Achieving satisfactory contractual terms for the engineer's role

An international survey of clients, consultants and contractors produced wide-ranging data on the views of users of the FIDIC form of contract. The purpose of the survey was to elicit views on a range of issues, prior to revising the model form, to ensure that the contract drafters produce a form that is satisfactory for its users. Those questions that focus upon the role of the engineer have been subjected to detailed statistical analysis. The analysis shows that, contrary to popular belief, the views of contract users from common law jurisdictions do not differ from those in civil code jurisdictions. The engineer’s role is not generally perceived as neutral in the contractual relationships between clients and contractors. Contractors would prefer someone other than the engineer to be the first-line settler of disputes in contracts.

Contractual restrictions on lawful use of information: sole-source databases protected by the back door?

This article is concerned with the risks associated with the monopolisation of information that is available from a single source only. Although there is a longstanding consensus that sole-source databases should not receive protection under the EU Database Directive, and there are legislative provisions to ensure that lawful users have access to a database’s contents, Ryanair v PR Aviation challenges this assumption by affirming that the use of non-protected databases can be restricted by contract. Owners of non-protected databases can contractually exclude lawful users from taking the benefit of statutorily permitted uses, because such databases are not covered from the legislation that declares this kind of contract null and void. We argue that this judgment is not consistent with the legislative history and can have a profound impact on the functioning of the digital single market, where new information services, such as meta-search engines or price-comparison websites, base their operation on the systematic extraction and re-utilisation of materials available from online sources. This is an issue that the Commission should address in a forthcoming evaluation of the Database Directive.

Designing flexible procurement systems

The systems used for the procurement of buildings are organizational systems. They involve people in a series of strategic decisions, and a pattern of roles, responsibilities and relationships that combine to form the organizational structure of the project. To ensure effectiveness of the building team, this organizational structure needs to be contingent upon the environment within which the construction project takes place. In addition, a changing environment means that the organizational structure within a project needs to be responsive, and dynamic. These needs are often not satisfied in the construction industry, due to the lack of analytical tools with which to analyse the environment and to design appropriate temporary organizations. This paper presents two techniques. First is the technique of "Environmental Complexity Analysis", which identifies the key variables in the environment of the construction project. These are classified as Financial, Legal, Technological, Aesthetic and Policy. It is proposed that their identification will set the parameters within which the project has to be managed. This provides a basis for the project managers to define the relevant set of decision points that will be required for the project. The Environmental Complexity Analysis also identifies the project's requirements for control systems concerning Budget, Contractual, Functional, Quality and Time control. The process of environmental scanning needs to be done at regular points during the procurement process to ensure that the organizational structure is adaptive to the changing environment. The second technique introduced is the technique of "3R analysis", being a graphical technique for describing and modelling Roles, Responsibilities and Relationships. A list of steps is introduced that explains the procedure recommended for setting up a flexible organizational structure that is responsive to the environment of the project. This is by contrast with the current trend towards predetermined procurement paths that may not always be in the best interests of the client.

A preliminary survey of attitudes to UK construction procurement practice

Although much literature on construction procurement is based on personal experiences, there is little data available to undertake realistic comparison between regions or from one year to another. A survey was undertaken in the UK to examine the feasibility of developing a replicable survey technique that will enable longitudinal studies and international comparisons. The survey showed that a majority felt traditional procurement methods were inappropriate. However, traditional general contracting is still the most common form of procurement. There was strong agreement that economic muscle compels weaker contracting parties to accept onerous contractual terms. There is no relationship between the size of a project and its procurement method, contrary to popular belief. The findings indicate that wider surveys would generate useful data about attitudes.

Construction management contracts: law and practice

The context of construction management (CM) reveals that this method of procurement is as much a management philosophy as a contract structure. It is important to consider legal and contractual issues in this context. The interplay between management and law is complex and often misunderstood. Before considering specific issues, the use of contractual remedies in business agreements is discussed. In addition, the extent to which standardising a form of contract detracts or contributes to the success of projects is also considered. The dearth of judicial decisions, and the lack of a standard form, render it difficult to be specific about legal issues. Therefore, the main discussion of legal issues is centred around a recently completed research project which involved eliciting the views of a cross-section of experienced construction management clients, consultants and trade contractors. These interviews are used as the basis for highlighting some of the most important legal points to consider when setting up CM projects. The interviews revealed that the advantage of CM is the proximity of the client to the trade contractors and the disadvantage is that it depends on a high degree of professionalism and experience; qualities which are unfortunately difficult to find in the UK construction industry.

Financial protection in the UK building industry: bonds, retentions and guarantees

Financial Protection in the UK Building Industry provides comprehensive treatment of a complex aspect of construction management which is increasingly important in modern construction contracts. The term 'Financial Protection' refers to refers to the various mechanisms by which funds are made available to ensure the due performance of a partys contractual obligations. This book is based on material written for a research project funded by the Reading Construction Forum. Financial Protection in the UK Building Industry looks at the legal and economic background to the problem of providing financial protection to clients to guard against poor performance and or the insolvency of contractors, consultants and sub-contractors. The inclusion of practical guidance notes and summaries makes this a valuable guide for the construction professional as well as for the researcher. * provides in-depth analysis of financial protection measures * explores the ways in which financial protection can increase efficiency in the industry * financial protection in construction is beset with problems - this book points toward practical solutions

The impact of contractor selection method on transaction costs: a review

The basic premise of transaction-cost theory is that the decision to outsource, rather than to undertake work in-house, is determined by the relative costs incurred in each of these forms of economic organization. In construction the "make or buy" decision invariably leads to a contract. Reducing the costs of entering into a contractual relationship (transaction costs) raises the value of production and is therefore desirable. Commonly applied methods of contractor selection may not minimise the costs of contracting. Research evidence suggests that although competitive tendering typically results in the lowest bidder winning the contract this may not represent the lowest project cost after completion. Multi-parameter and quantitative models for contractor selection have been developed to identify the best (or least risky) among bidders. A major area in which research is still needed is in investigating the impact of different methods of contractor selection on the costs of entering into a contract and the decision to outsource.

Risk and price in the bidding process of contractors

Formal and analytical risk models prescribe how risk should be incorporated in construction bids. However, the actual process of how contractors and their clients negotiate and agree on price is complex, and not clearly articulated in the literature. Using participant observation, the entire tender process was shadowed in two leading UK construction firms. This was compared to propositions in analytical models and significant differences were found. 670 hours of work observed in both firms revealed three stages of the bidding process. Bidding activities were categorized and their extent estimated as deskwork (32%), calculations (19%), meetings (14%), documents (13%), off-days (11%), conversations (7%), correspondence (3%) and travel (1%). Risk allowances of 1-2% were priced in some bids and three tiers of risk apportionment in bids were identified. However, priced risks may sometimes be excluded from the final bidding price to enhance competitiveness. Thus, although risk apportionment affects a contractor’s pricing strategy, other complex, microeconomic factors also affect price. Instead of pricing in contingencies, risk was priced mostly through contractual rather than price mechanisms, to reflect commercial imperatives. The findings explain why some assumptions underpinning analytical models may not be sustainable in practice and why what actually happens in practice is important for those who seek to model the pricing of construction bids.

Commercial reviews in the tender process of contractors

Purpose – The purpose of this paper is to show the extent to which clients amend standard form contracts in practice, the locus of the amendments, and how contractors respond to the amendments when putting together a bid. Design/methodology/approach – Four live observational case studies were carried out in two of the top 20 UK construction firms. The whole process used to review the proposed terms and conditions of the contract was shadowed using participant observation, interview and documentary analysis. Findings – All four cases showed strong evidence of amendments relating mostly to payment and contractual aspects: 83 amendments in Case Study 1 (CS1), 80 in CS2, 15 in CS3 and 29 in CS4. This comprised clauses that were modified (37 per cent), substituted (23 per cent), deleted (7 per cent) and new additions (33 per cent). Risks inherent in the amendments were mostly addressed through contractual rather than price mechanisms, to reflect commercial imperatives. “Qualifications” and “clarifications” were included in the tender submissions for post-tender negotiations. Thus, the amendments did not necessarily influence price. There was no evidence of a “standard-form contract“ being used as such, although clients may draw on published “standard-form contracts” to derive the forms of contract actually used in practice. Practical implications – Contractors should pay attention to clauses relating to contractual and financial aspects when reviewing tender documents. Clients should draft equitable payment and contractual terms and conditions to reduce risk of dispute. Indeed, it is prudent for clients not to pass on inestimable risks. Originality/value – A better understanding of the extent and locus of amendments in standard form contracts, and how contractors respond, is provided.

Reaching for the skies: Time and turbulence in digital technologies and practices

This research examines dynamics associated with new representational technologies in complex organizations through a study of the use of a Single Model Environment, prototyping and simulation tools in the mega-project to construct Terminal 5 at Heathrow Airport, London. The ambition of the client, BAA. was to change industrial practices reducing project costs and time to delivery through new contractual arrangements and new digitally-enabled collaborative ways of working. The research highlights changes over time and addresses two areas of 'turbulence' in the use of: 1) technologies, where there is a dynamic tension between desires to constantly improve, change and update digital technologies and the need to standardise practices, maintaining and defending the overall integrity of the system; and 2) representations, where dynamics result from the responsibilities and liabilities associated with sharing of digital representations and a lack of trust in the validity of data from other firms. These dynamics are tracked across three stages of this well-managed and innovative project and indicate the generic need to treat digital infrastructure as an ongoing strategic issue.

Contracts and incentives in the construction sector

The aim of this chapter is to examine what the construction sector brings to our understanding of the procurement of complex performance. The chapter is divided into the following parts: fi rst, an overview of the various matters that contribute to the complexity of construction procurement is provided. Second, the most important contractual incentive schemes found in construction contracts are discussed, and this is followed by, third, an examination of the changes associated with the shift towards procuring complex performance (PCP) (service provision). Fourth, the main findings of the authors’ recent research on PCP contracts are summarised, followed by the conclusion. It should be noted that the procurement of services is referred to as ‘PCP’ in this chapter.

The future of the tenanted sector in British agriculture: a review of the proposals for change

The impending decline of the tenanted sector in British agriculture has been forecast for many years. Much debate has surrounded the issues and ensuing legislation has repeatedly attempted to stave-off what some view as the inevitable demise of tenant farmers. Following a flurry of activity after the Northfield Report of 1979 and culminating in the Agricultural Holdings Acts of 1984 and 1986, the debate has recently been fuelled by a strongly pro-market lobby. With the public support of successive Ministers of Agriculture, this lobby has advocated a rejection of the former state intervention in the landlord/tenant relationship in favour of freedom of contract, an option that now appears increasingly likely to reach the statute books. This paper reviews the significant elements of the debate, attempting to explain the principal reasons for the failure of earlier legislation and the primary shortcomings of the current emphasis of consultation. The paper concludes that while there are some significant legislative disincentives to letting land, the freeing-up of contracts in isolation from other, non-contractual issues, will not result in the increase in lettings purportedly desired by the Ministers and their acolytes.

Practicing sustainability in PFI project management

This paper investigates the relationship of the project management in Private Finance Initiative (PFI) and sustainability. A live PFI project is selected as a case study, where contract review and monitoring on project management are carried out to evaluate the sustainability of project management. The PFI procurement shows great advantages in increased contractual responsibilities of the contractor in sustainable construction, and also in practicing sustainability in project management. Six main sustainable attributes of the project management are selected to evaluate the sustainability of project management in the PFI project. The project management process in the case study is closely monitored in order to verify how the PFI project promotes sustainability in practice. The project management in the different stages of the PFI project, including tendering, design, construction and operation, contributes to the six sustainable attributes in different ways. The project management in PFI project paid more attention in sustainable development during its whole process. As the private sector is responsible to the whole life of the building project, the project manager has to consider the long-term benefits during the management process. The government should take advantages of PFI project management in practicing sustainability therefore to promote sustainable development of the national infrastructure services.