S.I.80 and some of the consequences after March 2014

Sands of Time

The following post was submitted to the Blog in November 2013. Authors of this paper are: Orla Hegarty, Joe Kennedy, Michael Collins and Eoin O Cofaigh.

1.         Background

1.1       The Building Control (Amendment) Regulations, 2013, S.I. 80 of 2013, were passed into law earlier this year and come into force on 1 March 2014.  They represent a significant change in the way construction projects are inspected and certified and will affect virtually all building projects. The regulations require the appointment of a “Design Certifier” and an “Assigned Certifier” to certify respectively that all aspects of the design and all aspects of the construction comply in full (as against substantially) with the Building Regulations.  The Certifiers can be Architects, Chartered Engineers or Building Surveyors.  The new Regulations also require the submission to the Local Authority of a “Completion Certificate” which the Local Authority must review and accept as being valid before the building is allowed to be opened, occupied or used.   Finally, the Regulations require the submission to the Local Authority of full detail designs and specifications for all projects in advance of construction commencing.  These must cover all aspects of the design which fall under the requirements of Building Regulations.  The Local Authority maintains these on record with the expectation that the material will be available to interested parties.

1.2       A consequence of the Regulations is that they rebalance the relationships between the client and his / her designers, main contractor, design specialist subcontractors, and materials suppliers. This induces a need for rewriting of the standard forms of building contract and service contract. The private sector documentation is being looked at, but only very slowly, because of the complexity of the changes needed and their extent across the documents involved.  There appears to have been an underlining set of assumptions on which the Certification regime was predicated; that is that the Design Certifier, Assigned Certifier and Architect/Employer’s Representative would be one and the same person.  Otherwise it would be hard to understand how there is no reference to the relationship between the three.  That was a short-sighted assumption.

1.3       The Regulations respond to disasters in, primarily, the speculative residential sector and seem to have been conceived primarily with this sector in mind.  In this sphere the design is largely complete, or capable of being made so, before the construction process starts and when the Design Certificate must be lodged with the Local Authority.  Furthermore, in the commercial residential sector there is an easily-achievable time lapse between Project Completion and Handover.  However, the Regulations cover virtually all construction projects in the State.  Furthermore, the Regulations are not adapted to different forms of construction project procurement.  One single “Assigned Certifier” must certify compliance with Building Regulations for the entire construction.  The regulations do not appear to allow for, e.g., multiple parallel main contractors, or for separate shell-and-core and subsequent fit-out contracts.  They do not recognize the extensive design input from engineering or envelope specialists.  In public sector procurement, revised conditions of appointment and revised PWC contracts have not yet been published, and the “Exemplar Design” system will have to be changed to reflect the new appointments, inspections and certification arrangements.

2.         Impacts

2.1       The new Regulations will impact the procurement and site operations of all projects due for construction after 1st March 2014.  The main areas that will be impacted are:

Client procurement of the Design Certifier and Assigned Certifier.  These roles do not exist at present. There is no certainty that either (in particular the Assigned Certifier) will be the Architect.  Where Design Teams are currently appointed on public projects, the issue of compliance with procurement rules will arise.  ( It is alarming to note that UCC is asking Architects to include the two Certifier roles as part of their general service submission in a current tender notice.  This is clearly a restrictive practice as it excludes those firms who do not want, in particular, to offer Assigned Certifier services.)

Tendering.  It is essential that the correct Contract details are included in tender documents.  That is not possible at present and there is no indication as to when new forms of Contract, which make provision for the new inspection and completion regimes, will be published.  Projects, currently being tendered with a post March 2014 commencement date, are going to present potentially difficult problems.

Inspection Plan. The Assigned Certifier is obliged to prepare an Inspection Plan before construction commences.  This plan may have cost implications for the Contractor and arguably needs to be a tender document.

Changes and evolving design.  Where changes are required after Commencement Notice or where specialist design was not possible before construction commenced, the new Regulations do not appear to facilitate these common activities.

Inspections and testing.  The Assigned Certifier has a very onerous set of responsibilities and the inspection, opening up and testing regimes may be very disruptive to progress of construction at certain times.  In particular it is envisaged that the Assigned Certifier will carry out unplanned inspections where he deems this appropriate. Where the Assigned Certifier is not the Architect or Employer’s Representative, he / she has no contractual authority or responsibility as contracts currently stand.  However his actions may result in contractual claims.

Contractual Relationships. Relationship between Contractor and Sub-Contractors will be affected by the need for all paperwork confirming compliance to be in place before the building can be occupied.  While this in itself is not necessarily a bad thing, situations where the Contractor and Sub-Contractor are in dispute could have extremely significant consequences for the project.  There is no obligation in S.I.80 or current forms of contract that obliges a Sub-Contractor to issue Certificates of Compliance.

Practical Completion.  Normally defined as being when the building can be used for the purpose it was designed, this will fundamentally be changed with the new Completion Certificate.  The building will now be capable of being used for the purpose it was designed when the Completion Certificate is accepted.  The time stipulated for this is three weeks (a) after the Assigned Certifier and the Builder both certify that the construction and design are in full and complete compliance with all the relevant aspects of the Building Regulations or (b) if all the various documents are submitted 3 weeks in advance of PC, one day after the Completion Certificate is issued.  (b) on the face of it seems like it would allow for PC and the Completion Certificate to coincide; we all know from experience the difficulty in getting all the paperwork, as–built drawings etc gathered and collated in a timely manner.  Getting these in place a month before projected PC is optimistic at best.   There is little confidence that all of the Local Authorities will have sufficient or appropriate staff to assess the huge amount of documentation that will accompany the Completion Certificate and rejection on spurious ground will no doubt become a common occurrence.

2.2       The Law of Unintended Consequence is expected to be a popular visitor to building projects on foot of the new Regulations.  Some that can easily be foreseen at this point in time are:

Hiatus.  A major hiatus in the Construction Industry is likely in both private and public sectors.  Anecdotally, this is already happening with some project tenders being delayed until there is more clarity.  To avoid such a hiatus, tested and appropriate forms of contract need to be already in place.  They are not available now when tenders are being prepared and even if they were available on the 1st March 2014, delays are unavoidable.

Building Control Authorities. It has been confirmed that the promised IT systems in Local Authorities will not be in place by March 1st but, at the same time, no additional resources will be provided in the understaffed Building Control Units to deal with vast amounts of paperwork.

Contractual Claims.  There is already a considerable number of GCCC projects in some form of Dispute Resolution.  The new requirements will open new avenues for the claims-conscious Contractor, eating up more and more unpaid resources of the Design Team.  Proper Scenario Testing could avoid much of this.

Disputes.  Many of the Building Regulations are generalised statements about quality and intent and lack detail.  Disputes arising from the interpretation of these are inevitable with subsequent delays during the construction process.  This is exacerbated by the fact that the Assigned Certifier is a private individual under SI 80 and does not carry the weight or protection of a Local Authority.

Legal Action.  The real prospect of delayed occupation of buildings following a protracted Completion Certification process is a fertile ground for legal action against Certifiers, Design Teams and Contractors.

Costs.  Better buildings will cost more money as will the additional roles required under the new Regulations.  In addition, value engineering after the Design Certificate is submitted is not envisaged in S.I.80.

Extended Project Periods.  The administrative load resulting from the new Regulations will lengthen project start-to-completion periods.  In complex projects where follow-on contracts are needed after the main contract is complete, there may be lengthy intervals to enable one process be completely finished before the next commences.

       

3          Some Interesting Questions.

3.1.      What happens to projects with shell-core contract followed by a fit-out contract? The Regulations have implications for many other forms of procurement. For example, it seems that shell-core contracts may require that the fit-out is sub-contracted under the first contract. There is no obvious provision for a Completion Certificate for the Shell-Core work which permits a new ‘builder’ for the fit-out (which might be under a new FSC).

A ‘one size fits all’ regulatory system does not fit complex building projects that are better suited to more complex,  flexible or efficient forms of procurement.

3.2       What if the owner changes? Can the Assigned Certifier resign and or is he/she effectively ‘novated’ to the new owner, possibly without his/her consent, as the duties of the Certifier continue to the completion of the project.

3.3       What information should be included in current tender documents? Many projects being currently tendered are likely to start on site after the 1st March ’14.  What contract form should be referenced? There is no guidance as to how to include provisions for the impact of S.I.80 and tender reports will be heavily qualified.  Clever tenderers will find ways of using this situation to their commercial advantage.  Negotiations with the apparent lowest tenderer to take into account additional provisions and changes to Contract forms will leave the door open to challenges by unsuccessful tenderers.

3.4       What happens if the architect/designer is novated to a Design-Build Contractor (having worked for the owner at the design stage)?  If the architect/designer is novated to the Design-Build contractor, will he/she have to be retained by the owner in a separate direct appointment or will another Certifier be appointed to the project?  The contractual implications and potential areas of conflict of interest need to be considered.

3.5       What happens if the Local Authority does not include the Completion Certificate in the Register after the stipulated periods? The wording of S.I.80 requires the local authority to enter in the Statutory Register details of ‘any valid Certificate of Compliance on Completion accepted by the Building Control Authority’. This wording is imprecise. There are no criteria for validity, no time-limits or procedures for the local authority to formally declare a Certificate invalid, no requirements to set out the reasons why it has been determined invalid, no provision for timely appeals etc.  What happens if you have a contrary Building Control officer?

3.6       What happens if there is a dispute over the interpretation of a Regulation? The Irish TGDs are based on the UK system. In the UK it is normal to have broad guidance in a system of prior approvals. The ‘interpreting’ is resolved at the approval stage, prior to construction. The Irish system has the same broad guidance without approvals and as a result there exist many areas of dispute over interpretation.  Under S.I.80, this has not been addressed and there are now further areas of potential conflict between the building control officer (with statutory authority), the architect (with contractual authority) and the Certifier (with statutory obligations, but no powers).

3.7       What happens if you have a rogue builder and you want to resign as Certifier? You cannot resign unless the owner (perhaps the same rogue builder) writes to the Local Authority and releases you.

3.8       What happens to Enabling Works contracts? Do all projects now have to have a main contractor on site from Commencement, with associated costs? This also has implications for other forms of procurement including construction management, management contracting etc.

3.9       What happens if you want to have give Partial Possession? There is no Completion Certificate so the building cannot be occupied until all phases are complete.

3.10      What happens to ghost estates and abandoned projects which need to re-start next year? Ghost estates may only have Commencement Notices for earlier phases, Nama projects may need revised Fire Certificates, changes in standards may not be achievable etc…

3.11      What happens if you have a nominated sub-contractor with responsibility for design? How does his design certification get reversed into the Design Certificate, which has to be submitted before the project starts on site? This also has implications for the design responsibility under the Collateral Agreement.

3.12      What happens if the Contract is determined by the Employer? In a case where the quality of finishes is of such a poor quality and the Contractor cannot demonstrate an ability to get these right, the Employer on the recommendation of the Contract Administrator, may take measures to determine the Contract and employ another Contractor to complete.  Who signs the Completion Certificate – the ‘Builder’ is defined in the Regulations as the person appointed at the outset of the Project and it is he who must certify on completion.

3.13      What happens if a Sub-Contractor has not been paid by the Main Contractor and subsequently refuses to hand over compliance documents that only he can deliver?  The ultimate consequence of this is that the building may never be “opened, occupied or used”.  There is no facility for deviation from the proscribed process in exceptional circumstances.

3.14      What happens if there is a defect in the Design Certificate?  Under S.I.80, the Builder confirms he has built in accordance with Building Regulations reliant on the design as certified.  This important qualification exonerates him from building some element that is not fully compliant if the Design Certificate has not picked it up.

3.15      If the Design Certifier and the Assigned Certifier differ, what is the outcome? As mentioned above, the Building Regulations are not absolute and prescriptive in every detail.  It is foreseeable that a Design Certifier will take one view and an Assigned Certify will disagree and, because he is the single point of liability, will refuse to certify on completion.  This could have been avoided if the design was audited pre-construction and the subsequent Certificate became prime facie confirmation that the design was fully compliant.

3.16      Who referees disagreements between the Architect and Assigned Certifier where they are different people?  The Building Regulations cover Workmanship and Materials and the Architect and Assigned Certifier may well have different views as to what an acceptable standard is.  Potential for stand-off arguments is obvious as both have different contexts for their positions; one compliance with Statutory requirements only, the other with broader duties and responsibilities to his / her client.

3.17      What happens if your Completion Certificate is deemed invalid?  The client will not be able to use or occupy the building and you will be liable to be sued. 

4          Consequences for Design Teams

 4.1       There is a perception that the new Regulations will really only affect Architects and their PI Insurance.  A deeper analysis leads to an understanding that the implications are far broader for all those involved in the Construction Industry and, particularly, the building professionals.

4.2       Clients expect that buildings are designed and built in a compliant manner and take it for granted that the Design Team is doing their job properly.  SI 80 is expected to increase the cost of buildings, as has been acknowledged by Minister Hogan; clients won’t be thrilled about this.  SI 80 is also likely to delay the commencement of construction, lead to longer construction period where intrusive inspection is required, delay the ability to open or occupy a building and increase the incidence of contractual dispute, all of which will in turn lead to unhappy clients.

4.3       There will be a significant increase in work load without a proportionate increase in fees, certainly for the Design Certifier, the Project Manager and the Contract Administrator/ Employer’s Representative.   All Design Team members with a design responsibility will have to certify their own designs, ideally before tender documents are completed to avoid and all specialist designers likewise.

4.4       The Preliminary section of Bills of Quantities will need to be redrafted to incorporate the implications of S.I.80, in particular with regard to the role of the Assigned Certifier and Completion.  These will become more complicated in complex buildings with multiple owners and follow on contracts.  The Main Contractor (Builder) and all sub-contractors will need to be obliged to submit compliance documents before hand-over.

4.5       There will be a learning process in getting familiar with new forms of contract, necessitating putting more time and effort into the never-ending CPD process.

4.6       An increase in Contractual Disputes is anticipated.  When Architects, Quantity Surveyors and Engineers get dragged into these, they absorb huge amounts of time and resource which is rarely billable.

4.7       Many projects planned for next year will be delayed unless the 1st of March deadline is postponed because the key elements to allow S.I.80 be rolled out are not in place.  This will obviously, and in some cases lethally, affect cash projections and workloads for many firms.

4.8       The current wording of the Certificates in S.I.80 has been confirmed as not being insurable by PI Insurers.  Draft amended wording has been published but not accepted yet by the Minister.   Senior Counsel has been engaged to give an opinion on the additional liability arising from the proposed/draft amended wording.  Some PI Insurers may be able to extend cover for this wording but at what additional cost is unknown.  (The prospect of being sued by a client because the paperwork at Completion Certificate stage is not accepted by the Local Authority and the client looses a valuable tenant is a brand new risk.)

 5          Conclusions.

5.1       The lack of scenario testing and limited consultation that has accompanied the drafting of The Building Control (Amendment) Regulations, 2013, S.I. 80 of 2013 is a recipe for disaster or at best confusion.  At a time when the building industry is trying to come out of a nose dive and the overall country is on a fragile road to recovery, what we least need is a totally avoidable crisis in one of the fundamental elements of the Irish economy.  Many stakeholders across the sector are calling on Minister Phil Hogan to postpone the introduction date to facilitate a serious review of the shortcomings in the Regulations and allow for proper preparation.  Foreign Direct Investment companies are going to be frustrated by the new layers of administration and risk.

5.2       The potential for less than scrupulous Contractors to misuse S.I.80 as a way to coerce or escalate disputes for commercial gain is clear.  In addition, there are several the possible conflicts with CCA2013 that do not appear to have been addressed.

5.3       Notwithstanding the practical and real issues raised above, there are serious reservations about the detail of the Regulations in relation to Consumer Protection, unfair transfer of risk to a small number of individuals and absence of a proper regime of independent audit and inspections.  These arguments are set out in other papers and can be made available to anyone who wishes to read them.

To read the SI 80 document, go to:

http://www.environ.ie/en/Legislation/DevelopmentandHousing/BuildingStandards/FileDownLoad,32732,en.pdf

This paper is intended for interested members of the construction professions.  It is one of several papers prepared by the B Regs Forum. Contributors to this paper are: Michael Collins, Orla Hegarty, Joe Kennedy and Eoin O Cofaigh.

0 thoughts on “S.I.80 and some of the consequences after March 2014

  1. Michael Gillespie

    Excellent analysis. One issue I would like to highlight on top of the concerns about risks, confusion & costs etc, is the fact that having spoken to a number of small-medium contractors and solicitors they all seem to be completely in the dark.
    This coupled with the lack of resources and poor state of readiness within engineering/architectural practices & local authority’s means the March 1st deadline is not achievable. Unless the recommended two year deferral is provided then we are looking at an industry in turmoil if not collapse.

    Reply
  2. Michael Gillespie

    Excellent analysis. One issue I would like to highlight on top of the concerns about risks, confusion & costs etc, is the fact that having spoken to a number of small-medium contractors and solicitors they all seem to be completely in the dark.
    This coupled with the lack of resources and poor state of readiness within engineering/architectural practices & local authority’s means the March 1st deadline is not achievable. Unless the recommended two year deferral is provided then we are looking at an industry in turmoil if not collapse.

    Reply
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