PPC 2000 Ironing Out The Risk In Contracting

Contracting is a risky business by its nature but traditional procurement exacerbated the problem. Both Latham and Egan recognised that traditional procurement practices of contractors tendering against client prepared documentation of incomplete designs inadequate surveys and contracts which simply dumped risks inevitably led to the poor relationships which plagued the industry.

The industry is being challenged to change these practices - to enter into less adversarial relationships - to manage risk fairly in its contract documents and to plan its procurement so that all concerned in the process have the opportunity to add value and are Not simply asked to sign up to a price.

PPC 2000 is a document that seeks to achieve that goal by making the Contractor ("Constructor") and other significant contributors to the process part the client team almost from day one. The traditionally Client led pre-construction phase of developing the brief and the Constructor led post construction phase are rolled into one contract but with two distinct phases. A Partnering Team sign up to a multi-party contract that requires them to go through activities according to a timetable.

The early phase is to develop a project brief to the level of a design for which full planning permission is sought and to develop a supply chain on the basis of whose prices an Agreed Maximum Price can be reached. Site investigations and other reports are procured at this stage. A risk management process requires all risks to be identified and either carried by the party most able to manage the risk or to be insured against. The Agreed Maximum Price should not include any contingency which has not first been considered in the risk management process.

The next phase-the construction phase-cannot begin until the process of phase one is complete. Before construction can commence a Commencement Agreement has to be signed and pre-conditions met. Until these are met the Partnering Team carry on with phase 1 unless the client terminates the contract. During this early phase the team are obliged to perform their roles and functions according to the partnering terms but there is as yet no commencement date or completion date for construction. Agreeing these dates as well as the Agreed Maximum Price and the Project Timetable are all part of the pre-conditions that have to be satisfied.

Once these are agreed and all planning conditions site investigations, the other matters listed in the...