According to the Office for National Statistics, between 2007 and 2009 construction output in the UK fell by just under 12.5%. And, although recent figures suggest that 2010 may see some improvement on the 2009 nadir, no-one seems particularly confident that the industry will return to pre-2007 levels any time soon, even after the meagre new rations offered out in the government spending review.
During these challenging times, there is an assumption that UK construction turns into something of a buyers’ playground. Leading commentators have suggested that partnering and good practice are being sacrificed on the altar of profit, with unscrupulous clients imposing onerous and unfair terms on their professional consultants and contractors.
And yet, with all the authority I can muster from my own experience and a (admittedly somewhat arbitrary and very anecdotal) straw poll amongst my colleagues, I’m just not sure if that’s the case.
While construction clients are probably even keener than before to adopt a cautious approach to risk – people certainly seem less inclined to ‘take a view’ on any given issue – we haven’t seen a change in the underlying structure of most institutionally-acceptable deals. They look pretty much the same after the credit crunch as they did before.
What does appear to have changed, however, is that consultants (in particular) seem ever more cautious about formally signing up to appointments; negotiations seem to take a lot longer than they did before, especially if clients continue to pay them for the work in the meantime. Although I can make some (hopefully sensible) guesses as to why negotiations may be taking longer (my starter for 10 is that clients aren’t the only people adopting what they perceive to be a more prudent approach to risk), I’m not sure that stringing the negotiations out for as long as possible whilst doing the work is a good idea for the consultants.
Most appointments will contain a cap on liability – most commonly by reference to the professional indemnity insurance cover being provided. Without an agreed cap, the consultants are arguably exposed (albeit perhaps through a claim in tort rather than for breach of contract) to unlimited liability.
The point in any negotiations when it is better to sign on the dotted line than to carry on arguing may be sooner than most consultants think.
