By Julia Hill, ECG Chair
January’s Federation of Piling Specialists (PFS) Early Careers Group (ECG) event/webinar was held 11 January 2022, and was the first in a series of webinars on key commercial and contractual matters that cover the life cycle of a construction project, with this tackling the topic of ‘Pre-Contract Matters”.
The meeting was well attended, with numerous piling contractors, both FPS Members and Associate Members, including Roger Bullivant, Van Elle, GSS Morrisroe, Keller, Cementation Skanska, Bachy Soletanche, Aarsleff, Expanded, Murphy, Wardell Armstrong and SOCOTEC, and included a secondary school student and a Geotechnical Engineer from Egypt.
Presented by Dean McGinty (Senior consultant) from Ramskill Martin, a Multi-Disciplinary Business specialising in Risk Management in the Construction and Engineering Sectors, the webinar focussed on items associated with forming a contract and contract negotiations.
Specifically, the presentation opened with an exploration of Contract Formation, and what constitutes offer and acceptance. The precedent setting case of Carlill v Carbolic Smoke Ball Company 1893 was discussed – given its defining decision in the Court of Appeal – setting out the common law position of what three things need to occur to form a binding contract (offer, acceptance and consideration) and in this instance the promise to pay.
As part of accepting of a contract, Battle of the Forms and the Last Shot Principle were discussed with Dean explaining the difference between the two, advising it is best to have an agreement in place before the works start, notwithstanding the inherent haste within the construction industry, particularly with regards to quick starts on site.
The presentation then moved on to discuss the contractual difference between the JCT and NEC 3 contract with regards to transferring risk; how design risk is allocated between the contractor and the employer.
As the audience was primarily piling subcontractors who design and install piles, it was when the presentation highlighted how both JCT the NEC deals with existing ground conditions, the responsibilities of the Subcontractor and the subsequent allocation of this risk (it is especially onerous in both contract forms) that generated most interest that sparked questions and debate. Dean explained that with the suite of unamended JCT contracts, ground risk lies with the contractor, however with the NEC, under clauses 60.1 (12), 60.2 and 60.3 the risk is dependent on whether it could have been reasonably foreseen. Guidance was provided on the amendments that could be made to the contract in benefit to the subcontractor and gave recommendations/good practice for managing commercial risk throughout the project, with respect to ground conditions.
Pre-Contract Service Agreements (PCSAs) were then touched upon – them being an avenue worth exploring when Early Contractor Involvement (ECI) is desired by clients, particularly when concerned with being paid for design input at early stages of a project when there is no guarantee of securing the construction phase of the works; the benefits of this being self-evident to piling specialists given the design responsibility inherent in most piling schemes.
As part of the presentation Letters of Intent were discussed. These are common in this industry and are commonly used to allow a quick start on site, before all the Terms and Conditions have been agreed. Dean highlighted the risks associated with letters of intent, which included not having a clear scope of works, programme, and under no circumstances exceed the sum stated.
Dean moved on to explain how the Construction Act 2009 replaced the Housing Grants, Construction and Regeneration Act 1996, and how the new act mitigated against ‘smash & grab’ adjudications too.
The webinar was closed with Dean looking at design risk, in particular reasonable skill and care and fitness for purposes. This was particularly interesting to understand the difference between the two, as piling contractors we don’t want to sign up to Fitness for Purpose as this puts a requirement on the contractor beyond conducting the works to the same standard as another reasonably competent professional but imposes an obligation to produce a result regardless. Fitness for Purpose is an onerous obligation and is not commonly covered by Professional Indemnity Insurance.
The presentation attracted varying questions from a wide variety of professions, with wide levels of experience and different competencies, thus demonstrating the importance of gaining an understanding of commercial and contractual matters.
Feedback has already been extremely positive and subsequent presentations should be equally as engaging.
To see a video of the webinar, visit: [FPS ECG Webinar Series] Pre-Contract | Federation of Piling Specialists