Partnering and frameworks in the Arabian Gulf

David Mosey and James Williams, Trowers & Hamlins discuss PCC International as a means of delivering successful partnering projects.

Trowers & Hamlins - Dubai, COMMENT, Business

David Mosey and James Williams, Trowers & Hamlins discuss PCC International as a means of delivering successful partnering projects.

Recent trends in the Arabian Gulf have seen a significant shift towards the use of partnering, often linked to joint ventures and frameworks, as a means of achieving successful fast-track developments.

This article looks firstly at the use of PPC International as a means to deliver successful partnering projects, and next week, will look at the logical extension of project partnering into long-term joint venture and framework relationships.

PPC International represents the latest development in the rise of partnering as a mainstream option for UK and international developers, contractors and designers.

Written by Trowers & Hamlins and published in 2007, PPC International has already been adopted on two major projects in Dubai, each worth approximately US $900million (AED 3.3billion), and forms part of the new suite of standard forms used by a third Arabian Gulf developer.

Partnering is a team-based approach to procurement of construction and engineering projects, designed to break down the barriers that are traditionally formed between designers, contractors and subcontractors and that have led to missed opportunities, inefficient working practices and a culture of claims and disputes.

While new contracts do not automatically change deep-rooted attitudes, partnering contracts can bridge some of the old divides and can clarify new roles and relationships and the extent of new commercial commitments.

PPC International has its origins in a UK initiative by the Construction Industry Council to create an alternative to single stage, lowest price tenders for selection of contractors and specialist subcontractors.

This process left them outside the team during the crucial phases of design and risk management and encouraged artificially low tender prices outweighed by later claims.

The Construction Industry Council's work led to the publication of PPC2000 in September 2000 and its early adoption to govern two stages procurement of office, school and residential projects.

By 2004, the UK Royal Institution of Chartered Surveyors reported that PPC2000 was being used on 6% of all UK construction (together worth $22 billion that year) and extended to a wide range of projects governing hotel and leisure developments, hospitals, airports and infrastructure.

So what is special about PPC that does not appear in other contracts?

Its key features, distinct from any other contract form, are early conditional appointment of the main contractor (and key subcontractors), the use of binding deadlines for all consultant and contractor outputs, the creation of a single contractual hub to ensure clear and consistent terms and conditions, and a system of meetings and communications to ensure early warning of problems and advance information so as to maintain client control over change and risk management.

At the end of 2006, a PPC2000 school project won the Prime Minister's Better Public Building Award in the United Kingdom, praised for the success of its sustainable design features and its adherence to time and budget notwithstanding the risks created by a contaminated and restricted site.

Since then, clients have recognised that two stage procurement under PPC2000 can ensure that proposals for sustainable development, whether by way of new designs or new working methods, are properly evaluated rather than dismissed or diluted on grounds of cost alone.

Now the benefits of early contractor appointment under partnering contracts are being exported to the Middle East and PPC International has been created to meet a new demand.

In this case, the drivers are more sophisticated project planning by developers (including in particular Islamic banks and client/contractor joint ventures) as well as the increasing failure of price-driven single stage procurement to deliver its claimed cost certainty - or indeed to attract top-class architects and contractors in what is a uniquely over-heated marketplace.

And what has PPC International achieved so far? Its adoption on the world-class University Hospital project in Dubai was a decision made by the entire team after their selection, with contract signature achieved within two months from standing start by the client (Dubai Healthcare City), main contractor (Al Naboodah Laing O'Rourke), architect (Ellerbe Becket), project manager (Confluence) and cost consultant (Davis Langdon).

Since then, the mechanical and electrical specialist contractor (a Balfour Beatty company, BK Gulf) plus two specialist sub-consultants (GHD and SKM) have joined the team under the same multi-party contract.

These structured relationships have enabled an early start on site of substructure and foundation works (saving up to nine months on the programme) and have allowed the team as a whole to contribute to value engineering and reduction of risk pricing in advance of the main works starting on site.

Meanwhile, another developer (Dubai Multi Commodities Centre) has selected its architect, cost consultant and main contractor under PPC International for an office and hotel development known as "The Time Zone Project", and other leading clients and contractors throughout and beyond the Arabian Gulf are expressing a keen interest in the benefits that this new form of contract can offer.

So far, so good. PPC International is not the only progressive form of contract available.

Others include NEC3 and JCT Constructing Excellence. However, PPC International has now been tried and tested for almost eight years with some obvious successes, as further illustrated by case studies on the PPC2000 website (www.ppc2000.co.uk).

In an industry renowned for disputes, it is also interesting to note that out of the 2,000 UK construction adjudications that took place in 2004, the number that related to PPC2000's 6% share of the market were not 120, but - zero!

Project partnering is only the tip of the iceberg if it is utilised only on a single project and if the team is then disbanded.

The benefits of achieving collaboration between designers, contractors and subcontractors are significantly greater when the same team is engaged on a series of projects - either under a framework agreement or through one or more joint ventures.

Framework agreements are documents under which the same consultants and contractors are appointed on a series of projects, provided that they continue to perform in accordance with the client's requirements and provided that they can offer increased savings in time and money and other improved efficiencies so as to justify their continued engagement.

Feedback on completed frameworks using PPC is encouraging, with Whitefriars Housing Group achieving 20% time savings and 10% cost savings on its US$500m housing programme and more recently the UK Government Department for Work & Pensions in partnership with private developer Land Securities Trillium achieving US$370m savings on their US$2.2bn nationwide office programme.

Meanwhile, another framework created by Trowers & Hamlins for the UK Eden Project, using NEC3, enabled that project to win the 2007 "Quality in Construction" award for excellence in collaborative engineered design of its "Core" educational complex.

Turning to joint ventures, under this approach clients take an equity interest in the contracting organisation, thus obtaining complete transparency as regards costs and performance while also gaining a share of the contractor's profits.

For a developer that has a major workload, joint ventures with consultants and contractors present an attractive option.

For example, in the UK, Sheffield City Council went into a US$1bn joint venture with Kier that produced a capital receipt for the client, a guaranteed workload for the contractor and an expanding business that brought both of them substantial profits as well as a range of awards.

Already, we have seen significant client/contractor and client/consultant joint ventures emerging in Dubai and Abu Dhabi, created by developers such as Aldar and other major Dubai and international developers.

Whatever the size and potential returns under frameworks and joint ventures, there must always be an effective contract for the delivering of each project.

This project contract needs to embody principles and processes consistent with the framework or joint venture.

While FIDIC or any other contract form could be adapted to achieve this, it will be no surprise to hear that PPC and NEC3 have the requisite features built in and need much less revision to support long-term collaborative arrangements.

Most popular

Awards

CW Oman Awards 2020: Meet the winners
A round of the thirteen winning names at the Construction Week Oman Awards 2020 that

Conferences

Leaders UAE 2020: Building a sustainable, 'resilient' infra
AESG’s Phillipa Grant, Burohappold’s Farah Naz, and Samana's Imran Farooq on a sustainable built environment
CW In Focus | Inside the Leaders in KSA Awards 2019 in Riyadh
Meet the winners in all 10 categories and learn more about Vision 2030 in this

Latest Issue

Construction Week - Issue 767
Sep 01, 2020