The life sciences sector has long been associated with innovation and the introduction of new technologies. This goes hand-in-hand with needing modern, sophisticated facilities for the purpose of developing and/or manufacturing of drugs and medical paraphernalia.
Due to the life sciences being historically focussed on certain popular hubs in the UK, there is often as much demand for re-fit as there is for dedicated life science buildings. Even where new-build is preferred, the generally agreed position is that the external structure is secondary to the internal fit-out, where ensuring key deliverables such as cleanroom environments are of paramount importance.
Whether a new-build or re-purposing of existing stock, fit out works come with several potential pitfalls and these can be exacerbated if certain issues are not thought about until last minute or worse, after a problem has arisen. In the latter this often necessitates a scramble to seek agreement, and put the correct documentation in place, usually resulting in an increase in costs and loss of goodwill.
To help parties planning to embark on fit out works we have listed our “top ten” recurring issues, which should be considered by any party intending to re-fit existing facilities or procure brand new ones.
1. Method of procurement
The method of procurement you choose will impact on the final cost of the fit out works as well as the time taken to complete them. It will also dictate the level of control you have over the design and finish of the final interiors. Should you go for design and build, conventional or a more nuanced approach?
At one end of the spectrum, you have the option of putting all decision making (and therefore risk) on the contractor, but life sciences is an area where the standard market offering for commercial space, even from those contractors experienced in this sector, may not suffice. The extremely specific environmental and technological requirements of the end users of the facility may require you to take a more conventional approach where you not only want to set out your requirements, but control how these will be achieved. We can advise you on the pros and cons of the various options available.
2. Forms of contract/contract amendments/risk and responsibility
Many standard forms of contract do not cater specifically for the fit out scenario and the practical realities of the risk and responsibilities found in fit out works (including insurance obligations). This is especially true if there are third party interests in the property. We can help you make the necessary changes to the contracts so that the risk is properly managed.
3. Time for completion/Liquidated damages
Consideration needs to be given not only to your losses in the event of a delay, but also any liabilities you may have under any third party agreements (i.e. Agreement for Lease, Licence for Alterations or funding agreements). Liquidated damages are not a ‘one size fits all’ solution, and such clauses need to be carefully considered and tailored to fit your particular requirements.
4. Insurance requirements
Care needs to be taken to clarify who is responsible for insuring the works and/or the existing structure. The goal is that there should be no gaps in the cover (unless this is a deliberate commercial choice), so you are not left carrying an uninsured risk, or barred from claiming under an insurance policy you were expecting to protect you. Assumptions are often made by parties that they will be secured under another’s policy, but due to the inclusion of loose wording or a failure to check underlying documents in advance, a party can be left with no legal redress.
5. Design/dealing with changes
Who is to have control of the design? Could there be design changes during the progress of the fit out works? Are there multiple parties involved, in which case who has the job of co-ordinating the various inputs? Without adequate safeguards in place, you may find that you end up with a design that does not meet your needs and/or incurring a high cost for any changes.
6. Programme/sectional completion/phased occupation
Programme is often a key issue for an employer. Sectional completion and/or phased occupation (wherein selected parts of the works may start to be used while others parts are still being worked on) may be of benefit in allowing you to derive use of the a site before all of the fit out works have been completed. However, taking occupation of part of a construction site before completion of the whole has a number of risks due to the often unforeseen legal implications of early use without proper legal underpinning to allow this. This can come as a nasty shock to both employer and contractor if the relationship comes under strain and early use has arisen. We can help you to identify and manage that risk.
7. Defects in existing areas/shell and core
If converting an existing property, ask yourself who is to be responsible for remedying existing defects? What control do you have over the timing of remedial works and/or the impact this may have on the fit out works/use of the site? What checks have been undertaken to the property to identify these, and who can bring a claim if the reports are themselves defective?
8. Payment regime
The Housing Grants Construction and Regeneration Act 1996 (as amended) requires strict procedures to be followed by employers when dealing with payments to contractors and consultants. The consequences of failure by an employer to comply with the detail of the Act can be severe. We will make sure you and your team are fully aware of the processes and provide you with the necessary pro forma documents.
9. Design warranties and/or product guarantees
What design warranties and/or product guarantees may be required? Do you have the benefit of these? What is their scope and for how long do they last? Are you buying and installing modular pieces that are being manufactured off site?
All these issues are important if a sophisticated plant is being installed. Consider whether redundancy has been built into the contractual matrix so that the employer is not wholly dependent on the contractor to foot the bill of resolving any defects, given the high insolvency risk rate associated with the construction sector.
10. Scope of fit out
You will need to be careful to clarify up front what will constitute the fit out works, whether any of these are works to benefit another party such as a Landlord, and whether you may start the fit out works prior to the completion of any other works taking place (such as shell and core). A failure to agree the scope of the works at the beginning can leave you with a reduced period for carrying out your fit out works along with increased costs.
What should I take away from this article?
Before engaging in any fit out works an employer should always keep the above ten principles in mind. Giving proper thought as to how the works will be carried out, and having the correct documentation in place, will ensure the works are completed to the high standard required and hopefully on budget and to time. It may also help avoid any lengthy disputes. If any disputes do arise, having the appropriate contracts in place will help to protect your position.
Our multi-disciplinary life sciences team has extensive experience advising on this area. If you have any questions on the above, or if you are considering undertaking fit out works or have questions about an existing or completed fit out project, please contact one of our team who would be happy to help.
Gwilym Evans