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What building contract: competing standard forms or standardisation?

There are many competing construction and engineering standard form contracts. Some would say too many.

The RICS Contracts in Use survey (a survey of building contracts in use during 2004), published in 2006, highlighted trends in procurement and the actual use of the different construction standard form contracts in 2004.

In 2008, the RICS asked their members for new information, on construction activity in 2007. It will be interesting to see what new trends emerge, when the results are published.

Rather than reviewing the whole survey and commenting on current trends and contract use, I’d like to use an example: one of the key trends reported for 2004 was the increase in partnering:

“The sharp increase in the use of the ACA Standard Form of Contract for Project Partnering (PPC2000) has been noted… with a four-fold increase in the number of uses recorded between the 2001 and 2004 surveys…

The NEC Option X12: Partnering Option may be regarded as having had some success, being used in 11% of cases where an NEC form of contract has been used.”

Although the JCT contracts dominated overall, with 71% of all contracts referred to in the survey (by value) let under a JCT contract, in 2004 only 0.6% of those JCT contracts used the JCT’s Non-Binding Partnering Charter for Single Projects. It would come as no surprise if the low usage of the partnering charter continued.

This is one reason why the NEC was (and is?) perceived to be “on the rise” and “pro-partnering” by the industry. Indeed, the NEC contracts were another “success story” in the 2004 figures (accounting for 13% of all surveyed contracts by value).  Given these trends, when the Office of Government Commerce (OGC) “endorsed” the NEC3 contracts, this did not necessarily surprise commentators. However, the fact that only the NEC3 was endorsed did (perhaps) stick in the craw.

The OGC may now “endorse” two other contracts, including one published by the JCT but, in the current economic downturn, more fundamental issues emerge:

  • If the RICS tried to survey current contracts right now, the first hurdle for them would be that there are few new contracts to survey.
  • Even if that hurdle was overcome, then surely it must make sense to minimise the time and effort the industry spends choosing between competing standard forms, negotiating the detail of the contracts and then reporting on them?

However, there simply is no magic wand to achieve “standardisation” – if the Egan and Latham reports can’t do it, this post certainly will not. In fact, is standardisation even possible, when each building or project is usually bespoke?

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