Climate Contract Playbook Edition 3
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1. Developers 2. Financiers 3. JCT, FIDIC, NEC 4. Private Practice Firms 5. RIBA 6. Legal Know How Providers
Stakeholders
Application
For use in construction projects.
The ‘best endeavours’ obligation in clause 2.1A3.3 would need to be considered in detail by public sector employers as it will need to align with procurement rules. Not exceeding the Carbon Budget is the ultimate goal, so strength and the clause can be amended to achieve this.
It is acknowledged that Clause 2.1A4. would be subject to the case law on penalties and liquidated damages. Some other ways of dealing with this could be:
• Instead of damages, have an incentive pot that is payable to the Contractor if they reach the Carbon Budget. The pot available could become proportionately larger the further below the Carbon Budget they manage to go to incentivise even better performance than the target. • Use the retention mechanism in a contract to cover the risk of the Contractor not achieving the Carbon Budget. Instead of the standard 3% retention to cover unfinished or defective work, increase the retention amount with a specific proportion held against achievement of the Carbon Budget. If at practical completion the works have gone over the Carbon Budget, the Employer could require the Contractor to spend the defects rectification period demonstrating how they have either offset that excess through carbon offsets or demonstrate how they have done so by reducing the carbon impact of another of their projects. If they still fail to do so after the defects rectification period, then the percentage of the Contract Sum retained can be held by the Employer to be used itself to ensure carbon offsetting. Further, the Employer could ask bidders at tender stage to competitively say what percentage of the Contract Sum they are willing to be retained for this purpose – so that the bidder offering the higher percentage that they put at risk is awarded more points at tender evaluation than the others. This would demonstrate bidders’ commitment and also ensure the Employer’s retained amount is the highest that the market will allow. • If the contract is a term contract, rather than a project contract, the contract could impose quarterly Carbon Budgets (as opposed to a single ‘global’ budget) and measure achievement through a key performance indicator. Achievement against good performance could lead to an incentive payment. However, continually exceeding the Carbon Budget could be linked to a termination right, enabling the Employer to get out of the contract so as to find a contractor that can deliver instead.
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