The ties that bind

In a letter published in Building recently (14 April), Duncan McIndoe suggests that the true benefits of a partnering arrangement will be properly realised only when a standard form partnering document exists and the concept of partnering is enshrined in a contractually binding document. This was an interesting idea and one to which I have been giving some thought following discussions with clients about how to develop partnering arrangements.

A great deal has been written about partnering in the construction press and no doubt there is more to come. Despite the volume of paper that exists on the subject, the precise definition of “partnering” remains elusive. I see this as a strength rather than a weakness: the absence of any rigid definition should allow flexibility and the development of a number of practical partnering arrangements for consideration on any given project.

One issue that surfaces increasingly is whether a contractually binding partnering arrangement is alien to the whole ethos of partnering itself. Those who are opposed to the idea argue, perfectly properly, that you cannot legislate for good behaviour and that any attempt to do so would defeat the essentially voluntary nature of the partnering arrangement. I don’t disagree with this argument. I have maintained for some time that the only way to effect a truly significant and long-lasting change in the adversarial nature of the construction industry is to change the culture of the industry itself, and, although such as partnering and the recommendations of the Latham and Egan reports point the way, they cannot in themselves bring about this change.

There may be, however, another way of looking at the idea of a contractually binding partnering agreement that sits with the idea of cultural change, and that is to see it as a development of existing partnering arrangements rather than a departure from them. Although it would certainly not be mandatory for every partnering agreement to be contractually binding, it may be the case that a partnering contract might be attractive in some circumstances. The parties may feel that their commitment to the partnering process can best be demonstrated by taking the voluntary nature of the partnering arrangement one step further and entering into a separate, free-standing contractual agreement. Alternatively, they could incorporate a number of appropriate obligations into their contract.

The issue here is not necessarily whether it would be possible to enforce these obligations in court or to sue for breach of a partnering contract. The value of this approach lies in demonstrating the parties’ commitment to the partnering ethos by endorsing the partnering relationship in the contractual document, as McIndoe says. He is also right to point out that the concept of “good faith” is something that the courts seem increasingly willing to enforce. In these circumstances, the use of such terms in a contract does not seem far-fetched.

Of course, none of this is particularly new. Provisions dealing with partnering obligations already exist in contractual form. The best known example is clause 10.1 of the Engineering and Construction Contract, where the parties agree to act “in a spirit of mutual trust and co-operation”. The guidance notes to the ECC explain that this requirement (added to the second edition of the NEC) was included on the recommendation of Sir Michael Latham. Surely the purpose of this clause is not to provide another contractual hook on which to hang subsequent claims but to demonstrate at the very start of the contract the spirit in which the parties will approach the contract and the project generally. That demonstration of commitment lies at the heart of a contractual partnering arrangement.

So, if my client wanted to have a contractual partnering agreement, what sort of clauses would I suggest? Although each project would obviously have to be considered on its own terms, the fundamental features would be as follows:

Parties may feel their commitment can best be demonstrated by taking the voluntary arrangement one step further

• A clear statement of the objectives of the relationship. Emphasise that the employer and the contractor will work together in a business environment to develop innovative solutions to problems arising in relation to the works, to co-operate in problem-solving, to employ the highest standards of effort, design and workmanship in the execution of the works, to use the best quality resources and skills available to the parties and to reduce or eliminate adversarial behaviour and disputes as far as possible.
• Establishment of a liaison group responsible for ensuring the objectives are observed.
• Possibly the establishment of some sort of incentive scheme linked to the fulfilment of the objectives.
• A definition of the term of the agreement with review provisions by the liaison group at the end of the term. The purpose of this review would be to decide whether the present arrangements should continue, whether they should be re-evaluated or amended, or whether the agreement should be terminated.
• A dispute resolution mechanism to deal with any disputes that arise in relation to the partnering agreement in a practical and (as far as possible) non-adversarial manner, probably involving some sort of neutral adviser and/or mediation.

I have said on more than one occasion that a partnering agreement should not be used as a substitute for properly drafted underlying contractual obligations. I doubt that many would disagree with that view. The contractual partnering agreement simply takes this one step further and one step closer to incorporating those partnering objectives in the contract.

As I have already said, this is not a solution that I would recommend for everyone: indeed, if the parties feel that their partnering arrangements would be damaged by making them contractually binding, then obviously this is not a course they should adopt.