The risk factor

Thinking differently is not always successful; and in the case of the BE Collaborative contract (a standard form of contract), it is still too early to tell whether it will prove to be a Ford Model T or a Sinclair C5. While it has been suggested that traditional forms encourage confrontation and disputes, they are a known quantity - the success of the BE form will depend on how widely it is used, and on whether claims made about its novel approach are shown to be true.

Interestingly, while the BE form uses wording that will be familiar from traditional forms, its authors have also looked outside the construction industry. Taking their cue from the Egan Report, Re-thinking Construction, they have paid regard to the way that supply chains operate in manufacturing. Service providers are referred to as "suppliers" and there is an attempt to bring a measure of uniformity to the way their services are procured. This leads to the novel treatment of a number of important matters.

Risk allocation

What sets the BE form apart is its approach to risk. The parties are required to produce a Risk Register, which identifies the potential risks faced in the performance and delivery of the project. A Risk Allocation Schedule then identifies how these have been treated in the planning and pricing of the works. "Relief Events", which compensate the supplier in terms of both time and money, are largely confined to matters that the supplier could not reasonably anticipate and were beyond their control.

Where the BE form scores highly is in its online guide, where its authors provide guidance about how this might work in practice. Section six guides the reader through the process of producing the Risk Register and includes the underlying truth that "if the parties do not identify the potential risks to the project, they cannot possibly plan how to prevent them."

This is coupled with a familiar set of provisions which require the parties to work together in a collaborative and co-operative manner. In language redolent of the Civil Procedure Rules, this is termed the "Overriding Principle". It is a reflection of the industry that the drafting of building contracts borrows from the rules governing litigation.

However, the clear advantage of this form is that in providing positive obligations in dealing with risk allocation, the parties are not simply reliant on the hope that all concerned will behave nicely. Many disputes arise because one, or both, parties have misunderstood or underestimated the nature and extent of a specific risk; and this may be avoided by compelling them to deal with it in an open manner at the outset.

In providing positive obligations for dealing with risk allocations, parties are not reliant on the hope that all will behave nicely

This theme also arises in sections three and nine of the guidance. The former deals with identification of the client's business aims; the latter with managing the timing and financial consequences of risk. The fact that a contract can recognise that the parties go into the arrangement with specific business goals, and that the contract is to be seen as the tool to achieve them, is no more than common sense, but no less welcome for that.

More problematic is the requirement that in the event of any dispute, a court or adjudicator shall have regard to the Overriding Principle and the parties' adherence to it in making an award. Elsewhere, it is stated that the Overriding Principle should prevail over the opportunity to take advantage of another express term of the contract. The intention is praiseworthy, but impractical. The great merit of the way in which risk is dealt with is that the parties should be able to approach their respective obligations in a way which is transparent and open. Adding marks for good behaviour can only dilute this.

An added problem is the argument that a party has acted in good faith if it has conducted itself strictly in accordance with the precise provisions of the contract. It is all very well to say that one party has taken advantage of a loophole. However, if it has acted in accordance with what the contract says, to do anything but enforce the terms of that contract would seem to create the greater injustice.

These concerns may indicate that the authors have overreached themselves, and whether this part of the contract will succeed in practice remains to be seen. That apart, this contract has much to offer, and will provide much food for thought for those engaged in procuring construction works.

Nicholas Carnell is a partner with City law firm Kennedys. Contact: n.carnell@kennedys-law.com