This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.
Attitude of the parties or contract terms? What matters more in fostering a collaborative experience on a project?
It’s a common discussion but it really shouldn’t be. Genuine co-operation is hard to force. Early warning mechanisms to ensure support on issues before they become antagonistic can be abused where when linked to compensation. Successful relationships can result from draconian agreements.
So culture is critical. Still, having the right contract helps. The Association of Consulting Architects (ACA) and the Association of Consultancy and Engineering (ACE) certainly think so. Later this summer, they’ll unveil the Framework Alliance Contract currently being trialled by Futures Housing Group.
Frameworks come in all shapes and sizes. Chiefly, they allow parties to settle terms and a basis of pricing works or services up front, avoiding the need to do so again for new activities. Instructions arrive through “call-offs” that set out project specifics and can be contracts in their own right. Scale allows for economies and the forging of close relationships.
At least that’s the theory. As long-term arrangements, their attractiveness to participants can wax and wane with the market. Anti-avoidance measures in public procurement, aimed at ensuring a level playing field, restrict the ability to build in flexibility. On other occasions, disappointment may arise simply from one side’s pre-contract expectations being missed. The Framework Alliance Contract’s success may depend on how effectively it tackles such challenges.
The word “Alliance” marks a promising start. The parties (or Alliance Members) work on improving value, sharing information on suppliers, reviewing and comparing prices and, as necessary, tendering or renegotiating sub-contracts. The focus on the whole supply chain makes positive outcomes more likely.
Success criteria and targets matter, too. Defined at the outset, these are set against incentives. An Alliance Manager instructs call-offs (Project Contracts) for single or multiple projects and arranges and chairs Core Group meetings. The Core Group, comprised of party representatives, assesses and co-operates on progress towards objectives and any Early Warnings. If targets are missed, it proposes rectification steps or revised targets. If the client declines these it may terminate or take other pre-agreed actions.
The Framework Alliance Contract can cater for several suppliers or clients with Project Contracts awarded either directly or through mini-tender. An interesting innovation is that clients can issue Orders ahead of Project Contracts. These simple directives can procure early works or long-lead items, as well as pre-construction services.
There’s also versatility regarding which form or forms of Project Contract can be used. JCT, NEC, PPC or other standard documents are all fair game, as well as bespoke agreements or a combination. This contrasts with the JCT and the NEC’s more partisan approaches. Users of the Framework Alliance Contract may, of course, prefer to ensure consistency across key provisions.
The client can specify a minimum quantity of guaranteed work and exclusivity given under the framework. With tendering costs often significant, this option will be welcomed by suppliers.
Alliance Activities are undertaken by all parties and include risk management in accordance with framework documents and a shared risk register. Nonetheless, in a multi-supplier framework it’s recognised that some matters, such as pricing, project proposals and intellectual property licensing for non-Alliance Activities must be kept bilateral. From an insurance perspective, multi-party duties of care are limited to Alliance Activities.
A confidentiality clause governs disclosure to third parties but does not address inter-party relationships. Those would need to be dealt with through separate non-disclosure agreements. Provisions covering BIM will appear in the publication edition.
Aside from the Core Group, ADR options include conciliation, mediation and, in a nod to international applications, dispute boards and arbitration. Adjudication is included where mandatory.
Ultimately, there’s little in the Framework Alliance Contract to surprise patrons of the ACA/ACE’s PPC contracts, which are soon due a revamp. However, that’s not really the point. Shorn of PPC branding and any mention of partnering or KPIs, this contract is aimed at the wider market of framework users, as well as those who may favour JCT or NEC.
It will take effort to shift developers off their beloved custom frameworks but at least there’s now a convincing alternative for those with both the experience and the desire to explore more meaningful collaborations.
