Long-term JV’s and framework relationships

David Mosey and James Williams, Trowers & Hamlins continue their discussion about PPC International as a means of delivering successful partnering projects.

Last week, we took a look at the use of PPC International as a means to deliver successful partnering projects, and this week, we look at the logical extension of project partnering into long-term joint venture and framework relationships.

As we covered in the previous article, 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 $900 million (AED 3.3 billion), and forms part of the new suite of standard forms used by a third Arabian Gulf developer.

PCC's 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, main contractor, architect, project manager and cost consultant.

These structured relationships have enabled an early start on site of substructure and foundation works 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. 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 $500 million housing programme and more recently the UK Government Department for Work & Pensions in partnership with private developer Land Securities Trillium achieving US $370 million savings on their US $2.2 billion 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 $1 billion 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 delivery 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.

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