The Chartered Institute of Building Standard Facilities Management Contract

The Chartered Institute of Building had for a number of years been aware of the increasing involvement of its members in the provision of facilities management services and the significant proportion of its members who are engaged in the provision of such services as their main business activity. Despite the growth of the UK facilities management industry the CIOB noted that there was no widely used standard form of facilities management contract, and that as a result facilities managers and their clients were entering into, at times, vastly disparate bespoke forms of contract, each of which required separate, often, lengthy, negotiation. As such, the CIOB decided that there was a need for a new standard form of facilities management contract and prepared in conjunction with Cameron McKenna, a standard form of facilities management contract which was first published in April of this year.

The type of facilities management services required by clients can vary significantly. Whilst some clients may require the provision of "hard" facilities management services, such as building and plant maintenance, others may require only "soft" facilities management services such as cleaning and catering, or a combination of both "hard" and "soft" services. Generally, where facilities managers are required to undertake the provision of complex and high value services, the Client will usually wish to appoint the facilities manager on a bespoke form of contract. The CIOB therefore decided that their standard form contract should be aimed primarily at the provision of relatively straightforward services.

The service and the specification

The contract is drafted so that the employment of the facilities manager will run for a fixed period to be stated in the contract appendix, such period being capable of increase by agreement between the parties. The facilities manager is obliged to provide certain Services which will be listed in an appendix to the contract. Whilst a sample list of Services is included, this needs to be tailored to the requirements of the client. The sample Services included in the contract include the arranging, administering and managing of sub-contract work, reporting obligations and the performance of any tasks or attendance requirements set out in the Specification. The Specification, which is also annexed as an appendix to the contract, sets out in detail the performance requirements and tasks to be undertaken by the facilities manager. Again, the Specification will vary from client to client and careful drafting will be needed to ensure that the requirements of the client are clearly expressed and that the facilities manager understands what is expected of him.

The contract recognises that during the course of the facilities manager's employment the client may, sometimes at the suggestion of the facilities manager, wish to amend the Services or the performance requirements set out in the Specification. Provisions are included to allow for this at the request of either the client or the facilities manager. Variations to the Services or alterations to the Specification will result in an adjustment to the amount due to the facilities manager under the contract.

Obligations and limitations on liability

The facilities manager's obligations under the contract are straight-forward. He is required to exercise reasonable skill, care and diligence in the performance of the Services and his other obligations under the contract. He also needs to comply with instructions given to him by the client as well as with any statutes, regulations, codes of practice, guidance notes and controls in relation to pollution or safety in respect of the premises where the Services are to be provided. It is recognised that in certain circumstances, the Construction (Design & Management) Regulations 1994 may apply and in such cases, the facilities manager is obliged to undertake the roles of planning supervisor and principal contractor under the Regulations.

The liability of the facilities manager can, if the parties agree, be limited to a sum to be stated in the Appendix to the contract. In addition, all liability of the facilities manager in relation to any claims relating to pollution or contamination (except for claims relating to death or bodily injury which cannot be excluded at law) are excluded including any claims in relation to Legionella.

Payment

The contract includes two payment options. Under the first the facilities manager is paid the prime cost of any sub-contractors he employs (defined as the Facilities Costs) together with an Administration Fee which will be a fixed percentage fee calculated on the Facilities Costs. In addition, he will paid an Annual Fee in respect of his overheads, profits and preliminary items.

The Annual Fee will be fixed and will only adjust in accordance with the provisions of the contract (eg. where there is a change in the Services) or annually on the anniversary of the commencement date.

Three options are included as to how the annual adjustment is to be calculated:-

• by an agreed percentage per annum to be stated in the appendix;
• in accordance with any change in the Building Maintenance Index published by the RICS;
• in accordance with any change in the Retail Prices Index (all items) prepared by the Central Statistical Office.

Many clients prefer to pay facilities managers a lump sum to include the cost of all sub-contractors as this provides clients with greater financial certainty. Under the second payment option the facilities manager will be paid a lump sum in respect of all his costs in relation to the provision of the Services. Where that option is used, the lump sum will be contained in the Annual Fee and references to the Facilities Costs and the Administration Fee will be deleted. The Annual Fee will adjust annually as before and in accordance with the contract.

Irrespective of which payment option is used, the facilities manager will also be entitled to reimbursement of any expenses set out in the Appendix. The list of such reimbursable expenses will need to be agreed on a contract by contract basis but would usually include travel and subsistence costs, overtime costs and printing and reproduction costs.

A common feature of many bespoke forms of facilities management contract is the inclusion of provisions allowing the client to make an abatement from amounts due to the facilities manager due to poor or non-performance of services or failure to meet any performance requirements set out in a specification or service level agreement. Given that many clients require the inclusion of such clauses, the CIOB contract includes an optional provision allowing adjustment of payment to the facilities manager to reflect performance. If utilised, the client will monitor the facilities manager's performance of the Services and if in his opinion, the facilities manager fails to provide the Services in accordance with the contract or the performance requirements set out in the Specification, then the Client will be entitled to make an abatement from any sums due to the facilities manager in accordance with any penalty point system included within the Specification or if, such a system is not included, make an abatement that reflects the costs that the client has incurred or will incur in relation to the facilities manager's poor or non-performance.

Other provisions

The facilities manager is not entitled to sub-contract any of the Services without the consent of the client. The Specification may name certain sub-contractors whom the facilities manager will be required to employ. Notwithstanding such naming, the facilities manager will remain fully responsible for all his sub-contractors, including those named by the client in the Specification,

Whilst it is intended that the client will insure the premises where the Services are to be carried out, the facilities manager is obliged to maintain employer's liability insurance and public liability insurance which will need to extend to cover any sub-contractors.

The contract is terminable by either party by giving three months prior notice or by either party on the default of the other or where the other has become insolvent.

A provision is included whereby the client indemnifies the facilities manager in relation to any liabilities which the facilities manager may incur under the TUPE regulations in respect of any employees of previous facilities managers or sub-contractors engaged to undertake any of the Services. Optional provisions are also included for use in relation to public sector contracts. These cover issues such as the Official Secrets Act, the Data Protection Act and race and sex discrimination.

The requirements of the Housing Grants, Construction and Regeneration Act 1996 are also dealt with and the payment provisions comply with the Act and allow the facilities manager to suspend performance of the Services due to non-payment. Dispute resolution procedures are included in the contract which reflect the adjudication requirements of the Act. Disputes not resolved by adjudication are to be heard by an arbitrator acting in accordance with the Construction Industry Model Arbitration Rules.

The introduction of a new standard form of contract always raises issues and questions. Both Cameron McKenna and the CIOB would be delighted to hear the views of any users of the contract. Any suggestions for amendments or feed-back on its use in practice would be gratefully received.