The increasing prevalence of novation in construction contracts is undermining project outcomes and building quality, a survey of architects has found.

Conducted over four weeks earlier this year, the Australian Institute of Architects survey involved 263 respondents from 71 firms throughout Victoria and covered results of 158 projects delivered between 2009 and 2019.

It found that whilst novation delivered important benefits, the practice also had significant drawbacks.

According to the survey:

  • 71 percent of respondents believed that novation had a negative impact on finish and durability of buildings constructed under these arrangements.
  • 74 percent say novation has negatively impacted on building aesthetics and design.
  • 63 percent say locally sourced materials were less likely to be used on novated projects.
  • After novation, only 10 percent of respondents reported that they were always included in strategic decision-making processes at project control group meetings, while 35 percent said they were never included.
  • 67 percent of architects believed that contract negotiations during novation impacted negatively on their ability to deliver quality outcomes for the general public and end user.
  • 45 percent of architects did not know if the monthly reports prepared for the clients were being passed onto the clients during novation.

Common under design and construct type contractual arrangements, novation was introduced to help enable considerations in respect of buildability and construction innovation to be incorporated into design.

Under such arrangements, clients typically engage architects or other consultants to carry out design work prior to engaging a head contractor to manage construction.

At some point during the project (for example when the design has reached a particular stage) the client ‘novates’ the appointment of its design consultants to the head contractor.

Once this happens, architects no longer work directly for the principal but instead work for the head contractor, who assumes responsibility for the entire design (including prior design work).

Usually, novation happens after the initial design is finished – after which architects work with the contractor to complete documentation and construction.

According to those architects surveyed, novation has several benefits.

In many cases, novation helped to facilitate greater collaboration between architects and builders along with more useful dialogue between architects and builders during construction.

Novation also helped to facilitate better understanding of builders’ construction methods, early contractor involvement in design and greater incorporation of construction related considerations into the design.

As indicated above, however, there were serious drawbacks.

First, there are concerns that severing the direct relationship between the architect and clients is affecting the ability of architects to ensure that buildings’ construction maintains the integrity of the design intent and delivers on design quality, regulatory compliance, ecological sustainable design, and quality of finishes.

As well, many architects feel that novation creates opportunities for builders to substitute materials for cheaper (and sometimes inferior) alternatives or for design integrity to be challenged by ‘value management’ where builders omit important design elements to protect margins.

On a related note, there were concerns about some architects being refused access to areas to conduct inspections and that some contractors were taking shortcuts in procurement and certification of building components.

Finally, there was concern that a trend toward novation earlier in the design process meant that this was happening at a time when documentation was less complete.

This was leaving a greater proportion of the design in the hands of the contractor and resulted in opportunities to ‘lock in’ design quality being missed.

AIA Victoria Chapter President Amy Muir said the findings are further evidence of the need for greater oversight and accountability within the building process.

Ideally, Muir said novation should occur after completion of the design development or after more than half of the construction documentation has been finalised.

The Victoria specific results of the survey were released ahead of the national results, which are likely to come out in September.