Buying in consultancy skills? Make sure your contract terms are in tune
The recent frantic rush to put in place principal designer appointments in order to comply with the new CDM Regulations has, for many, brought into focus the issue of appointing sub-consultants. With most architects lacking the in-house experience to carry out the function, many are subletting services to former CDM co-ordinators to assist in discharging the principal designer role. What issues do practices need to consider when appointing sub-consultants?
The most important issue to check is that your professional indemnity policy will cover the services provided by the sub-consultant and what conditions apply, as the client will expect you to assume full responsibility for the sub-consultant’s services. You will also need to ensure on a practical level that appropriate arrangements are put in place for you to be able to deliver the seamless service the client will expect.
You will need to consider the terms of the sub-consultancy agreement. The client may have a right of approval of the terms of this and may require collateral warranties or third party rights from the sub-consultant in favour of itself and others with an interest in the project. Ideally you will want the sub-consultant to be appointed on back to back terms with your main appointment, though this may not always be possible.
PI problems
If the sub-consultant has a lower level of PI or insists on a cap on its liability you will need to ensure this does not cause issues with your insurer. A client is unlikely to agree to a lower level of PI and cap in the main appointment even if there is a gap here.
Then there are fee payment arrangements. Ideally you will want an extended payment period under the sub-consultancy agreement so that you have a few days from receipt of payment from the client in order to make payment to the sub-consultant. Except in very narrow circumstances it is not permitted under the Construction Act to make payment of the sub-consultant contingent on receipt of payment from the client (a so-called pay when paid arrangement). You also need to ensure that the sub-consultant’s right to additional payment is not broader than your rights under the main appointment, as you would have to cover the gap.
You will want to ensure that you have a right to terminate the appointment of the sub-consultant if the main appointment with the client is terminated, or you will be bound to pay the sub-consultant even though you are no longer appointed by the client.
Ideally you will want the sub-consultant to be appointed on back to back terms with your main appointment
Co-ordinating copyright
Care must be taken to ensure that copyright provisions comply with the requirements of the main appointment. If this contains a waiver of moral rights, it should be included in the sub-consultant appointment too. Architects are often obliged to indemnify the client if they breach a third party’s copyright. Again, this must also appear in the sub-consultant appointment.
Bribery Act and confidentiality provisions will also need to be passed down as appropriate. Often the main appointment will include express requirements for this in any sub-consultancy agreement.
Appointment of sub-consultants does not need to be difficult. Care needs to be taken however to ensure that the terms are as closely aligned as possible with the terms of the main appointment.
Angus Dawson is partner at Macfarlanes
In plain English: Joint names cover
Joint names insurance is cover under which the contractor and employer are each named as insured on the policy. This means that either can claim if an insured risk occurs but also that the insurer is unlikely to be able to pursue the employer or contractor if either of these causes the claim in question. If, for example, the contractor is a joint name and causes a fire on site, the insurer will have to pay out but will not be able to recover reinstatement costs from the contractor.
Composite insurance operates in a similar way.
If the contractor were not a joint name, the insurer might look to exercise its rights of subrogation. Here the insurer steps into the shoes of the insured to sue the person who has caused the insured risk. If an insurer waives these rights, it loses its right to sue the person who caused the insured risk. A waiver of subrogation rights therefore provides similar protection to joint names. The key difference between the two is that someone benefitting from a waiver of subrogation rights cannot recover insurance proceeds under the policy.