In the fourth part of our series on contract management pitfalls, we look at the risks arising out of varying the terms of construction contracts.
The Government announced on 16 May that it will provide a fund of £400m to cover the costs of removal and replacement of cladding to high rise residential blocks which have failed tests.
Part of the reason for this is to ensure funding is not diverted from other essential maintenance and repair budgets. The question is whether this is anywhere near enough? As 266 blocks failed BRE tests, the remedial costs are likely to be very substantial and will probably exceed £1billion.
Our view is that it could be sufficient provided that contractors make appropriate contributions where they have breached legal duties. We were recently approached by a registered provider of social housing for advice on cladding issues. A national contractor had installed cladding to two of their high rise blocks through a sub-contractor. The cladding had failed the tests and subsequently needed to be removed. So, the cladding was stripped off, our clients waited and waited for the contractor who was responsible for installing it to come up with a remedial solution. The problems were compounded as additional defects came to light on removal. As the likely costs increased, the contractor backtracked and delayed in organising remedial works. After a period of some 5 months, we advised that our clients should appoint experts to advise on a remedial solution and then get the remedial works done by an alternative contractor. We explained that it is not a legal requirement for remedial works to be carried out by the original contractor after the expiry of the rectification period.
We informed the original contractor and their lawyers of the approach that would be taken, they were not happy! We suspect that they did not want to commit until they could be sure of recovery from their subcontractors. Our clients remained firm about their intention to have the works done by an alternative contractor and as a consequence, negotiations commenced. A substantial contribution was agreed by the original contractor to the costs of removal and replacement without the need for legal proceedings. No doubt, the contractor is taking steps to recover these sums from their sub-contractors.
Our top tips for addressing cladding issues are:
- Appoint your own expert at an early stage to advise on the full nature and extent of the defects and the correct remedial solutions.
- Keep the original contractor informed but remain in control of the process. It is not a legal requirement for them to carry out the remedial solutions unless this makes sense.
- Take advice about your recovery options. A firm approach should result in appropriate recovery of costs at an early stage.
If you have any questions or queries relating to this article, please get in touch with Andrew Lancaster.
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