Two Stage Tenders On The Rise

As many public figures have found out too late it is often the short, seemingly less significant tweets and blogs that often get people into real trouble. And so it can be with construction documents. People often seem to focus their attention on the big documents, such as building contracts and overlook those smaller but frequently more troublesome ones.

Pleasingly, letters of intent have in the last few years started to receive the bad press they so completely deserve and the number of last minute requests for us to 'print off the standard form letter of intent' has diminished as people become more wary of them.

What we have seen an increase of over the last few years, a trend which seems to have accelerated, is the increased use of two-stage tendering. In the absence of hard data, I am going to speculate that this is partly due to the perceived benefits to an employer of early contractor design involvement, such as an earlier start on site and 'an approach to contracting that supports improved team working and planning to deliver value for money' (government wording in respect of HS2), and partly due to increasingly busy and confident contractors in some areas rejecting single stage tender processes.

Deployment of two-stage tendering typically requires use of a 'pre-construction services agreement or "PCSA"'. Although longer and more complex than a letter of intent, and always intended to be a contract, PCSAs do share some practical similarities: bespoke forms have predominated (despite the relatively recent introduction of two standard form JCT PCSAs); and they are often assumed to be 'standard' documents, whereas in reality they often require substantial negotiation and amendment.

The basic rationale

It is probably helpful at this stage to revisit the basic rationale of two-stage tendering, namely to achieve the early engagement of a contractor:

As the contractor is typically paid for the services performed during this second stage, and can influence the direction the development the project is taking, there can be a substantive shift in power to the contractor once the second stage has begun. Employers therefore enter into PCSAs to seek to control this second stage. From the contractor's point of view, it wants to get paid for its services and put itself in the best position for securing the eventual contract. Given the aim of arriving at a construction contract of sufficient certainty in time, cost and content to be executed, I find...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT