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Hi everyone.
Jacob Austin here,
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owner of Quest Zone.
And welcome to episode 24 of The
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Subcontractors Blueprint, the show
where subcontractors will learn how
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to ensure profitability, improve
cashflow and grow their business.
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So I'm doing episode 24 today.
It's the first show of the new year
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in 2024, 24 in 2024. Sounds good.
Today's episode is going to be
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about design and build
subcontracts and design liability.
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There are several different ways
that you could be appointed to
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carry out design on a typical
project for our main contractor.
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So you have the standard
building subcontract with
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subcontractors design.
You have a design and build
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subcontract, you have a minor
work subcontract with design.
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And then there's the neck form.
Any of the neck options can be
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used with subcontract design.
It's a little bit more fluid.
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They give you the option to add
in certain requirements and
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stipulations wherever you want,
and it's more customizable.
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I think the neck form of contract.
So it is straightforward to
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introduce that subcontract
design into any subcontract,
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as it's the most common subcontract.
I'm going to refer to the JCT design
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and build subcontract, and we'll use
that as the lens for today's episode.
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I start with subcontract design.
So design liability, any design that
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you produce as a subcontractor,
you'll be liable for any errors.
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You'll be liable for faults that
occur as a result of your design.
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So you are obliged under the
subcontract and via tort law,
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to make sure that your design is
correct, to make sure that it is
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designed properly with skill and
proper skill and care.
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One thing to be careful of is that
where the design is stipulated,
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where the requirements are laid out,
there is no requirement for you
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to design a fit for purpose item.
So let's say you're encumbered
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with designing the concrete floor,
the precast concrete floor for a
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steel frame project.
Somewhere along the line there's
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a fitness for purpose statement
within the requirements.
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So within the requirements there's
a fitness for purpose statement.
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Now, the problem with fitness for
purpose is that it's a really woolly
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phrase, and it brings in all manner
of risk and all manner of issues.
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So by the courts, the courts have
used and abused this phrase and
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used it to incorporate all kinds
of requirements which aren't
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necessarily expressly written out.
And the issue with it is that
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sometimes the employer will use the
building for a particular purpose,
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but within his requirements he will
state, I want a floor that can do x.
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I want you to design me a floor that
fits in this space and it needs
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to carry this amount of weight.
So you design to those criteria.
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But then the fitness for purpose
element may take it above and
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beyond that.
So okay they've said I want it
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to cater to this weight.
But well let's just say that
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that precast floor is actually
in a large leisure facility.
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And part of the leisure facility
is a gym.
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So within that gym they're going
to be lifting weights.
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And they're not just lightweights.
We're talking deadlifts,
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several hundred kilograms worth
of deadlifts and weights,
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perhaps going to be lifted up and
dropped freehand onto the floor.
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And regardless of whether somebody
has stated that within the employer's
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requirements that whether they've
told you those are going to be the
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conditions that that floor is going
to be used under, you are going to
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be expected to know that that is
what the building is being used for.
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Why haven't you designed a floor
that can withstand those kind of
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pressures?
So it introduces the possibility
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of requirements beyond what is
being specified.
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And that's the issue with
fitness for purpose.
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So why is that important to you.
So as a subcontractor you will have
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a professional indemnity policy.
If you are a designing subcontractor,
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if you're subletting your design,
your sub designer will have a
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professional indemnity policy.
And the issue is that professional
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indemnity insurance only covers
you for professional negligence.
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So this is a failure for you to
exercise the reasonable skill
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and care that you might do in
carrying out a design.
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So because fitness for purpose
includes these additional
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requirements that may not be stated,
what you're actually doing is
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exposing yourself to any risk
beyond the level of reasonable
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skill and care, up to the level
of fitness for purpose.
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So you might be uninsured and
that might cost you a fortune.
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We're talking if we're having to
rip out and replace floors.
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Going back to the same example in a
live building, the person using the
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building has lost their use of it.
You are liable for all of that.
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Moving the tenant out, moving them
into temporary accommodation,
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maybe setting them straight for loss
of income. That. I have incurred.
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Whilst I have not been able to use
the building and also refunding
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their customers who say subscription
they haven't been able to use,
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and they might even argue because
this is a leisure facility,
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that some of their customers
have now gone elsewhere,
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they've set up their membership with
a different facility, and they've
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lost ongoing forward revenue.
And that's a level of difference.
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We're talking between fitness for
purpose and just designing with
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the reasonable skill and care that
would be expected of a professional.
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And this is why it matters so much,
because the issue is that this duty
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to design to fitness for purpose
goes beyond professional negligence,
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and it's an absolute requirement
that you've got to satisfy.
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So this makes it a greater demand.
And rather than just being liable for
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negligence, and you would have to
be proved to be negligent in the
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case of a regular design liability,
the requirement under fitness
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for purpose is you've got to
satisfy fitness for purpose,
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for whatever the purpose is.
So what you want to see is an
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express statement, a clear written
statement in your subcontract to
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clearly state that your design to
reasonable skill and care, and that
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then reduces the burden down to what
will probably fit within your pie.
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And what it does is it introduces a
requirement for somebody to prove
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that you've done something wrong,
that you've done something negligent,
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that you failed to use the reasonable
skill and care that is expected
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of a professional designer.
Then, also,
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unlike the fitness for purpose test,
even if something fails,
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if you're able to demonstrate that
you've done all of the things that a
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competent person would have done,
then you haven't done anything
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negligent and you therefore
can't be punished for it.
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So hopefully you can see there's a
huge disparity between those terms.
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On the one hand,
you've got the likelihood of being
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punished for things that you
haven't even thought about under
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the fitness for purpose argument.
And on the other hand,
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you're able to say, hold up,
it's not my fault, it's failed.
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I've done exactly what anybody else
would have done in my situation,
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and therefore it's the requirements
that must be wrong and not me.
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Now, hopefully that makes that clear.
Why you need to watch out for fitness
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for purpose statements within your
subcontract inquiries and within
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your subcontracts themselves.
And if you find them and hopefully
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you won't because contractors are
savvy to these statements as well.
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But that's not to say that
someone slipped through the net.
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If you find them, challenge them,
and don't be afraid to walk away
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from the work if you can't
negotiate those statements out.
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And if you didn't know this,
of course, the phrase reasonably
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fit for purpose probably
wouldn't raise any eyebrows.
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But now that you do,
you know what to do.
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Okay, well, next, I wanted to have
a look at the JCT subcontract.
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And if you look at the subcontractors
designed works clause, which is 2.2,
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this in typical JCT fashion, uses
far too many words to basically say
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design and specify the works you've
been asked to complete in accordance
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with the contractor's requirements
and your subcontractors proposals.
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It does also say, including any
work that you've been asked to
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complete as a result of a variation.
It then says you must comply
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with the contractor's directions
for integrating your design into
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the wider contract works and the
contract design, and then it
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refers you to clause 3.5.1.3,
which is an interesting clause that
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says that you must comply with what
the contractor requests you to whilst
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you're completing your design,
unless within five days you tell
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the contractor that that is either
going to compromise you completing
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the works under CDM, or compromise
the quality of your finished work
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or your ability to complete it.
And this is basically giving you some
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sort of means of kickback if the
contractor asks you to do something,
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but it's going to make it really
hard for you to complete your work,
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or it's going to result in something
illegal, i.e. non-compliant with CDM,
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then you basically have five
days to submit a notice to that
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effect and tell him about it.
Back to clause 2.2.
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It rounds up by reminding you
that you have to act under the
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CDM regulations,
and specifically clauses 8 to 10.
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I'll let you look those up on
your own time as they don't make
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exciting reading.
But these are the general duties,
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the duties of a designer and the
designs prepared or modified
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outside of Great Britain. Clauses.
Perhaps I'll come back to these
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and do an episode on them at
another time.
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Or if one of you puts me up to it.
And that concludes clause 2.2.
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Now if you thought that was far
too short and sweet, a whole
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further section 2.13 and 2.24 also
relates to the subcontract design.
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And then you have the design
submission procedure, which under the
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subcontract is schedule seven under
the main contract is schedule one,
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but they are a repeated version
of the same thing.
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The idea under the JCT suite of
contracts is that you support the
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contractor to submit their design
as a designing subcontractor,
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and of course, they've got their
architect, structural engineer
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and whatever other consultants
working directly for them.
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And the contractor has to coordinate
all of that design, or they can
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pass that design response.
Ability that coordination
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responsibility onto an architect,
say as the lead consultant,
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they are tasked with designing
everything and they may draw
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together the subcontract design,
the structural engineer,
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civil engineer and so on.
Make sure it's all coordinated
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and talks to each other.
In theory at least, they then make
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sure it ties up with the KPIs and
the employers requirements and
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present it to the employer to review.
The design submission procedure
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is quite straightforward.
There are some added complexities.
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If the project is using some
design management software,
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or a contract management software,
where sometimes designs are
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submitted to a portal and then
the administration of the design
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submission procedure is via that
portal as well, it doesn't really
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make it any more difficult on a
technical level, it's just that
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it's another technological barrier,
another system for you to get used to
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when you're submitting your design.
The principles, by and large,
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remain the same or very similar.
And it goes a little bit like this.
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The contractor submits his drawings
to the employer within 14 days
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of receipt of those drawings,
the contractor should receive a
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response from the employer with
a status either A, B, or C,
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and these statuses mean under A.
The document is perfect.
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The contractor can get on with
the work status, b the contractor
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can proceed with the document,
but there are some comments from
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the employer that need to be
incorporated and then status C the
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contractor can't proceed and must
resubmit the document for approval.
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So for A that's straightforward, you
just crack on and do the work with B.
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Presumably these are minor
points and minor tweaks.
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I like it,
but just change this a little bit.
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That might be used to select a color
or to slightly tweak a finish.
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And then status C this is
requiring whole resubmission.
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So for statuses B and C the design
can't be returned with a status
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B or C without any comments.
There can't just be a flat
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rejection with no reason behind it.
And sometimes that might be.
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We need to see your calculations
behind the design.
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Or it might be if you're proposing
something slightly different,
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they want to see how it works.
They want to understand the
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specification, how it compares to
what was in the contract originally.
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Or maybe the employer just
doesn't like it. Now.
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If the contractor doesn't agree
with the comments,
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they can notify the employer
within seven days of receiving the
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comments that they don't agree and
that they want an instruction.
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And that should give rise to a
change.
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Now, if the employer has just
rejected it because they don't like
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it and they've just given comments on
it, then this should give rise to a
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change, because the employer can't
just reject something that there's
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been designed and submitted and is
in accordance with the contract.
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But the employer, in my experience,
often misuses the process.
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And we'll start rejecting things
because they don't like it, because
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their preferences for something
slightly different, something else.
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I recall a situation where we had
a ceiling, which was in the main
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atrium of a building that we were
constructing, and we submitted a
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design which is near as dumb.
It reflected what was on the original
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architect's drawing, and the employer
decided they didn't like it.
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They started saying, hold on,
I think I'll be able to see my
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structural steel through this.
I want to be able to see this
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and nothing else.
I don't want to be able to look
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down the panels and start seeing
unsightly bits of the structure, and
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then started playing silly buggers
about what they actually wanted,
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saying, no, you're supposed to be
the designer. Make me a proposal.
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And well, our proposal,
which was in accordance with the
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contract they didn't like,
and we got given a real runaround
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and it ended up causing quite a
significant delay to this
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particular section, which was the
main entrance of the building.
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And actually, in hindsight,
we should have said, no way.
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Give us an instruction for what
you want if you don't want this,
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because this is exactly what
you've asked for.
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Or alternatively, we could have asked
the employer to demonstrate from
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the contract what specifically they
thought didn't comply with their
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requirements, and that should have
then drawn a line under the matter.
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Either we'd get on with that.
The employer, from my recollection,
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wouldn't have been able to justify
what they were saying, so we'd have
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just been able to carry on with
that design or resubmitted it,
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and it should have sailed through,
or they should have then stipulated
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what they wanted instead and give
us an instruction for that change.
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So if the contractor notifies the
employer that he would consider the
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comments to be a change, the employer
has then got seven days to come
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back to them and either restate or
confirm the comment or withdraw it.
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So if the comment is withdrawn, this
can change the document to status A.
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Otherwise the contractor has to
resubmit and this restarts the
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process.
So they have to incorporate the
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comments.
And the employers then got 14
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days to rereview everything.
Now that sounds reasonably
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straightforward.
So just to make it more interesting,
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the JCT adds in another couple
of items.
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So they state that confirmation or
withdrawal of a comment doesn't
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signify acceptance by the employer
that the relevant document or amended
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document is in accordance with the
contract, nor that compliance with.
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The employer's comment would
give rise to a change, so the
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employer can effectively insist
that the comment is incorporated
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without giving rise to a change.
So that means you need to fight
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your corner on that one.
The next comment says if the
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contractor doesn't notify the
employer that they think a comment
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gives rise to a change, then it
shall be treated as if it doesn't.
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00:16:01,150 --> 00:16:05,470
So this is another strike while
the iron is hot issue or forever
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hold your peace.
And finally, neither compliance with
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the design submission procedure
in schedule one nor compliance
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00:16:12,970 --> 00:16:16,000
with the employer's comments
shall diminish the contractor's
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00:16:16,000 --> 00:16:20,410
obligations to ensure the contractors
design documents and works are in
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00:16:20,410 --> 00:16:24,370
accordance with this contract.
And that means to say that even if
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the contractor has submitted the
design, the employer has given its
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status a crack on and build, and then
they later realize that something
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doesn't comply with the contract.
They can come back and pick on
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it later.
Sometimes that might mean that
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the employer has spotted some of
these things, but then decides to
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let you crack on and come back
for a saving at a later date.
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Sometimes it might mean that they
just haven't picked up on things.
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So say they've asked you to design
and construct a building to maintain
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a massive piece of plant which
is five metres tall, and during
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00:16:54,910 --> 00:16:58,420
the design submission procedure,
you submit drawings for a hanger
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door which is only 4.7m tall.
If they don't pick up on that
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00:17:02,830 --> 00:17:06,100
and they approve the drawing,
it goes to state to say they can
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00:17:06,100 --> 00:17:09,730
still come back at a later time when
they can't get their five metre tall
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00:17:09,730 --> 00:17:13,420
piece of plant through the door
and say, hold up, Mr. Contractor,
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00:17:13,420 --> 00:17:16,690
you fucked this one up.
So it is in your best interest
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00:17:16,690 --> 00:17:20,170
to comply with the employer's
requirements for that very reason.
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00:17:20,200 --> 00:17:22,990
Now, just going back to those couple
of clauses that we missed out,
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the contractor will follow
largely the same process with you
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00:17:26,260 --> 00:17:30,040
as their subcontract designer,
albeit they may water it down via
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00:17:30,040 --> 00:17:33,700
amendments in their own conditions.
They may also lengthen your
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00:17:33,700 --> 00:17:38,440
submission time scale explicitly,
so that they've got a period of
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00:17:38,440 --> 00:17:41,650
time to review it themselves,
to pass that on to the client,
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00:17:41,650 --> 00:17:45,280
and then for the client to do
their 14 day review, albeit it's
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00:17:45,280 --> 00:17:49,090
not in the contractor's interest
in any way for them to delay you
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00:17:49,090 --> 00:17:53,050
or for them to delay themselves by
delaying submitting your design.
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00:17:53,050 --> 00:17:57,100
So they typically want to work to the
shortest timescale that they can.
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00:17:57,400 --> 00:17:59,440
Of course,
when everything is finished, you
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00:17:59,440 --> 00:18:02,830
have to provide as built drawings.
And this of course goes hand in
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00:18:02,830 --> 00:18:06,280
hand with the health and safety
file and operation and
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00:18:06,280 --> 00:18:09,910
maintenance manual file.
You are bound to provide a license
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00:18:09,910 --> 00:18:14,560
for the contractor and the employer
to copy and use the subcontract
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00:18:14,560 --> 00:18:18,670
design and reproduce any of it,
for the purpose of maintaining
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00:18:18,670 --> 00:18:22,600
and extending the building.
They are not allowed to start using
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00:18:22,600 --> 00:18:26,260
your design for purposes other
than that, and they can typically
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00:18:26,260 --> 00:18:30,670
reassign that right onto a subsequent
purchaser of their building.
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00:18:30,670 --> 00:18:33,850
And there is a statement to say
if the documents are used for
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00:18:33,850 --> 00:18:37,000
any other purpose,
that you're not liable for that.
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00:18:37,060 --> 00:18:40,840
And speaking of liability,
that brings us back nicely to 2.13,
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00:18:40,840 --> 00:18:44,410
which we also mentioned earlier,
which is about design liability
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00:18:44,410 --> 00:18:47,020
and limitation.
The intention of the subcontract
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00:18:47,020 --> 00:18:51,130
is to create the same liability
as if you were an architect,
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00:18:51,130 --> 00:18:55,240
designing specifically your section
of the building, your section of
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00:18:55,240 --> 00:18:59,110
the overall contract design,
and so that you would have the
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00:18:59,110 --> 00:19:03,460
same liability to the contractor
in terms of being an appropriate
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00:19:03,460 --> 00:19:07,720
professional designer who is able to
complete that design adequately,
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00:19:07,720 --> 00:19:11,890
and that you would carry the same
liability to the contractor as they
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00:19:11,890 --> 00:19:15,700
carry upstream to their employer.
I think that about covers all of
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00:19:15,700 --> 00:19:19,570
the meat on the bones when it comes
to design and build subcontract
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00:19:19,570 --> 00:19:23,590
certainly the design aspect of them.
My mission with this show is to
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00:19:23,590 --> 00:19:27,970
help the million SME subcontractors
working within the industry.
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00:19:27,970 --> 00:19:31,300
If you've taken something away
of value from today's episode,
309
00:19:31,300 --> 00:19:34,270
I'd love it if you'd share the show
and pass on that value to somebody
310
00:19:34,270 --> 00:19:38,140
else who could benefit from hearing
it. And thanks for tuning in.
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00:19:38,140 --> 00:19:41,140
As ever, if you like what you've
heard and you want to learn more,
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00:19:41,140 --> 00:19:48,070
please do find us at WWE, NXT zone.
That's the letters Q, S, Dot zone,
313
00:19:48,070 --> 00:19:51,880
Zona where you can subscribe to
our training and support system
314
00:19:51,880 --> 00:19:55,030
for like minded subcontractors.
In there you'll find templates,
315
00:19:55,030 --> 00:19:58,720
how to videos, interviews, and more.
It's less than the price of a
316
00:19:58,720 --> 00:20:01,720
cup of coffee per day,
and you can cancel anytime.
317
00:20:01,810 --> 00:20:06,640
We're also on all your favorite
socials at SHS zone. Thanks again!
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00:20:06,640 --> 00:20:09,430
I've been Jacob Austin and
you've been awesome!
