T017 Contract Practice - Pre Construction Services Agreement Rics Apc

Front 1

What is a pre-construction services agreement?

Back 1

Documents services and T&C's that contractor is to perform before entering into the building contract.

Front 2

When are they usually used?

Back 2

Two stage tendering, signed after first stage and cover up to end of second stage.

Often on D&B.

Front 3

Why are they used?

Back 3

Develops a lump sum price, enables it to be determined and the main contract entered into

Front 4

What happens in Stage One?

Back 4

Employer issues outline information (including scope of services in preliminaries) to potential contractors.

Front 5

What do the contractors include in their tender returns?

Back 5

Profit, overheads, preliminaries, proposals on how they intend to execute the project, fee for second stage services

Front 6

What tasks might the Contractor be asked to perform in the second stage?

Back 6

Finalise the design
Advise on methods of construction
Obtain subby prices for packages (open book basis)
Evaluate tender returns and agree selection with the employer

Front 7

What are the advantages of this two stage approach?

Back 7

Contractor advice to the employer
Early input should reduce the disputes and problems arising during construction
Design and tendering of packages overlaps – quicker
The contractor also benefits from getting paid earlier and becoming part of the DT

Front 8

What are the disadvantages?

Back 8

Contractor no longer in competition – costs rise
Longer involvement without the main contract signed, weaker contractor’s bargaining position
Contractor integration means employer becomes reluctant to dismiss them if fails to perform or negotiate on price/programme
Subbies tend to be bigger and more prominent = more expensive (diff. under single stage)
Generally only 80-85% fixed pricing at contract execution, prov. sums = less price certainty than under single stage

Front 9

What should be taken into account in the wording of a PCSA?

Back 9

Does NOT commit to the building contract
Ensure obliged to pay for documented services only and nothing else
State employers discretion to appoint the contractor at the end of the second stage or not
State that if they do not appoint the contractor, the employer has no liability for any loss of project, contract or other opportunity

Front 10

What might the pitfalls be?

Back 10

It is not uncommon for the pre-construction services to include enabling works and surveyors etc
More work carried out before the building contract T&Cs are executed the weaker the employer’s negotiating position becomes
If the contractor is not selected to go further, any new contractor will be reluctant to adopt responsibility for the previous contractor’s work – split liabilities

Front 11

Where would you recommend the use of a pre-construction services agreement?

Back 11

Long pre-construction period

If the contractor integration into the design team, and providing advice is needed

Front 12

What do you need to be careful about?

Back 12

Explicit agreement on what services to be provided and how paid

How to disengage if not satisfied (procedures)

Careful not to encourage a lot of work to commence before the building contract is signed (dis-incentivises) (over-commits)

Front 13

What other forms of procurement could be used that may safeguard the employer better?

Back 13

Early start before final design - consider construction management rather than trying to shoehorn a traditional or D&B contract into a programme where it does not fit

Front 14

Is there a standard form PCSA that you might recommend the use of?

Back 14

Traditionally, no contractor involvement ahead of contract execution and start on site

Traditionally bespoke documents – drafted by lawyers for the Employer

Now JCT Pre-Construction Services Agreement: General Contractor 2011: (PCSA)