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Vol 12 No 1 Spring 2006

CEMicircularThe College of Estate Management compiles this bulletin forcurrent and former students as an aid to your studies and futurecareers.CEMicircular covers all courses and includes information aboutimportant developments and topical issues in the world ofsurveying and property. You should not, however, rely on theextracts inCEMicircular as your only source of information. Theywill seldom offer more than a brief summary of a new topic orrecent issue and some points are bound to be omitted, perhapsgiving undue emphasis to the material included. You aretherefore urged to read as widely as possible, including makinguse of the Internet, and it is vitally important that current

students study the course material. This could make thedifference between superficial knowledge and realunderstanding.To help you keep up to date, look out for the following captionsagainst items:

CEMicircular WebWatch gives details of relatedwebsites where additional information can be sourced.

Latest Research indicates material that has beengenerated by recent research, including projects carriedout by CEM and other institutions.

Editor’s noteThe editor of this circular is Gaye Pottinger, Senior ResearchOfficer at CEM. She would be pleased to hear your views andcomments on its structure, content and presentation.Contributions or suggestions of material for inclusion are alsowelcome. Please write to Gaye Pottinger at the College addressbelow, or email to:[email protected].

Subscription to CEMicircularCEMicircular is produced twice a year, in the spring and autumn. Itis sent to all students on CEM courses, staff, CPD subscribers and

members of the Property People’s Network (PPN), which is opento CEM alumni. To join PPN see www.ppnonline.co.uk.

CopyrightThe extracts from journals in this circular are reproduced bypermission of the publishers. So as not to abuse this permission,the College asks that anyone wishing to make copies of any of thearticles should first contact the editor ofCEMicircular.

Whiteknights Read ing Berkshire England RG6 6AWTel 0118 986 1101 Fax 0118 975 5344

ContentsPage

BuildingUnder floor heating and cooling 2Stainless steel fixings 3Building Regulations and energy 5Finishing a cathedral 7

ConstructionWhole-life value 11Concurrent delay 12JCT contracts and historic buildings 15PFI equivalent project relief clauses 16

DevelopmentSocial housing costs 19Mixed-use schemes 21

FinanceOff-shore investment 25UK REITs 27Islamic finance 29

LawExpert witnesses 32Adjudication 34

ResidentialHome information packs 36Retirement housing 37

ManagementShopping centre definitions 40Onerous lease terms 44FM and multiskilling 46

PlanningPlanning and flooding 50Planning permission life span 52Planning gain 53Housing strategy 55

PropertyAuction conditions 57Property research origins 59

RuralAncient rights of way 61Inheritance tax and farm property 62

ValuationComparable evidence 64Break clauses and valuation 66Valuing gaming property in Macao 69Wind farms and home values 73

NoticesBSc graduations 75

Wanted: online tutors 75CEM publications 75

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Underfloor heating is nothing new, but underfloor cooling is more novel. Both can offer greater energy efficiency thanconventional systems. Mike Mosely , major projects manager for Rehau, explains the main features and application of underfloor installations ( AJ Specification , 11.05, pp.47-49).

BUILDING

Underfloor heating and cooling

Throwing more energy at a building to keep it cool insummer and warm in winter is no longer an option withrising energy prices and the need to tackle globalwarming. With more innovative methods of regulatingtemperature required, developments in wet underfloorheating and its companion, underfloor cooling, makethem an interesting option.

HeatingThese are similar to systems used by the Romansthousands of years ago. Wet underfloor-heating systems,however, have been slow to catch on in the UK market,compared with those on the continent. In the majority ofapplications, underfloor heating uses less energy. This ispredominately because of the delivery of warmth throughmore radiant heat transfer than a conventional radiatorsystem (in which most of the heating effect is viaconvection). Generally, air temperatures are lower, withthe same level of comfort for the occupants.

Compared with a conventional radiator system, thetemperature of the water within an underfloor system ismuch lower, which makes underfloor heating ideal foruse with high-condensing boilers. Often the water can befed directly into the floor from such boilers without theneed to pre-mix down to a lower temperature. Becauseunderfloor heating systems use lower-temperature waterthey can also be used with non-conventional heatsources, such as geothermal heat-recovery systems. Coilsof pipe are either laid 2m deep in a large, open area orplaced into piles around the building. The ground willremain constant at about 10°C throughout the year. Withthe use of a heat pump, heat energy can be extracted fromthe ground and used to heat the building.

CoolingUnderfloor cooling is simply a conventional, wetunderfloor heating system into which chilled water ispassed to cool the building in the summer. Most of thecomponents are identical for heating and cooling systems:the most significant difference is in the control systems.Most underfloor heating systems are controlled by thedifferent circuits or zones running from the manifold,fitted with a zone valve and thermostat. When anindividual area reaches the required temperature, the flowto that area is cut. With cooling, the controls are morecomplex. Underfloor cooling will need to be linked to abuilding-management system. Index rooms are alsorequired and these will be either in a temperature-neutral

part of the building or be in pairs: one north-facing andone south-facing. The index rooms work with thebuilding-management system to monitor whether to coolor heat the building. For example, on a hot, sunny day thebuilding-management system switches the main controlvalve to the chiller side. Chilled water is then passedthrough the floor, cooling it below the ambient

temperature.The choice of floor covering has a much greater effect onan underfloor-cooling system than on a similarunderfloor-heating system. With the exception of thickshag-pile carpet, underfloor heating can cope with themajority of floor coverings. Underfloor cooling can onlywork with a limited variety. Coverings will need to bestone or ceramic, or a fully-bonded vinyl or commercialcarpet. Underfloor cooling requires the floor to be of asolid concrete construction and it cannot be used in first-floor timber construction.

An issue that must be considered with underfloor coolingis the minimum floor temperature and the dew point. Thefloor temperature must never be cooled below the dewpoint because of the risk of condensation forming on thesurface – which could rot a carpet or be a potential sliphazard on solid floors. The ideal floor temperature forcomfort reasons should not fall below 20°C. This is why abuilding-management system is needed to control it. Itcan monitor the relative humidity and either restrict theamount of cooling or control the humidity with someform of air-handling system.

In a well-designed system, the switch from cooling modeto heating mode will not take place in the same day, as

this would be energy inefficient. The system will heat inthe morning and go off in the afternoon or vice versa.

Cooling potentialUnderfloor cooling will never replace conventional air-conditioning systems. It offers a level of comfort coolingthat can be ideal for our moderate climate. Because of itsrelatively inexpensive installation costs, it is consideredfor applications where full air-conditioning systems wouldnot be appropriate. The majority of new schools underconstruction are using underfloor heating systems, whereit is ideal because of its lack of hot surfaces and radiators.

As such projects often also have building management togo with the systems, cooling can be provided for themoderate additional cost of a small chiller.

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The hidden fixings within structures may be small, but they are essential to overall structural integrity. Wall-tie failure, for example, can be drastic and expensive to correct, therefore choosing the right fixing is vitally important.Dennis Ansell ,technical services manager at Ancon Building Products, discusses the benefits of stainless steel fixings ( AJSpecification , 01/06, pp.30–31).

Large glass atria are another application for underfloorcooling. Having large glazed areas can give huge thermalgain and the size of plant required to control this with air-handling units would be enormous. Underfloor coolingcan be installed in such areas with a moderate budget,and the output of such systems is limited to the occupiedlevel – providing optimum temperature at chest height.

The rest of the space can remain at a higher temperaturewithout affecting the occupants.

Underfloor heating is now a standard part of manyprojects and its inclusion is becoming orthodox.Underfloor cooling is unorthodox and its inclusion inprojects needs to be considered at an early stage of thedesign, with the entire design team.

Stainless steel fixings

Life-cycle costing is increasingly recognised as the trueway to establish the cost of building components.Although stainless steel may be considered expensive, itsmaintenance-free status and integrity eliminate the needfor remedial or refurbishment measures during the life ofthe structure.

In cavity-wall construction, stainless steel is nowexclusively used to manufacture wall ties, restraint fixings,masonry support systems and windposts. As the trendtowards higher specification and longer life continues,stainless steel could also provide cost-effective long-termsolutions in other architectural applications.

Significant changes to wall-tie regulationsWall ties are an essential element in the stability ofmasonry panels. The correct selection, spacing andinstallation of ties is essential to avoid damp penetrationand the distortion, cracking or even collapse of brickwork.

Wall-tie selection depends on many factors, includingtype of brick/block to be tied, cavity width, type andheight of building, location and design life. There areseveral documents which need to be consulted and somerecent changes in regulation.

BS 5628: The Use of Masonry: Part 1: 1992 providesrecommendations on length of tie, embedment, densityand positioning. Wall ties conforming to BS 1243(withdrawn) or DD140 will meet the requirements of thisstandard.

BS 1243: Metal Ties for Cavity Wall Construction:1978 was withdrawn in January 2005. This documentspecified the shape and material specification of butterflyties, double triangle ties and vertical twist ties(pictured).Wall ties should now be specified to DD140-2.

D140: Part 2: 1987 gives recommendations for the designof wall ties for use in masonry and timber construction inthe UK. Ties are classified by type. The relevant

classification is determined by strength, function and use.Types 1 to 4 cover masonry-to-masonry ties, while types 5and 6 cover masonry-to-timber construction. Unlike BS1243, DD140-2 enables architects to select wall ties to suitthe performance criteria of the intended application.DD140-2 enables wall tie manufacturers to design cost-effective wall ties that offer superior performance.

BS EN 845-1: 2003 Specification for AncillaryComponents for Masonry specifies the requirementsfor wall ties used for interconnecting masonry and forconnecting masonry to beams, columns or other parts ofthe building. Materials, tolerances, tie types and therequirements for declared values are all covered in thisstandard.

Approved Document E: Resistance to the Passage ofSound was amended in 2003 to raise the performancerequirements of walls for their resistance to the passageof sound. To meet the new requirements the dynamicstiffness of ties must be measured to test the product’sability to transmit airborne sounds. Document E classifieswall ties into two types: type A and type B.• Type A ties:For separating (party) walls and external

walls. Taking both cavity width and tie density intoaccount, these ties must have a measured dynamicstiffness of less than 4.8MN/mJ.

• Type B ties: For external walls where a type A tie isunsuitable. Taking both cavity width and tie densityinto account, these ties must have a measureddynamic stiffness of less than 113MN/mJ.

Robust Details Limited has approved the use of severalstandard construction details as a means of complyingwith Document E when building new houses and flats.Use of these details eliminates the need for pre-completion sound testing. Ties complying with type Arequirements must be used with the standard details formasonry separating walls.

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Density and p ositioning of tiesFor walls in which both leaves are 90mm or thicker, tiesshould be used at not less than 2.5 per square metre(900mm horizontal x 450mm vertical centres). Ties shouldbe evenly distributed over the wall area, except aroundopenings, and should preferably be staggered.

In cases where insulation board is incorporated within thecavity and restrained by ties with insulation-retainingclips, it may be necessary to reduce the horizontal spacingof the ties to 600mm.

At vertical edges of an opening, unreturned or unbondededges and vertical expansion joints, additional ties shouldbe used at a rate of one per 300mm height, located notmore than 225mm from the edge.

Length of tie and embedm entWall ties should be of the correct length to ensure thatthey are properly embedded in the masonry.

The tie should have a minimum embedment of 50mm ineach leaf, but also take site tolerances into account forboth cavity width and centring of the tie. For this reason,tie lengths which achieve an embedment of between62.5mm and 75mm are recommended.

Recommended lengths of masonry-to-masonry ties

Cavity width (mm) Length (mm)

50–75 200

70–100 225

101–125 250

126–150 275/300

CEMicircular WebWatch

Further information about stainless steel fixings canbe found at the following websites:Ancon Building Productswww.ancon.co.uk

British Stainless Steel Associationwww.bssa.org.uk

Robust Details Limitedwww.robustdetails.com

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In response to the European Energy Performance of Buildings Directive, the UK is implementing changes to Parts L and F of the Building Regulations and accompanying requirements for improved energy efficiency in new homes will put pressure on housebuilders to cut carbon emissions. Jason White , sustainability services manager with NHBC, looks at how developers can clean up their act ( Building Data toolkit, online, 20 January, 2006). However, more recent reportsindicate that industry may get a further year to implement the revised Part L ( Building Breaking news , online, 10February 2006: see box below).

Building Regulations and energy

About a half of all carbon dioxide emissions come frombuildings and about 30% of that from the 24 milliondwellings in the UK. Because of this, the Government iscalling on housebuilders to make a substantialcommitment to cut carbon dioxide emissions frombuildings in 2006, in order to meet Kyoto Protocol targets.

The EU driving energy efficiencyWhile the UK Government is looking for developers tospecify and build efficiently, the European Union is alsoparty to the Kyoto Protocol. The European Commission’sresearch shows that, by improving energy efficiency,carbon emissions from buildings could be reduced by22%.

For the European Community to meet its Kyotorequirements it has developed the Energy Performance ofBuildings Directive. Under the directive, EU countriesmust ensure that when any building, including housing, isconstructed, sold or rented, a valid energy performance

certificate is made available to the prospective buyer ortenant. For new dwellings, the UK is ensuring compliancethrough the revision of Part L of the Building Regulationsand the directive’s implementation from April 2006.

Amen dments to Part L and FThe ODPM has brought forward the changes to parts Fand L of the Building Regulations, concerning ventilationand fuel conservation, from 2008 to April next year. Theamendments follow the Government’s energy whitepaper which outlines methods of cutting the UK’s carbondioxide emissions 60% by 2050. In the latest revision, thechanges to Part L are intended to improve the energyefficiency of new buildings by reducing their levels ofcarbon emissions by about 25%.

The latest revisions include a requirement for air-tightnesstesting of a representative sample of new buildings toensure minimum heat loss. The amendments to Part F willcomplement Part L by ensuring there is adequateventilation within the home without compromising itsenergy efficiency. The Government estimates thatamendments to the Building Regulations will improveenergy standards in non-dwellings 27%, 22% in houses,and 18% in flats. It also anticipates that the changes to PartL will deliver an overall saving of 80,000 tonnes of carbonannually from new homes.

Changes to EcoHom esThe Building Research Establishment (BRE) introduced theBREEAM rating in 1990 as a method of measuring theenvironmental performance of buildings. The assessmentspecific to housing is EcoHomes, and this balancesenvironmental performance with the need for a highquality of life and a safe and healthy internal environment.

Currently, it is compulsory to receive a ‘Good’ EcoHomesrating for Housing Corporation developments and a ‘VeryGood’ rating for English Partnerships’ developments.EcoHomes’ assessors look at environment andsustainability factors including energy use, transportoptions, pollution, choice of materials, water use, landuse, ecology, and home owners’ health and wellbeing.Each category has a weighting and contributes to the finalEcoHomes’ score, a ‘Pass’ rating of 36%, a ‘Good’ rating of 48%, a ‘Very Good’ rating of 60% or an ‘Excellent’ rating of70%. EcoHomes will form the basis for the Code forSustainable Homes which will replace it.

The drive for efficient affordable housingFor the first time since its inception, developers in theprivate sector have been invited to bid alongside the UK’shousing associations for a share of £3.9bn available fromthe Housing Corporation’s National Affordable HousingProgramme. However, the Housing Corporation has alsoannounced that in the 2006–08 funding round, new homesdrawing on its grants will have to achieve an EcoHomes‘Very Good’ rating – up from the ‘Good’ rating, which is itscurrent minimum requirement. This rating is expected tocover an estimated 70,000 affordable homes due to befunded in 2006–08. The Environment Agency has issuedfigures suggesting that these measures will cut carbonemissions by an estimated 26%, compared with typicalnew build housing. The Housing Corporation alsobelieves that housing association tenants and privatehomeowners could save an average of £138 a year in utilitybills on homes with a ‘Very Good’ rating.

Code for Sustainable HomesThe Code for Sustainable Homes will become reality in2006. From April all new residential developmentsreceiving government funding will need to meet thecode’s requirements. This will impact on developersseeking Housing Corporation funding. Although theenvironmental rating system has yet to be finalised, thegovernment has stated the code will cover fuel and water

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efficiency as well as focusing on building materials andwaste reduction. The code will include practices andmaterials to safeguard occupants’ health and wellbeing. Aconsultation document on the code was released inDecember, inviting comments until March.

How McC ann Homes achieved anEcoHomes ‘Excellent’ score

McCann Homes’ Willows Chase development, in MiltonKeynes, includes four- and five-bedroom homes and two-bedroom apartments. To achieve an ‘Excellent’ EcoHomesscore, McCann took the following measures (amongothers):• installed high-efficiency boilers and low-voltage

downlights;• fitted A-rated white goods in kitchen and a rotary

drier. Flats have a drying space over baths;• undertook sound tests to meet EcoHomes’ standards

and exceed Building Regulation requirements;• used timber from sustainable sources;• used roofing materials and windows which achieve an

A-rating in the Green Guide to Housing Specification;• fitted compact fluorescent light fittings outdoors, plus

light timer sensors and recycling facilities;• maintained the former agricultural site’s original

hedgerows and made sure it was cleared outside thebird breeding season;

• enhanced the grounds through landscaping.

How Eco are your homes?Developers required to achieve a ‘Very Good’ rating ormore have to plan for their homes to be pushing the limitsof environmental performance. Categories to considerwhen looking at any EcoHomes rating include the home’senergy requirements, transport requirements, pollution,environmental implications associated with buildingmaterials used, water used, ecology and land use, andinternal and external issues which might affecthomeowners’ health and wellbeing. It is helpful toconsider:• Dedicated energy-efficient light fittings, condensing

gas boilers, the provision of white goods which are A-rated for energy efficiency, drying lines or even theuse of renewable energy, such as solar hot waterheating.

• A higher score may be achieved if the development iswithin the vicinity of public transport and localamenities such as a food shop, post box, medicalcentre, primary school or pub, in a bid to reducereliance on cars. You should check whether there aresafe pedestrian routes. Consider providing cycle shedsor space for a home office.

• Have you checked with your insulation suppliers thattheir products have a Global Warming Potential of lessthan five, to reduce the material’s effect on climatechange?

• Are the timber and timber products used for basicbuilding elements or for finishing elements sourcedfrom certified sources or recycled? Do theconstruction materials used receive an A rating in theBRE’s Green Guide to Housing Specification?

• Are there facilities available to allow current andfuture homeowners to recycle their household waste?

• Have amenities been specified to ensure reducedwater consumption, including dual flush toilets, tapswith flow regulators and showers with a reduced flowrate?

• Are water butts provided to enable rainwater to be

reused for irrigation of gardens and landscaped areas?• How can you improve the ecological value of the site?

Have you had an ecological assessment? Can youprotect any existing features from damage?

• Are rooms designed to have good natural daylight, toimprove quality of life and reduce the need for energyto light a home?

• Have you undertaken pre-completion sound testing toreduce the possibility of noise complaints?

CEMicircular W ebWatch

You can find out more about the Building Regulationsat the ODPM website,www.odpm.gov.uk, includingcopies of current regulations, consultationdocuments on the latest changes and news updates.

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Industry m ay get extra year for Part LThe Industry could be given another 12 months to implement the new Part L of the Building Regulations. ( Building , 10February 2006 p …)

The legislation comes into effect in April but it is understood that, under an unprecedented period of grace, buildingscan comply with the 2002 edition providing the scope of the scheme has been submitted to building control.

It is unclear how long this transitional period will last for but it is believed that it may be six months or a year. The ODPMsaid the arrangements would be announced shortly.

To become eligible for this transitional period an application must be made before 6 April.

Previous arrangements had required full details of schemes to be submitted to Building Control and work to havestarted before the new regulations came into force.

John Tebbit, industry affairs director of the Construction Products Association, said: ‘If this is correct it would mean theODPM has effectively delayed the implementation of new Part L for a year, but politically John Prescott can stand up inthe Commons and say it has been implemented.’

Last week housing minister Yvette Cooper gave a further indication that the government is responding to Building’ssuccessful campaign to reform the Building Regulations.

Speaking at an Environment Audit Select Committee, she admitted the regulations were confusing and the ODPMneeded to adopt a more efficient approach. She said: ‘The way we do Building Regulations needs to be improved.’

The cathedral for Suffolk has just been finished. It is England’s last Anglican cathedral.George Clark MSc MCIOB,craftsman, site manager and long-time educator, observed this project from 2001 to its completion in 2005, and reportshow inspired leadership, devoted craftsmen and a miracle in a quarry answered many prayers ( Construction Manager ,6 January 2006, pp.18–21).

Finishing a cathedral

The medieval church of St James in the grounds of theAbbey of Bury St Edmunds was nominated in 1914 as thecathedral for Suffolk. In 1959 work began to enlarge thechurch for use as a cathedral under the direction ofStephen Dykes Bower, cathedral architect from 1943 until1988. Between 1963 and 1970 the East End was completelyrebuilt, but funds ran out and only the concrete base for afuture tower could be constructed. Other works were leftincomplete.

At his death in 1994, Dykes Bower left a substantialbequest to trustees to finish the work. His generouslegacy was not sufficient to raise the tower but wasenough to secure Millennium Commission co-funding.This, together with a public appeal which raised morethan £2.5m, provided the funds needed to carry out theproject.

Outstanding leadershipLeading the construction was Horry Parsons, whose quietpersonality fostered enthusiastic commitment from theteam for the full five years. It was refreshing for a visitorlike me to hear men express a sincere pride in their work

and to see the quality of craftsmanship that resulted fromthis pride.

Tenders were invited in accordance with EU rules, but thesuccessful bid was not based on price alone. The chosencontractor had to demonstrate the special qualities ofmanagement.

At an interview, shortlisted contractors had to describehow they would manage a team of skilled craftsmen.Bluestone selected Parsons as its project leader designateand he attended the interview. Although its tender wasnot the lowest, Bluestone won. Parsons likes to think itwas his Suffolk accent that won over the client, but he hadmore to offer than that, having been with his companynearly 50 years, and with many prestigious projects underhis belt.

The contract required a two-stage tender, with stage onecovering the preliminaries, which included themanagement team, site set-up and insurance, and

scaffolding, which was a major work package. A huge andcomplex buttressed scaffolding system was required toconstruct the 150ft stone tower. It had to be used for

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heavy lifting as well as for working on. Ninety-eight milesof tubes and beams were used.

Stage two covered the brickwork and the stonework. Theextent and complexity of the stone cladding demanded aspecialist contractor, but the tower is essentially a load-bearing brick structure, so the brickwork was just as vital.

Here Parsons demonstrated what it meant to him to be abuilder. Rather than inviting a brickwork contractor to bid,he recommended to his directors that they bid for thework themselves, arguing that they’d be able to work as atraditional builder rather than just provide managementexpertise. It meant he could appoint and develop theteam of craftsmen, and so control the standard ofworkmanship. It would enable him truly to lead theproject. They agreed and asked him to prepare theestimate. The bid was successful. Parsons’ assistant wassite manager David Palmer. They worked together closelyto ensure the project’s success.

The North TranseptWork started in 1999. At ground level three vaultedcloister bays, with one extra bay, were built to link withthe north cloisters built in 1959–61. Internally the massconcrete vaulting, finished with lime plaster, supports ahigher level gallery. This was fitted with tiered seating tooverlook the nave altar. A staircase from the northcrossing leads to this gallery.

Externally the walling is built of Doulting and Clipshamstone. The two flank walls of the transept are of random

flint rubble, on a brick core, while the north wall ispatterned with flushwork of knapped flints.

The Lantern TowerThe gothic stone tower at the heart of the project is, infact, a load-bearing brick tower faced with stonework thatis bonded to the brick core. St James’s church wasoriginally built of Barnack Stone from Lincolnshire. Owingto its popularity in the Middle Ages and later, most seamshave long been exhausted. Fortunately it has beenpossible to open a new seam of Barnack stone toconstruct the outer walls, and the inner walls are linedwith Ketton stone. After trials, a traditional lime mortarwas used.

The existing reinforced concrete over the crossing, thebase of the new tower, was found to have such significantirregularities that engineers had to carry out detailedmeasurements. These measurements determined avarying thickness for virtually every stone of the claddingin order to maintain the required half-inch gap around theconcrete capping.

The BrickworkThe new elements were designed in the gothic style to

harmonise with the original medieval church. Whereverpossible the construction had to replicate medievalmethods, even to the point of using imperialmeasurements over metric. This is why they bonded the

exterior stone to the brick core so the whole acts as onemass of load-bearing masonry. The strength required bythe structure has been achieved without reinforcement ormetal ties, as these materials do not have a track record oflasting a thousand years.

David Peacock was the leader. Every brick of the tower,from the massive foundations up to the parapets, had tobe laid with a full bed and with precise accuracy. The teamhad to develop special techniques in the use of modifiedtrowels. The architect required a completely flat bed,which was obtained by cutting the trowels, to remove thepoint, and creating a 75mm flat tip.

The brickwork was built to an imperial gauge using bricksmade specially by Baggeridge of Birmingham. All fair facework has been built in English Bond while the coreconstruction used quarter and half bonds. English Bondwas introduced from about 1560 and the nave of thepresent building was begun in that century.

The four walls of the tower’s corners are exceptionallythick, up to six feet in places, and this forms some 70% ofthe work. Fellow craftsmen will appreciate the demandsthis made on bricklayers who had to work on top of thecore. Much of their work was at toe level – nose bleedwork, as it’s commonly known. To lay the full bed oversuch wide walls required a technique not unlike icing acake. The jointing of all exposed work was wood andragged finished to give a full flushed effect to all thejoints.

The bricklayers had to demonstrate the required craft skill

and an attitude that would consistently produce high-quality work, but even then they underwent a skillsdevelopment programme to prepare them further. Everybrick to be laid, for every course, was drawn in detail bythe architect. Many trials were carried out to familiarisethem with the workability of the mortar.

The Lime MortarThe company was issued with a series of mortarspecifications for the various activities. Lime mortar wasused for bedding and grouting stonework, bedding andpointing flints, laying bricks in general conditions and indamp-proof courses.

Recognised as an authority on preparing and using limemortars, Michael Wingate produced the specifications. Heworked with a team consisting of architect Gothic DesignPractice, the BRE, structural engineer Brian Morton andBluestone. He spent six months experimenting withnumerous mix ratios, methods of mixing, timing ofindividual stages, various aggregates and water content.Despite this initial work, every mix needed to be finelytuned to be of practical use. Depending on the particularuse, a range of materials was required: Blue Lias HydraulicLime from Dorset, Bleaklow Slated Lime Putty fromDerbyshire, crushed chalk from Norfolk and a mix of softsands from Suffolk Pits.The process of mixing was, of course, critical to the finalresult. Two pre-mixes were prepared in a barrel mixer.

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These are a mix of hydraulic lime and sharp sand, whichhas a shelf life of six days, and a soft sand with slated limemaking a putty which has a shelf life of months, probablyyears. A proportion of each pre-mix was brought togetherwith chalk granules and water ‘to taste’ in a pan mixer. Theproportions and timing of each ingredient were accuratelycontrolled in the mixing to maintain the requiredstandard.

The stoneworkStone is the ultimate building material available to man. Itimparts a sense of permanence and allows the designer,with the craftsmen, to produce a building that will mellowthrough the years to delight generations to come.

At St Edmundsbury Cathedral, the links with earliercathedrals and their builders are remarkable. Barnackstone was used to build both the Abbey and the adjacentNorman tower. For many years the quarry was consideredexhausted. But fate took a hand and a seam of Barnackwas located which proved to be enough for cladding thetower. It was occasionally supplemented by a similarstone, Clipsham, to ensure that sufficient Barnack wasavailable for areas facing severe weather exposure.

When quarried the stone was transported a short distanceto the contractor selected to carry out all masonry work,Ketton Architectural Stone and Masonry. Here the stonewas cut and worked. Each individual stone had to be setout using detailed drawings and these were produced byPeter Banister working in a small office in the garden ofhis own house. Each of the full size templates were drawn,and cut, to an accuracy of 1/32” with no tolerancespermitted. Many hundreds of face and bed templateswere required.

The arches presented a particular problem, as they had tobe drawn full size to set out the curve of support centringand to prepare the templates. The floor of the village hallwas the only surface large enough.

Brick and stone were bonded throughout the structure sothat the whole acts as one mass of masonry in the way itwould have done in a medieval building. Most 20th-century buildings other than housing use a steel orconcrete frame to provide stability and load distribution.However, St Edmundsbury’s tower achieves strength andstability without reinforced concrete, metal ties orPortland Cement. The masons and bricklayers worked as ateam. The stone facing was laid ahead of the brickwork byone course, thus enabling bonding across the stoneworkat intervals.

Each of the worked stones arrived on site in accordancewith its scheduled position number. The completed towerwas created from 3800 tonnes of worked stone, but suchwas the accuracy of the templates and the skill of themasons that only some five or six stones had to bereplaced. The journey of each stone to its position in thetower was a fascinating path to follow. The required batchof prepared stones was carefully placed on a pallet,transported to a lift housed in the huge buttressedscaffolding tower and then raised to the working level.The pallet was then wheeled 50ft on an access bridge tothe north face of the tower.

It then became necessary to distribute the stones aroundthe external face of the tower and provide a means oflifting them for bedding on the section underconstruction. This was achieved in a most efficientmanner. As each lift of the scaffold was raised, asuspended perimeter rail was provided that ran

continuously around the centre line of the tower wallingand above the masons’ heads. The rail carried an electrichoist, mounted on a powered bogey, which enabled themasons to hoist the stones, transport them over the top ofthe perimeter walls and by means of a hand heldcontroller lower them gently on to their prepared bed. Itwas remarkable to see a half-tonne carved stonesuspended only by the friction grip of a Lewis Pinprecisely lowered on to its bed.

To bed the huge arch stones the masons employed theirown special techniques. As each stone was gently loweredinto position, small wooden wedges were placed under

each corner and these carried its weight. The arch wascompleted in this way and the wedges withdrawn on thesame day. This allowed the whole arch to bed firmly downon its joint lines and freed the centring for ease ofremoval.

Each craftsman had to interpret the intentions of thedesigner consistently and faithfully. Parsons successfullycombined his roles as leader of the craftsmen andmanager of the commercial demands of his company. Hisphilosophy was simple: instruct clearly; constantlyencourage; continually communicate; show appreciation;and keep smiling. It worked, as very few of the team leftbefore their part of the work was completed.

High up on the north face, incorporated in the flint flushwork of the tower parapet are the initials EE (for StEdmund). In recognition of his outstanding leadership thearchitect presented Parsons with a framed, detaileddrawing of the completed project. He had changed theinitials to HP.

Project informationScope To complete the final phase of St Edmundsbury’s Cathedral, building a transept, a 150ft lantern tower, and a smallchapel. Work took from 1999 to 2005Total cost £9m (approx)Contractor Bluestone (formally Sindall)Architect Gothic Design Practice of Saffron WaldenMasonry Ketton Architectural Stone and Masonry

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Photographs by Ian Hulland

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The Private Finance Initiative (PFI) was aimed at delivering better quality and greater cost effectiveness from public sector projects by driving down the whole-life costs associated with managing and maintaining buildings. But it’s not workingout like that. Thomas Lane asked Andy Green of Faithful & Gould if there is another way of going about the problem and found that what we need now is whole-life value ( Building, 23 September 2005).

CONSTRUCTIONWhole-life value

As we know, a dog is for life, not just for Christmas. Thiscautionary message could apply equally to theconstruction industry’s attitude to its product: for years itwas accustomed to simply putting up buildings thenwalking away without having to worry about subsequentrunning and maintenance costs.

Then the PFI came along and compelled contractors tostart considering those costs, as they would be picking upthe costs for them. Indeed, this was seized upon byadvocates of PFI because now the consortiums had anincentive to optimise whole-life costs, which in turn meantbetter-value public sector buildings.

Or so the theory went. The reality is that PFI procuredbuildings have been heavily criticised for poor build

quality, notably the Cumberland Infirmary in Carlisle. Notonly did that building suffer from poor build quality,including leaking roofs, but any alteration the NHS trustwanted to make incurred huge costs – hardly a positiveexample of low whole-life costs (for more on this, enter‘Cumberland Infirmary’ into theBuilding website archivesearch engine. This will bring up the May 2003 article‘We’ve got your results’).

That said, the Cumberland Infirmary was completed in2000 and was the first hospital PFI. Has the industry movedon from there, and is it now delivering PFI projects wherewhole-life costs have been honed to perfection? Or arethere still barriers preventing the industry from achievingbest-value public buildings?

According to Andy Green, a director at cost consultantFaithful & Gould, there are still obstacles to achieving bestvalue. Green has lived and breathed whole-life costing forthe past 11 years. He says the PFI market has come a longway for a small group of people, but ‘a lot of people arestill reverting to habit and going for low capital costs’.

He quotes a recent report published by the National AuditOffice called Improving Public Services through Better

Construction. ‘It identified four key barriers to successfulwhole-life costing that I totally endorse,’ he says. ‘First,there’s a lack of clarity on what we mean by whole-life

costing. Second, there’s a lack of robust historical data onrunning costs. Third, people making investment decisionsneed a tool not just based on cost but other drivers suchas time, sustainability, quality and return on investment.It’s done in a vacuum and there’s no way of comparingand evaluating these options. Finally, there is a lack oftangible evidence of the benefits of whole-life costing.’

He is right about what is meant by whole-life costing. For astart, it is fogged by overly complex terminology – lifecyclecosting, through-life costing and whole-life value.Furthermore, there is no common agreement what shouldbe included in whole-life cost analyses. Some peoplemight define certain replacement items as capital costsand others might define them as maintenance costs. ‘Ifthis isn’t structured, your predictions can be completely

out of place,’ warns Green.On the other hand, there is some good news here – theBuilding Cost Information Service is working on astandardised approach to whole-life costing to help tacklethis problem (see ‘The data debate’, below).

Another problem with the PFI is that the client often asksfor a high-specification building or for extras that it cannotafford. ‘If people are asked to give too much, somethinghas got to give and that may not be in the client’s bestinterest,’ says Green. ‘It has to be affordable for the clientand the bidder. If this doesn’t happen then you’re stuffed.’He adds that bidders are often reluctant to pull out ofdeals going this way because they would have to write offsignificant bid costs. Clients are happy to proceed, too,because according to Green their stock response is ‘theindustry can use innovation to deliver savings’.

The tight invitation-to-tender timescale is anotherproblem facing PFI consortiums. In the case of schools thisis typically 16 weeks, which is not long to develop andsubmit a proposal. ‘The architect goes off on one andcomes up with a fancy scheme that is then put againstcosts,’ says Green. There’s a 11th-hour panic, the schemeis twisted to fit so it’s no surprise when the whole thinggoes off the rails.’

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What is concurrent delay?The definition of ‘concurrent delay’ is itself the subject ofdebate. For the purposes of this article, a concurrent delayis assumed to arise where a single period of delay iscaused by more than one event. On this analysis it is thetime that the delay is suffered, and not the time that theevent occurs, that is the key factor in determiningconcurrency.

Why con currency mattersConcurrency is important, because different delays havedifferent consequences. Delays can be divided into thefollowing categories:• Compensable delay – events that entitle the contractor

to an extension of time and to additional payment (lossand expense) in respect of costs flowing from theevent.

• Excusable delay (or neutral delay) – events that entitlethe contractor to an extension of time, but where thecontractor bears the risk of additional costs that flowfrom the event.

• Culpable delay (or inexcusable delay) – events that donot entitle the contractor either to an extension oftime or to additional payment.

Events in two or more categories that can be said to havecaused the same period of delay (concurrent delay)conflict in the determination of extensions of time andloss and expense.

The dichotomy between extensions of timeand loss and expenseThe key to understanding concurrent delay is toappreciate that the considerations that apply toextensions of time are different from those that apply toloss and expense. This is sometimes overlooked, despitebuilding and engineering contracts such as the JCT andICE forms dealing with the two issues separately.

Concurrent delay and extensions of timeIt is often forgotten that extension of time provisions arenot included solely for the benefit of the contractor. Theirkey purpose is to preserve the employer’s entitlement toliquidated damages. Unless the extension of timeprovisions allow an extension of time for delaying eventsthat are the responsibility of the employer, then theliquidated damages machinery breaks down and cannotbe enforced (Peak Construction (Liverpool) Limited vMcKinney Foundations Limited1 BLR 111). Where themachinery for extensions of time and liquidated damagesbreaks down, then time becomes ‘at large’, giving thecontractor a reasonable time to complete, and restrictingthe employer’s remedy to losses it can prove have beencaused by the contractor’s default.

Where there are concurrent delays, one of which entitlesthe contractor to an extension of time and another isculpable, then the employer’s default can be said to becausative of the delay. To deprive the contractor of anextension of time in such a case would be to allow theemployer to recover when it is itself in default.Accordingly the contractor should maintain its right to anextension of time.

This reflects the decision of the Court of Appeal inPeak vMcKinney, and accords with the decision of Dyson J inHenry Boot Construction (UK) Limited v Malmaison Hotel(Manchester) Limited (1999) 17 Con LR 32, in which theJudge accepted the parties’ agreed position that:

‘... if there are two concurrent causes of delay, one ofwhich is a relevant event and the other is not, then thecontractor is entitled to an extension of time for theperiod of delay caused by the relevant eventnotwithstanding the concurrent effect of the otherevent’.

The above text was also cited with approval in thejudgment in Motherwell Bridge Construction Ltd v MicafilVacuumtechnik 81 Con LR 44. A similar approach wasadopted in Royal Brompton Hospital NHS Trust vHammond (No 7) [2001] 76 Con LR 148, where His HonourJudge Seymour found that if the contractor:

‘… was delayed in completing the works both bymatters for which it bore the contractual risk and byrelevant events, within the meaning of that term in theStandard form, in the light of the authorities to which Ihave referred, it would be entitled to extensions oftime by reason of the occurrence and the relevantevents notwithstanding its own default’.

In any case, where there is concurrent delay, theemployer’s loss is the same regardless of the occurrenceof the culpable event. Where there are concurrent delays,both of which can be said to have caused the delaysuffered, the contractor should remain entitled to anextension of time, notwithstanding its own culpable delay.

Concurrent delay and loss and expenseUnlike the position with extensions of time, there is nooverarching principle that interferes with agreementsbetween the parties with regard to loss and expense. Theposition therefore depends upon the terms of thecontract. The standard forms differ in their drafting, butmost provide that the contractor can recover loss andexpense caused by specific matters identified in thecontract in question. Unfortunately, concurrent delaygives rise to difficult questions of causation. Wheredifferent events can be said to cause a delay, it is oftendifficult to attribute costs to each. The starting point mustbe to unravel the factual position as far as possible. Inmany cases, the events and the costs can be broken down

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so that it can be shown which party is responsible foreach.

Where delays are truly concurrent, the questions ofcausation are more difficult, and have been the subject ofdebate in various competing authorities. Until recently,these have tended to favour a winner-takes-all typeapproach, where the claim succeeds or fails as a whole.

In some cases, though, it is not possible to attribute adominant case to a particular item of loss and expense,notwithstanding clear evidence of concurrentcompensable delaying events. This was recognised in arecent Scottish case, John Doyle Construction Lid v LaingManagement (Scotland) Ltd [2004] Scot CS 141, which hasopened the door to apportioning the losses betweencompeting causes. Whilst this case is not strictly bindingon the courts of England and Wales, it is persuasiveauthority.

The Doyle case states that where an item of loss resultsfrom concurrent causes, provided the events for whichthe employer is responsible are a material cause of theloss, an apportionment of the loss can be carried out inappropriate cases. The Judge considered where delaymight have been caused by late provision of informationby the architect but where bad weather might haveprevented work for part of the time in the same period,and stated:

‘In such a case responsibility for the loss can beapportioned between the two causes, according totheir relative significance.... During the period when

both operated, we are of the opinion that each shouldnormally be treated as contributing to the loss....Unless there are special reasons to the contrary,responsibility should probably be divided on an equalbasis, at least where the concurrent cause is not thecontractor’s responsibility. Where it is hisresponsibility, however, it may be appropriate to denyhim any recovery for the period of delay during whichhe is in default.’

Accordingly, where the concurrent delay is caused by acombination of compensable delay and neutral delay, an

apportionment exercise should be carried out, basedupon the relative significance of each event. Where theconcurrent delay flows from compensable delay andculpable delay, such an exercise is unlikely to beappropriate, though it is not ruled out entirely. In thelatter case, the contractor is likely to be prevented fromrecovering loss and expense save to the extent he canshow that the compensable delay was the dominant oreffective cause of specific items of loss.

Specific contract clausesGiven the confusion that abounds in this area, those

drafting amendments and bespoke contracts sometimes

deal expressly with concurrent delay. As such provisionstend to be proposed by employers, they often seek toexclude extensions of time and loss and expense in thecase of concurrent delays.

Although this may be seen as cutting through theconfusion and protecting the employer’s interests, thereare risks involved.

There is a risk that a clause denying the contractor anextension of time for compensable or excusable delay,which is concurrent with culpable delay, will render theliquidated damages unenforceable. This follows from therelationship between extension of time provisions andliquidated damages provisions, exemplified byPeak vMcKinney.These days, there is less suspicion of liquidateddamages than when Peak v McKinneywas decided in 1970and the court is more likely to uphold such provisions.However, in the absence of clear authority on the point,the risk remains.

The position is different in relation to loss and expense.Here the parties are free to provide what they wish.However, such clauses are not a panacea and can fail todeliver the required certainty in practice. Given theinterwoven events on construction and engineeringprojects, questions of causation abound and trueconcurrency can often be difficult to establish.

SummaryWhen analysing concurrent delay it is vital to distinguishthe effect on extensions of time from the effect on loss

and expense.In essence, barring specific contract terms to the contrary,concurrent culpable delay ought not to preclude acontractor from obtaining an extension of time, though itis likely to prevent him from recovering loss and expense.Where compensable delay is concurrent with neutraldelay, the contractor is entitled to an extension of timeand the resulting loss and expense should ordinarily beapportioned between the competing causes according totheir relative significance.

A final word of warning, however: this is a developing areaof law, so the above propositions are not beyondargument. More importantly, the above legal analysisassumes concurrent delay in fact. This can only beestablished by a rigorous examination of events on site,and not every apparent concurrent delay turns out to becritical on proper analysis.

Contact:Construction Law is published by LexisNexisButterworths, tel +44 (0) 20 7347 3549. See the publisher’swebsite www.lexisnexis.co.uk for orders, subscriptionsand online trials.

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CT contracts can sometimes seem unwieldy for historic building projects, but Adrian Stenning warns against strikingout clauses too readily because they appear irrelevant or burdensome. The Information Release Schedule, for example,may actually assist in running a project more effectively if used imaginatively ( Building Conservation Journal , Autumn/Winter 2005, pp.18–19).

JCT contracts and historic buildings

You might find this slightly controversial, but those whowrite the JCT Form of Contracts must sometimes wonderwhy they bother. I know it is far from the easiest set ofcontracts but the clauses are there for a good reason andshould not be simply dismissed.

Take the sixth Recital of the JCT Intermediate Contract –the Information Release Schedule (previously the fourthRecital in the old IFC 98 Form), where there appears to bean assumption that this should always be deleted. On this

clause the architect's guide to the contract even startswith the words ‘If not deleted ...’ which seems to presumethat it should be. What is more, the example page of thecontract shows it crossed through. Why did those goodpeople of the JCT put the clause in only for us to be toldto scratch it out?

More importantly you might ask, what does this have todo to with surveyors working on historic buildings? Weare not architects and historic building work is quitedifferent from the new build projects it might be felt thatguide is directed at. However, the deletion of theInformation Release Recital is a common perception, and

one I must hold my hands up to supporting for a while, iethe notion that this clause is not appropriate to historicbuilding projects because it might tie the contractadministrators’ shoelaces together. That is, the contractadministrator (CA) could not guarantee dates forproviding information due to opening up delays, need fora considered reaction to what is found, design ofsympathetic solutions and agreement of such solutionswith the relevant authorities.

A re-roofing project is a good example where the exactnature of the repairs to the structure cannot be identifieduntil the roof coverings have been removed and thestructure opened up. It is possible to get around theproblem by allowing a long enough construction timeand, considering what is found on its merits, discussingand agreeing any impact with the contractor and awardingan extension of time if necessary.

This ‘touchy feely’ approach is laudable and you wouldalways like to think you can resolve any problems with acontractor on an amicable basis.

But if that is to be the case, why should we bother to use acontract at all?

Why do we want to be strict over certain clauses and notothers? Is it because it just happens to suit us? Perhaps weshould be discussing and considering the use of all theclauses of the standard contract in relation to historic

building work – but that is taking me away from the issuein hand.

Any extension of time granted due to unforeseen work isliable to attract cost (possibly substantial) and is unlikelyto inspire the client that this is wholly well-managed if it isborn out of a ‘Well, we didn’t really know what to expect’approach. I agree this might be the only solution in someinstances, but in many that ‘we don’t yet know what willbe found’ is too often used as an excuse for not wanting

to put in the groundwork before the project commences,and, further, would not want this drawn to their client’sattention highlighting it in an Information ReleaseSchedule.

Is this just too cynical?So is there a big problem? How often at the first sitemeeting of your project are you faced with thecontractor’s ‘Information Required’ list, all with dates forabout one or two weeks thereafter, which it is just notpossible to achieve. With an Information ReleaseSchedule not in use, the contractors’ programme

(although not a contract document) has just been elevatedin status. If information is not provided, an argumentensues and with it claims for delay. You can spend timediscussing and negotiating alternative dates with thecontractor, but you are still probably going to be leftunder some pressure. In such instances the striking out ofthe Information Release Schedule is almost certainly amissed opportunity to be in better control of your project.

Let’s go back to our re-roofing example. Although it wasnot possible to ascertain what repairs will be necessary tothe structure beneath, it was perhaps possible to knowwhen that information might be provided. Remember theproject duration had been fixed so we already had somethoughts about what we expected to find. Why then couldwe not have fixed the latest date when the designinformation and decisions on such repairs could beprovided?

If we do so then we can take back control. The contractorcannot pretend his programme and tender requires theinformation by an unrealistic date: it has to have allowedfor the fact that this might not be available until a certaindate. That date is now fixed by you and the project isunder your control as project leader.

It is possible the date could be linked to a construction

activity, eg, two weeks after the roof coverings to area' A’ are removed the repairs will have been designed,scheduled and information made available.

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The recent case of Midland Expressway Limited v Carillion Construction Limited & Ors[2005] EWHC 2963 (TCC) has cast doubt on the effectiveness of equivalent project relief clauses in PFI subcontracts and will cause waves in the PFIindustry. The case has implications for project companies and their funders and investors. It arose out of the constructionof the M6 toll road and revolves around the applicability of the Housing Grants Construction and Regeneration Act 1996to construction contracts. Given the Government’s PFI-friendly stance, changes may have to be made to policy in thearena of PFI subcontracts and the resolution of disputes. This article, issued on 11 January 2006, is fromLaw-Now , CMSCameron McKenna’s Online Information Service.

Of course things will happen on an historic buildingproject that were genuinely unforeseen. Discussion andnegotiation with the contractor as part of the constructionteam will be necessary to provide an amicable solution.However, it will be done in far less muddy water, as themajority of the issues will have been managed within theframework you have set up and the problem isolated. It ispossible to make allowance in the contract documents forupdates to the schedule to be made, perhaps at monthlyprogress meetings, and this would further assist in themitigation of any problems, which will make it easier toexplain to the client

So, as the Intermediate Form Guide states: ‘Used carefully,the Information Release Schedule can be a very effective

management tool.’ I believe that the essence of this clausehas been overlooked for too long and it is time its use wasconsidered more widely for historic building projects.Don’t think just because it is not included in the MinorWorks Form the ethos cannot be accommodated withinthe other contract documents. I am certain it couldimprove the performance of many projects, not least byproviding an early and better consideration of the risksand thus a well-managed solution. Enjoyment can betaken in the project and work itself, avoiding bickeringover where fault lies,

Go on, make the JCT happy. Start using the contracts torun successful projects not battlegrounds! Food forthought if nothing else.

PFI equivalen t project relief clauses

PFI subcontracts: doubt cast on

effectiveness of equivalent project reliefclausesFor some time practitioners in the field of PFI havegrappled with the issues arising from the application ofthe Housing Grants Construction and Regeneration Act1996 (referred to here as ‘the Act’) to subcontracts in PFIprojects (typically the construction contracts and the FMcontracts). In particular, there is a potential conflictbetween the needs of investors and funders to keep theproject company whole on the one hand (ie to match(both in quantum and timing) the liabilities which fall duefrom the project company to its subcontractors with the

benefits which fall due to the project company from thecontracting authority), and the provisions of the Actintended to promote prompt payment to subcontractorsin a contractual chain on the other hand.

Issue and relevant legislationTwo points arise out of a consideration of the Act.

The first is that s.108 provides that under a ‘constructioncontract’ as defined in the Act (which will cover a PFIconstruction subcontract and may cover the ‘hard’services part of a facilities management/maintenancesubcontract) either party is entitled to refer a dispute to

adjudication at any time. This right cannot be excluded bycontract. If a subcontractor invokes its rights under s.108before the project company has had a chance to secure itsposition under the related project agreement, the project

company could be exposed to costs it cannot recover.Further, there is a possibility that a decision by anadjudicator under the subcontract would be inconsistentwith or conflict with a decision made pursuant to thedispute resolution procedure under the ProjectAgreement, again exposing the project company to aliability that it has not predicted or provided for.

The second is under s.113(1), which provides:

‘… a provision making payment under a constructioncontract conditional on the payer receiving paymentfrom a third person is ineffective, unless that thirdperson, or any other person payment by whom is,under the contract (directly or indirectly), a condition

of payment by that third person, is insolvent’.

This has become known as the prohibition of ‘pay whenpaid’ provisions in subcontracts.

The result is that any provision whereby a subcontractmay (i) defer or limit a subcontractor’s right to go toadjudication ‘at any time’, and/or (ii) provide that thesubcontractor’s payment is conditional on the projectcompany receiving payment, may be held to beunenforceable.

While it has long been realised that the drafting of clausesthat seek (by using any similar devices) to achieve this isbeset with difficulty, it was thought that clauses limitingthe subcontractor’s entitlement under the subcontract to

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the project company’s agreed or determined equivalententitlement (as opposed to actual payment) under theproject agreement, would be effective.

The caseMidland Expressway Limited v Carillion ConstructionLimited & Ors [2005] EWHC 2963 (TCC).

The case in point was an application for an injunctionbrought by the project company, Midland ExpresswayLimited (‘MEL’) to prevent the construction subcontractors(each subsidiaries of Carillion, Alfred McAlpine, BalfourBeatty and AMEC, and referred to as ‘CAMBBA’) frompursuing a reference to adjudication under theirsubcontract. None of the subcontractors was an investorin the project company. The subject of the alleged disputewas the amount of the payment due to CAMBBA fromMEL for a variation requested by the Secretary of State forTransport (‘the Department’) as contracting authority tothe project signed in 2000 to design, build, operate andmaintain the M6 toll road near Birmingham. The variationrelated to the construction of the ‘tie-ins’ with the mainM6 motorway at either end of the toll road.

The Department disagreed with the sum requested forvariation works carried out by CAMBBA, and CAMBBAinstigated an adjudication against MEL for short of £10m.While the project agreement gave the Department theoption to become a party to any dispute between MEL andCAMBBA, the Department decided on this occasion not todo so, preferring to await the result of the adjudicationbetween MEL and CAMBBA.

In its reference to adjudication, CAMBBA requestedinterim payment of the sum they claimed due, saying thatMEL’s pursuit of its entitlement under the ProjectAgreement should not hold up payment to CAMBBA.

Mr Justice Jackson (Technology and Construction Court)considered each of the clauses relied on by MEL to defeatCAMBBA’s claim in light of each of the relevant provisionsof the Act.

S.108 (right to commence adjudication at any time)Clause 7.1.3 of the contract between MEL and CAMBBA

(the ‘D&C contract’) limited CAMBBA’s entitlement topayment or recovery in respect of a price adjustment(such as a variation) to such time as:

‘(a) an agreement has been made between theSecretary of State and MEL or a determination hasotherwise been made under or in connection with the[Project Agreement] establishing that [MEL] is entitledto Equivalent Project Relief in respect of such PriceAdjustment…; and (b) [MEL] has received the PriceAdjustment Funds or has certified that it has fundsavailable to it for the purposes of payment of suchPrice Adjustment.’

This was agreed to at best be a defence to adjudication asopposed to a bar. However, clause 7.4 of the D&C contractstated:

‘… pending the determination, agreement orresolution of any Equivalent Project Relief under the[Project Agreement], [CAMBBA] shall take no steps toenforce any right, benefit or relief under this Contractto the extent that such right, benefit or relief relates tothe same circumstances as those to which the ProjectRelief Event to which that Equivalent Project Reliefrelates’.

Mr Justice Jackson held that there were two possibilities:first that clause 7.4 should be construed narrowly and in amanner compatible with the Act, and second that theclause is contrary to the Act and thus the Scheme forConstruction Contracts (which would give CAMBBA aright to go to adjudication at any time) is substituted inthe place of the contractual adjudication provisions. Ineither case (and he did not decide which was correct),clause 7 of the D&C contract did not bar CAMBBA frompursuing its claim by adjudication.

S.113 (bar on ‘pay wh en paid’ provisions)MEL relied on clause 39.6.2 of the D&C contract. Itprovides:

‘… subject only to clause 7 (Contractor’s Rights) andnotwithstanding any other provisions of this Contract,[CAMBBA]’s rights to any Price Adjustment under or inconnection with clause 39 (Changes) in respect of aSecretary of State’s Change shall in no event exceedthe amounts, if any, to which [MEL] is entitled to bepaid by the Department in respect of a correspondingchange pursuant to Clauses 8.1.3.1 and 8.1.3.3 of the[Project Agreement].’

Mr Justice Jackson held that the practical consequence ofthis clause was that CAMBBA would not be paid forvariations requested by the Department unless and untilMEL had received a corresponding sum from theDepartment, even where CAMBBA had shown or couldshow, under the D&C contract dispute resolutionprocedures, that it was entitled to payment or extrapayment.

In Mr Justice Jackson’s view, this was what s.113 of the Actwas designed to legislate against. He went on to say thatthe use in that clause of the words ‘to which [MEL] isentitled to be paid’ did not save the clause: words used asa device to get around s.113 will not assist.

He went on to say that if that analysis were incorrect, thenclause 39.6.2, when read together with clause 7.1.3, wouldin any case be a ‘pay when paid’ provision in allcircumstances other than where MEL had certified that ithad funds available to pay CAMBBA.

Effect of the judgm entThe outcome of this case will clearly cause waves in thePFI industry. However, there are a few points to bear inmind.

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The first is that the case related to payment for a variationas opposed to the payments to which the subcontractorswere entitled under the project as at financial close. Thelatter type of payments made to a constructionsubcontractor during the construction phase will not fallwithin the ambit of any equivalent project relief-typeclause as they are paid through the project company fromthe project’s funders on certification by the latter’stechnical adviser. They are thus not the subjects of anyclause in the construction subcontract that relates thesubcontractor’s entitlement to a correspondingentitlement of the project company against thecontracting authority.

A similar analysis should, given appropriate drafting, applyto variation payments where the payment is being fundedby the project company by way of an addition to itsexisting debt facility. Payment will be made to theconstruction subcontractor following certification by

lender’s TA and the unitary charge adjusted.Second, the case did not concern entitlement toextensions of time or relief from termination. While it ispossible that a clause limiting the constructionsubcontractor’s entitlement to time or relief to that agreedor determined under a project agreement could offends.108, the ‘pay when paid’ considerations are irrelevant.

Third, each case turns on its facts and the exact words ofthe relevant restrictions. In many of the clausesconsidered, the judge found wording which directlyoffended the Act. With different drafting the result couldbe different in another case. Other contractual provisionscould be, and often are, included which are aimed atachieving by other means the protection for the projectcompany that investors and funders are looking for andwhich facilitate the funding of these projects.

Nevertheless the court’s ‘purposive’ approach to theinterpretation of the Act, particularly of s.113, must causeconcern.

This leads on to the issue of government policy. Part ofthe problem lies with the fact that, whilst the Act doesapply to many of the subcontracts on a PFI project, it doesnot apply to the project agreement. Any proposal todisapply the Act from PFI subcontracts is unlikely to beacceptable to the construction industry. On the otherhand, the Government last year rejected a proposal that

the Act should be amended so that it applies to theproject agreements as well as the subcontracts.Government policy has always been that the public sectorshould not be embroiled in every dispute between theproject company and its supply chain (and that the projectcompany should ensure that decisions flow through thecontractual chain by correct structuring).However, given the difficulties illustrated by this case, itmay be that this policy should now be reviewed. If boththe subcontract and the project agreement were subjectto the same dispute resolution regimes, there would bemuch more scope for ensuring that the constructionsubcontractor’s entitlement would be determined at thesame time as the project company’s, and by the sameprocess.

Meanwhile, investors and funders will need to reviewsubcontract provisions in both signed deals, particularlygiven the recent activity in secondary market transfers,and those approaching close, in the light of this case. If itis thought that these clauses could fail, then they and theiradvisers will be looking for alternative ways to deal withthe potential risk to the project company. They may nowbe looking for longer periods in the subcontracts for theproject company to respond to claims. The as yet untestedback-up device of parallel loan agreements may comeunder greater scrutiny as a potential solution. The risk of achallenge may be higher in consortia that are not sponsor-led.

Contacts

For more information please contact:Susan Booth at [email protected] oron +44 (0)20 7367 3095,

Paul Smith at [email protected] oron +44 (0)20 7367 3475, or

Trevor Butcher at [email protected] oron +44 (0)20 7367 2517.

Acknowledgement

Law-Now – CMS Cameron McKenna’s On-lineInformation Service www.law-now.com

CEMicircular WebWatch

This article, together with others related toconstruction contracts and PFI, can be found at theLaw Now website. Gowww.law-now.com and usethe search facility.

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The cost of building social housing is highly pertinent for UK private developers, with local authorities still seeking freeserviced land through their strategic planning guidelines and section 106 planning agreements. Most local authoritieswant 30% affordable housing on private schemes, while the London Mayor wants 50%. In a buoyant market with rising property values, meeting such demands has proved possible, but a more static market accompanied by rising buildingcosts can quickly make schemes unviable. In the following extracts fromProperty W eek , EC Harris provide data on thecosts of building houses (18 November 2005, p.60) and flats (21 October 2005, p.56) for registered social landlords.

DEVELOPMENTSocial housing costs

Social housing build costs

The Graphs 1 - 3 illustrate the costs of new houses builtfor registered social landlords (RSLs) tendered in the lastfour years. The figures are based on the contract sum,adjusted for location and updated to current price levels.

Most social housing developments include a mixture offlats and houses in a range of unit sizes. The figures hereare for houses only and represent costs of a typical mix ofone-, two- and three-bedroom homes. The procurementmethod is invariably design and build.

Building costs are affected by a range of factors, and theschemes included in the benchmark studies cover a rangeof locations and specifications. It should be noted that thecosts of external works, such as hard and soft landscaping,access roads and car parking, can be extensive and cantypically add around 20% to the overall cost, althoughfigures of 15%–30% are not uncommon.

It is of interest that, based on a gross floor area of 818 sq ft(76 sq m), the square metre cost of the deputy primeminister’s ‘£60,000 house’ is £72.83/sq ft (£784/sq m). Atprices prevailing in South-East England, only one of theschemes in the EC Harris sample came in below thatfigure.

However, with prices varying by as much as 28% around

the country this £72.83/sq ft target is achievable by around50% of the sample in areas of Scotland and Wales.

Although 70% of housing schemes were built onbrownfield sites last year, the benchmark figures excludecosts of any site remediation which may be necessary.

Social housing flats build costs

Graphs 4 - 6 illustrate the costs of new flats built forregistered social landlords which have been tendered inthe last four years and with which EC Harris has beeninvolved. The figures shown are based on the contractsum, adjusted for location and updated to current pricelevels.

Most social housing schemes include a mixture of flatsand houses in a range of unit sizes. The figures here arefor apartment buildings and represent costs of a typicalmix of one-, two- and three-bedroom units in low- tomedium-rise schemes, invariably design and build.

These costs do not apply to affordable housing built aspart of a private scheme, as there is often no differencebetween the designs of the two types of units.

The schemes included in the benchmark studies cover arange of locations and specifications.

The costs of external works, hard and soft landscaping,access roads and car parking, can add around 15% to theoverall cost, although figures can range from 7% to 30%.

There is a big drive from within the Government to buildon brownfield sites. Last year more than 70% of housingschemes were built on previously developed land. Thebenchmark figures exclude the costs of any siteremediation.

Postscript:While all reasonable care has been taken in compiling thefigures, EC Harris takes no responsibility for any use putupon them.

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Graph

Graph 2

Graph 3 Graph 4

Graph 5 Graph 6

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The post-war UK planning policies pursued a regime of separating housing from business uses, on the grounds o providing people a better quality of life by locating homes away from the dirt and noise of industry and commerce. Thedifferent tenure arrangements for housing and commercial property were also perceived to be incompatible for property investment reasons. Since the 1990s, the pendulum has swung the other way, and mixed-use is increasingly the name othe game for town-centre redevelopment, in a bid to bring life back into city centres. But can uses such as retail and residential really mix? Simon Rawlinson of Davis Langdon examines the practicalities and costs of mixed-use city-centreschemes ( Building, 9 December 2005, pp.50–52).

Mixed-use schemes

Introduction After years in the doldrums, Britain’s cities are on therebound, with huge investment going into centrallylocated commercial, retail and residential developments.Major centres such as Manchester and Birmingham havealready transformed themselves, and others such asLiverpool have begun on their own regeneration. Theeffects of this trend can also be seen in Britain’s markettowns, which are upgrading their retail in mixed-useschemes to compete with large shopping destinations.

Much of this trend can be put down to planning policy,particularly PPG6, which since the late 1990s has directeddevelopment into town and city centres and whichincreasingly is aimed at creating rejuvenated city-centreeconomies serving visitors and expanding localpopulations. Even supermarkets are now required in somecircumstances to provide mixed-tenure housing as part ofa development.

Retail-led mixed use is seen as key to the creation of adiverse and sustainable urban economy, creating a criticalmass of activity, raising property values, increasingemployment opportunities and introducing a localpopulation to sustain services and create vibrant, lived-inpublic spaces.

In order to succeed, regeneration projects need to createa step change in the value of property in their target area.However, combining uses such as retail, leisure andresidential introduces a number of challenges in terms ofoptimising value and compatibility between different

occupier needs. This is a complex process that potentiallyinvolves a wide range of development partners, and thatwill benefit from specialist skills and early investment ingetting the right development balance.

This cost model looks particularly at the integration ofretail and residential large-scale schemes.

Albion RiversideKnown for its distinctive luxury flats, also has a separate asix-storey block of affordable housing above retail units.

Opportunities for mixed-use developmentThe traditional mixed-use development pattern in Britain’stowns and cities was broken by post-war planning andinstitutional investment in large single-use buildings, suchas shopping centres, designed to meet the specific needsof tenants and investors. The legacy of many of theseschemes has been to disrupt pedestrian movement and toerode the diversity and vitality that make town centreswork. Many of these schemes are now obsolete and aredue for redevelopment.

Because of political and social pressure rather thaninvestor demand, mixed use has been adopted as the newplanning standard, aimed at revitalising city centres andsecuring broader community benefits such ascontributions to transport, infrastructure and affordablehousing.

One of the things that makes mixed use quite complex isthe considerable separation of residential and commercialexpertise involved in design, construction, marketing andinvestment. In some cases, different design teams may beengaged to design the different elements. Because of thelack of shared knowledge, opportunities on schemes toadd value can be missed, and projects can fall short oftheir objectives.

When planning mixed-use schemes, the following issueswill have a substantial influence on the development mixand the initial layouts of the development:

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• Size of the scheme. Retail schemes need to belarge to achieve a critical mass, and mixed use ismuch easier to co-locate on larger schemes, whichallow better separation of uses.

• Separation of uses. In larger schemes, the

preference is to separate uses vertically indifferent buildings. In these schemes, vibrancy isprovided by proximity of uses, and also by activemanagement. This approach works well withmixed tenures in residential schemes. Theadvantages of this approach include the avoidanceof the need to physically isolate differentoccupiers through design and construction andthe easier packaging of the development forinvestment. Separation of uses horizontally in asingle building enables the achievement of higherdensities by combining high-value ground-leveluses such as retail with residential, which securesvalue from building height. Horizontal separationis generally the only option available on smallerschemes where a mixed use such as ground-floorretail units might be imposed as a planningrequirement.

• Influence of the primary use. Retail andresidential have some fundamentally differentspace planning and layout needs and the main useand source of value should determine the basicdesign parameters. A retail-led scheme will needto maximise rents by maximising the extent of theactive frontage, and ensuring that the design,

orientation and permeability of the scheme create‘retail routes’ for potential shoppers. A residentialscheme in a similar location will aim to exploitviews for value and will also seek to increaseprivacy and calm by encouraging pedestrians tomove around rather than through the scheme. Formost retailers, this effect would be disastrous.Similarly, the retail mix should be carefullyconsidered. On larger schemes, the opportunitymay be to address a lack of deep medium-sizedunits aimed at providing high-quality space forhigh-street multiples. However, on a residential-led scheme, local demand for retail might supportsmaller convenience stores rather than larger unitsfor restaurants and retail chains that are popularwith institutional investors.

Value drivers for retail and residen tial –getting the mix rightLocation, location, location is the mantra for both retailersand residential. Town centres provide the convenienceand vibrancy that certain groups of residents value andthe critical mass of shoppers upon which retail absolutelydepends. Retail and residential also benefit greatly fromthe enhanced public transport focused in city centres,from central facilities such as parking and service yardsand from secure, managed environments.

Thereafter, the priorities for each use diverge. For retaildevelopments, the main issues include:

• Permeability and footfall.Retail centres dependin exploiting existing and new pedestrian flows todirect shoppers to their tenants. In modern retail

design, which is moving away from self-contained,covered malls, the on-street active frontage iscritical to maximise rental values, so it is importantto carefully locate and to minimise the number ofaccess points and service entrances required toserve to residential uses on floors above.

• Retail mix.This is all about providing a range ofunits to attract retailers and to support ‘multi-mode’ shopping. The driver is the need to providea range of large and small units to attract high-street multiples, niche retailers and smaller unitsfor one-off stores, which give a scheme characterand individuality. Leisure is increasingly a key partof the mix, aiming to extend the operating hoursof a scheme. However, depending on the tenant,the incorporation of leisure into a schemeintroduces a whole new set of requirementsconcerning servicing, acoustic treatments andwider impacts on other uses.

• Preserving investment value. Retail units aretypically targeted at the institutional investmentmarket and are generally let on leases of 10 to 15years. One of the concerns of mixed use is that thedifferent lease and ownership arrangements forretail and residential might get in the way of beingable to refurbish and reconfigure the retail units tomeet future tenant needs to support rentalgrowth. In order to provide long-term flexibility,units need to be capable of reconfiguration.Provision for the inclusion of mezzanines, throughincreased head height and strengthenedstructures, will also differentiate units and providelong-term flexibility.

• Sightlines and visibility. Whether in malls orhigh streets, retailers need to compete forattention in a visually crowded environment.Feature entrances, signage, canopies and towersare key elements of design strategies to drawshoppers to a scheme, which may affect theattraction and value of some residential units.

• Access and servicing. The location and design ofservice yards is important in terms of minimisingthe impact of deliveries to residents. Withmechanical plant such as DX units located onroofs or in back-of-house areas, care also needs tobe taken in acoustic design and access formaintenance. In order to minimise loss of salesareas, designers may also seek to use access stairsto residential as part of the means-of-escapestrategy.

• Resilient operation. Mixed-use schemes canface risks associated with the routing of residential

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services, particularly drainage, through retailtenant areas. Failure in these services could have asubstantial impact on high turnover businessessuch as food retail if an incident resulted in thetemporary loss of sales floor area. Protectedservice routes can be created in transferstructures, but add substantial costs of theresidential shell as they have to be sized to permitaccess for maintenance, resulting in increasedbuilding height and volume.

Residential design priorities also concern securing themaximum value from the development. In a market withstatic prices, optimum specification levels anddevelopment efficiencies, together with the avoidance ofunnecessary costs, have become ever more critical.Substantial issues that mixed-use developers will beconcerned with include:

• Efficiency. Residential development efficiency isprimarily concerned with optimum unit size, net-to-gross ratio and wall-to-floor ratios. Ideally sizedresidential units may not match the depth of theretail units, requiring transfer structures, setbacksor a ‘wrap around’ style scheme focused on apodium or courtya