The RICS Contracts in Use Survey, published earlier this month, revealed some interesting and surprising trends – not least the increased take-up of the NEC form
The RICS’ 10th Contract in Use Survey reinforces many of the issues that we see in our working lives. The survey is not based on what people think they are doing, what they would like to happen, or the sales of forms of contracts. Rather, it relies on practice across a wide range of chartered quantity surveyors. This year’s survey of contracts used in 2004 confirms some interesting trends.
The JCT standard forms are now the single most prevalent form of procurement, and the JCT With Contractor’s Design is the most popular contract. This would suggest that clients are attracted by the increased certainty of cost and time associated with this form of contract.
Clearly many clients want to transfer the design and construction risks away from themselves. Alternatively, clients’ preference for design and build could reflect on the design management service they get from their consultants.
This also leads onto the question – how is this risk transfer being done? The survey does not pick up the degree of amendment to standard forms. Heavy amendments, such as making the contractor responsible for the ground risk and the pre-contract design are increasingly common.
Interestingly, bills of quantities, prepared for clients, show a slight increase on the previous survey, although the overall trend is downwards.
Hidden away in the data is the inference that design and build is strongest in London and the South-east, with bills of quantities mainly surviving in the rest of the country. This is probably related to the dominance of privately financed projects in the South-east and public projects in the remainder of the UK. Is this because private clients are more commercially aware and so find design and build more attractive? We will look at this in future surveys.
Now, for the first time, the NEC contracts are making a real showing
For years the JCT family of contracts has dominated the results of our surveys. Now, for the first time, the NEC contracts are making a real showing. The only surprising thing has been how long this has taken, given the perceived support for the NEC from Egan and Latham.
The NEC forms are an excellent system to follow if all the parties understand what is actually required. Clients, consultants and contractors need to allow more management resources. The need to keep on top of change requires a lot more input from decision makers, project managers, surveyors and programmers. This needs to be reflected in consultants’ bids, contractors’ preliminaries and clients’ management teams. Failure to make this effective might lead to a rise in adjudication work.
The survey shows a rise in the use of partnering agreements, particularly PPC2000. The emergence of partnering is an unusual step in commercial agreements. PPC2000 is an innovative multiparty contract, as opposed to the partnering bolt-on clauses of the JCT and NEC suites. It brings together all the parties, client, consultants, contractors, and specialists in a contractual framework, with the pre-contract timetable becoming a contract document. So now a designing consultant has a contractual link with a designing specialist, so this should make life interesting.
PPC2000 is strongest in public procurement, especially social housing. Is this survey the first to show an emerging trend? Or is it a blip, like management contracting was in the 1980s?
Surveys like this always throw up unusual information, and this one is no different. The returns record 18 uses of the 1980 edition of the JCT Minor Works Form. So some people are not only happy to use such an old form, they are also happy to tell their professional body they did so.
The survey confirms that this is a time of change in construction procurement. The market’s response to this can be seen in the emergence of alternative contract writing bodies. However tempting this may be in the short term, I would be disappointed if we lose the many advantages that flow from a single, industry-accepted, contract writing body.
Michael Sullivan is vice chair of the RICS quantity surveying and construction faculty and partner of Rider Hunt