10/04/2018

SEMINAR FOR RICS

CPD FOUNDATION (WINTER/SPRING 2018)

_______________________________

APPROPRIATE CONTRACT
SELECTION
________________________________

11 April 2018

Tom Pemberton

Seminar Outline

1. Alternative contract models

2. Established suites of contract

3. Collaborative contracting: your options

4. Amending standard forms: key

considerations

5. Q&A

Alternative Contract Models

- “Traditional” Contract

- Design and Build Contract

- Management Contract

- Construction Management Contract

- Alliance Contract/ Partnering Contract

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“Traditional” Contract structure

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Design and Build

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Construction Management

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Management Contract

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Standard form contracts

- Practice of using standard forms of contract for construction and

engineering projects dates back to 19th century

- Provide “complete legal codes” which are widely accepted for the
performance of contract works

- Trends in use – NBS National Construction Contracts and Law Survey 2015

A few standard form families (construction contracts)….

- Joint Contracts Tribunal (JCT 2016)

- New Engineering Contract (NEC4 2017)
- PPC2000 (Project Partnering Contract, amended 2013)
and FAC-1 (Framework Alliance Contract 2016)
- Infrastructure Conditions of Contract (ICC 2011–
formerly ICE)
- Institution of Chemical Engineers (IChemE 2013)
- Federation Internationale Des Ingenieurs-Counseils
(FIDIC 2017)

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Some standard form professional services contracts….

- RIBA Standard Agreement 2010 (2012 revision)

- ACE Professional Services Agreement 2017

- NEC4 Professional Services Contract 2017

- FIDIC Client/Consultant Model Services Agreement

5th Ed (2017) – White Book

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Joint Contracts Tribunal (JCT)

- Most widely used forms of construction contract in the UK –

but NBS survey indicates steady decline from absolute market
dominance

- Latest edition – 2016

- Design and Build – widely used for larger schemes

- Standard Building Contract (x3 versions)

- Intermediate (x2 versions) / Minor Works (x2 versions)

Joint Contracts Tribunal (JCT)

‐ Generally follow same structure divided into Articles of
Agreement, Contract Particulars, Conditions and Schedules

‐ Conditions divided into 9 Sections

‐ Definitions and interpretation
‐ Carrying out the Works
‐ Control of the Works
‐ Payment
‐ Measurement and Valuation
‐ Termination
‐ Settlement of disputes

‐ What’s new in the 2016 edition?

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New Engineering Contract (NEC)

‐ Most widely used standard forms in the UK infrastructure

sector
‐ Intended also for use in relation to building and process
engineering projects
‐ First edition published in 1993
‐ NEC4 published in June 2017
‐ Expanding family of contracts
‐ Key UK projects, including High Speed 1, London 2012
Olympic Games, Crossrail, HS2 and Highways England
‐ Endorsement of NEC4 for use in public sector projects by the
Infrastructure and Projects Authority (reporting to the
Cabinet Office and HM Treasury)
‐ International take up, e.g. Hong Kong, New Zealand

NEC4 Contract Suite

- Features of NEC contracts:

‐ Obligation to act “as stated in the contract and in a spirit of

mutual trust and cooperation”
‐ Focus on programme
‐ Compensation events
‐ Simple language; use of present tense throughout

- What’s new in NEC4?

- “Evolution not revolution”

Federation Internationale Des Ingenieurs Conseils

(FIDIC)
‐ Founded in Belgium in 1913 – now has members from over 100
countries globally

‐ First contract (“Red Book 1957”) re-badged version of ICE

Conditions of Contract (4th edition)

‐ The International choice for standard form contracts –

endorsed by multilateral development banks

- Can be used in any jurisdiction and when countries do not

have their own standard form contracts

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The Rainbow Suite

‐ Latest versions of leading FIDIC forms published in December
2017:
‐ “Red Book” (2017) – for Building and Engineering Works designed by
the Employer
‐ “Yellow Book” (2017) – Plant and Design-Build
‐ “Silver Book” (2017) – EPC/Turnkey Contract
‐ “White Book” (2017) – Consultants/Client Model Services Agreement

‐ What’s new?

‐ Other FIDIC forms

‐ “Blue Book”, “Pink Book”, “Gold Book”, “Green Book”,
“Orange Book”

Trends in standard form contract use

- Latest NBS survey report published in 2015
- Consensus is that the future of the construction
industry is “collaborative”
- The figures indicate a shift with NEC contracts
being used more often than they had been
previously and JCT contracts significantly less so
- Overall, JCT contracts were used most by 39% of
respondents, with NEC used most by 30%. Bespoke
contracts were used by 11%
- FIDIC contracts were used most often by 7% of
respondents, more than double the rate in 2011
- “Traditional” forms of procurement are still used
most often by 47% of respondents, with D&B
procurement most often used by 39% of respondents

Collaborative contracting: your options

- Range of options from non-binding Partnering charter to “full on”
alliancing
- Partnering contracts include
- NEC4 suite
- PPC2000
- JCT Constructing Excellence
- Standard form alliance agreements now/soon to be available:
- FAC-1 (published by ACA in 2016)

- NEC4 Alliance Contract (consultative version published in

June 2017)

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Collaborative contracting: the drivers

- Responsibility, risk and reward collectively owned/shared

- Building Information Modelling – requires collaborative
working
- Objective is to focus on achieving project objectives, and
to reduce or eliminate disputes with their associated costs
and tie-up of management time

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“Full on” alliancing

- First adopted in the UK in the 1990s (to reduce BP’s
costs of drilling for oil in the North Sea)
- Widely used in parts of Australia (particularly New
South Wales and Queensland) in the noughties
- More recently adopted by some major UK employers
including National Grid, Network Rail and the water
utilities
- Underpinned by principle that alliance members
“win together and lose together”
- One team/“no blame” culture - shared ownership of
risk
- Shared gainshare/painshare mechanism

Advantages and Disadvantages of Alliancing

+ -
• Collaboration/pro-active management Breaks down in absence of mutual trust/
cooperation
• Focus on solving problems, not disputes Legal uncertainty/ unenforceability
• Scope to reduce costs / project durations Investment needed for new processes
• Promotes long term relationships Risk of complacency/ “cosy relationships”

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Standard form “collaborative” approaches

Measures to promote collaboration in standard forms of contract include:
NEC3 (ECC)
- Requirement for the Employer, Contractor, Project Manager and Supervisor to
act in a spirit of mutual trust and co-operation
- Early warning/risk reduction meetings

PPC 2000 and FAC-1

- Multi-party focus (“partnering”) – between client,
constructor, professional team and specialists
- “Best for project” approach

Other standard forms

JCT
- Constructing Excellence Contract (2016)
- Framework Agreement (2016)
FIDIC
- New “advance warning” clause (8.4)
- Move towards “real time” claims management (cf NEC)
- Increased emphasis on dispute avoidance

Amending Standard Forms

‐ Why amend a standard form contract?
‐ Party preferences
‐ Contractor: unamended standard forms
‐ Employer: amendments dealing with:
‐ design responsibility/liability – fitness for purpose?
‐ transfer of risk (e.g. adverse weather/site
conditions/document discrepancies)
‐ notification of claims (extension of time/payment)
‐ compliance with third party requirements
‐ collateral warranties
‐ performance security
‐ various other issues

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Amending Standard Forms – key considerations

‐ Standardised schedules of amendments – “here’s one we

agreed last time”
‐ Have project risks and client’s requirements been fully
thought through?
‐ Impact on tenders
‐ Increased risk of disputes if contractor does not fully
understand/allow for contract risk
‐ Do amendments promote collaborative working?

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Q&A

Contact Details

Tom Pemberton
‐ tpemberton@gdlaw.co.uk
‐ +44 (0) 20 7421 7908

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