Embracing partnering

Careful study is needed if misunderstandings are to be avoided, says Sachin Kerur, partner, Masons Galadari.

COMMENT, Projects

When launched in 2000, the PPC2000 was the first standard form multi-party partnering contract. It has subsequently been adopted for use on a variety of projects in both the public and private sector. In the form of its international version, PPC International, it has made its debut in the UAE with use on the University Hospital Project in Dubai.

Innovation in construction procurement techniques is to be welcomed, particularly in a market facing a number of inherent challenges such as we see here in the UAE. New project delivery forms will obviously need to be approached with care, particularly by those encountering some of the more radical forms for the first time. For example, there are a number of headline issues a constructor may observe when thumbing through PPC 2000 for the first time and here my thanks go to my colleague Richard Dartnell for leading me to them so expertly.

The PPC2000 is a multi-party contract and as such will be signed at the outset by the client, the client's representative, the constructor and any consultants and specialists (sub-contractors) who may be in place. Others may well join later. Each party to the contract will owe its contractual obligations to every other party to the contract. A constructor causing a delay to completion of a project would of course expect to be liable to his client. But he might also find himself liable in contract to other parties if they can establish that they too have suffered loss as a result of the constructor's default. So a constructor may wish to consider provisions dealing with duplicate claims, priority of claims and the binding in of other potential claimants to settlement arrangements.

The contract establishes a duty of reasonable skill and care for each partnering team member. To the extent that design falls within his role, expertise and responsibility a constructor may assume that this duty of care will apply to such design. However there are specific options relating to design responsibility elsewhere. Option 1 places responsibility on him to design, supply, construct and complete the project. In the event of a dispute in relation to design, the client can sue the constructor, who would in turn need to sue any culpable partnering team member for breach of its duty of care. To the extent a constructor has accepted full design responsibility or a fitness for purpose warranty, a constructor will recognise that although the client has a right of approval over design development, the constructor has lesser rights to object to a design and no veto rights or implied contractual relief elsewhere.

The constructor is generally responsible for managing all project risks except for any specifically carved out. Given that a project is likely to be complex with multiple parties and multiple obligations covering many different disciplines it may well be the case that the division of responsibility fails to cater for all eventualities. In these circumstances the constructor may have to assume a balance of risk not expressly provided for. Constructors should understand the breadth of the obligation they have to rectify any aspect of a project not in accordance with the partnering documents. This could arguably include the design defects of consultants, irrespective of whether such defect has been caused by the constructor's failure to meet its duty of care. The constructor will of course have a cause of action against the consultant, though he will have to go to the trouble and expense of pursuing the consultant.

The sub-contracting arrangements in PPC 2000 allow the client a significant degree of control over the process where the risk of sub-contracting lies with the constructor. Transparency is to be embraced of course but a constructor will wish to be confident that the client's controls would not undermine his ability to properly manage the risks he is being asked to assume. If these requirements have to be retained at all, the constructor may feel more comfortable in limiting their application to particular works packages in respect of which the client has project specific concerns.

In the same vein, where a specialist is making a significant contribution to the project perhaps he should be made to become a member of the partnering team, although this does not absolve the constructor from liability for such a specialist as, with the exception of client appointed specialists, the constructor shall be responsible for all aspects of the performance by each specialist of its responsibilities in relation to the project. The effect seems to be to place the constructor into a design and build role and the risks that go with it. It is to be hoped that this will not dampen the spirit of partnering, particularly where the client has had significant input into the appointment of the specialists.

PPC2000 inevitably has a number of areas that should be fully appreciated by constructors before entering into the contract. Indeed, as with any partnering contract it should not be assumed that everything will turn out well in the end. Partnering philosophies in general should be warmly welcomed but contracts that implement that philosophy must nevertheless be studied very carefully indeed.

Whilst clients may wish to share the rewards of a successful project, other stakeholders need to look out for those clients who may not be as keen to share the risks that go with the territory of any construction contract.

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