Macroeconomic Trends: forewarned is forearmed - simple steps to a claims free future

Macroeconomic Trends: forewarned is forearmed - simple steps to a claims free future

Macroeconomic Trends: forewarned is forearmed - simple steps to a claims free future

Macroeconomic trends highlight a challenging but bright future for construction and property professionals but simple steps must still be taken to avoid a future of increasingly costly claims.

Choose your partners wisely, agree the right fee, and on occasion, resist the urge to be too helpful, were just three of the top tips that emerged from a recent industry roundtable discussion on how consultants can avoid costly contract disputes in the increasingly challenging economic conditions.

The roundtable event, organised by professional risks specialists, Griffiths & Armour and generously hosted by legal advisors BLM, also highlighted the vital need for built environment - professionals to spend time upfront on projects getting the contractual basics right such as a clearly defined scope and appropriate provisions addressing limits of liability and net contribution.

At the heart of the discussion was the latest Griffiths & Armour white paper 'Macroeconomic and Construction / Property Market Trends' produced in association with BLM. This analyses the impact and legacy of the recent financial crisis on the sector and sets out predictions as to how the current macroeconomic climate may influence professional indemnity claims against professionals in the future.

"In risk terms, the recent recession has given rise to some classic case studies illustrating how not to go about undertaking certain projects," says the white paper. "From simply biting off more than one can chew, or being the ever-too-helpful consultant, are well-worn paths to claims problems for the unwary."

Using a range of examples drawn from real recent cases, the paper sets out examples to help the industry to better manage its current workload expectations, serving, it says, as a "useful warning to those involved in the construction professions throughout the UK".

Carl Evans, the managing director of Griffiths & Armour Professional Risks told the gathering of engineering consultants, designers and contractors that evidence from the past demonstrated that claims still tended to flow from industry making the same simple mistakes.

"There are some fantastic opportunities for the construction and property professionals as the UK economy continues to move forward supported by investment in infrastructure," said Evans. "But lessons from the past highlight how, in the rush to meet this opportunity, professionals must take simple steps to protect themselves from the risk of future PI problems."

He set out his key tips to help avoid professional indemnity claims on construction and property projects as:

  • Agree the correct fee for the work to be carried out at the outset
  • Get the project resourcing right
  • Stick to what you know – provide the services you can deliver
  • Understand the roles and responsibilities across the project
  • Get the contractual basics right, including appropriate limits of liability and net contribution
  • Work with the right partners – that you can trust
  • Don’t be too helpful in areas beyond the intended brief
  • BLM partner Keith Lonsdale agreed that the examples continued to demonstrate that across the growing construction and property market future claims against professionals were inevitable, but it is possible for consultants to take steps to minimise that risk.

"While clearly the 2008 financial crash put extraordinary pressures on the market, it is clear from the examples in this paper that there are a number of steps that professionals can take to learn from the past mistakes," said Lonsdale. "As it concludes, what better time to read of problems from the near past and stock up on cautionary tales for the future? Forewarned is forearmed."

The discussion heard analysis of the macroeconomic trends likely to impact the sector by Institute of Directors’ economist Andy Silvester.

He pointed out that while there were some major risks to the economy such as from the Brexit vote and the US presidential elections, in reality the greatest impact was likely to come from the need for the government to find £30bn in efficiency savings by 2019/20 from the public purse.

He also highlighted the on-going fragility in household incomes and the impact of the disproportionate rise in the cost of housing across the UK, particularly in the south east, and the pressure that this put on available skills.

However, Keith Waller of the Infrastructure and Project Authority dismissed the notion that cuts to public spending on infrastructure were inevitable, highlighting the latest National Infrastructure Delivery Plan 2016-2021 which covers more than 600 projects or programmes worth approximately £483bn.

"As the biggest client for projects in this plan", he said, "it demonstrated the increasing focus away from short term public spending inputs towards longer term investments in outcomes and whole life value from infrastructure. Initiatives such as the National Infrastructure Commission, setting out a vision for the nation’s infrastructure needs in the long term underlined this policy."

For a copy of the white paper, please click here.

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