Pre-Construction Services Agreements (PCSAs) are used to appoint design and build Subcontractors to carry out services before entering into contract and tend to be used as part of a strategy to remove risk.
PCSAs are generally advantageous as the early involvement of ‘Specialists’ can lead to Value Engineering opportunities, as they contribute their expertise to influence the design and provide advice on buildability and sequencing.
PCSAs massively reduce the risk for both parties and for Subcontractors, early involvement is a big value-add as below:
1. Influencing the Design
Design and Build Contracts were conceived so that Contractors had the same level of responsibility as the Architect. While this is the case contractually, too often the ‘power’ remains with the Architect when it comes to design, meaning the expertise of the Subcontractor goes to waste.
PCSAs are useful in extracting this knowledge and can result in major value engineering opportunities. Let’s take an example from the cladding world:
The project is a unique design and the shape of the building is non-standard.
If a Cladding Contractor is involved early, they can influence the design so that while the non-standard concept design is maintained, the detailed design results in better optimised panel sizes to reduce design, production and transportation costs and potentially installation too.
All parties are happy: the Concept Design is retained and the practical side of the project is more buildable and more economical.
The chances of catching and delivering positive change during the design phase is greatly increased by PCSAs and for the project, this can be huge.
2. Defining the Contract & Milestones
Construction Contracts are highly complex with a multitude of differing risks. A well-managed PCSA can reduce risks and give greater definition and understanding to the key issues. The involvement of project focused individuals, like Project Managers and QS’s, at an early stage is great for ensuring realistic programmes and detailed scopes of work are drafted.
This is good for the project as a whole and for the Subcontractor it is very positive because, generally speaking, the programme, scope and price negotiated during a PCSA will be better understood than that during a traditional tender stage.
3. Developing a Partnership with the Client
In addition, if the PCSA is managed well, the subcontractor inevitably increases their leverage in a PCSA more so than during a typical tender period. A focused, professional and personable team will naturally become embedded in the project making it difficult for the Employer to imagine a project without them and their expertise.
Picking the right team for the PCSA is vital and in building rapport there are a whole host of benefits as it should lead to improved contract terms, a better programme of works and even a better price.
Despite these positive outcomes, what are the key considerations and risks to consider when signing a PCSA?
- Copyright – it is important that property in any design you complete for the project vests in your ownership regardless of whether, long term, you win the contract or otherwise. This is also incredibly powerful leverage for your contract negotiations.
- Design Responsibility – the JCT PCSA expressly states that the Subcontractor does not have design responsibility unless and until the parties enter into a formal Subcontract. Given the nature of the PCSA and the circumstances in which it tends to be used (i.e. before the design is fully developed and so that the subcontractor can offer advice and assistance in this regard), Subcontractors are best placed to ensure this Clause isn’t amended.
- Clarity – the PCSA needs to clearly identify those matters which are already agreed (payment, PCSA sum etc.) versus those that will be clarified during the PCSA. The document must have a clear purpose: stating exactly the intention of the works and the agreements which need to be made regarding Scope of Works, programme and the contract.
Working under PCSAs isn’t always possible and the decision to do so is client driven. For the Subcontractor however, if during early tender stage discussions, value engineering opportunities and/or de-risking options could be clearly identified, it is logical that the client would lean towards this type of agreement.
It’s all about highlighting the value of working in closer partnership with one another.
Our view is that it is much more likely that a project will get the best of a sophisticated Subcontractor by giving them the opportunity to fully invest their resource to it. In the right circumstances, a PCSA brings new ideas, design enhancements and costs savings and perhaps more importantly can be the start of a strong working relationship.