Last reviewed 18 May 2022
Understanding who the client is and the outputs expected from an agreement are not necessarily straightforward in any built environment contract. Alan Field helps to understand the complexities.
Built environment contracts are often complex and can have an equally complex array of parties with different reporting lines. There is always a risk that solely focusing on the conditions of contract will deflect what the actual outputs or deliverables are going to be over the lifecycle of the project.
And these can affect on risk and opportunities in a dynamic way.
This is not just a compliance or quality management issue — it can change our understanding as to what the heath and safety obligations are under such contracts.
Whether one accepts a contract and its particular terms and conditions, such a decision is usually based on a leadership team’s assessment of the risks and benefits it will bring their organisation. Unless these are fully understood — not just in terms of current obligations but with any future ones — then such decisions may be skewed. This article explores these issues further.
In most instances, the client is the party that pays you and, in return, you are responsible for meeting their expectations, as mutually agreed by the parties, subject to overriding legal obligations, such as health and safety.
This article takes a slightly wider view of a client — a party to whom you have sufficient contractual obligation so that they can direct you to, or desist from, doing something. In other words, one aspect of defining the client or clients relates to the agreed outputs from a contract. So, being certain of future outputs are not always straightforward unless it is carefully defined at the contract’s outset. Any such uncertainty, of course, creates a higher degree of risk and so can affect on safety and compliance in some instances.
Firstly, it should always be remembered that criminal and civil law obligations are completely separate, ie a party can never fully contract out of their obligations under criminal law. This means it is of little comfort, after receiving a criminal conviction as a business, that you may have the right, in civil law, to sue the party that led to your conviction. The court of public opinion on your brand may not understand such distinctions. Where there are strict liabilities in criminal law, it is almost always irrelevant to the criminal courts what your contractor may have promised to do on your behalf, eg waste management offences. Equally, your contractual client shouldn’t imagine they can always pass off such responsibilities to you in instances where they are criminally liable. You may be surprised how many organisations, even quite large ones, might not fully appreciate such a distinction themselves.
So, always bear in mind that liabilities can never be fully contracted away unless there is a statutory process that acknowledges that different parties can, in some circumstances, do this, eg under CDM.
More than one client
On large infrastructure projects, for example, it may not be as simple as saying that the party who pays you is the client. Often such contracts will have different reporting lines for different elements during the lifecycle of a project or where your client is directly working to the expectations of their end client. It is very common on such contracts that “packages” will be granted to one designer or contractor who then appoints or manages other parties who report to them.
There may be “back to back” clauses in contracts where there is a financial relationship with a primary client. Alternatively, there may be a master contract that applies to everyone in the package chain; this is particularly true in large infrastructure projects. This can indirectly, for example, impose stricter health, safety and sustainability requirements than your own management system; make sure you understand these. In short, situations can arise where a primary client begins to influence the decisions of all parties, whether direct contractual obligations exist or not.
Another risk within the built environment is that there may be little direct contact with the client and instead communication is chiefly through their “advisors”. Arguably, one should always know who these advisors are in advance and that there is still a contractual right to speak to the client direct. This can have safety implications as well as broader financial ones. Of course, many advisors are very professional and can add to the project’s management, but this should not be assumed. One ideal scenario may be that there are minuted project meetings with all the design partners, advisors and even the client where any issues and their corrective actions can be recorded. Leaving issues like this “between the lines” during contract negotiation is a risk in itself.
Another risk not always taken into account is that management can change both at a client and their advisors, ie good working relationships may sour if a senior manager moves on and their replacement takes a different point of view to the business relationship. Contracts can only give a certain amount of protection against such scenarios but they should be at least considered. The same applies if the contract means that you are responsible for supervising the client’s appointed design or other partners; how will such relationships work in practice and what happens if they start to go wrong, especially if these impact on safety or other compliance issues? Even larger businesses may have different approaches and emphasise to one another in health and safety in areas like, say, near-miss reporting and analysis or more tactical issues like the extent of fire extinguisher deployment training. These need to be understood and a contractual approach agreed to deal with such detail.
In practice, some kind of escalation process should be envisaged and discussed within the contractual negotiations, even if the risk is seen as a low probability. Similar complexities can arise where is there is joint venture working and, again, escalation processes should exist to deal with any disputes — be these project or personnel related.
The key area to keep in mind is what the impact is on risks, and possibly opportunities, through evolving changes in reporting lines. This can affect all areas of risk, especially where the exact nature of their expected outputs might not be understood at the outset. This lack of awareness of how the project lifecycle may develop in terms of interested parties is, in itself, a risk that needs to be considered. Don’t be tempted to leave it to a later date when it may become more difficult to influence client expectations.
The terms and conditions of a contract are only ever part of the story. The outputs to be delivered and the relationships that need to be developed are just as important. This includes responsibility and, indeed, approach to health and safety. Everywhere the client is clearly defined, their roles and expectations need to be understood for other interested parties and how these might develop during the project lifecycle. These are not always straightforward decisions where the project lifecycle is still evolving or when unexpected delays or other issues arise. Nevertheless, an element of contingency planning and any internal “red lines” to what would not be agreed to should be reflected in the contractual negotiations.