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04/09/19 – Novation: A procurement model in the spotlight

The industry is talking about novation.

A ‘design and construct’ procurement model where the consultants are novated to the builder has become commonplace on many commercial construction projects. How this project delivery model may be impacting project outcomes – both positively and negatively – has become a topic of much discussion.

Novation was the topic of our August webinar – Understanding Novation – and is also the subject of the recently released Australian Institute of Architects paper – The Benefits and Challenges of Novation for Architects (Victoria).

The findings of the survey on novation conducted by the Institute of Architects make for interesting reading. The Institute received responses from 71 architectural practices in Victoria (263 nationally), predominately large practices with greater than 51 employees, who between them delivered 158 projects under a ‘design and construct’ with novation procurement model between 2009 and 2019.

When considering the benefits and challenges of novation, the Institute reports that risk was the main ‘challenge’ mentioned by respondents. Whilst risk was also reported by some respondents as a ‘benefit’ of novation, that benefit was gained by clients/developers (and financiers) who were able to shift risk to another party through the process of novation.

Respondents perceived ‘risk’ in:
• consultancy agreements which impose onerous obligations but without appropriate authority to advise or instruct;
• an inability to properly fulfil their duties due to limited access to information;
• being instructed by builders to change documentation or details that they do not recommend;
• being prevented from undertaking comprehensive inspections due to builders prohibiting access; and
• being required to take on more responsibility for other consultants appointed by the contractor.

A summary of the Institute’s finding on the benefits/challenges of novation is set out in following table extracted from the report:

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Source: ‘The Benefits and Challenges of Novation for Architects – Victoria’ (page 6),Australian Institute of Architects, August 2019

The Institute has indicated that the survey of its members is just the start of a broader research and consultation process on this topic, with a view to improving procurement processes and project outcomes.

The Institute report can be found at: https://www.architecture.com.au/wp-content/uploads/Australian-Institute-of-Architects_Novation-Survey_Victoria-2019.pdf

If you interested in learning more about novation, the recording of our webinar – Understanding Novation is now available on our online learning platform: https://cpd.informedprofessionals.com.au/coursecart/viewitem/143

 

Natalie Sullivan
Risk Manager – NSW

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