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JCT Framework Agreement 2007 - 2 years worth of progress?

09 September 2008

The JCT Framework Agreement, first published in 2005 in its binding and non-binding form was disappointing; has the introduction of the 2007 form addressed the concerns the initial form raised to make the new form worth using?

The JCT Framework Agreement (FA) was first published in 2005 in its binding and non-binding form. The introduction of the FA 2005 was disappointing; there was no procedure for successive projects, which meant it was not a FA in its accepted sense and in turn received many criticisms, mainly:-

  1. The non-binding FA caused concern and created an unnecessary level of ambiguity. The FA did not set out clearly the contractual terms governing the works being carried out.
  2. The potential market was extensively limited due to the FA not being in compliance with EU Public Procurement policies. This in turn meant that the public sector (i.e. local authorities) were unlikely to utilise the FA.

The “Rethinking Construction” report by Sir John Egan stated that the FAs failed in two main ways; procurement systems not allowing for improvements in effectiveness; and fragmenting roles and processes in a manner that restricts proficient team working systems.

Taking into account the above, the introduction of the 2007 FA by the JCT has been eagerly awaited. Now only the binding version appears in the FA; the non-binding version has not been republished. This has addressed the criticism of 2005 FA, ensuring that there is no longer any confusion in relation to the position of the non binding form.

The revised FA complies with Public Contracts Regulations 2006 and EU Procurement rules and therefore whilst still being suitable for use in the private sector the FA will now also attract the public sector. The FA can be used by both sectors who anticipate procuring a large volume of varied construction work/services. Under the EU Consolidated directive such work should cover a period of up to 4 years. The JCT 2007 ensures that once the FA has been created there should be no need for amendments and that a pricing mechanism should be in place.

The new form appears to be more successful due to the inclusions of provisions such as the requirement for all party pre-contract risk assessment and risk allocation to be taken on. Under the FA, this requires the parties to work together and attend site identifying risks and discussing management strategies. Additionally, the new form can be used for a wider range of services at different tiers due to the inclusion of a pre-agreed contractual system that applies to call-off under the FA. This has been designed for use with underlying contracts which are set out in the contract particulars of the FA. However, this does not include systems for competitive approaches such as mini-competitions. This would have an effect on public sector clients envisaging a more intricate FA and as a result an employer would need to look to bespoke documents. Mini-competitions can be a constructive way of ensuring that the competitive approach remains in the FA structure.

The 2007 form encourages communication of clear organisation structures and accurate briefing with those responsible and also includes provisions dealing with collaborative values which require the parties to express to personnel their desire to work in a collaborative manner.

Some weaknesses of the JCT are that the new risk management proposals are unclear and the FA does not offer an agreed financial incentive. Also, that JCT may have caused problems by placing collaborative processes in the FA and overriding provisions in the underlying contracts. Some contractors have expressed the view that the FA still requires significant development and integration with other contracts.

Aside from the above and in comparison to the 2005 FA the JCT FA 2007 is a welcomed improvement within the marketplace.

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Simon Wain

Associate
T: 08700 86 4122
I: +44 (0)121 625 4122
E: simon.wain@shoosmiths.co.uk