Commercial Liability Risks Posed by Major Construction Projects
Since its creation in 2008, the Education Investment Fund (EIF) has had a significant impact on the university sector. Many Members of Unimutual, as well as others, have actively pursued awards from the $2 billion in funding available under the various rounds of this program. Many Members have been successfully receiving impressive grants for the funding of research and innovation through this Commonwealth government program. Funding is made available to the sector to promote research and the development of new infrastructure, thereby promoting innovative projects, which the government hopes will both stimulate the economy and "enhance … teaching, learning, research and/or research training capacity" (DEEWR).
Such large grants appear to be changing the research landscape of Australian educational institutions, thereby maintaining the country's tradition of punching above its weight as a centre for research. For example, this month's release of the Shanghai Jiao Tong rankings has 17 Australian universities ranked in the top 500 in the world. Such exceptional performance in the global league tables has been regarded by many as an important measure of a nation's economic health and competitiveness, as well as academic achievement.
The EIF grants, and similar funding programs, are also having the effect of altering the physical landscape as well, with construction cranes, barricade tape, concrete trucks and traffic control signs becoming as common a sight on campuses as laptops and coffee carts. There is a mini-building boom underway in our sector, which will provide capacity for the future, but which also presents new risks for the present.
Most university facilities divisions are highly experienced in maintaining access for, and the safety of, staff, students, contractors and visitors as they move about on campuses where extensive construction and renovation programs are under way. Previous building booms and campus expansion programs have helped to develop skills in campus risk assessments and mitigation procedures to safely accommodate the large concentration of people typical of a university campus, and to protect them from the invasive effects of major construction.
Recently, the Mutual has become aware of a new area of risk relating to campus construction, which relates more to commercial interests rather than to site safety; it is commercial liability risk exposure. Over the past few years, many universities have sought to increase the level of commercial activity on their campus through outsourcing or sub-leasing. Such activities range from the traditional café and food vending services to the outsourced running of university-critical operations such as printeries, mail services and bookshops. In addition, there has been a considerable expansion of general retail operations on university campuses, whereby multi-national, private firms are enticed to become tenants in university-owned and managed facilities.
Many of these commercial operators are unfamiliar with the nature of a campus with extensive construction and renovation programs underway. With the increase of campus construction, the Mutual sees an opportunity for potential conflict and new commercial risks. We are aware of at least one recent case, in which a campus tenant has sought to hold the university's construction program directly responsible for its reduction in access by the public and a consequential drop in revenue. It is arguing that the university is responsible for road closures and foot traffic diversions, which result in a loss of attraction for their commercial establishment, and is pursuing litigation as a way to explore its grievances again its university landlord.
Members should be aware that extensive construction projects can adversely affect the attractiveness of some campus-based commercial vendors, who may feel that their contracts guaranteed them a more stable environment, providing unobstructed and unhindered access for their customers and suppliers.
The Mutual recommends that these issues be considered when large construction project risk assessments are conducted, to ensure that the interests of nearby vendors are recognised and protected as disruptive projects are advanced. Any Members seeking assistance with large project risk assessments should contact Unimutual Risk Management Services, to take advantage of this risk consulting service.
