PPC 2000 (ACA Standard Form Of Contract For Project Partnering)

In the year since its publication, PPC 2000 has laid claim to significant success in terms of the value of projects upon which it has been used. It has also attracted considerable comment in industry and legal journals – ranging from cautious encouragement to forthright accusations of muddled thinking or "crass" drafting. Most views have leaned to the former position, manifesting an understandable reluctance on the part of construction lawyers to be perceived as in any way opposed to innovation and to the move away from the adversarial attitudes which have bedevilled the industry for so many years. Few would claim, however, that the contract is without difficulties. Now that the dust has settled on its initial appearance, and the industry has had some opportunity to familiarise itself with PPC 2000’s approach, it may be helpful to outline some of the issues which should be considered by any client, contractor or consultant who is seriously considering the use of this new form.

The most radical innovation in PPC 2000 is its multi-party nature, designed to house all of the principal participants in each stage of the procurement process under one contractual roof. Some commentators have seen this as a failing in itself, and likely to give rise to unnecessary complexity and confusion in identifying and policing the parties’ mutual rights and obligations. It is difficult to see, however, why the more usual multiplicity of contractual documents in any project of significant size or value can be considered somehow easier to create, interpret and administer.

Consultants may be nervous about the extension of the category of those to whom they owe a contractual duty (so as to include the entire Partnering Team), but their duty still comprises only the professional standard of reasonable skill and care appropriate to their role, and PPC 2000 envisages that their attendant liability will be limited – whether by reference to a net contribution provision, a fixed percentage contribution, or other expressly stated parameters. A more significant consequence of the multi-party approach is that – despite the inclusion of an optional clause which requires the Constructor to assume single point responsibility to the Client for the delivery of the Project – PPC 2000 is unlikely to have immediate appeal to institutional clients, or to those involved in the PFI/PPP process, who place a premium on a simple and direct chain of contractual responsibility.

The most commonly voiced complaint as to PPC 2000 appears to be that it contains a number of aspirationally phrased obligations, which are uncertain in their scope and interpretation. This is most readily apparent in the contract’s list of partnering objectives, but of more practical significance are the provisions which seek to regulate how the parties actually work together on a daily basis. In this respect, PPC 2000 echoes the approach of NEC in requiring the Project Team members to work together in a spirit of trust and mutual cooperation for the benefit of the Project. PPC 2000 goes further than NEC, however, in adding to this a requirement of fairness.

The difficulty with provisions of this nature is the question mark over their enforceability under English law, which places such emphasis on certainty of contractual obligations. How does one judge when a party is not dealing fairly with another? And what does fairness mean in the context of other express contractual obligations which owe their content primarily to the parties’ respective commercial bargaining positions or technical expertise? Could (and should) concepts of fairness and trust undermine a party’s ability to rely on what would otherwise be an unambiguously stated contractual right?

Unless and until English law is prepared to take a more interventionist position on concepts of fairness and good faith, the best answer to these concerns appears to be as follows. Firstly, trust, fairness and mutual benefit are laudable aims, whose achievement will have real and sustainable commercial benefits. They are, therefore, to be encouraged. Secondly, the parties are more likely to act in accordance with these aims, if they are actually stated in their contract. Thirdly, concerns as to certainty and enforceability may, in any event, be overstated. Despite these contentions, however, prospective users may be wise, before signing up to PPC 2000, to ask themselves what they value more in their contractual provisions – legal certainty, on the one hand, or commercial innovation, on the other.

If their desire is for innovation, a further example lies in PPC 2000’s use of "key performance indicators" ("KPIs") for the achievement of reduced time, costs and defects, on the one hand, and increased productivity, turnover, profit and quality, on the other. It is necessarily left to the parties themselves to give real substance to these indicators (without which they will amount to little more than a wish list of the type already very familiar from non-binding partnering charters). The same is necessarily true of the parties’ stated commitment in the contract to pursue joint initiatives and to develop strategic alliances for the implementation of future projects – the latter, not surprisingly, being made expressly subject to the agreement of specific terms.

It shouldn’t be assumed, however, that everything about PPC 2000 is new. It pursues a relatively traditional approach to the allocation of construction risk, and the Constructor’s entitlement to additional time and money (its list of entitling events being reminiscent of JCT’s "Relevant Events"). In dispute resolution, the use of a problem solving hierarchy and core group review, whilst sensible, can no longer be regarded as particularly innovative. And the style and presentation of the drafting is also conservative – the authors have wisely avoided the temptation to emulate NEC’s idiosyncratic use of the present tense (which gives rise to its own ambiguities of interpretation).

There are also certain provisions which sit rather oddly in a partnering context, and which have potentially onerous consequences for one or more of the parties. For example, it appears to be a condition precedent to the Constructor’s entitlement to any extension of time that it notifies the Client Representative as soon as it becomes aware of the delaying event, and at the same time provides detailed proposals for tackling the delay (to be implemented within 2 working days). Contractors often complain that such rigid notification provisions can be difficult to implement as a matter of practice, and that they should not be penalised for innocent or minor non-compliance. A more progressive approach, therefore, may have been for PPC 2000 to take account of such non-compliance by reducing the extension of time to be granted, rather than to treat the non-compliance as an absolute bar to recovery.

Another potential criticism is that PPC 2000’s payment mechanism lacks some of the flexibility inherent in, say, NEC’s modular approach. The latter allows the parties a number of options, ranging from fixed prices, through target cost to cost reimbursable. By contrast, PPC 2000 provides an "Agreed Maximum Price". Whilst its drafting does allow for greater variation in price than this definition suggests, the provisions for incentivisation, shared savings, and payment by reference to the KPIs, are little more than agreements to agree.

Overall, however, PPC 2000 can be seen as a brave attempt to provide a proper contractual structure for the previously rather nebulous partnering process, and to grapple with the underlying problem of how to capture the essentially collaborative and co-operative nature of this process within a binding framework. Given what some might see as the inherent contradictions between a contractual relationship, on the one hand, and partnering, on the other, it is, perhaps, understandable, if the attempt has given rise to a number of issues which will require careful thought. This does not alter the fact, however, that PPC 2000 is a serious contender for consideration by any client, contractor or consultant who is committed to a partnering relationship.

"© Herbert Smith 2002

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