The design element of a contract represents one of the best opportunities for a contractor to increase margins on a project. It also represents one of the riskiest areas where you can lose margin. Ever been hit by a Stealth CDP (Contractor’s Design Portion)? If you have, there’s a good chance you’ve lost a decent chunk of profit on your project for no reason other than you missed some elements of design that were “stealthily” slipped under the carpet and into your contract without you noticing. This article is all about how to identify and protect your business from Stealth CDPs.
What is a Stealth CDP?
At tender, in the preliminaries document, the contract will detail the elements of work that the Contractor should allow for as CDP, similar to the example in the image below:
You’ll have been provided a full spec and drawings and within this information is a Stealth CDP – buried within the details there is reference to an element of work that will say ‘design by contractor’, but it is not identified in the preliminaries with the other CDP components which have been correctly referenced in the Contractor’s Design Portion category. Something similar to the example below:
You typically see these Stealth CDPs in contracts such as the JCT Intermediate Building Contract with contractor’s design (ICD), where the Main Contractor is already obliged to carry out CDP on some aspects of the build. Whilst it’s less common, you do sometimes see them in other contracts without any design responsibility such as the JCT Standard Building Contract.
Normally, these Stealth CDP elements will be something little and fiddly which the architect lacks experience and knowledge on, so they need specialist input. For example, you are halfway through the project, you submit an RFI for the acoustic louvre details so you can procure and provide fabrication drawings. The architect then responds to you that it’s contractors design as per the specification, so you need to provide the design… Here the architect is using what they think is their ‘get out of jail free card’.
The architect includes CDP to absolve themselves of risks and keep a competitive edge on their fees. It’s a lot of work (and responsibility) for the architect to provide details and information on systems and certain construction elements which they may lack expertise on, so by putting design responsibility within a specification document, there appears to be an element of cover should an issue regarding design responsibility occur during the project.
The Effects of Stealth CDPs
Co-ordination costs, programme costs, subcontractor costs are all impacted by Stealth CDPs. If you find that you’re responsible for elements that you were previously unaware of, you need to organise design meetings, procurement lead-in times may increase due to the drawing approval process, and you could suffer increased costs from your supply chain.
When pricing the works you would typically add an extra 5-10% on to each CDP package. So if you’ve not allowed for this, you’re immediately 5-10% down on the package before you start!
Defence against a Stealth CDP
If you have been hit with these stealth CDPs and you’ve signed up to the contract, you can still quash these CDPs by the Order of Precedence in the contract. If the CDP is not referred to in the heads of terms under CDP items then you are not contractually obligated to take responsibility for the design portion of these works. So, in this situation, you’re entitled to push back. You can state that your company is not responsible for the design of the element in question because you didn’t agree to it, and if they refer to the presence of such CDPs in the specifications, you can raise the point of the Order of Precedence.
We’re not responsible for this design but we’re happy to help you try to resource it.
By taking this approach, you’re trying to be proactive and amicably move the relationship and situation forward without suffering the costs and responsibility that should lie with the design team. Put them in contact with a relevant specialist and your risks, programme and costs are protected, whilst maintaining the relationship with the project team.
CDPs, no matter how big or small, are more costly in terms of programme and co-ordination when compared to a traditional package. You shouldn’t be taking on this ownership unless you have allowed for the extra 5-10% in your original offer.