Legal update ––––– March 2017

Projects and Construction Framework Alliance Agreement

———— Pioneering ———— Bahrain ———— Construction ———— Public sector ———— Energy ———— Real estate ———— London ———— Tax ———— IT ———— Dubai ———— Manchester ————

Connecting ———— Knowledge ———— Pragmatic ———— Malaysia ———— Exeter ———— Thought leadership ———— Housing ———— Agile ———— Creative ———— Connecting ———— Private equity

Local government ———— Manchester ———— Environment ———— Focused ———— Islamic finance ———— Projects ———— Abu Dhabi ———— Corporate finance ———— Passionate ————

—— Employment ———— Regulation ———— Procurement ———— Expertise ———— Specialist ———— Planning ———— Investment ———— Committed ———— Delivery ———— IT ———— Governance

——— IP ———— Corporate ———— Infrastructure ———— Value ———— Development ———— Private wealth ———— Oman ———— Governance ———— Birmingham ———— Corporate finance ————

—— Dynamic ———— Pensions ———— Dispute resolution ———— Insight ———— Banking and finance ———— Arbitration ———— Diverse ———— Regeneration ———— Care ———— Communication

In June 2016, the Association of Consulting

Architects published a standard form

"Framework Alliance Contract" (FAC-1) that

works as a combined framework and

alliancing agreement and caters for multi-

alliance members.

Authored by the Centre of Construction Law at Kings

College, London, FAC-1 is based on best practice

guidance set out in the Infrastructure Client Group

Alliancing Code of Practice 2015 and from the

successful frameworks and alliance projects that were

used to support the UK Government Trial Projects

programme.

The programme was an integral part of the Government

Construction Strategy 2011-2015 and recommended

three "New Models of Construction procurement": "Two

Stage Open Book", "Cost Led procurement" and

"Integrated Project Insurance". The Trial Projects

programme highlighted that savings of between 14-20%

were achieved using these new models and the

frameworks and alliances of which they formed part of.

The frameworks and alliances used in the Trial Project

programme included the following:

• SCMG Hackney Homes and Homes for

Haringey Alliance;

• Ministry of Justice National and Regional

Framework Alliances;

• Surrey County Council Project Horizon

Highways Alliance; and

• Connect Plus M25 Framework.

Trowers & Hamlins advised the parties on each of these

projects as to how to use frameworks and alliancing to

achieve stated objectives and added value.

Why a new framework agreement?

FAC-1 provides the basis for alliancing by contractors,

consultants and suppliers working on complementary or

related projects.

Although the reputation of frameworks ebbs and flows,

and it is true that some frameworks are simply "static"

with no guarantee of work and of little benefit to the

client if the supply chain is not incentivised, the

Government Construction Task Group`s report

"Effectiveness of Frameworks" (July 2012), highlighted

that there is evidence of benefits from effective

frameworks such as

• delivering sustainable efficiency savings;

• reduction in consultancy and construction costs;

• delivery of projects closer to target cost and

time;

• reduction of disputes, claims and litigation;

• high client satisfaction rates;

• high proportion of work undertaken by small and

medium-sized enterprises;

• high proportion of local labour and sub-

contractors;

• high take-up of government in initiatives such as

fair payment, apprenticeships ;

• high proportion of waste diverted from landfill;

• good health and safety performance against

national average; and

• acting as a key enabler to integration of the

supply team.

Source: Fotolia

Why Alliancing?

Alliancing has long been seen as an opportunity that

allows clients and the supply chain to develop long-term

relationships against a pipeline of projects. Alliancing

Published by

Trowers & Hamlins

Trowers & Hamlins LLP

3 Bunhill Row

London

EC1Y 8YZ

t +44 (0)20 7423 8000

f +44 (0)20 7423 8001

www.trowers.com

Trowers & Hamlins LLP is a

limited liability partnership

registered in England and

Wales with registered number

OC337852 whose registered

office is at 3 Bunhill Row,

London EC1Y 8YZ. Trowers

& Hamlins LLP is authorised

and regulated by the Solicitors

Regulation Authority. The

word "partner" is used to refer

to a member of Trowers &

Hamlins LLP or an employee

or consultant with equivalent

standing and qualifications or

an individual with equivalent

status in one of Trowers &

Hamlins LLP's affiliated

undertakings. A list of the

members of Trowers &

Hamlins LLP together with

those non-members who are

designated as partners is

open to inspection at the

registered office.

Trowers & Hamlins LLP has

taken all reasonable

precautions to ensure that

information contained in this

document is accurate but

stresses that the content is not

intended to be legally

comprehensive.

Trowers & Hamlins LLP

recommends that no action be

taken on matters covered in

this document without taking

full legal advice.

Projects and Construction Legal update March 201

through multi-party arrangements with shared goals

should be a feature of every framework.

However, there has been no standard published form to

guide clients on how to put together alliancing

relationships and how to obtain value from them.

Consequently this makes it difficult for clients to develop

integrated teams.

FAC-1 creates a single multi-party framework alliance

between the Client, Alliance Manager and all other

Alliance Members so that they are enabled and required

to work more effectively in direct relationships with each

other.

FAC-1 is designed to provide an accessible and

versatile basis for any framework and alliance, enabling

preparatory and procedures for the award of projects;

better procurement with reduced drafting costs and bid

costs and improved framework and alliance practices

based on a common foundation.

Source: Fotolia

How does it work?

• a standard form framework agreement under

which a Client (and potentially Additional Clients)

can enter into Project Contracts for works,

services or supplies through the implementation

by an Alliance Manager of a Direct Award

Procedure and/or Competitive Award Procedure;

• appoints all Alliance Members, including the

Alliance Manager, under a single multi-party

contract;

• provides a contractual system for the Client to

issue early Orders instructing works, services or

supplies in advance of award of a Project

Contract, without the cost or risk involved in

bespoke letters of intent, to allow early

involvement of tier 1 and tier 2/3 contractors; and

• creates a collaborative Alliance between the

Client , the Alliance Manager and all contractors,

consultants or suppliers appointed as Alliance

Members so that they work can together to

achieve greater efficiency, cost savings and

other Improved Value.

How does it achieve improved value?

Improved Value can be created at a strategic level

using collaborative systems that precede the award of

individual Project Contracts.

Achievement of Improved Value is linked to

performance of "Alliance Activities" backed by

"Objectives", "Success Measures" and "Incentives",

prescribed by the parties, and by a "timetable" which

sets out the nature, sequence and duration of an

agreed activity for each Alliance Member.

FAC-1 uses Supply Chain Collaboration to enable

engagement with tier 2/3 sub-contractors,

manufacturers and suppliers. This has led to

demonstration of Improved Value through:

• greater engagement of local and regional

businesses;

• new local and regional employment and skills

initiatives;

• recycling and other Sustainability initiatives;

and

• positive feedback from Users and

Stakeholders.

Key provisions include:

• shared Objectives, Success Measures,

Targets and Incentives among the Client and

all other Alliance Members;

• a Core Group to review new proposals and

undertake non-adversarial dispute resolution;

• a Direct Award Procedure and/or Competitive

Award Procedure, each leading to Project

Contracts based on a set of agreed Template

Project Documents;

• links to Building Information Modelling (BIM) in

the Framework Documents and Template

Project Documents;

• links to the UK Government’s recommended

Supply Chain Collaboration system to achieve

Improved Value among Alliance Members,

each within agreed timescales;

• a shared Framework Brief with separate

confidential agreement of each Alliance

Member’s Framework Prices and Framework

Proposals;

• joint Risk Management using a shared Risk

Register;

• provision for expansion of the Alliance to

include Additional Clients and other Additional

Alliance Members under a standard form

Joining Agreement; and

• a separate schedule for any Special Terms

required by a Client.

Projects and Construction Legal update March 201

What project contract can I use?

FAC-1 is compatible with any project procurement

model under its Direct Award Procedure and

Competitive Award Procedure. For example it can

support:

• traditional or design and build or construction

management procurement models, with any

level or combination of contributions from

design consultants, tier 1 contractors and tier

2/3 sub-contractors/suppliers;

• integration of contributions under an alliance

comprising different specialists working under

related Project Contracts; and

• integration of the capital and operational

phases of each Project.

FAC-1 is designed for use with any one or more Project

Contract forms. It is compatible with all and any

combination of the following standard form project

contracts:

• JCT/NEC/PPC/ICC/CIoB/FIDIC; and

• CIC/RIBA/ACA/ACE/RICS/FIDIC.

Does it provide for BIM procurement?

FAC-1 provides the option for Building Information

Modelling (BIM) to underpin the agreed approaches to

design, supply chain engagement, costing, Risk

Management and programming that are set out:

• in relation to the Framework Programme in the

Framework Documents; and

• in relation to each Project in the Template

Project Documents.

How has Trowers & Hamlins been involved in

FAC-1?

FAC-1 was subject to extensive industry consultation in

the UK and abroad. Members of the construction group

took part in this consultation and reviewed in detail the

terms of FAC-1 just ahead of publishing. In addition a

draft FAC-1 was trialled by Futures Housing Group

advised by the Trowers & Hamlins construction group.

Futures Housing wanted to procure a framework

alliance of SME contractors to carry out a range of

maintenance works to its housing stock. The

attractiveness of FAC-1 to Futures Housing was the

ability to directly engage with SMEs and for Futures

Housing to assist sustainability of the local market

through collaboration with the alliance members.

March 2017 © Trowers & Hamlins

For more information please contact

Katharine Saunders

Partner

t +44 (0)161 838 2071

e ksaunders@trowers.com

Alan Tate

Partner

t +44 (0)1392 612330

e atate@trowers.com

Rebecca Rees

Partner

t +44 (0)20 7423 8021

e rrees@trowers.com

Mark Robinson

Managing Associate

t +44 (0) 121 214 8824

e mrobinson@trowers.com

John Forde

Senior Associate

t +44 (0)20 7423 8353

e jforde@trowers.com