D&B firms go for claims

Design and build's image as a dispute-free form of contracting is under threat because recession-hit contractors are trying to supplement their low profit margins with claims.

CJ's annual design and build survey - see p16 - polling 87 firms carrying out œ4 billion D&B work, found that 44% believe many or most contractors are actively seeking profit through disputes.

A further 32% believe some design and build contractors are guilty.

Mike Smith, marketing director of Hall & Tawse, said: 'Contractors have been going in very tightly and it's resulting in claims for extra payment because that's the only way they can make money.'

Ann Minogue of solicitor McKenna agrees: 'People are killing themselves on D&B contracts and employers are quite cynically exploiting that. But very low margins mean there has to be opportunity for claims.'

The increasing likelihood of disputes on D&B jobs is being blamed on the unsavoury cocktail of inexperienced clients, poor briefs and unsuitable jobs.

Danny Gowan of lawyer Davies Arnold Cooper said: 'We have a fair few cases in which arguments arise over interpretation of the employer's requirements. I think some contractors are probably factoring in claims as their profit on the job because of the state of the industry.'

Novation - where the client picks his own designer, and later passes him over to the contractor - is also believed to be fuelling claims. Under novation, many clients are appointing consultants on a reasonable skill and care basis to get the job moving.

But they are then forcing contractors to accept an uninsurable fitness for purpose burden - in contravention of standard forms such as JCT 81.

'The contractor, having taken on that risk, will be much more likely to contest any claim against him from the client, using the ingenuity of his lawyers - even if his defence is pretty hopeless,' said Andrew Hibbert, construction partner at Masons.

'Novation is causing problems... The idea that, under design and build, clients will have none of the traditional arguments about what is a design fault and what is a construction fault is wrong.'

Jenny Price, head of legal affairs at the BEC, said informal research for the Latham review contradicted CJ's findings and suggested profit through claims was unattractive to contractors.

Ann Minogue of McKenna also says that, while disputes may be increasing, there is no rise in arbitration and litigation.





A delegation of leading design and build contractors is meeting Labour's art spokesman Mark Fisher today following his reported criticism that D&B is 'a blight on this whole generation'. Fisher also suggested that D&B should not be used by public sector clients, which now account for 39% of D&B workload.

Members of the delegation - JT Design Build, Amec, Laing, Kyle Stewart, Shepherd and BCP, together with a number of architects and academics - hope to set up a permanent forum to lobby on design and build issues. The CIoB has expressed support for the idea, and president Robert Harding has offered a meeting in September.