RI CS CONST RU C TIO N JOUR NAL
Understanding the main procurement routes is critical for those who advise on contract selection
route for a project before selecting the construction contract. This ensures that the employer’s requirements, and any project-specific factors, are provided for in the chosen form of contract. Different procurement routes place greater emphasis on performance, cost and time, and the decision of the procurement route should be made after analysing the relationship between these elements. The most appropriate construction contract will then flow from that. The guidance note is divided into three main sections – general principles (knowing), practical application (doing) and practical considerations (doing/advising), which conform to RICS Assessment of Professional Competence. An appendix contains a comprehensive table comparing the JCT Standard Building Contract (2011), the NEC3 Engineering and Construction Contract (April 2013), PPC2000 (2013 edition) and the Infrastructure Conditions of Contract Measurement Version (2011).
Section 1: General principles The first section includes a summary of the most commonly adopted procurement routes in the UK, and is an abridged version of the RICS guidance note Developing a construction procurement strategy and selecting an appropriate route. Diagrams explain the contractual structure of each main route (e.g. traditional procurement, design and build and construction management), and details the key differences between them. Understanding the main procurement routes is critical for those who advise on contract selection, and this part of the guidance note provides a basis of knowledge for what then follows. Following this analysis, the guidance discusses why standard form construction contracts are used, with an introduction and review to the bodies that publish the various forms for use in the UK (e.g. the JCT and NEC).
Section 2: Practical application
Section 3: Practical considerations
The second section begins with a short analysis of the differences and interrelationship between procurement, tendering and contract selection, elements that are frequently blurred in practice. This leads on to a review of other factors influencing the contract selection. These may include: bb The nature of the work and sector: certain standard form contracts are more suited to particular types of work, whereas others have been developed for use in specific sectors (e.g. civil engineering or process engineering). bb Size, value and complexity of the project: while these are important factors, they are not necessarily interdependent of each other, e.g. a large-scale project may be relatively simple to construct. bb The employer, and their level of sophistication and familiarity with construction: some contracts demand more involvement from the employer, whereas others can be handled by a contract administrator or employer’s agent. bb The balance of risk: the parties to the construction contract should be considered during procurement and when choosing the form of contract for a project. For example, a design and build contract is inherently more risky for a contractor than a construction management appointment. bb design responsibility: the associated risk either for the whole or part of a project will affect the choice of procurement route and the form of contract. bb the basis of the contract sum and payment: this can influence both the procurement route and form of contract chosen e.g. fixed priced lump sum or target cost. bb control over subcontractors: although not a primary factor for choosing a form of contract, this remains important to some employers.
Once an appropriate contract has been selected, the contractual requirements have been negotiated and agreed and the tendering process completed, the parties will be ready to sign the documents. Professional consultants who assist in the collation of the contract documents and execution process need to be aware of the basic elements required to create a contract, and the practical issues of agreeing and executing it. Therefore, the third section of the guidance note covers: bb essential elements required to create a contract bb understanding the contract documents and pitfalls to avoid bb how to amend standard form construction contracts and to incorporate schedules of amendments, including why this might be necessary bb executing a contract and duration of liability bb the jurisdiction in which the works are located. The guidance note is recommended reading for all those construction professionals who advise on this topic. b
More information > The guidance note is available for download at http://bit.ly/1LRYBUK or the RICS shop
Richard Dartnell is a Senior Associate at Pinsent Masons LLP and lead author of the Appropriate contract selection guidance note Richard.Dartnell@pinsentmasons.com
Related competencies include Contract practice
SEPTEMBER/OCTOBER 2015 1 7