Jacob Austin 00:00:00 Hi all. Jacob Austin here from QS.Zone. And welcome to episode 131 of the Subcontractors Blueprint, the show where subcontractors will learn how to ensure profitability, improve cash flow and grow their business. Today's episode is all about subcontract design, and with particular emphasis on how small parts of design can create big exposure under JCT. 24 subcontracts how design submissions can become program weapons, why approval doesn't shift responsibility, and the simple process you need to do to stop doing the details and accidentally owning design failure. So let's dig in. If you've been involved in subcontractor design before, you've probably heard the phrase you can just do the details. It always sounds small. A connection detail, a bracket builders work drawing a coordination sketch. Setting out proposal, a shop drawing to show how you're going to install something. But the commercial truth behind this is that a small design output can control the performance of an expensive system, and when that fails, it doesn't just fail at the size of the small detail that you've designed, it fails at the size of a massive consequence of that big system not working.
Jacob Austin 00:01:44 And all of the knock on effects of it be that rework, temporary works, testing, inspections, delays, withheld money, contra charges between different suppliers for putting their parts back together again after your detail failed, and after completion, it can get even uglier because the building is potentially live and a defects claim now involves people being relocated out of an existing building into somewhere temporary whilst repairs get completed. And that all means that the design risk that you think you have isn't just what the contract is telling you it is, it's all of the consequential effects of it. Because in reality, you pick up design risk through your deliverables, buy what you agree to produce and what it's associated with. So today is about spotting those moments or trying to early and managing them like a commercial professional. Because if you don't, somebody else is rolling the dice with your margin. So let's put this into context of the JCT 2024 subcontract that you'll actually see on a project. The first regular issue is the Don't start yet. Trap in the standard building.
Jacob Austin 00:03:00 Subcontract with subcontractors design. You have clause 2.6. This tells you about subcontractors design portion information. It defines what you must provide, when you must provide it, how it's reviewed. And unfortunately, there is a bit of a sting in the tail if you follow that procedure to the letter, you're often not meant to start related work until the submission and approval procedure has been complied with. Now, I'm not going to pretend that every main contractor runs that clearly to the letter. A lot won't, but commercially the clause gives them a lever. They say you shouldn't have started or you've started at your risk. If you submit information late, you've loaded their gun with ammo, saying you didn't submit on time, and the same if you don't follow the procedure properly. So even if the site is really messy, the paper trail from that design submission process can still be used against you later. And so just designing a small detail can also turn into a large program risk. Let's think about the next group of clauses.
Jacob Austin 00:04:10 We have 2.26 to 2.27 in the subcontract, which deals with third party rights and collateral warranties. This is the mechanism that turns your contract from just contracting to the main contractor into potentially owing duties of care to an employer, a funder, purchaser, tenant, and whoever else is named. Effectively, depending on the clauses and the structure of the collateral warranty, this is multiplying. Who can sue you if there's an issue, and it's particularly when you start seeing step in rights that may be triggered whether or not the main contractor has gone into insolvency, which would be the normal situation that your collateral warranty starts to kick in. The best time to challenge these is before you start entering the contract. That's when you've got some leverage because you can ultimately walk away. If you think the liability you're going to find yourself in under the collateral warranty is too big. Once you've entered into a contract, the contractor has got some leverage on you. Presumably, they've included a set of collateral warranties in the contract, along with a statement to say that you've read them and you accept them as they are.
Jacob Austin 00:05:20 Now, that's not going to stop you from challenging them, but they've got even more leverage once you started doing some work, and there's actual money that they can hold pending you signing that collateral warranty. It wouldn't be uncommon to see multiple thousands of pounds being held back, plus retention and even your whole final payment, depending on the conditions of your contract, to force you to return a collateral warranty. So, as I say, the best time to deal with one is right at the beginning because you've got leverage, then you can refuse to enter into the subcontract using the contractors program, pressure against him to leverage out clauses that you don't like, and you don't need to do that in any inflammatory way by using phrases like, I can't sign up to that, it's not reasonable, and articulating your arguments calmly is the way to get the job done. Ultimately, the more claimants you have, the more routes there are into you. If there is an issue that you then need to defend yourself against. Meaning more cost, more admin.
Jacob Austin 00:06:22 More potential payouts as well. Clause 2.25 in the DB sub C and the SBC with subcontractors design is the clause about copyright and use. This is the element of paperwork that gives the contractor, and often the employer, the rights to use, copy, and sometimes sublicense your design documents. Now, you don't want to just hear copyright and switch off, because commercially, this links to two things where your documents can end up and who might rely on them later for one. You certainly don't want somebody taking your work and recreating it and creating questionable liability situations. But on top of that, once your drawings and details can be used beyond the immediate subcontract, you need to be crystal clear about what they are for, what assumptions they rely on, what they're not designed for, what interfaces are excluded, what needs confirmation on site because otherwise these are creating potential hooks for claims. And your documents can also unfortunately be used as evidence against you. Want to watch out for at the end of your subcontract? Is that as built drawings, clause 2.24 as built are rarely treated as nice to have.
Jacob Austin 00:07:40 They become a condition of completion, a condition of release of money, a condition of release of retention, a reason to refuse signing off the completion of your work and reason 246 on the pile of reasons not to pay your final account. Quite often, as bolts aren't priced properly, you price the design, you price the installation. You perhaps price some updates between design revisions. But you didn't price to do that 32 times and chase information from others. And then when you finished everything, validate what was actually installed to record and set your drawings and administer a final issue. Quite often, the main contractor receives a final construction issue drawing rather than as built. And of late, with the importance of the golden thread and the attention being shown to as built drawings within the handover information, this just isn't good enough to get away with final construction issue. Now, you're probably concerned that if you priced in doing a proper survey and recreating all of your as built drawings that you wouldn't win the work. So what I would suggest is you caveat your quote.
Jacob Austin 00:08:54 You say this is based on a final construction issue, and if you want the asset built survey and the as built drawings, here's the extra lump sum that you're going to need to pay. And bear in mind, all of the other contractors that are tendering for this same piece of work will likely have priced final construction issue too. So in your comparison, Mr. Contractor, add that sum to everybody's price. If you actually need as built drawings. Every time I say to somebody, you need to price this and that into your work, they always come back with that statement.
Subbie 00:09:29 If I for priced everything. I'd never win any jobs.
Jacob Austin 00:09:32 But there's always a way to get your intent on the paper to price what you want to price that makes you feel competitive, but include options. An additional sum for this, if that's what you need. It helps the contractor do his proper assessment, and it also keeps your bottom line number nice and tight and competitive. So that's got to be a win win right now.
Jacob Austin 00:09:55 The big booby trap. This sits throughout the JCT subcontract family. And this is a potentially big booby trap when it comes to design because it probably goes against the grain of common sense. But in JCT land and it is replicated in Nessie using different words of course. But there are multiple points when the contractor or a consultant can review comment content or approve design submissions that you're making. And the way that you can get hurt with that is that you treat that as if it's an approval. And that that approval means that everything is fine. The risk is now theirs. They've accepted it, but no commercially, approval is often about coordination, control, making sure different parts of the build fit together, that the steel frame talks to, the window supports and the opening sizes are all coordinated and that kind of thing. But if there is a fundamental statement set in the employer's requirements that then cascade into your work, and that statement is ultimately not complied with. The fact that the contractor has approved your drawing doesn't mean it wasn't your fault that you didn't get it wrong.
Jacob Austin 00:11:08 So let's give a ridiculously simple example. We're building a big tin shed and it's to carry out maintenance on an aircraft. The aircraft has a 20 metre wingspan, so they've specified in their requirements the entrance to this hangar. This warehouse has to be 22m to allow a little bit of wiggle room. But disaster, when you've designed it, you've ended up creating a 19.5m opening, so it falls short of the requirement. So now the client racks up with their aircraft on building opening day thinking, yes, this is great, I'm finally get inside park my prized possession inside my newly constructed hangar. And hold on. It doesn't fit. Now they've done nothing wrong. They've commissioned a building and told the main contractor, I need the opening to be this wide to get my lovely aircraft in it, and now it doesn't fit. So it's Mr. Contractor's fault. Now the contractor says. But hold on. I submitted the design to you for approval. And you never tell me. But that approval doesn't reduce his liability.
Jacob Austin 00:12:13 And it doesn't reduce your liability either. You still have a contract requirement to provide what the employer initially asked for. Arguably, the client has made a mistake because he has, in a sense, approved a drawing that says the opening is this size. But he says, no, I was just approving the colour of the materials and what the finish was going to look like. I told you I needed this to be 22m wide. You're not going to give me a drawing that says it's 19.5m wide, and that suddenly change what I need. The fact that you've done that doesn't make my plane wings any smaller. Now, this kind of scenario has been tested in court, and all of this comes back to if there are strict, clear requirements in the contract, you need to provide them and that comment or approval from either the client, the client's agent, the contractor, or otherwise doesn't absolve the designing party of that responsibility. So when you do see these statements, you need to be doubly sure. Tripoli sure that you've complied with them.
Jacob Austin 00:13:16 These are the kind of statements that, whilst they're absolutely necessary, can turn into a fitness for purpose type obligation. Now, we've spoken about that at length before, so I'm not going to labour the point here, other than to say that the JCT 24 has clarified and reduced the contractor's design duty to reasonable skill and care, and said that it's not a fitness for purpose obligation. But you do need to watch out for amendments at subcontract level that try to sneak guaranteed outcome language back in. And the moment you see your design duty becoming stronger than reasonable skill and care, things like warrant that it will be fit for purpose. That's kind of an obvious one. Guarantee performance criteria. Give a design life of X years. Ensure the works achieve X shall comply with performance requirements regardless of and so on. These kind of statements are leading you towards an uninsurable exposure. Now you can't just stop accepting performance criteria. If the employer couldn't specify the size of an opening, there wouldn't be much point in building in the first place.
Jacob Austin 00:14:28 I'm just saying treat it like dynamite, because if your pie cover is written on a reasonable skill and care basis, which pretty much all of them are, then a fitness for purpose promise can put you outside the policy. Now let's cook up a few examples scenarios that put these issues into context for you. The facade bracket. That wasn't a big deal. So you're a specialist cladding installer. The main design gives a general intent for the structure but doesn't go to the nth detail. So you're asked to pick up the details around the brackets and the fixings. So you produce a drawing. It gets approved with comments you fabricate, you install, and six months later there's some movement, there's some water ingress, there's also some thermal issues, and it's resulting in the end users complaining about the building. Now the discussion isn't about the whole facade package. It's about your bracket detail. And did it satisfy the performance requirements? If you don't have a clear statement of design scope, confirmation of loads and substrates, assumptions recorded, interface responsibilities agreed, and a submission trail showing when he submitted what was agreed and when.
Jacob Austin 00:15:45 And also evidence that you didn't start your install before. That design and comment process was complied with. This is when you become an easy target. Your document is a tangible output and it looks like design. It quacks like design. So it's a design that detail, as with all interfaces, might seem insignificant to you, but it's a vital component in the overall context of the job. Similarly, small seeming details which have a large impact are things like fire stopping and penetrations. Let's say you're installing M-A, or even a subset of that each time your pipe is passing through a wall or your conduit. If it's a firewall, there needs to be some sort of fire stopping detail. That detail controls the fire compartment. Without adequate stopping, there's a risk of fire penetrating through the wall in the location of your service, because it's now a weak spot. So let's say you've excluded that detailing from your package. You've said that needs to be by a fire stopping specialist. Good plan. But what happens now when you've increased the size of one of the components.
Jacob Austin 00:16:55 And it means that fire stopping detail is no longer sufficient. The next thing you know is that the fire stopping fails inspection. There's remedial works. Now the argument becomes who owns that interface, who's detailed it, who's confirmed compatibility of it, who's changed this without telling other members of the team, other designers that there's a knock on effect for their work. This is one of those areas where things can all get a little bit grey and grey. Areas cause arguments, cause costs, delays, and damages. You need to be careful about how you define boundaries when it comes to the design liability, and you need to be clear that you tell people when things change so that any knock on effects can be properly considered and dealt with. We're no longer in a place where you can make things up on site, bodge the paperwork later, and get away with it. Because of the need to provide the golden thread and the audited as built details for inclusion in the client's final folders. Now, we've mentioned a few risks in relation to design.
Jacob Austin 00:18:00 Let's talk about protecting yourself from those risks and identifying them early. So let's start by considering design by deliverable. You can do this really early on and confirm it back to the contractor. Confirm it again at the pre start meeting. You're looking out for words like design by specialist coordination drawings performance requirements and then where those appear you're looking for important trigger words like warrant guarantee. And sure even if you only think you're producing details if you're producing outputs that control performance. It's a form of design and it carries his own risk with it. Once you define that, move on to defining the scope and the interfaces with other packages. You need absolute clarity on where your design starts and where it stops, what information you rely on, what interfaces are by others, and things like tolerances and substrates that you assume you perhaps butting up to and what the performance of those are. It's also critical to confirm the performance criteria you're designing to. If you don't do this, the gap will be filled by the contractor later, and it won't be done in your favor.
Jacob Austin 00:19:14 It will be done to suit them. And now, finally onto one of the show's all time favorite subjects, the all important records that keep you afloat in the stormy east of seas. When you're designing, you need even more records, and most of them are simple to create. A lot of these could be captured in one master schedule for the job. So starting with a design tracker to show what's required when it's due when you submit it. Who went to the date? A response is due. The actual response date. The status approved, comments rejected and revised resubmission dates, and a key piece of information where the work is holding on pending compliance with that design when it's been issued for construction, and any revisions post being issued for construction that are going to impact the design, and whether retrospective changes are needed with each element as you see fit, you need to make sure you've got backup paperwork showing design decisions, assumptions, calculations so that you can refer back to all of this. If there's ever any question about why you got to a particular solution, and whether you followed enough due diligence that a professional would have done in the same scenario.
Jacob Austin 00:20:32 A separate document, but another altogether necessary document would be an RFI tracker. Questions that you've asked. Responses received and when you got them. Those couple of documents together have got a lot of power in them. They'll help you demonstrate that you've submitted design on time or if not, how late you were. It will help you demonstrate whether the contractor has been late in responding to your submissions or to your RFI. So if there's any questions about who's caused a delay, then you've got it in one handy schedule that will either help you defend claims or secure extensions of time of your own if you need them. Records are your biggest source of protection from commercial nasties in construction, and even if you don't like the suggested format that I've given you today, have a think about what works for you. What is the way that you can capture that information most efficiently so that you can rely on it if you need to. The important thing is that if you get accused of some lack of diligence or of causing a delay, that you can get your hands on your records pretty damn quickly and defend it, you could even hand over your pack trackers and all to a consultant to build your defense for you.
Jacob Austin 00:21:50 Obviously, the more comprehensive your records are, the more robust your defence is going to be. That is the biggest single takeaway that I want you to have from today's episode, but we've also covered approval and its status more as a coordination control, not a transfer of risk or acceptance under somebody else's PI. We've also considered the small details that can have big impacts in terms of design liability. And finally, we've thought about as built drawings and their need for them to reflect reality more and more in line with new legislation. Plus the way that I would make sure you exclude them from your tender whilst giving the price information that helps you to charge for it later. I hope we've got something useful after today's episode. My mission with this podcast is to help the million SME contractors working out there in our industry. So if you've taken some value away from today's show, then I really need your help to share the show and pass that value on to somebody else who'd benefit from hearing it, so that I can help as many subcontractors as possible.
Jacob Austin 00:22:54 And of course, subscribe yourself if you haven't already. And thanks for tuning in. If you like what you've heard and you want to learn more, then please do find us at www.QS.Zone for more information. And we're also on all your favourite socials again at @QS.Zone. And remember, miss the contract detail and the commercial risk falls on you. Thanks all. I've been Jacob Austin and you've been awesome.
