Reasonable precautions

The government has just published a contract for facilities management services, and since there is a shortage of standard FM forms, contractors are likely to meet it sooner or later.

The contract, called GC/Works/10(2000), is flexible. The price can either be fixed for the contract term or adjusted annually. The specification can be based on output (the employer sets out performance requirements, leaving contractors free to decide how to fulfil them) or on input (where the employer has more say in how the performance requirements are to be achieved).

The Office of Government Commerce recommends the first of these options. This is understandable, given the current thinking on public–private partnerships, which is to place as much risk on the contractor as reasonably possible. In line with this, the contractor's obligations are mainly performance-related.

Although this is a government contract, plainly drafted from the point of view of the employer, it is not unfair. Nevertheless, there are a few amendments that contractors should consider if they are invited to use it.

First, the form allows two options for dealing with inadequate performance by the contractor. Option A is simply to allow the employer to reduce payment. There is no indication as to what the reduction should be and, in particular, whether the employer must show any loss (often difficult in the field of FM services). Nevertheless, the employer has a wide discretion. Better, therefore, is option B, which uses a performance points system, under which the contractor loses points, and therefore money, for failure to perform. Here, the parties know where they stand.

The client can end the contract, subject to a contractor’s right to make representations. Contractors should seek rather more than a right to protest on the steps of the scaffold

Second, the clause for valuing variations is too brief. As in most modern contracts, early agreement on valuation is encouraged. If this does not happen, the contract provides JCT/ICE-style rules for valuation. You can either:

• Apply the contract prices or rates first
  
• Use the prices or rates that are pro rata to, or based on, those rates
  
• Use fair and reasonable rates.

The problem is that whereas the JCT and ICE forms stipulate the circumstances in which these rules apply, this contract contains no such criteria. The parties should therefore make clear exactly when it is that contract rates may be departed from (that is, when the varied work is of a different type to the original work, or is to be carried out under different conditions).

Third, the employer has draconian termination rights if the contractor fails to "set up operations" (the preparatory work prior to performance of the services) on time. It can summarily terminate the contract, subject only to the contractor's right to make representations. Contractors should seek rather more than a right to protest on the steps of the scaffold, as it were. They should also resist the employer's general right to terminate without reasons (and without having to pay compensation) on three months' notice.

Also, either party can determine if any default remains unremedied after 90 days. These clauses can be abused by employers who dangle them over contractors as a threat. The contractor is then forced to offer some concession in order to keep the contract alive. Contractors should argue for a "stepped" termination clause, with termination only upon persistent or substantial defaults.