Pitfalls of incomplete design
Recently, a client approached me with a predicament. They had signed a contract with a group housing company to build a new house, but there was a significant issue – the design work had not been completed at the time of contract signing. As a result, much of the geotechnical and civil engineering design work was done well after the contract was agreed upon. This late-stage design change significantly altered the scope of work initially agreed upon, and with it came a host of potential problems, primarily the looming uncertainty of the final cost.
Incomplete design equates to an incomplete scope of work. In such cases, it’s unreasonable to expect builders and subcontractors to provide final, fixed prices. They can, at best, provide estimates until they have a more detailed design to work with.
When you encounter a situation where the design isn’t finalized, here are key factors to consider when evaluating a contract or quoted price:
1.Estimates vs. Fixed Quotes: How many of the suppliers and subcontractors have provided estimates rather than fixed quotes?
2.Provisional Sums: Check for provisional sums in the contract. These are essentially placeholders that will be replaced with final amounts once the design is completed.
3.Budget Flexibility: Understand how changes in the design can affect budget considerations, especially with fluctuating material prices.
These factors significantly increase your project’s risk, as there’s a real chance that the final cost will escalate. In the case I mentioned, an incomplete design led to the need for a temporary retaining wall, impacting various aspects, from the foundation to excavation costs. Subcontractors couldn’t provide fixed prices due to the evolving design.
Furthermore, the subcontractors presented additional costs without restraint, charging for every single item. This resulted in a substantial cost overrun from the original contract price, creating financial challenges for the project’s owners.
In such situations, it’s crucial to exercise caution. If you encounter incomplete design issues in a construction contract, seek advice from professionals such as lawyers or quantity surveyors who can guide you through the complex and potentially costly intricacies of incomplete designs.