Professor David Mosey, King’s College London Centre of Construction Law
At last the construction procurement landscape is moving decisively in the direction of collaborative working, and a catalyst is required to capture the lessons learned by the pioneers and to increase the momentum of change. Should this be a new form of contract? I can hear the groans already.
It is true that construction contracts are not always the friends of a collaborative approach: they can often encourage two party silos and become a breeding ground for claims and disputes. Also, whatever your preferred construction phase standard forms, they are usually signed too late to be able to help create integrated teams with clear roles and joint objectives. These contracts cannot prevent collaborative aspirations being undermined by the exploitation of poor tender documents, incomplete or late designs, inadequate site investigations or unrealistic deadlines, or by failure to learn from one project to another.
But a new form of framework alliance is a different matter, and to quote the National Association of Construction Frameworks (NACF) in 2016: “significant savings, benefits and other efficiencies in construction can be achieved by effective frameworks through the longer-term arrangements, non-adversarial relationships, common incentives, integrated teams and objective assessment of performance associated with such frameworks”.
With this in mind King’s College London Centre of Construction Law led drafting and consultation with over 120 organisations on the new standard form “FAC-1” Framework Alliance Contract. FAC-1 is designed to help plan and integrate any number of related two party contracts and/or related projects for works and/or services and/or supplies, so as to:
- enable a client and its team to obtain better results
- help to integrate a team into an alliance
- clarify how project contracts are awarded and how performance is assessed
- help to obtain improved value through joint alliance activities
- operate in conjunction with FIDIC, JCT, NEC, PPC and any other project contract form in any sector and in any jurisdiction.
FAC-1 drew on bespoke frameworks which had already successfully adopted a collaborative structure, including those illustrated in the UK Government’s 2012 Effectiveness of Frameworks Report and in related trial projects. Click HERE to view the document.
Under the FAC-1 multi-party structure alliance members have a shared system of open performance measurement and rewards by reference to agreed objectives, success measures, targets and incentives. Contractors and other providers need to understand how success measures affect the future award of work, and FAC-1 provides clarity as to which targets are so important that a failure to meet them will require urgent action. It also includes an early warning system enabling notification of the reasons behind any issues or obstacles that are encountered.
FAC-1 creates a collaborative system for risk management including a risk register kept up to date by an in-house or consultant alliance manager, for approval by a core group of agreed individuals. This core group also acts as a joint forum through which alliance members can raise issues with each other in order to resolve problems before they become disputes
FAC-1 introduces a new collaborative system known as “supply chain collaboration” , which describes how clients can work with tier 1 contractors to improve mutual commitments under tier 2/3 subcontractor and supplier appointments. Surrey County Council trialled supply chain collaboration on its highways alliance and agreed 15% post-tender cost savings, ten year warranties, local business opportunities and additional apprenticeships.
In the first year since its publication FAC-1 has been adopted on works and services totalling over £9.5 billion, and ranging from a £7.5 million small works programme for Southern Housing Group to a £5.5 billion multi-client schools programme for the LHC local government consortium.
In the private sector FAC-1 has been adopted by the Football Foundation, Sport England and the Football Association to integrate the work of five contractors and modular suppliers with two consultant firms under a £150 million national programme for construction of new sports ground changing rooms. It has also been used on the sub-structure and infrastructure frameworks procured by the developers of Graven Hill, the largest self-build programme in the UK.
Futures Housing Group used FAC-1 to integrate the work of 23 small contractors under a £40 million works programme, and reported savings of 10% on previous prices. They also created new initiatives for training and employment, for rapid payment and for discounted access to building supplies from Travis Perkins.
On the new Crown Commercial Service £2.8 billion project manager and architect frameworks, the appointed firms will enter into FAC-1 contracts with each other in order to agree ways to deliver better value services. Meanwhile the European Bank for Reconstruction and Development has obtained a briefing on FAC-1 and has decided to review its potential value under pilots with selected clients.
The results so far suggest that FAC-1 offers more than two party construction phase contracts can ever achieve, and that it can be an effective catalyst to help build strong teams with a culture of collaboration and continuous improvement. Regular FAC-1 updates and guidance can be found at www.allianceforms.co.uk