A new trend has emerged in the drafting of construct-only construction contracts which places unexpected design risks on Contractors. Contractors should pay close attention to any clause containing the terms buildability or constructability, which may entail broad design obligations, even where the contract is otherwise a construct-only variety such as AS4000.
Construct-only projects with harsh buildability or constructability clauses or provisions may cause Contractors to under-quote or fail to engage the necessary consultants, as Contractors are unprepared for the hidden liabilities and obligations these new provisions entail. Specifically, contracts may include broad warranties and indemnities with respect to design defects which are usually only found in design and construct contracts. The result is that the Contractor must engage design consultants to validate the Principal's designs; these ostensibly construct-only contracts reveal themselves to be design & construct contracts by stealth.
Buildability and Constructability: What do these words mean?
Any time the word buildability or constructability is used in a contract, Contractors should pay close attention to the precise definition of the word. All too often, a particular meaning is mistakenly presumed where a different meaning is defined within the contract terms.
The terms buildability, and constructability are generally interchangeable, but may have different meanings depending on the context. These terms can be given specific meanings in academic contexts but may mean something very different when used in a construction contract.
Academic Context
Academics and consultants specialising in construction management and architectural theory use the terms buildability and constructability when comparing the efficiency and feasibility of building designs, construction programs, or tender packages.
In this context, improving the buildability or constructability of a project requires implementation of construction knowledge and experience throughout a design phase.1 The term buildability might be used when discussing whether a particular design is optimised for ease of construction or affordable and timely realisation of an architect's vision.2 3 The term constructability on the other hand may more often be used when discussing whether a project is able to be managed safely and effectively, having regard to environmental factors, procurement, and supervision of subtrades. 4 5
A basic example of improved buildability is where a structural steel design using many different sizes of beam is standardised to a reduced set of beam sizes to simplify procurement, fabrication, transport, and installation processes required to complete a project (compared with using a wide variety of unique beam sizes). The end result is to reduce the risk of human error and simplify the construction process.
A popular method of improving the constructability of reinforced concrete slabs is the use of steel decking products as sacrificial formwork, which 'doubles' as a safe working platform for steelworkers (and other trades) before the concrete cures. This further reduces the amount of physical labour involved in removing formwork. Here, the goal is to simplify a construction program and reduce the degree of demobilisation and remobilisation of personnel and equipment.
Professionals in the construction, architectural design, infrastructure and planning industries may be familiar with the terms being used in a manner as described above and may assume that a reference to buildability or constructability in a construction contract has a similar, academic meaning (where it may not).
Legal Context
Judgments referring to the terms buildability or constructability arise infrequently. Although these terms occasionally appear with the academic meanings just described above6, they are more often applied in the ordinary sense of whether a building can be built or not.
No Warranty as to Buildability
The position at Common Law, in Australia, is that a Principal does not warrant that drawings or designs attached to a construction contract are actually capable of being built, unless explicitly stated so.
If the designs/drawings turn out to be incapable of construction, the Contractor is barred from claiming a variation, or suing the Principal for damages, arising from the need to redesign the work. A competent contractor is deemed to have relied on their own judgment as to the buildability of a design before agreeing to enter the contract. An old authority on this point is set out in Thorn v London Corporation (1876) LR 1 App Cas 120 (Thorn's Case).
Thorn's Case
In Thorn's Case, a contractor (Thorn) had agreed to build a bridge across the River Thames. After commencement, Thorn discovered the foundations for the bridge (specified in the contract) were incapable of resisting the tidal forces of the river. The foundations required redesigning. Thorn was then required to reconstruct the bridge according to the Principal's amended designs, which resulted in wasted work, significant delays and other additional costs.
Thorn submitted to the House of Lords that the Principal had (impliedly) warranted the contract drawings were capable of being built (but they weren't), and Lord Cairns rejected Thorn's argument. Lord Cairns reasoned that if Thorn had required such a warranty, he was free to negotiate that into the contract. The decision of the House of Lords upheld the "sanctity of contract and the imperative of enforcing parties' express agreement"7. The result is that, in the absence of special terms or circumstances, a warranty that designs are capable of being built will not be implied into a contract for the benefit of a Contractor.
Lord Cairn's sentiments in Thorn's Case still hold sway 150 years later.8 In Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24 Mason J stated that the "canon of common sense" found in Thorn's Case cannot be "elevated to an absolute rule of law"9 and the presumption that a Contractor accepts the risk of buildability issues must be applied carefully to the facts of each case. Nevertheless, the basic principle in Thorn's Case is broadly upheld throughout Common Law jurisdictions10.
When the Contractor Must Thoroughly and Comprehensively Inform Itself
Contemporary standard form Australian construction contracts often require the Contractor to warrant that it has "thoroughly and comprehensively informed itself" of various matters11. This may include considering the feasibility of designs and the potential costs required to complete the works (including potential cost overruns). By including these provisions, Principals seek to reinforce that the Contractor has satisfied itself of the suitability of designs prior to entering a contract, such that the Contractor cannot complain later if the drawings turn out to be difficult (or impossible) to build.
In Abigroup Contractors Pty Ltd v Peninsula Balmain Pty Ltd [2001] NSWSC 75212, Abigroup claimed a variation to install driven tube piles (instead of the bored piles specified in the contract drawings). The new pile design was determined to be necessary by the Principal's engineers, after work had already commenced. The relevant contract included a warranty that Abigroup had thoroughly and comprehensively informed itself of the buildability of the Works before commencing.
Abigroup tried to apply Thorn's Case in reverse. Abigroup's position was that the contract should have explicitly stated that Abigroup bore the risk of buildability issues, because the parties were free to assign risk in that way if they truly intended to. Barret J disagreed, and held that the warranty by Abigroup to thoroughly and comprehensively inform itself of the buildability of the Works would have no effect unless Abigroup also accepted the risk of consequences arising from such buildability issues.
The requirement to thoroughly and comprehensively inform oneself prior to entering a contract can be seen as a complement to the principle in Thorn's Case particularly in situations where application of Thorn's Case is doubted.
How Buildability Clauses Work In Construct-Only Contracts
Over time, the Contractor's duty to thoroughly and comprehensively inform itself has been elaborated. It may include consideration of matters that might otherwise be unclear from the contract and designs alone. The most significant example is the construction program or the sequence of the Works. Even in construct-only contracts (where the Contractor is not required to design the Works) the Contractor may nevertheless be required to design the method of completing the Works.
A common form of buildability clause starts with a definition of a buildability issue. This may take the following form:
Buildability Issue means any ambiguity, discrepancy, inadequacy, inconsistency, incompleteness or lack of coordination or integration in or between the documents forming part of the contract, that a prudent, competent and experienced contractor would reasonably have foreseen to cause an issue, difficulty, complexity or additional work relating to the means, methods or techniques by which the work under the contract is to be performed.
This is often paired with an obligation to inform the Principal of any buildability issues as soon as the Contractor becomes aware of them. For example:
The Contractor must identify and bring to the attention of the Principal any Buildability Issue the Contractor becomes aware of, or that a competent contractor ought to be aware of in the circumstances known to the Contractor at any time.
The Contractor must notify the Principal of any consequences that may arise from the Buildability Issue with respect to:
- the time required by the Contractor to complete the Works, or
- additional costs likely to be incurred by the Contractor
as a result of the Buildability Issue, within 3 business days of becoming aware of the Buildability Issue (or within 3 business days of the date on which a competent contractor ought to reasonably have become aware of the Buildability Issue).
In addition, the Contract will normally include time bar and notice provisions, failure of which to comply with may result in the Contractor being ineligible to claim for additional costs or extensions of time. Such time bars may be in the following form:
The Contractor shall have no claim arising out of or in connection with a Buildability Issue unless the Contractor gives notice to the Principal of the Buildability Issue in accordance with [the above clause].
The Contract may then go on to qualify the Contractor's entitlements in the event of a resulting design change, such as a method of calculating the Contractor's entitlement to payment, or the Contract may specify that the Contractor's only remedy is an extension of time. Accordingly, the Contract may be much less favourable to the Contractor than AS4000.13
Principal's Secret Weapon
Further still, the Contract may require that the Contractor provide detailed explanations of the effect of a buildability issue on the construction program, and possibly require the Contractor to propose its own resolutions to the buildability issue (thereby potentially taking on design responsibilities). The Contractor may be explicitly barred from making claims with respect to buildability issues at all. Depending on how the Contract defines buildability issue (or constructability issue), the results can be very serious for the Contractor who does not understand the operation of these types of novel clauses.
Principals can add greater force to their buildability clauses by including an indemnity by the Contractor to compensate the Principal for any losses or damage incurred as a result of buildability issues. This compels the Contractor to consider the longer-term consequences of buildability issues as defined in the Contract.
Such indemnities can stand alone in the Contract terms or might be inserted into a long list of circumstances in which the Contractor already provides an indemnity to the Principal. As such, joining the dots between a Contract's buildability provisions may require traversing the entire General Conditions.
New Breed of Buildability – Not just "Buildable" but "Fit for Purpose"?
Consider the following 'expanded' definition of "Buildability Issue":
Buildability Issue means any ambiguity, discrepancy, inadequacy, inconsistency, incompleteness or lack of coordination or integration with a prudent, competent and experienced contractor would reasonably have foreseen to cause an issue, difficulty, complexity or additional work:
- relating to the means, methods or techniques by which the work under the contract is to be performed; or
- to ensure that the Works as completed are suitable for their intended purpose.
The words "suitable for its intended purpose", "fit for purpose", "compliant with all applicable laws and regulations", "carried out in a manner that is compliant with all applicable laws and regulations" or simply "free of all defects" add yet more liability not seen in a construct-only contract. These terms in fact refer to a Contractor's design liability.
Design & Construct By Stealth
The basic mechanism behind most buildability clauses is that they start by expanding the Contractor's obligation to thoroughly inspect and consider the contract drawings (and other technical specifications given by the Principal). From here, Buildability clauses typically introduce obligations on the Contractor to respond to those drawings and specifications.
The contract may be entirely silent on the Contractors' obligation to actively "design the Works" or "produce any design", but the Contractor is liable for the designs nevertheless. A "fitness for purpose" obligation hidden within a buildability provision causes the construct-only contract to deviate from the traditional risk profile to be subject to additional design risk.
Gone are the days when Contractors could rely on the front page of a contract to determine whether they are liable for design defects. By the operation of buildability clauses, construct-only contracts are becoming quasi-design & construct contracts by stealth.
Whereas Contractors and subcontractors building in the Australian "East Coast" residential sector already account for design consultancy fees in their tender prices (given the design liabilities implied under various state legislation for residential building work14), the Contractors and subcontractors likely to be most adversely affected are those carrying out commercial or infrastructure projects, where construct-only contracts are more likely to be used.
Contractors may wonder whether this method of contract drafting is practiced deceptively, to pull the wool over their eyes and trap them with hidden liabilities. Perhaps the evolution of buildability provisions is an accidental result of decades of continuous adaptation, and incremental amendments to construct-only standard contracts, subtly responding to developments in case law along the way. However, now that such buildability provisions have evolved teeth, it may be impossible to deny their damaging effects on those Contractors who have not caught on.
Footnotes
1. Wimalaratne, P., Kulathunga, U. and Gajendran, T. (2021). "Comparison between the terms
constructability and buildability: A systematic literature review." In Proceedings of the 9th World Construction Symposium, 9-10 July 2021, Sri Lanka. from page 196, at Page 203
2. Ibid., Page 204.
3. Cheetham, D. and Lewis, J. (2001) (September). "Productivity, buildability and constructability: is work study the missing link." In 17th Annual ARCOM Conference . Page 274.
4. Wimalaratne, P., et al, (2021) Page 200.
5. [5] Cheetham, D. and Lewis, J. (2001) Page 275.
6. See for example Transport Action Group against Motorways Inc v Roads and Traffic Authority (1999) 46 NSWLR 598
7. Dalling, M. and Baron, A. (1999) "Thorn's case and the notion of buildability: a change in direction by the Canadian Courts?" In the Building and Construction Law Journal volume 15, from page 178, at Page 179
8. Froböse, O. (2014) "What does fairness have to do with it? A critical jurisdictional comparison regarding the notion of "buildability"" In the Building and Construction Law Journal volume 30, from page 238, at Page 241.
9. At [34].
10. Dalling, M. and Baron, A. (1999), Pages 181, 186 to 189.
11. Design and Construct AS4300 cl 4.1(c) and AS4902 cl 2.2(a)(i) require the Contractor to warrant that it has "examined and carefully checked" certain documents – this requirement is not included in Construct-Only AS2124 and AS4000 but regularly finds its way in by way of a Principal's amendments.
13. Consider clause 8.1 of AS4000 which provides for compensation to the Contractor for costs associated with design changes.
14. Home Building Act 1989 (NSW) Section 18B(c), (e), and (f),
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
