Early contractor involvement, often referred to as two-stage procurement or two-stage contracting, involves the early appointment of a contractor through a preconstruction services agreement (PCSA). Typically, but not always, this will take place prior to entering into a building contract during the construction phase to carry out major works relating to PCSA services.
This method of procurement has several benefits, including early contributions to the design process, more accurate cost planning, and application planning assistance. When implemented effectively, it enhances your ability to create cost certainty and build integrated project teams.
Often the same contractor is used for both the pre-construction and construction phases, although major work may be directed to different parties. Therefore, the PCSA uniquely acts as a limited scope “test run” between the contractor and client teams.
Contractual matters
Employers typically enter into PCSAs with contractors in a format similar to the appointment of a consultant. The services you provide must be clearly defined.
The Joint Contracts Tribunal (JCT) has published two standard forms of the PCSA. One for general contractors and one for specialists, and both are also suitable for use in future main construction contracts, with or without contractor design, in other JCT contracts such as design and build (D&B), standard construction contracts, large project construction contracts, or intermediate forms.
With some adjustments, it can also be used in conjunction with the procurement of JCT construction management contracts to provide pre-construction services by trade contractors.
PCSA for general contractors (GCs) does not reinvent the wheel. It contains the usual provisions regarding skills and care, payment, insurance, termination, suspension, copyright, CDM regulations, obligor compliance, assignment and security guarantee provisions. The PCSA envisages that, prior to construction, contractors will submit a first stage bid and provide details of pre-construction services and fees in an annex.
It also includes an easy mechanism for contractors to claim additional amounts, whether related to additional services or costs incurred in connection with uncontrollable events that materially alter or delay the performance of preconstruction services.
One notable aspect is JCT’s approach to design liability and the limitation of contractor liability for designs provided under the PCSA. Although Article 2.8 of the GC form exempts the contractor from liability for designs carried out during the pre-construction phase and excludes cases of personal injury, we argue that this is not appropriate for PCSA-type drawings.
The contractor is exempt from design work unless a prime contract is signed. This is something to consider when considering the use of a JCT PCSA, particularly where another contractor has been appointed to the main contract, as there is a risk of contractual gaps regarding design responsibilities occurring during the pre-construction phase.
Things to consider
All of this raises important questions. If PCSA can be easily used with other JCT forms, why isn’t PCSA used as much as the broader JCT suite?
The PCSA’s JCT form does not tick all the boxes and will require modifications to bring the form into line with market standards. We always recommend modifying the JCT form or using a bespoke PCSA that is more in line with market standards and suitable for your project. While design liability needs to be addressed and the role of obligor introduced by the Building Regulations Amendment 2010 is addressed, this form does not address the high-risk building regime or the process for applications to the Building Safety Regulator for Gateway 2.
Modifications will also be required to address complexities that arise in the project, whether related to the design itself or not. To ensure that the contractor is responsible for any design. and/or address property requirements to address specific requirements or responsibilities regarding site conditions and site preparation.
After all, it is important to remember that a PCSA is not the same as a letter of intent, which is often used to instruct a contractor to begin initial work on site. PCSA focuses on pre-construction activities.
However, although a well-drafted PCSA can include early contractor involvement, including design responsibility, these tend to cover preliminary physical works such as site surveys and enablement.
Written by Isobel Moorhouse of Pinsent Masons
