this arrangement. The period need not slow the programme as the developer’s design can be finessed while the pricing of those packages with completed design is ongoing. The importance of a tender sum A key feature of the pre-construction services period should be that, if the contractor is unable to produce a tender sum acceptable to the developer at the end of second stage, the developer may invite other contractors to tender. However, the contract for the pre-construction services period (the pre- construction services agreement or PCSA) will, in this market, necessarily make some allowance for the contractor to place orders, deposits or (even) packages for both long- lead items and specialist subcontractors in increasingly short supply. This may be managed by dedicated drafting in the PCSA, or through a letter of intent that sits beside it, but the issue will usually have to be dealt with, as contractors will not be prepared to front-up this cost. This produces a tension in the pre-construction services arrangement as the more orders, deposits or packages placed by the contractor, the more difficult it becomes for the PCSA to operate at the end of the pre-construction services as intended, should the contractor fail to produce an acceptable second stage tender price. The contractor may simply be too imbedded in the project, with resultant implications for price and programme, to allow the developer to consider alternatives. The draftsman should ensure that the PCSA allows for any orders or deposits placed during the pre- construction services period to be novated to
the developer, should he not proceed with the original contractor. The developer has, after all, paid for these items and will want any replacement contractor to use them. If the employer wishes the contractor to commence ad-hoc works packages during the pre- construction services, these should, as far as possible, be governed by appropriate building contract terms. For larger value or more complex packages, a self-standing building contract might be considered, although a letter of intent incorporating a largely agreed form of such a contract might be appropriate for others. Preparatory works Preparatory works (for these purposes, strip-out, demolition and enabling) present their own challenges in the current market. Often, a developer will be in a position to commence preparatory works some time before he is in a position to commence any main construction works on the project. Moreover, many developers will take the opportunity to carry out (or at least procure) such works in order to maintain progress of the project. But, if a developer is keen not to take the interface risk between the preparatory and main works, considerable care must be taken. The reason for this is that contractors (perhaps not unreasonably) are reluctant to adopt these works and pick up the risk of managing and completing works either carried out or to be carried out which they have not been able to price, or even negotiate terms for. This difficulty is exacerbated by the strong bargaining position that contractors for preparatory
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