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New Facilities Management Contracts: What do they mean for procurement and project delivery?

On the 26 January 2021 the NEC published a new suite of Facilities Management Contracts (FM Contracts). These were published with the support of the Institute of Workplace and Facilities Management.

The suite includes four contracts, a number of user guides and two flowcharts, which have been designed for use in all types of Facilities Management procurement and delivery strategies.

A hard copy will be available from June 2021.

The FM Contracts include:-

• The Facilities Management Contract – for use where a client is appointing a service provider for a period of time to manage and provide any type of FM Services.

• The Facilities Management Sub-Contract – for use where a service provider has been appointed under the FMC and is appointing a sub-contractor.

• The Facilities Management Short Contract – for use where a client is appointing a service provider for a period of time to manage and provide any type of FM Services that do not require sophisticated management techniques, comprises straight forward services and imposes low risk.

• The Facilities Management Short Sub-Contract – for use where the service provider has been appointed under the Facilities Management Short Contract.

In keeping with the NEC suite of contracts, key features include:-

• Stimulating good management of the relationship between the parties to the contract.

• Application to a wide range of commercial situations, for a wide variety of work and both national and international.

• Clarity, simplicity and written in plain English.

There are three main pricing options:-

Priced contract with price list, allowing for a combination of lump sum and re-measurement of rated items. This provides flexibility in how the price list is created, allowing the parties to determine the level of detail and the way in which the service provider is to be paid.

Target contract with a price list, which is the target cost on a lump sum, on a re-measureable basis, where the service provider is paid when the service is provided on a cost reimbursable basis defined cost, plus fee. At an identified date the costs incurred are compared with the target to assess the service provider’s financial performance. Savings made or overspend incurred are then shared between the parties on a pre-agreed percentage split. The intention is to incentivise performance and encourage collaboration between the parties.

Costs reimbursable where the service provider is paid for the service provided on a cost reimbursable basis, which allows the client to develop and change the service required throughout the service period.

The conditions retain the familiar NEC format and the requirement to act “in a spirit of mutual trust and co-operation” is maintained.

A key new procedure is the “service order” intended to reflect how work, such as reactive maintenance, is instructed in practice and represents the order given by the client to the service provider to undertake work.

This procedure allows the client to call off work identified in the service order requirements as and when required and the order details the processes to be followed and the constraints that apply. This allows the client flexibility to produce a service to meet their own requirements.

The ability to measure performance and apply sanctions for non-performance is a core element driving service delivery, so the suite includes a performance table, setting out targets and detailing how performance is assessed, reported and rewarded.

The suite contains secondary options, which include:-

• The right of the service provider to identify opportunities to change the scope;

• The ability to be used for contracts under which the service provider is required to undertake design as part of the service;

• The ability to extend the service period;

• The client’s right to terminate the service provider’s obligations in certain circumstances;

• Building information modelling.

The NEC suite already includes a Term Service Contract Form, however, this form was not written for the purposes of the FM sector and often requires considerable adaptation. The new FM Contracts offer an approach more aligned to FM Contracts in practice.

The new NEC4 FM suite also includes provisions around non boarding, exit strategy and performance monitoring. However, some, more complex, FM areas such as data protection and employment may need to be incorporated as bespoke Z clauses.

For help and advice that is tailored to the needs of you and your business, please contact Martin Collingwood, head of construction at Andrew Jackson Solicitors, on 01482 325242 or email martin.collingwood@andrewjackson.co.uk

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