absolute rule and this is often
resolved by negotiation.
The contractor and employer have the task of agreeing the value
of variations so they may be included in interim payments here, the
bills of quantities come into their own and it is important that bills or
schedules of rates are priced in detail.
When valuing variations there are a number of widely accepted
principles for traditionally procured contracts if:
the work is the same as the original scheme, then bill or schedule
rates should be used (clearly this can be used for omissions)
the work is similar to the original, then rates based on the original rates
should be used
there is no work comparable to the original, then an agreed or
reasonable rate can be used (building up rates from first principles)
the work cannot be measured and valued, then daywork rates
may be used.
In all of the above, the impact on preliminaries, overheads and profit,
etc, should be considered as appropriate for the circumstances. For
preliminaries, it should also be established whether items are time-,
method- or value-related.
Daywork vouchers
JCT05 clause 5.7 deals with variations which cannot be measured
and valued in accordance with the above rules. The prime cost of the
work shall be recorded on daywork vouchers showing the hours for
labour and plant, and the cost of materials. The prime cost shall be
calculated in accordance with the relevant Definition (this depends
on the trade) and a percentage shall be added for overheads and profit
(this percentage will have been entered in the bills by the contractor).
The vouchers should be handed to the CA (or his authorised
representative) for signature no later than the end of the week after
the work was done plus, the CA must have signed the sheets before
payment can be made. The CAs signature verifies that the details
regarding labour plant and materials are correct for record purposes
only; it does not mean that any prices are correct (these must be
checked by the QS) or that the work must be paid as daywork if the
work could be measured it will be valued according to the above rules.
The CA should only sign daywork sheets when the hours worked can
be verified and this can only be done when the CA has been advised
in advance that daywork is to commence.
A default starting point?
There are sometimes disagreements regarding whether work can be
measured and some contractors will attempt to use dayworks as the
default starting point. On occasions, a variation may include an element
of both, e.g. forming an opening in an already constructed structural
element and then lining the opening with a softwood frame; the forming
of the opening would be measured on a dayworks basis whereas the
frame could easily be measured and priced using bill rates. Many
contracts provide for the value of the varied work to be agreed before
the issue of the instruction which helps to avoid disputes as, traditionally,
the work is nearly always complete before the value has been agreed
(although this can cause delays).
JCT05 clause 5.9 covers the situation where a variation or instruction
is issued to:
expend a provisional sum for undefined work
vary the expenditure of a provisional sum for defined work
carry out work against an approximate quantity in the contract bills.
If this results in substantially changing the conditions under which other
work is carried out, then the other work shall be treated ...as if it had
been the subject of an instruction of the CA requiring a variation... and
shall be valued according to section 5; no formal instruction in writing
is required. This clause is saying that changes in such other work are
deemed to be a variation.
Variations can test a CA in many ways but perhaps the biggest
challenge is to ensure that the full impact of new and proposed
variations on both cost and scope of the works is always known
and communicated to everyone.
Duncan Cartlidge is an Associate Lecturer at Glasgow Caledonian
University, an External Tutor for the College of Estate Management
and sits on the RICS QS & Construction Professional Group Board
duncan.cartlidge@btinternet.com
New Aspects of Quantity Surveying Practice, 3rd Edition,
by Duncan Cartlidge is available from www.ricsbooks.com
1
The Valuing change guidance note is available from
RICS Contract administrator is an online system for producing
JCT contracts. For more information, visit bit.ly/RICSCAdmin
Related competencies include: T016, T064, T067, T074
A variation shall be in writing and can be issued at any time usually
using proformas, but may also be issued by: amended drawings, a
letter or a verbal instruction by the contractor
Legal issues FIDIC
A stress-test strategy
In their third article on FIDIC, Mark Roe and Khalid Ramzan look at time and money claims and dispute resolution
under the Red, Yellow and Silver Books and discuss the risks in the FIDIC approach to claims
t is often said that the FIDIC Red and Yellow Books
are claims-led contracts where contractors will
bid low to win work and then rely on contractual
entitlements to extract additional payments through
the claims mechanisms. There is some truth to this
but the statement is simplistic (and would certainly
not apply to the Silver Book which limits contractors
rights to claim to very few matters).
To understand why, we must go to the heart of the
forms. The Red and Yellow Books are vehicles for
traditional procurement where the employer takes
the risk (to varying degrees) of cost and time over-
runs. They are administered by an employer-
appointed engineer who is expected to act with
fairness when determining claims.
The Silver Book, however, is intended to be a fixed-
price, lump-sum contract. FIDIC guidance says it can
be used for a [build-operate-transfer] or similar type
venture, but also for all the other projects both larger
and smaller... where government departments and
private developers wish to implement projects on a
fixed price turnkey basis. It is primarily suited to
projects where cost and time certainty is
paramount and the contractor should
therefore build in a healthy risk
premium.
and hydrological conditions but excluding climatic
conditions.
Unforeseeable is defined as not reasonably
foreseeable by an experienced contractor by the
date for submission of the Tender.
By contrast, in the Silver Book where the
contractor is responsible for verifying and interpreting
all data concerning ground conditions, he is deemed
to have satisfied himself as the correctness and
sufficiency of the Contract Price. The consequences
of this are that the Contract Price shall not be
adjusted to take account of any unforeseen difficulties
or costs (4.12(c)).
If the Silver Book is selected as the basis of the
risk allocation between parties, the contractor must
have sufficient time to examine all employer-
provided data and independently perform
the necessary investigations
to price (to the extent
20
I
Extra time and money
All three forms make the contractor liable for delay
damages if completion is achieved after the agreed
completion date unless the delay is caused by a
matter for which an extension of time (EoT) is
available. All FIDIC forms provide a range of EoT
and extra cost entitlements. Key to the successful
use of FIDIC is understanding how entitlements differ
according to the form.
Entitlements that appear in all forms include:
failure of the employer to give possession of
the site at the contracted time (2.1)
delays caused by authorities (8.5)
changes in laws which affect the contractors
obligations (13.7).
Only in the Red and Yellow Books risk allocation is
the contractor entitled to an EoT where it encounters
physical conditions that are unforeseeable.
Physical conditions are defined as natural physical
conditions and man-made and other physical
obstructions and pollutants... including sub-surface
possible)
the risks of any
unforeseen conditions.
FIDICs own guidance discourages
its use where there is insufficient time or
information for tenderers to scrutinise and check the
Employers Requirements ...[or] if construction will
involve substantial work underground or work in
other areas which tenderers cannot inspect....
Unfortunately, many contractors enter into Silver
Book contracts without making proper checks, only
to suffer serious losses.
Conditions precedent to claim
The Red, Yellow and Silver Books, require strict
compliance with the condition precedent to notify
the engineer (the employer under the Silver Book) of
its claim no later than 28 days after the contractor is
made aware of the event or circumstances giving rise
to it. If the contractor does not, then all three forms
are emphatic on the consequences: ...the Employer
shall be discharged from all liability in connection with
the claim (20.1). While common law jurisdictions will
uphold this provision, in some civil code jurisdictions,
e.g. France, the condition precedent arguably
breaches public policy.
The contractor must then submit a detailed
application within 42 days of notifying the claim.
This gives the engineer/employer the information to
consider it fully. Under the Red and Yellow Books,
when the engineer carries out its duty to determine
any matter regarding entitlements under the
contract, it is required to make a fair determination
In countries
that have
adopted
the French
Civil Code,
liquidated
damages
clauses
providing for
payments in
excess of the
actual loss
suffered will be
likely deemed
invalid
21
Legal issues FIDIC
in accordance with the Contract, taking due regard
of all relevant circumstances (3.5). An identically
worded obligation appears in the Silver Book but
in respect of the employer himself rather than a
notionally impartial third party.
It is easy to see why the employer who has a
vested interest in ensuring the contractors claims
are unsuccessful may be tempted to stretch the
definition of fairness in the Silver Book. In many
cultures, employers and engineers consider that an
engineer in the employers pay should look after their
best interests.
A quick and robust contractual
mechanism is important for
reviewing engineers
decisions
Arbitration
International arbitration is envisaged as the final forum
for dispute resolution under all FIDIC forms. This
makes sense as contractual relationships commonly
involve parties contracting in countries with legal
systems often deemed unsatisfactory.
Agreeing to local law as the
governing law of the contract
is not usually
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final dispute resolution.
FIDIC forms provide for a final
decision by arbitration administered by, and
subject to, the rules of the International Chamber of
Commerce (ICC).
Dispute Adjudication Boards
All three forms provide for the appointment of a
Dispute Adjudication Board (DAB) but with differences
about when one comes into existence. The Red
Book provides that it should be appointed by the
date stated in the Appendix to Tender. The Yellow
and Silver Books provide that it will be appointed by
28 days after a party gives notice of its intention to
refer a dispute to the DAB.
However, the parties should consider on a
project-specific basis:
whether a DAB is necessary
whether it comes into being at the time of a
dispute or whether it is appointed from the outset
of a project
the qualifications required of members and
should they have a technical, legal or accounting
background, and any particular language skills
will the DAB be empowered by the parties to
provide non-binding opinions?
DABs may not be suitable for large and complex
disputes and with the DAB decision being interim (if
one party is dissatisfied it may, on giving appropriate
notice, arbitrate the decision), the cost of maintaining
a DAB for the duration of the project may not be
justified. Considering these issues is vital for a
contractor, particularly during contract formation, to
enhance the prospect of successful cost recovery.
Outside the UK, immediate enforcement of DAB
awards can be difficult and if a party fails to honour
a decision, the only option is to commence an
arbitration which can be slow and wearisome.
a problem.
However, agreeing to
local court or local arbitration
can have catastrophic consequences.
Parties often fail to give enough thought to the
dispute resolution provisions. In short, FIDICs ICC
Arbitration provision is a safe if rather expensive way
to proceed. Contractors should either adhere to the
FIDIC scheme or take specialist legal advice if they
want to amend it.
Contractors should also carefully investigate the
effect on contractual interpretation of the mandatory
provisions of a particular governing law. For example,
in France and countries that have adopted the French
Civil Code, liquidated damages clauses providing for
payments in excess of the actual loss suffered will be
likely deemed invalid. Similarly, many systems impose
mandatory (decennial) liability on contractors in
respect of latent defects.
If an award is made in their favour, parties
should also establish that it can be enforced in the
jurisdiction in which assets are located. A start is to
ensure that the seat of the arbitration is in a country
that has signed the New York Convention on the
Recognition and Enforcement of Foreign Arbitral
Awards (1958) enabling it to be accessed in a
signatory country. Most emerging economies are
now members (but not all, e.g. Libya, Sudan and
Yemen). This does not, though, guarantee that an
award will be enforced as one is still dependent on
the local court process where assets are located. In
reality, enforcement against local state agencies in
emerging countries can be very difficult. Conversely,
enforcement against international trading corporations
in the courts of London, Paris, Geneva or New York
is relatively easy.
Whatever a contractors strategy, before agreeing
to contract on a FIDIC form it is important for
contractors to stress-test the contractual processes
from entitlement to the enforcement of an arbitral
award, to ensure that they can get paid what is
properly due to them.
The final article in this series will look at the FIDIC
sub-contract form.
Mark Roe is a Partner and
Khalid Ramzan is an Associate
with law firm Pinsent Masons
mark.roe@pinsentmasons.com
khalid.ramzan@pinsentmasons.com
The previous FIDIC articles
by the authors are available
on www.rics.org/journals
2011
Legal Issues in Construction
conference, 29 November
2011, RICS HQ, London,
www.rics.org/legalissues2011
For a free 7-day trial
to isurv Construction,
which contains a
chapter on FIDIC, visit
www.isurv.com/freetrial
include: M006, T017
22
Expert witnesses and immunity
False alarm
The judgement in Jones v Kaney shouldnt stop surveyors acting as expert witnesses, says Vivien King, but they
should check their professional indemnity insurance cover first
The rational expert witness who has performed
his duty is unlikely to fear being sued by the
rational client. But unsuccessful litigants do not
always behave rationally. So said Lord Phillips in
giving judgement in Jones v Kaney [2011] UKSC 13.
Lord Phillips words may reflect the fears of some
following this Supreme Court majority decision. It held
that expert witness immunity from liability to clients
for breach of duty (whether in contract or negligence)
can no longer be justified and should be abolished.
But are such fears justified?
The expert witness, Ms Kaney, was a medical
expert instructed with the courts authority on behalf
of the claimant, Mr Jones. The court ordered that
Kaney meet with the relevant expert witness for the
defendant and that they prepare a joint statement
a common court order for expert witnesses.
Unfortunately, the joint statement did not reflect
Kaneys expressed opinion and had, she claimed,
been signed under pressure.
Naturally concerned, the claimants solicitors sought
the courts authority to instruct another expert
witness: the court refused. In consequence, Jones
issued proceedings against Kaney claiming his
solicitors had been constrained to settle for
significantly less than the settlement that would
have been achieved had Kaney not signed the joint
statement. Kaney pleaded immunity from suit.
Onwards and upwards
The judge felt constrained by the law regarding
immunity as it stood and held that the Court of
Appeal would be equally constrained. He therefore
took the unusual step of referring the case directly
to the Supreme Court. Lord Phillips, giving
judgement, identified four potential justifications
for expert witness immunity from suit:
1. A reluctance for expert witnesses to testify
2. Ensuring expert witnesses give full and frank
evidence to the court
Paragraph 2.1 of RICS practice statement Surveyors
acting as expert witnesses states: Your overriding
duty as an expert witness surveyor is to the tribunal
to whom the expert evidence is given. This duty
overrides the contractual duty to your client. The
duty to the tribunal is to set out the facts fully and
give truthful, impartial and independent opinions,
covering all relevant matters, whether or not they
favour your client.
An expert witness surveyor who complies with this
duty should not be concerned that an unsuccessful
litigant will have an actionable claim in negligence
against them. This is supported by Lord Kerr, who
said that If an expert expresses an honestly held
view, even if it differs from that which he may have
originally expressed, provided it is an opinion
which is tenable, he has nothing to fear from a
disgruntled party.
The removal of the immunity may actually have
the effect of improving the quality of expert witness
evidence the possibility of a negligence action
should make experts think more carefully about what
they say, and ensure a greater degree of care when
preparing reports.
This was recognised by Lord Brown, who said that
the consequence of removing the immunity would be:
a sharpened awareness of the risk of pitching their
initial views of the merits of their clients case too high
or too inflexibly, lest these views come to expose and
embarrass them at a later date.
However, there are two possible downsides to the
removal of immunity:
while there is no reason why PII premiums for
expert witness surveyors should increase, the
general consensus is that this is likely because
insurers will see the lack of immunity as increasing
the risk of a claim. Any such increase to a
professionals overheads will inevitably be passed
on to their clients as part of their fee, thereby
increasing the overall cost of litigation
an unsuccessful litigant may use the possibility
of raising a claim as a bargaining tool to reduce
the fees payable to the expert. Even though the
unsuccessful litigant realistically has no actionable
claim, the expert may nevertheless feel pressured
to reduce their fees rather than go to the expense
of instructing solicitors, etc.
Only time will tell what the true impact of the
removal of immunity might be, but if it is anything
like the impact caused by the removal of immunity
from barristers then it may be very little.
Jonathan Cope is a Chartered Surveyor and
Barrister, and is a Director of MCMS Limited.
He is Chairman of the Dispute Resolution
Professional Group UK Board and regularly
acts as an adjudicator and expert witness
jonathan.cope@mcms.co.uk
Jones v Kaney the expert witnesss view

23
Expert witnesses and immunity
3. Harassment of the expert witness by vexatious
claims for breach of duty
4. The risk of a multiplicity of suits.
In each instance, he found that the justification was
unfounded. He questioned why an expert witness
would be apprehensive in giving an honest opinion if
it proved to be adverse to his clients case. He said It
would be quite wrong to perpetuate the immunity of
expert witnesses out of mere conjecture that they will
be reluctant to perform their duty to the court if they
are not immune from suit for breach of duty.
Further, he said while It is easy enough for the
unsuccessful litigant to allege, if permitted, that a
witness of fact who has given evidence against him
was guilty of defamatory mendacity. It is far less easy
for a lay litigant to mount a credible case that his
expert has been negligent.
Hence, immunity for witnesses of fact remains, as
does immunity for expert witnesses against a claim in
defamation. But in future a client may sue a negligent
expert witness and there will be many who support
the finding.
Stop and think?
But will this judgement make a surveyor approached
to act as an expert witness stop and think before
accepting the instruction? Probably not. As Lord
Phillips emphasised: why should the risk of being
sued in these circumstances constitute a greater
disincentive than the risk of being sued in relation
to any other form of professional service?
There is one important matter to check. In giving
his judgement, Lord Dyson said Experts can and
almost always do obtain professional indemnity
insurance to cover the risk of negligence. Hence,
before accepting an instruction to act as an expert
witness, a surveyor should check that his insurance
covers such instructions.
However, the risk of being negligent when acting
in the role of expert witness should be no higher, or
lower, than the risk of being negligent in any other
role. While the alarm bells may have been rung by
this case, it should not prevent a professional from
accepting instructions.
Vivien King is a Consultant with Malcolm Hollis
vivien.king@malcolmhollis.com
For reference sources go to
www.rics.org/catalogue and search
for Jones v Kaney
Following the decision of the Supreme Court in Jones
v Kaney, the Dispute Resolution Professional Group
formed a working party to look at the existing RICS
Surveyors acting as expert witnesses practice
statement and guidance note (PS/GN).
The conclusions of the working party are as
follows:
GN22 (Immunity of the expert witness) no longer
applies and requires re-writing. As a result,
Appendix C (Immunity of the expert witness
exemptions) also requires review.
The consensus of the working group is that the
current PS/GN is a comprehensive and well-written
document that, on the whole, remains relevant.
Therefore, a straightforward addendum document
covering GN22 and Appendix C is considered to
be the most appropriate, cost-effective and timely
solution to the current issue. It is aimed to have this
in place as soon as practically possible.
As the client copy of the PS only covers the
practice statements contained in the main
document, there is no need to make any revisions
to this.
The 2009 Briefing and addendum covering CPR
changes (and the related client copy) are unaffected
by the abolition of expert witness immunity.
With the exceptions of GN22 and Appendix C,
the Surveyors acting as expert witnesses practice
statement and guidance note, 3rd edition, remains
in full force.
For many members, the decision in Jones v Kaney
will make little practical difference. Our members are
highly professional and conscientious even when a
situation arises that may result in a conflict of interest.
John Anderson, RICS Associate Director
johnanderson@rics.org
Jones v Kaney the RICS view
Why should the risk of being
sued in these circumstances
constitute a greater disincentive
than the risk of being sued in
relation to any other form of
professional service?
Rail infrastructure
Window pain
In his final article on efficient rail infrastructure delivery, Neil Thompson looks at benchmarking and how the
results of a recent exercise can be used to identify and address cost reduction
n my previous article*, I discussed the challenge
of managing a Victorian asset base. This article
addresses cost benchmarking of interventions to
maintain the assets condition (based on an exercise
carried out in advance of the McNulty Rail Value for
Money Study recommendations of May 2011
1
).
The International cost efficiency benchmarking
report of March 2008, by the Department for
Transport/Office of the Rail Regulator (ORR) referring
to the ORR 2008 Period Review, highlighted that
Network Rail was 30-50% less efficient in its
maintenance and renewals expenditure compared to
European railways. The cost variance is derived from
the Union of International Railways annual study into
expenditure (known as the Lasting Infrastructure Cost
Benchmarking) and illustrates that the UK invests
significantly more in the maintenance and renewal of
the civil engineering asset. When comparing the UK
and France based upon 2008 data, it reflects that the
UK annual investment was 418m (367m)
compared to 277m (243m) in France.
asset type drives maintenance costs, in particular
metal bridges where the UK has the highest
percentage of stock (see my first article*).
Valid comparisons
What this illustrates is the challenge in attempting
to compare international data without clear
measurement tools. While the data should not be
discredited, the challenge of normalisation can often
mask the primary reason for benchmarking that of
identifying areas of best practice for improvement,
such as the working windows in Europe compared
to the UK.
Benchmarking is important to organisations such
as Network Rail which arguably has a monopoly
regarding the maintenance of the UK heavy rail asset
and must support delivery of Control Period outputs
as well as providing evidence for future Control
Period plans. In civil engineering, there are three
methodologies to demonstrate cost efficiency:
1. Benchmark costs against comparator infrastructure
operators within the UK and overseas via
quantitative and qualitative comparisons
2. Internal benchmarking within Network Rail
route delivery teams
3. Year-on-year improvements.
In August 2010, Network Rail produced a shopping
basket of typical civil engineering items and input
rates and prices for labour, plant, materials and
site preliminaries in the UK, Germany, France and
Holland. It showed that labour, plant and staff rates
were lowest in the UK while material prices were
the highest. Overall, the average un-weighted
composite rate identified the UK as being 6% less
than the Netherlands and Germany but 3% higher
than France.
European approaches
In September 2010, Network Rail attempted to
identify whether there is an extra over cost of working
on UK rail civil engineering schemes by comparing
firstly to non-rail schemes in the UK and then to
France and the Netherlands. For this, Network Rail
enlisted the support of its key longstanding delivery
partners (Bam Nuttall, Birse Rail, Vinci and
Faithful+Gould) who all had the capacity of in-house
European colleagues (a key factor in ensuring trust
when benchmarking).
The exercise involved taking three actual design
and build schemes that had been designed within
a UK rail environment:
under bridge reconstruction (Victoria Road)
embankment stabilisation (Berkeley)
Access for All station scheme (Wrexham).
24
I
However, careful consideration needs to be given
when comparing international data because:
sterling/euro rate conversions can impact greatly
so the Comparative Price Level (CPL) index is
generally utilised which compares the relative
purchasing power of different countries. This is
the ratio of purchasing power parity (PPP) and the
exchange rate. The PPP is produced annually by
the OECD and compares the relative annual wealth
of a country by calculating how much an individual
can purchase a typical basket of similar goods
countries differ in how they account for investment.
For example, bridge reconstructions are classified
in many countries as an enhancement rather than
renewal/maintenance
the comparisons do not necessarily compare
the same asset stock, e.g. there are 14,000
overbridges included within the UK data but not
within the French
asset age is a factor with 83% of bridges in the
UK greater than 50 years old compared to 66%
in France
Design costs were estimated as being
an average of 19% lower within Europe
and tender design periods are greater
in Europe where clients are prepared
to contribute to tenderers design costs
25
Rail infrastructure
Under the review of Faithful+Gould, estimators and
planners were tasked independently to plan, resource
and cost these projects within their own environment.
For the non-rail schemes, for example, they assumed
an A road in lieu of a two-track railway over Victoria
Road bridge, and the M4 motorway in lieu of the
Western mainline along the Berkeley embankment.
While artificial, the exercise gave a valuable insight
into how estimators within different environments
assume differing outputs, resource requirements
and views on risk.
Once completed, the analysis highlighted that UK
civils was the most efficient followed by Netherlands
Rail and French Rail (Wrexham was not priced), with
UK Rail being the least cost efficient (see Figure 1).
Analysis of results
The analysis also highlighted that:
1. Design costs were estimated as being an average
of 19% lower in Europe and, significantly, tender
design periods are greater in Europe where clients
are prepared to contribute to tenderers design
costs. In the UK, rail tender periods are generally
six weeks compared to between four and five
months in Europe
2. Overhead and profit expectations in the UK
averaged at 7% of project value, compared to
9% in UK civils, 10% in the Netherlands and
15% in France
3. The risk of/need for contingent labour and plant
was significantly higher within UK Rail. This was
perceived to be a consequence of the potential
contractual damages and reputational risk of
overrun. In Europe, damages are generally levied
at 10% of the contract value compared to 100%
within the UK
4. Deck materials were established as being more
expensive within the UK primarily due to utilisation
of metal-decked bridges rather than pre-stressed
concrete in Europe. Metal bridges are often chosen
in the UK due to the limited headroom between the
structure and the kinetic envelope of rolling stock
5. Within the UK, there is a large cost associated with
infrastructure fencing, which doesnt normally
happen in Europe
6. UK Rail has a greater requirement for safety staff
including PICOP (Person in Charge of Possession),
Engineering Supervisor, Site Warden, Look Out
and Machine Controller. The Europeans tend to
multi-task
7. Material specifications were deemed higher in the
UK. This was particularly apparent with supply
and installation costs relating to lifts
8. The UK has greater restrictions when creating
construction windows to take possession of a line.
In the benchmarking exercise, the UK constructors
requirement was only 11% of the access required
in the Netherlands, and 30% for the French.
6m
5m
4m
3m
2m
1m
0
Victoria Rd Wrexham Berkeley Total
UK Rail
UK Civils
Netherlands
France
(excludes Wrexham)
[The report]
highlighted that
Network Rail
was 30-50%
less efficient in
its maintenance
and renewals
expenditure
compared to
European
railways
Figure 1 Project comparison of UK rail civil engineering
schemes against non-rail schemes in the UK, and then to
the Netherlands and France
Rail infrastructure
Figure 2). This highlights that in all industry terms
for these two projects then, by coincidence, the UK
is operating at the optimum trade off between
construction and disruption cost.
Network Rail recognises that improvements can
be made in delivering infrastructure projects more
cost efficiently. Benchmarking data has illustrated
where challenges to culture and process within UK
rail can be made to reduce costs. An extensive
programme of change has been established which
was recognised in the McNulty study and includes
moving towards a devolved route-based approach
and new ways of working between Network Rail
and its supply parties.
Further information
1
Sir Roy McNultys Rail Value for Money Study is
available from www.rail-reg.gov.uk
Neil Thompson FRICS is Programme Director
(Construction) at Network Rail
neil.thompson@networkrail.co.uk
26
* Age old problems, page
14, Construction Journal,
June-July 2011,
www.rics.org/journals
The BCIS Online Rates
Database provides pricing
information for QSs and civil
engineers. For a free demo,
visit www.bcis.co.uk/demo
include: T010, T017,
T022, T062
UK
Netherlands
France
Industry cost
Construction cost
Disruption cost
100 hrs 200 hrs 300 hrs 400 hrs 500 hrs
5m
4m
3m
2m
1m
0
Figure 2 Comparison of all industry costs for the Victoria Road and Berkley schemes
It is this latter point which highlights the major
differences that drive costs in UK projects.
In 2011/12, the building and civil engineering
renewal works are planned to be completed in:
216 36-hour possessions
90 54-hour possessions (i.e. 2400 Friday to
0600 Monday)
and 15 72-hour possessions.
Limited access
The remainder of the works will either be completed
with the railway in high street environments or in
rules of route possessions where typically only four
hours productive work is achieved within a paid shift.
In the UK, access windows are generally limited to
certain periods of the year, typically bank holidays
with a large element of night time and winter working,
which impose further constraints on productivity and
creates additional costs in conjunction with the non-
productive overtime burden.
However, the major consideration not accounted
for within any benchmarking review is the cost the
infrastructure maintainer must bear within the UK
in the form of Schedule 4 costs. These are
compensation payments from Network Rail to the
train/freight operating companies arising from the
disruptions caused. In general terms, as disruption
costs increase (i.e. the length of possession) then
construction costs will reduce as the impact of
inefficient resource utilisation is lessened.
Arguably, it is this all industry cost that must be
considered in making any tangible and objective
comparisons. In the benchmarking analysis, the
Schedule 4 costs the European programmes
would demand when added to the construction
costs, create a differing illustration of efficiency (see
The UK has greater restrictions when
creating construction windows to take
possession of a line. In the benchmarking
exercise, the UK constructors requirement
was only 11% of the access required in
the Netherlands, and 30% for the French
27
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