Pre-construction agreements

Question 1

What is a pre-construction services agreement?

Answer 1

An agreement which identifies the services that the contractor is to perform before entering into the building contract, including the T&C’s the services are performed.

Question 2

When are PSCA’s usually used?

Answer 2

• Two stage tendering

- They are signed after the first stage and cover the period until the completion of the second stage

Question 3

What do the contractors include in their tender returns?

Answer 3

• Profit, overheads, preliminaries, proposals on how they intend to execute the project
• They should also include their fee for the second stage services

Question 4

What tasks might the Contractor be asked to perform in the second stage?

Answer 4

• Assisting the project team to finalise the design
• Advise on the methods of construction
• Obtain prices for packages of work from sub contractors (open book basis)
• Evaluate their tender returns and agreed the selection with the employer
• This enables a lump sum price to be determined and the main contract entered into

Question 5

What are the advantages of this two stage approach?

Answer 5

• Contractor provides valuable advice to the employer
• Their early input should reduce the disputes and problems arising during construction
• Finalisation of design and tendering of the packages is overlapped – quicker
• The contractor also benefits from getting paid earlier and becoming part of the DT

Question 6

What are the disadvantages?

Answer 6

• The contractor is no longer in competition – costs may rise during pre-construction
• The longer the contractor is involved without the main contract being signed the weaker the contractor’s bargaining position becomes
• Once the contractor is integrated the employer will become reluctant to dismiss them in the event of failure to perform or to negotiate on price / programme
• The sub contractors chosen will be different from those that would have been selected under a single stage approach – generally bigger and more prominent = more expensive
• It is usual that the price is not fully fixed at contract execution – generally around 80-85% - this means some of the work may be covered by provisional sums – less price certainty than under single stage