A new form of standard facilities management contract is set to have a major impact on the procurement of facilities management services by the public sector.
CMS Cameron McKenna were commissioned by the Property Advisors to the Civil Estate (“PACE”) in the Autumn of 1999 to prepare a standard form of facilities management contract that could be used by government and public sector organisations to procure facilities management services. The contract was required to be suitable for the provision of both stand alone services, where a contractor would supply only one type of service (for example cleaning services), as well as for the provision of “total” facilities management services, where the contractor might be providing all services to a particular building (such as cleaning, maintenance, security and catering services). It was also important that the contract could cover both “soft” services (such as cleaning and catering) and “hard” services (such as building and plant maintenance).
Following extensive consultation with a wide variety of public sector organisations, including government ministries and publicly funded organisations such as national museums, and with technical assistance from WSP Facilities Management, the GC/Works/10 facilities management contract was drafted and finally published by PACE at the end of May. A separate volume containing detailed guidance on the contract terms together with a sample specification and model forms and notices was published at the same time and both volumes are sold together. The contract is already being used by a government department to procure complex facilities management services.
Employer’s representative
The contract has been drafted to follow as closely as possible the other GC/Works contracts in the PACE suite of standard form contracts. The contract envisages that the employer will engage an “Employer’s Representative” to act on his behalf. The “ER” can either be an independent consultant or a member of the Employer’s own staff. The employer is free to delegate to the ER the Employer’s rights to issue instructions and notices. It is envisaged that the ER will be the Contractor’s main point of contact with the Employer.
The contract also follows the precedent set by the other GC/Works contracts and is drafted to satisfy as far as possible Latham’s requirements for a model contract. For example a specific condition is included in the contract to encourage fair dealing by both parties, stressing the need for a co-operative and open relationship founded on team working.
The Contractor’s obligations to perform the services (which are to be set out in the Specification) are absolute as are his obligations to comply with relevant statutory requirements and health and safety requirements.
Contract price
The contract envisages payment by way of an annual lump sum “Contract Price” and two options are included in relation to how the Contract Price is to adjust. The first option allows the Contract Price to adjust annually in accordance with any selected cost or price index (or if no index is selected, the Retail Prices Index). The second option allows the Contract Price to remain fixed for the Contract Period but to be adjusted if the Contract Period is extended.
Where services to be provided include the maintenance of plant or building fabric, further optional clauses included in the contract may be used. These allow the parties to agree that either one of them is to be fully responsible for the cost of repair of any defect in such plant or building fabric. Alternatively, it can be agreed that the Contractor will be responsible for all repairs up to a certain value whilst all repairs above that value remain the responsibility of the Employer.
The contract recognises the importance of the Transfer of Undertakings Regulations to the facilities management industry and contains extensive provisions dealing with the same. The contractor is prevented from altering terms and conditions of employees or adjusting staff numbers or individuals prior to the end of the Contract Period in any way which would result in increased tenders from competing contractors tendering for the provision of the same services. This complex area of law and the contractual provisions dealing with the same are discussed in some detail in the guidance notes.
Termination
Both parties are entitled to terminate the Contractor’s employment in circumstances where the other has become insolvent or is in persistent and continuing breach. In addition, a break clause is included in the contract allowing the Employer to terminate the Contractor’s employment on three months notice.
The contract envisages the Employer may wish to adjust payment to the Contractor to reflect the Contractor’s performance of the services. It also envisages that any performance assessment system or mechanism for adjusting payment to reflect performance should be included in the Schedule of Rates and Prices. The guidance notes set out the drafting of such performance assessment systems and mechanisms although no sample drafting is provided given the wide variety of mechanisms that could be drafted to reflect the disparate types of facilities management services that could be provided. It is stressed that such performance assessment systems can, and should, reward exceptional performance and not just punish poor performance.
Disputes are in the first instance to be referred to adjudication and thereafter to arbitration or litigation depending on the parties preference. Optional provisions for both of the latter are included in the contract.
The contract comprises a number of parts: a Contract Agreement to be executed by both parties as either a deed or a simple contract, the General Conditions of Contract, the Abstract of Particulars (setting out the details of the Contract, e.g. the Contract Period), a Specification and a schedule of Prices and Rates. The latter will include a breakdown of the Contract Price and will be used to calculate the cost of any Variation. It will also set out any performance point system or mechanism the parties agree to use to adjust payment to the Contractor to reflect performance.
The Specification is intended to set out the services to be provided by the Contractor and any performance standards to be met. PACE encourage the use of output specifications that specify the desired result of the services rather than input specifications that state how particular services will be supplied. PACE believes that output specifications generally provide a more cost effective solution to clients facilities management service requirements. Guidance is included in the guidance notes on the drafting of output specifications and a fully worked sample cleaning output specification is included in the guidance notes.
The contract has been drafted to comply not only with English and Welsh Law, but also Scottish and Northern Irish law. It can therefore be used in such jurisdictions without further amendment although certain alternative provisions will apply to the various different legal jurisdictions.
Whilst the contract contains extensive provisions making it suitable for public sector employers (such as conditions relating to security, and race, sex and disability discrimination and rights of audit) it is expected that the contract will be widely used by the private sector for the outsourcing of facilities management services.
For further information on this topic, please contact Marc Hanson at [email protected] or on +44 (0)20 7367 3487.
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