Contractors' risk in Design, Novate and Construct contracts

Abstract

The Design, Novate and Construct (DN&C) system is becoming an increasingly popular method of construction procurement. In the DN&C system, the contractual rights and liabilities of the design team are transferred to the contractor once appointed. This makes DN&C a very attractive procurement option for the client but leaves contractors with the problem of identifying and managing the extra risks involved. The aim of this paper is to identify these risks. The results are described of a series of interviews with construction projects managers experienced in DN&C work. These show that the major risks to contractors in DN&C are concerned with (i) the novated design team's ability to perform, (ii) the lack of design team fees allocated to the post-novation phase, (iii) the working relationship with the novated design team, and (iv) the timing of the novation. It was also found that contractors had insufficient time during the bid preparation period to check the design produced by the novated design team. © 2001 Elsevier Science Ltd. All rights reserved.