Otago Polytechnic
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Buildability risk in construction contracts

David Finnie

David Finnie, Lecturer within the School of Architecture, Building and Engineering, investigates the precise interpretation of construction contracts as they relate to buildability risk.

Buildability is linked to productivity and quality, providing better value for money and often superior quality.  “Yet it is possible to design something which complies with, say the Building Code, but which is impracticable or even impossible to build.  Therefore, it is important to understand who bears the risk of design buildability,” David says.

David examined how legal principles such as absolute liability, frustration and restitution based on unjust enrichment, impact on buildability risk, and how the processes of adjudication, arbitration or litigation can be used in the cases of disputes. 

According to David, when a contractor prices a contract they also need to factor in costs for the likelihood of risk occurring and the likelihood of arbitration decisions. 

Using case law precedent and expert commentary, David has developed a conceptual framework which establishes how buildability obligations are allocated across the contracting parties dependent on a range of variables. This framework can guide contract users in interpreting construction contracts and inform contract drafters and policymakers on their rights and responsibilities. “My hope is that this will help contractors price risk more accurately and write contracts using clear, plain English.”

David's research is already capturing lots of interest.  He presented a peer reviewed conference paper to the Pacific Association of Quantity Surveyors Congress held in May 2016 on dispute resolution processes. Another journal article about the implied legal position of buildability has also been accepted, and David has won a scholarship to further develop his ideas into a PhD.

 

Finnie, D. (2015) Key aspects affecting buildability risk allocation in construction contracts. Masters dissertation, Massey University.

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Building delays – who pays?

David Finnie

We’ve all seen the television shows about building projects which encounter time delays and ballooning costs for clients.

Time adjustment clauses are worked into construction contracts, allowing contractors to request time extensions if unforeseen difficulties occur, and to pass the resulting costs onto the clients. But what constitutes an unforeseen event? Is it correct that clients should bear these costs?

Construction lecturer David Finnie decided to research this grey area.

“Obviously, things like significant weather or natural events are reasonably unforeseeable,” Finnie acknowledges, “but contractors are expected to consider buildability before they tender for a project.”

Buildability involves examining a building’s design and identifying any potential obstacles before construction begins, to reduce delays and cost overruns.

 “If a contractor was building a structure with a foundation a metre deep, and they struck soft ground and had to dig deeper than expected, who would have to pay for that?” questions Finnie. “Everyone I asked – architects, consultants, quantity surveyors – said the client would.”

But Finnie’s research indicated otherwise.

“Every textbook and journal paper I encountered said buildability risk is the responsibility of the contractor,” he confirms. “In submitting a lump sum price, the contractor is saying that they can build that design for that price.

“In common law established through precedent cases, a reasonably competent contractor is obligated to foresee buildability,” he says.

Finnie has incorporated his findings into his teaching, and also organised a seminar in Dunedin to inform the local construction industry of these legal precedents.

 

Finnie, D. (2013) Comparison of Time Adjustment Clauses between DZ3910, AS4000 and STCC, Australasian Journal of Construction Economics and Building, 13(1), 66-84.