Two-stage procurement, PCSAs, Centre Point and Pizza

If you want to get some relatively complicated or high value construction work done, and you want it done right, you are going to want to get your contractor involved at an early stage. Much as your architect, engineer and other consultants will be able to advise, the contractor is usually an invaluable source of experience and expertise.

However, you will also want value for money and will therefore ask contractors to tender for their work. You may end up in a bit of a “chicken and egg” type of situation where you want the contractor’s input before formal tendering stage.

The answer for many is a Pre-Construction Services Agreement (PCSA), which allows the parties to follow a two-stage procurement process. The JCT publishes its own PCSA, and the NEC Early Conditional Appointment does the same job. We usually recommend that if these standard form contracts are used then at least some amendments are agreed to them. The JCT PCSA, for example, does not create any design liabilities on the part of the contractor, and usually it is design input that the contractor is specifically being asked about (though there are often good reasons for the contractor not to carry design liabilities under a PCSA). Alternatively, we can simply provide a bespoke PCSA for employers to use that places far less risk onto the employer.

PCSAs have rarely been considered by the courts in the past, but on 21 February 2018 the Technology and Construction Court handed down judgment in Almacantar v Sir Robert McAlpine [2018]. The case related to a £100m redevelopment of Centre Point in London, which is the big brutalist tower above Tottenham Court Road tube station, into residential flats.

Sir Robert McAlpine was instructed under a PCSA, with a view to later entering into a Design & Build contract. Sir Robert McAlpine decided, after providing a lot of work, that it thought that Construction Management was a better way to contract on this project than Design & Build. I have a lot of sympathy for that view, but that’s for another blog post. Centre Point (or, rather, the company getting the work done at Centre Point, Almacantar (Centre Point) Limited) disagreed and appointed another contractor instead on a Design & Build contract, and then terminated the PCSA with Sir Robert McAlpine. The new contractor carried on with the project.

The issue arose from an unfortunately worded payment clause as follows:

The final Fee instalment of [50% of the fee] shall not become payable to the Contractor until the first valuation subsequent to commencement on site under the main contract.

Sir Robert McAlpine was never actually appointed under a main contract, and therefore Almacantar argued that the 50% fee was not payable. Sir Robert McAlpine argued that actually the clause referred to any main contract, not specifically one with them, and therefore their final fee ought to be paid.

Despite the adjudicator at first instance agreeing with Sir Robert McAlpine, the judge disagreed and sided with Almacantar. Centre Point therefore saved themselves £1,166,711.16, which Sir Robert McAlpine had to repay (Centre Point paid the money when Sir Robert McAlpine won at adjudication).

The Chief Executive of Almacantar, apparently not one for taking a victory gracefully, went onto Twitter and said he “wouldn’t trust Sir Robert McAlpine Ltd to deliver a pizza after this experience”.