RICS “Contracts in use” survey for 2001

United Kingdom

The last Survey carried out by Davis Langdon & Everest on behalf of the RICS in relation to contracts in use in construction projects was published in April this year. It surveyed domestic construction contracts let in 2001 (other than civil engineering, heavy engineering, term contracts and repair and maintenance contracts). These Surveys are carried out at 3 yearly intervals - with the last Survey being carried out in 1998. The Surveys provide an insight into methods of procurement currently in favour and the forms of contract which are in vogue.

The results

Points of interest which can be derived from the 2001 Survey are:

  • There is an increased use of design and build procurement (now at 13.9% of the total number of contracts surveyed, or 42.7% by value) and of procurement using specifications and drawings (62.9% by number of the contracts surveyed, 20.2% by value) at the expense of procurement using Bills of Quantities. This is now at 19.6% by number, 20.3% by value of the contracts surveyed as opposed to 30.8% and 28.4% in 1998.
  • Whilst the use of design and build procurement has increased markedly since the Surveys first started in 1985 when judged by value of the contracts let (its market share is now more than double that of its closest competitor), use of this form of procurement appears to have decreased when compared against the 1998 Survey (13.9% as opposed to 20.7%) when judged on number of contracts let. This is likely to be explained by the increased use of the JCT Minor Works Form.
  • The Joint Contracts Tribunal (JCT) forms are still market leaders, accounting for 91% of all contracts let by number (79% by value).
  • The use of the JCT Minor Works Form increased substantially from 1998 to 2001. This is probably explained, however, by a higher preponderance of lower value contracts caught by the Survey than had been the case for previous Surveys. In 2001, use of the Minor Works Form accounted for 40% (by number) of all JCT forms used but only 2.9% by value.
  • There has been a decrease in the use of management contracting (now at 0.6% by number of the contracts let and 2.3% by value in 2001 as opposed to 1.5% and 10.4% respectively in 1998). Use of construction management has increased - but only when judged by the value of the contract let, not by the number of contracts (0.4% by number of contracts let, 9.6% by value (as opposed to 0.8% and 7.7% in the 1998 Survey)). This reflects the fact that construction management tends to be used on higher value projects.
  • The use of partnering contracts, in isolation, is very low (0.6% by number of contracts, 1.7% by value). However use is slightly higher when it is used with a standard form. In this respect it is interesting to note that the use of the NEC/ECC forms remains low, but, where they are used, in 30% of the cases they are used with Option X12 (the Partnering Option).
  • The 2001 Survey is the first attempt to record the use of two-stage tender forms of contract. These account for at 4.1% of the total value of contracts let - but this figure could be understated due to the fact that same surveys were returned incomplete in this respect. Some use of the ACA form of contract PPC2000 was also recorded.

Trends

So what can be derived from this?

  • It is clear that the use of JCT forms is still dominant within the industry.
  • Use of management contracting has decreased, as has construction management (except when judged by value of work). The use of design and build is still increasing for mid-value work.

The move away from management contracting and construction management towards design and build may be symptomatic of the times in which we live. Employers are more interested in controlling cost rather than in achieving quick completion. As times change, however, and the property market becomes more buoyant again, this may alter and management contracting and construction management may regain some of their popularity.

  • It is also interesting to note that, despite the industry’s espousal of partnering, the take up of partnering contracts is still low. It is also worth of note that, despite the industry’s clamour against retention, there is no recorded use of the JCT option of a bond in lieu of retention.

For further information please contact Victoria Peckett at [email protected] or on +44 (0)20 7367 2544