A framework agreement is like an umbrella that sits above a contractual dinghy in which the elements of the Egan partnership await their fate like good little girls and boys. Until, of course, it starts getting wet
What’s this “framework” idea all about? I was at the launching of the JCT Framework Agreement (2007), and I didn’t know much about it. A fellow guest whispered “Why didn’t they call it a term contract?” Don’t ask me. Next day I noticed in Building that one or two cute people had plugged into £9.5bn of construction work with Spanish-owned BAA (18 January 2008). But I’m still none the wiser about framework agreements. The JCT is keen, though, hence its 16-page document thingy.
It’s an umbrella. But not a standalone umbrella. The framework umbrella sits neatly above a sailing dinghy. And in the dinghy is the construction enterprise: the architect, the PQS and the employer. They are all reading the ordinary standard form JCT contract (the ones that you are familiar with).
In short, there are two lots of agreements to be agreed. It is my guess that for all that £9.5bn BAA work, the nine companies involved are still mere contenders for some of that work. A framework deal is, in my old-fashioned language, a “call-off” deal. The potential winners of work have agreed what I will call basic ingredients. But they haven’t yet won any work. It may even be that having got a framework in place, no work is won at all. A framework deal is an “if” deal. It’s more or less like you saying to me: “Let’s do a deal whereby if we need an adjudicator next year we have already agreed your terms.” So, we have a call-off deal.
So, having got the umbrella up and agreed, what next? The JCT explains that the employer will issue an enquiry to what it calls “the provider” in the dinghy. The enquiry sets out the specific works. It may be that the umbrella has agreed basic prices and costs. So, if Laing O’Rourke is asked to fix a door knob at Stansted airport, the framework has pre-agreed the price. If Carillon is asked to build another runway, the framework may have laid down which JCT form will apply, may have priced the canteen costs, the staff, the huts, the price of the concrete. Truth to tell, it doesn’t matter how detailed the framework agreement is. The idea is to somehow short circuit the actual or eventual contract value. Having worked out the actual price on the call-off system, all that is needed is the order to build the runway or fix the door knob.
What’s the big idea behind all this? The JCT says it’s all down to Sir John Egan and his Rethinking Construction report. He challenged the way we have done things hitherto in our industry. Oh, he had a sound point. Instead of doing one-off work (invariably won at the lowest bid by the outfit that dropped the biggest clanger when estimating the job) he thought it better to “be together”. Better to move teamlike from project to project. He said: “Fragmentation of production roles and processes tends to bring contractual relations to the fore, further inhibiting effective and efficient team-working, sharing of information and know-how.”
This is grand stuff. All we need in the dinghy is that bulldog in the television commercial that says ‘Oh yes’ …
And now for what happens in real life
JCT Framework Agreements makes a similar point: “The focus tends to be on contractual demarcation lines and responsibilities, rather than working together to meet the client’s needs in the most effective and/or efficient manner.” Frameworks enable project participants to take a longer view, to build and develop relationships, to “enhance the reputations and commercial opportunities of all concerned”. This is grand stuff. All we need in the dinghy now is that smiling bulldog in the television commercial that says “Oh yes”.
And now let me tell you what will happen in real life. Happily, an estimator somewhere is going to help to compile a four-year call-off framework price list … and lock his outfit into an awfully big mistake. It’s a fixed price four-year call-off term contract. As soon as it is realised that any one job under the umbrella is going to take a cold bath, folk will begin to wriggle. Hold on, says the construction chief, this deal will bring a profit on the next job. But it doesn’t. Oh misery! Oh wet dinghy! Man overboard!
I do wish Egan well but we in construction are fond of fighting. The JCT gets 10 out of 10 for trying … but the JCT is not in the dinghy, and it gets damp down here.
Tony Bingham is a barrister and arbitrator