This guidance does not discuss the public health or medical aspects of the COVID-19 pandemic. Please continue to refer to and follow the guidance published by Australian health authorities and the directions of state and federal government.
At the time of publication, most state, territory and federal governments continue to acknowledge construction services as 'essential' which can continue, subject to some limitations and public health guidance. The general advice provided in this note may no longer apply if federal or state governments declared construction services as 'non-essential'. We recommend that the parties seek legal advice on the complexities of navigating the uncertainties of construction in the pandemic environment.
If accessing the publicly available version of this note please also refer to the Acumen Disclaimer.
Architects, like many other professionals and businesses, are feeling the impact of the COVID-19 pandemic. The Australian government's public health responses, measures and directives impact how architects can continue to deliver their professional services in this environment.
The focus of this note is your professional and contractual obligation to carry out site inspections when assessing claims and administering the construction contract, while navigating the challenges posed by the current COVID-19 environment.
When administering the construction contract, a key activity is correctly assessing payment claims submitted by the contractor for work done and materials fixed to the works. To satisfy your professional obligations under the consultancy agreement and at law, best practice expects that you will attend the site, inspect the condition of the works and note incomplete works and defects, to support your assessment of the builder’s claim. This can include documenting the works by making photographic and video records of the works while on site.
- Inspection challenges
- Inadequate site inspections, premature practical completion and risks
- Premature practical completion and inadequate security
- Specialist consultants – know your limits
- Additional costs of delayed practical completion notices
- Getting to site and site alternatives
In the current environment, governments are declaring sectors of the economy ’non-essential’. Many workplaces have been required to close, while citizens are isolating or distancing to guard their health or as directed to do so. These real-world challenges may delay consultants and contractors or prevent them from attending the project site altogether and more so where the site is in a remote location.
Even where it is possible to travel to the site, avoiding contagion by observing the current guidelines on social distancing, limiting contact with others or isolating, may hinder the thorough inspection of the works that a project demands. If an inspection is not adequate to meet the contractual and legal standard expected for that project, risks and contractual liabilities may arise.
Under a typical construction contract, a project achieves practical completion when the works are:
- substantially complete, except for minor defects or omissions and
- the project is reasonably capable of being used for its intended purpose.
However, the specific conditions for practical completion will be set out in the construction contract and we recommend that you be familiar with the specific wording of each of those conditions.
Under an ABIC contract, *practical completion is assessed and determined in the architect’s reasonable opinion, when the works are substantially complete and incomplete works or defects are minor and will not unreasonably affect occupation and use of the building or residence. This also requires all commissioning tests are successful and all approvals for occupation have been obtained and copies given to the architect. See clause M1.1.
When practical completion is achieved, or when it is certified by the architect’s certificate, the owner can take possession of the project.
Practical completion is critical because the risk and responsibility for the project shifts, under the construction contract, to the owner.
For example, see ABIC clauses D.3 and D.4.
If practical completion is prematurely or incorrectly certified by a superintendent or architect, the change of possession, risk and liability under the contract still shifts to the owner. But if there is loss or damage to the works after practical completion and there was some deficiency in the way the architect conducted the site inspection, assessed the works and certified practical completion, then the owner who has suffered that damage or loss, will look to the architect and their PI cover to make good their loss.
Before you can be satisfied and hold a reasonable belief that the works are at practical completion, a site inspection is critical. The ABIC contract requires both the contractor (clause M2) and the architect (clause M3.2) to carry out inspections of the works and to detail defects and incomplete work.
In the COVID-19 environment where site inspections are restricted or impossible to conduct in person, you may be put in a difficult and risky situation that can compromise your liability and PI insurance cover.
When the works are at practical completion, this typically triggers the return of some part of the security the owner holds back to the contractor. If practical completion was certified too early, or without a thorough inspection of the works, it may give rise to the scenario that defects or incomplete works of a major nature were not properly identified by the architect. The builder, faced with the higher costs of rectifying major defects during the liability period, may try to avoid that obligation, or in the COVID-19 environment may be facing financial difficulty and not return to the project.
The risk here is that the owner is left with inadequate security to remedy (or compel the contractor to remedy) those major defects and is left with an incomplete project and a wayward builder. If you prematurely or incorrectly certified practical completion, the owner may look to your PI to make good the cost of rectifying the major defects or incomplete work.
We strongly recommend that you are aware of the professional and contractual limits of your expertise as an architect and to not certify all or part of the works that should be inspected, tested and certified by a specialist consultant.
Where the works require input from separate specialist consultants, you are not the best-placed expert to inspect those specialist components of the works. If you inspect those components, but the expert consultant does not, and you then assess the works for the purpose of a payment claim or practical completion, this can set up a complex scenario of liabilities and contractual obligations. Ultimately, you may be inadvertently taking on more time, cost and risk than contracted for under your client-architect agreement and more liability than you are insured for.
Do not inadvertently take on the inspection responsibilities of a separate specialist consultant. When certifying a payment claim or practical completion where you need to rely on a consultant’s input, we recommend that you include additional qualifications and limitations on your decision, where you are relying on information or certification provided by a consultant. There may be scenarios where you cannot properly make your decision or issue a notice or certificate because there has not been an in-person inspection by a specialist consultant and they haven’t been able to provide the information you need to make a fully informed decision.
If in doubt, we recommend that you don’t issue a certificate or other notice. Be aware that additional costs may be incurred by the parties if you need to delay or cannot issue a required certificate or notice.
If you are delayed or cannot properly issue a certificate or notice required under the construction contract, this may entitle the builder to claim for delay costs. This may be necessary and unavoidable in some scenarios, to manage the risks outlined above, of incorrectly or prematurely certifying practical completion.
For example, if a notice in relation to practical completion is not issued within time, the contractor may make a claim to adjust the contract for the delay and any loss, expense or damage associated with the failure to issue the notice.
See ABIC Major Works clause M8; and Simple Works clause M7.
If you find yourself in this scenario, inform your client and manage their expectations about these real-world limitations on-site inspections and how this can impact your ability to assess and certify practical completion. You may also discuss and manage expectations about additional costs of the alternatives to carry out the site inspections (see below) and additional costs that may be owed to the builder for delays in issuing the required notices. As a general recommendation, always be aware of the notice requirements and applicable time limits.
See the ABIC User Guide that set outs a cross-referenced list of the relevant time limits, including the provisions of section M.
In the current COVID-19 environment, if a specialist consultant is not able or willing to attend site to carry out an inspection, there may be other practical steps the parties can take to facilitate progress of the works and to continue administering the contract, while not taking on more liability than they should.
Suggestions and examples are:
- Consider digital, robotic or ‘virtual’ technologies for inspections: Streaming-enabled (eg Skype) devices, roving cameras, drones.
- Consider practical separation measures that will reduce the amount of contact between consultants and contractors on site: single-person inspections; high-resolution digital SLR photography with zoom lenses; abseil facade inspection; stricter site inductions and OHS/WHS requirements.
- The parties and the consultants could agree to engage a single party to carry out the inspections on behalf of each of them. This could be the builder, an experienced third-party or a professional engineering surveyor. There will be additional costs here and the parties will need to agree how those are shared.
Each of the above suggestions come with their own limitations and none will be an ideal substitute for in-person inspections augmented with technology. For example:
- Streamed video quality can be poor and suffer technical difficulties or be hampered by poor quality internet connections.
- Drones can’t fly close to humans or too close to buildings and are prone to failures due to wind gusts and battery life.
- Site visits that restrict other persons being on site may impede what would otherwise be efficient progress of the works.
- Engaging a single third party still leaves open the risk that a non-expert making the inspections might miss recording details that the expert might identify and examine more closely when on site in person.
In the current COVID-19 environment, we recommend that all parties take a collaborative and pragmatic approach to navigating the challenges presented. This applies to managing in-person and virtual site inspections, attendance by consultants and gathering other information required to assess and certify practical completion. Although time limits under the construction contract are an important mechanism for orderly administration, the parties should be in regular communication to understand the limitations on the other and to manage expectations and realistic time frames or unforeseen delays and costs. As much as possible, a collaborative approach—which is at the heart of the ABIC form of contracts—should urge the parties to be pragmatic and to fairly share the risks and costs of operating in the pandemic environment.
All parties should take steps to stop the spread of the virus; and all parties can agree to spread the costs imposed by the COVID-19 pandemic environment.
Once the pandemic and the public health restrictions have run their course, the architect and consultants will be able to undertake a more thorough inspection and at that stage identify any defective or incomplete work during the Defects Liability Period.