Rudi Klein has been complaining about Network Rail’s new contracts. But Ann Minogue, who helped document the client’s procurement strategy, thinks he has missed the point
As Graham Watts noted (3 August, page 31), we have become used to the Specialist Engineering Contractors Group lambasting the government, main contractors, consultants and so on. It is usually pursuing its members’ interests when it does so and, on many occasions, there is substance in its criticisms.
However, Rudi Klein’s recent attack on Network Rail, which he accused of failing to involve supply-chain organisations in putting together its new contractual strategy and of ignoring government procurement advice, was unfair and unwarranted.
The Civil Engineering Contractors Association contradicted these comments were, saying it had been involved in the new strategy and was “extremely happy” with the plans. But Rudi’s suggestion remains that Network Rail is failing to employ best practice as a major construction client.
The criticisms are particularly damaging in the context of Network Rail’s ambition to achieve, in the words of Iain Coucher, its chief executive, “a more professional rail industry with more trust, more partnership, more innovation and more sharing of successes”.
Although I was not involved in formulating Network Rail’s strategy, I did have a hand in documenting it. From the repeated assertions in the documents that we produced in response to comments received, I know Network Rail consulted extensively with the industry before publishing its suite of contracts. Supply-chain organisations were not just involved in the strategy, but also in the detail through these wide consultations.
What about Rudi’s suggestion that Network Rail ignored government procurement advice, and the inference that it is mistreating the supply chain? Let’s look at some of the facts.
First, Network Rail has for the most part adopted standard forms – ICE, JCT, MF/1, MF/2 and so on. They may not be Rudi’s preferred contracts, but they are the most widely used in construction. JCT forms account for 78% of all contracts, according to the RICS’ latest Contracts in Use survey. Does Rudi intend to condemn all other clients using JCT forms? Rudi’s preferred forms, the NEC and PPC2000, account for 7% and 2% respectively.
The standard forms Network Rail has chosen may not be Rudi Klein’s preferred contracts, but they are the most widely
used in construction
Second, the suite of contracts has been issued with common amendments so Network Rail’s supply chain quickly becomes familiar with what is being done. Many of the changes were to create a common format and terminology so all the contracts are compatible with other Network Rail documentation.
Third, Network Rail has dispensed with a number of contractual requirements that can add cost to projects. In particular, it will not routinely ask for performance bonds. It has standardised its insurance requirements and will effect third-party insurance in excess of £5m up to £155m, which is the level of insurance required for work on the railways. It has deleted the adjudication regimes in the forms and adopted in all its documentation the statutory Scheme for Construction Contracts.
Finally, as a result of consultation with the industry, it has introduced limits on the liability of the contractor that go beyond those routinely accepted by other clients.
- It has limited liability for breach by the contractor of its obligations in relation to the design of the works to £10m
- It has limited the contractor’s liability for “railway losses” – compensation payable to train operating companies – to the contract sum under each contract
- It has limited the contractor’s liability for liquidated damages for delay to the contract sum.
It is hard to see how this can be regarded as “non-collaborative”. Rudi’s accusation that the rail contract forms fail to employ best practice seems to boil down to a criticism that Network Rail has not adopted the NEC or PPC2000. It hardly stands alone in that respect.
By lambasting Network Rail for its choice, he has ignored the many collaborative amendments it has made to accommodate the industry’s concerns and for which it perhaps deserves applause.
Ann Minogue is a partner in solicitor Linklaters