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JCT Framework Agreement: Umbrellas? Who needs ’em
A framework agreement is like an umbrella that sits
above a contractual dinghy in which the elements of the Egan
partnership await their fate like good little girls and boys.
Until, of course, it starts getting wet
“This is grand stuff. All we need in the
dinghy is that bulldog in the television commercial that says
‘Oh yes’ … And now for what happens in real life”
What’s this “framework” idea all about? I was
at the launching of the JCT Framework Agreement (2007), and I
didn’t know much about it. A fellow guest whispered “Why didn’t
they call it a term contract?” Don’t ask me. Next day I noticed
in Building that one or two cute people had plugged into £9.5bn
of construction work with Spanish-owned BAA (18 January 2008).
But I’m still none the wiser about framework agreements. The JCT
is keen, though, hence its 16-page document thingy.
It’s an umbrella. But not a standalone
umbrella. The framework umbrella sits neatly above a sailing
dinghy. And in the dinghy is the construction enterprise: the
architect, the PQS and the employer. They are all reading the
ordinary standard form JCT contract (the ones that you are
familiar with).
In short, there are two lots of agreements to
be agreed. It is my guess that for all that £9.5bn BAA work, the
nine companies involved are still mere contenders for some of
that work. A framework deal is, in my old-fashioned language, a
“call-off” deal. The potential winners of work have agreed what
I will call basic ingredients. But they haven’t yet won any
work. It may even be that having got a framework in place, no
work is won at all. A framework deal is an “if” deal. It’s more
or less like you saying to me: “Let’s do a deal whereby if we
need an adjudicator next year we have already agreed your
terms.” So, we have a call-off deal.
So, having got the umbrella up and agreed,
what next? The JCT explains that the employer will issue an
enquiry to what it calls “the provider” in the dinghy. The
enquiry sets out the specific works. It may be that the umbrella
has agreed basic prices and costs. So, if Laing O’Rourke is
asked to fix a door knob at Stansted airport, the framework has
pre-agreed the price. If Carillon is asked to build another
runway, the framework may have laid down which JCT form will
apply, may have priced the canteen costs, the staff, the huts,
the price of the concrete. Truth to tell, it doesn’t matter how
detailed the framework agreement is. The idea is to somehow
short circuit the actual or eventual contract value. Having
worked out the actual price on the call-off system, all that is
needed is the order to build the runway or fix the door knob.
What’s the big idea behind all this? The JCT
says it’s all down to Sir John Egan and his Rethinking
Construction report. He challenged the way we have done things
hitherto in our industry. Oh, he had a sound point. Instead of
doing one-off work (invariably won at the lowest bid by the
outfit that dropped the biggest clanger when estimating the job)
he thought it better to “be together”. Better to move team-like
from project to project. He said: “Fragmentation of production
roles and processes tends to bring contractual relations to the
fore, further inhibiting effective and efficient team-working,
sharing of information and know-how.”
JCT Framework Agreements makes a similar
point: “The focus tends to be on contractual demarcation lines
and responsibilities, rather than working together to meet the
client’s needs in the most effective and/or efficient manner.”
Frameworks enable project participants to take a longer view, to
build and develop relationships, to “enhance the reputations and
commercial opportunities of all concerned”. This is grand stuff.
All we need in the dinghy now is that smiling bulldog in the
television commercial that says “Oh yes”.
And now let me tell you what will happen in
real life. Happily, an estimator somewhere is going to help to
compile a four-year call-off framework price list … and lock his
outfit into an awfully big mistake. It’s a fixed price four-year
call-off term contract. As soon as it is realised that any one
job under the umbrella is going to take a cold bath, folk will
begin to wriggle. Hold on, says the construction chief, this
deal will bring a profit on the next job. But it doesn’t. Oh
misery! Oh wet dinghy! Man overboard!
I do wish Egan well but we in construction
are fond of fighting. The JCT gets 10 out of 10 for trying … but
the JCT is not in the dinghy, and it gets damp down here.
Readers are invited to forward recent
judgments for reporting in this column (with full
acknowledgement) to: Tony Bingham, 3 Paper Buildings, Temple,
London EC4Y 7EU. DX: 37164 Biggleswade
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