Early contractor involvement is about more than just two-stage tendering. There are tested resources to build strong project teams, including last year’s FAC-1 framework alliance contract
This month I read a law firm’s guide to two stage tendering using a PCSA (the pre-construction services agreement created by JCT). Depressingly they did not even mention the early contractor involvement models that were recommended in the 2011 Government Construction Strategy and that have been thoroughly tested over the last five years. These models are Two Stage Open Book (conditional early contractor appointment as part of a collaborative team), Cost Led Procurement (a collaborative framework seeking early contractor proposals) and Integrated Project Insurance (collaboration through a no-blame project insurance policy including design risk and cost overruns). Each model is described in Cabinet Office on-line guidance and has demonstrated savings and other improved value through a programme of trial projects. None of them relies on a PCSA.
I am not saying that a PCSA does not have a role, but it does not work in public sector procurement because it is the first of two separate contracts when there can only be one contract award. Instead I will outline achievements under more integrated options that work in both the private and public sectors, firstly a conditional pre-construction phase contractor appointment and secondly a framework alliance contract.
The Ministry of Justice has used Two Stage Open Book for many years, making pre-construction contractor appointments under the PPC2000 form of contract, most recently on its trial project with Lendlease and Crown House for HMP Berwyn in Wrexham. The project team used joint work during the pre-construction phase to agree substantial efficiency savings before fixing their contract price, while also agreeing innovative design improvements, local business opportunities and 93 permanent new jobs. The first prisoners arrived on programme in February this year.
Two Stage Open Book delivers results while also building an integrated team that avoids disputes: only two court cases in 17 years is a record that users should be proud of
Meanwhile the City of London has just finished reservoir works at the Hampstead and Highgate chain of dams, working under PPC2000 with Atkins, Capita and Bam Nuttall. Early contractor involvement enabled Bam Nuttall to provide innovations in the use of precast concrete for headwalls and piling, a prefabricated steel structure for changing rooms, and resequencing that de-risked the programme on site. PPC2000 provides the contract machinery for Two Stage Open Book that delivers these results while also building an integrated team that avoids disputes: only two court cases in 17 years is a record that users should be proud of.
Many clients are more familiar with the JCT, NEC or FIDIC than with PPC2000, but none of these single project contracts can create the links needed for a team to learn from one project to another. For this reason King’s College London Centre of Construction Law created the new FAC-1 framework alliance contract, published in June 2016 after a year of industry consultation and converting successful bespoke framework alliances into a standard form that enables advisers to add the details rather than reinvent the wheel.
FAC-1 creates early framework appointments and provides for direct or competitive project award processes under any project contract form, enabling Two Stage Open Book to be combined with Cost Led Procurement. FAC-1 also describes supply chain collaboration, a system separate from project awards under which clients and tier 1 contractors can seek improvements in tier 2 and 3 subcontractor and supplier appointments. Surrey County Council trialled supply chain collaboration on its highways alliance with Kier, Aggregate Industries and Marshall Surfacing, and agreed 15% post-tender cost savings, new 10 year warranties, additional apprenticeships and improved recycling of materials.
Clients are more familiar with the JCT, NEC or FIDIC than with PPC2000, but none of these single project contracts can create the links needed for a team to learn from one project to another
Under the FAC-1 multi-party structure, alliance members have a shared system of performance measurement against agreed objectives, targets and incentives so that teams can improve value from project to project. This provides clarity as to which targets are so important that a failure to meet them requires urgent action, with an early warning system to review the reasons behind any issues or obstacles.
In its first year FAC-1 has been adopted on works and services totalling over £9.5bn. It is being used with PPC, JCT and ICC project contracts to obtain integration and improved value on frameworks such as a £40m new-build housing procurement for North Devon Homes and infrastructure forming part of the Graven Hill self-build programme. Meanwhile the Football Foundation, Sport England and the Football Association are using FAC-1 to integrate the work of five contractors and modular suppliers on new sports ground facilities worth £150m.
The options I have outlined create early contractor involvement systems that deliver improved efficiency and that reach beyond the limitations of two stage tendering under a PCSA. For example, Futures Housing Group have reported 10% savings under FAC-1 compared to their previous frameworks.
The trial project case studies can be found on the Cabinet Office website and updates on FAC-1 can be found at www.allianceforms.co.uk.
Professor David Mosey is director of King’s College London Centre of Construction Law