Episode 98:
Hello and Welcome to the Part3 with me podcast.
The show that helps part 3 students jump-start into their careers as qualified architects and also provide refresher episodes for practicing architects. I am your host Maria Skoutari and this week we will be talking about the Pre-Construction Services Agreement aka PCSA. Today’s episode meets PC5 of the Part 3 Criteria.
So what is a Pre-Construction Services Agreement (PCSA):
This type of agreement tends to be used to appoint a contractor to carry out services before entering into a formal building contract. It can also be referred to as a pre-contraction agreement (PCA) which is used in a two-stage tendering process to obtain further design input, buildability advice, technical advice and detailed cost information from a prospective contractor.
The PCSA is a formal agreement to provide specified services, and sometimes to carry out specific works. It is not a letter of intent.
Just to quickly cover two-stage tendering, this process has been developed to meet the desire for integrating the supply chain into a project team at an early point in the project. This then allowed the employer to tap into the contractor's expertise and gain advice on matters such as cost and buildability. At the first stage, there is little detailed project information available and contractors compete on the basis of their track record and expertise. Then at the second stage, the successful contractor works with the client and other consultants to develop the design to meet the clients requirements and once the package of information is considered sufficiently complete, the contractor then submits a tender for undertaking the project and if acceptable the contractor will be appointed for the project.
Now, reverting back to the PCSA itself, there are two types of Pre-Construction Service Agreements, one for a General Contractor and the other is for a Specialist.
The PCSA for a General Contractor:
Is for the supply of pre-construction services by a Contractor selected under a two-stage tendering procedure; and where the main contract is to be either a JCT Standard Building Contract, Design and Build Contract, Major Project Construction Contract, Intermediate Building Contract or Intermediate Building Contract with contractor’s design.
It can be used:
- whether or not the Contractor is to be responsible for any design work;
- where there is to be novation to the Contractor of any specialist sub-contract(s) or supply contract(s) or (in the case of a Design and Build Contract or Major Project Construction Contract) any consultancy agreement(s);
- by both private and local authority employers; and
- in a JCT Construction Management procurement, for the provision of preconstruction services by prospective Trade Contractors, with some minor adaptions required.
It is not suitable for use:
- between the Employer and specialist sub-contractors (except as prospective Trade Contractors in a JCT Construction Management procurement);
- between a Contractor and a sub-contractor; or
- in conjunction with the JCT Management Building Contract.
In terms of the agreement form itself, it is a contract between the employer and the contractor and the contractor's principal duty is to perform Pre-Construction Services in accordance with the Employers Requirements, the Statutory Requirements and the Programme. The contractor is also required under the agreement to exercise the skill, care and dilligence reasonably expected of a contractor experienced in projects of similar size, scope and complexity and they are also expected to carry the required Professional Indemnity Insurance to cover their liability as well as maintaining Public Liability Insurance. If the services include design work, the contractor will have no liability to the employer for this design unless and until the main contract is entered into.
Under the agreement, the employer is also required to identify an Employer’s Agent for the pre-construction phase and the contractor is required to appoint a representative and key personnel for the pre-construction phase. There is also an optional provision where the contractor agrees that they will accept the novation of other team members or specialists, should they be awarded the project contract.
So the agreement is for the interim appointment of a general contractor by the employer to carry out pre-construction services, as mentioned under a two-stage procedure. The appointment follows the first-stage tenders and covers the period leading up to the contractor’s submission of a definitive second-stage tender and entry into the main contract for the construction phase. As well as setting out the terms under which the services are provided, and the second stage criteria, it also sets out the form of construction contract to be entered into for the construction project.
The appointment will enable the contractor to assist the consultant team with the development of detailed designs and development of the main contract works and specialist tender documents. The contractor’s involvement at the pre-construction stage is widely viewed as being valuable and often essential in the final design process and preparations for the construction phase, including the programme, cost plans, buildability and specialist procurement. If the contractor fails to complete the Pre-Construction Services in accordance with the programme, this would be deemed as a breach of contract which may entitle the Employer to claim damages. Similarly, if the contractor is delayed by events which are beyond their control and are related to the project, they would be entitled to adjust their fees for the services.
Using the PCSA agreement provides opportunities to explore non-traditional approaches to procurement, and offers those which seek to collaborate the scope to work together in achieving the common objective of a successful project outcome. The agreement also includes provisions relating to BIM and whether or not the contractor is to be responsible for design work, the PCSA can still be used, unless otherwise agreed in the provision of services, any liability will only arise once a contract for the construction works is executed.
Now if for any reason the employer is not satisfied with the services of the contractor or their performance, the employer is allowed to suspend the contractor for the whole or any part of the pre-construction services at any time by issuing a 14-day notice. If a dispute arises, the parties have the contractual right to refer the dispute to adjudication.
Now the PCSA for a Specialist:
Is for the supply of pre-construction services by a specialist to either an employer or the actual or prospective main contractor on substantial and/or complex projects, prior to entry into a sub-contract for construction or installation work. This would typically take place during a two-stage tender process and the services must be listed by the parties. It can be used where the main contract is to be the JCT Standard Building Contract, Design and Build Contract, Major Project Construction Contract, Management Building Contract, Intermediate Building Contract or Intermediate Building Contract with contractor’s design, 2016 Edition.
It can be used:
- whether or not the specialist is to be responsible for any design work;
- where the pre-construction services agreement is to be with the employer but the benefit of the specialist’s tender may be assigned to the main contractor; and
- by both private and local authority employers.
It is not suitable for use:
- between the employer and main contractor (for which the other version of the agreement, i.e. the JCT Pre-Construction Services Agreement (General Contractor) (PCSA) should be used);
- between the employer and a professional consultant (for which the JCT Consultancy Agreement (Public Sector) (CA) may in appropriate cases be used).
In terms of the agreement form itself, it is an agreement between the purchaser and the specialist and the specialist's principal duty is to perform Pre-Construction Services in accordance with the purchaser's Requirements, the Statutory Requirements and the Programme and they must comply with all instructions issued by the purchaser. The specialist is also required under the agreement to exercise the skill, care and dilligence reasonably expected of a specialist contractor experienced in the types of work to which the services relate for projects of similar size, scope and complexity. They are also expected to carry the required Professional Indemnity Insurance to cover their liability for design and details set out in the Particulars, as well as maintaining Public Liability Insurance. If the services include design work, the specialist will have no liability to the purchaser for this design unless and until a sub-contract is entered into or until the specialist is required to enter into a collateral warranty.
If the specialist fails to complete the pre-construction services in accordance with the programme, this would be deemed as a breach of contract, entitling the purchaser to claim damages. The specialist is also forbidden from selecting or recommending materials that do not comply with the guidance in Good Practice in the selection of construction materials published by the British Council for offices.
Under the agreement, the purchaser is also required to identify a representative for the pre-construction phase and the specialist is required to appoint a representative and key personnel for the pre-construction phase.
As mentioned, this agreement is designed for the interim appointment of a specialist to carry out pre-construction services for either the employer or the actual or prospective main contractor and requires the specialist to work cooperatively with other project team members to achieve the clients requirements. There is an optional provision whereby the specialist may be required to submit a second-stage tender and if the specialist is engaged by the employer, there is provision for the benefit of its second-stage tender to be assigned to the main contractor and that the specialist agrees to this. The specialist will not be liable for their design services during this period unless and until they enter into a subcontract with the contractor or a collateral warranty with the employer. This version of the agreement is likely to be used on substantial or complex projects prior to entry into sub-contracts for construction or installation work.
The appointment enables the specialist to be involved and give advice during the pre-construction period. And it’s at this time, not during the construction phase, that the purchaser, assisted by the contractor and relevant specialists, is able to derive the greatest benefits from value engineering exercises. If the purchaser requires additional services from the specialist, the agreement allows for them to do so to the extent that they are within the scope of the project and the specialist’s competence. And similarly, if the specialist wishes to claim any additional fee, loss and expense or additional time due to providing additional services, or to any delaying event, the specialist must notify the purchaser with details. Then upon receiving the notification, the adjustment agreed between the purchaser and specialist.
The PCSA agreement provides opportunities to explore non-traditional approaches to procurement, and offers those which seek to collaborate the scope to work together in achieving the common objective of a successful project outcome. It also includes provisions relating to BIM. And it can be used whether or not the specialist is to be responsible for design work but, unless otherwise agreed in the provision of services, any liability will only arise once a contract for the construction works is executed or, additionally, a collateral warranty with the employer has been executed.
If for any reason the purchaser is not satisfied with the services provided by the specialist, the puchaser is allowed to suspend the specialist for the whole or any part of the pre-construction services at any time by issuing a 14-day notice. If a dispute arises, the parties have the contractual right to refer the dispute to adjudication.
To sum up what I discussed today:
- Generally, a pre-construction services agreement is a type of agreement that tends to be used to appoint a contractor or specialist to carry out services before entering into a formal building contract.
- There are two types of Pre-Construction Service Agreements, one for a General Contractor and the other is for a Specialist.
- The PCSA for General Contractor is for use where an employer wishes to appoint a contractor to undertake services before a main contract is let. This would typically occur during a two-stage tender process. It would also be suitable for the provision of pre-construction services by prospective trade contractors in a construction management arrangement.
- The services must be listed by the parties, as well as the fees for those services.
- The contractor agrees that, if awarded the project, it will accept the novation of specified consultants and specialists.
- The PCSA for a Specialist is for use where an employer or contractor wishes to appoint a specialist contractor to provide services prior to entry into a subcontract for construction or installation work. This would typically occur during a two-stage tender process. And, it may also be used in relation to other forms, such as the JCT SBC, prior to the specialist being listed or named in the main contract.
- The services must be listed by the parties, as well as the fees for those services.
- There is an optional provision within the agreement whereby the specialist may be required to submit a second-stage tender.
- Where the specialist is engaged by the employer, there is provision for the benefit of its second-stage tender to be assigned to the contractor.
