School’s out, but the building work continues

The summer holidays will have seen many schools carrying out maintenance and larger projects ready for the new school term. So what should schools watch out for on projects that are running behind schedule? And what should schools should bear in mind when balancing the urgent need for occupation before the start of term against taking completion with a lengthy ‘snagging’ list?

Practical completion
When nearing the date for completion a school will need to consider if ‘practical completion’ has been achieved.  In legal terms, practical completion means that the contractor has completed the works in accordance with the contract, and strictly speaking, that requires all works to be completed. This does not mean that the works are ‘perfect’, and minor defects often remain to be rectified following completion. Whether or not practical completion has been achieved will be a question of fact on each project.
   
Contractors usually push for practical completion to be certified as quickly as possible following the contractual date for completion for the reasons set out below (and in particular the deduction of liquidated damages). Schools should, however, be aware of allowing practical completion to be certified before works are completed in accordance with the contract. If returning staff and children mean that you are forced to accept practical completion early, the following should be borne in mind.

What to bear in mind?
Any defects or incomplete works known about prior to practical completion should be clearly listed on a schedule ‘snagging’ items attached to the certificate. This approach should prevent the contractor subsequently arguing that you accepted those works in their incomplete state or no longer required them.
   
Consider which items of work are left outstanding on that snagging list and whether you have a sufficient amount in your retention to attend to those ‘defects’ should the contractor fail to adhere to its contractual obligation to return and put them right at their own cost. If the defects are so extensive that your retention is insufficient then this is usually a strong indicator that the works have not reached practical completion.
   
After completion you will need to arrange with the contractor for defects to be dealt with and provide access. Given the nature of a school it is likely to be half terms and future holidays before the contractor will have sufficient access and so you should plan and deal with matters early.
   
If your contract includes completion by sections, you could consider simply taking practical completion of a particular section or sections and asking the contractor to deliver the time critical first section earlier and to allow the less time critical work to be delivered later, perhaps if practical after the school term has recommenced.
   
You may find yourself in a situation where you need to take partial possession of the site as it is critical for the first day of term. If you do, note that the area you take will be deemed practically complete, whether it is or not, and that you are responsible for insuring that part of the site from that date. Furthermore, the defects liability period will run from that date and so you are likely to have more than one defects liability period to manage, finishing on different dates.
   
You should also be aware of the implications of certifying practical completion under any other relevant documents, for example, does the performance bond expire on practical completion?
   
Depending on the reasons for the slippage in programme, you could consider giving the contractor an instruction to accelerate in order to meet the original date for completion – in other words – to put more men on the job. This is more than likely to have cost implications and, depending on the circumstances, you may prefer to incur additional cost than have the building completed later than planned.

Non-completion
If you cannot take partial possession and are not satisfied that practical completion has been achieved you will usually need to serve on the contractor a ‘non-completion notice’.

If the contractor is late, and assuming all appropriate extensions have been given, there are usually measures in your building contract to assist. Firstly, provision is usually made in most contracts during pre-contract negotiations for a fixed weekly amount that the contractor has to pay if late. These are known as liquidated damages. 
   
The rate of liquidated damages should be a ‘genuine pre-estimate’ of your losses should the building not be ready and, typically, would include items such as the cost of renting alternative space, additional finance charges and storage charges. Of course, this list is not intended to be exhaustive, but gives you a guide as to the items you should be looking at when considering what amount the contractor ought to pay you per week if late.
   
Liquidated damages are standard practice and it is usually a case of negotiating the amount at the contract stage rather than the existence of them. We often see contractors attempt to remove them from draft contracts and this should be strongly resisted. The issue of a non-completion notice is usually a pre-condition to claiming liquidated damages and therefore you should ensure that the notice is issued as soon as possible. Usually liquidated damages will be deducted from the latest application for payment. 
   
The contractor is only permitted to apply for an extension of time for limited causes of delays that are its responsibility. At the pre‑contract stage this list should be carefully considered in negotiations particularly where the overall programme for the works is tight. 
   
Usually, the contractor would not get an extension of time if he is simply slow, but if matters have been delayed for reasons that are your responsibility, such as a large variation you require to the works or perhaps there has been some extreme weather, then your representative may consider that an extension of time is reasonable.

Lessons learned
If you find that your contract is not as robust as you would like then these are our general pointers for next year.
   
The time spent prior to tendering and entering into a contract is critical. Whether you are planning major works or routine maintenance, the contractor’s ability to provide a fixed price, which is realistic, is enhanced if you are certain what you want and have fully developed your design. This can avoid problems arising later for which the contractor may rightly be able to claim for. The clearer you can be, the greater certainty you will have that the contractor will deliver what you want and when you want it.
   
It is good practice to have the form of contract ready before going out to tender and to seek tenderers’ agreement up front in their tender returns. This means that you can put forward the most favourable terms you wish and it is likely that in their tender returns contractors will limit any points they wish to raise as they are in competition and usually very keen to win your work. This makes negotiating the contract with the successful bidder much simpler; it can sometimes be more challenging to agree terms after the contractor has won the tender as the bargaining position of the parties clearly shifts.

Good project management is the key to successful delivery of most projects. On larger schemes it often goes without saying that professional representatives (who may be external or internal) should be engaged to monitor progress, the accuracy of the contractor’s claims and to drive the project forward.

On smaller schemes, it can be tempting to try to save costs by simply relying on the contractor, particularly when there is no in-house expertise, but unfortunately this can sometimes lead to problems for the inexperienced. If budgets allow, we would always recommend that you appoint professional personnel to represent your interests and advise you generally on the running of your construction contracts.
   
There is no substitute for having detailed and robust contracts in place which are run by experienced people. If you are in a situation where the building will be late, document the issues fully and serve all appropriate notices to protect your position.

Further information
www.wslaw.co.uk