The Construction Playbook recognises that public sector clients have a tendency to transfer excessive risk to suppliers, and that 'Inappropriate allocation of risk remains one of the main concerns of suppliers looking to do business with government' (p.48). This view is echoed in the comments of many review participants, 80% of whom consider that frameworks need a more active approach to risk management.
The Playbook states that the treatment of risk needs to make government 'a more attractive client, deliver better value for money and incentivise suppliers to focus on delivering agreed contractual outcomes' (p.12), and that 'Proposals for risk allocation will be subject to consideration and scrutiny to ensure they have been informed by genuine and meaningful market engagement' (p.12).
Risk allocation is dealt with clearly and equitably in the JCT 2016, NEC3, NEC4 and PPC2000/ TAC-1 suites of standard form project contracts, and there is rarely justification for changing this delicate balance. Levels of supplier liability and supporting insurance should be proportionate to the size and complexity of particular frameworks and framework projects, and review participants comment that suppliers may decide not to bid for frameworks or framework projects where clients require excessive contractual protections.
The Playbook states that 'The key is to have joined up, transparent mechanisms to identify and handle foreseen and unforeseen risks and opportunities when they arise' (p.47). Frameworks enable risk management mechanisms to be established and implemented at a strategic level and also during the planning and design stages of framework projects, when there are unique opportunities to examine how risks can be eliminated, reduced or mitigated.
80% of review participants say frameworks need more active risk management. |
Frameworks provide the strategic overview and long-term relationships that enable risk management actions to be agreed and implemented by reference to a shared risk register. A Gold Standard framework implements the Playbook requirements that:
■ 'Collaborative risk management throughout the commercial lifecycle is essential to support successful project and portfolio delivery and sustainable outcomes' (p.47)
■ 'A proactive approach to identifying and managing risks and opportunities using contracts effectively can drive improvement, innovation and value throughout the commercial lifecycle' (p.47).
■ 'Risk allocation should be supported by good risk management aligned to the project and programme strategic outcomes set out in the Project Scorecard' (p.48).