Partnering Contract - PowerPoint by juj18736

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									   Which Partnering
Contract Should I Use ?

       Tim Willis
    What are you procuring ?

   A Project – new build / refurbishment

   A service – e.g. maintenance of existing buildings or upgrading
    housing stock

   A series of as yet undefined projects

   Type of contract must reflect the type of procurement – single
    project – term contract or framework agreement
    Why are you Partnering ?
     The Client’s objectives
   Government Policy
   Buzz word
   Objectives
      Integration to improve design and process ( Collaboration)
      Involvement of stakeholders ( Collaboration)
      Budget certainty at construction phase
      Lowest cost
      Greatest risk transfer
      Reduction of disputes
      Cost transparency
      Best value
      Design control
      Process control
      Risk Management
      Streamlining procurement process
      Continuous improvement/ improved efficiency
      Quickest procurement time
   Not all objectives are best met by partnering
     Why are you Partnering ?
    The Contractor’s objectives
   No option but to respond to market

   Buzz Word

   Objectives :
      Client satisfaction
      Maximum profit
      Minimum Risk
      A next project at any price
      Guaranteed workflow
      Industry Recognition
      Contribution to the wider community
      Improved working culture
      Reduction in disputes
      Improved supply chain
      Commercial advantage

   Not all objectives are best met through partnering
       Features of partnering
   Collaboration
   Integration
   Incentivisation
   Risk management
   Pre-construction phase
   Construction phase
   Can be single project
   Can be multiple projects
   Performance measurement
   Improved efficiency
   Transparency
            What is available ?

   Single Project
      PPC 2000
      NEC 2 and NEC 3
      Be
      JCT CE 2006

   Term Contracts
      TPC2005
      NEC Term Service Contract

   Bespoke and published framework agreements
      JCT framework
      NEC framework
    Single Project - PPC 2000

   PPC 2000
   Multi – Party
   Pre-construction phase and construction phase
      Both phases managed under one contract – client option to proceed
        with construction phase subject to meeting conditions precedent
        including agreement of Agreed Maximum Price
      Supply chain documentation SPC 2000 – supply chain encouraged to
        be part of Partnering Team
      Pre construction phase Partnering Team carry out risk investigation,
        supply chain development and planning and pre-construction works.
      Partners may change by leaving or joining as contributions dictate.
      Core group manage process
      Partnering objectives identified
      Continuous improvement KPIs,
      Shared savings or Incentivisation agreements to be agreed
      Client has final say but the Constructor has a right to refer back to
        Client any instruction that is contrary to the Partnering Documents or
        demonstrably not in the best interests of the Project.
      Detailed drafting of the procedures but with greater detail to be
        agreed by Core Group.
      PPC 2000 Constructor’s
   Pre –construction to carry out its activities in accordance with
    Partnering Timetable.

   Construction phase – obligation to carry out and complete the
    works with input from as agreed from other Partnering Team
    Members in accordance with the Partnering Documents by the
    Completion Date

   Option for Constructor to carry out its obligations with reasonable
    skill and care or

   Constructor to take full responsibility for the design supply
    construction and completion of the Project in accordance with the
    Partnering Documents.

   Client allocated risks see table

   Single project or multiple projects using framework agreement
                             NEC 3

   Bi-lateral contract with Partnering Option X12

   Parties to act in spirit of mutual trust and co-operation

   No pre-construction phase but possibility of appointing consultants
    on NEC professional services contracts and Contractor on Short
    form of contract for pre-construction phase. No mechanism for
    linking team at pre-construction phase to team at construction

   Design liability – Client / Contractor or mixed.
    NEC 3 Partnering Features

 Parties bound to act in a spirit of mutual trust and co-operation

 Early warning procedures to manage risk

 Clause 60.1 compensation events

 Employer’s design Contractor’s design or contributions from both

 Interlocking family of documents Professional Services Contract –

 The NEC has a range of options for payment –

   − Option C - Target contract with activity schedule
   − Option D – Target contract with bill of quantities
   − Option E – Cost plus
NEC 3 Limitations: Integration and
    NEC assumes a relatively complete design by Employer consistent
     with Latham’s suggestion that parties should take “all reasonable
     steps to avoid changes to pre-planned works information”.

    Design procedures simply assume submission of Contractor’s
     design to Project Manager for acceptance.

    No procedures for managing a mixed design process.

    The contract is simply 2 party with the Employer taking
     responsibility for his design the contractor taking responsibility for
     his own design.

    The contract does not anticipate early integration and
     collaboration on the part of many participants.
                NEC Option X12

   The option introduces clauses and partnering information into the
    existing NEC contract between the Parties i.e Main Contract or
    Sub-contract or Professional Services Contract

   Not a multi-party document - does not create contractual relations
    between Partners unless there is an existing contract into which it
    is incorporated

   No contractual duties owed to other Partners but may increase
    likelihood of duty in tort

   It allows for greater collaboration but the detail needs to be
    designed by the parties and the relationship with underlying
    contracts is not spelt out and not easily defined.

   Potential conflict between “ Partnering” procedures and works
              NEC3 Option X12

   Partners identified in Schedule

   Work together to achieve Client’s objective

   Work together as stated in Partnering Information – changes to
    Partnering Information are compensation events

   Managed by a Core Group. Core Group can make decisions which
    Partners must implement.

   Partners must provide information to each other and advice
    information and opinions to the Core Group

   Contributions timetabled

   Transparency of information – contingency risk allowances in
    programmes and costs.

   Option to incentivise by agreeing arrangements
NEC 3 Relationship with Own
   “No legal Partnership created between Partners who are not one
    of the Parties to this contract”

   Contractor obliged to Provide the Works in accordance with the
    Works Information.

   Design Liability option – design rests with Employer or Contractor

   Contractor option for limitation of design liability to reasonable
    skill and care.

   Responsibility for design of Partnering Group – as between
    Contractor and Client probably depends upon who implements it
    in their own contract.
                           JCT CE
   Bi –party agreement with option to enter into a separate Project
    Team Agreement

   Purchaser and Supplier are the parties

   Client is the person ( who may be the Purchaser) who is procuring
    the project

   Services the services, work and or goods to be provided

   Overriding Principle – Collaboration - Working together and with
    Project Participants in co-operative and collaborative manner –
    sharing feedback on each other’s performance and sharing
    information at the earliest opportunity.

   Not a main contract or sub-contract in the construction industry
    sense but a supply chain agreement adaptable for use in different
    levels of the supply chain and for different participants

   Lump sum / re-measurement or target cost options
                          JCT CE

   Integration through The Project Team – optional Project Team
      Functions – general review and improvement of construction
        and partnering processes
      Role advisory
      Liability as between partnering team under PTA excluded
        except in respect of incentive sharing

   Integration of the Supply Chain
      9.2May sublet services in part with consent ( not to be
        unreasonably withheld)
      9.2 Subletting – use of more onerous terms to be avoided
      Unless otherwise agreed JCT CE terms to be used
   Overriding principle
              JCT CE Integration

                                               3.6 Where the Supplier is a Sub-
•Client ( Purchaser) A Co ( Supplier )         supplier and Purchaser’s Contract
                                               provides for matters to be decided
                                               by or with agreement of the Other
                                               Party e.g. Client ( Other party) –
                                               A Co (Purchaser) must use all
                                               reasonable endeavours to consult
   A Co ( Purchaser ) B Co ( sub supplier)     with B Co before decision made
                                               by Client. E.G extension of time

        B Co ( Purchaser) C Co ( sub-sub- supplier)
        JCT CE Risk Allocation
   Risk Assessment and Risk Register

   Risk Allocation

   Notification of risks allocated in Schedule

   Relief Events
      Instructions
      Breach
      Identified risks to the extent not allocated to the Supplier
      Risks not reasonably foreseeable at contract date
         − beyond the control of the supplier
         − But not any act omission or insolvency of the Supplier any
            member of the Supply Chain or any sub-supplier of the
            Supplier to the extent set out in contract particulars

   See table

   Term contract based upon PPC 2000 but for services over a term
    on a call off basis
   Multi-party – the term provides ideal opportunity for integrated
    team working and measurable continuous improvement
   Term Programme implemented by Orders and Tasks. The scope of
    Orders or Tasks can comprise day to day tasks or a fuller range of
   Payment based upon Price Frame work – can be based on rates
    lump sums or open book approach
   Option for separation of Profit, Central Office, Site Overheads so
    cost and pricing more transparent to allow savings to be more
    easily identified.
   Provisions for transfer of Assets or Employees
   Except as agreed no guaranteed minimum value or number of
   Limited provisions controlling the implementation of tasks / orders
   Risk management – risk register
   Change / risk management see table
NEC 3 Term Service Contract

   Based upon the NEC conditions. Pricing document uses rates and
    lump sums – with lump sum or target cost options.

   For provision of a service over a period of time with the option to
    issue “ Task Orders ” provided tasks fall within service.

   Assumes service defined pre-contract in the tender stage

   Not Multi-party but partnering Option X12 can be used

   No specific supply chain documentation – notes on amending head
    contract to sub-contract.

   Service Manager monitors Contractor’s plan and assesses any
    change to the Prices or Plan through compensation events

   Risk management through early warning and risk register
          Features of partnering
   Collaboration

   Integration

   Incentivisation

   Risk management -Pre-construction phase

   Risk management - Construction phase

   Single Project

   Multiple Projects

   Performance measurement

   Transparency

   Continuous improvement
                Project Contracts
Features         PPC 2000          NEC 3          JCT CE

Multi-party      Yes –             No             No

Partnering       See above         X 12           CE/p
Option                             partnering     partnering
                                   process        process
Collaboration    Partnering Team Actions 10.1     Overriding
                                 Option X12       Principle

Integration      Supply Chain      Pre –          Project Team
                 part of           Construction   Agreement
                 Partnering Team   Phase          Supply Chain
                 – Design and      OR             arrangements
                 pricing in        Post
                 collaboration     construction
                                   phase – team
               Project Contracts
Features        PPC 2000           NEC 3             JCT CE
Risk            Collaborative by   By Client or      By Client or
management      Partnering         Contractor at     Contractor at
Pre-            Team and Core      tender stage      tender stage
construction    Group              identifying and   identifying and
phase                              agreeing          agreeing
                                   allocation        allocation

Risk            By Core Group      Contractor or     By Supplier if
management                         Client or Core    stipulated by
Post                               Group if X12-     prep of Risk
Construction                       used updating     Register and
                                   risk register     updating Risk
                                   operating CE      Register
             Project Contracts

Features         PPC 2000   NEC 3           JCT CE

Single / Multiple Single    Single          Single

Performance      KPI’s      If Option X12   If Part 6
measurement                 adopted and     adopted and
                            KPI’s agreed    KPI’s agreed
               Project Contracts
Features        PPC 2000         NEC 3              JCT CE

Transparency    Transparent       If Target Cost    If Target cost –
                build up of Price chosen            definition of
                Framework         transparency of   Actual Cost and
                                  cost and          records
                                  adjustment of
                                 Lump Sum           If Contract Sum
                                 Option –           - no
                                 transparency of    transparency of
                                 Fee and Defined    pricing and no
                                 Cost of            clear basis of
                                 Compensation       valuing Relief
                                 Events             Events
                Term Contracts
Features          NEC                     TPC 2005

Collaboration     Not multi –party        Multi-party
                  Post contract Option    Supply Chain
                  x12                     documents must
                  No specific supply      compliment term
                  chain documents         agreement
Integration       Pre –service delivery   Pre-Task Order
                  - Client and Service    delivery working as
                  provider in separate    team to establish
                  teams.                  conditions precedent
                                          to Task Order.
                                          Working on processes
                                          e.g. value
                                          management ,
              Term Contracts

Features             NEC                       TPC 2005

Risk management -    Identification of risks   Pre service delivery
Pre-Service / Task   by tenderers /            phase identification of
Order                allocation of risks by    risks by teams and
                     NEC terms                 design of service.
                                               Allocation of risk
                                               management through
                                               risk register
               Term Contracts
Features         NEC                    TPC 2005

Term             Service – including    Programme of Works,
                 tasks if Option x19    Services or Tasks

Performance      If Option X12 chosen   Team objective –
measurement      KPI’s and              continuous
                 incentivisation by     improvement.
                 measurement and        Measurement by
                 improvement of         KPI’s provision for
                 performance            incentives
Transparency     Lump sum – prices
                 and fee separate
                 Change measured by
                 Defined cost
               Term Contracts
Features         NEC                      TPC 2005

Transparency     Lump sum – prices        Prices for “ Tasks”
                 and fee separate         payable on basis of
                 Change measured by       Price Framework.
                 Defined cost             Option for separate
                 Target Cost – target     identification of
                 prices and fee           Agreed Profit, Central
                 separate. Change         Office Overheads and
                 Defined cost. Cost for   Site Overheads and
                 measuring shares –       Tasks payment on
                 Defined Cost             open book basis
                                          Client may inspect
                                          financial records

 Client - think about what your procuring
    Is it a project – why are you partnering – are the
      partnering features important ?
    Is it a Term Contract for series of works or services –
      why are you partnering – what processes are you
      expecting beyond performance of the tasks or service
    Can you define the content of the work and services
      adequately ?
    Do you need to retain the option of using more than one
      lead supplier under the same agreement ?
    Which of the Project Contracts meets your needs
    Which of the Term Contracts meets your needs
    Do you really need a framework agreement instead
    Tim Willis

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