Legal

Lessons from Fosters’ Heathrow hotel debacle

26 October 2017 | By Stephen Homer, Lianne Edwards

Stephen Homer and Lianne Edwards of Ashfords LLP, who acted for Riva in its successful High Court battle with Foster + Partners, explain the implications of the ruling.

The High Court recently ruled on a case concerning the duties of an architect – Foster + Partners – regarding budgetary constraints on a project, which offers much food for thought for designers and architects.

Judgment was given by Mr Justice Peter Fraser on 18 October 2017 in the case of Riva Properties Limited, Riva Bowl Ltd, Riva Bowl LLP and Wellstone Management (“Riva”) against Foster + Partners.

The case concerned the world famous architecture practice and its duty to design a five-star hotel in line with a budget indicated by the client, Riva.

The design in question included 13 floors, seven below ground, 600 bedrooms, conferencing and leisure facilities, a bowling alley and parking set out in a village theme at a site near Heathrow.

Riva informed Fosters that its budget was £70m, later increased to £100m. However, when Fosters’ design was costed, its build cost was estimated at £195m, more than double Riva’s original budget.

The design was carried out in 2007 and early 2008 under a bespoke appointment which incorporated RIBA Stages A – L – equivalent to the current RIBA work stages 0 - 6.

Riva alleged that Fosters had failed to carry out RIBA Stages A and B as Fosters had failed to consider Riva’s budget, and had designed a hotel that would cost more than twice its original intended budget to build. As a result of the build costs, the hotel never obtained development finance and was not built.

“Justice Fraser held that designing a project to match the constraint of budget is not synonymous with providing advice on costs and therefore an architect’s duty of care extended to consideration of a budget, irrespective of the appointment of a quantity surveyor.”

In his judgment, Justice Fraser noted that RIBA Stage A required Fosters to “identify requirements and possible constraints" and Stage B required Fosters to "confirm key requirements and constraints”.

He considered that “a client’s budget for a project is plainly a constraint”. In the circumstances, Justice Fraser considered that an architect must “establish whether there was a budget or not at an early stage, as that is the only way that all of the key requirements and constraints could have been identified”.

Justice Fraser further considered that the independent appointment of a quantity surveyor by the client does not affect the extent of a designer’s duty to consider the budget.

He held that designing a project to match the constraint of budget is not synonymous with providing advice on costs and therefore an architect’s duty of care extended to consideration of a budget, irrespective of the appointment of a quantity surveyor. 

In the circumstances, it was clear that Fosters was required to identify any constraints and design the project to match the constraint of budget. However, the architecture practice appeared to have jumped straight to Stage C and designed without any thought for costs. 

In addition to this main breach, further breaches were alleged against Fosters in respect of advice given by Fosters that the design could be value engineered from £195m to £100m. It was alleged Fosters failed to warn Riva that the design could not be value engineered to such an extent.

Given the fact it was so “blindingly obvious” that the Fosters design could not be value-engineered to £100m, Justice Fraser found that Fosters was in breach of contract for positively advising it could be value engineered or, having been made aware that the claimants intended to value engineer the design to £100m, failing to warn this was not possible.

Although Riva was not successful in claiming lost profits for reasons of causation, as a result of the breaches established, Justice Fraser awarded the Claimants £3,604,694 plus interest – the estimated cost to obtain a new hotel design and planning permission.

This case serves as a warning to designers that they cannot ignore the client’s budget. Cost and budget are a key constraint and should always be identified and considered when designing any project, even when the provision of cost advice is expressly excluded from the designer’s obligations.

This article is co-authored by Stephen Homer and Lianne Edwards of Ashfords LLP, which acted for the claimants

Comments

I find it hard to believe that Foster's would make such an incredible error. You would think procedures would be an automatic response after all those professional years.

Sheila, 26 October 2017

What a refreshing judgement by Justice Fraser. Blindingly obvious, yes, but in my experience keeping the design within budget is not a skill universally practiced by architects.

As a client, often I have found architects get far too absorbed in their design to pay attention to affordability.

Value engineering is not a technique to slash massive cost excesses. A good design must meet the brief and be affordable.

David Kearney, 26 October 2017

In my experience, Architects rarely have any idea of build cost.

Richard Moore. MCIOB, 26 October 2017

Ihave always found that architects have not got any idea on the cost of their design but in light of this rulling they maybe should have or employ the services of a cost advisor. Also the cost of almost £200 million for 600 bedrroms seems very excessive even for a 5 star hotel?

Keith Barclay, 26 October 2017

I have to agree with two of the previous correspondents but I am surprised this occurred with a commercial client where they are usually more careful.

The Public sector is quite different. 30 years ago I worked in Metro Borough and I am reminded of something our Departmental Director, himself an architect, said at a Management meeting. Addressing the performance of the architectural division and requesting improvement he told them,

"You can build what you like, how you like and if you overspend there is no comeback except a bit of moaning in a Council Committee. If you don't think that's a good environment to work in try it outside.”

Edward Browning MCIOB, 26 October 2017

Architects are so far removed from actual costs it’s embarrasing.
Why don’t they stop using old rates and start testing the market themselves. Instead of waiting until the contractor is involved and the reality is known.
But of course it’s always the client who pays!! And the architect being paid more for VE.?!!

Rob Metcalfe, 26 October 2017

Blinding arrogance on Foster+Parner's part, in my very humble opinion. Every rule on risk management was broken not because of incompetence- Foster+Partners are very competent architects- but because they assumed they did not need to pay attention to client's wishes.

Andrew Gibb FCIOB RIBA MAPM LEED AP, 27 October 2017

I think it should incumbent upon the designers to engage an independent cost consultant when they are directed to design to a fixed budget objective. QS personnel need to be part of the design process from concept to bid stage rather than the usual process of the client engaging the QS as a final rationalization of a completed (or nearly so) design. A review too late in the game is problematic in that it is difficult to reign in the momentum that the project has gained, and the cost of redesign is excessive at that point.

John Spinelli, 27 October 2017

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