Novation agreement in design and build contracts

Abstract

In the current market of Malaysia construction industry and among its players, the term ‘design and build’ is no longer require a proper launch as it has been in the implementation since the late 90’s. However, the term ‘novation agreement’ in the design and build definitely requires a long and detail explanation. This is of course a new exercise in the local industry implemented massively by the semi-government holding company being the developer for a development of a territory. The implementation which grants the advantage on the part of the developer due to its mechanism has attracted other private employers to implement the same. This is because the traditional system has been revolutionized. Apart from providing single point responsibility by the procurement system, the employer can also take fully charge of the design prior to the tender stage and transfers his whole burden under the project to the contractor which includes employer’s design team. This total litigious arrangement if not being properly monitored will produce arising numbers of contractual disputes and arbitration cases. Rights of contractors and design teams seemed not to be catered for in the novation agreement due to the bespoke agreement drafted in project to project basis by the employer’s contract drafters. Protection to the interest of the contractor and consultant is to be attained. Therefore, the objective of this research is to identify the feasible contractual solutions to the implementation of novation agreement in design and build in order to suit the requirement and the intention of the employer and at the same time to ensure the impartiality of the rights and obligation of the contracting parties. The scope of this research is confined under the design and build system implemented in Malaysia and in UK. The methodology of this research adopts from literature review together with the conduction of semi-structure interviews with various construction professionals. As a conclusion with this research, the probable solutions shall be either the institution of the Malaysia standard form of novation agreement or warranty furnished by the design team on pre-novation breaches, supplementary agreement to the novation agreement or the change in the methodology where the contractor is allowed to step in earlier during the design stage.