What ‘quality’ really means in demolition contracts

Image: Adobe Stock

Simplify the Scope

A few years ago, I entered into a ‘deal’ with my teenager by SMS saying I would pay him £5 to tidy his bedroom “to my standards”.

I knew that if I merely asked him to clean his room, then he would be able to argue that his opinion of clean was all that was needed!

However, when it comes to demolition and recycling contracts, quality standards can present some real difficulties. Do we define quality by inputs or outcomes?

Or can we leave it to the opinion of an individual who should be scrupulously fair and independent, but who may be biased towards one party or unnecessarily pernickety?

Defining the Quality Needed

Every single contract I have ever read in the last 30 years has included a heady mix of differing obligations relating to performance and quality.

In the legal terms, there will be some attempt to create an overarching generic standard, as well as a fallback provision such as allowing a contract administrator’s opinion to determine whether the works comply with the contract.

Attached (annexed) to the legal terms, the works documents will provide technical and functional specifications such as method statements, acceptable noise and vibration levels, standards of de-contamination, rates for recycling specific materials and the overall end goal of the project.

Input Vs Output Standards

Unless it is based on the opinion of an individual, each quality or performance standard is either input-based or output-based. The classic example across common law jurisdictions is the difference between reasonable skill and care, and fitness for purpose.

‘Reasonable skill and care’ is an input standard. As long as you achieve that standard (which is average competence) then it doesn’t matter what the end product is.

This standard is typically used for construction, demolition, and recycling projects, as well as services. It is a low bar and the level of competence that insurance policies will cover (breach of which is often – inaccurately if we are being legal about this – referred to as ‘negligence’).

The only problem is that clients aren’t really interested in your labour and skills – they care about the end result.

‘Fitness for purpose’ is an output standard. It doesn’t matter how skilled you are, if the end product is not fit for the purposes described in the contract then you are at fault.

Outcome-based contracts are very common in the engineering sector – it doesn’t matter how aesthetically pleasing a cleared site is if there are contaminants below the ground level. In demolition, take the Green Square Complex project in North Carolina.

It achieved a 98.8% recycling rate by setting clear outcome targets, including detailed waste tracking. No guesswork, no opinions – just an agreed standard and measured result.

However, this functional approach is balanced with:

• clear objective measures for completion
• tests against those measures (off-site, during construction, before and after completion)
• limits on the contractor’s liability, to require claims to be brought soon after completion and to protect the contractor with financial caps
• remedies for failure to meet those tests – from rejection and termination, to resolving defects or paying agreed damages
• precise purposes for the works.

An increasingly common approach, but in my view misguided and risky for contractors, is to take an engineering standard like fitness for purpose and lob it (like a hand grenade) into a construction or demolition contract, without the accompanying safeguards.

When Standards Aren’t Clear

What if the contract does not mention a specific standard? What if it merely refers to a ‘clean site’ without any clarification of what that means?

The UK’s National Federation of Demolition Contractors (NFDC) offers guidance and model clauses that define what ‘clear site’ means – including removal of all hazardous materials, foundations, slabs and debris, and returning the ground to a specified condition.

On the flip side, many online contract platforms have templates which do not prompt the parties to define scope or quality with precision.

Who Decides if Quality is Met?

If there is no other description of what is required, then we have to rely on a contract administrator or client’s agent.

Their role is to determine whether, in their reasonable opinion, acting independently of their client, they think the works have met the requirements of the contract as a whole.

For the purposes of this article, we need to put aside worries such as whether they have read the whole contract (the simpler it is, the more likely that is), whether the contract has clear measures, whether they have the competence or technical skills to assess those requirements, and whether they are acting reasonably and independently. They are acting as arbiter of that decision and their opinion is the only one that matters.

Coming back to my opening story, did my son trust me to be fair or did he expect me to get really granular on anything which might remotely be referred to as ‘untidy’ in his room?

He trusted me as I was known to follow through on my promises – for better or for worse – and always paid when they’d done most of what I’d asked.

Unlike me, the Arcadis Global Disputes Reports consistently show that contract administrators do not apply the contract terms properly, leading to disputes.

It’s one of the top three causes of construction conflict globally – right up there with poorly drafted or incomplete contracts.

What the Client Really Wants: The End, Not the Effort

As I said on The Contract Teardown podcast, ‘The client doesn’t care how much competence you have or how much effort you put in; they just want the result to match their expectations at the end of the day.’

When we want to define client expectations we need an output standard. Often the best way to describe the quality required is not some generic legal phrase or based on the opinion of an individual.

Quality standards should not be based on commercial drivers or legal niceties. Quality standards should be based on a technical view of what the site will be used for once the demolition is complete.

Take a typical urban demolition project near a school or hospital. The ‘quality’ of the result might mean ultra-low dust levels during works, noise below a certain decibel level, and reinstatement of pedestrian routes by a fixed date.

Each of those needs defining upfront – not left to assumption, or worse, dispute resolution.

Quality is too important to be left to the legal team to define. It should be defined by the client and contractor together, to describe precisely what success looks like for this project and this site.

About the author Based in the UK, Sarah Fox is a contract expert with over 30 years’ experience in the construction and engineering sectors. A former lawyer, she works with both UK and international clients and is an associate lecturer at the University of Salford. Sarah specialises in creating concise, user-friendly contracts that promote clarity and reduce disputes. She is also the author of several books on construction law, including the ground-breaking industry title Small Works Contracts in Just 500 Words.