QUESTION: A structural consultant was appointed under FIDIC's Client/Consultant Model Services Agreement, 3rd Edition 1998 (ISBN 2-88432-014-8) by a Turnkey Contractor (TKC) for the structural design of a residential block of apartments. The construction is ongoing but the TKC has complained that the bar reinforcement for the project per the Consultant's design is excessive and has resulted in huge over-expenditure (about 3x TKC's budget). Indeed, the supervising officer on the Employer's side has made similar observations on site that the building seems overly reinforced. TKC has recently completed 3 similar projects in the locality and in comparison with this project, they all show bar reinforcement utilization well below that of the current project designed by this consultant. Incidentally, this is the first and only project the TKC has engaged the services of this consultant. TKC has threatened to stop the payment of remaining fees and refer the matter for dispute adjudication insisting that the consultant had been negligent. Is the TKC right in his action? How could the TKC prove that the consultant had been negligent? Are there similar cases you are aware of?
ANSWER: Dear Yaw,
A consultant may be cautious or incompetent, but it is difficult to prove that he has been negligent. He merely has to consider alternatives and reject them for his own reasons to avoid being negligent.
Has the TKC asked another consultant to check the current design and advise on whether or not it is over designed? Has the TKC discussed the matter with the consultant? What was the consultant's response? The consultant may have sound reasons for the quantity of reinforcement. Has the TKC considered that the other consultants may have under-designed the other buildings? I suggest that the TKC should get answers to these questions before he takes any action regarding withholding payment of fees or getting adjudicators involved. Incidentally, why did the TKC change his consultant?
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QUESTION: Many thanks for your prompt response; much appreciated.
Yes, TKC has asked another consultant to review the design and give his opinion. This exercise is ongoing and the consultant is yet to provide his findings / opinion. TKC has not formally discussed the situation with the consultant. Consultant has submitted his invoice for monthly payment (as per the payment terms) but TKC is refusing to pay. My question is; has TKC got any grounds at all to refuse payment on the basis that he thinks the structure had been over-designed and hence cause him huge over expenditure? If the other consultant comes with an opinion that affirms TKC's position, would that be sufficient enough grounds to justify the refusal to pay the remaining fees? Can TKC call on the PI for the consultant? What processes should TKC follow?
The TKC can do whatever he likes, but he must be prepared to justify his actions and to pay the price for them. I presume that the TKC changed consultants to save money and now is upset because he has uncovered the cost of saving money. The TKC must study his contract with the consultant to see if he has grounds for withholding payment or taking other action. If there is nothing in the contract, then he is relying on general law and needs good legal advice.
If he calls on the PI for the consultant, then he will involve the insurance company, who will want full justification for his claim. If the insurance company denies the claim, the case could go to court, where further costs and justification will be needed. In any event the TKC will need full documentation, so he must get the documentation before he does anything. If he withholds payment on a vague notion, then he will get sued for restitution, including damages for destroying the consultant's reputation. Also any future consultant will increase his rates due to the increased risk.
The TKC has no grounds for doing anything until he has the second opinion and he has the consultants response to his questions. Even if the second opinion says that the reinforcement is excessive, the TKC must ask the consultant for his justification before taking further action. At the moment the jury is out, as the TKC has no evidence as to which consultant is correct. It could be that the first consultants designed the project using sophisticated finite analysis software and the second consultant designed the project using manual methods. Neither would be wrong. It is possible that if the reinforcement is more, then the concrete may be more and the foundations are bigger to carry the extra weight.
The TKC needs the full facts before he does anything. Once he has all the facts, then he can take the steps stated in his contract with the consultant.