More DIY disasters

Powerful clients are often tempted to commission bespoke forms of building contract – and lawyers are always willing to oblige. But does a bespoke contract actually make good commercial sense for the client, and is it really a sustainable alternative to a published contract form?

Recent exchanges between Anne Minogue and Rudi Klein over bespoke components of the Network Rail suite, and criticism elsewhere of the Building Schools for the Future (BSF) bespoke design and build contract, have put these issues back in the spotlight.

From the main contractor’s point of view, a bespoke form suggests a client is flexing its muscles and prompts close inspection to check what risks have been transferred to the supply side. A bespoke form also demands the reworking of subcontracts and supply agreements, a cascade effect whereby the whole supply chain spends time and money checking its fresh obligations while falling into a defensive state of mind.

This all adds up to an expensive distraction from what the client really wants to achieve: namely a successful project. Even where bespoke contracts are bulldozed through to signature, it is naive to think this is enough to educate the supply chain as to how they work. In fact, the difficulty in learning to use bespoke forms is bound to increase the risk of misunderstandings and disputes – and create further expensive sideshows that do not help the client’s business.

The uncomfortable reality is that bespoke forms can create an atmosphere of hostility that undermines the best intentions. So why do it? Enormous effort goes into creating standard forms and it is sheer hubris for drafters to think they can do a better job just because a big client has asked them to.

Highlighting the positive aspects of bespoke contracts misses the fundamental point that there is no need for them
in the first place

Granted, the Network Rail suite includes published forms and concessions to modern practices. Likewise, the BSF form fits with other BSF documents. However, highlighting the positive aspects of bespoke contracts misses the fundamental point that there is no need for them in the first place.

Emerging standard forms such as NEC and PPC2000 between them commanded nearly a fifth of UK construction throughput in 2004. By now, I suspect their share is significantly greater. These forms did not invent good practice – they simply articulated it, and they have now been in use long enough for the supply chain to be comfortable with them. The accessibility of modern procurement and contracting practices, through published contracts greatly increases the chances of their acceptance and adoption.

For example, there are now contract forms that describe two-stage procurement, joint risk management, evaluation of changes and claims, integration of consultant and contractor roles, binding key dates and alternative dispute resolution. These have been studied, trialled and accepted by the industry as a balanced approach – and all this owes much to the fact that they are readily available as published documents.

In contrast, the delay in producing standard construction management agreements in the 1990a encouraged widely different interpretations of this approach and a plethora of bespoke documents. By the time JCT went to print in 2002 the industry had moved on and the innovations introduced by construction management had failed to gain recognition.

This comparison may not bother major clients, rolling out heavily tailored suites of contracts. However, the cost and time spent forcing the market to absorb another set of bespoke or customised documents suggests standard forms aren’t a bad starting point.