Alliancing can improve quality as well as productivity – and the JCT Constructing Excellence Contract is just the ticket. Peter Hibberd explains how the contract can rejuvenate collaborative approaches across the construction industry.
Those involved with construction frequently berate themselves and others for its poor performance, often rightly. Nevertheless, they fail to recognise fully what can be done to improve. The tendency is to concentrate on improving efficiency, but this is not enough – as one can be efficient without creating value. What must be improved is quality and productivity, as these will create project life value for the client and a better return to the participants without increasing costs disproportionately.
Those two objectives are achieved through appropriate procurement processes, but evidently there are differences of opinion as to which process is best. Whatever process is adopted, none will work effectively in delivering a successful whole-life asset without leadership, management skills, design and technical competence and an appropriate legal framework. Even then, for those requirements to be successful there must be collaboration, which in turn is dependent on trust, fairness and honesty. Behavioural capabilities and motivation should not be underestimated for the part they play in creating relationships that deliver superior outcomes. In recent years alliance arrangements for contracting, which some suggest is a form of partnering, have emerged; these are similarly dependent on such factors.
What, then, is different about an alliance? Recently King’s College London’s Centre of Construction Law suggested that the contractual principles supporting a successful alliance were: shared objectives, transparent performance measurement, aligned commercial interests and collaborative governance, which collectively underpin shared risk management. These are indeed much the same as those for partnering.
The reality is that participants generally endeavour to establish shared objectives and work with absolute good faith within a legal framework that not only supports these but provides a mechanism in the unfortunate event of breakdown
Obviously such issues have the greatest potential impact when a series of projects are involved rather than a one-off; scale is a major factor but not necessarily the determining one.
An umbrella such as a framework agreement partly meets those requirements but something more is needed because for each contract called off under a framework agreement there is often a need for an underlying contract such as JCT’s Constructing Excellence.
Some believe legal requirements get in the way of partnering arrangements, which rely on trust and good faith, and that if you need such an agreement then the approach has failed; that view is too simplistic. A more frequent complaint about partnering, collaboration and alliancing is the lack of an effective legal agreement; they are too touchy-feely and lack teeth. The reality is that participants generally endeavour to establish shared objectives and work with absolute good faith within a legal framework that not only supports these but provides a mechanism in the unfortunate event of breakdown.
An alliance arrangement, like partnering, is not a specific procurement method but rather a concept that can be used with or incorporated into many forms of contractual arrangement, albeit some better than others. That is where JCT’s Constructing Excellence Contract (CE) together with its Project Team Agreement (PTA) come in: there is no need to start devising further documentation. CE fulfils all the requirements identified for an alliance, and much more. It embraces early involvement of all parties and not only underpins collaborative working but also promotes the formation of integrated teams, transparency in all things – including risk – and shared objectives. CE’s overriding principle is working together and it operates throughout the supply chain using a series of bilateral contracts. That, together with each party’s obligations on communication, collaboration (which includes consultation) and transparency, are the drivers that improve the outcome in terms of both productivity and quality.
This is done by working transparently using well defined processes and may, optionally, adopt risk and reward sharing arrangements by taking into account the project’s final cost and its previously agreed target cost
As with any partnering or an alliance approach, CE assumes a different mindset where positivity flourishes and blame becomes redundant. This means establishing not only clear objectives but also a basis for fair payment that properly takes account of project risks. One must choose the appropriate payment option (section 7), provide a risk register and determine the risk allocation schedule (section 5).
A valuable attribute of CE is that it deals with all a project’s important requirements, not shying away from insurance, copyright, termination or dispute resolution, which must all be covered in alliance-type arrangements. The contract also provides specifically for sustainability and health and safety, and for measuring performance using key indicators. CE is an effective legal framework that recognises the statutory setting within which construction operates yet avoids making liability overly complex.
The PTA is a supplementary agreement to CE for bringing together the project team members in a multi-party agreement. Its objective is to guide successful delivery of the project through design and construction. This is done by working transparently using well defined processes and may, optionally, adopt risk and reward sharing arrangements by taking into account the project’s final cost and its previously agreed target cost. This agreement also requires early consideration of matters that might lead to disputes: the project team is tasked with conciliation.
Those engaging in an alliance are presented with much the same issues to address as those entering into any other contractual arrangement. Success does not come by avoiding these issues but by embracing them and in so doing working together to build the alliance that delivers quality and productivity gains. JCT’s Constructing Excellence contract is ready-made to support that objective. It is familiar yet remains novel; it is flexible yet provides discipline.
Peter Hibberd is the past chair of the Joint Contracts Tribunal