Standard Facilities Management Contracts
I’ve heard the RICS are looking to develop a Standard Facilities Management Contract and if it happens, it is important that it reflects the needs of clients and suppliers and is adopted by the industry.
So far there has been a dearth of effective standard contracts in FM. A number have been developed over the years but few appear to have gained traction. Some of these contracts include NEC3 (more about this later), GC/Works10 Facilities Management (2000), CIOB's Facilities Management Contract etc
A ‘standard form’ is a contract published by an industry body, recognised by that industry’s participants, containing established and generally accepted terms and conditions. The construction industry uses a variety of successful standard forms, including JCT and NEC. The FM sector has more limited options regarding standard forms.
Standard forms can result in more efficient procurement and fewer misunderstandings because both parties are familiar with the risk profile and can instead devote their time to genuinely commercial issues. The greater the amendment the more legal expertise required by the contracting parties to ensure there are no unintended consequences.
If the construction industry has embraced the use of Standard Forms why has the FM sector not encouraged their use as well? Having worked in both FM and Construction I tend to find FM less adversarial (possible exception of PFI – which is another story) Also, no matter which lawyers draft the contracts, a well drafted FM contract normally has very similar clauses.
A few of my clients have looked to use Standard Forms in the past. One, a pharmaceutical business opted for NEC3 but then spent a lot of time and effort developing the Z Clauses.
The other, a major firm of lawyers, chose to update GC/Works10 Facilities Management (2000), because “it was easier to update an old contract than it was to add Z Clauses to the NEC 3 contract”. The principal NEC for FM document is the NEC3 Term Service Contract (TSC). The TSC is a ‘standard form’ of contract, intended for the use in the provision of any type of service and therefore suitable for use when appointing a facilities management supplier. The TSC has also been endorsed by the Facilities Management Board of the Cabinet Office UK.
My concern with this standard form for FM is that it is not a genuinely standard Form ie it cannot be used off the shelf; it needs major input from lawyers. Any FM form of contract that requires you to put in Z Clauses for issues such as how TUPE should be managed, what are the expiry and handover requirements at the end of the contract etc is not a genuinely standard form. It’s okay for Government who have enough contracts to warrant the legal resource to develop their own “Z Clauses”.
For most of the rest of the FM client market, whilst still expensive, it is often easier to get off the shelf “lawyer” contracts than it is to add clauses to NEC. My view is that standard Forms of Contract need to ensure both clients and their supply chain perceive there is a fair balance of risk. Equally, the FM industry must be able to use it without needing to add clauses necessitating significant input from lawyers.
So fingers crossed that the RICS develop something that can be endorsed by the FM industry and reduce the reliance on bespoke contracts.