A standard form framework alliance contract

The brief for this review includes recommendations for standard contract terms that support a Gold Standard framework. Review participants comment on the cost, duplication and confusion created by the wide range of bespoke framework contracts. Each bespoke contract requires clients and suppliers to familiarise themselves with a new set of terms and conditions, sometimes running to several hundred pages, and this increases the cost and time required for framework procurement. Although good practice can be embedded in a bespoke framework alliance contract, it is wasteful and distracting for clients, managers and suppliers to invest significant resources in understanding and agreeing each new bespoke form. Suppliers are also suspicious of hidden risk transfer in a bespoke framework contract, and this can inhibit their commitment to collaborative framework activities.

The use of a published standard form framework alliance contract:

■  Provides consistent foundations on which to construct the detailed components described in Annex 4

■  Avoids the wasted cost and time required to create, understand and implement multiple bespoke forms

■  Creates mutual confidence between framework providers, clients, managers and suppliers

■  Provides a consistent basis for training, guidance and exchanges of experience.

A Gold Standard framework alliance contract needs to create the matrix of commitments, relationships and systems through which the framework provider, clients, manager and suppliers integrate their differing commercial interests in ways that implement Playbook policies. A published standard form provides accessible and consistent contractual foundations on which to construct these commitments, relationships and systems by reference to the framework requirements of different clients and different sectors.

The Construction Playbook states that FAC-1 'is a good example of a standard form framework contract that can achieve... many of the ambitions set out in this Playbook' (p.42). It also notes how the Crown Commercial Service framework alliances are 'integrating FAC-1 and Project 13 principles' (p.27).

 

Crown Commercial Service reports that:

■  The FAC-1 Framework Alliance Contract enables the government to align its strategies in construction with the key objective policies outlined in the Construction Playbook. The benefits of this drive improvements across the construction industry including:

■  Ability to influence design through earlier contractor engagement

■  Connecting whole life considerations through an integrated supply chain

■  Focus on newer and safer working practices in construction

■  Options for innovative construction methods and technologies

■  More opportunities for SMEs, specialists and local providers

■  Sustainable solutions and environmental benefits

■  Collaborative risk management and dispute avoidance

■  Promoting standardisation in contracting through common 'boilerplate' clauses'.

■  By adopting the FAC-1 as the centre point of our framework agreement structure, this enables CCS to establish closer relations with the additional clients and supplier alliance members, focus on collaborative opportunities, drive best practice, improve framework performance and outputs across our frameworks'.

The FAC-1 framework alliance contract was developed through consultation with clients and industry on the basis of the bespoke framework alliance contracts used on government Trial Projects. It describes shared objectives, success measures, targets and incentives, and its multi-party structure supports transparent performance measurement and work allocation procedures. It describes joint work on improving value and reducing risks, including improved sustainability, and its Supply Chain Collaboration process is quoted in Annex 5.

FAC-1 has been adopted as the basis for framework alliances created by Crown Commercial Service, LHC, NHS Shared Business Services and Ministry of Justice, which have a total projected value of over £57 billion and which are summarised in Annex 1. Framework providers, clients, managers and suppliers are using FAC-1 in conjunction with a range of standard form project contracts such as JCT2016, NEC3, NEC4 and PPC2000/TAC-1.

 

GRAHAM reports that:

■  'Most frameworks that we operate under adopt the use of a bespoke Framework Agreement for appointment to the Framework. Exceptions to this are the CCS and NHS SBS Frameworks that adopt the FAC-1 Alliancing agreement. This is an approach we support.'

■  'Many Framework Agreements that we are a party to facilitate the adoption of varying project level forms of contract by users, as does FAC-1.'

 

 

VINCI reports that:

■  'We see the benefit of frameworks that offer different models of 'call off 'contract (as can be facilitated by FAC-1) but also where there is consistency between the collaborative approach defined in the overarching framework agreement'.

Construction contract bodies such as JCT and NEC may decide to develop their own published forms of framework alliance contract, or they may recognise the flexibility of FAC- 1 in supporting the award of JCT and NEC project contracts. Feedback and lessons learned from users of FAC-1 and other alliance contracts should form part of the training, guidance and case studies recommended in Section 24, and should contribute to a body of shared knowledge that supports the wider understanding and adoption of standard form framework alliance contracts.

 

Recommendation 4: Reduce procurement costs, improve value and reduce risks by wider adoption of a standard form Gold Standard framework alliance contract

To achieve efficiency savings by reducing waste, confusion and duplication, and to replicate the substantial value improvements shown in collaborative framework case studies, this review recommends the wider adoption of a standard form framework alliance contract that:

■  Aligns the objectives, success measures, targets and incentives of clients and suppliers

■  Provides transparent performance measurement and work allocation procedures

■  Requires joint work by clients and suppliers to improve value and reduce risks

■  Translates framework objectives into actions with clear timescales and outcomes.