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New contract form built on insecure foundations

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legal matters

Last summer I wrote about the erosion of the status of independent certifiers, and in particular about Lord Hoffmann's remarks in Beaufort Developments v Gilbert Ash. By way of a reminder, he said: '...the architect is the agent of the employer. He is a professional man but can hardly be called independent... the notion of what amounted to a conflict of interest was not as well understood [in the last century] as it is now.' The judicial spotlight has again turned on the independent certifier, or rather the empty space he used to fill, in criminal prosecutions under health and safety legislation brought in in the aftermath of the Heathrow Express tunnel collapse.

The project was procured under the New Engineering Contract, or the NEC for short, which is the baby of the Institution of Civil Engineers. It was drafted to be used for all types of construction. Much praised in Sir Michael Latham's report in 1994, many aspects of the NEC are novel, including its elimination of the traditional role of the engineer. Heathrow Airport used the NEC to employ Balfour Beatty to build the Heathrow tunnel. Balfour Beatty in its turn employed Geoconsult to carry out design work. The employer's control was minimal and limited to a 'hands-off audit'.

On 20 October 1994 the tunnel collapsed while under construction. We all watched it continue to collapse over the following days on successive news bulletins. What we did not then know was that cracking in the tunnel had been evident since the beginning of August and that repair work had been ongoing since then.

Balfour Beatty and Geoconsult found themselves at the Old Bailey. Mr Justice Cresswell's remarks when sentencing included summaries of the dramatic evidence: 'He said that at about ten to one the men were ordered out of the tunnel. They went to the canteen but the canteen itself started to move. He came down the stairs and the ground started to suck down.' More prosaically, the judge commented on the contractual arrangements. While his remarks are of substantially less weight than those in Lord Hoffmann's speech in Beaufort in the House of Lords, the matters raised are of considerable interest.

Quality control and the standard of remedial works were solely the responsibility of the contractor. This gave rise to problems. An example given by the judge was that during August a decision seemed to be taken that sufficient repairs had been carried out to one area. Later events proved that not to be the case. Balfour Beatty could not say who, if anyone, had made that decision.

The judge summarised the factors which contributed to the collapse. These included that, 'Balfour Beatty accepted contractual arrangements which placed upon them particular and unfamiliar duties which they failed to perform' and that having done so, the contractor 'failed to investigate allegations of defects' which were made by the employer. As for Geoconsult, it failed in its duties to monitor and to warn. For the record, Balfour Beatty was fined £1.2m and Geoconsult £500,000.

The construction of the tunnel was a learning process. It used an innovative technique which had not been tried before in London clay. That did not mean that the technical method was inherently flawed, but that great care should have been taken. A parallel can perhaps be drawn with the contractual structure which was used. New forms of contract which address concerns about conflict of interest will undoubtedly continue to be developed. But preserving in some form the role of an independent auditor with power to give instructions potentially has real benefits for all parties. Mr Justice Cresswell's observations may yet swing the pendulum a small distance back towards an independent role.

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