But a mission statement “not to shaft each other” is not the only Egan objective. The DETR, as sponsor of the construction taskforce, demands continuous improvement through an incentive-led construction market, and takes this into the heart of the public and social sectors. It requires fundamentally improved performance in return for greater rewards. Most strikingly, it recognises the concept of making a better profit, previously a black art in the eyes of government, as part of the science of achieving changes for all players in the construction game.
To reconcile this with measurable improvements in cost, time, defects and accident rates is not a casual process. Promises have to be measured and adhered to. Partnering, as the most obvious means to achieve Egan compliance, relies on a fair deal – but this is still a “deal”. Here is where some clients and contractors seem to get confused.
Repeatedly, the novelty of discovering trust and shared project objectives between the client and contractor leads otherwise rational people to turn their backs on contracts just when they can add particular value. “Why bother with a contract when you are partnering?” they ask.
First, there is Egan’s example of Nissan procuring axles with “no formal contract”. Of course, there are deals struck with no proper written framework, but this can create uncertainty, misunderstanding and a consequent reluctance to commit and invest. The essence of Egan is to achieve best results all round from a level playing field and, by and large, contracts help you do this. If they are the right contracts.
I have also heard the argument that a partnering charter, a one- or two-page mission statement, is all you require to implement Egan.
A charter focuses on key objectives and can send a clear message, but compared with a contract it does not cover very much.
Others say that an unamended standard form, because it is “kept in the drawer”, will do the job. Different standard forms are more or less sympathetic to partnering, but none of them fully captures the range of innovative deals now emerging to meet the Egan targets, and many carry the luggage of a claims-based culture. Standard forms in partnering do not encourage the parties to understand exactly what they are agreeing, and they have a chequered history when it comes to dispute avoidance.
- Uncertainties occur without a written framework
- Partnering charters are incomplete and standard forms are inflexible
- Clients want contracts geared to particular projects
So, what about a bespoke partnering agreement? This can take many forms and often stands above, or alongside, a conventional building contract. It can be a framework to strategic partnering and/or a lead-in to project partnering. It can also drive innovation – for example, setting out a system of thorough design and organising the contributions of an integrated supply chain, establishing the role of KPIs and introducing systems of shared reward for improved performance. If a partnering agreement is clear and simple, specifically geared to partnering and the Egan objectives, it can cover pretty well everything, be adapted to fit individual needs, and make the partners feel confident in their relationship.
We are entering into a contractual revolution. Although most of our partnering documents remain founded on a standard form overlaid by a partnering agreement, some clients are now looking to more imaginative contracts geared to their particular partnering projects. A related contractual challenge is how the parties should tackle supply-chain management. Even those contractors geared up to partnering generally stop short of a visible, partnered supply-chain structure. Many still maintain an informal, paternalistic approach in deciding when subcontractors and suppliers can be trusted to make a design or project-planning contribution.
This cuts at the whole foundation of the Egan philosophy and is a major barrier to an integrated design, supply and construction process. Where subcontractors are allowed to sit around the design table with the “grown ups”, they can make revolutionary contributions at many levels. On a recent £30m housing project, the M&E subcontractor announced, at a pre-contract partnering meeting, its discovery that all the boilers were invalidly certified (by the previous owner) and required immediate replacement: with time still left for radical reappraisal rather than post-contract variation.
Egan insists that procurement gets below the waterline of the main contract. Without visible supply-chain partnering arrangements, demonstrating how and why early subcontractor input can be relied on, main contractors will find it hard to demonstrate their credentials.
As to the extent to which a client is entitled to poke its own nose down the supply chain, this can be taken as far as resources allow. For example, on certain projects Slough Estates has cut out both main contractors and subcontractors, and goes to its own suppliers and labour teams direct, inviting them onto a partnering team. Not all clients can take on that degree of DIY, but it demonstrates vividly that no one is too humble to have a practical input to Egan compliance.
Endless bespoke agreements in partnering projects sound like a nightmare, but not if they serve a purpose in documenting imaginative deals rather than dumping unwanted risk. The chairman of one major contractor said that he was “shocked at the fairness” of a recent partnering agreement drafted on behalf of the client. To go one stage further, the development of such an agreement as a joint document (with only heads of terms set out at tender stage) can prove an effective way of encouraging trust and achieving quick consensus.
David Mosey is partner and head of projects and construction at Trowers & Hamlins, solicitors.