You asked (NCE 20 July) 'Are brownfield clients too risk averse'? I read John Navaratnam's defence of English Partnerships' stance with a degree of incredulity.
First Navaratnam states: 'There is no difference in the level of risk taken on (by consultants designing remediation schemes compared with, say, their work on bridge or tunnel projects)'. Then in the next breath he says that '. . . insurance companies normally impose a limit on the cover available'.
Why do they do that?
Because there is more risk attached to brownfield remediation.
Insurance companies know about the identification and management of risk and they charge for, and limit, cover accordingly. Which is why consultants are unable to get the high levels of PI cover we would all like.
EP is still placing remediation contracts with consultants, none of whom can get the PI cover to match EP's conditions of contract. Many practices are unwillingly to contract for something they cannot get PI cover for, so the work is let to those consultants who are willing to take the excess risk themselves.
I'm sure that's what John Navaratnam would say should happen. Let the consultants 'put their money where their mouths are'. But this is also where John's stance has the potential to fall down around his ears.
When a project goes horribly wrong and EP takes the consultant to court and wins a substantial claim for professional negligence, only part of it will be covered by the consultant's PI. The smaller or less financially sound consultants will not have the money in the bank to cover the excess. They'll have to file for bankruptcy to protect themselves and, hey presto, EP is left carrying the bill.
Or can John state that EP always ensures that any consultant it appoints has the £10m-£30m in the bank to cover potential claims? EP would only be placing contracts with one or two consultants if it did.
Risk should lie with the party best able to manage it. That has to be with clients such as EP.
Consultants could go out and try to buy extra cover in the market. But will the available margins on EP work cover that cost? No, it is very much into the cheapest bid wins, no matter what it may publicly claim. And I doubt that consultants would be able to buy project specific contamination insurance anyway. You can buy it for the whole project, but not specific elements.
Surely EP is in a better commercial position to buy this insurance cover and wrap it up with its other requirements?
EP owns these brownfield sites, and their incumbent assets and liabilities. Indeed, remediating them is its raison d'etre. EP should stop abdicating its responsibilities.
Paul J Murphy (F), 43 Rookfield Avenue, Sale, Cheshire M33 2BQ