Forget NEC - let's give PSA/1 a fighting chance

The Latham Committee Report's endorsement of the New Engineering Contract has come as a big surprise as, in my view, it is ill-adapted to conventional building.

Further, as many commentators have pointed out, it is full of traps for the unwary and, why there should be this new-found enthusiasm for it escapes me.

A viable and better alternative is about to be launched on the market, in the form of the long-awaited private sector version of GC/Works/1 - called PSA/1. It is being published by HMSO this month in a 'with quantities' version and it will rival not only NEC but also JCT 80. PSA/1 does not deserve to be stifled at birth; it should have a fighting chance of survival and go on to make an impact based on solely what both I and the draftsmen believe are its substantial and well thought out merits.

CJ (21 July) covered 'Latham's model for a modern contract' and set out a number of criteria which should be met. Here, I set out how PSA/1 copes with these stated objectives - which all the industry must agree with. In future articles, I will analyse the relevant PSA conditions.



1.A specific duty for all parties to deal fairly with each other, and with their subcontractors, specialists and suppliers.

lSee Condition 1 (S) (Definitions etc) and also Condition 62 (2) (Sub Letting).



2. Firm duties of teamwork, with shared financial motiviation to pursue those objectives, etc.

lSee the procedures laid out in conditions:-

n 35 (Progress meetings)

n 36 (Extensions of time)

n 42 (Valuation of Variation Instructions).



3.A wholly inter-related package of documents which clearly defines the roles and duties of all involved, and which is suitable for all types of project.

lModel forms are provided. (Edition 3. This would be easily adaptable).



4.Easily comprehensible language and with Guidance Notes attached.

lPSA/1's language is derived from GC/Works/1, Edition 3, which has been praised by many commentators for its clear and easily understood language.

lGuidance Notes are provided.



5.Separation of the roles of contract administrator, project or lead manager and adjudicator.

lUnder PSA/1 the contract administrator is the PM, but the adjudicator is a separate person: see Condition 59 (Adjudication).



6.A choice of allocation of risks, to be decided as appropriate to each project but then allocated to the party best able to manage, estimate and carry the risk.

lThis has already been done in the drafting of PSA/1.



7.Taking all reasonable steps to avoid variations, but where they do occur they should be priced in advance, with independent adjudication if agreement cannot be reached.

lThe avoidance of variations, if possible, is a policy decision which the draftsman achieves.

lFor the pre-pricing of variations see:-

n Condition 40 (5) (PM's Instructions)

n Condition 42 (2) to (4) (Valuation of Variation Instructions).

lFor Adjudication see: Conditions 59 (Adjudication).



8.Express provision for assessing interim payments by methods other than monthly valuation ie, milestones. The aim should be to phase out the traditional system of monthly measurement or remeasurement, but meanwhile provision should still be made for it.

lSee the provisions for valuing the Works by means of a Stage Payment Chart:-

n Condition 1 (Definitions)

n Condition 48 (2) (a) and (3) (Advances on Account).



9.Clearly setting out the period within which interim payments must be made to all participants in the process, failing which they will have an automatic right to compensation, involving payment of interest at a sufficiently heavy rate to deter slow payment.

lPeriod of interim payments - see Conditional 48 (1) (Advances on Account)

lPeriod for honouring certficates - see Condition 50 (1) (Certifying payments), and Schedule of Time Limits (blue page 104).

lAutomatic right to compensation - see Condition 47 (1) (a) (Finance Charges).



10.Providing for structure trust fund routes of payment.

lSee optional Condition 48A (Protection of reserve) - (Optional because local authorities, big funding institutions etc, do not need it).



11.Providing for speedy dispute resolution if any conflict arises, by a pre-determined impartial adjudication/referee/expert.

lSee Condition 59 (Adjudication).



12.Providing for incentives for excpetional performance.

l See Conditions:

n 38 (Acceleration)

n 52 (Cost savings)



13.Making provision where appropriate for advance mobilisation payments including in respect off-site prefabricated materials provided by part of the construction team

lThis can be set up in the Contract documentation, if required, by carrying out a few minor amendments to the Standard Contract.