All for one: The OGC's contract decision

I recall some years ago enjoying lunch with my good friend Tony Bingham and other industry people. Suddenly he leapt up and, with a magician’s flourish, threw loads of standard contracts upon the table: yellow forms, blue forms, green forms, gold forms and on it went. The point had been made.

The industry is awash with forms. Tony’s pile did not, of course, take into account the thousands of bespoke and amended standard forms.

By now I hope the reason for this story has become apparent. It relates to Tony’s article, The Great NEC Stitch-Up (page 47, 26 June). He railed against the government for favouring the NEC3 over contracts published by the JCT and the Association of Consultant Architects. Given his stance back then, I’m at a loss as to why Tony is encouraging the proliferation of contracts.

Let me give some background as to how the Office of Government Commerce (OGC) and the Public Sector Construction Clients’ Forum (PSCCF) reached the decision to endorse NEC3. There are numerous misconceptions and errors in Tony’s column.

There remains a vast array of contracts used by government procurers. Each time one bids for a government project, the contract on offer is likely to be different from the last job. Along the supply chain, the position is a nightmare. All sorts of contractual nonsense reigns supreme. In a 2005 survey carried out by my organisation, the overwhelming majority of engineering contractors expressed dissatisfaction with the contracts imposed upon them on government projects. This state of affairs is wasting the industry millions of pounds.

Ten years ago the government launched its Achieving Excellence initiative, which had standardisation – including contracts – as one of its main aims. Like JCT, the GC/Works Contracts reflected the outdated baggage of traditional contracting. The National Audit Office, which represents the interests of the taxpayer, recommended that the government adopt the NEC3 contract since it “embeds the principles of good project management in its procedures and promotes role clarity”. Subsequently, the OGC endorsed the NEC3 for use across government construction projects.

Tony says NEC3 ‘waxed lyrical’ about partnering. Actually, it didn’t. It waxed lyrical about effective and efficient management requiring the active participation of the parties

Tony makes reference to the Public Accounts Committee. I think he means the Business and Enterprise select committee. In 2007 this committee launched its inquiry into construction; it received submissions from all sides of the industry and its clients. The committee bemoaned the fact that a large proportion of government construction was still let using a variety of traditional contractual arrangements. In its report, Construction Matters, the committee recommended that government departments work towards the use of collaborative contracts that are transparent and non-adversarial. “NEC3 has set the benchmark in this area,” it said.

As Tony rightly says, the OGC invited Arup to consider whether NEC3, the JCT Constructing Excellence contract and PPC2000 satisfied the Achieving Excellence criteria. The decision on whether to continue only endorsing NEC3 was sensibly left to government clients sitting around the PSCCF table. This was not a decision for the Construction Confederation chief or, indeed, any other chief. The PSCCF could not see any justification for encouraging further proliferation of forms.

Now we come back to some of Tony’s other points. He states NEC3 is outside the comfort zone for 99% of firms. Where on earth does he get this figure from? I am aware of many specialist contracting companies that have worked under NEC3 and, having been there, hate the thought of having to work under a DOM/1 subcontract. Why so? Adversarial contracts cost them dearly.

Tony says NEC3 “waxed lyrical” about partnering. Actually, it didn’t. It waxed lyrical about effective and efficient management requiring the active participation of the parties. It wasn’t about being nice to each other – it was about regularly engaging the other party better to manage risk and avoid surprises. NEC3 is favoured by Procure 21, the Highways Agency, the Environment Agency, the Olympic Delivery Authority and now the £15.9m Crossrail project.

Having said what I have, I do not condemn in any way the JCT Constructing Excellence contract or PPC2000. Far from it. But it is costly to the industry (and, therefore, to the taxpayer) for the government to promote a range of contracts. Government clients have made a decision. We should now ensure that it is implemented across the whole of government procurement, particularly along the supply chain. In this way we’ll save the industry and the taxpayer millions of pounds.