This article examines contract and procurement risks associated with engineered facade in particular curtain wall system and cladding system that are generally used for high rise commercial buildings. Whilst building facade is commonly identified as one of the trades under architectural and builders works, it exhibits certain unique characteristics that elevate its risks profile considerably. Firstly, unlike regular architectural finishes that could be replaced multiple times within the lifecycle of a building, facade system typically last as long as the design lifespan of the building. It is uncommon for the building envelope system to be replaced in its entirety as part of the building maintenance plan. Therefore, most building owners would require the main contractor and its facade nominated subcontractor to jointly provide deed of warranty that could last as along as 12 years. Whilst such duration is much longer than that of conventional architectural products, it is still significantly shorter than the design lifespan of any building. Secondly, in cases where defects are found in the facade system it does not just implicate the owner and the occupants of the building concerned but also third parties such as members of the public in case of falling facade panels. Therefore any design and/or workmanship defect can have a disastrous and enduring effect, beyond pure economic losses. In terms of rectification of fallen facade panels, it goes beyond mere replacement and installation of new panels at affected areas. This is because the failure of selected panels may indicate a systemic problem with the building facade as a whole, therefore could involve a thorough review and inspection to other facade areas leading to rectification and replacement of other parts of the building enclosure. All these rectification works are likely to be carried out under heightened authority and/or media scrutiny, due to the possible public health and safety hazard concerns. This makes any settlement between disputing parties more challenging. Most of these issues are not thoroughly considered at the point when the facade system is first awarded to the contractor concerned. 

Given some of the unique characteristics highlighted above, one would expect that the contract and procurement risks are approached differently both during tender and construction period. However in reality, the subcontract standard conditions for facade system is usually not drafted in a bespoke manner to cater to its unique characteristics. Likewise the tender process leading to the award of facade system is not significantly different from other conventional architectural trades. These anecdotal observations suggest that there could be a dichotomy in risks perception between procurement phase as compared to the maintenance phase. The issues raised in this article hopefully will assist in bridging these risks perception gaps. In the next few sections of this article, several pertinent issues will be examined including the engineering and technical characteristics of facade system that contribute to its risks profile. These in turn raises the question of what would be the appropriate procurement pathway for facade system. The conventional approach of awarding facade system through a nominated subcontract may have inadvertently contributed to the prevailing issues. Ultimately, the Employer’s ability to truly benefit from any warranty beyond the conventional maintenance period is dependent on the contracting arrangement involved. 

Unique Characteristics Of Curtain Wall System And Facade Cladding

A curtain wall system is a form of building enclosure which comprises glass panels and supporting metal frames that is a prominent architectural feature commonly used for skyscraper that has become ubiquitous in city skyline. These glass panels spanning from floor to ceiling level enhances one’s sense of internal volume and space. Engineering wise it is designed to support its own weight as well as to manage any environmental forces that it may be subjected to e.g. wind load, air pressure differential, vibrations from adjacent construction sites, seismic activities etc. Apart from these structural loading considerations, curtain wall system plays a significant role in regulating the overall thermal transfer value which is a measure of a building’s heat gain through its envelope system. Therefore an appropriately designed curtain wall system should ideally allow natural lighting into the building whilst providing heat insulation, so as to reduce the demand for electricity to cool the interior spaces. Interestingly whilst curtain wall system is traditionally an architectural trade, there are various inter disciplinary elements of consideration in its design such as structural engineering as well as mechanical and electrical engineering. Therefore it is not uncommon to find that the Employer may engage a separate facade engineering firm as part of its team of consultants to manage its project. What is worth noting however, is that the facade engineering consultant does not usually provide a prescriptive and all encompassing design drawings to the contractor. The contractor is usually required to demonstrate how it proposes to adhere to certain performance based requirements issued by the facade engineer so as to address various architectural, structural, mechanical and electrical concerns. In this regard, most facade nominated subcontract are procured via design and build or partial design and build. The intricacies and challenges arising from such procurement pathway will be further elaborated in the next section of this article.

As mentioned earlier, there are various competing elements of design and engineering requirements that spans across multiple disciplines in most facade systems. From a structural perspective, the curtain wall system is required to be light weight and yet sturdy so as to reduce the dead load it imposes on the building structural system. Likewise, a thick and bulky glass panel and metal framing curtain wall system is not favoured architecturally due to aesthetic and space utilisation consideration. On the other hand, it is rather challenging to have on one hand a light weight and lean curtain wall system and yet provide a good heat insulation, water tightness and overall thermal properties. Therefore the competitive edge of facade contractors is in their proprietary designs that are capable of addressing some of these competing performance requirements. These proprietary design are usually protected in terms of intellectual property rights. In this regard, the principal role of facade engineers engaged by the Employer is to provide a professional evaluation and validation of engineering proposals offered by these facade contractors. 

Apart from curtain wall system, cladding system that uses metal or natural stone panels as part of the building envelope share some of the issues raised above. As the facade cladding panels used are fairly large in size and its overall dimensions, the weight of each stone panel may easily exceed 100kg per unit. Therefore the proprietary design offered by the facade contractor’s  installation system include fixing mechanism that can securely anchor the panels into the building’s external reinforced concrete wall. Whilst a cladding system is predominantly an aesthetic feature of a facade system, it shares a similar risk profile to that of a curtain wall system. Any defects  in installation that results in falling of heavy panels from high rise building is no less serious in consequences. 

Procurement Pathway – Reasons Behind Design And Build

The detail design of curtain wall system are mostly carried out by the facade contractors due to the increasingly rigorous performance expectations. This explains why the procurement pathway for curtain wall is either design and build or partial design and build, as alluded to earlier. The facade engineering consultants engaged by the Employer is mainly to provide ‘check and balance’ as the facade contractors carries out its detailed design development. The following paragraph provides a brief explanation on how the transition from ‘stick system’ to ‘unitised system’ for curtain wall have resulted in an increasing adoption of design and build procurement pathway for curtain wall system.

The rigorous performance demands on building facade system meant that the modular curtain wall panels had to be manufactured with precision under controlled and automated environment within a factory or plant. These panels are then subject to factory acceptance tests to ensure that it complies with various requirements such as thermal insulation, water tightness, air permeability as well as structural performance. Thereafter these panels are transported to site for assembly and installation. Such off site fabrication method is also known as a ‘unitised system’. Such fabrication method allows better consistency in quality and is superior to the ‘stick system’. 

Stick system is a relatively traditional but cost effective in situ construction method where various individual structural frame members such as transoms and mullions are installed on site and are subject to application of sealants for water tightness upon insertion of glazing panels. Quality consistency can be challenging under this methodology primarily because much of the on site installation are carried out manually by labourers as opposed to off site automated machineries. There are also limits to which tests could be carried out on the curtain wall system manually assembled and installed on site. 

The commercial incentive for facade contractors to transition to unitised system is the competitive edge that it progressively develops over competitors through its proprietary design. By the same token, there is very limited commercial incentive for facade engineering consultants to assume such design responsibility given the risk reward ratio. In general, the consultancy fee payable does not commensurate with the risk that may entail in case of defective facade design. Whilst Employers generally favour design and build approach which offers single point responsibility, facade system are mostly carried out by subcontractors whom they do not directly contract with. This give rise to a unique conundrum as it relates to the main contractor, which will be elaborated further in the next section of this article. 

Design And Build Subcontract Under Design-Bid-Build Main Contract

As facade systems are fairly niche and specialised, these trades are rarely carried out by general contractors or main contractors. With the help from its team of consultants, the Employer typically tender, negotiate and select the facade contractor directly before instructing the main contractor to enter into a nominated subcontract with the selected facade contractor. The gist of this arrangement is to ensure that the main contractor continue to be wholly responsible for all workmanship related issues under the project, but at the same time allow the Employer to negotiate the best possible commercial deal with the facade contractor concerned. However what if the main contractor is engaged under a traditional procurement pathway of design-bid-build? Such main contractor do not have design responsibility since it is only required to construct strictly based on design provided by the Employer’s designers/engineers. Such traditional procurement arrangement is fairly prevalent in construction of commercial buildings that commonly uses curtain wall as its facade system. As regards commercial building, the Employer is more inclined to be in direct control of its aesthetic and design development in an effort to enhance its real estate value. Therefore, whilst the main contractor may not have a design responsibility under the main contract, it is interestingly now required to be jointly responsible with the facade subcontractor for the curtain wall design upon execution of nominated subcontract. The duration of design responsibility may well exceed the period beyond the finalisation of account under the main contract. This is because most nominated subcontractor for facade system and the main contractor are expected to issue a deed of warranty in favour of the Employer for a considerable period e.g. 12 years commencing from practical completion of the project. Such warranty is usually structured under a joint and several liability, where the main contractor remains on the hook even if the facade subcontractor ceases to be in operation within the period of warranty. The intricacies and challenges under such arrangement will be further elaborated in the next section of this article. 

The commercial incentive available to the main contractor in exchange for undertaking a fairly significant facade system design responsibility is rather limited. When the traditionally procured main contract is awarded, the facade system is usually categorised as ‘Prime Cost’ Sum or PC Sum where the main contractor may include its costs for profit and attendance. The profit is usually expressed as a percentage to the nominated subcontract sum, whilst the attendance is a lump sum amount for general supervision and coordination of such trade under the main contract. The total amount for these provisions is generally within the range of 10% of the PC Sum. At the point when the main contractor provides its profit and attendance for the PC Sum concerned, the details of the facade system design are usually not available. Therefore the costing by the main contractor in this regard is done without thorough appreciation of the specific types of risk that such subcontract may entail. In any case, there are provisions available under the main contract where the instruction for nomination may be reasonably objected by the main contractor. Unfortunately as the design for curtain wall system has yet to be completely developed at the point of nomination, there is very limited basis for the main contractor to raise its objection on technical grounds as it relates to the reliability of the design proposed. 

In addition to the above, the scope of design responsibility for the facade system may not be as clear as it should be. If and when defects arise, it is not immediately clear whether such defects emanate from the facade system itself or the building elements that interfaces with the facade system. Such distinction is important because it implicates the extent to which the main contractor may be liable. Whilst the facade system is generally designed by the facade subcontractor, the building structural system is designed by the consultant structural engineer. By way of illustration, curtain wall systems or cladding systems are usually anchored to an underlying structural substrate e.g. external reinforced concrete walls, beams and/or columns. The structural integrity and performance of the facade panels are heavily influenced by the structural elements that it is anchored to. Any lack of clarity in division of responsibility may give rise to finger pointing problem when the facade system fails. 

Defects Rectification Arrangement Under Deed Of Warranty

As alluded to earlier, a deed of warranty is usually executed by the main contractor and the facade subcontractor in favour of the Employer for a considerable period beyond the completion of the project. As such warranty is normally structured under a joint and several liability arrangement, the main contractor may be left solely liable in case the facade subcontractor ceases to be in operation within the warranty period. This should be taken into consideration even if the main contractor may take comfort from the fact that its facade subcontractor shall provide indemnification on a back to back basis.

The rectification effort often involve various contractual matters beyond the physical effort to make good the defective parts of the facade works. There are various intricacies that may not be obvious at the point when the deed of warranty was executed. By way of example, the Employer may require that a complete survey of the facade system as a whole be carried out beyond the mere replacement of the facade panels in issue. This is on the basis that the facade panels that had fallen may be indicative of an underlying systemic issue with the facade system as a whole. This may lead to dispute over the scope of liability and the cost of rectification. The disputing parties may also need to agree on the engagement of a neutral and mutually acceptable expert or consultancy firm that will ‘certify’ that the rectification works are complete. When parties are already embroiled in dispute, it is often very challenging if not impossible to establish agreement on any related matters. If the facade panels involve natural stones e.g. marbles, granite, there is an additional difficulty in finding replacement panels that matches the aesthetic and visual appearances of the existing facade panels. This is because these stones are extracted from natural quarry as opposed to manufactured in a factory. Whether the replacement panels exhibit the same colour tonality and vein like features as the original marble panels can be extremely subjective particularly if the existing facade panels had already been subject to weather elements for a considerable period of time. The time and cost that the main contractor and subcontractor had to expend to make good the defective work can be extremely unpredictable.

Subcontract Practical Completion On Main Contract Critical Path

In Singapore, whilst the certifications of practical completion of buildings are carried out by the certifier appointed under the contract, there are occasions where such certification is predicated on the contractor obtaining the relevant approvals from statutory authority such as Building And Construction Authority (BCA). As regards engineered facade such as cladding and curtain wall system, the BCA requires that the design for framing and fixing of all engineered facades are submitted for its approval. These facade system installation related approvals are necessary for the BCA’s subsequent issuance of Temporary Occupation Permit (TOP) and Certificate of Statutory Completion (CSC) for the building concerned. Any Qualified Person (QP) making application for TOP and CSC on behalf of building owner must list down the relevant structural plan reference numbers of all the engineered facade on an itemised basis. 

In view of the above, complete installation and approval for facade system is a condition precedent prior to any practical completion. It follows that the facade system is highly likely to be on the project schedule’s critical path. Accordingly, any on site testing to installed curtain wall and facade panels had to be completed in advance prior to practical completion. In fact the integrity of the facade system of operational building is so critical that the BCA requires a periodic facade inspection (PFI) to be carried out every seven years for high rise buildings to prevent deterioration and defects. 

The upshot to the above mentioned sequence of procedural approvals and certification for facade system meant that any delay to facade subcontract works may delay the main contract completion as a whole. Whilst the facade subcontract sum may be a fraction of the main contract sum, any liquidated damages under such subcontract may be equal to the main contract liquidated damages. This presents a very tricky risk reward ratio for facade subcontract works. There is very limited incentive for concessions to be made by the main contractor in favour of the facade subcontractor. This is because any concession given may result in its inability to recover a back to back indemnification from its facade subcontractor if the main contractor is found liable for the full main contract liquidated damages to the Employer.

Conclusion

Contrary to popular belief, risks arising under the contract do not commensurate naturally with the expected reward or profit. Facade subcontract works is probably a good testament to this principle. Having the appropriate balance between risks and reward involves deliberate and active intervention during the procurement and negotiation phase of the project. Part of this intervention requires an in-depth understanding of any practical issues that are often contractually elusive.



Koon Tak Hong Consulting Private Limited