The new kid can win this battle

The JCT’s partnering agreement, Constructing Excellence, is bold and brave. It does all the things Andrew Hemsley said it would in his article on 17 November (page 59) – and more.

But as the new kid on the block, competing with two veteran partnering contracts, NEC X12 and PPC2000, will it get a following?

The table attached compares some of the key aspects of Constructing Excellence, NEC X12 and PPC2000. At first glance, Constructing Excellence seems more user-friendly:

• The parties to the contract are the purchaser and the supplier
• There is only one set of conditions, whether the supplier is the contractor, consultant, subcontractor or subconsultant
• The terminology is straightforward
• The drafting is clear and concise and the format will not be unfamiliar to those who use the JCT forms.

The Constructing Excellence approach to risk management is unique. There will be several bilateral contracts between a series of purchasers and suppliers. Before each contract is entered into, the purchaser must ensure each project-specific risk is identified and recorded in a risk register. Some of these may be mitigated entirely by investigation or insurance. Others may not. All purchasers and suppliers must:

• Agree who will be responsible for managing such risks
• Agree how the financial and time consequences of each risk will be allocated
• Record the decisions made in the contract’s risk allocation schedule.

If a risk is not included in the risk allocation schedule, it will be dealt with as a “relief event”. That mean its time and financial consequences will be evenly shared between the purchaser and supplier (unless stated otherwise).

This approach to risk management is arguably more collaborative than that of the JCT form’s rivals, but getting the work upfront right will be vital if the project is to reap the fruits of true collaborative working.

Unfortunately, unlike PPC2000, the early activities of identifying, mitigating and allocating project risks need to be carried out under a separate arrangement from that under which the construction activities will be carried out. Realistically, the ultimate client will often engage the potential project team to carry out this work for a fee.

High procurement costs, I hear you cry.

Fear not: the extra cost of negotiating a preconstruction activities contract is likely to be outweighed by the fact that Constructing Excellence is less process-driven than NEC and will require less bespoke drafting of supporting documents than PPC2000.

Another argument in favour of Constructing Excellence, as well as NEC X12, is that the collaborative framework is achieved without the uncertainties about the potential liability of each party to the others that is intrinsic to PPC2000. This will be a relief to contractors, which arguably bear the greatest risk under PPC2000.

However, those who worry that partnering is over-reliant on the team’s willingness to “play happy families” may be concerned that under Constructing Excellence, the project team has no teeth to drive the work forward. This is because its role is only advisory and the contract does not state how its decisions are to be taken. These concerns may be legitimate, but one does not usually go into partnering feeling pessimistic and unwilling to work collaboratively.

It will be obvious by now that I like Constructing Excellence. The procurement strategists out there who, like me, have an optimistic streak may agree.