Sarah Elliott
- Partner
- Construction
BSA in practice: challenges and evolving solutions
Following the publication of the Government’s timeline for implementation of the recommendations from the Grenfell Tower Inquiry and the changes at the BSR to clear the well-publicised backlog of Gateway 2 applications, Wedlake Bell was delighted to host a number of clients, contractors, funders and members of building control to their share experiences, challenges and insights. The top three subject discussions are set out below.
Gateway 2: BSR Bottlenecks
Unsurprisingly, delays in securing Gateway 2 approvals from the BSR remain high on the agenda. The delays have a domino effect: developers are unable to commence construction, and investors are reluctant to release funds which in turn can affect housing delivery targets.
Concerns remain around lack of BSR resources and insufficient guidance to the industry exacerbates the problem. Although organisations such as the Construction Leadership Council (CLC) and Build UK have issued excellent guidance, the consensus was that there is still a need for more structured engagement with the BSR, particularly at the pre-application stage.
Programming adjustments and change procedure
Contractors generally are calling for Pre-Construction Services Agreements (PCSAs) at an early stage to enable them to engage their supply chains sooner. However, PCSA arrangements can be costly and risky if those arrangements last for prolonged periods and pose significant challenges to contractors who need to lock in sub-contractor prices for longer durations. However, early commitment to sub-contractors could provide them with some clarity around future pipelines of work.
The need to front-load design development to meet Gateway 2 requirements has significantly altered project programming for contractors and reduced the scope of value-engineering for both contractors and sub-contractors alike. Developers are wary of changes to design and layouts once construction has started due to the need to seek BSR approval during the build. One unintended consequence is that the change procedure might stifle innovation and efficiency, for example, by limiting the ability to adapt to technical innovations during long build periods.
Insolvency scenarios add another layer of complexity. A change in contractor mid-project could trigger fresh BSR approvals, and cause delays and contractual disputes.
Gateway 3: challenges
Gateway 3 presents its own set of challenges. Extending contract programmes to accommodate BSR sign-off and delays ahead of practical completion might be favoured by developers and funders but is onerous for contractors, particularly in terms of liability for liquidated damages. The difficulty of unoccupied units and concerns around site security and insurance also need to be addressed. For developers (and their lawyers) the challenge is to find solutions to enable projects to remain financially viable for contractors while satisfying concerns of developers and their funders.
A possible mechanism to achieve partial relief and financial certainty for contractors while maintaining compliance with Gateway 3 regulatory requirements is to treat “physical completion” prior to the BSR completion certificate application akin to sectional completion. For contractors, this would allow for some relief from liquidated damages and partial retention release, while a separate financial rate could be provided for the Contractor to cover the interim period until Gateway 3 approval and final completion of the works are achieved. This requires careful thought. There would still need to be sufficient contractual commitment and incentive for contractors to provide developers (and their funders) certainty in the delivery of all the requisite documentation to be included in the Gateway 3 application, but this is an example of a possible way to manage the risks surrounding Gateway 3.
Clarity from the BSR in relation to the extent of any snagging work or non-Building Regulations works that could be carried out in the period leading up to Gateway 3 approval would also be helpful when considering Gateway 3 risk. Debate around the scope of work that contractors could carry out post-Gateway 3 application concluded that this was likely to be limited to such things as landscaping (so long as this did not affect fire escapes) or minor finishes only.
Final thoughts
It’s hoped that the recent changes at the BSR and commitment to clear the backlog of Gateway 2 applications will help projects get off the ground. However, there are still major challenges in terms of BSR resources and uncertainty in the market over the Gateway system.
On a positive note, the consensus was that despite the friction that the regulatory landscape has introduced to the development and construction process for higher-risk buildings, the construction industry is adapting and will find a way to make the Gateway system work.
This article is for general information purposes only and does not constitute legal advice or a comprehensive statement of the law. Specific legal advice should always be sought in relation to individual circumstances.
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