Standard form

Until spring 1999, facilities management had no standard form of contract. Then, the Chartered Institute of Building (CIOB) produced a standard contract for the industry. The use of the CIOB model form is growing, but the vast majority of facilities management work is undertaken on bespoke forms of contract. But a new standard contract is due to be produced – by the Property Advisers to the Civil Estate (Pace) – which is likely to lead to increased standardisation of terms, in the public sector at least.

CIOB standard contract

The CIOB approached CMS Cameron McKenna in early 1998 to help produce a standard form of facilities management contract. The first edition of the contract, produced in spring 1999, was used for more than £42 million worth of work in the following six months, according to CIOB figures. The contract is drafted to be clear and concise and cover the provision of individual facilities management services on a stand alone basis or total both ‘hard’ and ‘soft’ services for a ‘total’ provision contract.

The contract envisages that the contractor will provide services using reasonable skill and care in accordance with a specification. A brief list of services is included in the contract, although it is expected that the parties will agree detailed services and a comprehensive specification on a project by project basis. The parties to the contract can choose from two alternative payment mechanisms: either a lump sum mechanism where the lump sum adjusts in certain circumstances, or a cost-plus mechanism, where the contractor is paid the amounts it pays to the sub-contractors, plus a fee for overheads and profit, and a separate administration fee. The contract also recognises that the parties may wish to agree to a mechanism to adjust payment to reflect performance.

Users of the CIOB contract have asked for some changes, especially relating to the Transfer of Undertakings (Protection of Employment) Regulations 1981 (Tupe). A second edition of the contract (to be published next year) will considerably expand the Tupe provisions and allow for the risk to be allocated to the contractor if that is what the parties agree. The CIOB is currently trying to produce standard form specifications to accompany the second edition, as well as comprehensive guidance notes that will be available later this year.

New form soon

The CIOB contract will soon be joined by the new Pace standard form of facilities management contract, which has been drafted for use in the public sector. Pace approached CMS Cameron McKenna last summer to produce a facilities management contract to fit into the Pace suite of standard form contracts. The new contract was intended for use with stand alone services, but it was envisaged that it will be more commonly used for the provision of total facilities management services.

The Pace contract is far more comprehensive than the CIOB’s. It too envisages that the contractor will provide certain services in accordance with a specification, although here the contractor’s obligation in this regard is absolute.

Pace favours the use of output specifications as it believes that service providers are best able to judge how to meet the client’s performance criteria in a cost effective fashion. Guidance on drafting output specifications and a sample output specification (for cleaning) are included in the commentary accompanying the contract.

As with the other Pace contracts, its facilities management version aims to encourage an open and fair relationship between the parties and stresses the importance of team work.

Payment provision

Payment under the Pace contract is on an annual lump sum basis. There is an option to adjust the payment annually in accordance with any selected cost or price index (such as the retail price index), or allow the lump sum to remain fixed for the full contract term but to be adjusted if the term is extended. Like the CIOB contract, the Pace contract also envisages that payment can be adjusted to reflect performance. Useful guidance on the drafting of performance payment systems is included in the commentary, stressing the fact that good payment systems should reward exceptional performance, not just punish poor performance.

In contrast to the CIOB contract, the Pace contract contains extensive provisions dealing with Tupe – where the related risk is placed firmly with the contractor.

The current edition of the CIOB contract does not deal with the special provisions for when the maintenance of plant or building fabric is included in the services. The Pace contract has optional clauses allowing the parties to agree that either may be fully responsible for the cost of repair of any defect in such plant or building fabric, or allowing them to agree to share the risk in such defects.

A government department is using a draft of the Pace contract for a complex total facilities management deal. Orders for the final version can be placed with HMSO (ISBN 0117023388).