Last edited 27 Nov 2015

Planning risk

Planning permission can be the greatest risk on a construction project.

Deciding whether to make an outline or detailed application, and when to make an application is of great importance. Typically clients wish to secure planning permission as soon as possible so as to minimise abortive design costs. However, being granted planning permission may become more likely as the design develops and more details can be provided to the planning authority.

On design and build projects delays in obtaining planning permission (which the contractor has taken reasonable steps to avoid) may be grounds for an extension of time, and loss and / or expense and may become grounds for termination of the contract if the delay results inthe works being suspended.

On private finance initiative projects, the client should at least consult the local planning authority to establish the likely planning parameters for the project and perhaps seek a screening opinion as to whether an environmental impact assessment will be required before seeking bids. The client may also wish to obtain outline planning permission before seeking bids, or even to make the contract conditional upon detailed planning permission being received. The contractor (integrated supply team) may then be responsible for obtaining detailed planning permission or any further permissions, for which purpose the contractor acts as agent of the client. Failure to obtain detailed planning permission may result in termination of the contract, giving rise to compensation events.

Problems can be caused by misunderstandings, misinterpretations, incomplete applications, applications that are not in an appropriate form, payment of fees, the timing of planning committee meetings and so on. To ensure that there are no delays, it is wise to seek pre-application advice from the local planning authority who can clarify the form of the application required and the information that it may require. If it is necessary for the application to be determined by the local planning committee (rather than by planning officers under delegated authority) they will be able to advise about the timing of meetings and whether the applicant might make representations to the committee.

Planning performance agreements can be prepared for complex applications, or applications where the statutory timescale is likely to be exceeded. These are voluntary undertakings that enable local planning authorities and applicants for planning permission to agree the timescales, actions and resources necessary to process a planning application. They are not intended to be legally-binding contracts, but are in the spirit of a ‘memorandum of understanding’.