Among the projects going ahead during the COVID-19 slowdown, there seems to be a particularly high proportion that include sub-consultant engagements.

By “sub-consultant”, we mean a specialist consultant who is engaged by you, or by your sub-consultants. We don’t mean other specialist consultants who are engaged by (say) the client or the builder. Every consultant working on a project should have a written consultancy agreement which, among other things, confirms who has engaged them, as that party has a very high level of contractual liability for all of their activities.

Engaging sub-consultants is hard work, and engaging them properly requires good systems.

Sub-consultant errors are a common contributor to claims against head consultants. Most often, those claims arise out of pure technical errors by the sub-consultant – that is, where the head consultant would not have had any liability for the problem if they had not engaged the at-fault consultant as their sub-consultant. Claims arising out of sub-consultant errors can generate multi-million-dollar insurance claims, and unquantifiable levels of stress and wasted work.

While avoiding sub-consultants would reduce this risk, the reality is that many clients remain wedded to procurement models that use chains of sub-consultants. In order to work for these clients efficiently, you will need good systems for making the vetting and engagement of your sub-consultants as consistent and simple as possible.

When you are in the role of head consultant, these are some systems that can help:

1. Have a short pro forma contract for engaging sub-consultants on “back to back” terms (for instance by annexing the head consultancy agreement with a provision that the sub-consultant must comply with all its terms as if it were the consultant under the head consultancy agreement)
2. In a tender scenario, clarify from the outset that the engagement of sub-consultants will be on “back to back” terms
3. Create a checklist for the paperwork required for each sub-consultant (e.g. consultancy agreement; insurance certificates of currency)
4. Put on a training session for your staff on the importance of taking care with sub-consultant engagements
5. Keep a register of sub-consultants so that your staff can draw on the experience of colleagues who have worked with a particular sub-consultant before
6. Review each sub-consultant’s scope carefully to check that any exclusions are appropriate and, if they are, account for them in your own scope too
7. Include a margin in your fees to cover the costs and work of engaging them: say, 10-20% of the sub-consultant’s fee

Of course, when you are in the role of sub-consultant yourself, the concept of “back to back” contracts is much less attractive, especially if the upstream consultancy agreement is long and prescriptive and full of warranties and indemnities. There is an unavoidable conflict here between the interests of head consultant and sub-consultant. One way to address it is by both consultants working together to seek amendments to the head consultancy agreement to get it in a form that both consultants can live with.

Our Liability for Sub-consultants Practice Guide can be downloaded from this link by professional indemnity insurance clients of Planned Cover with an authorised login.

In addition, for practices with larger teams who have access to our in-house training program, Sub-consultants is one of the topics on which our risk managers can present to your staff, underlining why all the above is important.

And finally, for a deeper level of assistance, the informed by Planned Cover Example Documents contain examples for item 1 in the above list (short pro forma for engaging sub-consultants on “back to back” terms) and item 3 (checklist for engaging sub-consultants). Access to these Example Documents is through an annual subscription, which is $500 for Planned Cover professional indemnity insurance clients.

See a list of our current example documents

More information about subscriptions

Please contact us at info@informedprofessionals.com.au with any questions about our subscriptions, Practice Guides or seminars.

 

Wendy Poulton
Risk Manager, informed by Planned Cover

 

This article is only general advice in respect of risk management. It is not tailored to your individual needs or those of your business, nor is it intended to be relied upon as legal or insurance advice. For such assistance you should approach your legal and/or insurance advisors.