Contract Selection for Project?

Inches

Hi All,

Im looking for some advice and opinions and hoping to get a second, third or experienced opinion.

If say you are trying to advise on contract selection for a €100m + project what would you choose?

Obviously depending on procurement route will have an effect on the choice of contract however I was thinking of perhaps of drafting a specific contract tailored to the project and perhaps using the GCCC PW-CF10 as a rough template for the drafting (as the risk would be more on the contractor)

however I am torn also by using the RIAI standard form and tailor it as contractors, sub-contractors etc are more familiar with it?

Cheers
Alan

BryanF

inches as discussed by pm thread to be altered

Inches

Tread now amended

kkelliher

Inches wrote: »

Hi All,

Im looking for some advice and opinions and hoping to get a second, third or experienced opinion.

If say you are trying to advise on contract selection for a €100m + project what would you choose?

Obviously depending on procurement route will have an effect on the choice of contract however I was thinking of perhaps of drafting a specific contract tailored to the project and perhaps using the GCCC PW-CF10 as a rough template for the drafting (as the risk would be more on the contractor)

however I am torn also by using the RIAI standard form and tailor it as contractors, sub-contractors etc are more familiar with it?

Cheers
Alan

You have to firstly look at who the contract is between. It maybe ok for the government to have a fairly one side contract (GCCC) and still get others to sign up to it, but their is a perceived security in that at least the contracting party has access to funds. Why on the other hand would a party sign up to a GCCC type contract with a private individual / corporate entity when all the risk is on them anyway, plus their is no guarantee of ability to pay.

The contract must be fair on both sides which is dubious when you bring the GCCC into play. The RIAI standard form where not perfect is a better, fairer fit to most contract senarios. It will require updating in line with the construction contracts act and the payment alterations brought about by the act but generally it is clear, fair and unambigious in the main.

Inches

kkelliher cheers for the reply, I should of specified that I would be looking at this from a private funded project.

I am just looking to learn as much as possible with regards to contracts,

What would be the norm for a large project and privately funded? I imagine in most cases and taking into consideration your reply that it would be the RIAI? but surely this is hardly detailed or complex enough for €100m + projects?

kkelliher

Inches wrote: »

but surely this is hardly detailed or complex enough for €100m + projects?

there is generally little difference outside of value from contract to contract. A contract outlines the rules of the game, the value of the game des not really require any contractual changes. The RIAI is a standard form and you may want to alter clauses relating to insurances, bonds etc but in the main it caters from variations, responsibilities, obligations, dispute resolution, payments etc which will be the same on all projects irrespective of value. You will find that a lot of companies (intel etc) may draft their own contract but many of the clause will be in line with RIAI standard form. the likes of intel etc would have additional requirements for privacy, cleanrooms etc that they may want to incorporate into the contract so they will later it to suit so it very much depends on whats involved in the proposed project as to which contract you use or if you need a contract specific draft.

fash

As someone who works in the construction claims side for multi hundred million and billion euro/pound projects- I can tell you the RIAI contract is in no way for that purpose.

1. At that amount of money you need proper top 5 solicitor firm advice.

2. Your basic contract will either be bespoke - or depending on the project based on the CIOB complex projects contract, NEC3, FIDIC (wouldn't usually recommend this) or the PWC (GCCC).

The PWC (GCCC) form of contract is one of the best in the world- if you are not going to pay for the legal advice ( and I strongly suggest you do), then use this. Ciaran Fahy and Anthony Hussey recently published a private sector version of the PWC. Google it.

kkelliher

fash wrote: »

As someone who works in the construction claims side for multi hundred million and billion euro/pound projects- I can tell you the RIAI contract is in no way for that purpose.

1. At that amount of money you need proper top 5 solicitor firm advice.

2. Your basic contract will either be bespoke - or depending on the project based on the CIOB complex projects contract, NEC3, FIDIC (wouldn't usually recommend this) or the PWC (GCCC).

The PWC (GCCC) form of contract is one of the best in the world- if you are not going to pay for the legal advice ( and I strongly suggest you do), then use this. Ciaran Fahy and Anthony Hussey recently published a private sector version of the PWC. Google it.

Its a given that you should seek legal advise from a construction contract specialist firm.

the contract documents as a whole are what is important as the best contract in the world is no good if the remainder of the documents are poor. I disagree that the riai standard form cannot be used but as i stated in an earlier post it will require alteration depending on the project requirements. It all comes down to the specifics of the project to be fair

fash

No matter how a €100 million project is being run, there will be scope for cost increase. The change mechanisms and claims notice requirements in the PWC forms are at sufficiently tight to at least require that issued are addressed at the time they occur - meaning proper informed change management by the employer can occur. This is not the case with the RIAI forms. It is far too easy with an RIAI type form for a contractor to land a post completion claim for €50 million or more on a €100 million project.

The fact that there is no programme management is also an issue- however that at least could be partly addressed by additional clauses. The change management procedures are so wrong that there is no point using the forms as a starting point.

kkelliher

fash wrote: »

No matter how a €100 million project is being run, there will be scope for cost increase. The change mechanisms and claims notice requirements in the PWC forms are at sufficiently tight to at least require that issued are addressed at the time they occur - meaning proper informed change management by the employer can occur. This is not the case with the RIAI forms. It is far too easy with an RIAI type form for a contractor to land a post completion claim for €50 million or more on a €100 million project.

The fact that there is no programme management is also an issue- however that at least could be partly addressed by additional clauses. The change management procedures are so wrong that there is no point using the forms as a starting point.

Alot of your concerns are slightly incorrect in respect to the RIAI form. I personally believe the whole contract needs a shake up but in respect to the variation section it is generally more a problem of actual inforcement of the contract provisions than the contract itself. The contract administration of most contracts that use the form would leave alot to be desired. The contract iq quite clear in terms of giving 5 days for notification of a variation and 5 days for confirmation of verbal instructions. there is also an obligation fo the clients reps to value variations and not wait for the contractor but again in practice this does not happen.

Having worked on many government contracts I do not believe you will find many contractors who would be overly happy to enter a contract with a private client or organisation using the PWC given the risk transfer involved but then I suppose you will always find someone to do so.

I think the whole area of contracts needs to be taken in consideration of the entire list of contract documents. the PWC, like the other contracts are of little use with poorly drafted drawings and specifications so you need to get the entire suite correct, irrespective which contract you use.

landcrzr

Hi,
There are horses for courses in my opinion. Bespoke contracts sound great but at the project value you speak of, the contract is likely to be well tested. Your bespoke contract is an unknown until tested.
Dept of finance contracts were developed for price certainty and to reduce public sector exposure to risk, the downside is that this increases the cost of the project (current recession does dramatically distort this however), you are essentially selling risk to the contractor. As others have said, a private contract based on the current government forms of contract will cost you extra.
Given this is a construction forum, I will assume the project is construction related. Consider one of the NEC3 contracts, they are a full suite of contracts with a range of option clauses. They are reasonably well known and depending on how you set your contract up are fair. Option C contracts (Target cost) encourage the client and contractor to complete the project for less than the original tender bid by sharing any savings and by sharing any cost over-run.