Industry Update


The trade press, like the press and media generally are dominated by Brexit with the usual speculation on what it will look like and the implications for our industry and the wider economy; however I have spotted one or two other snippets which are of interest.

The first was a comment attributed to Dame Judith Hackitt, author of the independent report into fire safety following the Grenfell disaster entitled ‘Independent Review of Building Regulations and Fire Safety’; the quotation was that ‘all value engineering does is cut quality and that it needs to be banned.

When I first became aware of ‘value engineering’ as a young surveyor working for a major contractor, it was explained to me as being a review of building functions to establish the best method of achieving them over the lifetime of the building.  For example if a corridor were to be constructed between two adjacent buildings to link them to each other so that the occupants of the buildings could move between them without getting cold or wet in winter then the options for constructing that corridor may range from a corrugated tin roof on light weight steel supports to a masonry corridor with a slate roof.  If the first of these were rejected because it only performed part of the intended function and then not very well, the design interrogation would go on to look in detail at the masonry corridor – how would it be lit for instance?  Well, light fittings could be installed at the end and in the middle of the corridor and this would provide lighting although there would be shadows due to the length of the corridor and the number of lights; and we would need to install another lighting circuit in the consumer unit; and we would need to employ a man to replace the bulbs periodically; and so on.  Or, we could form window openings in the masonry walls and install windows, but this would make the corridor more complex to construct because we would need to close the cavities at the reveals and install dpc’s; and depending on the window material chosen they may need to be painted periodically; and in the winter we would still need to have electric lighting as the daylight would fail before the occupants went home; and so on.  This then is what ‘value engineering’ is about – functional decisions based on whole-life considerations.

In Appendix H, the Glossary of the report, ‘Value Engineering’ is defined as: ‘Value Engineering is a systematic and organised approach to providing the necessary functions in a project at the lowest cost.  Value engineering promotes the substitution of materials and methods with less expensive alternatives.’

This is unfortunately what ‘value engineering’ has become and how it is perceived; an opportunity to downgrade specifications and reduce quality.  But, substituting a facing brick for a cheaper brick is not ‘value engineering’; the achievement of the function of forming the external walls, or questioning whether and how it is to be achieved has not changed.

We should guard against confusing quality and performance of building materials with designing and selecting how building functions are to be achieved.

Secondly, my attention has been caught by the recently decided appeal case Arcadis Consulting (UK) Limited v AMEC (BCS) Ltd which has spawned a number of detailed and interesting commentaries on the particulars of the case.  In summary, at first instance, it was held that in the absence of an express agreement that Arcadis’ liability under its design agreement was capped, it was liable for the full costs of remediation for errors in its designs.  On appeal it was found that there was an operative limitation of liability agreement capping Arcadis’ liability at £610,000.00.

The reason that this case has particularly caught my attention is that it entirely revolves around the all too common issue of a party to a contract commencing works without there being an agreed contract in place.  At the start of the project everyone is keen to get along, not to rock the boat, ‘things’ will be sorted out and ‘everything’ will be fine … and sometimes this is the case.  But in my experience when things start to go awry, when the programme slips, when the ground conditions are not what was expected, when there are discrepancies in the documents; this is exactly when an agreed contract is necessary to clearly set out who is responsible for what.  Contractors are generally all too keen to get on and ‘do things’; programme is king!

 On the facts of the particular circumstances Arcadis’ position was upheld, but only after two rounds of litigation and with the attendant costs and uncertainty.  This case should be a salutary lesson of the dangers of starting work before the hard yards of agreeing the contract are concluded.