Novation & Construction (Design & Management) Regulations 2015

Imagine a scenario whereby at the start of a building project, an architect is engaged by the employer (who, for the purposes of the CDM Regulations 2015, is the Client) and appointed to act as Principal Designer in accordance with the CDM Regulations. The project is being procured via a design and build contract. Upon execution of the building contract by the employer and design and build contractor, the architect is novated to the contractor.

There are many different types of contract in the construction industry which a company may enter into to procure a building or facility. The different contract forms have generally become known as: traditional contracts, design and build contracts, management contracts, and integrated contracts.

Design and Build procurement works on the basis that the main contractor is responsible for undertaking both the design and construction work on a project, for an agreed fixed price.

Design and build projects can vary depending on the extent of the contractor’s design responsibility and how much initial design is sought in the employer’s requirements. The level of design responsibility and the input from the contractor is much greater on design and build projects than in standard contracts where the responsibilities of the designer builder are distinct and separate.

Adequate time must be allowed to prepare the employer’s requirements (the employer usually appoints consultants to facilitate this), as well as time for the contractor to prepare their proposal and tender price. It is vital that the proposal matches all of the employer’s requirements before any contract is entered into.

The employer has control over the design brief and the project requirements, but once the contract is agreed the responsibility over design passes to the contractor, so the employer has less direct control over the contractor’s detailed design.

The contractor can carry out the design in a number of ways. Often they will appoint their own consultants or use their own in-house team. It is also common practice for the contractor to take on the employer’s consultants and continue to use them to complete the detailed design under what is known as a novation agreement.

Novation transfers both the rights and obligations of the outgoing party to the incoming party, whereas assignment is the transfer of rights only. It is not possible to assign contractual obligations to another party. Innovation requires the consent of all parties in order for it to be valid (normally by way of a tripartite agreement). Conversely a contract may be assigned without consent,  save for where there is an express contractual provision to the contrary. Novation gives rise to a new agreement on the same terms as the original agreement, with the original agreement being discharged.  Once an assignment occurs, the original contract is not extinguished and, consequently, the assigner will remain bound by any prospect of obligations and liabilities under it.

The Health and Safety Executive (HSE) (L) Series guidance on the regulations states that a designer may be the architect, quantity surveyor, consulting engineer, interior designer, temporary work engineer, chartered engineer or anyone else who specifies or alters the design. The principal designer also has control over the pre-construction phase of the project”. The change is intended to encourage an integrated approach to risk management and increased co-ordination at the pre-construction phase of design and build projects.

Under the regulations, the client has a continuing duty to ensure arrangements are put in place to manage health and safety risks. Under the regulations it is not permissible for a client to discharge the principal designer prior to project completionThe HSE (Legal) Series guidance suggests that the role of principal designer will continue for the duration of the project. So what happens when the architect’s appointment (acting as principal designer) is novated to the contractor, which is an often desirable way of retaining project experience on a design and build project? An architect or any other professional appointed as the principal designer can be appointed in two separate roles as both the designer and the principal designer. When the designer appointment is then novated to that of contractor the client continues to fulfill their obligations under the regulations by ensuring that the principal designer’s  responsibilities are discharged.

An alternative approach after novation of the designer is to choose a consultant whose appointment is not intended to be novated to the contractor to act as principal designer however, to satisfy the regulations they would have to be a ‘designer’ with control” of the pre-construction phase. This approach is perhaps less desirable as it incurs cost in addition to instructing the same professional on a designer and principle designer basis.

Unlike its predecessor, the Constructor (Design and Management) Regulations 2007, at the time of writing there is no ACOP for CDM 2015 and no guidance in any of the helpful HSE publications as to a course of action approved or suggested by the HSE to overcome novation based problems. In order to avoid inadvertent non compliance by contractors and construction management professionals the industry would welcome guidance in this area, possibly following a short but focused consultation period with design and build professionals.


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