Download Standard forms of partnering contracts The ultimate contractual

Standard forms of partnering contracts
The ultimate contractual commitment? Part 2
This is the second in a series of articles being published in CES comparing the
terms of some of the different standard forms of partnering contract currently
available. The Partnering Team has decided that readers will find it more useful
to see how each standard form addresses the different topics concerned with
partnering and collaborative contract relationships. So, contrary to common
practice which would typically devote one article to one standard form of
contract, this series is going to address each major topic in sufficient detail to
give the reader an idea of the main features and relative merits of each form and
the series will run as long as necessary to do justice to that objective.
The first article in the series provided an introduction to partnering by
identifying its ethos, history, aims and so on, and by establishing its fundamental
difference to conventional (confrontational) contracting forms. In this, the
second article, we set out how the different standard forms of partnering
contract address the corporate and personnel commitment to partnering by way
of such issues as:
• The establishment of a core group of key persons.
• Multi-party commitment.
• The requirement for a charter.
• Extent of party involvement.
• Whether the form’s requirements are binding
or voluntary.
The standard forms
First, however, it is necessary to identify the forms that we are comparing,
together with a brief background to its genesis where appropriate. The forms
are:
• Association of Consultant Architects; Standard Form of Contract for Project
Partnering PPC2000 (with passing reference to SPC2000 and TPC2005).
• Institution of Civil Engineers; Engineering and Construction Contract Third
Edition; NEC3 and partnering option X12.
• Joint Contracts Tribunal; Constructing Excellence Contract JCT/CE and project
team agreement PTA.
• Joint Contracts Tribunal; Partnering Charter Non-binding JCT PC/N.
PPC2000
PPC2000 was launched, perhaps unsurprisingly, in 2000 and is described as the
first standard form project partnering contract. It was drafted by Trowers and
Hamlins Solicitors in response to the recommendations in the 1998 report
Rethinking Construction (aka the Egan Report) and incorporates ideas from the
Guide to Project Team Partnering published by the Construction Industry
Council. However, its roots may also be traced back to the 1994 report by Sir
Michael Latham, Constructing the Team.
At its launch it was described by Sir Michael Latham as “the full monty of
partnering and modern best practice” — an accolade which does not understate
its significance at all. The PPC suite comprises:
• PPC2000; the standard form of contract for project partnering for single
projects.
• SPC2000; the standard form of specialist contract for project partnering which
is a subcontract arrangement between the contractor and a subcontractor who
has bought into the partnering process.
• TPC2005; the standard form of contract for term partnering for a series of
projects.
Each set of forms has its own suite of documents comprising the agreement, the
detailed provisions of the contract, appendices for different uses and each set
runs to many pages (PPC2000 to 68 pages; SPC2000 to 36 pages). These
contracts are fully developed, wholly integrated and binding arrangements; they
are not a collection of nebulous aspirations.
PPC2000 brings together partnering arrangements, consultant
appointment terms and a building contract into one document which integrates
the whole project team, governs both the pre-construction and construction
phases and provides a procedural framework that underpins the partnering
process. This permits the client, consultants, main contractor and, where
appropriate, subcontractors to work together as fully signed-up, committed
members of the partnering team as parties to one contract.
The motivation behind PPC2000 was to provide a more positive role for
the contract by describing the way in which the project partnering team works
together and provides a binding structure that underpins trust and co-operation
between the partners. This overriding principle is set out at clause 1.3, which
states that:
“The partnering team shall work together and individually in the spirit of trust,
fairness and mutual co-operation for the benefit of the project, within the scope
of their agreed roles, expertise and responsibilities as stated in the partnering
documents.”
Specific requirements include that partners shall work together, or individually,
to achieve transparent and co-operative exchange of information in all matters
relating to the project and to organise and integrate their activities as a
collaborative team.
Furthermore, the early warning provisions require each partner to notify the
others as soon as it is aware of any matters adversely affecting or threatening the
project or that partner’s performance under the contract. Since PPC2000
requires the partnering team to be established during the pre-construction
phase, it provides for a series of agreements:
• Project partnering agreement; this should be signed as far in advance of the
start on site as is possible and should include the client, constructor and client’s
representative and preferably at least one designer and cost consultant.
Reference should also be made to prospective additional consultants,
subcontractors etc by discipline, if not by name.
• Joining agreement; at any time after the creation of the project partnering
agreement, additional or replacement partners may join the partnering team by
signing a joining agreement.
• Pre-possession agreement; this is required to address any work that is to be
carried out, either on or off site, prior to the unconditional approval of
commencement on site. It should clearly set out the agreed work scope,
timetable and price. It is not an unconditional commitment to the project
proceeding, but is analogous to a pre-enabling works contract, or a preliminary
activities contract.
• Commencement agreement; works on site are enabled when this is signed by
all of the partners after design and price certainty, together with other agreed
preconditions, are achieved.
The partnering team members are required to establish a core group which is
responsible for meeting regularly to review and stimulate the progress of the
project and for the implementation of the project partnering agreement. The
core group makes decisions by consensus; such decisions must be complied with
by the partners. In addition to the core group, there are two other key roles, the
client’s representative and the partnering adviser.
The client’s representative has considerable authority, which is set out
within the project partnering agreement. The representative may organise,
attend and minute meetings of the core group and partnering team and is
empowered by the partnering terms to issue instructions to the constructor (the
term used by PPC for the contractor). They will also be responsible for
organising partnering workshops for the partnering team.
The partnering adviser should be a person who preferably already has a
good track record in the role and will inject enthusiasm and knowledge of
partnering into the partnering team. The role is to facilitate the smooth creation
and development of the partnering team, although they are not a member of the
team. The adviser provides fair and constructive advice to the partnering
process, assists in the development of the partnering relationships and the
operation of the partnering contract. The adviser has a very wide remit which
includes, inter alia, reviewing all contracts for consistency with the partnering
documents, preparing any partnering charter, giving advice on the partnering
process, partnering relationships, and partnering contracts, attending relevant
meetings of the core group and partnering team, and assisting in the solving of
problems and resolution of disputes.
Whilst PPC2000 refers to a partnering charter as a potential contract
document, it is not mandatory. A partnering charter is generally a brief
document intended to capture headline statements of the agreed values, goals
and priorities of the partnering team and this function is covered by the
provisions of PPC2000.
SPC2000
This is the standard form of subcontract designed to allow a main contractor
under PPC2000 to enter into a contract with its subcontractors in a manner
wholly consistent with PPC2000 and which further integrates relationships and
processes and binds the subcontractor into the whole partnering ethos of the
project.
Emphasis is placed on the subcontractor’s involvement in project design
and risk management as early as possible and the use of open-book accounting
and collaborative working are actively encouraged.
TPC2005
This is the standard form designed specifically for use with term contracts and
follows the same general ethos as PPC2000.
NEC3
The New Engineering Contract (NEC) family of contracts has its origins in the
1990s as a response to, and in recognition of, the poor state of construction
contract arrangements in the UK. The ICE published a consultative draft in
January 1991 followed by the first edition in 1993. Sir Michael Latham’s 1994
report Constructing the Team supported the use of the NEC and consequently
the second edition was published in 1995, albeit with the name expanded to the
NEC Engineering and Construction Contract to avoid any misconceptions that it
was not suitable for use on building projects. The number of contracts in the
suite was then increased and the third edition (NEC3) was launched in July 2005.
Perhaps the most important aspect of the concept behind the NEC suite is
found at the very first clause of the conditions, clause 10.1, which states the
fundamental principle that the named parties shall act as stated in the contract
and in a spirit of mutual trust and co-operation.
This clause is a general obligation creating the environment within which
the remainder of the contract should be read. If embraced properly by the
parties, it affects the manner in which all the duties and obligations of the parties
are to be carried out.
The NEC contract, per se, creates a partnering contract between the two
contracting parties whether they are, for example, employer/contractor under
one of the engineering and construction contracts, or employer/consultant
under the professional services contract, or contractor/subcontractor under the
engineering and construction subcontract. However, these are only bi-party
contracts, and in order for a multi-party partnering agreement to be set up it is
necessary to use the relevant secondary partnering option X12, within each of
the bi-party contracts.
Partnering Option X12
The partnering option X12 is a more recent addition to the suite of secondary
options to the NEC. X12 was first published in 2001 and the same form was
adopted for NEC3 at the 2005 launch.
The content of X12 is derived from the Guide to Project Team Partnering
published by the Construction Industry Council with the aim of addressing the
requirements of the guide that were not already catered for within the NEC suite
of contracts.
As noted above, the purpose is to establish an effective contractual basis
for multi-party partnering based on the NEC suite. The option is given legal effect
by its inclusion within the relevant bi-party contract and acts not as a freestanding agreement, but as an integral part of that bi-party contract. The
provisions of X12 itself are, therefore, binding and set out the obligations of the
partners to one another, the role of the core group and provides for performance
incentives. Each bi-party contract becomes known as the own contract between
the two parties to each such contract and is referred to as such within option
X12.
However, an important subtlety is that the X12 is not a vehicle in itself for
a multi-party contract (like the PPC suite) but is an add-on to the relevant biparty contract. The parties to a contract including X12 must recognise that this
option imposes further responsibilities in addition to those in the basic NEC
contract, and that they are to act “in a spirit of mutual trust and co-operation”
with the other partners as well as with the other party to the bi-party contract.
X12 is a brief document that comprises the following clauses, each with
various
sub-clauses:
• Actions
• Identified and defined terms
• Working together
• Incentives
...and schedules:
• Schedule of partners
• Schedule of core group members
• Including the option in the own contracts (which identifies the client, its
objective and the partnering information).
The client is the party for whom the project is being carried out and who may, or
may not, also be the employer under the relevant bi-party NEC contract. The
client’s objective is the objective of the project (or projects if the partnership
relates to more than one) and therefore also of the partnering objectives.
The partnering information specifies how the partners are to work
together and includes:
• Use of common information systems, sharing of offices etc.
• Attendance at partners’ and core group meetings.
• Participation at partnering workshops.
• Arrangements for joint design development.
• Value engineering and value management.
• Risk management.
• Other matters that the core group manages.
The core group is selected from the partners; both groups are identified in the
relevant schedule and not every partner is necessarily a member of the core
group. It is the core group who acts and takes decisions on behalf of the partners
on the matters stated in the partnering information. The core group organises
and holds meetings, provides the timetable for the proposed timing of the
partners’ contributions and may give instructions to the partners that are issued
in accordance with the relevant own contracts.
It is a stated requirement that the partners should give advice and
assistance not only when asked, but also whenever they identify anything that
would assist the others. This is consistent with the early warning mechanism
within the NEC core clauses and reflects good project management techniques.
Since the requirements are contractual and binding, there is no stated
requirement in X12 for a partnering charter. Indeed, there is no need for such a
requirement.
Joint Contracts Tribunal
We do not intend to delve into the history of the JCT and its contracts, since this
is probably the best known suite of contracts in use in the UK and known
throughout the world, certainly in those common law jurisdictions with a close
affinity to England. Suffice to say they have been around for longer than the
others considered in these articles (and indeed the authors themselves). It is
rumoured that the first use of a JCT contract was the greenfield development at
Stonehenge, but that may be wrong as Stonehenge was a civil engineering
project, whereas JCT contracts are traditionally used for building projects.
In any event, JCT was slow to recognise that the industry was crying out
for a partnering form of contract and was the last of the major forms being
reviewed, to be born.
JCT Constructing Excellence and Project
Team Agreement
JCT/CE was launched in 2007 and is based on the Be Collaborative Contract
published in 2003. JCT/CE incorporates principles established by the Latham
Report and Egan Report, i.e. simplicity, flexibility and partnering, and is itself the
product of collaboration between the JCT and Constructing Excellence (which
incorporates Be Collaborative).
It is a single form that is intended to engage the entire supply chain in a
series of bi-party contracts to carry out works or services. The project team
members may then enter into an optional multi-party project team agreement
(PTA) which sets out how the team works together. It is important that key
suppliers and specialists are engaged early, ideally at a stage when the proposed
design is not complete, so that it is possible for the suppliers and specialists to
consider ways in which the design can be made easier to build and maintain. The
terminology identifies the three parties to the contract; the purchaser, the client
(who may, or may not, be the purchaser) and the supplier.
Clause 2.1 identifies the overriding principle that is guiding the parties in
the operation of JCT/CE as that of collaboration. The parties undertake to work
together with each other and all other project participants in a co-operative and
collaborative manner, in good faith, and in a spirit of mutual trust and respect.
Furthermore, the parties agree that they shall each give to, and welcome
from, the other project participants feedback on performance, and shall draw
each other’s attention to any difficulties and shall share information openly at
the earliest practicable time. They shall also support collaborative behaviour and
address behaviour that does not comply with the overriding principle. This is an
important provision that recognises one of the prerequisites for successful
partnering is collaborative behaviour — and this may require a party to remove
and replace otherwise very competent persons who are simply not acting
collaboratively. This may be a bitter pill for a party to swallow; and cynics
describe this as a charter for encouraging mediocrity and smooth-talkers rather
than firm, clear, competence.
As noted, an optional PTA is provided so that members of the project
team can enter into a simple multi-party agreement. The PTA is intended to
supplement, rather than completely override, the relevant bi-party contracts to
which its members are also a party and sets out in greater detail their respective
obligations to work together as a team, including how the project team will
function. In the event of any inconsistencies in the respective provisions, the
provision in the PTA is intended to have precedence.
The PTA sets out its own overriding objective by reference to the
overriding objectives within the bi-party JCT/CE contracts to which it relates.
This helps to reinforce the need to apply the good words and expected
behaviours of the project team and is considered a stronger edict in this regard
than clause 10.1 in the NEC suite which states simply that the parties shall act as
stated in this contract and in a spirit of mutual trust and co-operation.
The project team comprises the client and other participants who are
considered by the client to be of key importance for the successful delivery of the
project. It should therefore involve any key specialist subcontractors in addition
to the lead designers and the lead supplier.
The role of the project team is to advise on most aspects of the project to
achieve the objective of guiding the successful delivery of the project through its
design and construction. This is achieved through regular meetings to share
information and to consider risk and opportunities, how best to coordinate and
manage the project, review progress and make decisions necessary for the
successful delivery and communicating such decisions to the relevant partners.
The project team does do not have the power to issue instructions; this function
being reserved for the purchaser.
JCT/CE has provision for a charter, albeit it is referred to as a project
protocol and it has no contractual effect; the obligations on the partners being
set out within the contract and PTA. Clauses 2.6 to 2.8 state that if engaged as a
member of the project team, the supplier, together with the other members of
the project team, shall give serious consideration to drawing up and adopting a
project protocol setting out the aims and objectives of the project team with
regard to the delivery of the project and the development of their working
relationships.
Any project protocol shall be signed by a senior representative of each
member of the project team and copies of the signed project protocol shall be
prominently displayed at the places of work of all the members of the project
team on the site and in accommodation on, or serving, the site. However, the
provisions of any project protocol shall not create any contractual obligation and
any failure to adhere to
its terms shall not of itself constitute any breach of this contract.
JCT Partnering Charter Non-binding
As the name suggests, this is a non-binding agreement that is appropriate for use
with most standard forms of construction and engineering contracts and
subcontracts, where the parties do not wish to enter into a legally binding
agreement, but wish to create a collaborative working environment.
As a charter, it is a very brief document that captures headline statements
of the agreed values goal and priorities of the partnering team, it is not a working
document and does not describe specific roles, responsibilities or relationships.
There are no sanctions for any breaches of the charter, other than perhaps to the
guilty party’s reputation and chances of similar work with the wronged parties
in the future.
This approach is not as daft as it may at first appear to be. Many
adherents of partnering take the view that partnering arrangements are so
important, subtle and sensitive, that the overriding requirement for their success
is that each party wants the project to succeed, and are so focused on that
objective that they will overcome any obstacle to achieving that by the exercise
of voluntary collaborative principles. If these should fail, then they will revert to
good, old fashioned confrontational contractual arrangements.
Conclusions
We have examined above, how some of the different standard forms of
partnering contract address the different topics concerned with partnering and
collaborative contract relationships. As will be seen, there are some common
themes but each form has its own nuances. Thus, the requirement for the parties
to act together in a collaborative way may be expressed in a single clause (NEC)
whilst others elevate it to an overriding objective (PPC2000 and JCT/CE).
Equally, the forms recognise (in slightly different ways) that partnering is a team
game, whereby the traditional bi-party contract may not be capable of
accommodating multi-party participation.
What is clear from all of the forms is that partnering is not an easy option;
it requires dedicated participation at all levels of a company’s organisation and
the adoption of a consistently open and collaborative way of working in order to
meet the team’s objectives. This last point is also an important one to bear in
mind if parties are considering which of the forms is best suited to their project.
Some commentators suggest that those arrangements that tie the project
participants into realisation of a common goal or objective and which arrange
risk and reward around the achievement of that objective are best configured to
achieve project success.
The Partnering Team
[email protected]
The Partnering Team comprises members of the institution’s Contracts and
Dispute Resolution Panel. Led by John Bacon, ICES past president, the members
are Mike Rowlinson, a director at Alway Associates, Jonathan Hosie, partner in
the construction and engineering practice of Mayer Brown, and Steven Williams,
an associate director at Turner and Townsend.