In recent months, Buckingham Group (a main contractor responsible for works on several football stadiums including Northampton Town, Birmingham City and Liverpool) ceased trading, owing over £108million to creditors [1]. It was reported that one of the reasons for their downfall was “the financial failure of a major and critical subcontractor”.

Buckingham’s collapse has led to huge disruption on the projects they were employed on and serves as a cautionary tale to football clubs to ensure that they have contractual protections in place to guard against main contractor insolvency.

In this article, our team of expert construction lawyers share their thoughts on what steps football clubs could take when appointing a main contractor to protect their position and mitigate risk.

Comprehensive due diligence

Conducting thorough due diligence prior to appointing a main contractor can help clubs have a clear understanding of both capability and financial status.

Alongside financial stability, important aspects of their business to consider include: details of their current subcontractors and suppliers, current projects in progress (including their programme and values), and their past performance and reputation.

Considering these elements of the business will give a good picture on their overall health and will allow any issues to come to light at an early stage (as early as the tendering process if possible).

Regular project monitoring

Football clubs should ensure the main contractor sets out a detailed “Construction Phase Plan”, as this will help keep track of both timescale and events, and subsequently make it easier to communicate on progress and manage expectations.

Requiring the main contractor to obtain approval from the Club as to who is appointed on site will ensure transparency in the skills, knowledge, and experience of all those working on the project site, which in turn should ensure a lower chance of delay being caused by inexperienced subcontractors.

Contingency planning

This should be a “proactive” exercise as opposed to a “reactive” one.

At the outset of the project, setting aside time and budget to discuss different eventualities and plans in relation to the work will allow better navigation of problems that could arise.

All parties in the project team should be involved in contingency planning to ensure nothing is missed.

A further consideration could be the creation of a “contingency fund” which allows for sums to be set aside, with the purpose of covering the costs arising out of unexpected events, such as material shortages or unforeseen site conditions.

Financial controls and payment management

Having a comprehensive payment management system will enable more efficient handling of payments.

A clear and accurate bill of costs or contract sum breakdown is an essential part of successful construction payment management, as this enables both the main contractor and the club to keep track and ensure that payments are made appropriately in line with progress. This also minimises the risk of unexpected cash flow issues for the main contractor.

Additionally, Clubs may also wish to consider additional payment controls such as a project bank account (PBAs) (often utilised in NEC contract forms) to enable security of payments (as well as expeditious payment) to the construction supply chain. PBAs act as a ring fence of payments against main contractor insolvency and enables payments to be made directly and simultaneously from the client direct to supply chain (instead of via the main contractor).

Project scheduling and programming

Construction planning is a fundamental activity when starting out a new project. Ensuring the project has been effectively scheduled and programmed is key to its success.

Creating a schedule that includes definitions of work tasks, estimations of resources and allocation of subcontractors will ensure that the parties have a document to refer to, to ensure that the project is progressing in line with expectations.

This document helps reduce delays, as the main contractor has clear instructions to work to, and the document can be regularly amended to fit the inevitable variables that come with a major construction project.

Ensuring the project is planned for a timeframe in which the stadium (site) can be accessible by the main contractor will also mitigate the chances of delay caused by any access related issues.

Detailed contract and scope of work

One of the most important considerations is ensuring the drafting of a comprehensive contract outlining the scope of work, project timeline, payment schedule, and the performance expectations. This will ensure the main contractor is clear on what they are contractually obliged to do.

FIFA highlights the importance of contractual certainty in ensuring the main contractor is committed to delivering the project as described, and equally commits the Employer to making the site available to the contractor [2].

How we can support you with stadium development projects

Walker Morris’ Construction & Engineering Team can:

• Provide advice to clubs at every stage of the construction process, with a focus on achieving the desired construction goal; and
• Advise on any construction documentation, taking into account the above information.

Please get in touch with Carly, Alex or Jonathan if you have any queries or would like to know more about mitigating/avoiding any risk associated with appointing a main contractor on stadium development projects.

[1] Buckingham Group owed £108m at collapse | Construction News

[2] 3.1 Contractor Appointment | FIFA Publications