On his appointment as Minister for Construction, Nigel Griffiths wrote to all trade associations and professional bodies and invited them to submit a concise briefing note on the issues which Members feel are vital to making Britain world leaders in construction. He indicated that he expected the note to raise our main concerns.

After discussion in the Working Group and the Executive Committee, the following response was sent on behalf of the AGS:

Making Britain World Leaders in Construction

The Association of Geotechnical and Geoenvironmental Specialists (AGS) is a trade association representing almost 100 companies who are specialists in ground engineering. Activities range from geotechnical engineering, ground investigation, and the design of foundations, to the geotechnical and chemical analysis of soil, rock and water and the identification, assessment and remediation of contaminated land.

In responding to the invitation from Nigel Griffiths MP for a concise briefing note, we have concentrated on issues on which our Members specialise and which are within the field of Government influence.

Additionally, the AGS as a Member of the Ground Forum, fully supports the comments made by Ground Forum, particularly in respect of, i) the need for greater funding of post graduate courses in geotechnical engineering and engineering geology; and ii) the need for clarity (possibly via a register) in defining areas of engineering expertise in order that clients can identify specialists with appropriate qualifications and experience for their projects.

1. Inadequate Ground Investigation 

The amount spent on investigation of the ground prior to construction is typically 1% to 5% of the whole project value (usually the lower end of this range). The cost of claims and additional expenses due to unexpected ground conditions (i.e. unexpected because the site investigation was not adequate) can be as high as 50% of the total cost overrun on the project. Furthermore, some (generally smaller) developments do not have any ground investigation at all. We believe very strongly, that an adequate ground investigation should be a requirement of the planning process. We understand that consideration is being given to harmonising building and planning regulations. This therefore presents an ideal opportunity to introduce such a requirement. We therefore propose that the Minister actively supports and promotes the introduction of such a requirement into the harmonised regime.

2. Insurance 

The current difficulties in the availability and cost of Employers Liability and Public Liability insurance have affected AGS Members, as other businesses. However, the major concern has been the soaring cost of Professional Indemnity insurance. This is compounded by the continuing trend for clients (including public sector clients) to require higher and higher levels of insurance cover with high/ unlimited limits of liability, often totally disproportionate to the value of the fees involved. This is particularly the case in regard to work involving contaminated land. It is a common misconception in many client organisations that a consultant’s Professional Indemnity policy is there to cover any loss incurred by the client, however such a loss occurs. This is of course, not the case. A consultant’s Professional Indemnity in there to protect the consultant in the event of a successful claim of negligence. All consultants in the AGS have signed up to our own Code of Conduct which is designed to ensure the potential for negligent act or omission is minimised. In addition, most companies have their own Quality Assurance system (many accredited through the British Standards Institute to relevant international standards, e.g. ISO14001). It is also a fact that to date the number of successful claims specific to our industry is very low.

It is therefore unfairly onerous on the industry for clients to require levels of Professional Indemnity cover and limitations of liability which are often out of all proportion to the fee charged for the services offered by our members (e.g. a liability level of £5m is commonly required for a project with a consultancy fee of less than £2,000). Such a requirement is particularly disadvantageous to small companies who are simply unable to obtain such cover, and are therefore excluded from contracts even when they have appropriate expertise and/ or relevant local knowledge.

Government and other public sector clients could helpfully demonstrate best practice in this respect by entering into such contracts with appropriate requirements for insurance (both level of cover and limit of liability) which reflect inter alia the fee for the project.

3. Onerous terms in Regional Development Agencies (RDAs) contracts

Members work for RDAs in connection with the assessment and remediation of contaminated land. The standard RDA contract terms require the consultant / contractor to provide a collateral warranty with unlimited liability for anyone using the site in the future, and to ensure that the site is ‘fit for purpose’ This is unreasonable on two counts:-

i) Neither unlimited indemnity nor ‘fitness for purpose’ can be covered by insurance . In the event of a successful claim therefore, the only recourse for the company will be to close down and surrender all their assets. This is a totally unacceptable way to enter into a contract.

ii) Contaminated land can be cleaned to a variety of standards, (e.g. the standard required for a factory car park is lower than that required for housing). It is not reasonable to expect the consultant /contractor, working to a specification (given by the RDA client) to warrant that the site will be suitable for all purposes and all users in the future – which is the legal implication of these terms. The normal standard is to warrant that the work has been carried out with due care and diligence.

RDAs (or their legal advisers) argue that their public duty requires these contract terms and that they will be held to account should a problem arise and the consultant/contractor is found to have limited liability. In reality, they are limiting their selection of consultants and contractors to the small number of concerns who are prepared, for what ever reason, to take the unreasonable risks that these contract terms represent. Furthermore, in pursuing this policy RDAs are endangering the Government’s targets for the redevelopment of brownfield land.

The Minister could usefully explore this matter with RDAs to ensure that an appropriate balance is obtained between the need to demonstrate appropriate accountability for public monies with the necessity of redeveloping brownfield land.

4. Environment Agency

Notwithstanding liaising with Environment Agency officials in our Committee and Working Group, in day to day, site specific activities, our members invariably find interaction with the Environment Agency extremely frustrating for a number of reasons:-

i) There is no consistency between local offices. Although the specialists in the EA issue guidance (generally after public consultation), there is no onus on local offices to follow the guidance. Consequently each office (and each officer within that office) follows their own understanding of how to implement the policy/guidance. Consequently a development which would be permitted in one area, in another faces undue, excessive costs, delays and may eventually be refused permission.

ii) There appears to be no way of appealing against a decision made by a local office even when higher officials acknowledge that the decision is wrong. The process of appeal is very unclear and local offices appear to have unchallengeable autonomy.

iii) Guidance essential to the development of brownfield land is delayed – often for years. For instance, only a very small number of soil guideline values (that specify the permissible amount of certain toxic chemicals in soil) have been issued. Chemicals not covered by SGV’s must be assessed in some other (unspecified) way. The EA has the right to reject the conclusion of the consultant if officials do not agree with the methodology. The local authority regulator is therefore in an impossible situation when trying to assess proposals for brownfield land redevelopment (particularly for housing schemes). The recent disbandment of the National Centre will exacerbate this problem.

iv) EA policy leads to uncertainty. Developers expect their consultants to be able to advise on the measures which must be taken in order to obtain planning permission. Because of the uncertainties (above), consultants cannot be confident in their advice. However, if the consultant’s advice turns out to be unacceptable to the EA (resulting in additional costs and delays) the client may try to recover costs from the consultant’s insurance – putting further pressure on insurance requirements and the viability of consultants businesses. (See Item 2).

Action, direction and resources to rectify these problems at the Environment Agency need to come from Government. The Environment Agency is not currently fulfilling its stated functions with an appropriate balance. Unless improved guidance, consistency and expertise is forthcoming from the Environment Agency, the Government targets for the remediation and redevelopment of brownfield sites will be seriously jeopardised.

5. Waste Management Licensing 

It is becoming increasingly clear that regeneration projects on brownfield sites are being frustrated by Waste Management Legislation and the Environment Agency’s approach to its implementation. The crux of the problem is the recent move by the Environment Agency to interpret the definition of waste more restrictively. The result is that a considerable number of practices on site that were not previously considered necessary to regulate now fall within waste management legislation. The consequence of this is as follows:

i) The requirement for / presence of a Waste Management License (WML) on a development site will severely inhibit redevelopment potential of many sites. This is particularly the case for re-development of large sites where phased development is the only way to make the redevelopment process financially viable. The presence of an active WML on a housing development would effectively prevent sale of homes during the development programme.

(ii) Property Blight: New houses built on ‘licensed’ land are often seen as being built on the equivalent of ‘Waste Tips’ resulting in loss of value. A recent RICS report suggests the negative effect on property prices can be as much as 40%

(iii) Loss of potential for re-use of site derived soils: The reluctance of construction companies to operate waste management licenses will result in materials defined as waste being removed to landfill rather than being re-used as secondary aggregates (and the consequent need to import virgin aggregates from quarries and pits, entailing haulage and other environmental impacts of quarrying).

DEFRA and ODPM are developing the option of a Single Regeneration Permit to overcome the problems highlighted above. In reality however, the government is progressing inappropriate and increasingly restrictive legislation in isolation of the legitimate needs of the construction industry. It is important to note that other European countries are not interpreting the legislation in the same way and are not imposing similar constraints on their construction industries. This restrictive approach will jeopardise the achievement of the Government’s target of 60% of new homes on brownfield sites. Government is therefore urged to address this matter will all interested parties and in particular the Environment Agency.