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What is a pre-construction services agreement?
Documents services and T&C's that contractor is to perform before entering into the building contract.
When are they usually used?
Two stage tendering, signed after first stage and cover up to end of second stage.
Often on D&B.
Why are they used?
Develops a lump sum price, enables it to be determined and the main contract entered into
What happens in Stage One?
Employer issues outline information (including scope of services in preliminaries) to potential contractors.
What do the contractors include in their tender returns?
Profit, overheads, preliminaries, proposals on how they intend to execute the project, fee for second stage services
What tasks might the Contractor be asked to perform in the second stage?
Finalise the designAdvise on methods of constructionObtain subby prices for packages (open book basis)Evaluate tender returns and agree selection with the employer
What are the advantages of this two stage approach?
Contractor advice to the employerEarly input should reduce the disputes and problems arising during constructionDesign and tendering of packages overlaps – quickerThe contractor also benefits from getting paid earlier and becoming part of the DT
What are the disadvantages?
Contractor no longer in competition – costs riseLonger involvement without the main contract signed, weaker contractor’s bargaining positionContractor integration means employer becomes reluctant to dismiss them if fails to perform or negotiate on price/programmeSubbies tend to be bigger and more prominent = more expensive (diff. under single stage)Generally only 80-85% fixed pricing at contract execution, prov. sums = less price certainty than under single stage
What should be taken into account in the wording of a PCSA?
Does NOT commit to the building contractEnsure obliged to pay for documented services only and nothing elseState employers discretion to appoint the contractor at the end of the second stage or notState that if they do not appoint the contractor, the employer has no liability for any loss of project, contract or other opportunity
What might the pitfalls be?
It is not uncommon for the pre-construction services to include enabling works and surveyors etcMore work carried out before the building contract T&Cs are executed the weaker the employer’s negotiating position becomesIf the contractor is not selected to go further, any new contractor will be reluctant to adopt responsibility for the previous contractor’s work – split liabilities
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