58 | LEGAL ADVICE | FINANCE AND MARKETS
Managing risk in construction and development agreements
O
ne of the huge challenges facing university estates teams is to replace or refurbish ageing,
inefficient and inflexible buildings with modern spaces that deliver a competitive edge in atracting students, staff and research opportunities. According to the 2014 annual report of the Association of University Directors of Estates, the annual cost of meeting that challenge is £2bn (excluding residential accommodation), with institutions increasingly relying on surpluses and borrowing to fund their capital programmes. This article suggests some key
ingredients that contribute to achieving a successful development or refurbishment project, whether or not the land is owned by the university. It then focuses on the key elements of a building contract or development agreement which drive quality, time and cost.
First steps A clear statement of the required outcomes for the project (and their respective priorities) is an essential first step. It facilitates the preparation of a business case identifying the need for change, reviewing a range of options and their respective costs, benefits and risks (legal, commercial and political), and recommending a solution. The prospects for success are enhanced by identifying a project champion within the university with personal responsibility for delivering the project.
Identifying impediments and risk The next step is to prepare a detailed assessment of the risks and impediments (internal and external) to implementation and to develop a strategy for addressing them. Risk should be assessed by reference to both the likelihood and consequence of occurrence of any event. The list will include issues of finance, funding and VAT, compliance with charity and procurement law, internal governance, HEFCE approval, legal title issues and the need for planning and other statutory consents. It should address
the operational challenges during any on-campus development, and the importance of meeting teaching and research-led deadlines.
Appointing the contractor or development partner ('developer') Aside from any procurement law requirements (beyond the scope of this article), the importance of engaging an external contractor or development partner with the appropriate technical competence, track record and financial soundness cannot be overstated. The process includes an investigation of its financial strength, corporate and group structure, availability of funding (and pre-conditions to the availability of funding) and in appropriate cases the availability of a parent company guarantee and/or performance bond.
Quality The risk is that the developer fails to deliver a good quality construction, including mechanical and electrical services and lifts, fitings and finish. An under-performing item may be repeated in many rooms. The mitigation tools include:
use of a detailed specification (with specialist consultancy input as necessary) to reduce the risk of an under-performing product, and limiting the circumstances in which the developer may vary the specification
“Managing the risk of major projects university commitment in senior management time. The University of Bristol's recent £280m programme of capital investment has been founded on strong internal governance, backed by excellent legal and construction management advice. Major projects can have long gestation periods and as such, an element of change is inevitable. A sound change management process is needed to prevent loss of overall control.”
PATRICK FINCH, BURSAR/DIRECTOR OF ESTATES, UNIVERSITY OF BRISTOL
obliging the developer to construct to specified standards, including compliance with the specification, planning permission, building regulations and all relevant statutory consents and requirements ensuring the university has the opportunity to approve the identity and terms of appointment of the key consultants and sub-contractors, including the terms of collateral warranties ensuring the university has access to inspect the progress and quality of the
Main image: © Photobac |
Dreamstime.com
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82