Consultant switch

[edit] Introduction

It is common on design and build projects for a design team to be appointed by the client to carry out ‘pre-contract’ services such as initial design studies and preparing the employer’s requirements. A contractor is then appointed to carry out or complete the design and to construct the project.

It can be beneficial for the contractor to ‘adopt’ the design consultants (or some of them) to undertake ‘post contract’ services, such as; carrying out or completing the design and inspecting the works (on behalf of the contractor not the client). This provides continuity of design and other advice throughout the project.

Clients can (incorrectly) see this as a way of securing influence over the contractor’s consultants. In fact, any post-contract relationship between the client and the consultant is through the contractor. The client can no longer rely on the consultants for design assessments or independent works inspection. These services will have to be undertaken either by the client’s in-house team, or by independent client advisers.

Swapping consultants from the client to the contractor can be either by ‘novation’ or by ‘consultant switch’.

[edit] Novation

When consultants are novated, the contractor ‘takes over’ the agreement between the client and the consultant. In effect, the contractual history is re-written to give the impression that the consultant has worked for the contractor from the start. This requires agreement by all three parties.

Novation is seen to preserve design responsibility and to give contractual continuity. However, as the contractor’s requirements from the consultant will be different to the client’s, it is likely to require some changes to the appointment agreement. It is sensible if these changes are listed in the original agreement between the client and the consultant and if an undertaking can be obtained that they are prepared to enter into a contract on those terms.

The benefit of novation is that the consultant has a continuous liability for their services, before and after novation, under the same (or very similar) terms – that is, they become liable to the contractor for the entire design, not just for completing the design. This avoids design responsibility becoming split between the client and the contractor.

NB: The process of novation in itself does not make the contractor responsible for design work carried out for the client. To achieve this, the building contract needs to specifically state that the contractor has examined the design and adopted it.

NB: In the Scottish case of Blyth & Blyth Ltd v Carillion Construction Ltd in 2001, a contractor's claim against consultants for mistakes made in pre-novation services was not allowed as it was held that the client, into whose shoes the contractor had stepped, had not suffered any loss and the consultant did not owe a duty to the contractor. Novation does not retrospectively change obligations that the consultant has already performed.

[edit] Consultant switch

When there is a consultant switch, the original agreement between the consultant and the client terminates on appointment of the contractor, and there is then a new agreement between the contractor and the consultant.

This can be seen to provide better clarity of the contractual relationships. However, because the consultant’s liability to the client for pre-switch services remains, some argue that there is a greater risk of conflict of interest.

As far as the contractor is concerned, liability for work before the switch remains with the client, who would then have to seek redress from the consultant. This complex position can be simplified if the building contract specifically states that the contractor has examined the design and adopted it.

[edit] Issues

In these complex arrangements, with multiple agreements, and probable requirements for collateral warranties, it is important that the consultant avoids taking on different levels of liability from one agreement to the next. For example, the consultant should be aware of the possibility of taking on a higher liability of 'fitness for purpose' when transferring to the contractor.

Both systems have their critics and it may be that conflicts of interest will arise no matter what arrangements are made. However, in neither case should the consultant be acting in the interests of the client after they are transferred to the contractor, and from that moment all instructions and communications with the client should be through the contractor or on behalf of the contractor.

The consultant may in fact be in a better position to influence the project if they remain employed by the client to advise on the performance of a new consultant team, than they are if they transfer to work for the contractor.

[edit] Related articles on Designing Buildings

• Architect.
• Assignment.
• Appointing consultants.
• Blyth & Blyth Ltd v Carillion Construction Ltd.
• Collateral warranties.
• Concept design.
• Consultants.
• Designers.
• Design and build.
• Detailed design.
• Novation.
• Novation agreement.
• Procurement route.

[edit] External references

• PACE Guidance on the Appointment of Consultants and Contractors P126 guidance on novation.
• Building article: Novation without tears.
• Beale and Company: Switch or ab initio novation, Rachel Barnes, October 2008.
• Reynolds Porter Chamberlain: Responsibilities of the design & build contractor.