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Nominated Consultant

10 replies [Last post]
Tue, 2006-07-25 02:34
John Whitney
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We (EPC Contractor) are bidding for work where the Employer has retained a consultant to submit the design to the local authority for approval. He has nominated that same consultant in the contract, meaning we have no choice but to use him.

I have reservations about conflict of interest - the consultant works regularly for this Employer and he knows where his future work will come from. In particular, the prospect of uneconomic over-design and lack of objectivity in any technical disputes between us and the employer is a major concern.

Does anyone have any experience of this from the legal side? What realistically can we do to protect ourselves in this bid as regards a consultant who is very likley to be sympathetic to the Employer from day 1? Are there any legal cases to cover such a situation?

Thanks

John
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Replies

Mon, 2006-08-07 01:54
#1
John Whitney
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Clive,

Thanks for your added comments - yes, judging by your response, I’m pretty sure it’s the project you’re thinking of.

My concern is also based on the fact that they are categorically insisting that we use their own AP. I know about the AP system (my friend was an AP for this very same client on another past EPC project), but I cannot see why we have to use their man other than for the reasons mentioned which all benefit the client. In HK, APs are employed by all the major consultants, so I would have thought it would have been easy to appoint a qualified person from somewhere else and use him as the signing authority. At least we would have had some semblance of control over a reasonably independent firm.

Thanks again.

John

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Fri, 2006-07-28 21:59
#2
Clive Randall
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John
I think I know the project you are reffering to.
The AP RSE have to work under the Building Department here in Hong Kong and are legally obliged to take responsibility for the design.
Normally if your design is compliant with the codes its pretty simple for the AP and RSE to sign it off and they will not usually cause a problem
Their difficulty arises when the Building Department interpret a particular requirement in what may appear to be a strange way. The AP RSE then has a choice either a) to challenge the interpretation or b) to incorporate it. Most projects usually end up doing b) as it is the quickest solution. If a) is chosen there is no guarantee that you will prevail and in the meantime you have lost time.
Particular areas of concern would be the approach to fire however if the ground rules are set at the initial design stage and BD are aware for example that you intend to develop a fire engineering approach they will not cause a problem, however if you try to slip it through you will have difficulties
Clive
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Fri, 2006-07-28 05:16
#3
Stuart Ness
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John,

You may consider asking for an unpriced copy of the Agreement between the Client and his Consultant. I share your view that there may be a tendancy (even unwillingly!) for the Consultant to gravitate towards the side of the "hand that feeds him"!

If you have an unpriced copy of their Agreement, this will enable you to ensure that the Consultant is not overstepping his position, and it will also help to clarify the areas (if any!) in which the Consultant may or may not have authority!

Hope this helps,

Stuart
www.rosmartin.com
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Fri, 2006-07-28 03:59
#4
James Griffiths
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John,

It sounds as though you’ve had some "interesting" experiences previously....and you’re learning from that. Good on you!

Best of luck.

James.
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Fri, 2006-07-28 03:22
#5
John Whitney
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Thanks for all the comments to my query.

I think Colin Randall gets where I am coming from here, as he is based in HK and our bid is for work in HK!

Apologies for the rather scant details in my first posting. We are an M&E equipment supplier and will be designing, supplying and installing the process equipment and several associated buildings and ancillary works. Foundations and the commissioning and testing of our equipment will be by the client. The price is lump sum with very limited variation provisions.

The client has a nominated consultant which he will retain as the Authorized Person (AP) and Registered Structural Engineer (RSE). The AP and RSE must sign the drawings for submission for statutory approval – which approval (and all other construction licences) we are obliged to obtain.

My concern is that the nominated AP/RSE will gravitate towards the client side during design and introduce preferred engineering (i.e. where there are two solutions, he will choose the more expensive) and generally not look for cost-effective options. I have had bitter experience in the past of this kind of nominated designer arrangement on a large EPC power plant, and it cost us considerable time and money. So, to avoid this and limit this kind of unwanted interference in our design, we should process our own drawings through design development and just use the AP/RSE as a check and sign engineer.

Thanks for your suggestions, and if anyone has any further pointers I would be glad to hear them.

Regards,

John

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Thu, 2006-07-27 01:21
#6
Clive Randall
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We inherit designers all the time from the Client
Often on a fee that we have no say in and a scope that is unclear.
What can you do about it
In reality very little especially when they are the ones who are authorised in that particular country.
However the easiset way to deal with it is to allow to do their job with your designer and just let them do the check, that way they dont have to do too much for their money and subsequently dont interfere too much
Clive
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Wed, 2006-07-26 21:43
#7
Norzul Ibrahim
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Is this a lump sum or reimbursable contract?
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Tue, 2006-07-25 11:49
#8
Andrew Flowerdew
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James has some very valid points but from the term EPC I am assuming you are being asked to take over the design responsibility for the project.

The courts are littered with cases where both Employers and Contractors have failed to recover valid claims against the Consultants for design issues or defects (and also against one another) due to the contracts put in place when the Consultant has swapped employer.

To avoid a nasty shock later, should you be successful, take the time (and advice) to ensure you get it right.
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Tue, 2006-07-25 09:00
#9
James Griffiths
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John,

From what you describe, it seems to not be unusual. Essentially, the Client is what they call the “Design Authority”. He, the Client, has the final-say in determining the design. However, it would be prudent to get it defined in the contract, before-hand, as to who precisely holds the Design Authority.

The question I ask is: are you bidding for the contract to design the building, just to erect the building, or both? Are you bidding to erect the building before the Consultant has even designed it? Is the contract a fixed-price or target-price?

Regardless of who holds the Design Authority, you must ensure that you have a tremendous amount of communication with the Client/Consultant and keep him informed and allow him his input ALL THE WAY THROUGH. That way, it minimises disputes. If the Client/Consultant changes something ¾ of the way through, and he has approved everything up to that point, then it puts you, the Contractor, in a much better position to claim additional costs associated with such changes….all subject to what the Contract states. Moreover, if the contract is a fixed-price, and you’re generally happy to work on such a basis, it is not unusual to load the contract and programme with levels of contingency that are commensurate with the perceived risks.

Basically, the Consultant is the Employers Representative (ER) and you might treat the Consultant just as you would the Client. Remember though, the Client can always sack the Consultant if he’s causing too much trouble and being over-zealous. We’ve seen it happen!

The best protection, ultimately, is the levels of communication, Contract Scope-of-Work and Approvals procedures.

HTH.

James.
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Tue, 2006-07-25 08:41
#10
Andrew Flowerdew
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John,

Interesting situation, but the bottom line is you know the situation and have to bid accordingly - the same as everyone else.

Would I be right that once the contract is made, the consultant will work for you under some form of novation contract? if not, that’s the first thing to look into - and get proper legal advice on it as a badly written novation contract may leave you holding the baby for design work rather than the consultant.
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