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Tested development: pitfalls of a new build

30 March 2009

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Chartered surveyor

Nick is a director of MacMullen Associates, who specialise in providing project management and development consultancy services. He is a chartered surveyor with more than 18 years of commercial property construction experience, having worked extensively for consultants and developers in the Midlands, and is just completing the handover of a new £2.5m medical centre in Warwick

The prospect of coordinating the construction of a new medical centre can be quite a daunting one for most practice managers, who have a fulltime job running the current practice and may have limited knowledge of what lies ahead.

The development process is one that has, over many decades, found a way of making itself more complicated. As the world becomes more susceptible to litigation, the commercial property and construction industry has developed a tangled web of legal and technical dos and don’ts that can leave the uninitiated losing countless hours of sleep, with the prospect of either being well and truly stitched up or facing a bill for something they thought was someone else’s responsibility.

The success of all development projects relies upon three factors: trust, a sound project team and cast-iron documentation.

Form good working relationships
Most new-build projects involve a private developer. The developer will obtain the planning permission, purchase the site, employ the design team, enter into a lease agreement with either the primary care trust (PCT) or the doctors, employ the contractor to build the property and then, having completed the lease, sell the investment.

All the while, this developer is running up a substantial loan as he/she must also finance the entire project until the proceeds from the investment sale materialise. The developer’s motives are purely financial – it is a naïve practice manager who thinks they will offer any more than the bare minimum.

Practice managers should take a good look at the developer and, to some degree, disregard the glossy brochures and glamorous websites to establish whether they really feel this is someone they can trust.

When rents and returns on properties start to fall and construction prices continue to rise, the developer will be looking to either offset any costs he/she can or pass them on to others. Ultimately, the end user is often the one who finds him/herself in the firing line for this and relationships can rapidly deteriorate. Once those relationships break down, the element of trust is lost and the project becomes a tiresome prospect with little reward at the end.

The quality of the project team will largely determine whether the next 18–24 months of the practice manager’s working life are likely to be pleasant or not. This team will comprise architects, engineers, project managers and the like, all of whom are in the pay of the developer and in hardened times know only too well with whom their allegiances lie.

So who protects the practice manager and the GPs? Depending on the size and complexity of the project, it’s often very wise for the tenant to employ a professional representative, usually a project manager, who will have experience of ensuring the developer complies with their obligations, checks the quality of the work, supervises monthly payments (possibly in respect of tenant-funded fit-out works) and generally monitors the project in the best interests of the tenant.

This can be a very time-consuming process. For example, it can involve checking drawings and specifications, which the practice manager may not have the resources or technical knowledge to undertake. Furthermore, building contracts and lease agreements are complicated documents that contain a host of deadlines, protocols, rights and obligations. These can often lead the untrained into delay situations and arguments, which are best avoided.

Practice managers may think this is a job for the PCT, but from recent experience I have found the PCT simply does not have the time or qualified staff to handle this work. This can leave the practice manager floundering, and to have someone that can lead him though the various pitfalls and procedures that face every tenant can be of immeasurable benefit.

Once the paperwork is signed, often very little can be done to change things without incurring costs. It is critical that practice managers employ a lawyer well-versed with commercial property matters and get a technical representative involved at an early stage.

Appended to the lease agreement will be drawings and specifications, warranties, cost schedules and all manner of detailed documents that not only bind the developer into providing a specific end product but also set out exactly what the PCT and doctors are entitled to receive for their money.

This is the time to negotiate! Once planning is granted, the developer will be keen to agree a quick deal on the back of a brief specification and a handful of planning drawings. The developer will benefit if the tenant doesn’t employ the right consultant to look after their interests, and, given the level of rent the developer is charging, there is likely to be plenty of room for negotiation before he/she starts to talk of walking away.

Key points
From my experience, a number of key design features usually become the main topics of conversation at meetings. The list below is not exhaustive but gives a flavour of what needs to be considered. After all, even the most detailed of building issues can lead to the most protracted of discussions.

  • Room layouts. All too often, architects baulk at having to prepare detailed room layouts, but these are key to getting everything in exactly the right place. As with all building contracts, changing plans generally costs money, and if a height chart or soap dispenser has to be relocated the contractor will seek compensation. Best to get this all on paper long before the contractor actually needs the information for two reasons:
    (i) Individuals can take forever in deciding how they want their particular room to be laid out.
    (ii) Everyone ends up changing their mind about something as the project progresses.
    The architect’s room elevations will go through several revisions as the various staff members see their new workplace coming to fruition and they realise the need to make changes. This is a natural process but one that can leave the practice manger faced with threats of contract over-runs if they do not act decisively within the agreed timescales.
  • Examination lamps. Which product is of adequate quality? Arm length, light intensity, wall or ceiling fixing, positioning relative to couch – these are all matters that need careful deliberation and each doctor will have differing requirements. The specification needs to make provision for these variations.
  • Clinical washbasins and taps. These need to be HTM64-compliant and also meet the particular requirements of each room. Often the PCT’s requirements can be at odds with the more hands-on needs of the practice staff. The GPs should discuss these sorts of issues with their advisers and the PCT before they become fixed in the documents.
  • Security. Locks, swipe-card systems, panic alarms, patient-call systems and intruder alarms all need to be integrated and specified to an exacting standard. Woolly documentation will lead to the developer offering the cheapest system they can get away with, and the tenant will feel conned – not good for relationships.

Other considerations

  • Agree a specific list of duties with your project manager, with whom you should enter into a formal appointment and hold regular meetings to ensure matters are dealt with and budgets are maintained.
  • Don’t sign anything until you are absolutely satisfied with what you are getting. The developer won’t want to spend too much time agreeing the detail before certain phases of the development process have been completed, but that doesn’t stop you raising questions and seeking out the information you need to make informed decisions.
  • Ensure the developer’s site proposals meet with your needs, not theirs. While the PCT will have clear objectives in terms of patient need and location criteria, the nature of the developer’s site, the layout of it and the architect’s vision for the internal arrangements may not suit your specific requirements. Ultimately, you have to live with the building, not the PCT or the developer. This may seem obvious, but if one doctor decides too late that his room is slightly small or faces the wrong aspect, the consequences could be enormously expensive.
  • Attend the developer’s site meetings. They won’t necessarily like it, but if the right to attend these meetings is written into the lease agreement then make sure you take up the opportunity. You will become fully informed as to the progress of the project, and if you are orchestrating voice and data installations or furniture deliveries after completion, you need to know exactly when the handover date will be. By not attending these meetings, you could find that out too late and be lumbered with cancellation costs and the like. Furthermore, site meetings are usually the best way to discuss issues in the open, and if the team has a good working relationship, you may get good advice for free.
  • Forge good associations with the design team. They may not be on your side contractually, but a successful project for all concerned leaves everyone with a feeling of satisfaction and can provide the consultants with recommendations for further work. It’s therefore in their interests to be as helpful as possible, and if project meetings and site visits are enjoyable occasions then practice managers can benefit from more assistance than they might otherwise be entitled to.
  • Agree a precise process for communication and decision-making. Too often, everyone wants to get involved – the more successful projects come about where only one person from each organisation acts as spokesperson. A room full of 20 people will lead to long and frustrating meetings.
  • Agree on dates by when decisions have to be made – the likes of colour schemes and positions of wall sockets can become emotive subjects and lead to frustration for the practice manager – ascertain with the contractor (and get it recorded in the site meeting minutes) when he has to know what colour emulsion to buy.
  • Agree costs before giving instructions for changes or introducing additional fit-out works. Always obtain a written confirmation from the developer that there are no programme implications and make sure that, when seeking quotations, you are given adequate time to make a decision before any project delay may take effect. Project over-runs are hugely expensive and the contractor will be on the lookout for any opportunity to seek compensation for delays, particularly if he is running late as a consequence of his own poor programming or mismanagement. 
  • Finally, leave enough dedicated time each week to work on the project, even if you are employing a technical adviser. There will be periods of low activity and other times when people are pulling you in every direction with vital decisions needing to be made. Plan the process carefully with your adviser, understand the various phases of the development and discuss matters before they become critical. A lack of time will lead to poor decision-making and costly mistakes.

All of this may paint a rather unattractive picture of the development process facing practice managers, but it’s one that can be rewarding and successful if careful preparation is undertaken.

Most practice managers will have to go through the process at least once in their career and many may remark afterwards: “Never again!” For others it may be a challenge they relish, but what everyone will ultimately agree upon is that getting it right the first time leaves you with a delightful feeling of self-satisfaction. Then it’s back to the day job.