PETER MCCARTHY, Conlex Consulting, writes all parties would be better served with a complete Works Requirement clearly reflecting all Employer needs, which eliminates guesswork for tenderers and provides a level tender playing pitch
The Office of Government Procurement (OGP) introduced its suite of Public Works Contracts (PWC) in 2007 to standardise the procurement and administration of government construction contracts in Ireland. Although one of the objectives of the PWC was to simplify the procurement and administration of construction projects, many difficulties still exist today regarding how these contracts should be applied.
Before we begin, it is important to recognise some ground rules that exist under the PWC.
Clause 1.3.1 of the Contract outlines the hierarchy of documents should inconsistencies arise between contract documents, where the Agreement and Schedule carry more weight than the Works Requirements and Pricing Document.
The Agreement states under Article 1 that ‘the Contractor shall execute and complete the Works subject to and in accordance with the Contract and shall comply with its other obligations in the Contract’, and Clause 1.2.2 (1) of the Contract tells us that the Works are the Works Requirements which usually include the drawings and specification describing the Works.
Therefore, when considering pitfalls that might exist under the PWC, special consideration needs to be given to the Schedule and Works Requirements.
THE SCHEDULE
As outlined under clause 1.3.1 of the Contract, the Schedule is ranked second in the hierarchy of documents. The type of information included in the Schedule plays a vital role in how a PWC functions. If wrongly drafted, it can have serious consequences. The Schedule, in effect, is the engine room of the PWC.
Part 1 B of the Schedule requires the contract drafter to consider what should be included in the Works Requirements Box.
As shown above, the OGP suggest that ‘As scheduled and included in Volume A’ be inserted. If that is the case, the contract drafter needs to make sure that Volume A only includes information that describes the scope and nature of the Works to be constructed, i.e. drawings and specification.
Very often, mistakes can be made when populating the Works Requirement (WR) box, where incorrect information is included.
On occasion, I have seen the WR box include site investigation information, other background information, and the Pricing Document, as shown below.
This incorrect population of the WR box could have serious consequences, especially where it is intended that unforeseen ground conditions are a Contractor risk event and where the Pricing Document is not a true reflection of the WR.
Part 1B of the Schedule also requires the contract drafter to indicate what method of measurement is used when drafting the Pricing Document (PD) . The standard OGP schedule provides for the drafter to choose one of three industry-standard method of measurements (MOM) from the drop-down menu as shown below:
It is imperative that the MOM selected is the one used when drafting the PD. Should the wrong MOM be selected and considering the Schedule takes precedence over inconsistencies that might exist between it and the PD, this could result in a large number of compensation event occurring under the Schedule Part 1 K item 17.
Part 1G of the Schedule requires the drafter to insert the contract Date for Substantial Completion. This data is essential, as it triggers many events under the contract from a liability perspective. Unfortunately, very often it can be found that the Date for Substantial Completion cannot be clearly established.
For example, see below the confusion that can arise if undefined contract terms are used to define what the completion date might be:
As the ‘commencement date’ is not a defined contract term, it’s difficult to establish when the 30 weeks starts to run. It is therefore imported to only use defined contract terms when setting a date for completion and to keep it simple.
The daily delay rate was introduced by the OGP as a means of getting tenderers to price the cost of prolongation should the Employer delay the Works. Part 1K of the Schedule states
In sub-clause 10.7, the amount to be added for delay cost is in accordance with sub-clause 10.7.1 (1) the expenses [excluding profit and loss of profit] unavoidably incurred as a result of the delay to the Date of Substantial Completion of the Works; or: sub-clause 10.7.1(2) the daily rate tendered by the Contractor in the Schedule, part 2D ) (NOTE: Delete as applicable. If neither deleted, ‘sub-clause 10.7.1(2) the daily rate tendered by the Contractor in the Schedule, part 2D’ is to be read as deleted.) [emphasis added]
In sub-clause 10.7, the amount to be added for delay cost is in accordance with sub-clause 10.7.1 (1) the expenses [excluding profit and loss of profit] unavoidably incurred as a result of the delay to the Date of Substantial Completion of the Works; or: sub-clause 10.7.1(2) the daily rate tendered by the Contractor in the Schedule, part 2D ) (NOTE: Delete as applicable. If neither deleted, ‘sub-clause 10.7.1(2) the daily rate tendered by the Contractor in the Schedule, part 2D’ is to be read as deleted.) [emphasis added]
In reviewing many Public Works Contracts, I very often find neither opinion delated. This means that clause 10.7.1 (1) will apply by default, resulting in the Contractor being entitled to its expenses unavoidably incurred as a result of the delay rather than the daily delay rate tendered by the Contractor. Careful consideration, therefore, needs to be given to ensure the option shown under Part 1K reflects the party’s intentions.
THE WORKS REQUIREMENTS (WR)
As already mentioned, Article 1 of the Agreement states that the Contractor must construct the Works as defined in the WR. Ordinarily, the WR is described on tender drawings and specifications. The WR needs to be an accurate and complete reflection of the Employer’s requirements or needs. After all, clause 7.7 of the Contract confirms that all the Contractors is only obliged set out and construct the Works to the points, lines and levels outlined in the WR.
To ensure Contractors submit a realistic tender sum for the Works, it is important that all Contractors tender on a level playing pitch, which can only be created by clear and concise WR. If the WR is unclear and the tender playing pitch is uneven, it could result in confusion among tenderers, tender prices that do not reflect the Employer’s requirements, below-cost tendering and the occurrence of a large number of compensation and delay events during the course of the Works.
As an alternative to clear and concise WR, seeking to prop up poorly drafted WR with all-encompassing statements in the PD or WR should be avoided. One such statement I have come across which presumably was inserted to transfer Employer design risk was:
‘The final location of pipelines […], shown on the drawings will be agreed on site between the Contractor and the Employer’s Representative to avoid any obstructions, existing pipes and services etc. If so directed, the Contractor shall propose / set out his preferred route for all pipelines […]’ [emphasis added]
As clause 1.1.1 of the Contract confirms that the Contract takes precedence over the WR, and on Employer design contracts, clause 7.7 of the contract states that ‘The Contractor shall set out the Works by reference to the points, lines and levels of reference in the Works Requirements’, the above statement will have little effect in diminishing the Employers design responsibility. The parties would be better served in having a WR that is a complete and full refection of the Employer requirements, thus ensuring tenderers are not second guessing what view the competition is going to take of the tender playing pitch.
About Peter McCarthy
Peter McCarthy holds dual expertise in Quantity Surveying and Construction Law and is the founder and owner of Conlex Consulting, which supports clients with pre-contract review, post-contract support, preparation and negotiation of claims, dispute avoidance and dispute resolution. Peter is a fellow member of the Society of Chartered Surveyors of Ireland and the Chartered Institute of Arbitrators and is an approved Adjudicator and Conciliator on the SCSI panels.
To learn more, email peter@conlex.ie or visit www.conlex.consulting