Ann Minogue wrote here that my criticism of Network Rail was unfair. But she is living in a fantasy world where there are still adversarial tools and penalties rather than teamworking and shared risk
I was pleased that I was able to provide some material for a recent Ann Minogue column (“Rudi’s on the wrong track”, (28 September, page 59).
Ann kicked off by accusing me of lambasting everyone in pursuit of my own vested interest. Most people have “a vested interest”, including Ann. Her vested interest in this case is her client – Network Rail.
My comments on Network Rail’s recasting of its contracts were in defence of a procurement policy that has been established for some time by the government and the National Audit Office (NAO), the taxpayers’ watchdog.
Let me acquaint Ann with its basics. Guidance was published by the Office of Government Commerce (OGC) as part of the government’s Achieving Excellence in Construction programme. In its procurement guide six, the OGC states: “An integrated project team should be appointed to carry out the project.” So, what does this require?
- Early involvement of key supply chain members in the design process so they are in a position to own the design solutions and decisions on risk and cost
- Selection on best value, not lowest price
- Emphasis on partnering and collaboration, and the exclusion of adversarial relationships
- Risk-share to replace risk-dumping.
This represents a complete departure from traditional procurement. In 2005, the NAO produced a report called Improving Public Services through Better Construction. It concluded that much work still needed to be done to involve the supply chain – where most of the value lies – in key decisions affecting project outcomes. Alongside other best practice measures, such involvement would help contribute to an overall annual saving of £2.6bn.
The message was clear. Public sector construction procurement strategies should embrace integrated and collaborative delivery. What about the contract? This should support the procurement strategy.
Back to the NAO: “Some contracts still take the traditional, more adversarial approach and are not suitable for modern collaborative ways of working.”
I suspect the supply chain contracts on Network Rail’s projects will continue to represent a back-to-back approach so that risk will still be ‘shunted’ along the supply chain
The NAO and OGC supports the use of collaborative contracts such as NEC. Although I am the chairman of the NEC User’s Group, I am not averse to other forms of collaborative contracts being used, such as PPC2000 or the JCT Collaborative Contract.
The issue is whether Network Rail’s contracts reflects the Achieving Excellence in Construction guidance supplemented by the NAO’s recommendations.
What has Network Rail done? Ann says it has adopted traditional contracts but added common amendments. She trumpets the limitations placed on the contractor’s liability as “collaborative”. Sorry Ann, that won’t wash.
It’s living in cloud-cuckoo-land to suggest Network Rail has, Steve McQueen-like, vaulted the fence that separates the land of adversarial contracting from the land of partnering. Ann states that liability for liquidated damages will be limited, but if Network Rail has to impose liquidated damages on the contractor it should not be choosing it as a partner in the first place. Network Rail is saying it does not trust the contractor to finish the job on time.
In Ann’s world there are still adversarial tools and penalties, not teamworking and shared risk. I suspect the supply chain contracts on Network Rail’s projects will continue to take a back-to-back approach so that risk will still be shunted down the supply chain. Where, for instance, in Network Rail’s amendments, can the team discuss the fair apportionment of risk?
Moreover, why is Network Rail adding another suite of contracts to the mounting pile of contractual documentation produced by public sector procurers? The government is keen to standardise contracts. All public sector procurers now have a choice of NEC, PPC2000 or the JCT Collaborative Contract. There is absolutely no justification for a public-sector client to adopt any other form.
Rudi Klein is the chief executive of Specialist Engineering Contractors’ Groups
See www.building.co.uk/archive for Ann Minogue’s column