Increasingly, the scale and complexity of projects are compelling practices in the same discipline to work jointly, pooling their resources to deliver the expertise that the client requires. This may be particularly so in the case of, for example, a PPP that you have been awarded, where you don’t necessarily have enough personnel to staff the required services in the short term, but don’t have the need to take on more staff in the longer term.
Different legal structures are available for joint work, all of which have their benefits and disadvantages. Some of the common industry structures of working with others include:
- independent secondary consultants;
- joint ventures (incorporated and unincorporated);
- working in association.
Consultants often like working as secondary independent consultants where the client will sign separate consultancy agreements with each practice, with separate scope of services. Each practice will be liable for its own work, with no liability for the other practice’s. However, this structure works best when each practice has completely separate areas of work, for instance they are designing separate buildings within the one complex. If, they do need to work jointly, then this structure will complicate issues like variation claims and liability for defects. For this reason (amongst others), clients may insist on other types of structures .
Working as a lead consultant and sub-consultant is another option. Although this simplifies the legal relationships and this structure is often preferred by clients, in effect, the lead consultant becomes liable (and take on the risk) to the client for the sub-consultant’s work as well as its own.
Another alternative would be to work together in a joint venture. A joint venture is a project which two or more practices undertake in common. The scope of services may be completely divided between each practice, or the same work may be undertaken together. A joint venture may be incorporated (where the two or more practices create a specific joint venture company to undertake responsibility for providing the services) or unincorporated.
While “architects in association” is an industry term commonly used by the profession for working together, it is not a structure which is recognised at law. If you are working “in association” with another practice, your legal relationship will have to take the form of a joint venture, a sub-consultancy or independent secondary consultants.
No matter which structure you choose, each will have different and varying implications for risk and for professional indemnity insurance. The legal structure chosen will also have liability and tax implications and so legal and accounting advice should be sought.
If you would like to know more about various structures of working with another practice, the pros and cons of each and the impacts on your professional indemnity insurance , please join us for our upcoming webinar Working Jointly – Responsibilities and Risks on 1 November. Please go to our website www.informedprofessionals.com.au/events for more details and to register.