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Articles from the Silver Shemmings Ash Team on contractual matters, recent case law changes and items of interest in the construction and property world

The JCT Constructing Excellence Contract 2016

November 21, 2019 | Silver Shemmings

 

The JCT Contracting Excellence contract proposes a radical and novel approach to building contracts. So what exactly is the JCT Constructing Excellence Contract? I will look at this, and its criticisms across two articles

By way of background, in 2016 as the UK recovered from the worst of the most recent recessionary pressures and the demand for construction and infrastructure services increased, it was evident that some clients in the industry were looking at ways of tendering for and delivering construction services which would deliver improved long-term value to clients and more realistic margins to contractors, supply chain members and professional teams.

So, Why Collaborate?

Well, the government is encouraging joint working, for a start. And does the industry always want conflicts in its construction process?

There needs to be a collaborative approach to new technology, and there is pressure on Government to change from a combative approach regarding tenders to a collaborative one. In time, it will assist with the proper assessment of risks by all parties.

The Good

Here is one example of the benefits of collaboration; let’s call it ‘The Good’. A contractor was appointed to construct some large caissons for the MOD. The caissons weighed in excess of 600 tonnes and were to be delivered to one of the Royal Navy Dockyards by sea.

The chosen contractor was based on the East Coast of England. The contractor had many years of experience building large steel structures for the North Sea offshore oil and gas industry, with some of the structures weighing in excess of 10,000 tonnes, therefore the construction and transportation of a 600 tonne caisson was seen initially as a straightforward project.

The Contractor developed a method statement as part of his bid submission and in simplistic terms it set out that the caisson would be built in the horizontal plane and once complete the caisson would be loaded onto a semi-submersible barge for delivery.

However, prior to the commencement of construction of the caisson a Risk Workshop was a held to discuss the project. The workshop included not just the designer and constructors but also representatives of the MOD including the Dockyard Basin Manager. The workshop concluded that there were two key risks in connection with the transportation of the caisson:

1. Any delay in delivery due to bad weather would incur on the contractor high cost, due to the daily hire charges of the barge (circa £20k per day)

2. Naval ship movements within the dockyards might inhibit the ability to offload the semi-submersible; any additional hire cost would also be to the contractor’s account.

Changing the method of delivery by the use of flotation aids and towing the caisson with a tug mitigated these risks. This action alone reduced the potential financial risks to the contract. However, this change also required the caisson to be built in the vertical plane. As the works had not started this incurred no additional cost to the project. However, if this had been highlighted at a later time then the cost would have been substantial in terms of the cost of the craneage and additional supporting steelwork that would have had to be installed into the caisson.

The caisson was successfully constructed with some delay in the delivery due to bad weather. Once at the dock yard, whilst the Contractor was unable to deliver the caisson into the basin due to military restrictions, the MOD were able to take it over with three of their own tugs and position the caisson outside the basin at no additional cost to the contractor.

So overall, everybody was happy!

However, there are a number of barriers to change. These include:

  • The comfort of familiar commercial and contractual structures
  • The perception that collaboration is likely to be more costly, timeconsuming and resource draining
  • Construction companies tend to have short-term goals, especially if their own involvement in the project is likely to be short term
  • KPI’s still tend to be more ‘stick than carrot’, often based around one- sided requirements, dressed up as Partnering & Collaboration
  • Fragmentation and division within the industry and its numerous bodies and organisations make it difficult for a clear lead to come from any one consistent source

There is still a reluctance by clients and their advisers to engage in a process which is likely to lead to a loss of client control if decision making becomes more collective, i.e. by a Project Board as opposed to the client. There are still insufficient commercial incentives for Industry professionals and contractors to change. There is currently a lack of adequate training in the potential benefits of collaborative working techniques and the ingredients required. Very few professional bodies or academic institutions seem truly prepared to advocate and promote new approaches, or indeed give any training thereon.

In addition, there is an absence of standard form construction contracts and professional terms of appointment which encompass collaborative working. Most agreements incorporating collaborative techniques are either bespoke or heavily adapted from existing, more traditional form. Perhaps most importantly, existing insurance models are well established and, for the most part, the insurance market prefers the comfort of the familiar. The insurance industry traditional models rely on setting premiums based on claims.

So, What Needs To Change?

Well, there needs to be a change in attitudes: greater commitment to change from major Industry clients, the Government and public sector clients and from the Industry as a whole. Furthermore, the adoption of BIM needs to change, specifically the continued use and development of BIM. In particular, greater clarity at the outset of projects as to when and how BIM is to be incorporated into the procurement, design, construction and operational phases. The Government’s recent commitment to fund the evolution of BIM to ‘Level 3’ is a welcome contribution to its future development, but it is only a start. There also needs to be more strong leadership from Industry bodies and key Industry figures.

Other changes that are increasingly required include:

  • Greater Emphasis on Effective Team Working: greater attention to effective team working structures and techniques and their role in a more collaborative project environment.
  • New Contractual Structures: ensuring that contractual structures and obligations enhance and support a more collaborative working environment by focussing on positive project outcomes and reducing the blame culture which dominates more traditional contract structures.
  • Involving Key Supply Chain Members: actively engaging with and involving key supply chain members in the core project team and in the collaborative structures
  • Training: training for Industry professionals, in particular architects, quantity surveyors and project managers, in collaborative techniques and the benefits of effective team working
  • Willingness to Devolve Management Control from Client to Core Project Team: encouraging construction clients to be prepared to devolve management of projects to a core project team even if this means a reduction in control
  • Evolution of the QS Role: development of the traditional QS role to include greater emphasis on long-term asset value and life cycle cost
  • Rewarding Success: encouraging construction clients to be willing to reward and incentivise project team members and key supply chain members by giving all key players a financial stake in the project’s success against agreed benchmarks / targets
  • Development of New Standard Form Contracts: developing standard form construction contracts and terms of appointment for professional team members which encourage and embrace collaborative behaviours
  • New Insurance Models: development of insurance models, including the Integrated Project Insurance model which recognise that collaborative techniques and emphasis on providing long-term solutions for clients may reduce overall project risk whilst, at the same time, placing additional collective obligations on all core team member

Things do need to change! And here is why – let’s call it ‘The Bad’.

The Bad

A Risk Manager received a telephone call from a Project Manager on a large commercial development. He explained to the Risk Manager that his project was coming to an end and he was being transferred to a new project. He went on to explain that at the commencement of his current project, some 18 months earlier, he had undertaken a risk workshop for the project and would like to undertake one for his next project. The Risk Manager thought he had found a true “Risk-Convert”, who had adopted the process and then seen the full benefits that the process can bring. However, this thought soon passed when the Project Manager went on to explain that he was sure that he had a copy of the Risk Register that had been produced somewhere and he would try to find it to see if any of the identified risks had occurred.

The Project Manager had gained some of the benefits of Risk Management but clearly not all. The workshop had helped the project team gain a better understanding of his project aims and assisted in building the project individuals into a team. If he had used the register as a tool to manage the risks, assisting in his decision making or setting the appropriate levels of contingency for his project he would have clearly gained the full benefits.

The risk register was not reviewed during the course of the project, and the risks that were identified at the beginning of the project would have changed through the construction life cycle. Furthermore, the learning from the risks that had been successfully mitigated would have been recorded for future reference on his next project.

Authored by Jon Sharp, Consultant Solicitor

Jon has practiced in the City for close to 30 years and has a wealth of experience in the insurance industry and has a number of reported cases that demonstrate his abilities as a leader in the areas of dispute resolution, insurance, marine, aviation, general commercial matters and social media. Jonathan regularly presents seminars and lectures to the public insurer’s banks and other lawyers, on a range of topics, including social media.

He has also conducted a number of Arbitrations, before both the LMAA and ICC and dealt with boundary disputes, defended planning applications, and property transfers after matrimonial issues. Jon can be contacted by telephone at 0207 167 6602, or through email via jonsharp@silverllp.com.


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