Refurbishment or extension work has a very different risk profile to new build projects. This subtlety is not reflected in the other major UK forms of contract. Even if this risk is partly or wholly insured, the contractor carries the risk of increased insurance premiums, either from an increased risk perception or as a result of increased claims payments. This risk of damaging the existing structure and disrupting the employer’s ongoing operations can be much greater than the potential profit from the project. Fundamentally, JCT contracts recognise that working within existing structures, particularly when the project value is at the lower end of the spectrum, can create a risk/reward imbalance skewed against the contractor.
The JCT suite of contracts has for many years sought to address the different risk positions presented by new build and refurbishment/extension projects. Nonetheless these events do serve as a powerful reminder of the different risks presented when working in existing structures. Thankfully the losses were restricted to property damage and disruption with no loss of life. These incidents occurred either during or immediately after refurbishment works.
The construction industry has returned to the headlines recently with the fires at the Glasgow School of Art and the London Mandarin Oriental Hotel. Blog Author: Dave Cahill – Senior Partner, Divisional Business Development Leader, JLT Speciality Limited
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