Professional Services Contracts

It is standard practice that the Contractors are well controlled and administered in standard construction contracts. They take most of the construction risks and are liable for construction delays due to events under their control. Penalties are levied as “liquidated and ascertained damages” for delays and the Employer does not need to prove damages and the quantum thereof in the event of delay.

The same standard does not apply to Consultants when viewed through their standard Professional Services Contracts. Consultants will only be liable if the Employer can prove negligence. The importance of communication and information systems in project management cannot be emphasized enough. Poor management of information can lead to a delay of the project, cost overruns, time barring of claims, loss of productivity and in some cases, even the loss of life. The situation may exist where the Contractor will have a claim against the Employer for an extension of time and additional cost for late supply of information by the Employers’ Consultants, without the Employer having recourse to the Consultant.

Accordingly, we identified the lack of remedies by the Employer to ensure design information is submitted timely, as one of the major shortcomings in standard Professional Services Contracts.

The strategy to appoint a strong Project Management team will be of no avail if they do not have authority to manage and control the performance of the rest of the professional team. They need to be able to drive the project to reach critical milestones on time and consequently to prevent liability.

Our proposed conditions are not an attempt to impose unreasonable obligations or liability on the Consultants. It introduces limited damages, whereby the Consultant will be held liable for any time related preliminaries, which the Employer has to pay due to late supply of information by them. However, the Consultant may apply for an extension of time due to a delay caused by a compensation event or in other terms, an event “beyond his / her reasonable control”.

This provision for damages will only be applicable to Key Dates as agreed in terms of the Consultant’s Accepted Programme and will not be forced unilaterally on the Consultant by the Employer. This must be viewed as a tool also to assist each Consultant to receive information on time as planned and should also increase his productivity. Acceleration provisions should obviate the need for applying damages as progress will be monitored on a regular basis.

The proposed conditions of contract require the Consultants to create a detailed “work breakdown structure” and to schedule their services accordingly. With this information available, the Project Manager will be able to monitor progress on a regular basis and act pro-actively in instructing fast tracking if certain activities fall behind schedule.

It is also our contention that the role of the Principal Agent should be allocated to an independent Project Manager, especially for major multi-disciplinary projects. The Principal Agent in turn will delegate all the Cost/Financial duties to the Quantity Surveyor and the technical and quality duties to either the Architect in terms of the Building Contract and to the other Agents, including Engineers, in terms of the Subcontracts.

Particular care over the integration of building services design, and the avoidance of “fuzzy edges” between consultants and specialist engineering contractors, should be exercised and same should be well defined. The main objective is to define the overlapping areas of scope between the consultants and to allocate responsibilities to the parties in the best position to execute the duty and to control the risk. This is the function of a Responsibility Assignment Matrix (RAM), to ensure no gaps or double execution of functions. The implication of the above is where certain risk areas are unattended and no ownership taken and also the converse were double fees will be claimed. The Interior Designer (if applicable) will for example need to be integrated with the Architectural Scope of Services in terms of the FF&E’s and OS&E’s.

The Consultants Scope of Services should be defined as not only its standard Services including its duties and responsibilities during the applicable stages, but also the Scope of Work on which it has to be performed. Very few Professional Services Contracts take cognizance of such definition to clearly define the Scope of the Consultants Services, but merely list the Services to be performed without defining the Scope of Works, which should also dictate the Fee attracted.

We propose that a Responsibility Assignment Matrix (RAM) be developed to finalise the above responsibilities and synergy between Time, Cost and Quality management. The Organisational Structure Diagrammes (OSD) should illustrate the functioning and communication lines between all the role players.