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Last edited 08 Jul 2014
Manual of the BPF system
In the early eighties, during a construction recession, The British Property Federation (BPF) formed a committee to review the way its members procured construction contracts. This was motivated by a disillusionment caused by the tendency for building projects to overrun in cost and time.
The committee was chaired by Stanley Honeyman of the English Property Corporation and comprised senior representatives of the larger property developers. Dr Martin Barnes CBE and David Trench CBE (two independent project managers) were seconded to the committee as external advisers. The objective was to produce a manual that set out a procurement system to address the issues that caused overruns and disputes. This was to be followed by the publication of a building contract reflecting the system described in the manual.
The committee concluded that :
- It's members were only confident that full value for money was guaranteed when a construction project was subject to competitive tender.
- Design and build contracts had the best record in respect of cost and time.
- Many design and build projects designed by contractors lacked imagination and in an effort to minimise costs, they produced inferior designs.
- It would be capable of accurate pricing by contractors tendering for construction.
- That any further design development by the contractor on the basis of the cheapest available solution would not reduce the required quality of the final product.
- That ultimate liability for both construction and design defects would rest with the contractor.
So for example a wharehouse could be tendered on the drawings submitted for a planning application whereas a city office block would be fully detailed other than design to be detailed by specialist subcontractors. So it was flexible as to when the client handed over design responsibility to a contractor. There remained an option for the client to stipulate whether the contractor employed its own designers or the client's designers under novation. Either way the contractor was contracted to adopt and accept liability for the design upon which it based its tender.
The BPF initially joined forces with the Association of Consultant Architects (ACA) to produce the BPF/ACA Contract. When published it was received with great hostility by the construction industry which perceived it as a way of transferring development risk to the contractor. This was seen to be unfair when developers worked on profit margins as high as 20% while contractors were hard pressed to make 5%. Ted Potter, CEO of Higgs and Hill, pointed out at the launch of the contract at the Lancaster Hotel, that if design was fully developed prior to tender there was no opportunity to recover potential losses by design modification and therefore there was only downside risk for the contractor.
In view of this hostility and because the industry became more heated due to the impending deregulation of the financial sector the BPF/ACA contract was put aside. Instead those developers that wanted to experiment with the system turned to adapting JCT 81 with Contractor Design by means of 32 amendments, not least of which was the principle of the contractor adopting the design. Interestingly the JCT went on to produce amendments and a supplement to its standard contract that closely accorded with the BPF Manual.
Land Securities were the first to use the system on a major £16m refurbishment to Kingsgate House in Victoria Street using Taylor Woodrow Construction. The success of this project led to a much more ambitious undertaking, replacing Grand Buildings in Trafalgar Square, which included £7m of carved stone, a major atrium, a basement car park (above the Circle line) and high quality finishes and services. The tenders received were substantially higher than the project estimates and it took a lot of negotiation with Higgs and Hill and the Bath and Portland Stone company to bring the cost down to anything near the budget level. However once the contract was agreed the project was extremely successful for all parties. The project would have been completed on time were it not for pole tax rioters setting fire to the site offices, causing a large element of the stone cladding to be replaced. With insurance contributions and an extension of time Grand Buildings was completed on time and within budget. Very few people would believe that a building of this quality was procured on the basis of a design and build competitive contract.
On the basis of four projects with a value in excess of £200m (2013 value) that were project managed using the system (albeit with an amended JCT contract) by the author of this article, the following advantages were noted:
- All the projects kept fairly close to their contract programmes.
- Ignoring certain enhancements introduced by the client during the construction stage all the projects were completed to budget plus 2% contingency.
- All the projects developed harmonious relationships between the parties, and attitudes were very constructive.
- Because the contract terms were perceived by contractors as being high risk, the teams put on the project were of a high calibre and the directors of the contractor's companies took huge interest in managing the projects.
- The main contractors took a close interest in specialist design, not only in relation to cost but to the long-term liability and durability of design solutions.
- By novating the design consultants the integrity of the design was preserved throughout design development.
- The tender prices were above the forecasted tender prices, but the final account was close to the tender price and the projects were completed on time.
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