In February, we asked for feedback on your experience working under a partial services or novated procurement structure.

This is what you said. Our survey results illustrate both the variation in experience, and the areas of strong consistency. We hope it will be a useful opportunity to benchmark your experience against your peers.

Partial Services

A third of you are engaged on a partial services basis for more than half of the projects you work on. However, the biggest group of you, at 41%, provide partial services on less than a quarter of your projects.

While some of you find partial services to be less risky, 44% of you think it raises much more risk, and 28% a little more risk, than the traditional full services procurement.

Once you’ve left the project, this is how the design is usually completed:

“Partial services” must be something of a misnomer, because a third of you “almost always” receive requests for further advice and assistance after completion of your services, and a further 20% “often” do. 39% said you “rarely” receive these requests, but none of you reported “never” receiving them.

The good news is that nearly 60% of projects are clearly flagged as partial services from the start, which gives you the change to plan and prepare your design accordingly. Only 19% of you reported that your partial services projects mostly start off as full services and then change part way through.

On the question of how you hand over your documents, you said:

Some of your comments on partial services included:

• Removes the difficult contract administration
• Clients are always surprised/indignant when issues arise after completion of partial services. Need to educate them from the outset.
• Works well with a good builder but excruciating when managed by client. Invariably, it revolves around helping them to ‘dig themselves out of a hole’
• Clear demarcation of what is AND is not partial services needs to be recorded.
• Educate clients about pitfalls of d & c work especially if they are new to it
• Understanding the risks associated with providing partial services, and specifically the risks associated with particular partial services, has allowed us to make informed assessments and commercial decisions in relation to our agreements.
• It’s all very clever, and shared CAD has proven to be a great tool for re-designing and solving clashes of services all we need is the to improve the tools that drive the human element. Individuals clashing can be more expensive than fixing an issue as compared with cooperative people in office and work well together.
• Measuring and comparing percentage targets make preparing and assessing fees difficult
• Preference is not to do them at all because the end product is out of our control and the risks both financially and to reputation

Novation

An interesting starting point is the difference between when you think novation should occur:

… and when you report that it actually does occur:

About a quarter of you report that you have “a little” (17%) or “a lot” (7%) of control over selecting the contractor to whom you will be novated. A further 35% say that, while you do not have control, your contract preserves the right for you to reject an unreasonable novation, but 30% of you report having no control over contractor selection.

A large majority of you never or rarely act as superintendent of the design and construct contract after novation, although 4% of you do, and a further 11% do so by having a contract administration team wholly separate from the design team. And on the question of your observation/inspection duties on novated projects, it’s clear that the role is very much less than on a traditional project:

More than half of you find novation leads to worse project outcomes and less satisfaction for consultants. A small number report better experiences under novation, and the remainder replied “About the same/It depends”.

Setting of fees for novated projects was the one question where our survey produced no useful results, with a common response being that it’s very variable, depending on market pressures and the type, size and scope of project.

On the vital topic of payment for variations, 63% of you report that you can usually claim a successful variation for redocumenting changes and substitutions by the builder for costs saving purposes. A significant number of you also have success claiming variations for redocumenting in trade packages (43%) and investigating alternative products substituted by the builder (35%).

On novated procurements (as compared to traditional):

• 17% of you find it easier to get clear decisions and instructions
• Only 7% of you find it easier to obtain fee payments, and 2% find it easier to obtain variations and extensions of time
• About a third of you find no difference when it comes to obtaining decisions, fee payments, variations and extensions of time
• The majority of you find all these things “a little harder” or “much harder” on novated projects.

In conclusion, your comments on novation were a neat summary of all the above factors. They demonstrated how your opinion of novation is very much dependent on the specific projects you have worked on, and the principals and contractors you’ve worked with. Here are some of your comments:

• Can work pretty well if the team culture is right
• Whether or not novation is more difficult between consultant and client than a traditional contract structure really turns on the relationship between the parties and their individual business operations. To manage risk associated with any contractual relationship, consultants must understand the agreements they are entering into from the outset, seek advice as necessary and propose amendments where required.
• The success of the novation process is dependent on a) the stage at which novation occurs b) the involvement/interest/intelligence of the Client c) the ‘quality’ of the contractor
• Builders input to design does have value (nobody knows everything). However changes to the design due to ill considered ‘Value Management’ usually has profound, expensive and undesirable knock on effects to the scheme.
• It is vital that the architect is able to communicate to the Client. Otherwise, the Client can never be aware of changes to the briefed design and cannot choose to accept the changes or not.
• The builder expects a ridiculous level of documentation for no fee at all!
• As a matter of principle I will not be novated to builders as the conflict of interest is to great
• Do not do it – it is degrading, frustrating, totally not profitable, downgrades the design quality of the project. We will never do it again!
• Contractors tend to be economical with communication keeping us in the dark about many aspects of the design. Less experienced/smaller ones lack knowledge about the design process leading to mistakes on site. Poor quality tradesmen add to the problem often leaving the contractor under resourced on site.
• The Client seems to think you are still working for them, looking after their interests when actually you do what your client requests….our “new” client is actually the contractor. They are usually just getting lowest cost but most often they also get unexpected delays, a lot of arguments and a lower quality result.
• The main issues would be: Who we are to be Novated; Any unfair contract conditions; Unpaid changes to documentation; Reluctance by the Contractor to take advice, particularly on substitutions
• Successful novation requires a responsive, intelligent builder.

Wendy Poulton

Risk Manager