pm guide in development strategy

8/11/2019 PM Guide in Development Strategy

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The College of Estate Management 2002

Paper 0143V3-0

A project managers guide to developmentstrategy

Contents

INTRODUCTION

1. Foreword

2. Introduction

APPOINTMENTS

3. The project management appointment

4. Consultant appointments

5. Architect

6. Quantity surveyor

7. Structural engineer

8. Mechanical and electrical services consultants

AGREEMENTS

9. Development partnerships contracts

10. Development/building agreements

11. Joint venture agreements

12. Finance agreements

PROCEDURES

13. Design and specification

14. Construction (Design and Management) Regulations 1994 (CDM)

15. Statutory approvals

16. Statutory powers and agreements

17. Rights over land easements

18. Insurance

19. Specialist subcontractors

(Continued)


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A project manager s guide to development strategy Paper 0143 Page 2

20. The building contract

21. Tenants leasing and occupation

22. Commissioning and management transfer

23. Monitoring and administration

READING LIST

APPENDICES

A. Drafts of consultant appointments

B. Developer/tenant outline specification; Tenants handbook contents;Letting memorandum; Shopfitting pro forma

C. Project record; Quarterly financial appraisal; Cash flow; Nominated

specialist status report

D. Health and Safety: Construction (Design and Management) Regulations1994 Project record addendum; Competency and resource enquiries


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1 Foreword

On reaching the first floor landing of the grand staircase in the RICS headquarters inGreat George Street, there have been times although I admit not many when,instead of my steps tracing a path in the direction of the bar, I have turned sharpright towards the double doors which announce entry to the library. Inside, two short

turns to the left have brought me to a short length of shelving which bears the legendProject Management. I cannot remember how long ago it was that my eyes first ranover the titles, but both then and subsequently I have been struck by theoverwhelming bias towards description of organisation systems and networkanalyses mostly related to construction activities. Helpful as these works may be,

the project manager of a commercial development has far wider horizons toencompass.

Since 1970 my career has been solely concerned with project management, and inrecent years, as director of a major development company, I have fortunately been

provided with the opportunity to translate experience into policy. This spawned theidea of a Guide which would act as a reference work for our in-house project

management team. However, the reality lay dormant until the announcement by theRICS in 1982 of a Project Management Diploma Course. The Guide was first

researched and created in response to the course requirement for a second yearproject, and in 1985 I was pleased to be prompted by CASLE (CommonwealthAssociation for Surveying and Land Economy) to revise and extend this work. Theinformation is necessarily based on features and practice within the UK development

industry, but I believe much of this to be of broad application. I trust the reader willtherefore find benefit even in those chapters which are closely tied to legal doctrine.

For the purpose of narrative style I have assumed that the project manager isrepresenting the developer, whether as an in-house employee or as an agent, and theattitudes and observations flow accordingly. I also refer to the employing party,

whether it be corporate or an individual, as the client or developer; the reader shouldtreat these identities as synonymous.

The term Guide is deliberately chosen. There is no single definitive approach toproject management and consequently my intention has been to provide a

commentary on the major facets affecting commercial development. Nor should it beregarded as exhaustive. The scope of project management is ever changing, whetherthrough market fashion or the influence of statute, and there is no shortage ofpersonal impressions that have been aired as to its content and style. The Guide

inevitably reflects my interpretation, but fundamentally it is a statement of factualand practical matters encountered in everyday project management.


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2 Introduction

In September 1989 the Royal Institution of Chartered Surveyors published the firstprofessionally authorised Project Management Agreement and Conditions ofEngagement. This was an ambition realised for the RICS s Project Management(Diploma) Association, which from its inception in 1985 had seen the creation of a

standard form, comparable to those published by the RIBA and ACE for architectsand engineers, as an essential requirement of the property development industry.Henceforth it would provide a basis of common understanding between clients andproject managers of the role and services to be performed.

However, such a document a contract has necessarily to be objective. It cannot

easily address the more subtle influences which affect the relationship of client andproject management. For example, by what yardstick is the project manager to bejudged? Does the project manager who directs the design and construction of lowquality speculative offices, which let immediately on completion, perform better

than one who gives care and attention to long term maintenance and service chargecosts for a building that does not attract a tenant for two years? Which is more

desirable: a shopping centre where a drive on programme saves two months andconsiderable interest charges but has only a few tenants ready for trading, or one

which completes on time with virtually all tenants shop-fitted and ready to receivethe public? The difference in marketing impact is considerable.

These examples may be simplistic but they nonetheless serve to highlight the need todetermine the project managers role. I suggest this can be looked at as one of three

possibilities:

l administration and co-ordination;

l achievement of targets, eg construction cost, completion date, or quality of

specialist accommodation such as computer suite;

l overall success from site acquisition to final letting and occupancy;

and allied to these considerations is the extent of the project managers brief. It mayembrace the entire development process or be limited to only part, such as designand construction.

The understanding between client and project manager is therefore of vital

significance. This will be influenced in part by the clients own expertise, but it mustbe anticipated that in some instances the project manager may have to prepare andcondition his client. He must understand the clients corporate and executivehierarchy, his decision processes and reporting requirements. There has also to be an

appreciation of the clients role: how did he gain his position, what are hisexpectations, and particularly what is his relationship to other principals and how didthis arise? The last point is fundamental to any contact the project manager mayhave with third parties when representing the client.

Following from this, the project manager must distinguish the rights, responsibilities

and obligations created by contracts. Development projects attract a plethora ofparties, ground landlords, funding institutions, consultants, contractors andsubcontractors, and statutory authorities to name just the obvious. The projectmanager is a pivotal character in fulfilling his clients obligations, covenant by

covenant. He must recognise where action under one contract may haveconsequences for another (eg extension of time under the building agreement), andalso distinguish between similar obligations under differing contracts (eg certificateof practical completion under a building contract, and certificate of practical

completion pursuant to a funding agreement).


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Whilst careful selection of a development team is important to the successfulundertaking of a project, much more can be gained by creation of a positive andresponsible working atmosphere. I appreciate that personalities influencerelationships, but I am firmly of the opinion that the project manager should show

respect for expertise, and recognise too that time, money and supporting informationare resources required in varying measure by the team if they are to perform andrespond effectively. Whilst the role of paymaster and client carries with it a degree

of privilege, it is all too easy amidst the daily pressures and demands for service tolose sight of the assistance and consideration that can be shown to the team whichwill in turn create goodwill and encouragement. I am not suggesting largesse, butresponsibility is a two-way process.

Even small gestures can go a long way. For example survey information

dimensions, levels, ground conditions, etc which usually cost comparatively little,can be obtained at the preliminary design stage. Not only does this facilitate thedesign consultants to be accurate in their schematic drawings, but it also introducesgreater reliability into the engineers foundation assumptions and the quantity

surveyors budget estimates.

Risk is an abstract characteristic, difficult to define but ever present indevelopment projects. In directing and administering a team whose activities mayrun from site acquisition to occupancy, the project manager has a crucial task in

controlling pace and direction. This is perhaps at its most obvious in the earlyspeculative stages when appraisals and potential commitments demand a supply ofinformation which can only sensibly be provided by the consultants. The projectmanager performs a key service in directing the teams effort to assist the removal ofuncertainty and aid negotiations, whilst preventing unnecessary or premature work

and limiting potentially abortive expenditure. Having passed beyond the speculativestage, the areas of risk exposure may well increase due to contractual commitmentsthat have been taken.

It is as important for the project manager to disseminate information as it is forconsultants to produce drawings and Bills of Quantity. A typical example, which Iquote in the Guide, is that the project manager should convey to the consultantsthose clauses in every draft contract between the client and a third party, eg Fund,which affect design and construction of the project. Their comments should be

sought, and those of the contractor if he is on board, and the final covenantsconfirmed again to the team once contracts are exchanged.

Design information is fundamental to effective preparation and planning forconstruction, yet frequently there is a crusade to achieve the earliest possible start

date with insufficient regard to the quantity or quality of information that will beavailable for contractors to tender against, or at the time works start on site. Still,

competitive tenders will be sought and due horror expressed when the contractorclaims for late information or details showing unimagined expression of the outlineconcept. Whilst many clients and consultants are alert to this industry trait the

project manager can still provide significant service to his client by analysing projecttimescale and ensuring that this is sensibly reflected in the consultants requirementsfor design production, the form of building contract adopted and financial budgetallowances.

The project manager should continually pay regard to the expertise professed by hisdevelopment team and for which he has agreed to pay. He is entitled to expect and ifnecessary demand service. To do so, however, he must remain aware of thefunctions ascribed under relevant contracts or conditions of engagement which can

be quite detailed. He must also understand the interaction required between therespective design consultants, and in turn with the cost estimating and controlprocess. The project manager should be explicit as to the service he requires;appointments worded in generalised terms invariably lead to disputes and requests

for additional fees. The format outlined in the chapter on consultants appointmentshas been successfully practised by my company for a number of years.


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The role of the project manager will inevitably involve him in discussion, reviewand instruction of matters impinging on the respective consultants specialistexpertise. This is particularly apparent in the chapter on Design and Specification inwhich I mention various aspects requiring the project managers attention, but which

clearly overlap the consultants functions. This cannot be avoided; the projectmanager should simply take care not to relieve or transgress the consultantsresponsibilities.

The project managers usual relationship to a building contract is that of an

estranged party. The employer (client/developer) and contractor will be signatoriesand the consultants names will at the very least be recorded. All will commit toobligations. However, not so the project manager. His role has yet to be formallyrecognised and he is therefore in a nebulous position. In practice the project

managers role is understood, but it is important to appreciate the underlyingreservation placed on any instructions he may issue; or the manner in which he dealswith contract advice from the consultants for the benefit of the client, particularly inrespect to claims!

Lastly in this series of role-playing features, I would mention the project managers

duty generally to safeguard his clients interest. This can take many forms, but byway of instance, he should monitor local press coverage and make regularinspections beyond site boundaries to ensure no unreasonable overspill effect on

adjoining owners and the public at large. Well maintained hoardings, safety lightingand courtesy notices present an image which reflects on the client and the entiredevelopment team.

A development project runs through many phases, a number of which will overlapaccording to circumstance, but for which there is nonetheless a reasonably

determined sequence. The chapters of this Guide are therefore arranged in theapproximate order of events. It may be that, for any given project, the projectmanager will be appointed to control only certain activities, in which event some

interpolation will be needed. However, even in these instances I suspect a review ofother topics will enable the project manager to assist his client beyond his immediatebrief. The Guide does not contain a specific chapter dealing with the clients brief, asthe criteria to be established are substantially reflected under the various headings.

Finally, but I am sure not least in the mind of the consultant project manager, is the

matter of his remuneration. The Project Management Agreement and Conditions ofEngagement deliberately leave open the assessment of fees. Consequently theproject manager must conduct his own assessment and negotiation with the client. Indoing so I suggest full account is taken of my earlier remarks about the alternative

degrees of project management responsibility; if this entails achievement of targetsor some measure of project success, then the role contains a degree of

entrepreneurial risk it is not simply consultancy. In such situations the projectmanager must consider whether this merits additional reward. Presumably thecontrary position must be that if the project manager does not achieve his target, he

is potentially liable!

I hope that the reader does not have the misfortune ever to become so distrainedfrom a client, and that in some measure this Guide will signpost the way to fruitfuland satisfactory service.


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A project managers guide to development strategy Paper 0143 Page 11

3 The project management appointment

In the Introduction to this Guide I referred to the clients and project managersexpectations of a project management appointment. It is now time to consider thecontractual expression of these and other matters. For a backdrop, I shall refer to theRICS Project Management Agreement and Conditions of Engagement (the RICS

Agreement), being a style deliberately drafted for universal application. The RICSAgreement is accompanied by a Guidance Note which provides advice on theindividual clauses. (The Guidance Note, Memorandum of Agreement between Clientand Project Manager, and Conditions of Engagement for a Professional ProjectManager, can be found in the Code of Practice for Project Management for

Construction and Development.) My purpose in this section is to offer thoughts onthe underlying consideration to this or any other appointment contract.

NB: For non -native English speakers the words appointment and engagement

may be considered interchangeable in this section.

3.1 Structure

There are threeprimary components to an appointment contract:

1. The project specifics, eg the parties, scope of development, duration ofappointment, fee etc.

2. The services to be performed.

3. The obligations and standards by which the contract is to be implemented andjudged.

Whilst there is some inevitable intermingling of these in all contract drafting, Irecommend the project manager always to keep these distinctly in mind whenreviewing or drafting terms. It is a helpful discipline when assessing the balance,relevance and risk of the contract. The RICS Agreement comprises two parts: theMemorandum contains the project specifics, and the project management services by

reference to an appendix; the Conditions of Engagement describe the obligations andstandards (although some also appear in the Memorandum).

3.2 The project

The partiesIt should first be appreciated (as defined under General Conditions in theConditions of Engagement), that the Project Manager is the person or companynamed in the Memorandum of Agreement. In other words the Project Manager isoften a company with a principal person specifically identified to undertake theproject managers duties and obligations (ref: item 11 in the Memorandum of

Agreement between client and project manager).

Title Institution Agreement

Project

Manager

Royal Institution of

Chartered Surveyors

Memorandum of Agreement between Client and

Project Manager and Conditions of Engagement for aProfessional Project Manager.


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Make clear to your client the form in which you are contracting as an individual,partnership, primary or subsidiary company? Is a guarantee for your performance onoffer (or perhaps only if requested)?

Equally, be certain of the client entity with whom you are contracting. A corporate

search never goes amiss, and does not have to be disclosed.

Scope of development The project manager is often first engaged at a time before the scope is sufficientlycertain for accurate contract description. By the same token, it is too soon to confirm

absolutely your contract commitment and services. Temporarily, a provisionalagreement is better.

For the client as well as project manager, it would benefit the ultimate relationship ifthe scope is wholly or substantially defined and confirmed in the agreement. A later

disagreement about what was intended, even though the misunderstanding may begenuine, will prejudice trust.

DurationWhilst the start of an appointment usually presents no difficulty, careful thought andanticipation needs to be given to its completion. Project management services

frequently go beyond events associated with the building contract, eg finalcertificate. Client and project manager should agree how the end is to be decided.Is it to be a fixed date come what may, a particular event, or completion of the lastservice (not necessarily an obvious point in time)?

Whatever the decision, the duration is important. First for contract certainty, secondfor agreeing the fee payment schedule, and third for setting the starting point forstatutory post-contract liability. One consideration in relation to this last is a possible

distortion of dates between that applying under the project manager s appointmentand those derived from the consultants and contractors agreements.

Keep in mind too that the project duration may vary from the original expectation. Amechanism for adjustment is usually prudent.

FeeIn the United Kingdom there is no Institutional guidance provided for the assessment

of a project management fee. Whilst a market opinion based on percentages hasdeveloped for commercial work, this is unsophisticated. I have not heard of anyonewho could demonstrate facts and figures from a number of sources. Consequently

even if expressed as a percentage of cost, the root calculation of a fee is in theestimate of the resources, time and effort which the project manager will devote. Tothis must be allied the responsibility, authority (and liability?) which the projectmanager is to take. I commented on this in the Introduction. Particularly in feebidding, it is so easy to be optimistic and assume all will go smoothly. Be prudent.Productive relationships and jobs well done are usually only achieved through

considerable effort those that turn sour are even harder.

Fees in the UK are usually expressed as a percentage of the building cost. Byimplication, this conveys the impression that project management is solelyconcerned with design and construction. This is often far from the truth, as I hope

this Guide and the course in general will confirm. Perhaps the worth of your project

management service will be better understood if the fee is calculated and expressedaccording to the services to be performed, eg as a measure of development cost.


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3.3 The services

The Guidance Note issued with the RICS Agreement offers a comprehensivesummary of services and reflects the broad spectrum that is project management. Itis not, however; nor is it designed to be a mandatory schedule applicable to every

development. The project management organisation owes it to itself and to the clientto scrutinise the schedule, and to add or omit as appropriate for the work anticipated.

For a UK development which qualifies under the CDM Regulations (which will bemost), it may be appropriate to add reference to the project managers

responsibilities in relation to health and safety, possibly even including a role as theclients agent and/or planning supervisor, if either should be the case.

When considering the services, think also of the external agencies with which youwill relate, eg funding partner, tax adviser, insurance broker etc. Ensure their

identities are known, and, perhaps more importantly, that they each understand andrecognise your role as project manager.

3.4 Obligations and standardsAuthorityFundamental! In the context of UK law (but a principle I am sure of equal

importance elsewhere), in what legal capacity is the project manager acting servant, independent contractor, or agent?

l Servant. An employee subject to client control, eg in-house project manager.

l Independent contractor.Engaged through a contract to complete a specified

task, and enjoys considerable autonomy except as qualified in the contract.

l Agent. Contains elements of both servant and independent contractor.Assumes professional competence and an ability to judge when toinstruct with the clients implied agreement, or when first to refer to the clientfor decision. The approach to certain situations may be prescribed in the

appointment.

In the UK, the most common relationship is that of agent, as indeed for the RICSAgreement. It is also comparable to that of the consultants.

It is desirable that the project managers authority and relationship to the consultants

be clarified in the appointment. The RICS Agreement deals with this in two respects.First it states that the client will directly appoint the consultants but that the project

manager will be responsible for management of them and that they shall provide theproject manager with information required for the performance of his duties, without

charge to the project manager. Second, the RICS Agreement states that the clientwill formally notify the consultants of the authority given to the project manager toact on his behalf, and also identify any specific items upon which the clients writtenconsent is to be obtained.

DecisionsDevelopment requires daily decisions, usually modest but sometimes significant.Few clients expect every item to be reported to them first, but as it is impossible toanticipate all circumstances, some guidelines are an important safeguard for both

client and project manager. Hence in the RICS Agreement a requirement not to issueany instruction which would materially vary the project, or increase cost or time tocomplete, without the prior consent of the client.


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Too many controls will inhibit the development process; two few and there is abreeding ground for misunderstandings and mistrust. The happy medium is fosteredas much by demonstrable responsibility by the project manager, eg frequent andinformal contact with the client to discuss current issues, as by specific controls or

periodic formal reports.

Directing the teamTo be effective the project managers function should include:

1. Organisation of the team.

2. Instructing the clients brief to the team.

3. Determining strategy.

4. Deciding priorities.

5. Taking decisions and instructing the team.

6. Negotiating and administering consultant appointments, and approving feepayments.

The client will participate to some degree in most of these. So far as it is practicableto do so, describe in the appointment the extent of the project managers function.

3.5 Reporting to and obtaining instructions from the client

Formal reporting is a healthy discipline, and the style and frequency mightreasonably be expected to be confirmed in the appointment. It is, however, desirable

to retain the flexibility to adjust and develop the reporting format as the developmentprogresses so that issues of the time can be given due focus and weight, rather thanbe shoehorned into a predetermined structure.

A distinction is required between reports for routine decisions (which might beconsigned to a pro-forma arrangement for example) and those for major topics such

as a planning negotiation or construction tender. There might also be periodicoverview reports. The arrangement will vary for each appointment, but the projectmanager should approach the matter positively; for instance consider the issues towhich the client is known to attach particular importance. Similarly the nature of the

clients organisation and its internal reporting and decision structure.

The corollary to this is the clients mechanism for instructing the project manager(and the project team). It will be beneficial if a pre-determined style or format can beadopted. This removes the potential for misunderstanding. A project team frequently

comprises numerous organisations and individuals, including within the clientsorganisation; it is vital to prevent confusion of requirement or approval. The projectmanager is the guardian of the clients brief. The decisions which flow from it andthis responsibility should be impressed firmly, positively and continuously.

Furthermore, it should be clearly set out in the project manager s Conditions ofEngagement.


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To study and negotiate in detail on the Institutions Conditions before eachappointment is, I believe, impractical. At best it is likely to lead to long and tortuous

discussion about interpretation of meanings and extent of responsibilities. Whilst theimportance of these is not to be under-rated, the project manager should, in my view,accept the services for what they are the recognised Institutional standard anduse his time to better effect in devising conditions which provide a comprehensive

set of appointments.

In the following sections of this chapter I describe how this may be achieved, using acommon proforma basis, and then incorporating the requirements and features of theproject and the particular consultant s role. Appendix A, Consultant Appointments ,

contains the resultant standard drafts. The ultimate aim: a total service, for a singlefee.

Example of professional charges (but not always used)

QUANTITY

SURVEYORARCHITECT

STRUCTURAL

ENGINEER

MECHANICAL AND ELECTRICAL

ENGINEER

RICS Scale of

ChargesRIBA SFA 99 ACE Agreement 3 ACE Agreement 4 A

Fees Fees Fees Fees Fees Fees

Scale 36 Work Stage Full Duties

Pre-design

Abridged

Duties

Performance

Duties

Preliminary Services

A/

B

Inception

and

Feasibility Time

Stage: 1 Time 1 Time 1 Time

Pre-contract Stage: 2 Time 2 Time 2 Time

Basic Services Design

Budget

estimating C

Outline

proposals10%

Outline

proposals15% 3 7% 3 10% 3 15%

(extensive)

Preparation of

tender

documents

D

Scheme

design25% Scheme design 35% 4 17% 4 25% 4 60%

E Detail design 45% Detail design and

tenderdocumentation 60%

5 40% 5 40% 5 66%

(restrictedservice)

(very limitedservice)

Examination of

tenders

received

FProduction

information

Production

information85% 6 80% 6 70% 6 70%

Gand Bills of

Quantities 65%

(restricted

service)

(very limited

service)

Construction

50% HTender

Action 7 7 7

(very limited

service)

(very limited

service)

Post -contract JProject

Planning

Measurement Construction stage 8 8 8

Costing variations K Operations on

site

(restricted

service)

Preparing interim

valuation and final

account

L Completion 98% Works complete 100% 100% 100% 100%

100% Final Account 100%


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I should stress here that the Conditions set out in the drafts are my own choice; thereader may consider some should be omitted and others added. There is no singleoption. For what it is worth, however, I can add that the style shown in Appendix Ahas been used by me without exception since 1980. Whilst there have been

amendments to the standard draft since that time, and on every occasion it has beenpurposely refined to suit the particular development, the essence has remained thesame. It has been remarkably successful in bringing certainty to the client/consultant

relationship.

Addressing appointment terms early in the life of a development does, in myexperience, promote a better and realistic understanding between the client/projectmanager and consultants. Thus I strongly recommend the project manager to issue adraft of the appointment as soon as possible, even though it may not be appropriate

to define or sign against final terms until some time later, when the character of thedevelopment has unfolded sufficiently for all parties to settle with reasonableconfidence. Prior to signature the draft appointment provides a substantial indicatorof the client/project manager and consultant relationship.

Other than the lead design and cost consultants, the project manager must consider

that further consultants or advisors should be recruited to the team. Some may have adesign bias, such as landscape architects, acoustic consultants or traffic engineers, inwhich event the project manager must determine between the direct appointment by

the client or a sub-appointment by main consultants; also whether the mainconsultant embraces full design responsibility or only direction and administration ofany sub-appointment, and whether the main consultants fee is deemed to includepayment to the sub -appointee or is separately defined.

Invariably, a development team will include an array of professional advisors whose

roles are essential to the development process and who may have a strong influenceon the direction and performance of the design and cost consultants. Surveyors, realestate agents and lawyers are the obvious examples, but the list may easily extend to

include others such as accountants and market research analysts. Whether imposedby the client or recruited by the project manager, the latter must be certain as to hisresponsibility for instructing, directing or ensuring overall co-ordination. If he is tosettle terms of appointment, the project manager can often obtain guidance fromrelevant institutional recommendations. The service required of these professionals

is usually more easily defined or described and thus a letter of appointment willoften suffice without need for recourse to a specially drafted agreement.

4.1 Appointment terms general criteria

The following comments are of general application to the draft Appointments which

appear under Appendix A of this Guide and clause numbers relate accordingly.

1. Project Although the development title appears at the head of each appointment, thisparagraph should give a brief resume of the work to which the appointment

relates. Example: The alteration and refurbishment of 63/67 Kensington HighStreet, to provide retail shops, stores, offices and car park.

2. ClientState the name and address of the client. Be certain: developments are often

carried out by a subsidiary or specially constituted company. The clientnamed will be the party responsible for payment of fees.


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3. ConsultantSome professional practices operate under more than one style. Check thepractice name (and address) acting as consultant and its corporate credentials!

4. Service

(1)

A further refinement, which the project manager might consider appropriate

to the service description, is to specify the number and/or names of eachconsultants personnel assigned to the development, and their role. My ownview is that this can be a double-edged sword as it may demand prematurejudgement of personalities and can inhibit flexibility. Nonetheless, I do acceptthat it is a means of determining adequate resourcing by consultants.

In commercial development it is essential the consultants function as part of ateam capable of servicing the sale and/or letting activities. Although generallyunderstood as a principle by consultants, the need for specifically produceddrawings and specifications suited to marketing campaigns and tenancy

agreements can be regarded by them as exceptional. There is no reference atall in the Institutions standard forms! Hence it is appropriate to include thecommitment in the appointment, even though the precise requirements areunlikely to be known at the time of signing the appointment agreements. It is

also therefore included within the fee.

Only the RICS Professional Charges refers to claims, and then only in thecontext of additional charges by quantity surveyors for investigating thevalidity of contractors claims. Bearing in mind that the consultants are

inextricably linked to claims discussion (argument!) and assessment indeed,lack of design information is probably the most frequent contractorscomplaint there seems good reason to make plain that the consultants

service includes advice to the client and project manager, and representationof the clients interest.

(2)

Before drafting the specific services requirement for a given development, theproject manager should assess the role of each consultant and their inter-

relationship. The architect has traditionally been regarded as the leader of theconsultant team and part four of the RIBAs Standard Form of Agreementconfirms this principle by stating The Architect will have the authority to co-ordinate and integrate into the overall design the services provided by anyconsultant, however employed. A decision on the extent of services to be

performed by the Mechanical and Electrical Services Consultant isparticularly important because of the three alternatives offered in ACEAgreement 4A. (See Mechanical and Electrical Services Consultant, later inthis paper.) The design of the M & E systems is often substantially

undertaken by specialist subcontractors, and this can influence overall designco-ordination and supervision responsibilities. The approach for eachdevelopment should be clarified when settling service terms.

Development associates (funding institution, local authority, tenants)frequently engage professional consultants to give independent advice on thequality of design and administration of the building contract, including

sanction of architects certificates submitted to a fund for reimbursement.Whilst it is important that there should be no interference in theresponsibilities of the clients consultants in relation to the building contract,it is also necessary that the consultants recognise and agree the liaison

required with those representing Development Associates.


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Collateral warranties are an established feature of commercial development,although the subject still gives rise to a considerable amount of vehementdiscussion, mainly on account of stories that certain clients and/or their

lawyers are reported to insist on unreasonable conditions. No doubt there issome foundation for this, but for the project manager endeavouring to strike afair balance, help is at hand. The British Property Federation, in associationwith the RIBA, RICS and ACE, has produced two standard forms. The first is

as between a financier and consultant(s), and the second is for a purchaser ortenant and consultant(s). (The RICS considers them equally appropriate forproject managers, adopting the adaptation for quantity surveyors noted in bothstandard forms.)

(5)

Consultants are not expected to carry responsibility for tenants fitting-outcontracts but it is reasonable to ask that they observe the works are properlyundertaken to comply with approved drawings and to safeguard the clientsstructure and services. The consultants should witness that connections to

landlords services are effective (eg sprinklers, fire and security alarms, noblockage of drains by careless dumping of screed mix, etc).

(6)

The project manager is well advised to monitor the consultants throughout thedevelopment programme, to be sure the records are compiled, guaranteesdocumented etc.

5. CopyrightThe wording in the draft appointment follows the style included in the BPFCollateral Warranty. Copyright is retained by the consultant but licence isgiven to the client for all reasonable needs.

Tenant works/fittings out. Compiling a Tenants Handbook can be asubstantial and time-consuming exercise; this clause establishes the principleof consultant co-operation and contribution, and/or the provision of other

information to tenants and their advisors/contractors to assist the preparationof fitting-out proposals. Occasionally it is necessary to arrange the inclusionof tenant works in the clients building contract; where necessary theconsultants must provide separate valuations and certificates to enable the

client to obtain reimbursement from the tenant.

As-built record : drawings, operating and maintenance manuals, guarantees,

maintenance contracts. These are essential requirements to the managementof a building, and any future repair, alteration or extension. However, it is

often difficult to collect all the information because it is derived from anumber of sources, and in the case of specialist products such as lifts,

manufacturers can be jealous of releasing information. The aim is therefore toput the consultants on notice that the information is required and that they areresponsible for preparing or securing it according to their discipline, andwithin a time limit.


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6. FeeThe fees set down in the respective Conditions of Engagement are notmandatory. Indeed the RIBA now only provides information on fee ranges

based on market research of actual fees from amongst its members. Theearlier table shows the cumulative fee due to each consultant according to theWork Stage completed, as recommended by the respective Conditions ofEngagement.

It is common to all four consulting disciplines to calculate fees as apercentage of the final account value. For the structural and servicesengineers, however, Agreements 3 and 4A set down specific means ofcalculating their fee against the value of the works with which they are

particularly associated. The calculations are complex, particularly those forstructural engineers, and seem to offer no definite advantage over the grossfinal account method. The latter is certainly easier for administration andpossibly removes any inclination on the part of the engineers to design

expensively, as they have limited influence on the total budget. The overallfee approach is accepted by most consulting engineers.

Fixed or lump sum fees have a definite attraction for the client and projectmanager, because of the certainty they provide. I have also found consultants

willing to agree once they are reassured how this is to be achieved. For themtoo it can be a safeguard; it is not unknown for final contract sums to be lowerthan the pre-contract forecast or accepted tender. An approach I have found towork well is to agree a percentage which, once a contract sum is defined, isapplied to that and converted into a fixed fee sum. This has the benefit that

the fee reflects the value of the work described in the building contract, whichis reassuring to the consultant, but removes any suspicion that there isfinancial advantage to the consultant in designing or instructing changesthrough the contract. When requested, I have agreed a proviso that the

consultant shall receive an additional fee if the client instructs a major change.

This is also discouragement to the client. As client changes can rarely beanticipated and may be omission or adaptation as much as addition I donot agree to any more specific wording then this statement of intent. In turn,

however, I regard it as the duty of the project manager to promote to the clientthe case for additional fees if instruction falls within the spirit of majorchange.

The fee should be recorded as being in payment of all services described in 4

above. If any exceptions are made, as for example in approving tenantsshopfitting proposals, special presentations, or production of a maintenancemanual, these should be specifically noted and the basis of assessment oragreed fee for these be recorded.

Expenses are usually treated on one of the following bases:

a. as within the aggregate fee, or

b. as a separate and additional percentage of the contract value, or

c. as based on actual costs incurred, evidenced by vouchers, etc.

For reasons of certainty and simplicity of administration, the project

managers preference might be in the same order.


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7. Site personnelThe need for site personnel will vary according to the complexity of designand construction, and also often according to the preference of the individual

consultant. Costs normally form an extra to fees and are customarily based onwage and national insurance expenses plus an addition for administrationoverheads. It is advisable therefore to establish early with each consultant thelikely need for site personnel, because cost allowances must be made in

development appraisals.

When budgeting for expenditure the project manager should take account ofpossible wage or salary increases during the time that site personnel areemployed on a project.

8. Terms of payment The project manager must distinguish between:

a. the pre-commitment period, ie prior to an unequivocal client

instruction to proceed and complete the project, and

b. the post-commitment period, when the full fee terms (Clauses 6 and 7)will apply.

During the pre-commitment stage the consultants reward may be based on

either a lump sum for work up to any given stage of design or developmentprogress or, alternatively, at an agreed monthly rate, subject to an aggregatelimit. In either event, pre-commitment should be defined as including allexpenses and site personnel. All payments made will be on account of the fullfee in the event of the development proceeding. Beware of payments based on

time charges without a ceiling limit; they can result in unpleasant surprises!

Provision should always be made for a proportion of the consultants fee, say5%, to be held until issue of the architects final certificate, ie completion ofdefects.

9. Suspension or abandonment of projectThis clause will usually distinguish between the pre- and post-commitmentperiods.

For the pre-commitment period it is preferable to relate the consultantsentitlement to the terms of payment for this same period, but occasionally it isappropriate to agree different figures.

Once the post -commitment stage is reached, it is conventional to provide that

payment to the consultant will have regard to the relevant Institutionalprovisions, unless some other basis is agreed.


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10. Professional indemnity insuranceThis clause follows the similar provision contained in the BPF warranty. Thejudgement for the project manager is the amount of indemnity. Better that he

proposes, than the alternative of asking the consultant whats available?, butkeep a sense of proportion.

The period will be commensurate with whether the appointment is signed

under hand (6 years) or under seal (12 years).

11. Consultant team, project manager If the project manager is appointed on the Agreement and Conditions ofEngagement published by the RICS, then it is probably sufficient only to

record the identity of the project manager, and that the consultants will supplyinformation to him without charge. The Conditions require that the clientshall formally notify the consultants of the authority given to the projectmanager.

If, however, the project manager is appointed on some other basis, it is

desirable to have on record his role and responsibilities vis--visthe client andconsultants, in so far as they impinge on the consultants activities.

12. Signature The draft appointments in Appendix A are presented in the format appropriatefor them to be signed as a Deed (in England and Wales), ie with twelve yearscontinuing liability following completion of duties. The project managershould consider whether this is appropriate to the type of development and

duties to be performed. The alternative is to sign under hand, which conveyssix years liability.

The following sections deal with matters related specifically to the respectiveappointments of the four primary consultants. The clause numbers again

relate to those contained in the draft appointments set out in Appendix A.

5 Architect

5.1 Appointment terms (Appendix A1)

4 ServiceSchedule Two of the SFA lists the services to be provided by the Architect. It begins

with four headings Design Skills, Consulting Services, Building/Sites, and AllCommissions under which are listed services generally applicable to anyappointment. It is intended, however, that the client (project manager) and architectshould indicate those included or deleted, and write in any additions.

Then in similar style, the following 11 Work Stages. In summary these are:

l Work stage A: Inception and feasibility Principally concerned with initial analysis of the clients brief but includingappraisal identification of clients requirements and possible constraints of

development. Preparation of studies to enable the client to decide whether toproceed and to select probable procurement method.


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l Work stage B: Strategic briefing Preparation of Strategic Brief by, or on behalf of, the client, confirming keyrequirements and constraints. Identification of procedures, the organisational

structure and range of consultants and others to be engaged on the project.

l Work stage C: Outline proposalsPrepare outline proposals and approximate construction cost for client

approval. Review of procurement route.

l Work stage D: Detailed proposalsDevelop the design to agree spatial design arrangements, materials andappearance, coupled with a cost estimate. Also give an indication of possiblebuilding contract start and completion dates. Prepare application for full

planning development control approval.

l Work stage E: Final proposals Develop detailed design; co-ordinate design work by other consultants,specialist contractors, etc; obtain quotations; carry out cost checks; prepare

application for building regulations approval.

l Work stage F: Production information

l Work stage G: Tender documentation

Preparation and collation of tender documentation in sufficient detail toenable a tender or tenders to be obtained for the construction of the project.(Solely concerned with the documentation required for tenders. Particularlyuseful with D & B or management contracts.)

l Work stage H: Tender actionIdentification and evaluation of potential contractors and/or specialists for theconstruction of the project. Obtaining and appraising tenders and submissionof recommendations to the client.

l Work stage J: Mobilisation Letting the building contract; appointing the contractor; issuing productioninformation to the contractor; arranging site handover to the contractor.

l Work stage K: Construction to practical completion

Administration of the building contract to and including practical completion.Provision to the contractor of further information as and when reasonablyrequired.

l Work stage L: After practical completionAdministration of the building contract after practical completion. Making

final inspections and settling the final account. (Clearly separated from theconstruction phase.)

6 FeeThe SFA guide contains information supplied by its members. This is reproduced on

the following pages. As will be seen there are two tables, one for New Works and

the other for Works to Existing Buildings, and each contains five classifications ofbuilding type, details of which are given in Table 3.

Clause 6 should contain a statement of the percentage, lump sum or other fee

payable and that this is in respect of the entire service. Any specific exceptionsshould be noted together with the fee basis.

F1: Preparation of production information in sufficient detail to enable atender or tenders to be obtained. Application for statutory approvals.

F2: Preparation of further production information required under the buildingcontract.


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In the case of multi-tenanted buildings involving considerable fitting out, it isrecognised practice that the architect receives a fee for reviewing tenant proposals;this is usually paid by the tenant. A cost yardstick should be agreed (eg a flat rate perunit) and stated.

5.2 Memorandum of Agreement

SFA contains a draft Memorandum of Agreement for signature by architect and

client. This should be superfluous if the form set out in Appendix A1 is adopted.

TABLE 1 New works Percentage fee bands for classes of buildings(see Table 3)

Construction costbands*

Class 1%

Class 2%

Class 3%

Class 4%

Class 5%

50 000 to 75 000 7.207.45 7.758.60

75 000 to 100 000 6.857.20 7.157.75 7.458.10

100 000 to 250 000 6.256.85 6.007.15 6.707.45 7.107.60 7.758.00

250 000 to 500 000 5.906.25 5.606.00 6.256.70 6.757.10 7.507.75

500 000 to 750 000 5.755.90 5.455.60 6.006.25 6.506.75 7.357.50

750 000 to 1 million 5.655.75 5.355.45 5.906.00 6.356.50 7.207.35

1 m to 2.5 million 5.505.65 5.055.35 5.705.90 5.956.35 6.857.20

2.5 m to 5 million 5.505.70 5.705.95 6.306.85

5 m to 7.5 million 5.355.50 5.655.70 6.206.30

7.5 m to 10 million 5.255.35 5.605.65 5.906.2010 m to 50 million 5.005.25 5.255.60 5.305.90

*Where no figures are given, insufficient data was available

TABLE 2 Works to existing buildings Percentage fee bands for classesof buildings (see Table 3)

Construction cost

bands*

Class 1

%

Class 2

%

Class 3

%

Class 4

%

Class 5

%

50 000 to 75 000 12.3014.00 11.4012.40

75 000 to 100 000 11.7512.30 10.8011.40 10.6511.15

100 000 to 250 000 10.2011.75 9.6010.80 9.6010.65 10.6011.40 11.4011.90

250 000 to 500 000 9.7010.20 9.359.60 8.959.60 9.8010.60 11.1011.40

500 000 to 750 000 9.509.70 9.309.35 8.608.95 9.409.80 10.7011.10

750 000 to 1 million 9.309.50 9.209.30 8.408.60 9.109.40 10.3010.70

1 m to 2.5 million 7.708.40 8.709.10 9.9010.30

2.5 m to 5 million 7.257.70 8.408.70 9.609.90

5 m to 7.5 million 7.107.25 8.208.40 9.309.60

7.5 m to 10 million 6.907.10 8.108.20 8.909.3010 m to 50 million 6.206.90 7.408.10 7.408.90

*Where no figures are given, insufficient data was available


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Survey of Fees

TABLE 3 Classification of Building Types

Type Class 1 Class 2 Class 3 Class 4 Class 5

Industrial l Storagesheds

l Speculativefactories andwarehouses

l Assemblyand machineworkshops

l Transportara es

l Purpose-builtfactories andwarehouses

Agricultural l Barns andsheds

l Stables l Animalbreeding units

Commercial l Speculativesho s

l Surface car

arks

l Multi-storeyandunderground

car arks

l Su ermarketsl Banksl Purpose-built

sho sl Office

developmentsl Retail

warehousesl Garages/

showrooms

l De artment storesl Sho in centresl Food processing unitsl Breweriesl Telecommunications

and computerbuildings

l Restaurantsl Public houses

l High riskresearch andproduction

buildin sl Research and

developmentlabs

l Radio, TVand recordingstudios

Community l Communityhalls

l Communitycentres

l Branch

librariesl Ambulance

and firestations

l Bus stationsl Railway

stationsl Airports

l Police stationsl Prisonsl Postal

buildin sl Broadcastin

l Civic centresl Churches and

crematorial S ecialist librariesl Museums and art

alleriesl Magistrates/ County

Courts

l Theatresl O era housesl Concert hallsl Cinemasl Crown Courts

Residential l Dormitoryhostels

l Estate housing

and flatsl Barracksl Sheltered

housingl Housing for

sin le eo lel Student

housing

l Parsonages/ mansesl A artment blocksl Hotelsl Housing for the

handicappedl Housing for the frail

elderl

l Houses andflats forindividualclients

Education l Primary/nursery/firstschools

l Other schoolsincluding middle andsecondary

l Universit com lexes

l Universitylaboratories

Recreation l S orts hallsl Squash courts

l Swimmin oolsl Leisure complexes

l Leisure oolsl Specialised

com lexes

Medical/Socialservices

l Clinics l Health Centresl General hospitalsl Nursing homesl Sur eries

l Teachinghospitals

l Hospital

laboratoriesl Dental

surgeries


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6 Quantity surveyor


4 Service

6 FeeScales 36 and 37 provide for fees to be calculated according to three categories of

work arranged in approximate order of complexity. Speculative standard offices andother relatively simple forms of construction fall into category C; whilst shoppingcentres and offices incorporating detailed tenants requirements are more likely tofall within category B. Category A relates to specialised buildings such as librariesand universities.

(1) The RICS publishes two fee scales, Nos 36 and 37. Scale 36 is an inclusive

scale; scale 37 gives an itemised scale of professional charges, breaking thequantity surveyor service into a number of components, and is only likely to have

relevance in the event of a contract proceeding on the basis of an approximateBill of Quantities or Schedules of Rates.

When defining the service it is important to consider whether a Bill of Quantitiesis required for the air-conditioning, heating, ventilating and electrical services as,

if undertaken by the quantity surveyor, this generates an additional fee accordingto both scales. The ACE Conditions provide that the services consultant canproduce a Bill of Quantities (for an additional fee based on the quantitysurveyors scale) but it is preferable that if a Bill is required this be undertaken

by the quantity surveyor, so as to maintain uniformity of cost control. It also

provides an independent check (by the quantity surveyor) on the adequacy ofinformation shown by the services engineer. For many commercial projects anM & E Bill is not necessary and frequently the quantity surveyor provides a

reasonable measure of cost control within the fee.

(8) Capital allowance. In the UK it has been a traditional part of the Governmentsfiscal policy to provide tax allowances in the form of an annual writing off of aproportion of the original construction costs. This does not apply to all forms of

building or every part of construction; but where it does apply can provide avaluable tax benefit. Plant and machinery is the most frequently cited instance,but the project manager should also review with the clients tax adviser to securethe best current advice, and then direct the quantity surveyor.

Tax allowances can usually only be claimed by the party providing thedevelopment finance. Whilst the client will therefore not always gain directbenefit, i t is necessary to retain the service in case this is required by the fund.

(9) Consulting engineers fees. As one means of determining engineeringconsultants fees, the ACE Conditions of Engagement require the percentagescale to be calculated against the respective value of the structural, andmechanical and electrical services, content of contract. It is usual for the client

and engineer(s) to accept the quantity surveyors assessment.


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Category B

Category C

The additional scale fees, when bills are required for air conditioning, etc are:

The inclusive scale of professional charges provides that the printing of a reasonablenumber of Bills of Quantity and other documents, together with normal travellingand other expenses, are included within the percentage fee.

However, the principle of using standard fee scales is no longer considered

necessary. Non-standard rates or agreed lump sums are now often used in the

UK.

Value of work Fee

300 000 600 000 16 110 + 3.9% on balance over 300 000

600 000 1 500 000 27 810 + 2.8% on balance over 600 000

1 500 000 3 000 000 53 010 + 2.6% on balance over 1 500 000

3 000 000 6 000 000 92 010 + 2.4% on balance over 3 000 000over 6 000 000 164 010 + 2.0% on balance over 6 000 000

Value of work Fee

300 000 600 000 13 800 + 3.3% on balance over 300 000

600 000 1 500 000 23 700 + 2.5% on balance over 600 000

1 500 000 3 000 000 46 200 + 2.2% on balance over 1 500 000

3 000 000 6 000 000 79 200 + 2.0% on balance over 3 000 000

Over 6 000 000 139 200 + 1.6% on balance over 6 000 000

Value of service Additional fee

Up to 120 000 5.0%

120 000 240 000 6 000 + 4.7% on balance over 120 000

240 000 480 000 11 640 + 4.0% on balance over 240 000

480 000 750 000 21 240 + 3.6% on balance over 480 000

750 000 1 000 000 30 960 + 3.0% on balance over 750 000

1 000 000 4 000 000 38 460 + 2.7% on balance over 1 000 000

Over 4 000 000 119 460 + 2.4% on balance over 4 000 000


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7 Structural engineer


The Association of Consulting Engineers is the presiding body which publishesTerms and Conditions of Engagement for Structural Engineering Services . Those

for the structural engineer are contained in a booklet titled ACE Conditions ofEngagement, Agreement 3 for Structural Engineering work where an Architect is

appointed by the Client Harmonised with Architects Appointment.

4 Service

6 FeeAgreement 3 (Clause 10) recognises four alternative methods of payment.

a. Calculated upon the cost of the project

b. Calculated upon the cost of the works

c. As a lump sum

d. On a time basis.

According to Agreement 3, Project may be taken to mean the total contract sum,

whilst Works are said to mean that part of the project for which the client hasengaged the engineer to provide professional services!

(1) Following the lead of the RIBA, Agreement 3 describes the normal serviceunder a sequence of work stages approximating to those set out in Architects

Appointment. (NB: Although Architects Appointment was superseded bySFA in June 1992, the Work Stages remain the same in principle.)

Whilst the nature of the service under each heading is described, there is only

minimal reference to the features of the development which the structuralengineer is to design or supervise. Consequently the project manager shoulddefine any particular matters for which the engineer is responsible, as indicatedin the draft (Appendix A3).

Clause 7 of Agreement 3 describes a number of additional services (not includedin the normal service) for which payment is on a time basis. Seldom will any of

the additional services be required, but for a large complex development thissection should be reviewed. If any additional service is needed, it is preferablethat payment be absorbed in the principal fee calculation rather than left forassessment on a time basis as provided in Agreement 3.

Adjacent properties. In establishing the structural engineers brief, it isparticularly important to consider the need for involvement with properties thatare to be retained either within or outside the development site. If the stability orstructural condition of such properties may be affected, the structural engineer

can be instructed to monitor their condition and represent and/or negotiate withany third parties concerned.

Ground investigation. A ground investigation is invariably required fordevelopment work, and will normally be undertaken by a specialist company to

the direction of the structural engineer.

(6) Record drawings. As-built drawings are listed by Agreement 3 under Clause 7.

Additional Services (time charge!). Engineers drawings are vital to the longterm ownership of a building, and possible future alterations or refurbishment.


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Agreement 3 goes on to describe a complex formula and graph for determining feesbased on the cost of the Works; too complex to attempt a precis here. I earnestlycommend every project manager to alternatives (a) or (c), for the reasons mentionedearlier under General Criteria, which seem equally to be appreciated by structural

engineers.

The ACE Conditions provide for expenses to be reimbursed at cost. A fixed lump

sum limit or adjustment in the fee percentage provides greater budgetary certainty.

7 Resident EngineerAgreement 3 stipulates that the client shall reimburse all salary and wage paymentspaid by the consultants to site staff, plus a percentage to be agreed for head officeoverheads and administration. Reasonable in principle, but beware the salaryincrease(s) part way through the job which blows the budget allowance! Better to

agree a fixed gross monthly sum, with an aggregate upper limit.

Memorandum of Agreement. Agreement 3 contains a Memorandum of Agreementto be signed by the client and consultant recording the engagement and terms of

payment. This should be superfluous if the form set out in Appendix A3 is adopted.

8 Mechanical and electrical servicesconsultant


4 Service

(1) Mechanical and Electrical Services Consultants are commonly appointed underthe Association of Consultant Engineers Conditions of Engagement Agreement4A. This provides three alternative bases of appointment, known as Full duties,Abridged duties and Performance duties. (See also M & E SubcontractorAppointment, below). This is a vital early decision. It affects the extent to which

the design of the services is on a comparable level with architecture andstructure; it also significantly influences the time when the services subcontractormust be appointed. See Sequence below.

Agreement 4A specifies in detail the work programme for each form of duty. The

respective programmes are divided into eight stages, which are intended to matchthe RIBA work stages.

Unless stated otherwise, the Full and Abridged duties provide for the consultantto produce a Bill of Quantities (for which an additional fee based on the quantitysurveyor scale is payable). A Bill of Quantities for the M & E services is

infrequently required, but, when it is, it is usually preferable for it to be preparedby the quantity surveyor. This acts as a check on the quality of informationproduced by the consultant and assures uniformity of cost control. By virtue ofother provisions in Agreement 4A, the services consultant still retains

responsibilities for providing budgetary advice and account checking.


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6 FeeAgreement 4A contains three graphs for calculating the fee according to each type ofduty, but interpretation requires (in the UK) knowledge of the output price indexproduced quarterly by the Department of the Environment. The cost of works,against which the scale fee is then applied, is the value of the specialist subcontracttogether with some additions for attendant builders work, and to this aggregate

figure there is a further 15% to cover profit and preliminaries. When assessing feeson the scale basis, be sure not to overlook the value of these additions.

The fee arrangements are further complicated by a series of notes at the side of thework programme for each type of duty, indicating that many of the items in the work

stages are subject to other forms of payment time charge, supplementary scale, and

quantity surveyor scale. In particular, stages 1 and 2 (pre-design work) are entirelyon a time charge unless otherwise stated. It is therefore preferable clearly to recordthat the consultants fee will be based solely on the scale or otherwise agreed fee,

and will be in respect of all the responsibilities listed in the work plan (exceptperhaps Bill of Quantities) unless specific exceptions are made and stated.

Fortunately, services consultants, like other disciplines, are happy to work on eithera lump sum fee or a percentage fee of the total building contract. As a general

indication, a fee for Full duties assessed on the total contract value is likely to restbetween 2% and 2.7% depending upon the size, complexity and value of the M & Eservices and building contract.

Expenses. According to Agreement 4A, the consultant will be entitled toreimbursement of expenses in addition to the scale fee. A percentage fee inclusive of

expenses, or a lump sum, are more positive alternatives.

Even when a consultant is appointed to Full duties, the subcontractor will have toproduce installation drawings, which Agreement 4A describes as drawingsbased on the tender drawings and/or co-ordination drawings (by the consultant)

showing details of the subcontractors proposals for the execution of the works.The drawings will be in such detail as to enable the works to be installed.

Separate to the detailed list of duties given for the three principal services,

Agreement 4A schedules a number of optional Additional duties. It thereforerequires a laborious cross check to establish what is automatically included in theappointment, and which of these further duties may be required for a particularproject. Most consultants recognise this problem and are willing to take a broadview, hence the wording in the draft Appointment. Although Agreement 4A

requires the M & E consultant to carry out commissioning and testingprocedures, to inspect the works on completion and record any defects, there isno mention of certification to support the architects Certificate of PracticalCompletion. Given the significance of the consultants role, it is desirable that

there should be a clear contractual record of acceptance, and hence the provisionin paragraph 4.1.3.

Agreement 4A contains an Appendix describing the engineering services andequipment included in the consultants appointment; a copy is reproduced in the

following pages.

(6) Record drawings . Both Full and Abridged duties provide in the scale fee for theconsultant to receive and examine, on completion of the work, copies of recorddrawings, operating instructions and maintenance schedules prepared by the sub-

contractor and deliver same to the client. However, if responsibility forproducing this information is placed on the consultant then, unless otherwisestated, an additional time charge fee is payable.


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7 Resident Services EngineerSimilar observations apply as for the Resident Structural Engineer (above).

8.2 Memorandum of Agreement

Agreement 4A includes a Memorandum of Agreement to be completed and signed

by the consultant and client. This should be superfluous if the form set out inAppendix A4 is adopted.

8.3 M & E subcontractor appointment

In reviewing the appropriate appointment basis for the consultant (ie Full, Abridged

or Performance Duties), the project manager must take into account the servicewhich will in consequence be required from the M & E subcontractor.Simplistically, the distinction may be described as the extent to which the consultantand subcontractor are respectively responsible for producing the M & E designs

and it should be acknowledged here that many reputable M & E subcontractors havecompetent design teams capable of operating from the concept design stageonwards.

The primary considerations for the project manager are:

l The degree of comparability required in the respective consultants designresponsibilities.

l The complexity/simplicity of the M & E installation.

l The degree of co-ordination/integration necessary between the M & E designsand the architectural/structural disciplines during the pre-contract design

stage; therefore the timing and selection method by which the subcontractor isto be appointed.

l The extent of tender competition required and the certainty of design andprice that is to be embodied.

l The degree of consultant verification of the M & E subcontractors design,on-site workmanship, variations, commissioning, snagging and maintenancemanuals.


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Agreements

Contents

9. Development partnerships contracts

10. Development/building agreements10.1 Approved plans, elevations and specifications10.2 Definitions

10.3 Demolition/site clearance/services diversions10.4 New main services10.5 Consultants10.6 Programme

10.7 Delays during building contract10.8 Multi-phase development10.9 Insurance10.10 Building contract

10.11 Ground landlords right to enter on site during building construction

10.12 Progress report to ground landlord

10.14 Archaeological finds10.15 Site hoardings10.16 Developers boards10.17 Works for third parties10.18 Leasing to tenants

10.19 Tenants shopfitting10.20 Displaced traders10.21 Local authority obligations10.22 Site access

10.23 Completion certificate10.24 Development outlay10.25 Arbitration clause10.26 Example of development agreement Process analysis

11. Joint venture agreements11.1 Definitions11.2 The company

12. Finance agreements

12.1 Approved drawings and specifications12.2 Working drawings, services installation drawings, etc

12.3 Consultants appointments12.4 Building contract

12.5 Deleterious building materials12.6 Contract administration12.7 Development outlay/developers calldown12.8 Completion certificate12.9 Tenants

12.10 Record drawings and manuals12.11 Finance provisions12.12 Reflection

10.13 Transfer of development obligations to ground landlord in event ofdeveloper s default


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9 Development partnerships contracts

Development projects are frequently conducted through the combined enterprise,contribution and expertise of two or more parties. Most obviously the assets of a siteowner are combined with the skills of a developer and the funds of a financier. Thusthe respective contributions will differ in character and value.

Whatever the individual circumstances, the activities, obligations and rewards of theparties will be recorded in a legal document, conventionally titled a DevelopmentAgreement or Building Agreement, or Joint Venture Agreement. The twoformer (whose title names signify the same type of contract and relationship of theparties) are employed where the parties retain their individual corporate and/or

statutory identity. In a joint venture a new corporate entity is created, with theinterests of the participating parties usually expressed as a shareholding.

10 Development/building agreementsProbably the most familiar application of development agreements has been in theformation of partnerships between local authorities and developers for town centre

redevelopments. The local authority has typically been responsible for site assemblyand the developer for design, construction and marketing, including the provision offinance. However, the principles underlying the need for, and terms of, adevelopment or building agreement, are equally applicable to project partnerships

between private sector organisations where there is no public authority interestinvolved. Usually the legal estate or interest of the developer will only be fullyrealised on completion of his development responsibilities, the common arrangementbeing that the agreed draft form of lease between the superior partner (landlord) and

developer, or other statement of developers reward, is set out in the developmentagreement. Consequently, one of the project managers ultimate objectives on behalfof his developer client is to ensure the grant of a lease or payment of the reward ispromptly and effectively achieved.

Development agreements contain numerous clauses which by convention, createdthrough experience and time, are found in virtually all lawyer drafts. There is not,however, a standard form of agreement. Each will be prepared specifically for thedevelopment contemplated, usually by the lawyers representing the owner of themajor legal interest in the site, and the drafting will therefore display a certain degree

of originality even in the standard clauses. I would advise any project manager, nomatter how extensive his experience, to read a draft agreement from cover to cover,

from The Recitals to here Witnesseth. Occasionally the project manager mayconclude that the drafting is fastidious or excessively weighted against his client, but

at least he will gain a feeling of proportion between the respective parties rights andobligations. With this in mind, the project manager can then turn to specific study.

It is as vital to ensure that the responsibilities of the developer client are clearlystated as it is to ensure that they are not unreasonably onerous. Also, the project

manager has the task of implementing and carrying through the developersobligations. It serves no purpose to the project manager, his team or his client (norindeed the project partner) if, for example, the project managers time is absorbed bya requirement for providing too frequent written reports, or the project partner can

interfere in minor design changes.


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10.3 Demolition/site clearance/services diversions

The ground landlords responsibility, if any, should be described. Indicate whetherdemolition or site clearance is to include removal of foundations, and stopping uponly or complete removal of mains services. Murphys law dictates that if this is not

clearly expressed, the ground landlord will regard his responsibility for demolitionas the superstructure only. This will be followed, once the client has taken

possession of the site, by the unexpected finding of fortified underground structures,conveniently missed by the trial holes. An early and damaging blow to the clients

budget!

10.4 New main services

State the ground landlords responsibility, if any, for bringing main services to the

site. If such responsibility exists, the point from which the developer must make hisconnection should be established by the project manager (eg site boundary or nearestmain road).

10.5 Consultants

Although not essential, the practice of naming the respective developersconsultants, and any similar representatives acting for the ground landlord, is to beencouraged because of the awareness this brings to both parties activities.

Consultants and/or contractor collateral warrantyIt is to be expected that the ground landlord will require the developer to obtain a

warranty from the developer s consultants and/or contractor (and subcontractors)

confirming that they owe a duty of skill and care to the ground landlord. The projectmanager should ensure the principle is promptly cleared with the developer s team,notwithstanding any provision in the consultants terms of appointment (Appendix

A, Clause 4.2).

The British Property Federation publishes standard forms of warranty, which weredrafted in conjunction with the RIBA, RICS (for quantity surveyors), ACE andCIOB. The warranties are expressed in the accompanying guidance notes to be used

where consultants and contractors are to provide commitments to financiers,purchasers or tenants. However, I believe the style to be equally appropriate to therequirements of a ground landlord, and I therefore suggest that the project managerconsider recommending that this be the form adopted. I should add that the RICS has

recommended the BPF warranty as suitable also for project managers who arerequested to provide this commitment. This should be with the same amendments asare noted in the standard form as appropriate for quantity surveyors.

Consultants advice on terms of development agreement While the development agreement is still in draft form, the project manager should

ensure that he informs the consultants (and the contractor where already selected) ofthose terms which directly affect them or their conduct of the project. This should bein sufficient time to permit advice and/or comments to be absorbed into the legalnegotiations. On completion of the agreement, copies of the final relevant clauses

should be issued to the development team. It is, however, important for the project

manager to ensure that confidential information, for example financial terms, isexcluded from circulation.


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10.6 Programme

Date of entryThe date of entry into the site is often specified in the agreement, and is frequentlyrelated to factors such as satisfaction of conditions precedent, exchange of approveddrawings, availability of vacant possession, etc. The project manager should

consider the practicality of the date of entry as defined.

More than once I have known the initial drafting to express the date of entry as somany weeks after signing of the development agreement or agreement of theapproved drawings. The timescale has appeared to be arbitrarily decided with no

consideration given for the programme period needed to complete detail design,prepare Bills of Quantity and obtain tenders.

Yet frequently the developer and project manager will have held the consultants on atight fee rein to restrict speculative expenditure with consequent limitation onamount of design work done so far. Months rather than weeks are required to

progress through the pre-contract programme. Often the development clock startsrunning from the date of entry, so it is vital to have the appropriate pre-entrytimescale stated in the agreement.

Vacant possessionIf vacant possession of the whole site is not available on the date of entry, ensure thedates for subsequent areas are specified and advised to the consultants and contractorfor consideration during pre-contract programming, and stated in the buildingcontract terms.

Building periodThe period permitted for construction is usually stated. Given that the agreement is

probably drafted many weeks before skilled (contractors?) analysis of theprogramme is possible, this can at best be an estimate only. I have been surprisedhow rarely this has been appreciated by the lawyers and other professionals in the

team. The project manager must persuade them, and in the cause of securing acommonsense document, include an element of contingency.


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10.7 Delays during building contract

The development agreement must provide that the developer is entitled to anextension of time resulting from any circumstance beyond the control of thedeveloper. Limiting the rights for extensions only to those which are granted to the

building contractor is insufficient. The developer enjoys beneficial use only afterpractical completion, and that may be a date later than calculated with the addition of

extensions of time formally granted to the building contractor.

The implications of this condition should be fully appreciated by reference to the

remainder of the document. What is the penalty on the developer if the programmeovershoots? Most likely the financial obligation to the ground landlord starts to runbefore the developer enjoys the benefit of income from the scheme. Liquidateddamages under the building contract are not an adequate or appropriate recompense.

(NB: the right to damages under the building contract, and the timing of their award,will be judged by issues distinct from the development agreement. The set value ofliquidated damages should relate to what is appropriate for the building contract; it isnot a figure derived from rents, interest and void costs, although I believe that is how

it has often been assessed.)

10.8 Multi-phase development

Where the development agreement refers to a series of developments perhaps bymore than one party two important features should be included in the document:

Phasing diagramsFor each significant stage of the development programme there should be a planshowing the respective site ownerships, extent of contractors works area, route for

contractors access, public rights of way, routes of services.

TimetableA statement, perhaps in the form of a bar chart, should be included showing theperiods of time allocated to the respective building contracts and any consequentialsequence or other interrelationship that is to be observed. Where the timing of onedevelopment is dependent upon another, the development agreement should provide

for the timetable to be extended, and hence the developer s obligations protected, inthe event of a preceding development being delayed. Such consequences must alsobe reflected into dates for calculation and/or commitments for payment of groundrent.

10.9 Insurance

Typically the developer will be required to insure for reinstatement and three yearsloss of ground rent, and to

pm guide in development strategy

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