Many looked forward to the birth of the JCT Framework Agreement 2005 but were disappointed by the reality, says Hillary Cohen. The 2007 version is an altogether better bet
Framework agreements are being used increasingly in the construction industry – for good reason. Employers that require repeat works or services of a similar type can use framework agreements to secure supplies and to save time and administration. Works or service providers benefit from the likelihood of a steady stream of work, enabling them to integrate supply chains and improve efficiencies. Framework agreements thus lend themselves to addressing two key failings identified by Sir John Egan in Rethinking Construction, namely short-termism and fragmentation of production teams and processes.
It was therefore with much anticipation of great things that we saw the introduction of the JCT Framework Agreement in 2005, only to be let down. While excellent in many respects, the agreement received widespread criticism for two fundamental omissions.
First, the 2005 JCT form did not set out the contractual terms governing the carrying out of the works. It was more akin (particularly in its non-binding form) to a partnering agreement, rather than to a contract that created a relationship by which works could be instructed, carried out and paid for. Instead, the form envisaged that the vital terms would be included somewhere else or negotiated on a project by project basis.
Second, the 2005 JCT form fell foul of Europe, as it did not facilitate compliance with the public procurement regulations. This meant that the most likely and potentially prolific users of the form, namely local authorities and other public bodies, probably would not use it.
Enough of the past, as the 2005 form has been confined to history. The JCT must be applauded for listening to the criticisms and addressing them in the recently published JCT Framework Agreement 2007 (FA). Only the binding version now exists; the non-binding version has not been republished, and quite rightly so as it introduced an unnecessary layer of uncertainty.
The 2007 form complies with the EU procurement rules and therefore opens its use to the public sector, as well as still being appropriate for use in the private sector.
Under the EU Consolidated Directive, a framework agreement should not cover a period that exceeds four years except in exceptional circumstances.
The contract particulars also include pricing documents to give parties certainty as to how the price for particular
tasks is to be calculated
There should be a pricing mechanism and no scope for substantial amendments once the framework agreement has been established. The 2007 form covers these points. It also has two provisions for compliance with public procurement processes. Where the employer is a public body that is subject to the Public Contracts Regulations, there is an acknowledgement that the EU tender requirements including advertisement have been complied with. Similarly, where the regulations do not apply, there is an acknowledgement that the principles of the EC treaty, including transparency, equal treatment and non-discrimination, have been applied when public bodies have entered into the framework agreement.
The other improvement is the inclusion of a pre-agreed contractual mechanism that applies to tasks once called off under the framework agreement. This allows the new agreement to be used for a wide range of works and services and at different tiers of the supply chain. It has been designed for use with an underlying contract or contracts (if more than one) as set out in the contract particulars of the framework agreement.
The underlying contracts could be any of a fair number of the standard forms, whether or not published by the JCT, or even bespoke forms tailored to the task or tasks in hand.
The contract particulars also include the all-important pricing documents to give the parties certainty as to how the prices for particular tasks are to be calculated.
The guidance also published by the JCT is particularly clear and worth reading before forming any view on the framework agreement itself. It is essentially the same guidance that was published for the previous framework agreement, but updated to address the EU procurement provisions and the introduction of the pre-agreed underlying contract.
Lastly, I must declare a vested interest, but only a small one, as I and my colleagues Philip Baker and Rosie Choueka at Lawrence Graham had a limited role supporting the JCT in drafting the amendments leading to the new framework agreement.
That does not alter the fact that we now have a functional and balanced framework agreement from the JCT, which I am sure will be welcomed as a move in the right direction.
Hillary Cohen is a partner in LG
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