Guide To The Appointment of Consultants & Contractors: Second Edition

GACC
GUIDE TO THE APPOINTMENT OF

CONSULTANTS & CONTRACTORS GUIDE
SECOND EDITION
FEBRUARY 1998
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ACKNOWLEDGEMENTS
The development of the Guide to the Appointment of Consultants and Contractors (GACC) was facilitated
by PACE Central Advice Unit under the direction of the interdepartmental Joint User Group (JUG).
The members of the Sub-Group formed to provide an oversight of the drafting were:
Mr S Dilcock Emplo yment Ser vice

Employment
Mr P Gollop Benefits Agency Estates
Benefits
Mr J Hogg Cour t Ser vice
Mr P Ridgeon The Buying Agency
Mr R Reed Depar tment of Tr anspor t
Mr M Sha w
Shaw Cabinet Off ice
Office
Mr J Gbadebo PACE Centr al Advice Unit
Central
The Sub-Group was chaired by a representative from PACE Central Advice Unit.
The substantive drafting was undertaken by Mr R A Palles-Clark with assistance from Mr P J Eyre and
Mr P McGivern of James R Knowles, Construction Consultants, 53 Bedford Square, London, WC1B 3DP.
Telephone: 0171 580 3536
Facsimile: 0171 436 4860
Construction
Contracts
Consultants
© Crown Copyright 1998
GACC
EDITION 2: FEB 1998
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This guide is suitable for use under the Scottish legal system as well as
that of England and Wales.
Where there are substantial legal differences or procedural

requirements between the English and Scottish systems, separate
sections have been written.
The relevant Scottish sections are numbered with the suffix ‘SCOT’, for
example:
• LE 1.2 SIMPLE CONTRACTS (English version)
• LE 1.2(SCOT) SIMPLE CONTRACTS (Scottish version)
To facilitate even easier identification the relevant Scottish sections are

printed on green paper. If there is only one section (with no SCOT
suffix) then it can be taken as applicable under both legal systems.
The amendments made to enable the guide to be compatible with the

Scottish legal system were developed in conjunction with Scottish
Executive and their legal advisers.
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EDITION 2 REV 2: JAN 2000
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CONTENTS
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ACKNOWLEDGEMENTS
INTRODUCTION (INT)
CONTENTS
INTRODUCTION INT 1.0

BACKGROUND INT 1.1
GUIDE TO THE APPOINTMENT OF CONSULTANTS AND CONTRACTORS INT 1.2
PURPOSE OF THE GUIDE INT 1.3
STRUCTURE OF THE GUIDE INT 1.4
USE OF THE GUIDE INT 1.5
LIST OF RELATED REFERENCE DOCUMENTS INT 1.6
ABBREVIATIONS AND DEFINITIONS INT 1.7
PRINCIPAL TERMS AND CONCEPTS IN THE CONSTRUCTION INDUSTRY INT 1.8
PROCUREMENT STRATEGIES (PS)
CONTENTS
GENERAL PRINCIPLES PS 1.0

THE PROCUREMENT PROCESS PS 1.1
THE ‘INTELLIGENT CUSTOMER’ AND THE ROLE OF CAU/ PS 1.2
PRINCIPLES OF ‘BEST PRACTICE CLIENT’ PS 1.3
THE CONDUCT OF STAFF PS 1.4
MANAGEMENT ROLES PS 1.5
EFFECTIVE DECISION-MAKING PS 1.6
FOCUS ON OUTPUT VALUE PS 1.7
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EDITION 2 REV 2: JAN 2000 Page 1
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PROJECT REQUIREMENTS PS 2.0

PROJECT IDENTIFICATION PS 2.1
DEFINING PROJECT OBJECTIVES PS 2.2
RISK MANAGEMENT PS 2.3
CONTRACT STRATEGY PS 2.4
DEFINING THE PROJECT BRIEF PS 2.5
PROCURING AND MANAGING THE TEAM PS 3.0

THE NEED FOR A PROJECT MANAGER PS 3.1
DEFINING THE PROJECT TEAM PS 3.2
APPOINTMENT THROUGH COMPETITION PS 3.3
FOSTERING TEAMWORK PS 3.4
PERFORMANCE INCENTIVES PS 3.5
MONITORING PERFORMANCE PS 3.6
RECORD KEEPING PS 3.7
PERFORMANCE EVALUATION PS 4.0

EVALUATING PERFORMANCE PS 4.1
PROJECT CRITIQUES PS 4.2
OTHER ISSUES PS 5.0

PARTNERING PS 5.1
PRIVATE FINANCE INITIATIVE PS 5.2
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LEGAL ENVIRONMENT (LE)
CONTENTS
LEGAL FRAMEWORK LE 1.0

PRINCIPLES COVERING THE LAW OF CONTRACT IN ENGLAND & WALES LE 1.1
PRINCIPLES COVERING THE LAW OF CONTRACT IN SCOTLAND LE 1.1(SCOT)
SIMPLE CONTRACTS LE 1.2
SIMPLE CONTRACTS LE 1.2(SCOT)
CONTRACTS BY DEED LE 1.3
SELF-PROVING CONTRACTS LE 1.3(SCOT)
PERFORMANCE AND DETERMINATION LE 1.4
PERFORMANCE AND TERMINATION LE 1.4(SCOT)
DISCHARGE OF A CONTRACT LE 1.5
MISTAKE AND MISREPRESENTATION LE 1.6
MISTAKE (ERROR) AND MISREPRESENTATION LE 1.6(SCOT)
BREACH OF CONTRACT LE 1.7
DAMAGES FOR BREACH OF CONTRACT LE 1.8
LIMITATION LE 1.9
PRESCRIPTION LE 1.9(SCOT)
EVIDENCE OF CONTRACT LE 1.10
EVIDENCE OF CONTRACT LE 1.10(SCOT)
ASSIGNMENT LE 1.11
ASSIGNATION LE 1.11(SCOT)
NOVATION LE 1.12
TRANSACTIONS WITH OUTSIDE BUSINESSES LE 1.13
PARENT COMPANY GUARANTEES LE 1.14
PERFORMANCE BONDS LE 1.15
STAMP DUTY LE 1.16
PROCEEDINGS INSTITUTED AGAINST LE 1.17
PROCEEDINGS INSTITUTED AGAINST LE 1.17(SCOT)
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INSOLVENCY AND BANKRUPTCY LE 1.18
INSOLVENCY AND BANKRUPTCY LE 1.18(SCOT)
RESERVATION OF TITLE LE 1.19
RESERVATION OF TITLE LE 1.19(SCOT)
UNFAIR CONTRACT TERMS ACT 1977 LE 1.20
LEGAL ADVICE LE 1.21
LEGAL ADVICE LE 1.21(SCOT)
OTHER ISSUES LE 2.0

HEALTH & SAFETY (CDM) LE 2.1
TRANSFER OF UNDERTAKINGS (TUPE) LE 2.2
RACIAL DISCRIMINATION LE 2.3
FAIR EMPLOYMENT (NORTHERN IRELAND) ACTS LE 2.4
INTELLECTUAL PROPERTY, COPYRIGHT, AND ROYALTIES ETC. LE 2.5
INTELLECTUAL PROPERTY, COPYRIGHT, AND ROYALTIES ETC. LE 2.5(SCOT)
PROPRIETARY COMPONENTS/ARTICLES LE 2.6
FIRM PRICE AND VARIATION OF PRICE LE 2.7
LIQUIDATED AND ASCERTAINED DAMAGES LE 2.8
THE HOUSING GRANTS, CONSTRUCTION & REGENERATION ACT 1996 LE 2.9
THE ARBITRATION ACT 1996 LE 2.10
ARBITRATION (SCOTLAND) LE 2.10(SCOT)
CONSTRUCTION INDUSTRY TAX SCHEME LE 2.11
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EC PROCUREMENT PROCEDURES (EPP)
CONTENTS
THE SCOPE OF APPLICATION OF THE EC PROCUREMENT

RULES EPP 1.0
GENERAL EPP 1.1
THE DIRECTIVES EPP 1.2
DECIDING WHICH DIRECTIVE APPLIES EPP 1.3
EXCLUSIONS EPP 1.4
THRESHOLDS EPP 1.5
ESTIMATING THE VALUE OF COMMISSIONS AND AGGREGATION EPP 1.6
PUBLICITY AND THE TYPES OF NOTICE REQUIRED EPP 1.7
PROCEDURE FOR ADVERTISING AND AWARDING CONTRACTS EPP 1.8
ACCELERATED TIMESCALES EPP 1.9
MODEL NOTICES AND THEIR CONTENT EPP 1.10
NUMBER OF TENDERERS EPP 1.11
TENDERER SELECTION EPP 1.12
AWARD CRITERIA EPP 1.13
CONTRACT NOTICE, DECLINE AND DEBRIEFING EPP 1.14
EC/GATT REPORTING REQUIREMENTS EPP 1.15
ANNEX EPP 1.1 CATEGORIES OF SERVICES Annex
EPP 1.1.1
EPP 1.2 NOTICES REQUIRED UNDER EC PUBLIC PROCUREMENT Annex
RULES EPP 1.2.1
EPP 1.3 PROCEDURES AND TIMESCALES FOR ADVERTISING AND
AWARDING CONTRACTS Annex
EPP 1.3.1
EPP 1.4 WORKS CONTRACTS - MODEL CONTRACT NOTICES Annex
EPP 1.4.1
EPP 1.5 SERVICES CONTRACTS - MODEL NOTICES Annex
EPP 1.5.1
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CONSULTANTS (CST)
CONTENTS
COMMISSIONING STRATEGIES CST 1.0

PROCUREMENT PROCESS AND PROGRAMME CST 1.1
APPLICATION OF EC PUBLIC PROCUREMENT RULES CST 1.2
PROPERTY MANAGEMENT TYPE COMMISSIONS CST 1.3
INDIVIDUAL PROJECT MANAGEMENT TYPE COMMISSION CST 1.4
INDIVIDUAL DISCIPLINE COMMISSIONS CST 1.5
TERM COMMISSIONS CST 1.6
COMMISSION FILE CST 2.0

IDENTIFICATION CST 2.1
SUB FILES CST 2.2
RETENTION PERIODS CST 2.3
RETENTION PERIODS CST 2.3(SCOT)
CONSULTANT SELECTION CST 3.0

SELECTION OF FIRMS CST 3.1
NEW QUALIFICATION SYSTEM (NQS) CST 3.2
THE LONG LISTING PROCESS CST 3.3
IDENTIFY PRE-SELECTION CRITERIA CST 3.4
PRE-SELECTION INFORMATION CST 3.5
COMPILATION OF SHORT LISTS CST 3.6
THE NUMBER OF TENDERERS CST 3.7
QUALITY PRICE MECHANISM CST 3.8
PRE-TENDER INTERVIEW STAGE CST 3.9
SINGLE TENDER CST 3.10
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TENDER PROCESS CST 4.0

GENERAL CST 4.1
FORMS OF TENDERING CST 4.2
TENDER DOCUMENTS CST 4.3
TENDER PERIODS CST 4.4
TENDER BOXES CST 4.5
SECURE INFORMATION CST 4.6
DOCUMENTATION STANDARDS CST 4.7
DISPATCH OF TENDERS CST 4.8
QUERIES BY TENDERERS CST 4.9
TENDER BOARDS CST 4.10
OPENING THE TENDER BOX CST 4.11
OPENING OF TENDERS CST 4.12
THE TENDER RECORD BOOK CST 4.13
LATE TENDERS CST 4.14
TENDER EVALUATION CST 5.0

EVALUATION CRITERIA CST 5.1
FEE SCHEDULES CST 5.2
INCENTIVE FEES CST 5.3
EVALUATION PROCEDURE CST 5.4
TENDER ANOMALIES CST 5.5
QUALIFIED TENDERS CST 5.6
AMENDED TENDERS CST 5.7
AMENDED TENDER DOCUMENTS CST 5.8
RE-INVITATION OF TENDERS CST 5.9
RECOMMENDATION FOR ACCEPTANCE CST 5.10
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AWARDING COMMISSIONS AND DECLINING TENDERS CST 6.0

LEGAL CONTRACT FORMATION CST 6.1
ACCEPTANCE OF TENDER CST 6.2
LETTER OF ACCEPTANCE CST 6.3
DECLINE OF UNSUCCESSFUL TENDERS CST 6.4
EXECUTION OF FORMAL AGREEMENT CST 6.5
DEBRIEFING CST 7.0

REQUEST FOR DEBRIEFING CST 7.1
DEBRIEFING INTERVIEWS CST 7.2
MANAGEMENT OF COMMISSIONS CST 8.0

ROLES AND RESPONSIBILITIES OF THE COMMISSION MANAGER/THE PROJECT SPONSOR CST 8.1
CONSULTANT AND SUB-CONSULTANTS CST 8.2
PROFESSIONAL INDEMNITY INSURANCE CST 8.3
BILL PAYING AND CHECKING PROCEDURES CST 8.4
DETERMINATION/TERMINATION PROCEDURES CST 8.5
DETERMINATION/TERMINATION DUE TO DEFAULT CST 8.6
CLAIMS AND DISPUTES CST 9.0

HANDLING OF CLAIMS BY AND AGAINST THE CST 9.1
CLAIMS ARISING FROM DEFAULT OR NEGLIGENCE BY A CST 9.2
CONSULTANT OR CONTRACTOR
ALTERNATIVE DISPUTE RESOLUTION PROCEDURES CST 9.3
ARBITRATION CST 9.4
WRITS AND SUMMONSES CST 9.5
EX GRATIA CLAIMS CST 9.6
PERSONAL INJURY CLAIMS CST 9.7
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PERFORMANCE REPORTING CST 10.0

PERFORMANCE REPORTING GENERALLY CST 10.1
PERFORMANCE REPORTING TO THE NEW QUALIFICATION SYSTEM (NQS) CST 10.2
CONSULT NOTICES WITHIN NQS CST 10.3
CONTRACTORS (CRS)
CONTENTS
CONTRACTING STRATEGIES CRS 1.0

PROCUREMENT PROCESS AND PROGRAMME CRS 1.1
APPLICATION OF EC PUBLIC PROCUREMENT RULES CRS 1.2
INTRODUCTION TO THE CHOICE OF CONTRACT CRS 1.3
CONTRACTS USING BILLS OF QUANTITIES CRS 1.4
CONTRACTS USING SCHEDULES OF RATES CRS 1.5
SIMPLE LUMP SUM CONTRACTS CRS 1.6
TRADITIONAL LUMP SUM CONTRACTS CRS 1.7
DESIGN AND BUILD CONTRACTS CRS 1.8
PRIME COST CONTRACTS CRS 1.9
MANAGEMENT CONTRACTS CRS 1.10
CONSTRUCTION MANAGEMENT CONTRACTS CRS 1.11
DESIGN AND MANAGE CONTRACTS CRS 1.12
EXTENSION CONTRACTS AND VARIATIONS CRS 1.13
TERM CONTRACTS CRS 1.14
STANDARD GOVERNMENT CONTRACTS CRS 1.15
GC/WORKS/1 (1998) - LUMP SUM WITH QUANTITIES CRS 1.15.1

GC/WORKS/1 (1998) - LUMP SUM WITHOUT QUANTITIES CRS 1.15.2
GC/WORKS/1 (1998) - SINGLE STAGE DESIGN AND BUILD VERSION CRS 1.15.3
GC/WORKS/1 (1999) - TWO STAGE DESIGN AND BUILD VERSION CRS 1.15.4
GC/WORKS/1 (1999) - WITH QUANTITIES CONSTRUCTION MANAGEMENT TRADE
CONTRACT CRS 1.15.5
WITHOUT QUANTITIES CONSTRUCTION MANAGEMENT TRADE
CONTRACT
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GC/WORKS/2 (1998) - BUILDING AND CIVIL ENGINEERING MINOR WORKS CRS 1.15.6
GC/WORKS/3 (1998) - MECHANICAL AND ELECTRICAL ENGINEERING WORKS CRS 1.15.7
GC/WORKS/4 (1998) - BUILDING, CIVIL ENGINEERING, MECHANICAL AND ELECTRICAL
WORKS CRS 1.15.8
GC/WORKS/6 (1999) - DAYWORK TERM CONTRACT CRS 1.15.9
GC/WORKS/7 (1999) - MEASURED TERM CONTRACT CRS 1.15.10
GC/WORKS/8 (1999) - SPECIALIST TERM CONTRACT FOR MAINTENANCE OF EQUIPMENT CRS 1.15.11
GC/WORKS/9 (1999) - OPERATION, REPAIRS AND MAINTENANCE CONTRACT FOR
MECHANICAL AND ELECTRICAL PLANT, ELECTRICAL PLANT,
EQUIPMENT AND INSTALLATIONS, ETC. CRS 1.15.12
C1303 - WINDOW CLEANING AND CRS 1.15.13
C1304 - CHIMNEY SWEEPING
C1306 - MAINTENANCE OF GARDENS, GROUNDS, ETC. AND CRS 1.15.14
C1312 - SUPPLY AND APPLICATION OF HERBICIDES, ETC.
C1804 - REPAIR OF PLANT CRS 1.15.15
CONTRACTS FILE CRS 2.0

IDENTIFICATION CRS 2.1
SUB-FILES CRS 2.2
RETENTION PERIODS CRS 2.3
RETENTION PERIODS CRS 2.3(SCOT)
CONTRACTOR SELECTION CRS 3.0

SELECTION OF FIRMS CRS 3.1
NEW QUALIFICATION SYSTEM (NQS) CRS 3.2
THE LONG LISTING PROCESS CRS 3.3
PRE-SELECTION PROCEDURES CRS 3.4
COMPILATION OF SHORT LISTS CRS 3.5
THE NUMBER OF TENDERERS CRS 3.6
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TENDERING PROCESS CRS 4.0

DOCUMENTATION CRS 4.1
INSTRUCTIONS/NOTICES TO TENDERERS/TENDER PERIODS CRS 4.2
MID TENDER INTERVIEWS CRS 4.3
TENDER BOARDS CRS 4.4
OPENING OF TENDERS CRS 4.5
THE TENDER RECORD BOOK CRS 4.6
LATE TENDERS CRS 4.7
TENDER EVALUATION CRS 5.0

GENERAL CRS 5.1
CRITERIA FOR EVALUATION CRS 5.2
QUALIFIED TENDERS CRS 5.3
ALTERNATIVE OFFERS CRS 5.4
AMENDED TENDERS CRS 5.5
ERRORS IN PRICED BILLS CRS 5.6
POST TENDER NEGOTIATION CRS 5.7
RE-INVITATION OF TENDERS CRS 5.8
TENDER REPORTING CRS 5.9
AWARDING CONTRACTS & DECLINING TENDERS CRS 6.0

LEGAL CONTRACT FORMATION CRS 6.1
ACCEPTANCE OF TENDER CRS 6.2
LETTERS OF ACCEPTANCE CRS 6.3
DECLINE OF UNSUCCESSFUL TENDERERS CRS 6.4
EXECUTION OF FORMAL AGREEMENT CRS 6.5
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DEBRIEFING CRS 7.0

REQUESTS FOR DEBRIEFING CRS 7.1
DEBRIEFING INTERVIEWS CRS 7.2
NOMINATION OF SUB-CONTRACTORS CRS 8.0

NOMINATION PROCEDURES CRS 8.1
PRIME COSTS CRS 8.2
ARRANGING A NOMINATED SUB-CONTRACT CRS 8.3
ESTABLISHING A CONTRACT CRS 8.4
LIQUIDATION OF A NOMINATED SUB-CONTRACTOR CRS 8.5
SELECTED OR APPROVED SUB-CONTRACTORS CRS 8.6
MANAGEMENT OF CONTRACTS CRS 9.0

ROLE OF THE PROJECT MANAGER CRS 9.1
ROLE OF THE PROJECT SPONSOR CRS 9.2
BILL PAYING CRS 9.3
CHECKING PROCEDURES CRS 9.4
DETERMINATION/TERMINATION PROCEDURES CRS 9.5
CLAIMS & DISPUTES CRS 10.0

GENERAL CRS 10.1
CONTRACT CLAIMS AGAINST THE DEPARTMENT CRS 10.2
AVOIDANCE OF CLAIMS CRS 10.3
MANAGING CLAIMS CRS 10.4
PRESENTATION OF CLAIMS CRS 10.5
CLAIMS AGAINST CONTRACTORS CRS 10.6
ARBITRATION CRS 10.7
EX GRATIA CLAIMS CRS 10.8
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MATTERS ARISING ON COMPLETION CRS 11.0

LIQUIDATED AND ASCERTAINED DAMAGES CRS 11.1
MAINTENANCE PERIODS CRS 11.2
PAYMENTS CRS 11.3
OVERPAYMENTS CRS 11.4
HANDOVER CRS 11.5
PERFORMANCE REPORTING CRS 12.0

GENERAL CRS 12.1
PERFORMANCE REPORTING TO NQS CRS 12.2
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INT 1.0 INTRODUCTION
INT 1.1 BACKGROUND
INT 1.2 GUIDE TO THE APPOINTMENT OF CONSULTANTS AND CONTRACTORS
INT 1.3 PURPOSE OF THE GUIDE
INT 1.4 STRUCTURE OF THE GUIDE
INT 1.5 USE OF THE GUIDE
INT 1.6 LIST OF RELATED REFERENCE DOCUMENTS
INT 1.7 ABBREVIATIONS AND DEFINITIONS
INT 1.8 PRINCIPAL TERMS AND CONCEPTS IN THE CONSTRUCTION INDUSTRY
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INT 1.0 INTRODUCTION
INT 1.1 BACKGROUND
On 1 April 1996 Departments took over from Property Holdings

responsibility as principals for the property they occupy. At the same
time Proper ty Holdings was disbanded and replaced by the new
executive agency ‘Property Advisers to the Civil Estate (PACE)’. PACE
would;
• co-ordinate the Government’s activity on the Civil Estate;
• promote rationalisation of the Estate;
• provide Departments with a body of “off-the-shelf ” advice and

support;
• provide intelligent customer support; and
• provide management of the Government’s vacant properties.
GACC
EDITION 2: FEB 1998 INT 1.1
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INT 1.2 GUIDE TO THE APPOINTMENT OF CONSULTANTS AND
CONTRACTORS - EDITION 2
The first edition of the Guide issued in September 1996 provided

essential advice and guidance to assist Departments and Agencies in
discharging their responsibilities for the management of their property-
related procurement.
This second edition has been developed by the PACE Central Advice
Unit (CAU) to reflect the various changes in legislation, systems and
accepted practices which have occurred since then. It also takes
account of interim changes in the organisation of other departmental
advice providers.
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INT 1.2 EDITION 2: FEB 1998
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INT 1.3 PURPOSE OF THE GUIDE
The Guide has been written to assist Departments in their role as the
“intelligent customer” whereby they are required to have sufficient
intelligent customer suppor t to be able to brief, appoint and monitor
consultants or contractors in a clear and cost effective manner.
Departments may either rely on their own in-house expertise or buy in
such support from PACE. Whichever route they choose Departments
will retain the final responsibility for all decisions on the properties they
occupy.
The Guide is intended to provide guidance on procurement in the

context of property management. Much of the work to be procured in
this context will therefore involve the management and maintenance of
existing facilities rather than the procurement of projects involving large
scale development, redevelopment or extension work. Such work does
however fall under the general heading of property management and is
considered in the Guide.
Its purpose is to encourage the most efficient and cost effective means
of engaging consultants and contractors to carry out necessary services
and works. In particular the Guide promotes the procurement of
services on the basis of ‘best value for money’, where quality is a major
criteria for selection and service providers are not commissioned solely
on the basis of the cheapest price. It promotes a view of procurement
which embraces the overall long-term objectives of a project and gives
consideration to whole-life costs.
It is recognised that there is a wide variation in the number, experience

and qualification of procurement staff within the departments. For this
reason the Guide is intended to be a practical document for use by
administrative and professional staff at all levels and has been written
specifically to assist informed lay persons and as an aide memoire. The
Guide is generally not mandatory and given procedures may be adapted
to suit the specific requirements of any particular commission or project.
The Guide will be updated from time to time when necessary and the
CAU will publish Information Notes giving details of any important
changes.
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EDITION 2 REV 1: JAN 1999 INT 1.3
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INT 1.4 STRUCTURE OF THE GUIDE
It is divided into five main sections: Procurement Strategies, Legal

Environment, EC Procurement Procedures, Consultants Section and
Contractors Section. Each section is further divided into subjects (e.g.
general principles), headings and where necessary subheadings. The
contents pages are structured to allow direct access to heading
references. Alternatively, there is a fully cross-reference index at the back
of the Guide.
The top of the page carries the heading and any subheading together
with an index card icon confirming the page’s location in the context of
the whole Guide. At the bottom of the page is the page reference. The
reference system is in numerical order based on section prefix followed
by the section reference. The abbreviations denote the main sections as
follows:-
PS Procurement Strategies
LE Legal Environment
EPP EC Procurement Procedures
CST Consultants Section
CRS Contractors Section
The right hand margin contains, where appropriate, icons relating to the
adjoining text. These are shown below:
This warning triangle indicates where particular care should be taken to

ensure that departments or their advisers are taking relevant action.
Generally, this will relate to situations where specialist advice may need
to be sought on particular issues.
▲
!
This blue icon is the cross-referencing code to other related sections of

the Guide. The reference is in the abbreviated code found at the bottom ➧ CRS 3.1
of the page.
This icon indicates where a cross-reference to other documents or

further reading is made.
Where it is appropriate to do so, a topic is concluded with a list of

actions or points for consideration under the heading ‘Key Points’.
The footer to each page also contains publishing information consisting

of the edition number and the date of issue.
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INT 1.4 EDITION 2 REV 1: JAN 1999
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• Volume 2 is not procedural but is intended to give Departments
“best examples” of commissioning documentation and Tender
packages. It is only available on CD Rom disk.
It contains the following:
PACE Documentation:
Property Management Commission (CU version)
Estates Management Commission
Works Management Commission
The PMC Guide (CU version)
Term Works Commission
Estates Commission
Term Estates Commission
Term Audit Commission
Project Advisor Commission
PH Legal Services Contract
Government Forms of Contract

There are various Government forms of contract available. For
ease of reference a copy of section CRS 1.15.1.1 to 1.15.14.1 is
incorporated into volume 2, as is a copy of contract forms C910,
C1102, C1301, C1303, C1304, C1306, C1312, C1401, C1501
and C1804. The GC forms referred to in CRS 1.15.1 to 1.15.6
are obtainable from HMSO.
Standard Fire Precautions for Contractors engaged on crown

works (1995 Edition): applicable to contractors engaged on works
for Crown Civil and Defence Estates.
Scottish Office (Leith) FM Contract Cleaning Contract
Employment Service Security Services Contract
Duties of Clerk of Works
Property Holdings Building Control Compliance

Checking Commission
All relevant supplementary conditions as listed in Section CRS

1.15.15 of GACC
Example schedules used by Employment Service
Schedule for window cleaning for use with c1303 form of contract.
Schedule for clerk of work contract.
Schedule for legal services contract.
Schedule for office cleaning contract.
GACC
EDITION 2: FEB 1998 INT 1.4.2
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INT 1.5 USE OF THE GUIDE
The Guide covers general advice and recommended procedures that

may be followed in connection with the selection, appointment and
management of consultants and contractors. As such, it necessarily
includes material on EC procurement requirements, purchasing policy,
strategic issues and procedural advice. In short, it covers a range of
issues with which Departments should be familiar when taking on and
managing consultants and contractors. It is one of a family of CAU
produced guidance material which has been, or is in the process of
being, compiled. They are:
• The Estates Services Guide (ESG) 3rd Edition (England/Wales

version) published in June 1999 provides advice relating to property
management under the subject headings; Strategic, Acquisition,
General Estate Management and Disposal;
• The Premises Management Guide (PMG) 2nd Edition published in

September 1999 provides advice on policy and functions associated
with premises management.
• The Fire Safety Guide, published in March 1998, provides clear and
concise guidance on current fire safety legislation and Government
policy in this area.
• Crown Fire Standards, published in December 1997, provides

guidance to those involved in the design of new buildings and in the
refurbishment and alteration of existing buildings.
• Business Continuity Planning Guide, published in May 1998, assists

Departments in discharging their responsibilities for the
management of their properties and the activities which are carried
out at those properties. It guides towards the most efficient and cost
effective means of enabling managers and users to plan against, and
recover from, the effects of an incident affecting individual
properties.
• Guide to Requirements for Office Buildings, and its associated

schedule, highlight the requirements which normally should be
incorporated in office schemes. Two versions exist:
- Version 1 deals with the physical standards/requirements for new

projects and refurbishments procured as Private Developer
Schemes;
- Version 2 covers the standards for Crown Build type schemes.
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EDITION 2 REV 2: JAN 2000 INT 1.5
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INT 1.6 LIST OF RELATED REFERENCE DOCUMENTS
SHOR
SHORTT TITLE TITLE PUBLISHED
Application of The Procurement of Construction

Competitive Professional Services: Industry Council,
Tendering (CIC) Guidelines for the Application London, (1992)
of Competitive Tendering
Construction Construction Procurement by TSO, London

Procurement by Government: An Efficiency (1995)
Government Unit Scrutiny
Procurement Essential Requirements for HM Treasury

Group Guidance Construction Procurement
No. 1
Procurement Value for Money in HM Treasury

Group Guidance Construction Procurement
No. 2
Procurement Appointment of Consultants HM Treasury

Group Guidance and Contractors
No. 3
Procurement Teamworking, Partnering and HM Treasury

Group Guidance Incentives
No. 4
Procurement Procurement Strategies HM Treasury

Group Guidance
No. 5
Procurement Financial Aspects of Projects HM Treasury

Group Guidance
No. 6
Setting New Setting New Standards: A TSO, London

Standards Strategy for Government (1995)
Procurement
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INT 1.6.1 EDITION 2 REV 2: JAN 2000
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SHOR
SHORTT TITLE TITLE PUBLISHED
The Latham Constructing the Team by Sir HMSO, London

Report Michael Latham; Final Report (1994)
of the Government/Industry
Review of Procurement and
Contractual Arrangements in
the UK Construction Industry.
Thinking About Thinking About Building The Business

Building Round Table,
London, (1995)
Thinking About Thinking About Facilities The Business

Facilities Management Round Table,
Management London (1996)
Value Assessment The Procurement of Construction

of Competitive Professional Services: Guidelines Industry Council,
Tenders (CIC) for the Value Assessment of London, (1994)
Competitive Tenders
Value by Value by Competition; A Guide CIRIA, London

Competition to the Competitive (1994)
(CIRIA) Procurement of Consultancy
Services for Construction
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EDITION 2 REV 1: JAN 1999 INT 1.6.2
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1.7 ABBREVIATIONS AND DEFINITIONS
CAU Central Advice Unit
CDM Construction (Design & Management)

Regulations 1994
commission Any services or works required to be procured to

satisfy a particular property management
requirement.
commission/ Officer, other than a project sponsor, who is

contract responsible for the delivery of a consultancy
manager contract or works contract
CUP * Central Unit on Procurement
Department Department or Authority with procurement

responsibilities
DETR Department of Environment Transport and the

Regions
GACC Guide to the Appointment of Consultants and

Contractors
GATT General Agreement on Tariffs and Trade
legal adviser Solicitor/Contracts Consultant
PACE Property Advisers to the Civil Estate
PFI Private Finance Initiative
project Work of a type which requires the appointment

of a project sponsor such as development,
redevelopment or large scale extension projects.
project sponsor Officer responsible for the delivery of a project
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the Secretary of the Secretary of State for the Environment,
State Transport and the Regions
TUPE The Transfer of Undertakings (Protection of

Employment) Regulations 1981
works Contracts for physical construction work rather

than consultancy or services commissions.
Note: * HM Treasury’s ‘Central Unit on Procurement’ has now changed

its name to ‘Procurement Practice and Development’. However, for the
time being at least, the series of CUP Guidance Notes will retain their
current CUP references and numbers.
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INT 1.8 PRINCIPAL TERMS AND CONCEPTS IN THE CONSTRUCTION
INDUSTRY
There are technical terms which are generally accepted in the building
industry but which not all readers may be familiar with. These are
explained below:
(1) Bill of Approximate Quantities (BAQs) - contains

correctly described items of work but only estimated or
approximate quantities. It is based on provisional or assumed
information before the design is fully developed. The work
subsequently ordered is measured and priced on the basis of
the BAQs in order to arrive at the final cost of the contract.
(2) Bill of Quantities (BQs) - contains correctly described

items and accurate quantities taken from firm and detailed
information at the completion of the design. It may contain
some sections marked “provisional” where there is no firm
design information but this should be minimal. Re-measurement
only takes place on those sections of the bill which are
provisional, or are the subject of variation, or where there is a
discrepancy between the bill and the drawings issued to the
contractor.
(3) Design and Construct - or design and build describes the

method of procuring works contracts which involve the
contractor in developing a detailed design solution based on a
set of employer’s requirements and then building to the design.
The contractor therefore assumes both design and
construction risks.
(4) Facilities Management (FM) - is an integrated approach to

maintaining, improving and adapting the buildings of an
organisation in order to create an environment that strongly
supports the primary objectives of that organisation.
Treasury guidance identifies FM as Contracting for Strategic
Services.
(5) Joint Ventures - these are usually only used on very large
projects where a single contractor lacks the technical or
financial resources to handle the project alone. Two or more
companies set up a consortium for the execution of the
contract, after which it is dissolved, so arrangements must be
made to ensure that services are available to deal with any
matters arising once the final certificate is signed and the works
handed over.
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(6) Liquidated and Ascertained Damages (LADs) -
Contractual damages (stated in the contract) to be paid by the
contractor to the employer for any period of delay to the
completion of a project for which the contractor is not entitled
to extensions of time.
(7) Partnering - is about fostering open and co-operative

relationships between members of the construction team, the
contractor and the Department.
One of the principal objectives is to reduce or avoid conflict. The

principle is generally appropriate but not limited to the forging of
longer-term relationships with suppliers which are based on
mutual trust and a joint aim to produce a product from which
both benefit.
(8) Prime Cost Items/Sums (PC) - where a specialist service

cannot be fully described in the specification the estimated cost
is included as a PC item. The PC sum is deducted from the
contract figure and the actual cost of the service included.
(9) Project Manager (PM) - the PM is usually appointed by a

Department to act as the Department’s representative in
dealings with other members of the construction team. The PM
may also directly supervise the construction works.
(10) Project Sponsor (PS) - the PS for any major project should
be an executive from within the Department. The PS need not
have a background in construction/contract management but
should have a clear understanding of the organisation’s
requirements and approvals procedure. The PS must have the
delegated responsibility to act quickly and effectively. The prime
project related tasks of the PS are:
(a) to establish a clear statement of objectives;
(b) to be responsible for the definition of the project at each

stage approval decisions are required;
(c) to ensure that funding is available when required and all

necessary approvals are obtained;
(d) to establish the day-to-day requirement for project

management and professional services for the project
including delegations to the project manager and
reporting requirements;
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(e) to manage and monitor the performance of the project
manager; where it is deemed appropriate to appoint one;
(f) to provide the sole source of contact and decision-making

to all parties concerned with the project from outside the
Department, and to provide decisions as required by the
programme. The PS is responsible for the completion of
the project to programme within the budget, and to the
required level of quality.
(11) Provisional Sums - A sum included when it has not been

decided whether work may or may not be required to be
carried out. This provisional sum is deleted from the contract
figure and the actual cost (if required) is included when
appropriate. Provisional and PC sums are included in order to
ensure that all contractors tender on the same basis and parity
of tender is obtained. Provisional sums are either known, or
‘undefined’ - where the workscope is unknown.
(12) Schedule of Rates or Prices - where the requirement is

indeterminate, or it is not necessary to quantify components, a
list of correctly described items are shown. Any variations are
based on the cost shown against described items.
(13) Sequential Tendering - the somewhat misleading name used

for a system in which PC sums are used to cover more than half
of the work, and in which the corresponding sub-contract tender
invitations/nominations are made in a planned sequence after
the main contract has started. Competition for the main contract
is based on the price tendered for those parts of the work, on
which design work is complete (usually just the foundations and
mainframe of the building).
(14) Turnkey Projects - a type of “design and construct” in which

even the basic design is entrusted to the single “turnkey”
contractor (or equipment manufacturer where the building
concerned is less important than its contents). In turnkey
projects the Department commissions a specialist manufacturer
to design a project and to execute the works. The Department
then expects to be only minimally involved until it receives the
completed project i.e., all it has to do is turn the key.
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(15) Variation Orders or Instructions - a written document
given to the contractor changing or varying the contract e.g., in
relation to the design of the works, or how they may be
executed. Various contract forms use different terms, and allow
different opportunities for the contractor to claim payment over
and above its tendered sum or rates. Instructions may be given
orally but must usually be confirmed in writing in order to be
effective.
(16) Variation of Price (VOP) - when the contract prices are

adjusted by means of an updating index or by reference to
invoiced current prices (generally the former). Thus contracts
incorporating VOP provisions recompense the contractor for
inflationary costs during the period of the works contract.
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PS 1.0 GENERAL PRINCIPLES
PS 1.1 THE PROCUREMENT PROCESS

PS 1.2 THE ‘INTELLIGENT CUSTOMER’ AND THE ROLE OF CAU/PACE
PS 1.3 PRINCIPLES OF ‘BEST PRACTICE CLIENT’
PS 1.4 THE CONDUCT OF STAFF
PS 1.5 DEPARTMENTAL MANAGEMENT ROLES
PS 1.6 EFFECTIVE DECISION-MAKING
PS 1.7 FOCUS ON OUTPUT VALUE
PS 2.0 PROJECT REQUIREMENTS
PS 2.1 PROJECT IDENTIFICATION

PS 2.2 DEFINING PROJECT OBJECTIVES
PS 2.3 RISK MANAGEMENT
PS 2.4 CONTRACT STRATEGY
PS 2.4.1 GENERAL
PS 2.4.2 PROPERTY MANAGEMENT FUNCTIONS
PS 2.4.3 FACILITIES MANAGEMENT STRATEGIES
PS 2.4.4 WORKS CONTRACT STRATEGIES
PS 2.5 DEFINING THE PROJECT BRIEF
PS 3.0 PROCURING AND MANAGING THE TEAM
PS 3.1 THE NEED FOR A PROJECT MANAGER

PS 3.2 DEFINING THE PROJECT TEAM
PS 3.3 APPOINTMENT THROUGH COMPETITION
PS 3.4 FOSTERING TEAMWORK
PS 3.5 PERFORMANCE INCENTIVES
PS 3.6 MONITORING PERFORMANCE
PS 3.7 RECORD KEEPING
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PS 4.0 PERFORMANCE EVALUATION
PS 4.1 EVALUATING PERFORMANCE

PS 4.2 PROJECT CRITIQUES
PS 5.0 OTHER ISSUES
PS 5.1 PARTNERING
PS 5.2 PRIVATE FINANCE INITIATIVE
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THE PROCUREMENT PROCESS
GENERAL PRINCIPLES
PROCUREMENT STRATEGIES
PS 1.0 GENERAL PRINCIPLES
PS 1.1 THE PROCUREMENT PROCESS
To procure means to obtain by care and effort. It takes care, effort,

judgement and clear decision-making to procure construction services.
There is a high level of service in any construction commission, and

there are a number of features of services which make the
procurement decision a difficult one. Services are:
• intangible - they cannot be stored, displayed, sampled before

use, or easily communicated;
• frequently - prices are difficult to set and standardisation is

non-standard difficult to achieve;
• inseparable - the consumer is involved to some extent in the

production. Services are sold first and then
produced and consumed simultaneously.
The quality of a service product is therefore difficult to evaluate before

it is delivered. It is therefore essential to have in place effective, well
structured and well managed procurement systems which enable the
management and control of the risks inherent in any procurement
decision.
The procurement process is a circular process which involves the

general steps set out in Figure 1.1 on the next page:
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EDITION 2: FEB 1998 PS 1.1.1
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THE PROCUREMENT PROCESS
GENERAL PRINCIPLES
DEFINE BUSINESS NEED AND

PROJECT OBJECTIVES
OBTAIN ADVICE ON DECIDE CONTRACT DEFINE THE BRIEF

AND/OR UNDERSTAND STRATEGY
MARKET CAPABILITY DEFINE TENDER LIST
INVITE TENDERS
EVALUATE AND REFINE

TENDERS
REVIEW PERFORMANCE ADMINISTER AWARD CONTRACT

AND FEEDBACK AND MANAGE AND DEBRIEF
CONTRACT
Fig 1.1 The Procurement Process
The performance review and feedback is an important step in the

process. It is most useful if it is a formal process. If in the form of a
critique it helps procurement staff to consider lessons that can be
learnt by the Department from the commission as a whole as well as a
close examination of the performance of each consultant or contractor.
The feedback is an all important part of improving Departmental
knowledge and expertise in the “intelligent customer” role.
Departments can make the greatest contribution to the enhancement

of the competitiveness of suppliers by managing their own
procurement intelligently and well. An important element of this is to
combine competition and co-operation in an optimum way.
Key Points
• Effective procurement is about having a clear set of objectives,

defining the scope and content of what is required from the supplier
and being clear about and managing expectations. Improvement in
this area will have a direct effect in reducing the scope for disputes.
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PS 1.1.2 EDITION 2: FEB 1998
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THE INTELLIGENT CUSTOMER ROLE
GENERAL PRINCIPLES
PS 1.2 THE “INTELLIGENT CUSTOMER” AND THE ROLE OF

CAU/PACE
PS 1.2.1 Intelligent Customer Role
In devising the appropriate procurement strategy to suit Departmental

operations it is essential to appreciate the minimum requirements for
the in-house (within Government) role. The Treasury requires
Departments to retain sufficient competent intelligent customer
support resource to be able to brief and manage professionals, ask the
right questions, know when the correct answers are being given and
decide what further action to take. The required expertise can be
achieved by:
• training in-house administrative staff to the appropriate level of

competency; or
• employing the requisite professionals in-house; or
• retaining PACE.
Buying the intelligent customer support from the private sector under a
framework agreement or contract is not an option open to
Departments.
To help Departments assess their resource needs some amplification of

the role is set out below.
The term ‘intelligent customer’ relates to a residual function that

remains with the purchaser of the services once the provision of such
services has been out sourced. It is a role that must remain within
Government. Whatever the source of supply the purchaser of property
related procurement or supply functions needs to retain sufficient in-
house knowledge, experience or expertise relating to those functions
to plan, specify, commission and subsequently to manage the services
being procured to ensure best value for money is obtained.
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EDITION 2: FEB 1998 PS 1.2.1.1
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THE INTELLIGENT CUSTOMER ROLE
GENERAL PRINCIPLES
The scope of the intelligent customer capability will necessarily be a

matter of judgement based not only on the nature of Department’s
property management but also its approach to property management.
Whilst it might for example be possible in some areas to set a
consultant to judge other consultants, and therefore reduce the
number of in-house purchasing and contract management staff, that is
not always feasible. Ultimately, there remains with Departments the
residual responsibility for both sound management and public
accountability.
Purchasers must be able to demonstrate value for money in the

services procured through the management of budgets, monitoring of
expenditure and benchmarking of services.
Key Points
• Ensure that in deciding procurement strategies full account is taken

of the associated intelligent customer role and its economic
provision.
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PS 1.2.1.2 EDITION 2: FEB 1998
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THE ROLE OF CAU/PACE
GENERAL PRINCIPLES
PS 1.2.2 THE ROLE OF CAU/PACE
On 1 April 1996, Property Holdings was disbanded and succeeded by

Property Advisers to the Civil Estate (PACE). The principal role of
PACE is to co-ordinate Departments’ activities on the civil estate and
provide “intelligent customer” support. It is also responsible for the
management of all Government’s vacant space/properties.
The Central Advice Unit (CAU) is a part of PACE but was set up on 1
April 1995 to provide adequate advice and suppor t to Departments to
help them assess the impact of the activities which they would become
responsible for in April 1996 and deal with issues that flow from
transfer of responsibility. The scrutiny team clearly saw the provision of
advice and suppor t as a key component of the new executive agency
(PACE).
The aim of the CAU is to provide central property guidance to

Depar tments.
Its objectives are:
• to assess the need for and provide user friendly general guidance on
property matters;
• to provide early notice and appraisal of key issues, including

forthcoming property legislation and other consultation documents:
and to act as a focal point for feedback from Depar tments;
• to provide quality advice on the acquisition, management and

disposal of proper ty and associated services; and
• to facilitate the sharing of best practice through a network of

Depar tments/agencies.
The Guide is one of a number of guides which have been prepared in

furtherance of these objectives.
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THE ROLE OF CAU/PACE
GENERAL PRINCIPLES
Key Points
• The CAU is here to help you.
• If you have any queries or require advice in respect of the Guide or

any matters not specifically covered by the Guide, please contact
the CAU at:
Central Advice Unit

Property Advisers to the Civil Estate (PACE)
5th Floor
Trevelyan House
Great Peter Street
London SW1P 2BY
Tel: 0171 271 2756/2833

Fax: 0171 271 2715
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PRINCIPLES OF BEST PRACTICE CLIENT
GENERAL PRINCIPLES
PS 1.3 PRINCIPLES OF ‘BEST PRACTICE CLIENT’
Government policy is that Departments will strive for ‘best practice’

procurement performance. It is intended that this should be a central
element in Departments’ business at all management levels. The aim is
to achieve best “value for money”, whilst ensuring that the objectives of
any commission are properly met.
‘Construction Procurement by Government’ at paragraph 29 gives

guidance on where Departments should focus their attention in order
to attain and surpass the best in the private sector. Departments
should focus on:
• quality of supplies, materials and results;
• the value of the finished product to the business;
• life-cycle costs not just initial costs; and,
• appointing, retaining and improving the best team to manage and

deliver a project.
Departments are a major construction industry client and have a key

role to play in leading the way with improvements in procurement and
industry performance.
Action point 5 of The Latham Report suggests that this may be done
by:
‘- openly finding out which designers, contractors or specialist suppliers

are the best;
- tendering with the aim of getting those who offer the best service;
- working with their people as a team not opponents; and
- making no compromises with people or suppliers who are unco-

operative or adversarial.’
These are all activities which are carried out by leading or ‘best practice’
industry clients.
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EDITION 2: FEB 1998 PS 1.3
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THE CONDUCT OF STAFF
GENERAL PRINCIPLES
PS 1.4 THE CONDUCT OF STAFF
The activities of Departments include the expenditure of public funds

for which they are accountable. Such Departments are therefore
frequently subjected to close scrutiny.
In addition, best practice clients and in particular Departments are and

should be seen to be associating with honest suppliers. Since it is
important that competitors are able to compete on a level playing field,
it is essential that Departments procure and are seen to procure
supplies in an ethical and honest way.
The aim should be that organisations and the people they employ
should be trusted by those with whom they deal, and they should
conduct their business in a fair and reasonable manner.
Key Points
• Self-discipline must be exercised if offers of hospitality, gifts etc., are

received from suppliers with whom staff deal in the course of their
official duties.
• Rules on the acceptance of gifts and hospitality are normally set out
in Departmental hand-books, and it is essential that the procedures
and requirements set out therein are followed.
▲
!
• Circular letter DAO (GEN) 17/96 concerning the prevention of
fraud and irregularity was issued to Departments by HM Treasury
on 18 December 1996. It reminds them of the risks and outlines
some key principles of control to minimise the possibility of
fraudulent activities occurring.
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DEPARTMENTAL MANAGEMENT ROLES
GENERAL PRINCIPLES
PS 1.5 DEPARTMENTAL MANAGEMENT ROLES
Commitment by senior management to a project and to the project

sponsor or staff directly responsible for the execution of a commission
is an important factor in the success of a project or commission.
In respect of any project or commission, it is best practice to ensure

that:
• the commission manager is empowered with sufficient authority and

knowledge to make quick and effective decisions;
• the chain of management command is short and accessible to

commission managers;
• there is only one commission manager who deals with the

commission from start to finish to ensure continuity and to avoid
conflicting instructions to suppliers.
In the context of works contracts where a project sponsor is

appointed, the ‘Construction Procurement by Government’ report
states that project success depends upon the fulfilment of three key
management tasks. These are:
• investment decision maker - at the head of the Department capable

of making informed investment decisions;
• project owner - a senior manager in the business line who is

responsible for strategic management of the project;
• project sponsor - a single person who has responsibility for the day
to day management of the Department’s interest in the project.
The report also says that the first two or the last two roles may be
combined in one person but one person should not be responsible for
all three roles.
The role of the investment decision-maker is to approve the project

and to demonstrate senior management commitment to it. This person
will also give guidance or re-approval in the event of threats or
proposed changes to the project which might affect the original
approval.
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GENERAL PRINCIPLES
The project owner should report to the investment decision-maker

and should manage all inputs from the top and act as a channel for
reports to and from the project sponsor. The project owner should also
be accessible to and foster good relations with senior users.
The project owner’s responsibility should be to:
• oversee the preparation of the business case and budget, ensure

that proposals realistically meet business objectives, and seek
approval from the investment decision-maker;
• ensure that users are involved with and committed to the project;
• appoint, manage and support the project sponsor ;
• ensure that the brief, when developed, clearly reflects project

objectives;
• hold regular progress meetings with the project sponsor and

maintain a strategic overview of the development of the project;
• act as arbiter for disputes on the Department side;
• approve changes to project scope and where necessary seek the

approval of top management; and
• ensure that a post completion critique is carried out and considered

by all project stake-holders.
The project sponsor must be the focal point for the intelligent
customer role and should have clear responsibility for ensuring delivery
of the project in accordance with the project objectives. The scope of
the project sponsor’s duties is more fully set out in the introduction to
the Guide at Section 1.7. The project sponsor is in effect the clearing
house for all Departmental and construction team inputs and outputs.
➧ INT 1.7
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GENERAL PRINCIPLES
Key Points
• Each project should have clearly identified responsibilities for each of

the management tasks, namely investment decision-maker, project
owner and project sponsor.
• The project sponsor should be empowered to make effective and

informed decisions and actively monitor and review the
performance of the members of the project team.
• HM Treasury are in the process of issuing a number of guidance

documents covering the clients’ role in the construction
procurement process. They are aimed at anyone who is undertaking
or has involvement with the Government client role in construction;
particularly those exercising the key roles of investment decision
maker, project owner and project sponsor. The guidance documents
making up the “family” of construction best practice advice will be
numbered 1 to 9 and are structured to follow the logical sequence
from the broader level aspects to the more specific. Six documents
have so far been issued:
- No. 1 - Essential Requirements for Construction Procurement.
- No. 2 - Value for Money in Construction Procurement.
- No. 3 - Appointment of Consultants and Contractors
- No. 4 - Teamworking, Partnering and Incentives
- No. 5 - Procurement Strategies
- No. 6 - Financial Aspects of Projects.
Copies can be obtained from:
Public Enquiry Unit

Room 89/2
HM Treasury
Parliament Street
London SW1P 3AG
Tel: (STD) 020 (GTN) 7270 4558

http: //www.hm-treasury.gov.uk
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EDITION 2 REV 2: JAN 2000 PS 1.5.3
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EFFECTIVE DECISION MAKING
GENERAL PRINCIPLES
PS 1.6 EFFECTIVE DECISION-MAKING
In order for Departments to ensure best value for money it is essential

that commission managers are able to make quick, informed and
effective decisions. They should also be able to make commercial
decisions which in the long-run may substantially reduce the ultimate
commission or project cost and risk. This is particularly so when it
comes to managing and settling disputes.
There is a perception and indeed direct experience by those in the

private sector that some Departments are hampered by procedures or
systems which either impair or prevent effective decision-making.
Guidance is often mistaken as prescriptive and is often followed to the
letter to the detriment of flexible and creative thinking.
As explained in the introduction, the Guide is intended to be an aide

memoire, not a set of procedures which must be rigidly adhered to.
Some steps in the Guide may be unnecessary for certain types of
commission for example. An element of judgement is therefore
required in their application.
In addition best practice procurement requires quality judgements to

be made. ➧ PS 1.7
Key Points
• Commission managers should be allowed and encouraged to use

their judgement in both the procurement and management of
commissions.
• The application of judgement or informed decision-making requires

knowledge and experience. Where appropriate, commission
managers’ skills should be enhanced through training.
• Where they require support for their procurement, management or

commercial decisions, commission managers should seek advice
from their managers, or CAU, or from professional procurement
advisers.
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FOCUS ON OUTPUT VALUE
GENERAL PRINCIPLES
PS 1.7 FOCUS ON OUTPUT VALUE
It is important for Departments to focus not on the construction

process itself or each commission in itself but upon the benefit of the
completed project or commission to the overall business objectives of
the Department.
Project or commission objectives will be set and strategies formulated

to ensure that the value added to the business activities of the
Department is maximised.
This means taking a broader view and a longer term view of the
importance of the construction procurement process.
Competitive tendering is the only way of establishing a price range for

the commission to be procured, and generally the only unbiased way to
find the cheapest price.
However, price is only one of the project criteria by which the success
of a commission is measured. It is far more important that the
commission meets the objectives set by the Department.
➧ PS 2.2
A cut-price offer can mean a cut-price service. If a Department pays

too little, then it may be that what is delivered fails to provide the
Department with what it set out to obtain.
Accordingly Government policy on procurement by Departments is

that a supplier is selected on the basis of an offer which represents the
best value for money. This means using a procurement system which
gives weight to quality as well as price. Quality judgements are
therefore an essential part of good procurement practice.
With major works projects in particular, price must be considered in

the context of the life cycle cost of the project.
The capital cost of a building is typically only say 10-20% of the cost of
owning and operating it over its expected life. Professional fees might
be around 10-15% of the capital cost and therefore represent 1 or 2%
of the life cycle cost. Therefore the relatively minor additional cost of
procuring higher quality services, in particular design services which
focus on optimising the balance between capital cost and maintenance
costs, will be far outweighed by long-term savings.
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FOCUS ON OUTPUT VALUE
PROJECT REQUIREMENTS
Whatever the scale and value of the commission it is acceptable to

choose a tenderer who upon evaluation offers the best value for
money, even though it may not have offered the cheapest price. This is
a view confirmed by the National Audit Office.
The Guide sets out procedures for the assessment and evaluation of
suppliers in terms of the quality they offer as well as the price they
quote.
The Guide suggests use of an evaluation method which involves

deciding which quality criteria are most important to the Department,
giving each a weighting totalling 100 and then deciding on the relative
importance of quality to price. For example the more complex the
project or commission the greater the importance that is likely to be
attached to quality. A total score is then calculated for each tenderer
and the tenders ranked in order of preference.
An important advantage of this arithmetical approach is that it

produces a logical and visible means of evaluation. However, in itself it
requires a fair degree of judgement, and it is ultimately only an aid to
decision-making.
The final choice will inevitably involve considerable value judgements by

the Department, but it is essential to think carefully about the service
the Department needs and how it is to be delivered, prior to arriving
at this value judgement.
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PROJECT IDENTIFICATION
PS 2 PROJECT REQUIREMENTS
PS 2.1 PROJECT IDENTIFICATION
Before the Department considers the procurement of professional

services or contract works it must first identify a need, and set down as
clearly as possible what it is that has to be achieved and why.
Maintenance or alteration to existing premises and in particular

construction of new premises takes time to procure both in the lead-in
prior to work commencing and in the carrying out of the work itself.
Such work can be highly disruptive to a Department and may result in
the use of substantial Departmental resources. This implies the need for
careful future planning and an allowance for such work in
Departmental strategic business plans.
Government property requirements must be driven first and foremost

by the operational needs of Departments.
There may be an immediately identified need which requires the

appointment of consultants and/or works contractors, but hopefully
needs will be future needs which have been identified as a result of the
strategic planning process. In the case of future needs, there is an
opportunity to give more consideration to the need and the options
available to meet the need, as well as taking a planned approach to the
procurement process.
It is therefore beneficial to Departments to produce plans for the

ongoing development and maintenance of their estates.
When a current or future need is identified then an officer should be

appointed to drive the commission forward. The process will begin with
a clear definition of the need. The options for satisfying the need will
then be identified and considered.
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PROJECT IDENTIFICATION
The principal needs required to satisfy the property management

function, will, for many Departments, relate to the management and
maintenance of their facilities. It will be necessary to decide on:
• the nature of the management and maintenance required for the

facility in the context of the Department’s business objectives;
• the extent of management and maintenance services required;
• how the services should be provided or procured. ➧ PS 2.4.2
Where the Department has identified the need for new or altered
property the options for satisfying premises needs are typically as
follows:
• maintain and extend existing premises;
• move to new premises;
• construct premises which precisely meet the new or changing needs

of the Department.
The feasibility of these options should be considered in the context of

the benefits, risks and financial constraints they represent, and specific
options identified. These options are then put in order of benefits and
feasibility and a decision is taken at the appropriate level on whether in
principal the project is necessary or feasible.
Key Points
• The identification and consideration of options is a very important

part of the procurement process. It is particularly important to
precisely define the nature and scope of the need.
• Where commission managers are not confident about carrying out

feasibility studies, they should seek advice from a professional
adviser. The professional adviser may come from any of the
recognised construction professions, but should be able to
demonstrate a strong experience and understanding of different
procurement methods and project feasibility processes. Accordingly,
project manager, quantity surveying and specialist firms of
construction contracts consultants may be best suited to this role.
Where a project manager is appointed, the work of the adviser
should cease when the project manager is appointed. There is
benefit therefore in retaining an independent professional adviser
who is not viewed by project managers and other consultants as a
competitor, particularly when it comes to them disclosing bid
information.
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DEFINING PROJECT OBJECTIVES
PS 2.2 DEFINING PROJECT OBJECTIVES
Defining a clear set of objectives for the project or commission is the

foundation for setting a clear brief and for deciding on an appropriate
contract strategy. Time spent on getting this right at the project
➧ PS 2.4
inception stage will pay significant dividends when the work gets under
way. When substantial resources are committed to the work, the risk of
cost escalation due to delay or late changes by the Department is likely
to be high. Setting clear objectives and defining realistic expectations
does much to avoid disputes and substantially reduces the scope for
cost escalations over and above approved cost estimates.
In the case of a building, a clear statement of the project objectives

should be prepared in terms of:
• nature of the building’s use;
• number of people that are to occupy it together with their space

requirements;
• quantification of equipment or machine space requirements;
• location of building, (i.e. geographical etc.);
• budgets, (i.e. amount available);
• programme, (i.e. when it needs to be in operation);
• life span, (i.e. how long is the economic life);
• how it fits into the corporate plan, (i.e. it may be part of a larger
planned development).
Some indication should also be established on:
• the relative quality/price needs;
• environmental issues;
• visual impact; and
• planning and any other constraints.
Key Points
• The project objectives should be carefully defined as early in the

decision-making process as possible.
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RISK MANAGEMENT
PS 2.3 RISK MANAGEMENT
All commissions for consultancy and works contracts involve some

degree of risk to one, other or both parties. Some risks are easily
foreseeable at the outset whereas others may not be so obvious. Risk
management requires the identification of risks, consideration of when
and how they might occur and what action must be taken to minimise
their effect and maximise value for money.
As an introduction to risk management, it is useful to think of standard

forms of contract as formal agreements which allocate to, or specify the
balance of anticipated risk events between one or other party to the
contract. A common aspect of standard forms of construction contract
is that there are provisions for extensions of time to the contractor, and
for liquidated damages which may be payable to the Department as a
result of inexcusable delay on the part of the contractor. Standard
forms of contract generally anticipate and allocate responsibility for all
types of time related risk. Exceptionally adverse weather is for example
nearly always a shared risk, the employer takes the risk of delay to
project completion but the contractor takes the risk of any additional
cost it incurs as a result of the delay.
Different standard forms are designed to allocate different risk to

varying degrees. The choice of risk allocation largely dictates the
selection of a particular standard form for procuring the construction
works.
Risk management is far more than risk allocation. It is a process which

should begin far earlier in the procurement cycle than at the stage of
choosing the form of contract. It is a process of management which
should continue until the project is finally complete.
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RISK MANAGEMENT
Risk management involves the following elements:
• risk identification;
• risk assessment and analysis;
• risk response (policies which lead to risk reduction and control).

There are five strategies for responding to risk:
- avoidance,
- reduction,
- transfer,
- sharing,
- absorption;
• ongoing monitoring and control of risks throughout the life of the

project.
Risk identification generally requires an understanding of all of the

project or commission requirements at all stages from inception to
completion. It involves reviewing the potential sources of risk and
identifying and listing those risks which are likely to affect the project or
commission in question.
In the whole life context of a works project there are four generic
types of risk:
• department’s special risks, including external risks such as those that

arise from the economic, legal or political environments;
• design risks;
• construction risks;
• operational risks.
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PS 2.3.2 EDITION 2 REV 2: JAN 2000
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RISK MANAGEMENT
The principal causes of contractual prolongations, overspend, and

disputes in respect of works commissions are as follows:
Pre-Contract
• incomplete pre-contract design;
• poor tender documentation;
• complex building works/novel design/lack of buildability;
• inadequate pre-qualification process - inexperienced/unsuitable

consultants and contractors;
• lay clients;
• opting for the “cheap” alternative;
• restricted/occupied site;
• too many parties - designers/projects managers;
• inadequate co-ordination of design/production information/tender

documentation;
• contractor/Department, and contractor/professional latent conflict;
• inadequate programme;
• non-standard contracts;
• amendments to standard contracts;
• legal/contractual inconsistencies generally;
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RISK MANAGEMENT
On Site
• excessive changes, lots of variations;
• poor documentation - inconsistencies and errors;
• evolving design, late information;
• inadequate design, supervision and co-ordination of construction

and services;
• poor management by professional team;
• tender price too low;
• claims conscious contractor;
• weak contract administrator/Project Manager;
• junior quantity surveying staff;
• force majeure/adverse weather conditions;
• fire/other insured risks;
• bad workmanship;
• late delivery of materials;
• contractor’s failure to manage/supervise sub-contractors;
• payment disputes:
- contractor/Department
- contractor/sub-contractor;
• inadequate resources on site;
• untidy site/disorganisation.
Many of these problem areas apply to any type of commission whether

works or services. An awareness of these problems or sources of risk is
essential in order to give focus to specific aspects of the procurement
process. How these factors are to be dealt with will heavily influence
the choice of contract strategy.
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RISK MANAGEMENT
As described earlier, risk response strategies lead to the choice of a

particular procurement strategy, but should also be part of the ongoing
management of the project. It is important to strike a balance between
the threat of risk and the chance of an outcome which will result in
better value for money.
Risk management is for most procurers of services a subconscious

process. However, it is here suggested that it is made a formal and
inherent par t of the procurement process. This will be particularly
essential if private finance is to be considered for the procurement of a
ç
project in line with the Private Finance Initiative. A key feature of PFI
PS 5.2
projects, is the identification and genuine transfer of risks to the private
sector.
Key Points
• Risk management should be a conscious process as part of the

management ethos of any commission or project from inception to
completion.
• Risk management is an inherent part of considering the

procurement of projects to be funded by PFI.
• Further reading on risk management can be found in Procurement

Group Guidance No. 2, available from:
Public Enquiry Unit

Room 89/2
HM Treasury
Parliament Street
London SW1P 3AG
Tel: 020 7270 4558
http://www.hm-treasury.gov.uk
GACC
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CONTRACT STRATEGY
PS 2.4 CONTRACT STRATEGY
PS 2.4.1 General
The choice of contract strategy is one of the most important decisions

to be made by the commission manager or project sponsor, and will be
the outcome of a series of decisions made in the early stages of the
commission or project.
Contract strategy is about choosing the right contract for allocating

commission or project risks to the party who is best able to deal with
them, in a way which is consistent with the Department’s objectives for
the commission or project. The contract strategy will therefore depend
on the objectives of the commission or project and how the
Department wishes to manage risks.
With any commission or project, the Department should be seeking to

secure the right quality of work at the right time and at a cost which
represents best value for money. The three main types of objectives
which must be set for the procurement of any commission are
therefore:
Quality
Cost Time
Quality here represents the standard to which the work is done and
the extent to which it meets those objectives other than cost or time.
It should be recognised that:
• a change in one of these main objectives is very likely to have an

effect on one or both of the other objectives (for example, a
reduction in cost and/or time is likely to adversely affect quality);
• if tight targets are set for all objectives then the likelihood of
meeting them all is small;
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CONTRACT STRATEGY
• since an improvement in one objective is likely to be at the expense

of others it is important for the Department to focus on which are
the most important and to establish the right balance between
them by choosing an appropriate contract strategy.
The contract strategy should also reflect the technical ability of the
commission manager or project sponsor and the extent to which the
Department wishes to be involved with or have direct control over the
commission or project.
The principal steps required to decide on the contract strategy are:
Identify need for commission or project
Appoint Commission Manager or Project Sponsor
Appoint professional advisor where necessary
Define objectives and prioritise them
If project management, feasibility design or cost

advice is needed then make temporary
Re-evaluate and prioritise objectives
Decide an appropriate contract strategy in

light of objectives
In the case of a works project, the last step above would involve the
appointment of a project manager who would develop the detailed
contract strategy, by evaluating the options for the contract strategy
and the alternative types of contract available, resulting in the
recommendation of a particular form of contract.
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CONTRACT STRATEGY
The formulation of a detailed contract strategy will involve the

consideration of the following issues:
• factors outside the control of the project team (e.g. inflation,

legislation, etc.);
• sponsor resources (or Departmental resources);
• project characteristics;
• ability to make changes;
• risk management;
• funding;
• cost issues;
• timing;
• quality and performance.
The commission manager or project sponsor will want to review their

control of the above factors depending upon their relative importance.
Key Points
• The choice of contract strategy is one of the most important

decisions facing the commission manager or project sponsor.
• It may be advisable to seek advice from a professional procurement

advisor or project manager on the choice of strategy.
• In the case of works projects the chosen strategy will dictate which
consultants are required to be procured and how, as well as how
the works contractors are to be procured.
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CONTRACT STRATEGY
PS 2.4.2 Property Management Functions
There are a number of functions which have to be fulfilled in order for

the Department to manage and utilise its facility or facilities. These are
principally as follows:
Gener all
allyy
Generall
• Management Function;
• Estate Services including:
- lease renewals,
- rent reviews,
- valuations,
- options appraisal,
- acquisition of existing properties,
- disposal of properties;
• Maintenance Services, including:
- mechanical and electrical plant and building services,
- lift maintenance,
- ground maintenance,
- general building maintenance, doors, windows, redecoration, etc.
- fire alarms,
- security system,
- computer maintenance;
• Domestic Services, including:
- security,
- general office cleaning,
- window cleaning,
- catering,
- office furniture relocation services;
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CONTRACT STRATEGY
• Business Support Services, including:
- typing,
- finance,
- admin support,
- messenger service,
- copying and graphics services;
• Statutory Compliance Services, including:
- fire consultancy,
- health and safety consultancy,
- legal advice;
Minor Wor ks
orks
Major alter ations and new projects

alterations
• Project Management;
• Design Services including:
- architect,
- structural engineer,
- M & E engineer,
- other specialists, such as lighting and interior designers,
- landscape designers,
- specialist contractor design input;
• Cost Consultancy Services;
• Estate Services;
• Legal/Procurement Advice;
• Works Contractors;
• Specialist Works Contractors.
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CONTRACT STRATEGY
There are a wide variety of alternative means available to the

Department to provide or procure these functions. There are also
therefore a number of alternative types of organisation structure which
represent these alternatives.
When there is an identified need for works or services then the

Department must decide how best to secure them to the maximum
cost benefit of the Department. The Department must decide whether
the services required to satisfy the property management function
➧ PS 2.1
should be:
• provided in-house;
• obtained externally and managed in-house; or
• obtained and managed externally under the supervision of a

commission manager.
The choice will be influenced by:
• the extent and types of services to be provided;
• what represents the best value for money to the Department;
• the size of the Department, and whether scale economies can be

achieved through central purchasing;
• the level of in-house service available to the Department;
• the qualifications and experience of the Department’s property

management staff.
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CONTRACT STRATEGY
The most common model to describe the way in which Departments

organise their property management functions is as follows:
Departmental Headguarters
Property Management Division
Property Management Departmental Property

Commissions (PMCs) Manager
for each area for each area
Scope of PMC covers all

property management, Business Support Domestic Services
including Estates Services, Services (usually direct
Maintenance Services, (usually in-house) service)
Statutory Compliance
Services and Works
Fig 2.4.2.1 Organisation of the Property Management Function
It is difficult to try to anticipate all of the possibilities which might be

appropriate for all Departments. The attached grid of services and
contract strategies has therefore been included in order to try to
illustrate some of the different possibilities.
Departments with small and/or scattered estate should explore the

possibilities of using other Department’s existing property and legal
contracts.
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CONTRACT STRATEGY
CONTRACT STRA
CONTRACT TEGIES FOR PR
STRATEGIES OCUREMENT OF PR
PROCUREMENT PROPER TY
OPERTY
OPER
MANA GEMENT AND WORKS FUNCTIONS
MANAGEMENT
CONTRACT STRA
CONTRACT TEGIES
STRATEGIES
Measured Term Contracts

Term Commission Estates
Specialist Term Contracts

Term Service Contracts
PR OPER
PROPER TY MANA
OPERTY GEMENT FUNCTIONS
MANAGEMENT
(planned maintenance)
Property Management
Facilities Management
Estates Commission
Provided In-House
(one-off functions)
Term Commission
Commission
GENERALLY
GENERALLY
Management Function • • •
Estate Services • • • •
lease renewals • • • •
rent reviews • • • •
valuations • • • •
options appraisals • • • •
acquisition of existing proper ties • • • •
disposal of properties • • • •
Maintenance Services • •
mechanical and electrical plant and building services • • •
lift maintenance • • •
ground maintenance • • •
general building maintenance, doors, windows,
redecoration, etc. • • •
computer maintenance • • •
fire alarms • • •
security system • • •
Domestic Services, including: •
security • •
general office cleaning • •
window cleaning • •
catering • •
office furniture relocation services • •
Business Support Services •
typing • •
finance • •
admin support • •
messenger service • •
copying and graphics services • •
Statutory Compliance Services • •
fire consultancy • •
health and safety consultancy • •
legal advice • •
MINOR WORKS • •
GACC
EDITION 2 REV 1: JAN 1999 PS 2.4.2.5
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CONTRACT STRATEGY
In line with the organisational structure illustrated in Figure 2.4.2.1, the

most common approach to procuring the property management
functions is:
• the Department retains strategic management control;
• the Department generally provides business support services in-

house;
• the Department’s central office procures regional or national

Property Management Commissions (PMCs); ➧ CST 1.6
• the Department directly employs domestic service suppliers such as

security, office cleaning, window cleaning, etc.
The types of consultant commission which will generally be required to

satisfy the property management function are described in more detail ➧ CST 1
in the ‘Consultants’ chapter of the Guide.
The various types of Government works contracts are described in

more detail in the ‘Contractors’ chapter of the Guide. ➧ CRS 1
Key Points
• In considering the way to procure property management functions

and business support services, it is important for the Department to
consider in detail what it wants and why and whether there is scope
for improvement in existing systems.
• It may be appropriate to consider the appointment of a facilities

management company. ➧ PS 2.4.3
GACC
PS 2.4.2.6 EDITION 2 REV 1: JAN 1999
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CONTRACT STRATEGY
PS 2.4.3 Facilities Management Strategies
Facilities management (FM) is an extension of the property

management role, to the extent that its scope often covers all non-
core business activities associated with the facility and with supporting
the business unit occupying the facility. FM is the continuous process of
tuning all such activities or services to satisfy business needs. Treasury
(CUP) identify FM as strategic services in their literature.
All Departments are involved to a greater or lesser degree in FM and a

consultant who undertakes a Property Management Commission on
behalf of a Depar tment is undertaking facilities management services
on its behalf.
The reason for including this section however is because of the

development in recent years of a separate professional FM discipline.
There are now numerous organisations who offer FM services on the
basis for example that they will:
• review business objectives;
• take control of and manage the facility and all non-core functions;
• rationalise non-core functions;
• save the Department money whilst maintaining the level of service

required to satisfy business objectives;
• maximise value for money.
Three examples of organisational structures for the appointment of an

FM company are as follows:
Department
.......... Facilities Manager
........................................
..........
........ .. .. ..
.... ........... ......
................ .
................ ................... ..........
............
................
........................ ........ ....
.......... .....
Cleaning Building Security Etc
Management
Fig 2.4.3.1 Department Agent
With the client agent arrangement the facilities manager is simply a

manager. The Department contracts directly with service providers and
retains the cost risk.
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CONTRACT STRATEGY
Department
Facilities Manager
Cleaning Building Security Etc

Management
Fig 2.4.3.2 Facilities Management Contracting
The management contracting arrangement is a hybrid between the

client agent arrangement and total FM. The FM company is appointed
for a fee and then the packages are let separately but in contract with
the FM company. Warranties are commonly executed between package
suppliers and the Department where appropriate.
Department
FM:
- Cleaning
- Building
- Security
- Etc
Fig 2.4.3.3 Total FM
With total FM the Department pays a lump sum to the FM company

who takes direct responsibility for all services and therefore all of the
risk. It is clearly essential with this arrangement for the Department to
very clearly specify minimum levels of service requirements.
Before considering the appointment of an FM company the

Department should look carefully at its business objectives and how
they are currently being met.
There is a very helpful guide called ‘Thinking About Facilities

Management’ which sets out steps for successful FM, planning for
effective FM and choosing the appropriate path. This is available from
The Business Round Table Ltd, 18 Devonshire Street, London, W1N
1FS (0171 636 6951).
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CONTRACT STRATEGY
‘Thinking About Facilities Management’ sets out a number of areas

where Departments should take care, including:
• Depar tments should not lose control of services by outsourcing,

and should retain the strategic management function in-house;
• Depar tments should not expect services to run themselves, service

quality depends on good management;
• Depar tments should not invite bids from the commercial sector
without first rationalising their FM requirements; the Department’s
business operations need to be as lean as possible to reduce the
cost of outsourcing.
Key Points
• Facilities management is aimed at optimising the value of the

facilities and organisational support services in such a way as to
maximise value for money whilst meeting the strategic business
needs of the Department.
• Read ‘Thinking About Facilities Management’.
• Included in volume 2 of the Guide is an example FM contract that

has been developed by the Scottish Office.
• HM Treasury has issued detailed guidance on the documentation

needed in the procurement process from appraising suppliers
through to award of contract. It is in four parts:
- Guidance Note No. 59A : Model Appraisal Questionnaire;
- Guidance Note No. 59B : Pre-Qualification;
- Guidance Note No. 59C : Model Invitation to Tender ; and
- Guidance Note No. 59D : Model Conditions of Contract.
A copy/copies can be obtained from HM Treasury, Allington Towers,

19 Allington Street, London SW1E 5EB (tel: 0171 270 4558).
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CONTRACT STRATEGY
PS 2.4.4 Works Contract Strategies
Works contracts are required for the procurement of construction

work, whether alteration, refurbishment or new construction work.
Works contracts are generally divided into:
• minor works contracts; and
• major works contracts.
The distinction is usually a cost threshold which is likely to be individual

to each Department. Minor works contracts have the following
characteristics:
• a typical threshold for minor works contracts is contracts less than

£50,000;
• they require less consultant input;
• they can be carried out by smaller contractors generally with a

smaller variety of specialist input;
• they require simpler forms of contract which are easier to

administer.
The various types of works contract are more fully described in the
Contractors Section.
ç CRS 1
The form of contract chosen dictates the scheme of risk allocation as

well as which consultants need to be procured and when. There will
generally be more than one way to procure the works.
The various alternatives will be more or less successful in achieving

project objectives. For major works projects a project sponsor will be
appointed and the choice of procurement strategy will be decided in
conjunction with an appointed project manager or procurement
adviser.
GACC
EDITION 2 REV 2: JAN 2000 PS 2.4.4.1
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CONTRACT STRATEGY
The suggested procedure for selecting a contracting strategy is briefly

summarised as follows:
• appoint a project manager to develop a fuller contract strategy in

parallel with the outline design;
• the project manager formally reports to the project sponsor setting

out the recommended strategy;
• identify and analyse the risks with the options considered;
• the project sponsor considers the report and challenges the

recommendation and ultimately agrees on a suitable strategy.
In 1995 the Business Round Table re-launched the ‘Thinking About

Building’ procurement guide. ‘Thinking About Building’ provides a
checklist for identifying the various procurement options available and a
systematic procedure for deciding on a particular procurement path.
The procurement checklist is intended as an aid to decision-making and
is reproduced overleaf with permission from the Business Round Table.
The table lists on the left-hand side the principal objectives affecting
contract choice. Each type of contract can be scored in one of three
alternative ways:
• the total number of bullets which coincide with the objectives;
• each objective is numerically weighted and the weighting is

substituted for a bullet where it coincides with the objective;
• each contract is given a relative score in place of the bullet point,

and each objective is weighted and the two are multiplied together
to give a weighted average score.
Key Points
• Read CUP Guidance Note 12 - Contracts and Contract

Management for Construction Works.
• Read Procurement Guidance Note No. 6, available from HM

Treasury.
• Read ‘Thinking About Building’.
GACC
PS 2.4.4.2 EDITION 2 REV 2: JAN 2000
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IDENTIFYING YOUR PRIORITIES
GACC
Lump Sum Design and Build Fee Construction Design and Manage
Sequential
Accelerated
Direct
Competitive
Develop and
Construct
Management
Contracting
Construction
Management
Contractor
Project
Manager
Consultant
Project
Manager
EDITION 2: FEB 1998

A Timing How important is early Crucial 1 • • • • • •
completion to the success Impor tant 2 • • • • • • • •
of your project? Not as important as other factors 3 •
B Controllable Do you foresee the need Yes 4 • • • • • •
Variation to alter the project in any Definitely not 5 • • •
way once it has begun on
site, for example to
update machinery layouts?
C Complexity Does your building (as Yes 6 • • • • • •
distinct from what goes in Moderately so 7 • • • • • • •
it) need to be technically No, just simple 8 • • • • • • • • •
advanced or highly
serviced?
D Quality Level What level of quality do Basic competence 9 • •
you seek in the design Good but not special 10 • • •· • • • • • •
and workmanship? Prestige 11 • • • •
E Price Do you need to have a Yes 12 • • • • • •
Certainty firm price for the project A target plus or minus will do 13 • • •
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construction before you
can commit it to proceed?
F Competition Do you need to choose Cer tainly for all works contractors 14 • • • • • • •
your construction team Works and construction management team 15 • • • •
by price competition? No, other factors are more impor tant 16 • •
G Management Can you manage separate Can manage separate firms 17 • • • • •
consultancies and Must have only one firm for everything 18 • • • •
contractors, or do you
want just one firm to be
responsible after the
briefing stage?
H Accountability Do you want direct Not impor tant 19 • • • •
professional accountability Yes 20 • • • • •
to you from the designers
and cost consultants?
CONTRACT STRATEGY
I Risk Do you want to pay No, prefer to retain control and therefore risk 21 • •
Avoidance someone to take the risk Prepared to share agreed risks 22 • • •
of cost and time spillage Yes 23 • • • •
from you?
TOTALS
PS 2.4.4.3
DEFINING THE PROJECT BRIEF
PS 2.5 DEFINING THE PROJECT BRIEF
The project brief is a formal statement of the objectives and functional

and operational requirements of the finished project.
This is a very important document. It should be in sufficient detail to

enable the construction team to execute the detailed design and
specification of the work, and it is therefore an essential reference for
the construction team.
It is through the brief that the Department must effectively

communicate its needs whether for a major works project or for a
term maintenance contract or a consultancy commission of some
description.
A project brief might typically contain the following:
• project aim and objectives;
• the functional/operational requirements of the completed project;
• the project budget:
- capital costs,
- operating and maintenance costs;
• the project programme and, in particular, whether the project is to

be carried out as a whole or divided into distinct parts;
• the standards required:
- overall quality standards,
- construction standards,
- standards specific to end-use;
• environmental factors;
• statutory controls;
• special requirements.
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The Department must go to great pains within its own organisation to

ensure that it clearly defines what it and any other affected parties
require in order to deliver work which satisfies the overall business
objectives of the Department. In the case of a major works project, this
may require an extensive consultative process.
The development of the brief is an interactive process and the brief

should become progressively more defined as the Department’s needs
become clearer and conflicts are resolved.
The project manager and designers will usually assist the Department
in the formulation of the brief to ensure that its scope is sufficient for
design development.
Typically the brief will develop through three stages before detailed
design commences:
• preparing the business case;
• concept design;
• scheme design.
When the scheme design has been developed (ideally in close co-
operation with the Department) then it should be reviewed and signed
off by the Department. This helps to confirm the commitment of all
parties to the brief, and to reduce changes.
During concept design many of the key strategic decisions are taken
which affect buildability, long-term maintenance and value for money.
Commonly alternative design solutions will be tested.
The project manager will generally select appropriate designers.

Depending on the contract strategy, designers may need to be
appointed to carry out the concept design before the rest of the
construction team is appointed.
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Key Points
• The brief is central to defining the Department’s needs and should

be comprehensive and clearly articulated.
• The project brief should be signed off at the completion of scheme

design.
• It is important to ensure that the designer has sufficient resources to

ensure design development to programme. Ideally resource levels
should be defined at the outset.
• It is strongly recommended that general and specialist contractors

are involved in design development of works projects where
appropriate.
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THE NEED FOR A PROJECT MANAGER
PROCURING AND MANAGING THE TEAM
PS 3.0 PROCURING AND MANAGING THE TEAM
PS 3.1 THE NEED FOR A PROJECT MANAGER
A common approach to project appraisal, and evaluation is for the

Department to obtain a professional procurement adviser, who will
advise on appraisal, assist in formulating the contract strategy and be
responsible for assisting in procuring a project manager. Thereafter, the
advisor will be disengaged.
When the course of the project is known, and project managers have
been appointed, they will then take up management responsibilities and
co-ordinate and organise the procurement of the required consultants.
They will then push the project through design and construction to
completion.
The appointment of a project manager should not, however, be an

automatic decision. For example, it is unlikely that a project manager
will be required for maintenance work. It is likely that the management
role may be carried out by private sector estate manager under a
Property Management Commission.
➧ CST 1.4
It may also be the case that the Department and its project sponsors
feel sufficiently confident to appoint and manage the design team
directly. If this is so then a design team leader should be appointed to
ensure overall design co-ordination. This also has the advantage that ‘in-
house’ project managers will clearly have authority to make decisions.
In any event it is generally inappropriate for a Department to rely solely

on a project manager. The impetus and drive for suppliers to hit
deadlines is at its most effective when it comes directly from the
Project Sponsor.
A further point is that the chosen contract strategy may be design and
build - where a large amount of risk is transferred to the contractor,
which might arguably negate the need for a project manager.
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DEFINING THE PROJECT TEAM
PS 3.2 DEFINING THE PROJECT TEAM
The size of the team will of course depend on the nature of the work
being undertaken. In respect of property management and
maintenance work for example it may be that just two estate
management consultant practices will be appointed each to manage
different parts of the estate.
In respect of works contracts, the number and disciplines of the

consultants on the team will depend on the nature and scope of the
work and also on the chosen contract strategy. Once a project is
underway there will commonly be a project manager appointed to
move the project forward and ensure it meets the Departmental
project objectives. Under a traditional lump sum form of contract such
as GC/Works /1(1998) the Department might typically expect to
employ the following professionals:
Architect Principal Designer

Structural Engineer Structural Design
Mechanical and Electrical M&E Design
Engineer
Quantity Surveyor Cost control
Planning Supervisor Required by CDM regulations
to prepare health & safety plan
and possibly also:
Communications or computer
specialist
Party Wall Surveyor Party wall agreements
Interior Designer
Landscape Designer For external works design
Under the management contracting route, the contractor joins the

team earlier in the process to advise on buildability. In construction
management the Department contracts directly with each specialist
works contractor, and the construction manager is also on the team at
an earlier stage. Conversely with the design and build strategy, the
Department may engage professionals to develop outline designs but
the contractor when engaged then takes on full design responsibility as
well as responsibility for construction. The Department’s designers may
at that stage be disengaged or novated to the contractor.
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DEFINING THE PROJECT TEAM
Key Points
• However the team is structured, the best practice clients take time
to assess the qualities of each potential team member and put time
into getting the right team.
• It is highly advisable to insist on meeting the individuals who a

tenderer actually proposes using for the specific commission.
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APPOINTMENT THROUGH COMPETITION
PS 3.3 APPOINTMENT THROUGH COMPETITION
It is generally accepted that best value for money is achieved through

competition, provided that quality and price are considered together in
the final choice of supplier.
Competition provides a systematic approach to selecting the most

suitable consultant or contractor, but it must be done in an impartial,
fair and reasonable way, and must provide a level playing field for
competitors.
It may be appropriate to appoint a supplier without competition if

there is only one supplier who has the required expertise.
The majority of the Guide is devoted to providing recommended

procedures for the procurement of professional and contract works
services in such a way as to ensure as far as possible best value for
money through competition.
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FOSTERING TEAMWORK
PS 3.4 FOSTERING TEAMWORK
The complexity and fragmentation inherent in the construction process

make it essential to foster a culture of teamworking as early as possible.
This is best achieved through the enthusiasm and direction of the
project sponsor or commission manager.
Teamworking is facilitated by preparing briefs to professionals which are

clear and unambiguous, and avoid gaps and overlaps between
professionals. It is also facilitated by regular team building meetings at
which those present are encouraged to take a stake in the success of
the project as well as to see their positive contribution to satisfy the
Departments needs.
Teamwork may also be encouraged from within the team by giving one
or all of its members performance incentives to which they should
work.
Key Points
• Teamworking requires leadership. This should come from the

project manager where one is appointed, but the project sponsor or
commission manager also has an important part to play.
• Partnering is a relatively new approach in the construction industry

to develop non-adversarial relationships between Departments and ➧ PS 5.1
contractors.
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PERFORMANCE INCENTIVES
PS 3.5 PERFORMANCE INCENTIVES
There are two principal forms of incentive:
• Time Related - where the contractor is given incentives to

complete the whole of the works earlier than it is contractually
bound to do or to complete certain critical elements of the works
early. For certain types of commission it may be appropriate to
provide consultants with incentives for early performance.
• Cost Related - where the contractor or consultant is encouraged

to make savings to project cost whilst ensuring that other project
objectives are still met.
Time Related Incentives
An effective means of encouraging good performance from

professionals and contractors is to change conventional payment
mechanisms such that performance milestones are identified. Payment
is then made on the basis of an agreed payment schedule which defines
sums to be paid when milestones are reached. The contractor is
therefore encouraged to use good management and innovative
solutions to ensure good cashflow. This approach should not result in
any extra cost to the Department.
Where early completion of the whole or part of the work is desirable,

and the Department stands to save money by having early completion
then it may be appropriate to consider cash bonuses to the contractor
or consultant for early completion. The Department or its advisers may
take the view that in any event it is worth offering such bonuses. It is
possible to pay bonuses for early completion of stages e.g. on early
completion of roof, but this may achieve little if the works are
subsequently not completed on time. It is generally better to allow
bonuses for the completion of the whole or part of the works. This can
work in a number of ways, examples of which are as follows:
• the contractor is paid 0.1% of the value of any section of the works
handed over before the completion date or an applicable sectional
completion date up to a maximum of say 5% of the whole contract
value;
• the contractor is paid a fixed sum per day for each day that the
works are complete before the completion date. See option Q -
Bonus for Early Completion in the Engineering and Construction
Contract (2nd Edition). (Formerly the New Engineering Contract.)
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PERFORMANCE INCENTIVES
Conversely liquidated damages clauses serve as a disincentive for a

contractor to incur culpable delay. ➧ LE 2.8
Cost Related Incentives
Where there is a need to ensure that cost limits are not exceeded
then it is appropriate to consider the use of incentives for the
contractor or consultant to save costs.
Some organisations offer members of the consultant team half the

savings it is able to make as a result of value engineering, in order to
encourage reduction in project cost. Clearly this should be done with
care. Consultants should not be given the opportunity to set high initial
budgets and then make windfall gains as they go through design
development securing cost savings.
The following are examples where the contractor to a works contract

is given an incentive to secure cost savings:
• The contractor and the Department share equally in any cost

savings achieved by the contractor. See clause 38 of
GC/Works/1(1998).
• In the Engineering and Construction Contract 2nd Edition: Target

Contract with Activity Schedule, the contractor receives an agreed
percentage share of any actual saving on the target cost of each
activity in the activity schedule. Conversely if the actual cost exceeds
the target cost then the contractor must pay that same percentage
share by way of contribution to the overspend.
Key Points
• Contract incentives may produce real benefits for the Department,

in achieving time and cost targets and in encouraging closer co-
operation between members of the team.
• Contract incentives may require amendments to standard forms

where such forms are to be used. Such changes should be carefully
considered.
• HM Treasury Guidance Note No. 58 provides a detailed background

to the principles of incentivisation. A copy/copies can be obtained
from HM Treasury, Allington Towers, 19 Allington Street, London
SW1E 5EB (tel: 0171 270 4558).
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MONITORING PERFORMANCE
PS 3.6 MONITORING PERFORMANCE
Performance monitoring is an important part of the ongoing

management of commissions and works contracts. It particularly
focuses the mind of team members if monthly meetings are held
directly with the project sponsor or commission manager at which he
or she shows an interest in the performance by each consultant of its
tasks against the programme.
It is better to discuss problems at the time they arise rather than let
customer dissatisfaction fester and let team members believe there is
no problem. Consultants value positive and honest feedback so that
they know what is expected of them and so that they know how to do
better next time. If there are problems then they should be resolved as
soon as possible. This ultimately benefits the Department and is an
inherent part of risk management.
Key Points
• Active performance monitoring can improve performance.
• If consultants do not measure up it is helpful for them and the

Departments to know why.
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RECORD KEEPING
PS 3.7 RECORD KEEPING
Record keeping and archiving is a discipline in itself, but there are a

number of important general points about record keeping which are
worth raising from a strategic point of view:
• The commission and contracts files should be kept as a record of ➧ CST 2

the procurement practice adopted, and made available so that the
procurement process can be audited if required. ➧ CRS 2
• Key documents such as contracts, specifications, design drawings will

need to be retained. It should be noted that the CDM regulations
are now fully in force and place a statutory obligation on
Departments to have prepared a health and safety file for the vast
majority of projects. This contains specification drawings, product
sheets and methods of construction. This must be retained for the
life of the building and passed on in the event of disposal of the
asset. The file must also be accessible.
• It is also advisable for the project sponsor or commission manager

to ensure that they obtain and retain sufficient records to support
or defend claims against or by consultants or contractors. It is true
to say that the quality of a parties’ records can substantially
influence the quality of any case advanced by it and the quality of a
response to claims brought against it. It is important to keep good
records of the following:
- consultant’s and contractor’s actual progress against planned

progress;
- a schedule of when and what information and approvals were

given by the project sponsor to any members of the
construction team;
- the dates of commencement and duration of delays to progress

and reasons for any such delays;
- the causes of cost escalation if not time related.
The existence of this type of evidence may well help to deter parties
from bringing claims against the Department.
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EVALUATING PERFORMANCE
PERFORMANCE EVALUATION
PS 4.0 PERFORMANCE EVALUATION
PS 4.1 EVALUATING PERFORMANCE
One of the key initiatives promoted by the Latham Report is the need
to improve the efficiency of the construction industry and the quality of
the service it provides. To secure high performance from their suppliers,
best practice clients continually monitor and evaluate the performance
of their suppliers. They keep themselves informed as to which
companies offer good performance and good value for money.
A performance evaluation results in a report on the performance of

the contractor or consultant which is useful for future reference,
particularly when repeat projects are anticipated.
Departments have access to a central database to assist them in ➧ CST 3.2

selecting suppliers. It is run by the DETR and is known as the New
Qualification System (NQS). ➧ CRS 3.2
Returning performance evaluations to these organisations ought to be

a critical factor in their ongoing success.
If suppliers are aware that their performance will be evaluated and that
this may affect their chances of selection on other Government
contracts then they are much less likely to deliver sub-standard
performance on contracts they might consider to be one-off projects.
More detailed consideration is given to performance evaluation in the

consultants and contracts section of the Guide.
➧ CST 10
➧ CRS 12
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PROJECT CRITIQUES
PS 4.2 PROJECT CRITIQUES
Any construction work gives rise to some degree of learning on the

part of its participants. This arises from the fact that the majority of
projects are unique and because rarely is a project team ever the same,
by virtue of the personalities involved.
It is often useful therefore to evaluate the performance of the whole

project rather than just that of the suppliers. Indeed such a review is
essential if the contract is a stage in an overall programme, or part of a
serial or maintenance contract.
The idea of a critique is not to attribute blame for problems but to

engender positive feedback. It should examine what went right and the
critical success factors which achieved that state of affairs as well as
what went wrong and why, so that lessons learned may be applied to
future projects.
This can be seen as the final step in the risk management process for a
detailed critique might typically re-examine the risks identified at the
outset of the project as well as those unexpected risks which may have ➧ PS 2.3
materialised during the projects. The difference at this stage is that the
outcomes are known. Some risks may not have materialised at all,
others may have been more serious than expected. The critique can
examine the effectiveness of the risk management strategies adopted
to deal with those risks.
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PROJECT CRITIQUES
Some key issues which might be considered in a critique of a works

project are as follows:
• Departmental Risks
- was sufficient support and guidance available to the project

sponsor or commission manager,
- were lines of communication effective,
- was the project sponsor empowered to make informed and

effective decisions,
- was liaison with users co-ordinated effectively,
- were decisions and information provided to the construction

team when required,
- were complaints managed effectively,
- were there personality problems,
- was the project sponsor sufficiently involved to engender the

good performance of the construction team,
- were claims dealt with promptly,
- were the project objectives clear and realisable;
• Design Risks
- was the design brief consistent,
- was the design adequately co-ordinated as between professional

disciplines and specialist sub-contractors,
- were there problems with boundaries between different roles in

the design team,
- were expectations and duties clear,
- were sufficient resources employed by consultants;
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PROJECT CRITIQUES
• Construction Risks
- were risks actively managed,
- did the contractor understand what the Department wanted,
- did the contractor’s terms of contract adequately match that

expectation,
- were problems identified and dealt with early enough,
- were claims dealt with promptly,
- were the contractor’s management systems effective,
- how effectively were quality, cost and time criteria met,
- were sufficient resources dedicated to health and safety,
- were commissioning and handover procedures defined and

effective,
- were complaints dealt with effectively and satisfactorily,
- did the Department get what it wanted.
Key Points
• A project critique is essential for certain types of work, especially

stage or repeat contracts.
• A project critique can be distilled into a non-personal case study

which can be distributed for the benefit of all interested parties.
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PARTNERING
OTHER ISSUES
PS 5.0 OTHER ISSUES
PS 5.1 PARTNERING
Partnering is a managerial approach used by two or more organisations

to achieve specific business objectives by maximising the effectiveness
of each participant’s resources. This approach is based on shared mutual
objectives; agreed methods of resolving problems; shared risks
according to who can best manage them; and an active search for
continuous measurable improvements.
Because of the scope for reducing adversarial relationships, partnering

is consistent with procuring best value for money services. Partnering
arrangements may be used by the public sector and are consistent with
EC procurement regulations provided cer tain conditions are met. These
are set out at paragraph 7.4 of Setting New Standards, and paragraph
240 of the Construction Procurement by Government. The conditions
which must be met are:
• the initial procurement of the supplier must be through competition;
• the client’s needs and objectives must be clearly stated and there
must be a clear definition of both parties contracted responsibilities;
and
• in the case of strategic partnering contracts there should be specific

milestones for improved performance with the contract being for a
specific period and periodically re-let in competition.
There are two forms of partnering:
Strategic Partnering
Strategic partnering occurs where individual awards are made

throughout the duration of a partnering contract. This type of
arrangement is often used by Departments when engaging consultants
on a term or call-off contract basis. This arrangement has also been
very successful in relation to maintenance contracts and capital
schemes.
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PARTNERING
OTHER ISSUES
Further advice on the principles behind Strategic Partnering can be

found in CUP Guidance Note No. 57 and Procurement Guidance Note
No. 4, available from HM Treasury (tel: 020 7270 4558).
Project Partnering
With Project Partnering the collaborative arrangement is established

after the contract has been awarded and is project specific. Further
information on Project Partnering can be found in the Construction
Industry Board’s report “Partnering the Team” (Thomas Telford
ISBN: 0 7277 2551 3) and the European Construction Institute’s
publication “Partnering in the Public Sector” (ISBN: 1 873844 34 4).
Key Points
• Partnering is a challenging approach to procurement that requires

high levels of commitment from both sides. It is not a universal
panacea;
• Properly managed partnering has been shown to effectively reduce

adversarial relationships, but partners must be procured through
competition;
• Such arrangements should work equally well with situations where

there is a specific need for a definable service over a specific period
of time, and for specific one off projects;
• Strategic Partnering arrangements have been effective in reducing

lead-times where elements of a work programme must be procured
and completed;
• Although a non-contractual option partnering must still be

suppor ted by appropriate documentation, such as a Charter or
Agreement and a joint workshop agenda. The effect on the formal
contract terms will need to be assessed, and the need for
consequential amendments to reflect the partnering arrangements
may vary as between Strategic and Project Partnering.
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PRIVATE FINANCE INITIATIVE
OTHER ISSUES
PS 5.2 PRIVATE FINANCE INITIATIVE
Since the launch of the Private Finance Initiative by the Chancellor in

November 1992, there has been increasing impetus from Central
Government for all Departments to consider this procurement option.
The objective of PFI is to use private sector finance, flair, management

skills and resources to secure the best possible value for money for the
taxpayer to deliver capital intensive services to the public sector.
PFI funded projects typically involve a consortia of private sector design,

construction and operator companies who take a stake in the life cycle
cost of the asset. The private sector typically takes on both construction
and programme risks as well as operational and economic risks. The
public sector becomes a purchaser of services on the basis of the
usage, availability and performance of the asset during its life. The public
sector incurs no capital expenditure.
Private finance in respect of Government premises for example might

result in the private sector taking design and construction risks but also
operational risks in running and maintaining the premises. The Landlord
will therefore have considerable interests at stake in ensuring the
ongoing satisfactory performance of the premises. The public sector
Department would typically be expected to pay a premium for risk
transfer, but might get in return certainty of cost and flexibility of
occupation.
There are two fundamental requirements for a PFI project:
• there must be a genuine transfer of risk to the private sector; and
• value for money must be demonstrated for public sector

expenditure.
It is intended that risks are transferred to those best able to manage

them. Cer tain type of public sector risk may not be capable of being
transferred.
PFI operates within the same policy and legal frameworks as other
procurement methods. As contracting authorities identify specific needs,
the procurement option appraisal must be conducted on the basis of
fitness for purpose and value for money.
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PRIVATE FINANCE INITIATIVE
OTHER ISSUES
If this appraisal concludes that PFI is the chosen procurement route, the
contracting authority has certain responsibilities before launching a
competition (through OJEC if appropriate). Many of these stem from
the review of PFI conducted by Malcolm Bates in May and June 1997.
The Government has accepted his recommendations which take into
account:
• the formation of a new HM Treasury taskforce, the project arm of

which will review all ‘significant’ projects prior to their release to
competition;
• the requirement that the new taskforce should sign off the
commercial viability of all ‘significant’ projects bef ore the
before
procurement process commences by way of publication in the
Official Journal;
• contracting authorities will continue to be responsible and

accountable for their own procurement decisions.
The definition of what is a ‘significant’ project will clearly influence the

direction and handling of the procurement exercise. The Taskforce
projects team will decide what constitutes a significant project in
conjunction with relevant departments and agencies. The definition will
probably comprise several different elements (eg. importance in a
policy or national context or the fact that a project is the first of a
series). The underlying purpose is to prevent flawed projects being
placed before the market - thus helping to avoid nugatory costs being
incurred on either side.
Key Points
• Contracting authorities who feel that their PFI project(s) may fall
into the ‘significant’ category should contact the PFI Taskforce
projects team as soon as possible at:
HM Treasury
Parliament Street
London SW1P 3AG
Tel: 020 7270 4865
• The PFI Task Force has published a “Standardisation of PFI

Contracts” which Departments can use as a model on any PFI
projects they may be pursuing. A copy can be obtained from HM
Treasury (ISBN 0-406-92879-7).
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This chapter of the guide concerns legal matters and seeks to address
both English and Scottish law.
Where there are substantial legal differences or procedural

requirements between the English and Scottish systems, separate
sections have been written.
The relevant Scottish sections are numbered with the suffix ‘SCOT’
following them. An example is shown below:
• LE 1.2 SIMPLE CONTRACTS (English version)
• LE 1.2(SCOT) SIMPLE CONTRACTS (Scottish version)
To facilitate even easier identification the relevant Scottish sections are

printed on green paper. If there is only one section (with no ‘SCOT’
suffix) then it can be taken as applicable under both legal systems.
This chapter has been developed in conjunction with Scottish

Executive and their legal advisers.
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EDITION 2 REV 2: JAN 2000
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LE 1.0 LEGAL FRAMEWORK
LE 1.1 PRINCIPLES COVERING THE LAW OF CONTRACT IN ENGLAND AND
WALES
LE 1.1(SCOT) PRINCIPLES COVERING THE LAW OF CONTRACT IN SCOTLAND
LE 1.2 SIMPLE CONTRACTS
LE 1.2(SCOT) SIMPLE CONTRACTS
LE 1.3 CONTRACTS BY DEED
LE 1.3(SCOT) SELF-PROVING CONTRACTS
LE 1.4 PERFORMANCE AND DETERMINATION
LE 1.4(SCOT) PERFORMANCE AND TERMINATION
LE 1.5 DISCHARGE OF A CONTRACT
LE 1.6 MISTAKE AND MISREPRESENTATION
LE 1.6(SCOT) MISTAKE (ERROR) AND MISREPRESENTATION
LE 1.7 BREACH OF CONTRACT
LE 1.8 DAMAGES FOR BREACH OF CONTRACT
LE 1.9 LIMITATION
LE 1.9(SCOT) PRESCRIPTION
LE 1.10 EVIDENCE OF CONTRACT
LE 1.10(SCOT) EVIDENCE OF CONTRACT
LE 1.11 ASSIGNMENT
LE 1.11(SCOT) ASSIGNATION
LE 1.12 NOVATION
LE 1.13 TRANSACTIONS WITH OUTSIDE BUSINESSES
LE 1.14 PARENT COMPANY GUARANTEES
LE 1.15 PERFORMANCE BONDS
LE 1.16 STAMP DUTY
LE 1.17 PROCEEDINGS INSTITUTED AGAINST DEPARTMENTS
LE 1.17(SCOT) PROCEEDINGS INSTITUTED AGAINST DEPARTMENTS
LE 1.18 INSOLVENCY AND BANKRUPTCY
LE 1.18(SCOT) INSOLVENCY AND BANKRUPTCY
LE 1.19 RESERVATION OF TITLE
LE 1.19(SCOT) RESERVATION OF TITLE
LE 1.20 UNFAIR CONTRACT TERMS ACT 1977
LE 1.21 LEGAL ADVICE
LE 1.21(SCOT) LEGAL ADVICE
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LE 2.0 OTHER ISSUES
LE 2.1 HEALTH & SAFETY (CDM)
LE 2.2 TRANSFER OF UNDERTAKINGS (TUPE)
LE 2.3 RACIAL DISCRIMINATION
LE 2.4 FAIR EMPLOYMENT (NORTHERN IRELAND) ACTS
LE 2.5 INTELLECTUAL PROPERTY, COPYRIGHT, AND ROYALTIES ETC.
LE 2.5(SCOT) INTELLECTUAL PROPERTY, COPYRIGHT, AND ROYALTIES ETC.
LE 2.6 PROPRIETARY COMPONENTS/ARTICLES
LE 2.7 FIRM PRICE AND VARIATION OF PRICE
LE 2.8 LIQUIDATED AND ASCERTAINED DAMAGES
LE 2.9 THE HOUSING GRANTS, CONSTRUCTION & REGENERATION ACT
1996
LE 2.10 THE ARBITRATION ACT 1999
LE 2.10(SCOT) ARBITRATION
LE 2.11 CONSTRUCTION INDUSTRY TAX SCHEME
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PRINCIPLES COVERING THE LAW OF CONTRACT IN ENGLAND AND WALES
LEGAL FRAMEWORK
LEGAL ENVIRONMENT
LE 1.1 PRINCIPLES COVERING THE LAW OF CONTRACT IN

ENGLAND AND WALES
General
The procurement of consultants and contractors requires officials in

Departments to initiate and prepare appropriate contracts. A lot of
time and exper tise has already been invested in the preparation of
standard forms of contract, in order to ensure clear and consistent
drafting. See the Government’s GC Works Series of Contracts and
CUP Guide 42 for standard terms and conditions for services contracts.
It is therefore recommended that standard forms are used without
amendment.
▲
!
Occasionally it may be necessary to adapt a standard form to satisfy the
specific needs of a commission. It is imperative in the carrying out of
this task that the contract conditions and insertions are drafted with
clarity and that there are no intrinsic conflicts within the contract itself,
and/or between the contract and associated documentation.
Amendments to standard forms are one of the areas of risk which
➧ PS 2.3
commonly give rise to disputes. It is recommended that legal advice

should be sought for the drafting of amendments or to audit any
amendments proposed by the Department. Officials involved in the
preparation of works contracts should therefore have an understanding
▲
!
of elementary legal principles and the meaning of legal terms
commonly used which is sufficient for them to know when legal advice
should be sought. The following sections set out the basic principles to
be understood in contract preparation.
GACC
EDITION 2 REV 1: JAN 1999 LE 1.1.1
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PRINCIPLES COVERING THE LAW OF CONTRACT IN ENGLAND AND WALES
LEGAL FRAMEWORK
LEGAL ENVIRONMENT
Essential Elements for Formation of a valid contract
A contract is an agreement intended by the parties to it to have legal

consequences and to be legally enforceable, the essential elements
being:
• offer by one party and acceptance by the other;
• intention to create legal relations;
• agreement about the same thing i.e. genuine agreement;
• capacity of the parties;
• legality of objects;
• possibility of performance;
• certainty of terms;
• in the case of simple contracts not by deed, the presence of valuable

consideration, i.e. some right, interest, profit, or benefit accruing to
one party or some forbearance, detriment, loss of responsibility
given, suffered or undertaken by the other.
Only the parties who enter into the agreement are bound by it and a
person who is not a party to the agreement cannot normally enforce
the rights and liabilities created by a contract entered into by others,
although the contract may have reference to the interests of that
person. This principle is known as the doctrine of ‘privity of contract’.
Third par ties may however acquire rights and liabilities by way of
collateral contracts.
Contracts are divided into two main classes:
• simple contracts (contracts made orally or in writing); ➧ LE 1.2
• contracts by deed (contracts made in writing). ➧ LE 1.3
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LE 1.1.2 EDITION 2 REV 1: JAN 1999
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PRINCIPLES COVERING THE LAW OF CONTRACT IN SCOTLAND
LEGAL FRAMEWORK
LEGAL ENVIRONMENT
LE 1.1(SCOT) PRINCIPLES COVERING THE LAW OF CONTRACT IN

SCOTLAND
General
The procurement of consultants and contractors requires officials in

Departments to initiate and prepare appropriate contracts. A lot of
time and exper tise has already been invested in the preparation of
standard forms of contract, in order to ensure clear and consistent
drafting. See the Government’s GC/Works Suite of Contracts and CUP
Guide 59D for standard terms and conditions for services contracts. It
is therefore recommended that standard forms are used without
amendment.
s
!
Note that the Scottish Building Contract Committee (SBCC) amend
the JCT range of contracts for use in Scotland.
Occasionally it may be necessary to adapt a standard form to satisfy the

specific needs of a commission. It is imperative in the carrying out of
this task that the contract conditions and insertions are drafted with
clarity and that there are no intrinsic conflicts within the contract itself,
and/or between the contract and associated documentation.
Amendments to standard forms are one of the areas of risk which
ç PS 2.3
s
commonly give rise to disputes. It is recommended that legal advice
should be sought for the drafting of amendments or to audit any
amendments proposed by the Department. Officials involved in the
!
preparation of works contracts should therefore have an understanding
of elementary legal principles and the meaning of legal terms
commonly used which is sufficient for them to know when legal advice
should be sought. The following sections set out the basic principles to
be understood in contract preparation.
GACC
EDITION 2 REV 2: JAN 2000 LE 1.1.1(S)
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PRINCIPLES COVERING THE LAW OF CONTRACT IN SCOTLAND
LEGAL FRAMEWORK
LEGAL ENVIRONMENT
Essential Elements for Formation of a valid contract
A contract is an agreement intended by the parties to it to have legal

consequences and to be legally enforceable, the essential elements
being:
• offer by one party and unqualified acceptance by the other;
• intention to create legal relations;
• agreement about the same thing i.e. genuine agreement;
• capacity of the parties;
• legality of objects;
• possibility of performance;
• certainty of terms.
In the ordinary case where a contract is made between two parties it is

they alone who acquire rights under and have liabilities imposed on
them by it. One of the most important exceptions to this rule is that,
where it appears that the object of the contract was to benefit a third
party, the contract may be held to confer a jus quaesitum tertio on that
person. Such a right will be held to have been conferred if the third
party is named, or referred to, or is one of a distinct identifiable class
referred to, in the contract. In the fields of contract and procurement,
instances in which such a right exists are firstly, where money is placed
on deposit receipt made payable to the third par ty, where that third
party can uplift the sum on deposit, and secondly, where third parties
acquire rights and liabilities by way of collateral contracts.
Contracts are divided into two main classes:
• simple contracts (i.e. made orally or in writing); ç LE 1.2
• self-proving contracts (i.e. made in writing).

ç LE 1.3
Note that contracts in respect of devolved functions will run in the

name of the Scottish Ministers, whilst contracts in respect of reserved
functions will run in the name of a Minister of the Crown (usually the
Secretary of State for the Environment, Transport and the Regions).
Contracts should never be in the name of a Department as they have
no legal personality. If however a departmental identity is desired the
contract may run in the name of “the Scottish Ministers/Secretary of
State, acting through [name of Govt. Dept. or Agency]”.
GACC
LE 1.1.2(S) EDITION 2 REV 2: JAN 2000
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SIMPLE CONTRACTS
LEGAL FRAMEWORK
LEGAL ENVIRONMENT
LE 1.2 SIMPLE CONTRACTS
Simple contracts include all contracts which are not deeds. They may
be made orally, in writing, or by implication from conduct, but must ➧ LE 1.1
possess the essential elements for formation of a valid contract.
Most works contracts are simple contracts and are nearly always in
writing, although they vary in form and comprise contracts made by
exchange of letters (e.g., the contractor’s tender and the department’s
letter of acceptance) and also contracts in the shape of a formal
agreement (e.g., contracts for electricity supplies signed on behalf of the
Secretary of State are ‘under hand’ and not ‘by deed’).
The essential elements of a simple contract should be borne in mind

with particular regard to the following:
Need for Consideration
• simple contracts (as contrasted with contracts by deed) require

there to be consideration;
• a gratuitous promise is not normally enforceable, and the presence

of consideration demonstrates that the promise is not gratuitous;
• in every simple contract each party’s promise is the consideration

for the other party’s promise. In other words there is an exchange
of promises;
• past consideration will not create an enforceable contract since the

reciprocal promise will not be present.
Form of Consideration
Consideration can take the form of:
• an act;
• a forbearance not to carry out an act; or
• a promise.
GACC
EDITION 2: FEB 1998 LE 1.2.1
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SIMPLE CONTRACTS
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Examples of valid consideration would therefore be the payment of

money, a promise to pay money, an agreement to provide a product or
ser vice, or forbearance from deducting liquidated damages. The
monetary value of the consideration is not material, as long as it does
have some value. Therefore a trifling payment which does not
necessarily represent the true value of work or service provided will be
sufficient consideration for the formation of a valid contract.
Communication of Offer and Acceptance
• the offer, and acceptance of the offer, must be communicated by the

one party to the other ;
• the contract is brought into existence upon communication of the

acceptance;
• the act of acceptance creates the contract and once communicated

the acceptance cannot be revoked;
• an exception to the general rule will be where the post is used as

the medium of communication between the parties. The posting of
the letter of acceptance is sufficient communication, even though
the letter may fail to reach its destination.
Time Allowed for Acceptance
Acceptance must be made:
• within the time prescribed e.g., an offer may be made subject to

acceptance within fifteen days; or
• within a reasonable time if no time has been prescribed.
The question as to what is a reasonable time is not capable of general

definition and is dependent upon the circumstances of the individual
case. To avoid the situation where a contractor disputes a Department’s
right to hold the contractor to the terms of the original offer, if there is
any doubt whatsoever about the length of time elapsed since the offer
was made, the Department should contact the contractor to obtain
confirmation that the offer still stands.
▲
!
GACC
LE 1.2.2 EDITION 2: FEB 1998
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SIMPLE CONTRACTS
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Acceptance to be Identical with Offer
An agreement does not give rise to a contract unless its terms are
cer tain or capable of being made certain, and a contract is not brought
into existence by acceptance unless the acceptance is absolute and
identical with the offer. As the Secretary of State is usually in the
position of acceptor (of offers made by contractors in response to
▲
invitations to tender) it is important to be satisfied that the offer has
been expressed with precision and that the unconditional acceptance is
in accordance with the Department’s requirements and intentions.
!
Conditional acceptance does not create a contract but amounts to a
counter-offer needing unconditional acceptance by the contractor
before a binding contract arises.
Similarly, when it is desired to make an offer on behalf of the Secretary

of State its terms must be carefully drafted in the knowledge that a
definite and unconditional offer becomes a binding promise upon
acceptance by the party to whom the offer is made.
Withdrawal or Revocation of Offer
An offer can be revoked at any time before it is accepted. Revocation

or withdrawal can take place before the time that the offeror has
prescribed for acceptance if such time for acceptance has been
prescribed.
To be effective, withdrawal or revocation must come to the knowledge

of the other par ty before the offer is accepted and is not sufficiently
communicated by the posting of a letter, bearing in mind this may well
be received after the posting of the acceptance of the original offer.
▲
!
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LE 1.2(SCOT) SIMPLE CONTRACTS
ç
Simple contracts include all contracts which are not self-proving. They
LE 1.1
may be made orally, in writing, or by implication from conduct, but must
possess the essential elements for formation of a valid contract.
Most works contracts are simple contracts and are nearly always in
writing, although they vary in form and comprise contracts made by
exchange of letters (e.g. the contractor’s tender and the department’s
letter of acceptance) and also contracts in the shape of a formal
agreement (e.g. contracts for electricity supplies signed on behalf of the
Scottish Ministers (for devolved functions) or the Secretary of State
(for reserved functions)).
The essential elements of a simple contract should be borne in mind

with particular regard to the following:
Communication of Offer and Acceptance
• the offer, and acceptance of the offer, must be communicated by the

one party to the other;
• the contract is brought into existence upon communication of the

acceptance;
• the act of acceptance creates the contract and once communicated

the acceptance cannot be revoked;
• an exception to the general rule will be where the post is used as

the medium of communication between the parties. The posting of
the letter of acceptance is sufficient communication. Whilst however
the offerer may be contractually bound for a few days before the
offer is actually received, it is doubtful whether, in Scots law, a
contract would be held to have been concluded if the letter
ultimately fails to reach its destination;
• offerers may stipulate the means of communication by which the

acceptance is to be communicated. If, e.g., acceptance by letter,
recorded delivery mail or fax is stipulated, then this must be adhered
to - it is a condition of the offer.
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Time Allowed for Acceptance
Acceptance must be made:
• within the time prescribed e.g. an offer may be made subject to

acceptance within fifteen days; or
• within a reasonable time if no time has been prescribed
otherwise the offer will terminate.
Where a time-limit for acceptance has been prescribed the offer

automatically falls at the expiry of that time. Note however that the
offerer may waive the time-limit if desired.
The question as to what is a reasonable time is not capable of general

definition and is dependent upon the circumstances of the individual
case. To avoid the situation where a contractor disputes a Department’s
s
right to hold the contractor to the terms of the original offer, if there is
any doubt whatsoever about the length of time elapsed since the offer
was made, the Department should contact the contractor to obtain
!
confirmation that the offer still stands.
Acceptance to be Identical with Offer
An agreement does not give rise to a contract unless its terms are
certain or capable of being made certain, and a contract is not brought
into existence by acceptance unless the acceptance is absolute and
identical with the offer. As the Scottish Ministers or the Secretary of
State are usually in the position of acceptor (of offers made by
contractors in response to invitations to tender) it is important to be
satisfied that the offer has been expressed with precision and that the
unconditional acceptance is in accordance with the Department’s
requirements and intentions.
s
!
Conditional acceptance does not create a contract but amounts to a
counter-offer needing unconditional acceptance by the contractor
before a binding contract arises.
Similarly, when it is desired to make an offer on behalf of the Scottish

Ministers or the Secretary of State its terms must be carefully drafted in
the knowledge that a definite and unconditional offer becomes a
binding promise upon acceptance by the party to whom the offer is
made.
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Recall or Withdrawal of Offer
To be effective, withdrawal or revocation must come to the knowledge

of the other par ty before the offer is accepted and is not sufficiently
communicated by the posting of a letter, bearing in mind this may well
be received after the posting of the acceptance of the original offer.
s
!
The main rules as to recall or withdrawal of an offer summed up are:
• if the offerer undertakes to keep the offer open for a definite

period, that promise is binding. The offer cannot be recalled within
that time;
• if the offerer states that acceptance must be made within a specified

time, and acceptance is not made within that time, the offer is
automatically recalled;
• if the offerer does not state a time within which acceptance must be
made, the offer remains open, not indefinitely, but only for a
‘reasonable’ time (see previously), and if not accepted within a
reasonable time it is automatically recalled;
• where there is no promise to keep an offer open for a specified

time, the offerer can recall his offer at any time before it has been
accepted. As long as the parties are still at the stage of negotiation,
and a contract has not yet been formed, either party has the right
to ‘resile’ or draw back. An offer cannot be withdrawn after it has
been accepted.
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CONTRACTS BY DEED
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LE 1.3 CONTRACTS BY DEED
Contracts of this class must be made in a formal written agreement (i.e.

a single document executed by the parties by deed) and not, for
example by exchange of documents or letters which is the normal
practice for works contracts.
The written document in which a contract by deed is formally

executed is known as a ‘deed’. A deed becomes operative when sealed
and delivered by the parties to it. Where an individual is a party to a
contract under seal, that party’s signature is also necessary.
Execution of a deed by a company is traditionally by affixation of the

company seal, although if it is made very clear that the document is
being executed ‘as a deed’, the affixation of the seal is not necessary.
Key Points
• Because of the form in which they are expressed, contracts by deed

are legally enforceable even though they are sometimes made
without valuable consideration.
• The right of action arising out of a contract executed by deed

continues for twelve years rather than the six year period that
applies to simple contracts.
➧ LE 1.9
• By law certain contracts must be executed by deed. Typically these

include documents such as those for the conveyance of land. Deeds
may be used if desired for any other contracts, however
unimpor tant, par ticularly where a longer limitation period may be
required.
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EDITION 2: FEB 1998 LE 1.3
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SELF-PROVING CONTRACTS
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LE 1.3(SCOT) SELF-PROVING CONTRACTS
Self-proving (probative) contracts must be made in a formal written

agreement (i.e. a document executed by the parties; and witnessed if
signing as individuals or par tnerships, or properly for the company if a
company) and not, for example by exchange of documents or letters
which is the normal practice for works contracts.
The advantage to, or reason for, using probative writing is that if

challenged, the contract carries a presumption of authenticity and
proves its own date. It is therefore for the other party to prove it is not
genuine.
Where additional documents, e.g. schedules or appendices (often

comprising the conditions of contract in one, and the specification in
another), or plans/drawings, are to form part of the formal contract
document they must be properly incorporated into that contract. In
order to be properly incorporated into the contract, such annexations
must be both referred to individually in the contract and identified on
the face of each as being the annexation referred to in the contract
(generally by the wording “This is [Schedule [A]]/[Plan [A]] referred to
in the foregoing contract between X and Y for ....” handwritten or typed
at the top of the first page of each such schedule/plan).
Key Point
• By law certain contracts must be self-proving. Typically these include

documents such as those for the conveyance of land. Self-proving
may be used if desired for any other contracts, however
unimportant.
GACC
EDITION 2 REV 2: JAN 2000 LE 1.3(S)
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PERFORMANCE AND DETERMINATION
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LEGAL ENVIRONMENT
LE 1.4 PERFORMANCE AND DETERMINATION
A par ty to a contract is entitled to have the contract performed in the

manner described in the contract.That par ty cannot be compelled to
accept a different mode of performance even though equally beneficial
to that par ty. Whether what has been done constitutes performance of
the contract is a question depending in each case on the construction
of the terms of the contract and/or the facts of the case. The parties
may by agreement or waiver substitute a different mode of
performance for that originally agreed and by so doing create a new
contract, providing that valuable consideration is present in so doing.
Contractual stipulations as to the time for performance are not

generally construed as being essential such that failure to perform by
the time for performance entitles the innocent par ty to elect to
terminate the contract. The general principle is that performance must
be carried out within a reasonable time. The exceptions to the general
principle arise where time is made “of the essence” in the following
situations:
• where the parties have expressly stipulated in their contract that the
time fixed for performance must be exactly complied with, or have
expressed that time is “of the essence”;
• where the circumstances of the contract or nature of the subject

matter imply a requirement for performance by an exact time e.g.
the sale of business land or the exercise of an option for the
purchase of proper ty;
• where time was not originally of the essence of the contract and
one par ty has been guilty of undue delay, the innocent party may
give notice requiring the contract to be performed within a
reasonable time, in which case time becomes of the essence of the
contract for both par ties.
Determination
Where one party to a contract fails or refuses to perform the contract

demonstrating an intention no longer to be bound by the contract, the
other party may treat such conduct as repudiation and determine the
contract by acceptance of the repudiation.
➧ LE 1.5
Alternatively, the conduct may be such as to entitle the injured party to

operate a contractual determination clause which normally brings
about the same end to fur ther contractual performance as would an
acceptance of repudiation.
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A par ty who purpor ts to operate a contractual determination clause

when not entitled to do so is likely to be held to have repudiated the
contract.
Contractual determination clauses do not exclude common law

remedies available upon repudiation unless the agreement expressly
provides that the contractual rights are to be the exclusive remedy for
the breaches in question.
Contractual determination clauses will normally set out precise

conditions to be fulfilled with respect to notice periods, along with
practical requirements for the conclusion of performance. Some
contracts, particularly consultancy agreements, allow for contractual
determination to take place without default on the part of either party.
Clauses of this nature do not, however, normally expressly entitle the
Depar tment determining the contract to recover damages from the
other par ty. The Department must therefore recover any damages
incurred by way of a claim in common law.
Key Points
▲
• Determination of a contract is a serious matter, and a commission
manager or project sponsor considering such an action should
obtain authorisation from an officer with the appropriate delegated
!
authority.
• The Department should be very clear about its grounds for

determining a contract and should follow all contractual
requirements regarding notice before doing so. (See for example
Clause 56 of GC/Works 1/(1998)).
• The benefits of removing a contractor or consultant who is not

performing must be balanced against the following factors:
– it takes time to procure a replacement contractor or consultant

to complete the work, and they themselves require a learning
curve and mobilisation time;
– whilst extra costs can be claimed from the defaulting party it will
commonly require legal action to secure recovery of such costs;
– the liability for defects can become very difficult to attribute to

the defaulting par ty or to the party engaged to complete the
work unless there is a clear demarcation between their work.
• A very clear record (ideally photographic and measured) should be

made of the state of the work as of the date of determination, and
the site should be secured.
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PERFORMANCE AND TERMINATION
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LE 1.4(SCOT) PERFORMANCE AND TERMINATION
A party to a contract is entitled to have the contract performed in the

manner described in the contract. That party cannot be compelled to
accept a different mode of performance even though equally beneficial
to that party. Whether what has been done constitutes performance of
the contract is a question depending in each case on the construction
of the terms of the contract and/or the facts of the case. The parties
may by agreement or waiver substitute a different mode of
performance for that originally agreed and by so doing create a new
contract.
Contractual stipulations as to the time for performance are not

generally construed as being essential such that failure to perform by
the time for performance entitles the innocent party to rescind the
contract. The general principle is that performance must be carried out
within a reasonable time. The exceptions to the general principle arise
where time is made “of the essence” in the following situations:
• where the parties have expressly stipulated in their contract that the
time fixed for performance must be exactly complied with, or have
expressed that time is “of the essence”;
• where the circumstances of the contract or nature of the subject

matter imply a requirement for performance by an exact time e.g.
the sale of land or the exercise of an option for the purchase of
property;
• where time was not originally of the essence of the contract and
one party has been guilty of undue delay, the innocent party may
give notice requiring the contract to be performed within a
reasonable time, in which case time becomes of the essence of the
contract for both parties.
Termination
Where one party to a contract fails or refuses to perform the contract

demonstrating an intention no longer to be bound by the contract, the
other party may treat such conduct as repudiation and rescind the
contract by acceptance of the repudiation. For repudiation, there must
ç LE 1.5
be a breach of contract, but note that not every breach will constitute
a repudiation.
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Alternatively, the conduct may be such as to entitle the injured party to

operate a contractual termination clause which normally brings about
the same end to further contractual performance as would an
acceptance of repudiation.
A par ty who purports to operate a contractual termination clause

when not entitled to do so is likely to be held to have repudiated the
contract.
Contractual termination clauses do not exclude common law remedies

available upon repudiation unless the agreement expressly provides
that the contractual rights are to be the exclusive remedy for the
breaches in question.
Contractual termination clauses will normally set out precise conditions

to be fulfilled with respect to notice periods, along with practical
requirements for the conclusion of performance. Some contracts,
particularly consultancy agreements, allow for contractual termination
to take place without default on the part of either party. Clauses of this
nature do not, however, normally expressly entitle the Department
terminating the contract to recover damages from the other party. The
Department must therefore recover any damages incurred by way of a
claim in common law.
Key Points
s
• Termination of a contract is a serious matter, and a commission
manager or project sponsor considering such an action should
obtain authorisation from an officer with the appropriate delegated
!
authority.
• The Department should be very clear about its grounds for

terminating a contract and should follow all contractual
requirements regarding notice before doing so. (See for example
Clause 56 of GC/Works 1/(1998)). For this reason it is strongly
recommended that legal advice from the Department’s legal adviser
also be obtained to ensure that the contract may be terminated.
The consequences for wrongful termination can be serious.
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• The benefits of removing a contractor or consultant who is not

performing must be balanced against the following factors:
– it takes time to procure a replacement contractor or consultant

to complete the work, and they themselves require a learning
curve and mobilisation time;
– whilst extra costs can be claimed from the defaulting party it will
commonly require legal action to secure recovery of such costs;
– the liability for defects can become very difficult to attribute to

the defaulting party or to the party engaged to complete the
work unless there is a clear demarcation between their work.
• A very clear record (ideally photographic and measured) should be

made of the state of the work as of the date of termination, and the
site should be secured. Remember that these may be required as
evidence in any subsequent arbitration or court action.
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DISCHARGE OF A CONTRACT
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LE 1.5 DISCHARGE OF A CONTRACT
There are a number of ways in which the parties may be released from
further performance, or in other words the manner in which the
contract ends. The parties may be released:
• by performance (by both parties) in accordance with the terms of

the contract; in the case of part performance by a contractor of an
‘entire’ contract, the contractor would not be entitled to any
payment; an entire contract is one where the performance to be
provided by the provider (supplier) is required to be complete in its
entirety before payment must be made by the purchaser/client
(Department) - for example the delivery and installation of a
functioning refrigerator; however, discharge can result from partial
performance being voluntarily accepted by the purchaser/client
where the purchaser/client had freedom of choice;
• by mutual agreement;
ç
• by novation, where a fresh contract on the same subject may
LE 1.12
expressly or impliedly discharge the original one;
• where unforeseen events destroy the basis of contract, making

performance impossible, impracticable or radically different from that
originally intended by the parties (frustration);
• by material breach of a contract condition; what is a material breach

will vary from case to case, but in the case of material breach of
contract the innocent party may rescind the contract and claim
ç LE 1.4
damages;
• by mora, taciturnity and acquiescence, i.e. delay, silence and consent,

inordinate delay by both parties which may justify the inference that
the contract has been abandoned or that any rights under it have
prescribed;
• by operation of an express contractual provision which provides for

the contract to be discharged.
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EDITION 2 REV 2: JAN 2000 LE 1.5
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MISTAKE AND MISREPRESENTATION
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LE 1.6 MISTAKE AND MISREPRESENTATION
Mistake
The cour ts will not seek to rectify a ‘mistake’ in the ordinary sense of
the word, for example, to mend a bad bargain made by one or either
par ty. However, there are situations where the cour ts will nullify or
rescind the contract as a result of mistake by the par ties concerning the
contract. These situations are as follows:
• where there is a fundamental or radical difference between the

document actually signed and what the signer believed it to be, and
the signer has not been careless, the signer may raise the plea that
the document is void; this plea is only likely to be successful in very
limited circumstances;
• where the par ties enter into contract on the basis of a false and
fundamental assumption; this may be because the subject matter of
the agreement does not exist or has ceased to exist, unknown to
the parties at the time;
• where one par ty is mistaken as to the identity of the other party,

and the identity of the other party is of crucial importance, the
contract may be void at common law and of no effect.
Where the contract has been reduced to writing and the contract fails
to reflect the intentions of the par ties, the cour t will rectify the
contract so as to carry out such intentions. Evidence of a contrary
intention may be adduced by production of written or parol evidence.
(This is a general exception to the parol evidence rule, which is that
evidence of oral undertakings made by either of the parties is not
normally admissible to add to or vary the terms of an agreement
expressed in writing.) The cour ts will not seek to rectify a written
agreement because the parties simply overlooked a matter, since there
was no intention expressed in respect of such a matter.
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Misrepresentation
Statements made during pre-contract negotiation can be either:
• incorporated into the contract as a term in which case the remedy

for non-compliance with that term is an action for breach of ➧ LE 1.7
contract;
• a representation not incorporated into the contract; if the

representation proves false, the remedy will lie in an action for
rescission and/or damages for actionable misrepresentation;
rescission means that the contract is set aside with the object of
putting the parties back in the position they would have been in had
the contract never been made.
The essential ingredients of actionable misrepresentation are:
• a false statement of fact made by one party to the other; and
• inducement of the other par ty to enter into contract as a result of

the false statement of fact.
The remedy available for actionable misrepresentation will depend

upon the nature of the representation, since a representation can be
fraudulent, negligent or innocent.
Rescission is available whether the misrepresentation is fraudulent,

negligent or innocent, although in some circumstances the injured party
may lose the right to rescind e.g. if the parties cannot be restored to
their original position. Damages for misrepresentation are available for
fraudulent and negligent misrepresentation but not for wholly innocent
representation. In most cases the injured par ty will claim damages for
negligent misrepresentation under S2(i) of the Misrepresentation
Act 1967, and if liability is established the injured par ty will be able to
recover as a minimum the “out of pocket expenses” incurred.
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LE 1.6(SCOT) MISTAKE AND MISREPRESENTATION
Mistake (Error)
The courts will not rectify a ‘mistake’ or ‘error’ in the ordinary sense of
the word, for example, to mend a bad bargain made by one or other
party. However, there are situations where the courts can intervene,
outlined below:
Errors may be ‘of expression’ or ‘of intention’.
• In the former case, if the courts accept the evidence, they will
‘reform’ the contract to make it truly express the bargain (for
example, if by a slip of the pen, an offer of £100 was recorded as
£10 and the other knew £100 was meant).
• In the latter case, if one or both parties laboured under a

misapprehension which induced him or them to contract, such that
had the true facts been known, no contract, or a different contract
would have been made, two situations arise:
– if only one party was in error, then, unless it was so vital an error
as to exclude consent (e.g. identity, subject-matter or price) or
unless the error was material and was induced by the other
party’s statement, the courts will not come to his rescue;
– where both parties are in error, the question of whether the

contract is reducible depends on the nature of the error. If the
error was, for example, of identity, subject-matter or price, then
the contract will be void (null and void). There may, however, be
other errors, important but not vital, which may render the
contract voidable (capable of being made void) at the instance of
either party (e.g. a house destroyed by fire before completion of
the bargain).
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Misrepresentation
This may be innocent or fraudulent.
• An innocent misrepresentation is one made in the honest belief

that it is true (e.g. an art dealer believes a painting to be original
when it is really a forgery).
• The essence of fraudulent misrepresentation is an intention to

deceive. As the law puts it, a misrepresentation, to be fraudulent,
must be made in the knowledge that it is untrue or else it must be
made recklessly, careless whether it be true or false. There must be a
moral wrong. A statement might be made negligently but provided
the person making it believed it to be true (as opposed to not
knowing if it was true or false) then there is no fraud. The
misrepresentation must be made with the intention of bringing
about the contract and, so far as reduction is concerned, must be
made by one contracting party to the other.
The contracting party injured by fraudulent misrepresentation may ask

for reduction of the contract and/or damages. If reduction is possible
and he has suffered no loss, then although he will be able to reduce the
contract, he will not be entitled to damages. If reduction has become
impossible and no loss has been sustained, he will continue to be
bound by the contract and will not be entitled to damages. If, however,
loss has been sustained, damages will be awarded based upon the
actual loss.
If the misrepresentation was innocent, then no claim for damages can

arise. The only remedy of the party to whom the misrepresentation
was made is to seek to have the contract reduced, if that is still possible.
If it has become impossible he has no remedy.
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BREACH OF CONTRACT
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LEGAL ENVIRONMENT
LE 1.7 BREACH OF CONTRACT
Breach of contract occurs where one (or both) of the parties fails to
perform its obligations under the contract.
Breaches of contract are material or non-material. Remedies available

to the innocent party depend upon the materiality of the breach (i.e.
degree of seriousness or importance).
Non-material Breach
ç
One remedy for a non-material breach of contract in Common Law is
LE 1.8
damages by way of compensation, such damages being intended to
compensate the one party rather than to punish the other. The
innocent party may alternatively choose to use retention and lien, i.e.
withholding delivery of goods or services, retaining possession of goods
belonging to the party in breach etc. Another option is to go to the
courts to force the other party to fulfil its obligations in an action
known as ‘specific implement’. Lastly, the simplest and most common
action for breach of contract is an action for payment as money
(usually the contract price) through the courts.
Material Breach
In the case of material breach, in addition to the remedy of damages,

the innocent party may also break off the contractual relationship (that
is to say, that as a result of the material breach, the contract has been
repudiated and the innocent party may rescind the contract or treat it
as repudiated).
The question of what is material in a breach situation is always a matter

of circumstances and fact to be determined in each case.
Damages
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Where the amount of compensation claimed is to be assessed by the
LE 2.8
court, the damages claimed are termed ‘unliquidated’ damages
(see LE 1.8).
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BREACH OF CONTRACT
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The parties may, however, choose to pre-determine or liquidate the

amounts payable in the event of breach. These amounts are commonly
termed ‘liquidated and ascertained’ damages. To be enforceable such
amounts must be a genuine pre-estimate of the loss likely to be
suffered as a result of the particular breach and not a penalty. Where
the estimated amount is subsequently found not to be a genuine pre-
estimate the court will not award damages as a liquidated sum but may
pay an alternative assessment as unliquidated damages. (Further
information on damages is at LE 1.8.)
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DAMAGES FOR BREACH OF CONTRACT
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LE 1.8 DAMAGES FOR BREACH OF CONTRACT
A party to a contract who suffers loss as a result of a breach of the

other party will be entitled to an award of damages. Note however
that a party seeking damages must be able to show not only that there
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has been a breach, but also that that breach is directly linked to the loss
LE 1.7
claimed. If the breach occurs when work has been partially completed
then the injured party may bring a ‘quantum meruit’ (as much as it is
worth) claim for the benefit of work partially completed.
Damages are normally awarded on the basis of putting the innocent

party into the position that party would have been in but for the
breach. The measuring tool in calculating damages however is the loss
to the innocent par ty, not the gain to the party in breach.
Limitation on Damages
The damages that can be awarded are subject to the limitation

imposed by the rules preventing claims for losses which are deemed to
be too remote from the breach. The test established in the case of
Hadley v Baxendale will generally be satisfied if:
• the damage or loss arises according to the usual course of things

from such breach of contract, i.e. naturally;
• the damage or loss arises as may reasonably be supposed to have

been in the contemplation of both parties, at the time they made
the contract, as a probable result of the breach of it; this may occur
in situations where one par ty specifically draws to the attention of
the other, a particular loss that may be suffered as a result of a
breach, at the time of making the contract.
In addition to the above the injured party is required to take

reasonable steps to reduce the loss and avoid taking action which may
increase the loss suffered (i.e. to ‘mitigate’ their loss). The onus of proof
of whether the innocent party has indeed mitigated its loss is on the
party in breach.
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LIMITATION
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LE 1.9 LIMITATION
The cour ts want to avoid stale claims. Legal actions must therefore be
commenced or originated within time limits. These time limits are
contained in various Limitation Acts. If proceedings are not
commenced within the relevant time limit, the action will be “statute
barred” and cannot normally be brought, regardless of the merits of
the case. The law of limitation has, over recent years become an
increasingly complex subject, culminating in the Latent Damage Act
1986. The basic limitation rules are set out below. However, as a result
of the above Act, the period may be extended significantly in respect of
non-personal injury actions in negligence, so if there is any doubt, legal
advice should be sought.
Personal Injury. The basic rule is that an action must be brought

within three years of the negligence or breach of contract which
caused the injury. The basic period may be extended in certain cases
where the injur y is latent, i.e. if the injured person could not have
known that he had been injured within the three year period.
Contract. An action must be brought within 6 years from the date of

the breach of contract. If the contract is by deed, the period is 12 years.
If there has been a breach of contract there may also be a cause of
action in negligence which may produce a longer limitation period.
Negligence in Tort. The rules regarding limitation periods for

actions in negligence are more complex than for contract, and in some
cases allow more time. The basic rule is that the period of limitation
expires six years after the damage occurs or comes into existence.
Alternatively, in accordance with the Latent Damage Act 1986, the

period is three years from the earliest date, (in very simple terms),
when the plaintiff knew:
• that the damage was sufficiently serious to justify proceedings;
• that the damage was attributable to the alleged negligence; and
• the identity of the defendant.
The above two periods relating to negligence are subject to an overall

15 year ‘longstop’ running from the date of the act or omission which is
alleged to constitute the negligence, after which such actions shall not
be brought even if the cause of action has not yet accrued or the
‘star ting date’ for the three year period has not yet arrived.
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PRESCRIPTION
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LEGAL ENVIRONMENT
LE 1.9(SCOT) PRESCRIPTION
The principle of prescription governs the length of time for which

obligations subsist. The need for such a role is clear. Rights cannot exist
forever.
‘Prescription’ is the term used to describe the process whereby a

contractual obligation may simply extinguish itself by the passage of
time during which no action is taken in respect of it. The same process
in other areas of law may be used to establish legal rights (e.g. rights of
way), and this operates so as to create a ‘positive‘ prescription. The main
effect of the process in the law of contract, however, is to extinguish
legal rights by means of ‘negative’ prescription.
The Prescription and Limitation (Scotland) Act, 1973 establishes two

negative prescriptions, the ‘long negative prescription’ (20 years) and
the ‘short negative prescription’ (five years). According to which
category a particular obligation falls within, it may be extinguished after
five or twenty years, if the remaining essential conditions are satisfied.
Some rights are said to be ‘imprescriptible’, and are therefore immune
from both periods (e.g. real rights to ownership of land).
The vast majority of all contractual obligations will expire under the
‘short negative prescription’, i.e. after five years if the necessary
conditions are satisfied.
However, before an obligation will prescribe, the relevant period of

time must have passed without any ‘relevant claim’ by the creditor, or
any ‘relevant acknowledgement’ by the debtor:
• A ‘relevant claim’ is a claim in a court of law, or in an arbitration, or a

lodgement of a claim in the debtor’s sequestration or liquidation.
Also classed as a relevant claim will be the execution of any
diligence in pursuit of the debt, or the enforcement of the
obligation.
• for a ‘relevant acknowledgement’ to occur, there must be some

performance on the part of the debtor which indicates that he
regards the obligation as still existing, or an unequivocal admission in
writing, by or on behalf of the debtor, to the creditor or his agent.
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PRESCRIPTION
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If neither of these events occurs within the relevant prescriptive period,

then the obligation is extinguished by prescription. However, excluded
from the computation of this period is any time during which the
making of a claim was delayed due to fraud on the part of the debtor,
or an error on the part of the creditor included by the debtor. Also
excluded is any period during which the creditor was under a ‘legal
disability’.
The prescriptive period begins to run from the date when the
obligation becomes enforceable.
Legal advice should be sought in relation to this subject.

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With regard to personal injury the basic rule is that an action must be
brought within three years of the incident giving rise to the claim. The
basic period may be extended in certain cases where ‘material facts of
a decisive character’ were not known until a later date (in which case
the time runs from that date).
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EVIDENCE OF CONTRACT
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LE 1.10 EVIDENCE OF CONTRACT
Government contracts should always be made or confirmed in writing

irrespective of legal need for the use of written documents. It may be
unavoidable, in very exceptional circumstances, to make oral
arrangements which create contractual liabilities. It is most impor tant
that any necessary authority is sought and that the terms of such
arrangements are confirmed in writing at the earliest possible moment
in order that the rights and obligations of both contracting parties may
be clearly defined.
Where written documents have been used the evidence of the

contract is the documents themselves, and all contract problems should
be considered from the star ting point of the documents constituting
the offer and acceptance and establishing the precise agreement
between the parties.
Oral evidence and extrinsic documents not forming part of the

contractual offer and acceptance are not normally admissible for the
purpose of giving a different interpretation to alleged contract
documents or to prove any subsequent variation of a contract which is
required by law to be in writing, but it is allowed:
• to set aside a written contract on grounds of fraud or mistake;
• to explain a latent ambiguity, trade custom; or
• to show that a written document does not contain the whole

agreement.
Original contract documents should always be retained in a safe place

(i.e. a locked safe) and should be kept separate from day to day job
files.
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EVIDENCE OF CONTRACT
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LE 1.10(SCOT) EVIDENCE OF CONTRACT
Government contracts should always be made or confirmed in writing

irrespective of legal need for the use of written documents. It may be
unavoidable, in very exceptional circumstances, to make oral
arrangements which create contractual liabilities. It is most important
that any necessary authority is sought and that the terms of such
arrangements are confirmed in writing at the earliest possible moment
in order that the rights and obligations of both contracting parties may
be clearly defined. Should a dispute later arise as to the scope of the
obligations undertaken by a party, the intention of the parties will be
looked at. In the absence of writing therefore, what the parties said
(rather than what obligation they thought they had undertaken) will
be the crucial point. If any aspect or term of the agreement was not
discussed and agreed therefore, e.g. termination and duration, then this
will not readily be implied. Oral contracts can be very risky therefore
and, particularly for larger such contracts, are not to be recommended.
Where written documents have been used the evidence of the

contract is the documents themselves, and all contract problems should
be considered from the starting point of the documents constituting
the offer and acceptance and establishing the precise agreement
between the parties.
Oral evidence and extrinsic documents not forming part of the

contractual offer and acceptance are not normally admissible for the
purpose of giving a different interpretation to alleged contract
documents or to prove any subsequent variation of a contract which is
required by law to be in writing. Some contracts also specifically
exclude all prior communications between the parties by including an
‘Entire Agreement’ clause which states that the contract constitutes the
entire understanding between the parties and supersedes all prior
writings and negotiations.
Original contract documents should always be retained in a safe place

(i.e. a locked safe) and should be kept separate from day to day job files.
Remember that contractual obligations do not expire under the short
negative prescription for five years. The original contract documents will
still be of importance therefore during that period.
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ASSIGNMENT
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LE 1.11 ASSIGNMENT
In law, a party to contract cannot assign any of its liabilities or

obligations (‘burdens’) under a contract although that party may be
able to assign its rights or some of them (‘benefits’). In view of the
ability of a contractor or consultant to legally assign rights under the
contract to a third par ty, it is normally advisable for the Depar tment to
include a term within the contract prohibiting assignment or the right
to assign. Alternatively it may be stipulated that assignment can only be
effected with the consent of the Department.
Key Points
• Care should be exercised in drawing up and executing contracts to

ensure that the Department’s rights to assignment are not
prohibited.
• Most of the standard forms for construction works contain a clause

preventing assignment or transfer of the contract or of any part,
share or interest under it without the consent in writing of the
Depar tment. Clause 61 of GC/Works 1/(1998), for example,
contains such provision.
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ASSIGNATION
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LE 1.11(SCOT) ASSIGNATION
The general rule in Scots law is that rights and obligations under a
contract may be assigned or sub-contracted to another party provided
that the original contract does not involve ‘delectus personage’ (i.e. that
the choice of one par ticular person to perform a particular task
excludes all other persons - element of personal choice). Generally
contracts for services are held not to be assignable due to this concept,
but each contract must be considered individually to ascertain whether
it is assignable (and, if so, the extent to which it is assignable). Each
depends on its terms, subject and all other relevant circumstances.
By the Contractor
In view of the ability of a contractor or consultant to legally assign

rights under the contract to a third party, it is normally advisable for the
Department to include a term within the contract prohibiting
assignation or the right to assign. Alternatively it may be stipulated that
assignation can only be effected with the prior written consent of the
Department.
By the Department
Care should be exercised in drawing up and executing contracts to

ensure that the Department’s rights to assignation are not prohibited.
Key Point
• Most of the standard forms for construction works contain a clause

preventing assignation or transfer of the contract or of any part,
share or interest under it without the consent in writing of the
Department. Clause 61 of GC/Works 1/(1998), for example,
contains such provision.
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NOVATION
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LE 1.12 NOVATION
Subject to the limitations discussed in Section LE 1.11, third parties may

acquire rights under existing contracts by way of assignment/assignation.
Alternatively, third parties can acquire rights and liabilities by way of a
new contract with one of the original contracting parties. The substitute
agreement makes provision for the discharge of all obligations under
the original agreement.
Examples of the use of novation are as follows:
• as an option to secure completion of the works in the event of

insolvency of a contractor;
➧ LE 1.18
• in the case of a design and build contract where the Department

procures an outline architect’s design and then novates it to the ➧ CRS 1.8
design and build contractor.
Key Points
• It is important for the parties in the new agreement to define

clearly the responsibilities or liabilities of the original contractor to
be assumed by the substitute third party.
• An example of an ‘English’ and ‘Scottish’ Government agreement for

the novation of a consultant commission is provided overleaf
(Standard Form LE1/SF1).
• Seek advice before proceeding.

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NOVATION
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STANDARD FORM 1
LE1/SF1
EXAMPLE NOVATION AGREEMENT (ENGLAND & WALES)
THIS AGREEMENT is made this [ ] day of ....................... 200[ ]
between .................................................................................. (herein called the Consultant) of the first

part, ................................................. (herein called “the Substituted Consultant”) of the second part,
and the Secretary of State for [as appropriate] acting through [Department] (herein called
“the Authority”) of the third part.
WHEREAS
1. This Agreement is supplemental to the following Commission (herein called “the

Commission”) between the Consultant and the authority.
Commission: ..........................................................................................
[Department] Reference No. ....................................................................
Consultant Reference No. ........................................................................
As set out in the correspondence between the Authority and the Consultant dated
[.................................................................................................].
2. The Consultant desires to be released and discharged from the Commission and the
Authority has agreed to release and discharge them on condition that the substituted
consultant undertakes to perform and be bound by the Commission.
IT IS NOW AGREED as follows:
1. The Substituted Consultant undertakes to perform the Commission and to be bound

by the terms of the Commission as if they were par ty to them in place of the
Consultant.
2. The Consultant assigns and releases all benefits and liabilities under the Commission to
the Substituted Consultant.
3. The Authority releases and discharges the Consultant from all claims and demands
whatsoever in respect of the Commission and agrees to be bound by the terms of the
Commission as if the Substituted Consultant were a party to them in place of the
Consultant.
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NOVATION
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4. The Authority shall pay the Consultant all amounts due under the Commission for
work carried out satisfactorily by the Consultant before the date hereof.
5. All work carried out under the Commission by the Consultant and all payments made
under the Commission by the Authority to the Consultant shall be treated respectively
as work done by the Substituted Consultant and payments made by the Authority to
the Substituted Consultant.
Signed by ..............................................................................................
Name .....................................................................................................
On behalf of the Consultant.
Signed by ..............................................................................................
Name .....................................................................................................
On behalf of the Substituted Consultant.
Signed by ..............................................................................................
Name .....................................................................................................
On behalf of the Authority.
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NOVATION
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STANDARD FORM 1
LE1/SF1
EXAMPLE NOVATION AGREEMENT (SCOTLAND)
NOVATION AGREEMENT
among
[ ] (“the Consultant”) of the first part
[ ] (“the Substituted Consultant”) of the second part
and
THE SCOTTISH MINISTERS acting through [Department] (“the Authority”) of the third
part.
WHEREAS
1. This Agreement is supplemental to the following Commission (herein called “the

Commission”) between the Consultant and the Authority.
Commission: ..........................................................................................
[Department] Reference No. ....................................................................
Consultant Reference No. ........................................................................
As set out in [the correspondence]/[an agreement] between the Authority and the
Consultant dated
[.................................................................................................].
2. The Consultant desires to be released and discharged from the Commission and the
Authority has agreed to release and discharge them on condition that the Substituted
Consultant undertakes to assume the obligations of the Consultant under the
Commission and to perform and be bound by the Commission.
3. The Substituted Consultant has agreed to assume the obligations of the Consultant
under the Commission.
NOW THEREFORE the parties hereto AGREE as follows:
1. The Substituted Consultant accepts the liabilities, rights and obligations of the
Consultant under the Commission and undertakes to perform the Commission and all
the duties and to discharge all the obligations of the Consultant under it and to be
bound by the terms of the Commission as if they were party to them in place of the
Consultant, and that with effect from [ ] (“the Effective Date”).
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NOVATION
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2. With effect from the Effective Date, the Consultant assigns its whole rights, obligations and
liabilities under the Commission to the Substituted Consultant.
3. With effect from the Effective Date, the Authority releases and discharges the Consultant
from further performance of the Consultant’s obligations under the Commission and from all
claims and demands whatsoever in respect of the Commission and agrees to be bound by the
terms of the Commission as if the Substituted Consultant were a party to them in place of
the Consultant.
4. The Authority shall pay the Consultant at the Effective Date all amounts due under the
Commission for work carried out satisfactorily by the Consultant before the Effective date.
5. All work carried out under the Commission by the Consultant and all payments made under
the Commission by the Authority to the Consultant shall be treated respectively as work
done by the Substituted Consultant and payments made by the Authority to the Substituted
Consultant.
6. This Agreement shall be governed by, and construed in accordance with, the law of Scotland
and the parties prorogate the jurisdiction of the Scottish courts so far as not already subject
thereto: IN WITNESS WHEREOF these presents consisting of this and the [insert no]
preceding page(s) [together with the Schedule annexed hereto] are executed as follows:
for and on behalf of [insert name of consultant] (Consultant)
at .................... on .................... 200[ ] by:
........................................................ (Director’s signature) .................................. (Director/Co Sec’s signature)
........................................................ (full name) ................................................. (full name)
for and on behalf of [insert name of substituted consultant] (Substituted Consultant)
at .................... on .................... 200[ ] by:
........................................................ (Director’s signature) .................................. (Director/Co Sec’s signature)
........................................................ (full name) ................................................. (full name)
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NOVATION
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The Scottish Ministers (Authority)
at .................... on .................... 200[ ] by:
........................................................ (signature)
........................................................ (full name)
........................................................ (title)
in the presence of:
........................................................ (signature of witness)
........................................................ (full name)
........................................................ (address)
NB. Need to ensure that in any formal agreement at least part of the text of the
agreement appears on the same page as the signatures. Do not have the
signatures on a separate page from the foregoing text.
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TRANSACTIONS WITH OUTSIDE BUSINESSES
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LE 1.13 TRANSACTIONS WITH OUTSIDE BUSINESSES
General
Departments may carry out transactions with the following types of

business associations:
• Sole traders;
• Partnerships;
• Companies.
Each of the above type of association is considered in relation to

contractual capacity and liability.
Sole Traders
Sole trader is the name given to a person who sets up in business and
trades in their own name. No formalities are required to set up as a
sole trader. The debts of the business are the liability of the sole trader
personally. There is no statutory requirement on the sole trader to
keep accounts in any particular form.
The contractual capacity of the trader will be determined by the

general rules for contractual capacity of the individual in the law of
contract.
The sole trader will be personally liable for breaches of contract

committed by employees in the course of business.
Partnerships
A par tnership is the relationship between persons carrying on a

business in common, with express or implied agreement as to the
nature of the business, with a view to profit. The sharing of profit will
not, however, of itself create a partnership. No formalities are required
to form a partnership. The partners jointly and severally have unlimited
personal liability for the firm’s debts.
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As with sole traders, there is no limit on the contractual capacity of

partners except the general rules of contract law. Employees of the
firm will be agents of it when acting in the course of their employment
and the partners will be liable for their acts.
The partnership is a legal person distinct from the partners of whom it

is composed and may therefore sue or be sued in the firm’s own name.
Companies
The term “company” is usually used to mean a corporation created by

registration under the Companies Act 1985. On formation, a company
becomes a legal person separate and distinct from its members. A
number of documents must be filed with the Registrar of Companies
before a company may commence trading, including the Memorandum
of Association which sets out the purpose for which the company is
formed and limits the scope of its contractual capacity.
The most important effect of registration is that the members of the

company (shareholders) are not liable for the debts of the company
and their liability to contribute to the company’s assets, to enable it to
pay its creditors, may be limited by share or by guarantee.
The company as a separate legal entity can contract in its own name,
with limits on its capacity as follows:
• it has no capacity before incorporation and any person purporting

to act on its behalf before this date will be personally liable on the
contract;
• any contract not authorised by the objects clause is ultra vires and
void, although the scope of this limitation is narrowed considerably
by Sections 35, 35A and 35B of the Companies Act 1985 (as
amended by the Companies Act 1989). The effect of these
provisions is that the company’s constitution cannot limit or call into
question, the validity of a transaction or act, unless the person
dealing with the company acts in bad faith. That person is not bound
to enquire as to whether that act or transaction is permitted by the
company’s memorandum, or as to any limitation on the powers of
the board of directors to bind the company or authorise others to
do so.
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Key Points
• Departments should be aware, when procuring works, as to the

type of business association with which it is proposed to enter into
a contract.
• Departments should consider when procuring works, whether the

person with whom the transaction is being discussed, has authority
to bind that association in contract with that Department. Ensure
that documents are signed correctly by that association according to
its type in order that contracts are valid and binding. If in doubt as to
how to have a document executed, or whether an outside body has
executed it correctly, Departments should contact their legal adviser.
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PARENT COMPANY GUARANTEES
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LE 1.14 PARENT COMPANY GUARANTEES
Guarantees - Generally
There are two types of guarantee:
• parent company guarantee;
• performance bond. ç LE 1.15
Both are mechanisms designed to provide some extra-contractual

protection to the Department generally in respect of works
contractors.
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Where the Department does make it a requirement for a tenderer to
provide a guarantee or bond then this requirement must be clearly
stated in the tender documents so that the tenderer has notice of the !
requirement and is able to price for it.
Parent Company Guarantees
This form of guarantee is given by a parent company or holding

company to guarantee the proper performance of a contract by one of
its subsidiaries (the contractor). The guarantee may require that the
parent company completes the obligations of the subsidiary in the
event of default by the subsidiary. The liability of the parent company
can take several forms including a financial guarantee of completion of
the project itself or the employment of another contractor to complete
the project.
A parent company guarantee will only be of value if the parent

company itself is financially strong and its financial resources are largely
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independent of those of the contractor. These matters should be
generally scrutinised in the overall vetting of the contractor by the
Department. In addition the form of wording of any parent company !
guarantee is usually complicated and legal advice should be sought.
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Examples of ‘English’ and ‘Scottish’ financial parent company guarantees

follow this section. They are:
• individual guarantee - (standard form LE1/SF2) for one-off

appointments or where a blanket guarantee has not already been
obtained;
• blanket guarantee - (standard form LE1/SF3) for all contracts

awarded to that tenderer.
Ideally a blanket guarantee should be sought and a Departmental

register kept of those companies from whom such guarantees have
been obtained.
Key Points
• A parent company guarantee will not normally have a cost

implication for the tenderer nor therefore the Department.
• Where there is a parent company or ultimate holding company it is

recommended that a parent company guarantee is sought as a
matter of course.
• The requirement for a guarantee should be stated in the tender

documents and made a condition of acceptance of the tender.
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LEGAL FRAMEWORK
LEGAL ENVIRONMENT
LE1/SF2 STANDARD FORM 2
INDIVIDUAL GUARANTEE (100%) - DRAFT AGREEMENT
THIS AGREEMENT is made the ....................... day of ............................. One Thousand Nine
Hundred and Ninety ............................. BETWEEN ...............................................................................PLC/LTD
whose registered office is situated at ............................................................................... (hereinafter called
“the Guarantor”) of the one part and the Secretar y of State for [as appropriate] acting
through [Department] whose office is at
..............................
...................................................................................................................
(hereinafter called “the Employer”) of the other part.
WHEREAS
A. .............................................................................................. PLC/LTD (hereinafter called “the

Contractor”) has submitted a tender dated ............ offering to carry out certain works on
the .............................................. to the Employer.
B. The Guarantor has agreed in the event of the Contractor’s tender being accepted, to
guarantee the due performance by the Contractor of such works (hereinafter called
“the Contract”) in manner hereinafter appearing:
NOW THE GUARANTOR AGREES WITH THE EMPLOYER as follows:
1) If the Contractor (unless relieved from the performance by any clause of the Contract
or by statute or by the decision of a tribunal of competent jurisdiction) shall in any
respect fail to execute the Contract or commit any breach of its obligations thereunder
then the Guarantor will pay to the Employer and its successors the amount of all losses,
damages, costs and expenses which may be incurred by the Employer by reason of any
default on the part of the Contractor in performing and observing the agreements and
provisions contained in the Contract to the extent that such losses, damages, costs and
expenses are or would otherwise be recoverable by the Employer.
2) THE Guarantor FURTHER AGREES with the Employer that it shall not in any way be
released from liability hereunder by any alteration in the terms of the contract made by
agreement between the Employer and the Contractor or in the extent or nature of the
works to be constructed, completed and maintained thereunder or by any allowance of
time or forbearance or forgiveness in or in respect of any matter or thing concerning
the Contract or by any other matter or thing whereby (in the absence of this present
provision) the Guarantor would or might be released from liability hereunder, and for
the purposes of this Agreement any such alteration shall be deemed to have been
made with the consent of the Guarantor and Clause 1 hereof shall apply in respect of
the contract so altered.
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IN WITNESS of which the Guarantor has executed this Agreement as a deed and has
delivered it on the day and year first before written.
THE COMMON SEAL OF ........................................................... PLC/LTD was affixed to this deed in

the presence of:
.........................................................................................................
Director
.........................................................................................................
Director/Secretary
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BLANKET GUARANTEE
THIS AGREEMENT is made the ......................... day of ........................... One Thousand Nine
Hundred and Ninety ............................. BETWEEN ................................................................................PLC/LTD
whose registered office is situated at ............................................................................... (hereinafter called
“the Guarantor”) of the one part and the Secretary of State for [as appropriate] whose
office is at ....................................................................................................................................... (hereinafter called
“the Employer”) of the other part.
WHEREAS
A. Tenders for cer tain work may from time to time be invited by the Employer or by
[Department] acting as its agents (hereinafter called “Agents”) and
............................................................................ PLC/LTD (hereinafter called “the Contractor”) may
submit such tenders to the Employer or as the case may be its Agents.
B. The Guarantor has agreed in respect of each such tender accepted by the Employer or
one of its Agents (hereinafter called “the relevant Agent”) (such accepted tenders being
hereinafter individually called “the relevant Contract”) to guarantee the due
performance by the Contractor of the Contract in manner hereinafter appearing:
NOW THE GUARANTOR HEREBY AGREES WITH THE EMPLOYER as follows:
1) If the Contractor (unless relieved from the performance by any clause of the relevant
contract or by statute or by the decision of a tribunal of competent jurisdiction) shall in
any respect fail to execute the relevant Contract or shall commit any breach of its
obligations thereunder then the Guarantor will pay to the Employer and its successors
the amount of all losses damages costs and expenses which may be incurred by the
Employer by reason of any default on the par t of the Contractor in performing and
observing the agreements and provisions contained in the relevant Contract to the
extent that such losses damages costs and expenses are or would otherwise be
recoverable by the Employer or the relevant Agent from the Contractor under the
relevant Contract.
2) THE Guarantor FURTHER AGREES with the Employer that it shall not in any way be
released from liability hereunder by any alteration in the terms of the relevant Contract
made by agreement between the Employer or the relevant Agent and the Contractor
or in the extent or nature of the works to be constructed completed and maintained
thereunder or by any allowance of time or forbearance or forgiveness in or in respect
of any matter or thing concerning the relevant Contract or by any other matter or thing
whereby (in the absence of this present provision) the Guarantor would or might be
released from liability hereunder.
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AS WITNESS of which the Guarantor has executed this Agreement as a deed and has
delivered it on the day and year first before written.
THE COMMON SEAL OF ................................................................ PLC/LTD )
was affixed by order of their Board in )
the Presence of: )
..........................................................................................................................................................
Director
..........................................................................................................................................................
Director/Secretary
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INDIVIDUAL GUARANTEE (100%) - DRAFT AGREEMENT (SCOTLAND)
GUARANTEE AND UNDERTAKING

by
[ ] PLC/LTD, having their registered office at [ ]
(“the Guarantor”) of the one part
in favour of
THE SCOTTISH MINISTERS acting through [Department] (“the Employer”) of the other
part
WHEREAS
A. .............................................................................................. PLC/LTD (hereinafter called “the Contractor”)

has submitted a tender dated ............ offering to carry out certain works on the
.............................................. to the Employer.
B. The Guarantor has agreed in the event of the Contractor’s tender being accepted, to
guarantee the due performance by the Contractor of such works (hereinafter called
“the Contract”) in manner hereinafter appearing:
NOW THEREFORE THE GUARANTOR UNDERTAKES TO THE EMPLOYER as follows:
1) If the Contractor (unless relieved from the performance by any clause of the Contract
or by statute or by the decision of a tribunal of competent jurisdiction) shall in any
respect fail to execute the Contract or commit any breach of its obligations thereunder
then the Guarantor will pay to the Employer and its successors the amount of all losses,
damages, costs and expenses which may be incurred by the Employer by reason of any
default on the part of the Contractor in performing and observing the agreements and
provisions contained in the Contract to the extent that such losses, damages, costs and
expenses are or would otherwise be recoverable by the Employer.
2) That the Guarantor shall not in any way be released from liability hereunder by any
alteration in the terms of the Contract or in the extent or nature of the works to be
constructed, completed and maintained thereunder or by any allowance of time or
forbearance or forgiveness in or in respect of any matter or thing concerning the
Contract or by any other matter or thing whereby (in the absence of this present
provision) the Guarantor would or might be released from liability hereunder, and for
the purposes of this Guarantee and Under taking any such alteration shall be deemed to
have been made with the consent of the Guarantor and Clause 1 hereof shall apply in
respect of the Contract so altered.
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3) This Guarantee and Undertaking shall be governed by and construed in accordance

with the law of Scotland and the parties hereto prorogate the jurisdiction of the
Scottish courts so far as not already subject thereto: IN WITNESS WHEREOF this
Guarantee and Undertaking consisting of this page and the [ ] preceding page(s) is
executed on behalf of the Company as follows:
......................................................................................... .........................................................................................
Director Director/Secretary
......................................................................................... .........................................................................................
Name in Capitals Name in Capitals
......................................................................................... .........................................................................................
Place of Signature Place of Signature
......................................................................................... .........................................................................................
Date of Signature Date of Signature
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BLANKET GUARANTEE (SCOTLAND)
GUARANTEE AND UNDERTAKING

by
[ ] having its registered office at [ ] (“the
Guarantor”) of the first part
in favour of
THE SCOTTISH MINISTERS acting through [Department] (“the Employer”) of the second
part.
WHEREAS
A. Tenders for certain work may from time to time be invited by the Employer and
............................................................................ PLC/LTD (hereinafter called “the Contractor”) may
submit such tenders to the Employer.
B. The Guarantor has agreed in respect of each such tender accepted by the Employer
(such accepted tenders being hereinafter individually called “the relevant Contract”) to
guarantee the due performance by the Contractor of the Contract in manner
hereinafter appearing:
NOW THEREFORE THE GUARANTOR HEREBY UNDERTAKES TO THE EMPLOYER as

follows:
1) If the Contractor (unless relieved from the performance by any clause of the relevant
contract or by statute or by the decision of a tribunal of competent jurisdiction) shall in
any respect fail to execute the relevant Contract or shall commit any breach of its
obligations thereunder then the Guarantor will pay to the Employer and its successors
the amount of all losses damages costs and expenses which may be incurred by the
Employer by reason of any default on the part of the Contractor in performing and
observing the agreements and provisions contained in the relevant Contract to the
extent that such losses damages costs and expenses are or would otherwise be
recoverable by the Employer from the Contractor under the relevant Contract.
2) That the Guarantor shall not in any way be released from liability hereunder by any
alteration in the terms of the relevant Contract made by agreement between the
Employer and the Contractor or in the extent or nature of the works to be
constructed completed and maintained thereunder or by any allowance of time or
forbearance or forgiveness in or in respect of any matter or thing concerning the
relevant Contract or by any other matter or thing whereby (in the absence of this
present provision) the Guarantor would or might be released from liability hereunder.
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3) This Guarantee and Undertaking shall be governed by and construed in accordance

with the law of Scotland and the parties hereto prorogate the jurisdiction of the
Scottish courts so far as not already subject thereto: IN WITNESS WHEREOF this
Guarantee and Undertaking consisting of this page and the [ ] preceding page(s) is
executed on behalf of the Company as follows:
......................................................................................... .........................................................................................
Director Director/Secretary
......................................................................................... .........................................................................................
Name in Capitals Name in Capitals
......................................................................................... .........................................................................................
Place of Signature Place of Signature
......................................................................................... .........................................................................................
Date of Signature Date of Signature
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PERFORMANCE BONDS
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LE 1.15 PERFORMANCE BONDS
A bond is a legally enforceable financial guarantee given by a third party

(the guarantor) to a purchaser (the Department) to guarantee the
obligations of a supplier of goods, works or services (the contractor)
under a contract. The guarantor agrees to pay the Department a sum
of money (usually expressed as 10% of the contract sum) if the
contractor defaults on its obligations. The purpose of requiring a bond
is to allow the Department to offset the extra expenses of remedying
the default and/or completing the contract.
It is not common practice for a Department to require a bond. The

decision to obtain one from a tenderer will normally be a high level
Depar tmental decision. A bond may be required if: ▲
!
• there is no parent company or holding company and the value of
the contract is a significant proportion of the company’s turnover;
• the company appears financially weak and there is a risk of its

collapse.
Obtaining a bond cannot serve as a substitute for thorough scrutiny of

contractor’s financial standing and assessment of the contractor’s ability
to meet the terms and conditions of the contract satisfactorily. Any
reasonable doubts should be followed through, since a contractor with
inadequate financial resources may present a consequent risk to
exchequer funds. A decision to require a bond must be part of an
overall approach to risk management and should take account of
available measures to reduce the risk of default, including a proper pre-
qualification of tenderers.
The wording of commercial bonds can vary depending on which

organisation is providing the bond, who is involved in drawing it up, and
what the bond is expected to deliver. The courts have recently been
very critical of bonds containing archaic language and terms found in
“traditional” standard forms provided by banks or surety companies.
Legal advisers should always be involved in their preparation and
negotiation. A model form of bond was published in September 1995
by the Association of British Insurers to address the criticisms of
standard form bonds.
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Characteristics of Performance Bonds
Performance bonds should generally have an expiry date and should

contain a mechanism for amendment in the event that the value of the
contract increases or the duration of the contract extends.
Classification of Performance Bonds
There are two basic forms of performance bond, the “conditional

on-default bond” and the much more onerous “conditional
on-demand bond”.
Conditional On-Default Performance Bonds
Usually these can be called only following a serious breach by the

contractor of the agreed terms and conditions of the contract (which
will include the contractor going into liquidation/receivership or
becoming bankrupt). Departments should seek legal advice that the
wording clearly expresses the true transaction and not assume that a
“traditional” form of wording will be appropriate.
▲
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Conditional On-Demand Bonds
This is an onerous form of bond which is not normally used by

Depar tments. Although this bond in essence is one that can technically
be called at any time “on-demand”, it should contain:
• a procedural mechanism for ‘calling’ the bond;
• a requirement for the Depar tment to identify the reason for calling
the bond; and
• a cooling off period (during which the contractor may remedy the
default).
The place for use of such bonds is where the costs or other
consequences of default by the contractor are very high and there is a
need for payment without risk of dispute. This being said, the
imposition of conditions should prevent the Department from acting in
an arbitrary or unreasonable way and protect the contractor from the
bond being called without the due and proper consideration of
responsible people in the Department’s organisation.
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Requirement for both Performance Bonds and Parent Company

Guarantees
It will not normally be desirable or necessary for a contractor to

provide both performance bonds and parent company guarantees,
par ticularly when the cost of obtaining a performance bond will be
passed on to the Department. A decision as to which form of
protection is required must be taken as part of an overall approach to
risk management.
Key Points
• The requirement for a bond will be an exception rather than the

norm, and will normally require a high level Departmental decision.
• A bond will have a cost implication for the tenderer and therefore
for the Department. The Department should be satisfied that this
additional protection is necessary and worth paying for.
• When the decision is taken to request a bond, legal advice should

be sought to ensure that a suitable form of bond is obtained.
• The requirement for a bond should be stated in the tender

documents and the contract should not be formally awarded to the
successful tenderer until the bond has been secured and provided
to the Department.
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STAMP DUTY
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LE 1.16 STAMP DUTY
Principally by virtue of Section 55 of the Finance Act 1987 no stamp

duty is chargeable on any conveyance, transfer or lease, made or agreed
to be made to a Minister of the Crown or the Scottish Ministers.
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PROCEEDINGS INSTITUTED AGAINST DEPARTMENTS
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LE 1.17 PROCEEDINGS INSTITUTED AGAINST DEPARTMENTS
Civil legal proceedings against the Crown are instituted in accordance

with the Crown Proceedings Act 1947.
The Act specifies that proceedings should be instituted against the

appropriate authorised Department. The list published under Section
17 of the Act specifies the various Departments which are authorised
to receive proceedings for the purposes of the Act and the name and
address for service of the person who is to be treated as the solicitor
for each such Department. While most Departments are represented
by the Treasury Solicitor, there are Departments which have their own
legal advisers acting for them. Further, there are a number of public
bodies who have market tested the provision of legal services and put
the work out to the private sector: in such cases, proceedings should
be served on their private sector solicitors.
Proceedings may also be instituted against the Attorney General.
Key Points
• Proceedings should be served on the solicitor retained to represent

the Department. This will be the Treasury solicitor unless a private
sector legal adviser has been engaged.
• Crown Departments may not sue other Crown Departments.
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LE 1.17(SCOT) PROCEEDINGS INSTITUTED AGAINST DEPARTMENTS
Civil legal proceedings against the Crown (either in right of Her

Majesty’s Government in the United Kingdom or in right of the Scottish
Administration) are instituted in accordance with the Crown
Proceedings Act 1947.
The Act specifies that proceedings should be instituted against the

appropriate authorised Department. The list published under Section
17 of the Act specifies the various Departments which are authorised
to receive proceedings for the purposes of the Act and the name and
address for service of the person who is to be treated as the solicitor
for each such Department. While most devolved function Departments
are represented by the Solicitor to the Scottish Executive, there are
Departments which have their own legal advisers acting for them.
Reserved function Departments may also be represented by the
Solicitor to the Scottish Executive acting on an agency basis, or by the
Solicitor to the Advocate General, or again by their own legal advisers
acting for them. Further, there are a number of public bodies who have
market tested the provision of legal services and put the work out to
the private sector: in such cases, proceedings should be served on their
private sector solicitors.
Proceedings may also be instituted in Scotland against the Lord

Advocate (where the action, suit or proceeding is on behalf of or
against any part of the Scottish Administration), and the Advocate
General for Scotland (in any other case).
Key Points
• Proceedings should be served on the solicitor retained to represent

the Department. This will normally be the Solicitor to the Scottish
Executive unless a private sector legal adviser has been engaged or
the Solicitor to the Advocate General is acting.
• Ministers of the Crown may not sue other Ministers of the Crown.
Since 1 July 1999 however, rights and liabilities may arise between
the Crown in right of Her Majesty’s Government in the United
Kingdom and the Crown in right of the Scottish Administration by
virtue of a contract, by operation of law or by virtue of an
enactment as they may arise between subjects. The Scottish
Ministers may therefore sue, and be sued by, Ministers of the Crown.
Notwithstanding this, every attempt should be made by
Departments to resolve disputes without recourse to court
proceedings.
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INSOLVENCY AND BANKRUPTCY
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LE 1.18 INSOLVENCY AND BANKRUPTCY
‘Insolvency’ is a legal term which covers the financial failure of

individuals and companies and their position before and after the start
of a formal insolvency procedure. Insolvency may be experienced in the
short term or long term. Short term insolvency usually means a cash
flow crisis where insufficient money is coming in to meet the company’s
outgoings. Long term insolvency relates to the situation where liabilities
exceed assets even though the company may be able to meet its
outgoings. In accordance with the Insolvency Act 1986 if a company
fails either the “going concern” test or the “balance sheet” test then it
will be insolvent.
General
In situations where individuals, par tnerships or companies run into

financial crises there are formal procedures for dealing with the
situation. The procedures are different for individuals and companies;
‘bankruptcy’ for example only applies to individuals. The procedures are
as follows:
For an individual:
• deed of arrangement whereby the debtor may agree with creditors

as to how debts will be paid;
• administration order in the county court;
• voluntary arrangements whereby the insolvent debtor has an

agreement with creditors, approved by a proportion of creditors, to
an arrangement for repayment supervised by a qualified insolvency
practitioner;
• bankruptcy as a result of creditors’ or debtors’ petition.
For a partnership:
• winding up the insolvent partnership as an unregistered company;
• winding up the par tnership as above and petitioning for the

bankruptcy of two or more insolvent partners;
• insolvency proceedings against some but not all of the partners;
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For companies:
• receivership, whereby a receiver is appointed by a debenture holder

(usually a bank) to take control of the assets subject to the charge;
the administrative receiver may be invested with wide power to
carry on the business to trade the company out of financial crises or
to ‘hive the company down’;
• appointment by the court of an administrator who has similar

powers to an administrative receiver ; the role of the administrator is
principally to trade the company out of its difficulties;
• voluntary arrangements, little used and complex arrangement;
• liquidation, which can be voluntary or compulsory; either way the

liquidator is appointed to realise the assets and pay off debts.
Departmental Procedures
Upon being notified of the insolvency of a works contractor it is

recommended that the following procedure should be adopted (many
of the steps will be the same for any type of commission):
• arrange to have the site secured cost effectively, to prevent

vandalism and unauthorised removal of any materials;
• establish the type of insolvency (since not all procedures result in

the liquidation and cessation of trading by the company);
• inform the lead consultant and any other professionals involved in

the project;
• consider obtaining legal advice;
• clearly record (preferably with photographs) the state of the work

at the date of insolvency; and
• with the assistance of the lead consultant or an appointed QS,

establish the value of works executed at the time of insolvency
including all materials on and off site;
• instruct the lead consultant to negotiate with the contractor to

establish whether the contractor will be able to continue with the
works. If the contractor can, arrange access to the site for the main
and sub-contractors;
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• establish the position regarding unpaid cer tificates, retention,

performance bonds and other contractual arrangements;
• establish the position regarding claims in title of materials on and off

site. This is a very important point and must not be overlooked; ➧ LE 1.19
• establish a programme for completion;
• establish the estimated cost for completion;
• liaise with the insolvency practitioner, arrange meetings as

appropriate;
• establish the next step and way forward, with critical dates, to
achieve the satisfactory financial, contractual, chronological and
physical conclusion of the project.
Options for Completion
There are essentially three options available for the completion of the
project:
• novation;
➧ LE 1.12
• completion by the insolvent contractor; or
• completion by another contractor.
Key Points
• In situations where a contractor or consultant fails and the

liquidator or receiver decides not to proceed with the contract, any
case of dispute over ownership of goods resulting from the use of
retention clauses should be referred immediately for legal advice. ▲
!
• Any attempts by a supplier of the main contractor to remove goods
should be discouraged.
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LE 1.18(SCOT) INSOLVENCY AND BANKRUPTCY
‘Insolvency’ is a legal term which covers the financial failure of

individuals and companies and their position before and after the start
of a formal insolvency procedure. Insolvency may be experienced in the
short term or long term. Short term insolvency usually means a cash
flow crisis where insufficient money is coming in to meet the company’s
outgoings. Long term insolvency relates to the situation where liabilities
exceed assets even though the company may be able to meet its
outgoings. In accordance with the Insolvency Act 1986 if a company
fails either the “going concern” test or the “balance sheet” test then it
will be insolvent.
General
In situations where individuals, partnerships or companies run into

financial crises there are formal procedures for dealing with the
situation. The procedures are different for individuals and companies;
‘bankruptcy’ for example only applies to individuals. The procedures are
as follows:
For an individual or partnership:
• deed of arrangement whereby the debtor may agree with creditors

as to how debts will be paid;
• voluntary arrangements whereby the insolvent debtor has an

agreement with creditors, approved by a proportion of creditors, to
an arrangement for repayment supervised by a qualified insolvency
practitioner;
• bankruptcy as a result of creditors’ or debtors’ petition.
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For companies:
• receivership, whereby a receiver is appointed by a floating charge

holder (usually a bank) to take control of the assets subject to the
charge; the receiver may be invested with wide power to carry on
the business to trade the company out of financial crises or to ‘hive
the company down’;
• appointment by the court of an administrator who has similar

powers to a receiver; the role of the administrator is principally to
trade the company out of its difficulties;
• voluntary arrangements, little used and complex arrangement;
• liquidation, which can be voluntary or compulsory; either way the

liquidator is appointed to realise the assets and pay off debts.
Departmental Procedures
Upon being notified of the insolvency of a works contractor it is

recommended that the following procedure should be adopted (many
of the steps will be the same for any type of commission):
• arrange to have the site secured cost effectively, to prevent

vandalism and unauthorised removal of any materials;
• establish the type of insolvency (since not all procedures result in

the liquidation and cessation of trading by the company);
• inform the lead consultant and any other professionals involved in

the project;
• consider obtaining legal advice;
• clearly record (preferably with photographs) the state of the work

at the date of insolvency; and
• with the assistance of the lead consultant or an appointed QS,

establish the value of works executed at the time of insolvency
including all materials on and off site;
• instruct the lead consultant to negotiate with the contractor to

establish whether the contractor will be able to continue with the
works. If the contractor can, arrange access to the site for the main
and sub-contractors;
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• establish the position regarding unpaid certificates, retention,

performance bonds and other contractual arrangements;
• establish the position regarding claims in title of materials on and off

site. This is a very important point and must not be overlooked;
• establish a programme for completion;
• establish the estimated cost for completion;
• liaise with the insolvency practitioner, arrange meetings as

appropriate;
• establish the next step and way forward, with critical dates, to
achieve the satisfactory financial, contractual, chronological and
physical conclusion of the project.
Options for Completion
There are essentially three options available for the completion of the
project:
• assignation or novation;
• completion by the insolvent contractor; or
• completion by another contractor.
Key Points
• In situations where a contractor or consultant fails and the

liquidator or receiver decides not to proceed with the contract, any
case of dispute over ownership of goods resulting from the use of
retention clauses should be referred immediately for legal advice.
• Any attempts by a supplier of the main contractor to remove goods

should be discouraged.
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RESERVATION OF TITLE
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LE 1.19 RESERVATION OF TITLE
The subject of title to materials and goods delivered to construction

sites and intended for their incorporation into the Works is a complex
area of the law. In general terms there are two sides to the problem:
• Suppliers of work and construction goods often seek to retain title

in their products until they receive proper payment for them, at
which time title passes. This is done by means of a retention of title
clause in the conditions of supply such as that which formed the
subject of the case of Aluminium Industrie Vaasen BV -v- Romalpa
Aluminium Ltd. The Romalpa clause was held to be effective even
though goods had been mixed in with other goods after delivery,
forming other products.
• The Department does not want to be in the position of having paid

the contractor or nominated sub-contractors for materials stored
on or off-site if the contractor does not have title to them. If it does
so and the contractor goes into liquidation then the supplier might
be able to recover materials or goods for which the Department
has paid, and the Department may end up paying for them twice.
It is a general common law principle that once materials (moveable

property) have been permanently fixed to the heritage (immoveable or
fixed property) they become part of the ground (title thus passing to
the Department). Although this principle might limit the Department’s
risk to only unfixed materials it may nevertheless be possible for a sub-
contractor to have an effective retention of title clause which also gives
the supplier a right of access to the property in the event of non-
payment.
The general rule with regard to title is expressed by the legal maxim
‘nemo dat quod non habet’, which means that a party cannot pass title
to another par ty if it does not itself have title.
Clause 30 of GC/Works 1/(1998) provides that all goods and materials

intended for incorporation into the works and all goods and materials
necessary to facilitate their incorporation into the works shall become
the proper ty of and vest in the authority. This does not make provision
for situations where sub-contractors or suppliers are using retention of
title clauses.
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However, payments made in accordance with clause 48 (Alternative A)

of GC/Works/1 (1998) are on the basis of stage payments for work
completed to the satisfaction of the Project Manager. There are no
specific provisions for the payment for materials on or off-site. In theory
stage payments are only in respect of workmanship and materials fixed
to the site, thus protecting the Department as far as possible from
retention of title clauses.
Where materials on site are to be included in an interim payment then

it is recommended that the Department ensures that the contractor
has good title to any such materials.
s
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Payment for Materials Stored Off-Site
Occasionally, a Department may receive a request for advanced

payment for materials stored off-site. It is recommended that such a
request is resisted. The contractor already has a liability to finance off-
site activities unless caused by delay on the part of the Department.
s
!
It may exceptionally be appropriate to pay for materials off-site if:
• there will be some real financial benefit to the Department, for

example steel or mechanical plant may be given over to another
contractor unless payment is secured in advance, thus avoiding
remanufacturing delay for example;
• the contractor or sub-contractor can demonstrate good title;
• the materials are secure and protected from damage and bad
weather;
• the goods are clearly marked as the property of the Department.
Note however that payment for materials must only be against a

specific legal agreement. If by reason of the nature of the work carried
out by a Department, payments for materials off-site are necessary
then the Department should consider commissioning the redraft of
these conditions to suit their specific requirements.
Key Points
• Seek advice before considering any payments for materials held off-
site.
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To provide additional protection in such situations, Departments

generally make use of an instrument called a ‘Wharfingers Warrant’.
This is a warranty signed by the contractor or sub-contractor
depending on who is holding the materials, which confirms that the
contractor or sub-contractor has good title to the material and that,
upon payment, title of the listed materials has passed to the
Depar tment. A Wharfingers Warrant was used in conjunction with the
following supplementary conditions to GC/Works 1/(Edition 2):
• 207 - vesting of goods and materials not on-site;
• 208 - advances on account including goods and materials held

off-site.
These conditions have not been updated for use with GC/Works 1/
(1998).
If by reason of the nature of the work carried out by a Department,

payments for materials off-site are necessary then the Department
should consider commissioning the redrafting of these conditions to
suit their specific requirements.
Key Points
• Seek advice before considering any payments for materials held off-
site.
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UNFAIR CONTRACT TERMS ACT 1977
LEGAL FRAMEWORK
LEGAL ENVIRONMENT
LE 1.20 UNFAIR CONTRACT TERMS ACT 1977
The Unfair Contract Terms Act 1977 reduces the effectiveness of, or
nullifies some contract terms and notices which seek to exclude or limit
liability for negligence or breach of contract. It has no significant
implications for the unamended provisions of standard conditions of
contract such as, the GC/Works, JCT, ICE, forms.
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LEGAL ADVICE
LEGAL FRAMEWORK
LEGAL ENVIRONMENT
LE 1.21 LEGAL ADVICE
Responsibility for legal services to Depar tments in England and Wales is

divided between the Treasury Solicitor and the Legal Adviser/Solicitor
to the relevant Depar tment. The Legal Adviser/Solicitor to the
Depar tment will consult with the Treasury Solicitor as necessary.
Furthermore, there are a number of public bodies who have put the
provision of legal services out to the private sector following market
testing and it may be necessary to obtain advice from these private
sector solicitors.
Key Points
• Refer to Departmental procedures about seeking legal advice.
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LEGAL ADVICE
LEGAL FRAMEWORK
LEGAL ENVIRONMENT
LE 1.21(SCOT) LEGAL ADVICE
Except as otherwise arranged, responsibility for the provision of legal

advice in Scotland rests with the Office of the Solicitor to the Scottish
Executive (OSSE) for devolved functions. For reserved functions,
responsibility in Scotland rests with the Office of the Solicitor to the
Advocate General (OSSAG), although generally the larger OSSE will
act for OSSAG on an agency basis in contract, procurement and
intellectual property matters.
Where it has been arranged that OSSE (or OSSAG) do not represent
a particular public body, it may be necessary to obtain advice from the
solicitors acting for this body. If in doubt, check first with OSSE.
Key Points
• Refer to Departmental procedures about seeking legal advice.
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HEALTH & SAFETY (CDM)
OTHER ISSUES
LEGAL ENVIRONMENT
LE 2.0 OTHER ISSUES
LE 2.1 HEALTH AND SAFETY (CDM)
The Health and Safety at Work etc. Act 1974 Part I makes provision for
securing the health, safety and welfare of persons at work and for
protecting others against risks to health or safety in connection with
the activities of persons at work. There are various regulations and
codes of practice (some of which are enforceable under the Act)
covering aspects of health, safety and welfare.
The principal duties imposed by Part I of the Act are:
(1) On the Employer (i.e., the contractor) to ensure, so far as is

reasonably practicable the health and safety of the contractor’s
employees and of other persons (i.e., supervisory officers, occupiers
or visitors) who may be affected by the way the contractor
conducts its under taking. While the Authority in the contract is
sometimes referred to as the employer of the contractor, its
function as such is not that of an employer within the terms of the
Act.
(2) On a Person (i.e., agent, occupying department, contractor or sub-

contractor) who has, to any extent, control of premises which are
made available as place of work for persons who are not employees
(e.g., sub-contractors’ employees), to take such measures as are
reasonably practicable, to provide that the premises and plant (and
substances) thereon are safe and without risk to the health of such
persons.
On 31 March 1995 the Construction (Design and Management)

Regulations 1994 (CDM regulations) were introduced, in the form of
regulations and an approved code of practice. The regulations were
made under section 16(1) of The Health and Safety at Work etc. Act
1974 and concern the management of health and safety on temporary
or mobile construction sites. On 1 January 1996 the transitional
provisions came to an end and all the regulations now apply to all
qualifying projects. The CDM regulations place specific duties upon
clients, designers and contractors and are designed to bring about the
careful consideration and management of health and safety risks
throughout the construction process from inception through to
completion.
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The regulations relate to the carrying out of any building, civil

engineering or engineering construction work, which includes
redecoration, maintenance and demolition works. (See Regulation 2 for
definition of ‘construction work’).
The CDM regulations do not apply to projects being carried out for
domestic clients.
The regulations will not apply to non-domestic construction work if the

following conditions apply.
• the project is not notifiable to the Health and Safety Executive

(HSE) (i.e. the work is expected to last less than 30 working days
(Approved Code of Practice condition 27)); and
• where the largest number of persons at work at any time is less

than 5.
The CDM regulations apply to construction work which involves the

demolition or dismantling of a structure regardless of duration or the
number of workers required.
The regulations therefore apply to the majority of construction

projects.
Where the regulations apply, the Department has the following

principal obligations:
• to make a declaration to the HSE that the Department or agent

will act as ‘client’ for the purpose of the regulations in respect of a
par ticular project (Regulation 4);
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• to appoint a planning supervisor, (Regulation 6) who will be
responsible for:
– notifying the project to the HSE (Regulation 7),
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– developing a health and safety plan for the design and planning
phase and prior to the commencement of work on site by the
contractor (Regulation 15),
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– advising the Department on the satisfactory allocation or
resources for health and safety (Regulation 14), and
– preparing a health and safety file (Regulation 14);
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• to provide the planning supervisor with all information necessary for

him to carry out the planning supervisor’s duties (Regulation 11);
• to appoint a principal contractor, who is responsible for developing

the health and safety plan which should be the basis of the health
and safety management of the construction phase (Regulation 6);
• to be reasonably satisfied that the planning supervisor, designers and

contractors are competent to carry out their duties (Regulation 8);
• to be reasonably satisfied that the planning supervisor, designers and

contractors have allocated or will allocate sufficient resources to
deal with Health and Safety matters in compliance with the CDM
regulations (Regulation 9);
• to keep available for inspection the health and safety file once it has
been prepared (Regulation 12).
Key Points
• The CDM regulations place statutory criminal and civil law

obligations on Departments. These must be complied with.
• It is not necessar y for the planning supervisor to be a separate

professional from the designers, but arguably, benefits may derive
from having a third party with a different perspective.
• In theory more practical and safer designs could result from a more
active management of health and safety risks which could also
benefit the client.
• Read the CDM regulations and Approved Code of Practice.
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TRANSFER OF UNDERTAKINGS (TUPE)
OTHER ISSUES
LEGAL ENVIRONMENT
LE 2.2 TRANSFER OF UNDERTAKINGS (TUPE)
Purpose of TUPE
The Transfer of Undertakings (Protection of Employment) Regulations

1981 as amended (‘TUPE’) are the regulations which brought about
the implementation in the UK of the 1977 EC Acquired Rights
Directive. The purpose of the Directive and therefore of TUPE is to
protect employee’s rights on the change of the operator of a business
or undertaking. This may include the contracting out of services.
This is a difficult and developing area of law. The European Court of

Justice is the main determinant as to whether the directive and
therefore TUPE applies in a particular case.
Effect of TUPE Applying
Where TUPE applies then in cases where the employee’s contract of

employment would otherwise come to an end on termination of the
employer’s contract, the general principle is that employees, their terms
and conditions of employment, acquired rights such as accumulated
holidays, bonuses and redundancy rights are transferred from the
outgoing consultant or contractor (‘the transferor’) to the incoming
consultant or contractor (‘the transferee’).
Determining Whether or Not TUPE Applies
Since TUPE was introduced in 1981, case law has widened the
interpretation of its provisions so as to include an increasing variety of
commercial situations including:
• contracting out (outsourcing);
• replacement of a service provider.
It is not possible to give definite guidance on whether TUPE will apply

to a par ticular situation. Application will turn on all the circumstances
of a particular transaction.
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The test to be applied was set out in the judgement in Spijkers -v-
Gebroeders Benedik Abattoir [1986] 2 CMLR 296 in which it was stated:
“The decisive criterion for establishing whether there is a transfer within

the meaning of the Directive is whether the business in question retains
its identity as would be indicated, in particular, by the fact that its
operation was continued or resumed ...”
The factors to be assessed in satisfying the test will include:
• the type of business or undertaking concerned;
• whether or not tangible assets have been transferred and the value
of such assets;
• the value of intangible assets transferred (e.g. contracts, goodwill,

etc.);
• whether or not the majority of employees are taken over;
• whether or not customers are transferred;
• the degree of similarity between the pre and post transfer activities;
• the duration of any period during which those activities are

suspended.
Situations Where TUPE is Likely/Unlikely to Apply
The following guidance has been given in relation to the outsourcing of

works:
“Unlikely” to apply where:
• the new employer conducts the operation substantially differently;
• the identity of the previous under taking is substantially changed or

restructured.
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‘Likely’ to apply where:
• the new employer employs substantially the same staff;
• key employees are required to carry out the work;
• the new employer takes on substantially the same employees as

recognisably the same organisational unit;
• there is an understanding between the parties that the new

employer will continue to use the same employees for the same
work;
• in a change in the arrangements for property management and

maintenance contacts.
Restrictions on the Widening Scope of TUPE
The trend to widen the scope of application of TUPE in cases

interpreting its application has been reversed in the recent case of
Rygaard v Stro Molle Akustik A/S, C48/94 [1986] IRLR 51 ECJ where the
European Court of Justice held:
“In order to be a transfer of an undertaking, business or part of a

business within the meaning of Article 1(1) of EEC Directive 77/187,
the transfer must relate to a stable economic entity whose activity is not
limited to performing one specific works contract. That is not the case
where there is a transfer from one undertaking to another of building
works with a view to their completion, and the transfer or undertaking
merely makes available to the new contractor certain workers and
material for carrying out the works in question. Such a transfer could
come within the terms of the Directive only if it included the transfer of
a body of assets enabling activities of the transferor undertaking to be
carried on in a stable way.”
The Court in this instance did not consider that the transfer created
the necessary stability.
It is perhaps too early to say whether the Rygaard case represents a

permanent reversal of the widening trend.
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The Practical Effect of TUPE for Departments
The consequences of TUPE applying are not likely to directly affect

the Department requiring performance of the service, since TUPE
provides that responsibilities and obligations in respect of employees
are either owed by the “transferor” (the outgoing consultant or
contractor) or the ”transferee” (the incoming contractor).
TUPE is, however, likely to indirectly affect Departments in the

following areas:
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• consideration of what reference if any should be made to the
application or otherwise of TUPE when inviting tenders; it may be
appropriate merely to include a notice in the tender document
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warning potential bidders of the possible application of TUPE and
advising tenderers that they should seek their own legal advice;
• the Department as client should take steps to ensure that existing

contractors co-operate in the provision of information in relation to
their employees so that prospective bidders will not be discouraged
for lack of information concerning the extent of any TUPE liability;
consideration should also be given to ensuring that any new
contractor is obliged to co-operate and supply information towards
the end of its contract;
• as a result of Regulations which came into force on 1 March 1996,

consultation must take place with trade unions or elected
representatives of the affected employees.
Key Points
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• The matter of TUPE is a complex subject and each case must be
treated on its merits. It is essential that legal advice is obtained
before final action is taken in every case.
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RACIAL DISCRIMINATION
OTHER ISSUES
LEGAL ENVIRONMENT
LE 2.3 RACIAL DISCRIMINATION
There is no direct legislation imposing upon Departments a duty to

stipulate compliance by contractors and suppliers with the provisions of
the Race Relations Act 1976.
The standard conditions of Government forms of contract do, however,

contain conditions requiring that the contractor or supplier shall not
“unlawfully discriminate within the meaning and scope of the provisions
of the Race Relations Act 1976 or any statutory modification or re-
enactment of it”. See for example clause 23 of GC/Works 1/(1998).
Government contracts were amended to incorporate this provision as

a result of a written answer given in parliament by Mr Roy Jenkins on
22 October 1969 which reflected consideration of how Government
influence as a major purchaser of goods and services could best be
used in the interests of discouraging racial discrimination.
When inviting tenders specific departmental procedures should be

consulted for selection criteria to be requested concerning findings of
unlawful discrimination.
It is worthwhile noting that the Race Relations Act 1976 does not
apply to Northern Ireland.
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FAIR EMPLOYMENT (NORTHERN IRELAND) ACTS
OTHER ISSUES
LEGAL ENVIRONMENT
LE 2.4 FAIR EMPLOYMENT (NORTHERN IRELAND) ACTS
As a result of the provisions of the Fair Employment (Northern Ireland)

Acts of 1976 and 1989, Departments and public authorities are
prohibited from entering into contracts with companies or partnerships
operating in Northern Ireland who have been notified as ‘disqualified’
by virtue of default under the Act.
Where a contract has already been entered into, the Department shall
take all such steps as are reasonable upon notification to secure that no
work is executed or goods or services supplied for the purposes of the
contract.
An aggrieved party claiming that a contravention by a Department in

placing or continuing with such a contract has occurred will have
recourse to the courts, asking them to require the Department to
comply with the prohibition.
The scheme of the Fair Employment Acts is to ensure balance in

employment trends and to encourage equal opportunity by requiring
employers in Northern Ireland to monitor and review the composition
of their workforces. The 1989 Act created the Fair Employment
Commission for Northern Ireland and the Fair Employment Tribunal for
Nor thern Ireland to monitor compliance and administer sanctions for
non compliance.
The sanction available to the Commission whereby notice is served on

an employer stating that the employer is not qualified to enter into
public works contracts along with the unwelcome publicity that it
attracts, is a powerful way of endeavouring to ensure compliance.
The Act applies to any contract, whether or not:
• it is governed by the law of Northern Ireland; or
• the contract is to be procured by competitive tender or other

means.
The Act is drafted to allow the Commission to serve notices on

subsidiaries or connected people, thereby preventing an employer on
whom notice has been served from benefiting from public contracts
indirectly through those subsidiaries or connected people.
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FAIR EMPLOYMENT (NORTHERN IRELAND) ACTS
OTHER ISSUES
LEGAL ENVIRONMENT
The prohibition on entering into contracts with unqualified persons

does not apply in situations where the Secretary of State, the Scottish
Ministers, the Department, or the relevant Northern Ireland
depar tment has certified in writing that the fulfilment of the contract is
necessary or desirable for reasons of:
• national security;
• public interest;
• disproportionate expense.
In view of the above, it is therefore necessary for Departments when
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seeking to procure contracts from contractors or suppliers operating
from, or with a connection to, Northern Ireland to check for relevant
notifications from the Fair Employment Commission for Northern
Ireland.
Departments will generally be advised of unqualified employers by the

Fair Employment Commission. A list of unqualified employers will also
be published on the first days of February, May, August and November
in the Belfast Gazette, The Belfast Telegraph, the News Letter and the
Irish News.
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INTELLECTUAL PROPERTY, COPYRIGHT AND ROYALTIES ETC.
OTHER ISSUES
LEGAL ENVIRONMENT
LE 2.5 INTELLECTUAL PROPERTY, COPYRIGHT AND ROYALTIES ETC.
Definitions
Definitions of the various terms are:
i) Intellectual Property - is the term which should be taken to

include patents, registered and unregistered designs, copyrights,
trade marks and analogous rights such as plant breeders’ rights. The
owner of intellectual property possess a proprietary right in the
object, design or work which can be asserted against third parties.
ii) Letters Patent are granted by the Patent Office to the patentee
to prevent others from manufacturing, using, exercising or vending
the invention which is the subject of the patent. ‘Invention’ here
means broadly a new manner of manufacture and includes new
methods of processing or testing applicable to the improvement or
control of manufacture. The patentee is able at their discretion to
grant a licence to others to exploit the invention commercially on
terms acceptable to him, and the very act of granting a patent gives
publicity to the invention.
iii) A Registered Design differs from a patent in that its subject must
not be an invention but a ‘design’ defined as ‘features of shape,
configuration, pattern or ornament applied to an ar ticle by any
industrial process or means, being features which are judged solely
by the eye but excluding a method or principle of construction of
features of shape or configuration dictated solely by its function’.
Registration of a design gives the owners ‘the exclusive rights in the

UK to make or import for sale or use for the purpose of any trade
or business, or to sell, hire or offer for sale or hire’ any article of
which the design is registered. Registration is administered by the
Patent Office.
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iv) Copyright describes the protection granted to literary, artistic,

dramatic and musical works (including drawings and photographs
and in certain circumstances models and samples), sound
recordings, films and broadcasts. No application, registration or grant
is necessary to establish copyright whether the work is published or
not. The right conferred is to prevent copying as distinct from the
right conferred by the registration of an industrial design which is to
prevent the production of a similar article whether by copying or
not.
A Design Right subsists in an original design comprising any aspect

of the scope or configuration of the whole or part of an article,
whether or not it has ‘eye appeal’. It needs to be recorded as a
‘design document’ but is not subject to registration. It has similarity
with copyright but copyright will take precedence over design right
when both may subsist in a document.
v) Crown copyright is vested in the Controller of HMSO and

applies to published or unpublished material produced under the
control or direction of a Department or public authority.
vi) Royalties are paid to the owners of patents, designs or copyrights

by those wishing to make use of them. They may be charged a flat
rate, or on a sliding scale with reduction beyond a certain initial
quantity or a lump sum irrespective of the extent of use.
Protection of Copyright by Departments
All drawings/sketches or original design should be dated at the time of

drafting and copies retained.
In any event drawings or sketches, of which the copyright is owned by

the Crown by virtue of original design or of contractual right, should
have the following words printed or stamped on them before issue to a
contractor or outside body:
“(C) CROWN COPYRIGHT (date of production of drawing e.g.,

14.10.96) SUPPLIED STRICTLY IN CONFIDENCE TO RECIPIENT
ONLY FOR (Name of Department) WORKS CONTRACT
PURPOSES. THIS DRAWING SHOULD NOT BE REPRODUCED
OR DISCLOSED TO THIRD PARTIES WITHOUT WRITTEN
AUTHORITY FROM (Name of Depar tment)”.
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The endorsement of the drawings does not confer any protection in

itself. It draws attention to the fact that copyright subsists in the
drawings and that action could be taken against anyone who copies
them without permission. Copyright is inherent in the work and is not
registrable in the UK. Its protection is limited to actual copying and
would not apply in the case of independent production of the same
work.
Evidence of the date of production of the drawing or sketch or part of

same is impor tant on refuting any third par ty claims in respect of
identical designs.
Crown Use of Processes or Designs Owned by Contractors or

Individuals
The Patents Acts and the Registered Design Act give the Government
Depar tment or authorised contractors the right to use any patents or
registered designs for the services of the Crown and to negotiate
royalties before or after use. Exercise of this right is strictly for the
ser vices of the Crown and cannot be extended to bodies other than
the Exchequer depar tments listed by the Treasury.
The Crown is liable to an action for infringement of copyright and has

no statutor y rights to copy and use for Government purposes drawings
or documentar y material belonging to others, the law on copyright
being thus quite different from that on patents or registered designs. It
follows that any rights to make use of drawings or documents are
restricted to those acquired by a Department by contract or
agreement. Any unauthorised use of such drawings may give rise to
legal action against a Department.
Drawings or design, etc., owned by one firm should not normally be

copied and given or shown to another firm or company for tendering
or contract purposes. Contravention could result in action being taken
against a Department for infringement and misuse of confidential
information. Where it is considered essential, permission from the firm
or company owning the design should be obtained.
Information such as drawings, specifications, reports and manufacturing

data proprietary to a person or firm which is supplied to a Department
without a contract is regarded as being supplied in confidence. To use
such information for a purpose other than that for which it was
supplied is an infringement of the owner’s rights and any such use must
have the owner’s written consent. Such considerations also apply to
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similar information supplied by foreign or Commonwealth
Governments.
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Protection of Designs and Processes by Use of Standard

Contract Supplementary Conditions
Depar tments may wish to consider the use of standard supplementary

conditions in order to reinforce preservation of rights in inventions,
processes or designs.
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LE 2.5(SCOT) INTELLECTUAL PROPERTY, COPYRIGHT AND ROYALTIES ETC.
Definitions
Definitions of the various terms are:
i) Intellectual Property - is the generic term which should be

taken to include patents, registered and unregistered designs,
copyrights, trade marks and analogous rights such as plant breeders’
rights. The owner of intellectual property rights has exclusive rights
as to certain acts which that owner can do, or authorise others to
do, in relation to such objects, design or work. These rights can be
asserted against third parties. Given that intellectual property rights
are simply property rights, the owner can also do with them as he
or she chooses, including exploiting that ownership by either (a)
licensing another person to carry out certain activities in relation to
those objects, designs or works, or (b) assigning, ie transferring
ownership of all or part of the rights, eg the copyright.
ii) ‘Letters Patent’ are granted by the Patent Office to the patentee
to prevent others from manufacturing, using, exercising or vending
the invention which is the subject of the patent. ‘Invention’ here
means broadly a new manner of manufacture and includes new
methods of processing or testing applicable to the improvement or
control of manufacture. The patentee is able at their discretion to
grant a licence to others to exploit the invention commercially on
terms acceptable to him, and the very act of granting a patent gives
publicity to the invention.
iii) A Registered Design differs from a patent in that its subject must
not be an invention but a ‘design’ defined as ‘features of shape,
configuration, pattern or ornament applied to an article by any
industrial process or means, being features which are judged solely
by the eye but excluding a method or principle of construction of
features of shape or configuration dictated solely by its function’.
Registration of a design gives the owners ‘the exclusive rights in the

UK to make or import for sale or use for the purpose of any trade
or business, or to sell, hire or offer for sale or hire’ any article of
which the design is registered. Registration is administered by the
Patent Office.
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iv) ‘Copyright’ describes the protection granted to literary, artistic,

dramatic and musical works (including drawings and photographs,
computer programs and databases, and in certain circumstances
models and samples), sound recordings, films and broadcasts. No
application, registration or grant is necessary to establish copyright
whether the work is published or not. The right conferred is to
prevent copying as distinct from the right conferred by the
registration of an industrial design which is to prevent the
production of a similar ar ticle whether by copying or not.
A Design Right subsists in an original design comprising any aspect

of the scope or configuration of the whole or part of an ar ticle,
whether or not it has ‘eye appeal’. It needs to be recorded as a
‘design document’ but is not subject to registration. It has similarity
with copyright but copyright will take precedence over design right
when both may subsist in a document.
v) Crown copyright was traditionally vested in the Controller of

HMSO and applies to published or unpublished material produced
under the control or direction of a Department or public authority.
In Scotland, however, since 1 July 1999, the Queen's Printer for
Scotland has been established to act on behalf of Her Majesty in
connection with, amongst other things, Crown copyright in works
made by Scottish Administration staff or copyright assigned to the
Crown in works made in connection with the exercise of the
functions of such staff. Copyright in work created by staff of the
Scottish Administration (ie Scottish civil servants) will still therefore
vest in the Crown, only its controller having changed.
vi) Royalties are paid to the owners of patents, designs or copyrights

by those wishing to make use of them. They may be charged a flat
rate, or on a sliding scale with reduction beyond a certain initial
quantity or a lump sum irrespective of the extent of use.
Protection of Copyright by Departments
All drawings/sketches or original design should be dated at the time of

drafting and copies retained.
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In any event drawings or sketches, of which the copyright is owned by

the Crown by virtue of original design or of contractual right, should
have the following words printed or stamped on them before issue to a
contractor or outside body:
“(C) CROWN COPYRIGHT (date of production of drawing e.g.,

14.10.96) SUPPLIED STRICTLY IN CONFIDENCE TO RECIPIENT
ONLY FOR (Name of Department) WORKS CONTRACT
PURPOSES. THIS DRAWING SHOULD NOT BE REPRODUCED
OR DISCLOSED TO THIRD PARTIES WITHOUT WRITTEN
AUTHORITY FROM (Name of Department)”.
The endorsement of the drawings does not confer any protection in

itself. It draws attention to the fact that copyright subsists in the
drawings and that action could be taken against anyone who copies
them without permission. Copyright is inherent in the work by virtue of
statute and is not registrable in the UK. Its protection is limited to
certain stipulated restricted acts, including actual copying and would not
apply in the case of independent production of the same work.
Evidence of the date of production on the face of the drawing or

sketch or part of same is important on refuting any third party claims in
respect of identical designs.
Crown Use of Processes or Designs Owned by Contractors or

Individuals
The Patents Acts and the Registered Design Act give the Government
Department or authorised contractors the right to use any patents or
registered designs for the services of the Crown and to negotiate
royalties before or after use. Exercise of this right is strictly for the
services of the Crown and cannot be extended to bodies other than
the Exchequer departments listed by the Treasury.
The Crown is liable to an action for infringement of copyright and has

no statutory rights to copy and use for Government purposes drawings
or documentary material belonging to others, the law on copyright
being thus quite different from that on patents or registered designs. It
follows that any rights to make use of drawings or documents are
restricted to those acquired by a Department by contract or
agreement. Any unauthorised use of such drawings may give rise to
legal action against a Department.
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It is important therefore to ensure that intellectual proper ty rights are

dealt with properly in the contract conditions, generally in the
supplementary or ‘special’ conditions to the standard building
conditions. Note too that if commissioning work, eg a design from a
consultant, the creator of the work will still have copyright in it unless
the Department provides otherwise. This is often not appreciated.
Drawings or design, etc., owned by one firm should not normally be

copied and given or shown to another firm or company for tendering
or contract purposes. Contravention could result in action being taken
against a Department for infringement and misuse of confidential
information. Where it is considered essential, permission from the firm
or company owning the design should be obtained.
Information such as drawings, specifications, reports and manufacturing

data proprietary to a person or firm which is supplied to a Department
without a contract is regarded as being supplied in confidence. To use
such information for a purpose other than that for which it was
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supplied is an infringement of the owner’s rights and any such use must
have the owner’s written consent. Such considerations also apply to
similar information supplied by foreign or Commonwealth
Governments.
Protection of Designs and Processes by Use of Standard

Contract Supplementary Conditions
The standard contract conditions do not deal sufficiently with

protection of intellectual property rights as they are obviously drafted
for broad-based use and cannot therefore cover every contractual
situation. Departments may therefore wish to consider the use of
standard supplementary conditions in order to reinforce preservation
of rights in inventions, processes or designs. Legal advice should be
sought for assistance in drawing up suitable supplementary conditions.
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PROPRIETARY COMPONENTS/ARTICLES
OTHER ISSUES
LEGAL ENVIRONMENT
LE 2.6 PROPRIETARY COMPONENTS/ARTICLES
It is contrary to the requirements of the Procurement Regulations and

to good procurement practice to limit by specification the supply of
goods to those of a particular named manufacturer or supplier where
this can be avoided, as this denies alternative suppliers the oppor tunity
to tender and restricts competition.
Wherever possible specifications should be performance based rather

than relying on prescription in terms of chemical/material composition
and build. As a consequence, each selected supplier will be able to offer
a trade pattern range of product which meets the particular
performance parameters.
Where it is impracticable to provide descriptions which are sufficiently

precise and intelligible by reference to objective standards, the use of
proprietary names is permitted to make the description precise and
intelligible. However the EC Directives state that the description
containing the proprietary name should be qualified by adding the
words ‘or equivalent’ (no variation from this wording is permissible).
Depar tments using outside agents to prepare works specifications may

need to impose suitable constraints on the specification of proprietary
articles, which is common practice in the private sector. Such agents
should be advised to use the words ‘or equivalent’ even when the use
of proprietary ar ticles is agreed or in case other suppliers subsequently
become available or in case other suppliers have to be used in the
event of the specified proprietary product(s) ceasing to be available.
Where the purchase of proprietary components/articles is unavoidable

Depar tments will need to check that the price tendered is fair and
reasonable and not less favourable to the Department than trade
prices for similar products.
In cases where difficulty is likely in establishing the reasonableness of

the prices e.g., the trade list price is not known, or the trade price of a
comparable product cannot be established, or where adequate
guidance is not provided by the experience of previous purchases,
Depar tments should consider including as a supplement to the price
schedule for signature by the tenderer a declaration to the effect that
the prices quoted to the Department are equal to or more favourable
than prices which are available to the trade.
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FIRM PRICE AND VARIATION OF PRICE
OTHER ISSUES
LEGAL ENVIRONMENT
LE 2.7 FIRM PRICE AND VARIATION OF PRICE
Firm price and variation of price (VOP) are terms which describe the
allocation of the risk of construction cost inflation to one or other of
the parties to works or maintenance contracts as follows:
• Firm price - means a contract where the contractor has to price for
the risk of construction cost inflation in advance of the cost being
incurred; effectively this is a contractor’s risk item for which the
Department pays a premium;
• VOP - means a contract where the contractor does not have to

price for future inflation and the Department pays the actual
additional costs if they materialise.
The standard forms of contract are drafted on the premise that the
contractor will tender a firm price, and supplementary conditions must
be incorporated if a VOP agreement is required. VOP agreements do
not generally apply to the appointment of consultants.
The decision as to whether or not to transfer inflation risk is a matter

for early risk management and the formulation of the contract strategy.
ç PS 2.3
The decision will depend on:

ç PS 2.4
• current economic conditions;
• duration of contract;
• projected economic conditions;
• value of contract.
One of the advantages of a firm price contract is that the inflation risk
is secured under the pressure of competition. In addition it is more
expensive to administer a VOP contract.
As a general guide, it is recommended that Departments enter into

firm price contracts for contracts of 2 years or less where the work is
considered to be sufficiently defined to enable tenderers reasonably to
assess cost increases during the contract.
In stable economic conditions in which price rises are reasonably

predictable it is appropriate to consider firm price contracts for 3 years,
this being the period recommended for term commissions referred to
ç PS 2.4
in the Guide.
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Note that the GC/Works (1999) measured term contracts are based
on a schedule of rates to which a VOP updating percentage is applied.
There is no period during which the price is firm.
An imprecise aspect of firm price tendering from the contractor’s

viewpoint is the period of time between submission of the offer and
the point when the contractor commences work on site. During the
part of that period prior to acceptance of the offer, the contractor may
withdraw or propose amendments to the offer and can, therefore,
control, to a certain extent, the extent to which the risk continues.
However, after acceptance the contractor is bound by its offer. To assist
tendering contractors to assess the period of time between acceptance
and commencement of work, invitations to tender for firm price
contracts which do not otherwise specify the date when
commencement of work is expected should contain a footnote in the
following form: “tenderers should note that it is expected that a period
of ... weeks will elapse between the date of acceptance and the date
when possession of the site or the order to commence will be given”.
Immediately prior to acceptance the date for the possession of site or

the order to commence should be checked and confirmed. If
confirmation is not available, acceptance should be delayed until the
period can be honoured.
It is unwise for a single work service to be divided to enable each part

to be dealt with as a firm price contract as the overall cost of the
service could well be increased by such action. The possibility of
grouping jobs to obtain better prices should, however, always be borne
in mind.
VOP Conditions
The scope of VOP is not a fixed quantity, but depends on the particular
words of the VOP condition used. There are various standard methods
and formulae available. For JCT forms, for example, three basic methods
exist:
• a minimum provision which covers contribution, levy and tax

fluctuations;
• a labour, materials and tax fluctuation provision covering fluctuating

costs on work terms in full, but ignoring preliminaries;
• a full fluctuation provision based on a monthly index figure but

allowing for part of the contract sum to be “non-adjustable” (usually
10%).
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VOP provisions, and mechanisms, are complex and are best

administered by professional staff or consultants, but a general
understanding of how they work is useful for all staff involved in
significant contract decisions. The general approach to the valuation of
VOP is on a formula basis using indices.
The object of Formula VOP is to compensate the contractor reasonably

for cost increases (and the Department for cost decreases) and to
reduce delays in payment associated with “actual cost” VOP and the
labour in producing and checking an “actual cost” VOP claim. Formula
reimbursement results from changes in the indices as from the base
index defined in the contract documents, irrespective of the actual cost
(or savings) incurred by the contractor or sub-contractor.
Price fluctuations under Formula VOP are assessed by use of the indices
as follows:
• The formula for building work uses indices covering labour, materials
and plant for similar or associated items of work;
• The formula for specialist M&E Engineering work uses separate

indices for labour and materials, the respective weightings of which
must be prescribed by the tender documents;
• The formula for civil engineering works uses indices relating to the
cost of labour, plant and nine basic materials including fuel, plant and
structural steel.
The concept of the “Base Month” is important to the condition. The

“Base Month” is the calendar month stated in the tender documents,
the index numbers of which are deemed to equate to the price levels
represented by the rates and prices contained in the tender. Under
normal circumstances the “Base Month” will be the calendar month
prior to that in which the tender is due to be returned. For example, a
tender returnable in July will quote June as the “Base Month”.
Exceptionally, it may be necessary to call for a quotation during the

currency of the contract for work which cannot be priced from the
tender because it is of different character from work described therein.
If the contract still has a long period to run and the work will take
some time to complete, it may be unreasonable to insist on a firm price
quotation. In this case it may be convenient to set a new “Base Month”
for the variation concerned so that any work performed under it can
be subject to separate price adjustment calculated from the “agreed”
“Base Month”.
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References
There are a number of publications which are available for

Depar tments or their advisers in securing and valuing VOP contracts:
• Schedules of Rates
There are a number of schedules of rates intended for use by

Depar tments in inviting tenders for small works and maintenance
contracts. These can be obtained from HMSO (0171 873 9090) and
are as follows:
– PSA Schedule of Rates for Building Works, 7th Edition (1995)
– ...Mechanical Works (1990)
– ...Electrical Works (1990)
– ...Painting and Decorating (1991)
– ...Landscape Management (1991)
These are extensive schedules of rates used either to estimate the

cost of work or to invite tenders from contractors who essentially
tender a percentage uplift or discount on these rates.
• VOP Indices for Maintenance Contracts
The VOP indices for adjustment of the above schedules are

published in a monthly bulletin called ‘Adjustment for Measured
Term Contracts - UPDATING PERCENTAGES’. This is available for
an annual subscription of £50 or for £5 per copy from:
Construction Research Communications Ltd

151 Rosebury Avenue
London
EC1R 4QX
Tel: 0171 505 6622
This publication includes:
– maintenance cost indices for building and civil engineering and

MQE maintenance;
– daywork indices;
– other indices.
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• VOP Indices for Works Contracts
The VOP indices for the adjustment of Government Works

contracts (historically known as NEDO indices) are published in a
monthly bulletin called “Price Adjustment Formula for Construction
Contracts : Monthly Bulletin of Indices”. This is available for an
annual subscription of £96 or for £9.75 per copy, and can be
obtained from HMSO. This includes both the Series II and Series III
indices, the latter having a base year of 1990 with extended work
categories.
An extensive Guide on the application of these indices is available for

£40 from HMSO. This is called ‘Price Adjustment Formula for
Construction Contracts : Users Guide, 1990 Series of Indices’.
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LIQUIDATED AND ASCERTAINED DAMAGES
OTHER ISSUES
LEGAL ENVIRONMENT
LE 2.8 LIQUIDATED AND ASCERTAINED DAMAGES
Damages are said to be ‘liquidated’ when the amount to which one

par ty is entitled in the event of breach of contract by the other is
predetermined and defined in the contract itself.
Liquidated damages are usually, but need not be limited to, damages
agreed in respect of culpable delay on the part of the contractor.
Liquidated damages must be a genuine pre-estimate of the extra costs
➧ LE 1.7
likely to be incurred by the Department, generally in the event of delay,

e.g. rent and extra running costs that might be incurred whilst
occupation of the works is prevented. Provided the damages are a
genuine pre-estimate then they will be valid even though the actual loss
in the event may be greater or less.
If damages cannot be shown to be a genuine pre-estimate then a

contractor may be successful in arguing that the damages are a penalty
and therefore unenforceable.
This does not however prevent the Department from claiming

unliquidated damages, i.e. the actual loss it incurs as a result of delay.
This may involve legal action and its attendant costs, and may negate
the whole point of liquidating the damages in the first place.
Historically Government policy was to include a provision for the

recovery of liquidated damages for larger works contracts of £150,000
or more. Some cases, however, may arise where it is considered
desirable to provide for liquidated damages in a contract which is
smaller in value but of sufficient importance to warrant safeguards
against delay in completion e.g., where the completion affects the
progress of a larger or more important contract.
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Key Points
• Liquidated and ascer tained damages are a contractual remedy

usually for culpable delay by the contractor.
• The level of damages must be a genuine pre-estimate of the loss.
• Keep records of the calculation of the pre-estimate of loss.
• The Department is not legally entitled to deduct liquidated damages

if the extension of time provisions have not been properly
exercised; in par ticular if the Department has failed to ensure that
further time has been granted to the contractor for causes which
are the responsibility of the Department.
• The Department may choose not to deduct liquidated damages

immediately the contractor begins the period of culpable delay. In
this situation the Department should always reserve its right to do
so in the future, since such damages may be used as a bargaining
chip to counter a claim from the contractor. Seek advice on this
▲
!
point.
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LEGAL ENVIRONMENT
LE 2.8(SCOT) LIQUIDATED AND ASCERTAINED DAMAGES
Damages are said to be ‘liquidated’ when the amount to which one

party is entitled in the event of breach of contract by the other is
predetermined and defined in the contract itself.
Liquidated damages are usually, but need not be limited to, damages
agreed in respect of culpable delay on the part of the contractor.
Liquidated damages must be a genuine pre-estimate of the extra costs
ç LE 1.7
likely to be incurred by the Department, generally in the event of delay,

e.g. rent and extra running costs that might be incurred whilst
occupation of the works is prevented. Provided the damages are a
genuine pre-estimate then they will be valid even though the actual loss
in the event may be greater or less. Until recently, the courts in
Scotland accepted a percentage of the contract price if it was realistic,
but the feeling now is that actual figures should be calculated on the
basis of a realistic assessment of the damage expected to be incurred.
As the sum(s) fixed should be a genuine pre-estimate of loss, there is a
legal presumption that a clause will be unenforceable if a single lump
sum is payable on the occurrence of several events, some serious and
others less so. In those circumstances, damages should be brought
down, ie different obligations should have different damage clauses.
If damages cannot be shown to be a genuine pre-estimate then a

contractor may be successful in arguing that the damages are a penalty
(ie a sum intended to punish the other party) and therefore
unenforceable by the courts.
This does not however prevent the Department from claiming

unliquidated damages, i.e. the actual loss it incurs as a result of delay.
This may involve legal action and its attendant costs, and may negate
the whole point of liquidating the damages in the first place.
On some contracts it may be impossible to estimate the LADs. Note,

however, that merely inserting the word “nil” in the contract has the
effect of preventing any claim for damages, both liquidated damages
under the contract and general damages at common law. If, therefore,
liquidated damages are not to be appropriate, the Department should
delete that clause or write “not applicable” against it, inserting an
alternative clause stating that “the employer reserves the right to claim
general damages for delay”.
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Historically Government policy was to include a provision for the

recovery of liquidated damages for larger works contracts of £150,000
or more. Some cases, however, may arise where it is considered
desirable to provide for liquidated damages in a contract which is
smaller in value but of sufficient importance to warrant safeguards
against delay in completion e.g., where the completion affects the
progress of a larger or more important contract.
Key Points
• Liquidated and ascertained damages are a contractual remedy

usually for culpable delay by the contractor.
• The level of damages must be a genuine pre-estimate of the loss.
• Keep records of the calculation of the pre-estimate of loss.
• The Department is not legally entitled to deduct liquidated damages

if the extension of time provisions have not been properly
exercised; in particular if the Department has failed to ensure that
further time has been granted to the contractor for causes which
are the responsibility of the Department.
• The Department may choose not to deduct liquidated damages

immediately the contractor begins the period of culpable delay. In
this situation the Department should always reserve its right to do
so in the future, since such damages may be used as a bargaining
chip to counter a claim from the contractor. Seek advice on this
s
!
point.
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HOUSING GRANTS, CONSTRUCTION AND REGENERATION ACT 1996
OTHER ISSUES
LEGAL ENVIRONMENT
LE 2.9 THE HOUSING GRANTS, CONSTRUCTION AND

REGENERATION ACT 1996
Part II of the Act lays down a framework for key terms in construction
contracts to deal with payment and resolution of disputes and stems
from the recommendations of Sir Michael Latham in his 1994 report
‘Constructing the Team’. In the case of the GC/Works suite of
contracts, the requirements of the Act have been met by the
publication of new documents or amendments circulated by PACE. The
guidance note to the GC/Works volumes (published as
‘Commentaries’) contains a full discussion on the practical implications
➧ CRS 1.15
of the adjudication and payment procedures affected by the Act.
Summary of the Act’s Provisions
The essential provisions of Part II of the Act are:
• A ‘construction contract’ is defined as an agreement in writing, or

evidenced in writing, for carrying out or arranging for the carrying
out of construction operations. It includes, specifically, agreements
for architectural, design, surveying, engineering or other professional
services in relation to such operations. The Act applies to England,
Wales and Scotland (separate action will be needed for Northern
Ireland). The Act does not set a minimum project value.
• ‘Construction operations’ are defined to cover most forms of non-

domestic construction, alteration, repair, maintenance, extension,
demolition or dismantling of buildings, civil/mechanical and electrical
engineering works, and ancillary or preparatory works. Specific
exclusions include oil drilling work, power generation, plant supply
contracts (without installation) and ar tistic works.
• Parties have a right to refer any dispute to adjudication. The

timetable must enable referral within 7 days and a decision within a
further 28 (which can be extended by agreement). Adjudicators
must be impartial and be able to take the initiative in ascertaining
facts and the law. The adjudicator will be immune from legal
proceedings (other than in cases of fraud or bad faith) and his
decision will bind the parties until any further arbitral or legal
proceedings are concluded. The parties may however accept the
adjudication as final if they wish.
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• Payment clauses must contain a clear mechanism for determining

the amount and timing of payments, with interim payments a matter
of right for contracts over 45 days duration, and a clear ‘final date
for payment’ specified for each payment. The payer must give
notice, not later than a prescribed period before the final date for
payment, of his intention to withhold payment, specifying the
amount to be withheld and the grounds for withholding. The parties
may agree the period to be prescribed in the contract. The payer
must also give notice, not more than 5 days after a sum is due,
specifying how much he has paid or intends to pay and the basis of
the calculation. Parties may suspend performance of the contract if
sums due are not paid without any prior notice of intention to
withhold payment having been duly given. Pay-when-paid clauses, by
which payment may be withheld down the contractual chain until
receipt of payment from a third party, are made ineffective unless
the third par ty is insolvent.
• Any contract that fails to meet the requirements of the Act will be
overridden by the Statutory Scheme For Construction
Contracts, which will automatically imply appropriate
provisions into the contract that either party will be
entitled to rely on.
Practical Implications of the Act
Relationship to arbitration etc
• Although adjudication is not a new concept the Act will represent a

new approach for most forms of contract. An important point is
that the adjudication procedure is laid down in the contract. This
contrasts with arbitration which is a separate process with the
procedure largely laid down in statute. The Latham Report
envisaged adjudication as a quick-fix, allowing the works to proceed
without festering disputes. If the adjudicator concludes that either
par ty needs to provide additional money or resources as par t of the
settlement then this should be done, albeit without necessarily
committing either side to accept the decision in the longer term.
But subsequent events will have to unfold within the context set by
the adjudication, and the contract may, as in the GC forms,
expressly bar arbitration, whether directly or following an
adjudication until after certified completion of the works. If new
evidence or circumstances arose after an adjudication suggesting
that the decision was mistaken eg as regards a dispute about quality,
then if the parties could not agree a different settlement it would
require a new adjudication.
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Scope of Adjudication
• This must cover any difference of opinion about any decision taken
by either party, or by a representative such as the architect, project
manager or engineer. No substantial contractual restraint can now
be placed on the referral of any dispute to an independent and
impar tial adjudicator. However contracts may specify only money
remedies for those areas of dispute which cannot realistically be re-
opened by an adjudicator, such as determination or security
decisions.
Adjudication mechanics
• The very tight statutory timescales make it likely that in most cases
adjudicators will need to be appointed before a contract is awarded.
Fall-back provisions will be needed to settle how a fresh adjudicator
might be appointed should this be unavoidable. To allow
adjudicators to take independent expert advice the terms of
appointment will need to deal expressly with the point, and what
steps are expected of the adjudicator if any dispute is so large,
complex or unusual that he feels unable to deal with it in the limited
time envisaged. The adjudicator must however actually resolve the
dispute, and not seek to shelve-it by placing a disputed sum with a
stakeholder or propose a nominal split-the-difference solution, since
these steps would not amount to a genuine decision.
Adjudication cost
• The most appropriate arrangement is likely to be a 50/50 split on

fees and for each side to bear their own costs. The adjudicator could
be empowered to rule on cost and fee liability as between the
par ties within his decisions on particular disputes (a possible
deterrent to tactical and mischievous calls for adjudication). A
standing fee or retainer for the pre-appointed adjudicator is likely to
be warranted only in exceptional cases.
Adjudicator commonality
• To enable consolidation of related disputes across the whole project

it may be appropriate for the main contract to specify that the
subcontract terms should name the main contractor adjudicator as
also acting in subcontract disputes.
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Payment periods
• Parties will be free to agree the amounts of interim payments and

the intervals, if any, that may become due. However the contract
terms will need to be precise as to periods both for certification of
advances on account and payment following certification.
Set-off from sums due
The Act imposes a broad framework covering all withholding of

payment. Set-off will only be effective after notice has been given of the
amount and reasons for withholding money. The contract can state
what the period of notice should be. The Act will not alter the general
law on rights to set-off payments on one contract against monies due
on another ; this is expressly allowed under the GC forms of contract.
Key Points
• The Act is not retrospective and will therefore not apply before the
Statutory Scheme for Construction Contracts comes into effect.
• All construction contracts as defined by the Act are covered by its

provisions.
• The Act cannot be ‘contracted-out’; forms of contract which are not

amended to take account of the Act will be subject to the
requirements of the Scheme for Construction Contracts.
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SCHEME FOR CONSTRUCTION CONTRACTS (SCOTLAND)
OTHER ISSUES
LEGAL ENVIRONMENT
LE 2.9(SCOT) THE SCHEME FOR CONSTRUCTION CONTRACTS

(SCOTLAND) REGULATIONS 1998
In Scotland, the characteristics and features of the systems of dispute

resolution are different from those in England and Wales. The Scottish
tradition has been to rely more on contractual or conventional
arrangements than on arrangements regulated by statute. The Act
therefore contains provisions enabling a separate Scheme for
Construction Contracts to take account of Scottish law, practice and
procedure and apply to construction contracts in Scotland. Accordingly,
the Scheme for Construction Contracts (Scotland) Regulations 1998
were introduced.
The purpose of the statutory Scheme is to remedy deficiencies in

construction contracts relating to adjudication (section 108(5) of the
Act) and payment (sections 109(3), 110(3), 111(3) and 113(6)). Where
any of the Scheme's provisions apply they shall have effect as implied
terms of contract between the parties, thus operating as contractual
provisions constituting obligations under the contract:
• for adjudication, unless a construction contract contains adjudication

provisions which satisfy all the requirements of section 108(1)-(4),
then Part 1 of the Scheme shall apply in its entirety
• for payment the situation is different. Where a construction contract

does not meet the individual requirements of the payment
provisions in the Act then only the relevant provisions of Part 2 of
the Scheme shall apply.
The Scheme's provisions are free-standing and were drafted to operate

across a broad range of types of construction contracts. It is felt by
many, including some of the Institutes, that it may therefore not meet
the detailed requirements of the parties to any particular contract.
For example, for adjudication, the Scheme makes adjudication of any
dispute available to any party to the contract at any time. The Act,
on the other hand, allows parties a considerable degree of discretion
and flexibility in their contractual arrangements.
Consequently, where parties to a contract do not wish that the

Scheme be imposed on that contract, they must ensure that in drafting
the contract they meet the requirements of the Act. Alternatively, some
Institutes, such as ICE, have developed their own alternative scheme
intended to meet the requirements of the Act but avoid some of the
difficulties which they perceive as inherent in the Government Scheme.
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SCHEME FOR CONSTRUCTION CONTRACTS (SCOTLAND)
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Key Point
• If the conditions of any particular construction contract do not

comply with the requirements of the Act, then the provisions of the
Scheme will apply to that contract.
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THE ARBITRATION ACT 1996
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LE 2.10 THE ARBITRATION ACT 1996
The 1996 Arbitration Act is a technical and procedural measure which

reflects the recommendations of the Department of Trade and
Industry’s Departmental Advisory Committee on Arbitration Law which
concluded that the 1950, 1975 and 1979 Arbitration Acts required
consolidation and reform so as to:
• incorporate principles established by common law
• give greater par ty autonomy
• make clearer the suppor tive role of the courts
• use a more friendly format and language.
The provisions of the new Act are quite separate from the mandatory
adjudication procedures introduced into construction contracts by Part
II of the Housing Grants, Construction and Regeneration Act 1996. The
relationship between adjudication and arbitration for the settlement of
➧ LE 2.9
disputes must be fixed by individual contracts.
Relevance to Construction Contracts Disputes
Building contract disputes, especially on major projects, tend to involve

many different parties and therefore sometimes require consolidation
and coordination in a way that is normal within the litigation process.
Under the previous law the courts were able to apply discretion when
considering applications for a stay of legal proceedings even though a
valid arbitration agreement was in existence. Under the new Act the
court will no longer have this discretion and must uphold the
arbitration agreement unless it is ‘null and void, inoperative or incapable
of being performed’.
The 1998 editions of the GC/Works contracts have enhanced

arbitration clauses which take account of the requirements of the Act.
These ensure that multi-party disputes can, where necessary, be
properly coordinated across a range of different contracts applying to a
project, without relying on the courts.
Key Points
• The new Act is not retrospective and only applies to arbitrations

which commenced on or after 31 January 1997 even if the basic
contract and arbitration agreement was entered into before that
date.
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ARBITRATION
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LE 2.10(SCOT) ARBITRATION
Unlike England, the rules governing arbitration in Scotland are based

almost wholly on the common law (ie case law). The Arbitration
(Scotland) Act 1894 did, however, give courts power to appoint arbiters
should the parties in certain circumstances fail to agree an arbiter. More
recently statute has provided that arbiters may, on the application of
one of the parties, and must if directed by the Court of Session, state a
case for the opinion of the Cour t of Session on any question of law (ie
not fact) which arises in the arbitration.
Note that the Arbitration Act 1996 only applies to Scotland in so far as
consumer arbitration agreements are concerned.
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CONSTRUCTION INDUSTRY TAX SCHEME
OTHER ISSUES
LEGAL ENVIRONMENT
LE 2.11 CONSTRUCTION INDUSTRY TAX SCHEME
The Scheme
The Construction Industry Tax Scheme was introduced in 1971 to

counter tax evasion by ‘the lump’. The Scheme was revised in 1999 and
from 1 August 1999 Government Departments are deemed to be
‘Contractors’. Inland Revenue requires ‘contractors’ to make a
deduction on account of tax from all the labour elements of payments
to construction sub-contractors unless an exemption certificate is
produced. The ‘contractor’ is also required to make a monthly return to
the Inland Revenue of payments to sub-contractors under each
contract. These returns also record the certificate number. At the end of
each tax year there is a requirement to make a consolidated annual
return to the Inland Revenue covering each sub-contractor individually.
Payments cannot be made gross to an unregistered sub-contractor in
respect of construction work. In these cases not only tax but National
Insurance deductions must also be made. These deductions must be
remitted to Inland Revenue.
The requirement on Government Departments
From 1 August 1999 Government Departments and Agencies are

treated as ‘contractors’ under the Scheme. This embraces any role in
the direct commissioning of construction works and also where an
agent acts on behalf of a Department. The authority is required to
make a deduction in respect of tax unless the contractor has an
exemption certificate. Also, there is a requirement to make monthly
and annual returns to the Inland Revenue of all payments to sub-
contractors using the Inland Revenue prescribed forms.
Contractors' registration
A primary requirement before placing any contract is to find out

whether contractors hold a current registration card (CIS4) or a tax
certificate (CIS5 or CIS6). The Department must ask to see the sub-
contractor's certificate or registration documents and then record its
number and expiry date on the relevant contract file. If there is any
doubt about the validity of the documentation presented the sub-
contractor initially should be regarded as being a non-certificate holder
and the case papers referred to Inland Revenue for evaluation/
adjudication.
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Any sub-contractor holding a Registration Card is only entitled to

payment net (that is, with the Department deducting an element for
tax and national insurance contributions). The Department is
responsible for passing these deductions direct to Inland Revenue at
the same time giving the sub-contractors a copy of the Tax Payment
Voucher (CIS25) each month for their records. Sub-contractors who
are holders of Tax Certificates (CIS5 and CIS6) are entitled to receive
their payments gross. In these cases a Gross Payment Voucher (CIS24)
must be completed for each payment made. These are then passed to
the sub-contractor to add their taxpayer's reference number. The sub-
contractor then returns one part to the Department whilst the other
copy is sent direct to Inland Revenue. It is essential that originals of
vouchers are retained on the contract file as an annual return has to be
made to the Inland Revenue.
Scope of the Scheme
Identifying precisely what work is covered by the Scheme is complex.

Inland Revenue leaflet IR14/15 (1998) gives detailed guidance. For ease
of reference, the following guidelines have been agreed with the Inland
Revenue:
• if only part of the contract work falls within the Scheme, the whole
value of the contract should be counted for tax purposes;
• small contracts for construction operations, amounting to less than

£1,000 (excluding the cost of materials), may be excluded from the
Scheme so long as they are not a product of disaggregation and
have been duly authorised as ‘excluded’ by Inland Revenue.
The excluded categories of work are:
• routine servicing and maintenance of heating, lighting, air

conditioning, lifts equipment or other related plant;
• routine external cleaning of buildings (other than painting and

decorating). This will include annual contracts to clean drains, gutters,
changing luminaries and grounds maintenance.
Included categories of work are:
• installation of M&E equipment, including lifts, pumps, boilers,

ventilation fans, electrical switchgear;
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OTHER ISSUES
LEGAL ENVIRONMENT
• all new building or alterations. This will include demolition of

partitions/walls, alterations to counters, installation or re-hanging of
doors, upgrading accommodation standards to meet fire precaution
requirements, installation of general plumbing and general electrical
works, major roofing works;
• all painting and decorating, including both initial decoration and

re-decoration and wallpapering.
When a job includes both excluded and included categories of work it

is regarded as a mixed contract and all work within it should be
included under the Scheme. If there is doubt about a particular
construction activity, it initially should be included in the tax return. The
sub-contractor can subsequently gain a rebate from the Inland Revenue
if they agree the item is exempt.
The Inland Revenue deadlines for the completion and return of forms
are very strict. All completed forms should be sent promptly at monthly
intervals to the Accounts Branch who will collate the Department's
annual return.
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EPP 1.0 THE SCOPE OF APPLICATION OF THE EC
PROCUREMENT RULES
EPP 1.1 GENERAL
EPP 1.2 THE DIRECTIVES
EPP 1.3 DECIDING WHICH DIRECTIVE APPLIES
EPP 1.4 EXCLUSIONS
EPP 1.5 THRESHOLDS
EPP 1.6 ESTIMATING THE VALUE OF COMMISSIONS AND AGGREGATION
EPP 1.7 PUBLICITY AND THE TYPES OF NOTICE REQUIRED
EPP 1.8 PROCEDURE FOR ADVERTISING AND AWARDING CONTRACTS
EPP 1.9 ACCELERATED TIMESCALES
EPP 1.10 MODEL NOTICES AND THEIR CONTENT
EPP 1.11 NUMBER OF TENDERERS
EPP 1.12 TENDERER SELECTION

EPP 1.13 AWARD CRITERIA
EPP 1.14 CONTRACT NOTICE, DECLINE AND DEBRIEFING
EPP 1.15 EC/GATT REPORTING REQUIREMENTS
ANNEX
EPP 1.1 CATEGORIES OF SERVICES
EPP 1.2 NOTICES REQUIRED UNDER EC PUBLIC PROCUREMENT RULES
EPP 1.3 PROCEDURES AND TIMESCALES FOR ADVERTISING AND AWARDING
CONTRACTS
EPP 1.4 WORKS CONTRACTS - MODEL CONTRACT NOTICES
EPP 1.5 SERVICES CONTRACTS - MODEL NOTICES
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GENERAL
THE EC PROCUREMENT RULES
EC PROCUREMENT PROCEDURES
EPP 1.0 THE SCOPE AND APPLICATION OF THE

EC PROCUREMENT RULES
EPP 1.1 GENERAL
The term ‘EC procurement rules’ used in the Guide is a reference to

the EC public procurement directives and in particular to the relevant
UK regulations introduced by way of statutory instruments. This
chapter gives guidance on the scope and application of the rules.
There are a number of important general points of guidance which

should be kept in mind in cases where the EC procurement rules apply.
These are:
• the principles of the EEC Treaty (The Treaty of Rome) apply to all
public procurement;
• the four cornerstones of the EEC Treaty are the free movement of
goods, persons, services and capital, and Article 7 of the Treaty
prohibits discrimination on the grounds of nationality; the
establishment of the common market therefore involves the
elimination of all obstacles to intra-community trade;
• one of the principal objectives behind the EC public procurement

rules is therefore to prevent the use of pre-determined shortlists of
tenderers, which in effect represent restrictive or anti-competitive
practice;
• the EC procurement rules generally apply only to single contracts

above a specified threshold value, however in a number of cases the
values of more than one contract must be added together for
deciding whether the threshold is met;
• the application of the rules requires special consideration at various

stages of the procurement cycle and may place an additional
administrative burden on the procuring Depar tment;
• there is a requirement to publish notices in the Official Journal of

the European Union (“OJ”);
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GENERAL
• there are specific minimum time limits which must be observed and
which can prolong the procurement process;
• there is a high chance of receiving applications from a large number

of companies; it is therefore essential that the Department has in
place a system which provides a fair and unbiased means of
reducing the list to a reasonable number of tenderers, generally on
the basis of a paper sift;
• there are three procedures which may be adopted, the open

procedure, restricted procedure and the negotiated procedure:
- under the open procedure anyone may tender,
- under the restricted procedure anyone may apply to be

considered for invitation to tender,
- under the negotiated procedure direct discussions take place

between the contracting authority and one or more contractors/
suppliers/ service providers of its choice.
• in order to provide for competition, and for the fair selection of a

short list, it will be appropriate to follow the restricted procedure in
almost every case;
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• it should be borne in mind that the Department may receive
expressions of interest from firms of which they have had no prior
experience; conversely the Department may have to exclude firms,
which they may wish to include on a short list, because the firms
have failed to respond to the OJ notice either in the prescribed
fashion, or at all;
• in accordance with the UK Regulations, each Department must

send to Treasury not later than 31 July each year for supplies and
every alternate year for works and services, a repor t which sets out
information about all contracts which have been let since the last
report; all such reports are then collated into a statistical report
(which must be provided to the European Commission by each
member state);
• finally the Depar tment is under an obligation to comply with the

Directives and UK Regulations; failure to do so may give rise to
court action resulting in an order for the Depar tment to pay
damages to a wronged party.
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GENERAL
Principles Behind the Regulations
• Completeness of coverage - which means that all purchases by

public sector bodies, above the thresholds established in the
legislation, will be subject to public purchasing procedures under
one of the key Directives.
• Access to information - means that free and equal access to a

pre-defined minimum amount of information should be available to
all contractors from the EU. This includes information on planned
procurements, specific contracts and tender procedures and the
results of those procedures.
• Equality of treatment - this means that all tenderers, regardless

of origin within the EU should have their offers considered on a fair
and equitable basis and that criteria should not be used to evaluate
offers that have the effect of unfairly excluding foreign suppliers.
• Rights of redress - means that tenderers who believe they have

been discriminated against should have access to remedies that can
be readily applied that compensate them for their losses, whilst
deterring future infractions of the rules. This includes actions in the
High Court for suspension of contract award and changes. This in
turn requires purchasers to record and document their decisions
and to produce statistics that can be used to identify possible bias in
contract awards.
Available Rights of Redress
The principal means of enforcement for a breach of the Regulations

and other enforceable EC law such as the Treaty are:
• action by suppliers or contractors against individual purchasers in

the High Court; and
• action by the Commission against the Member State in the

European Court of Justice.
Either way the result might be:
• the suspension of an incomplete contract award procedure; or
• the setting aside of a decision in an incomplete contract award

procedure.
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GENERAL
The Cour t of Justice has demonstrated that, in appropriate

circumstances, it is prepared to overturn a contract.
The High Court also has powers to award damages. In cases where a
contract has been entered into, an award of damages is the only
remedy which the High Court can provide. The Regulations set out the
procedures to be followed.
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THE DIRECTIVES
EPP 1.2 THE DIRECTIVES
The EC rules on public procurement arise from European Community

Directives. EC Directives are known as ‘secondary level legislation’,
because they are secondary to the Treaty of Rome. The EC Directives
on public procurement have been incorporated into UK law by way of
a number of Statutory Instruments (SI’s).
The EC Directives and their associated UK SI’s which set out the public
procurement rules and their scope are as follows:
• The Supplies Directive (UK SI 201/ ‘The Public Supply

Contracts Regulations 1995’) - the supply, lease, rental or hire
purchase of goods.
• The Works Directive (UK SI 2680/ ‘The Public Works Contracts

Regulations 1991’) - the supply of capital work.
Public works concession contracts are the subject of regulations 25

and 26. These are contracts under which the consideration given by
the public authority consists of or includes the right to profit from
the works to be carried out under the contract, (for example a toll
bridge). These regulations are not considered in any detail in this
Chapter.
• The Services Directive (UK SI 3228/ ‘The Public Services

Contracts Regulations 1993’) - the supply of services. A distinction is
made between part A services, also known as ‘priority’ services, to
which all of the regulations apply, and part B services, also known as
‘residual’ services, to which only selected regulations apply. (See ➧ Annex 1.1
Annex EPP 1.1 (at the end of this chapter) for the services included
under each category).
Design contests are the subject of regulation 24 which sets out

when the regulations apply and the special procedures which must
be followed. This regulation is not considered in any detail in this
chapter.
• The Utilities Directive (UK SI 3279/1992, amended by SI 3227/

1993) - the supply of goods, works and services to the Utilities
sector. This concerns nationalised industries and private sector
companies within the water, energy, telecommunications and
transport industries. Departmental purchases will not normally be
affected by this Directive and no further mention of it is made in
this section.
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THE DIRECTIVES
• The Compliance Directive - to enforce the other four

Directives. This Directive has been embodied in the UK SI’s for
supplies, works and services under the section entitled “Applications
to Court”. Under this section the courts are given specific power to
ensure compliance with EC procurement rules, including the right to
award damages to a wronged supplier.
The Directives apply in the following circumstances:
• Where the procurer is a ‘contracting authority’ as defined by

regulation 3 of each of the supplies, works and services regulations.
This includes Departments. The regulations also apply to goods,
works and services which are being procured by a third party on
behalf of a contracting authority.
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• Where the nature of the contract is not such as to be excluded by
the EC procurement rules. ➧ EPP 1.4
• Where the value of the contract is above the relevant threshold

(see EP 1.5).
➧ EPP 1.5
Key Points
• Section EPP 1 of this Chapter is intended as a summary of the key

points relating to public procurement. Many of the provisions
contained in the supplies, works and services regulations are
common and use similar or identical wording. Where there are
differences, the principal ones have been identified in the sections
that follow.
• It is recommended that you read each of the relevant SI’s listed in

this section.
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DECIDING WHICH DIRECTIVE APPLIES
EPP 1.3 DECIDING WHICH DIRECTIVE APPLIES
In general it is clear which directive applies for the procurement of a

particular type of work.
It will be seen by reference to Annex EPP1.1 that in relation to services

contracts, construction design and related professional services are
category A - priority services to which all of the services regulations
apply.
The choice may be less clear where, as is commonly the case, the
scheme involves a combination of works, services and/or supplies. The
regulations are not comprehensive in dealing with this issue.
• Supplies and Services
Some assistance may be found under the definition of ‘public supply

contract’ in the ‘Public Supply Contracts Regulations 1995’. This
states that where a contract involves the supply of goods as well as
the provision of services, then the supply regulations apply only if
the value of the goods supplied and any siting or installation of the
goods is greater than the value of the services element of the work;
otherwise the services regulations apply.
• Works and Services
In respect of works and services the EC Commission’s own

guidance states that where the value of the works element of a
contract exceeds the value of the services element, then it should
be categorised as a public works contract.
The ser vices generally required for construction projects will be

categorised as public services contracts.
However, if these services form part of a single “design and build” or

managed construction contract to be awarded to a main or
managing contractor, the work will be classified as a public works
contract.
Where the Department decides, for good commercial reasons, to

award separate contracts for these services in advance of the main
contract (for example where initial design is novated to a ‘design
and build contractor), then the services regulations will apply.
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DECIDING WHICH DIRECTIVE APPLIES
• Supplies and Works
Contracts for the supply of mechanical plant for example, which are
par t of a main works contract, will be subject to the works
regulations. Contracts for the early procurement of any items where
this is appropriate, would be classed as public supply contracts. The
items may then be issued free to the contractor. Note that the
value of free issue equipment etc. has to be included with the value
of the works contract for the purpose of assessing overall value
against the works contract threshold.
Key Points
• The general rule is that a contract should be classified according to

which ever element (supplies, services, works) has the greatest
value.
• No attempt should be made to select an unnatural combination or

to sub-divide contracts merely to ensure that the likely prices of
individual parts fall below the threshold values of their respective
directives.
• It costs a lot more to prepare an invitation to tender and place a

contract than to insert an advertisement in the OJEC. First costs
alone can never justify employing additional contracts to beat the
threshold. When in doubt, advertise.
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EXCLUSIONS
EPP 1.4 EXCLUSIONS
There are a number of types or classes of work which are specifically

excluded from the application of the EC public procurement rules.
These may be found at regulation 6 of each of the supplies, works, and

services regulations.
A common exclusion from all three sets of regulations is any contract

which is classified as secret or where the carrying out of the supply,
works or services in connection with it must be accompanied by special
security measures in accordance with the laws, regulations or
administrative provisions of any part of the UK or when the protection
of the basic interests of the security of the UK require it.
• Supplies
The principal exclusion from supplies contracts is those contracts

which fall under the utilities regulations.
• Works
The principal exclusions from works contracts are in respect of

offers being sought:
- by a contracting authority which is exercising the functions of a

courier by land, air, sea or inland waterway;
- which concerns the production, transport or distribution of

drinking water;
- by a contracting authority whose principal activity is the

production or distribution of energy.
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EXCLUSIONS
• Services
The principal exclusions from the services regulations are in relation

to the following:
- contracts for the purchase or rental of land or buildings - but not

contracts relating to financing for such transactions;
- contracts for broadcasting material or broadcasting time;
- contracts for voice or radio telephony, telex, paging or satellite

services;
- arbitration and conciliation services;
- securities contracts relating to the issue, sale, purchase or

transfer of securities or other financial instruments and central
bank services
- contracts for central banking services
- R&D service contracts (other than those where the benefit

accrues exclusively to and is wholly paid for by the contracting
authority)
• Subsidised Contracts
In the case of public works contracts (regulation 23) and public

services contracts (regulation 25) the regulations need not apply
where a contracting authority contributes less than one half of the
contract consideration to a subsidised body. If the contribution is
greater than one half then the authority must make it a condition of
the contribution that the regulations are observed by the subsidised
body as if they were a contracting authority.
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THRESHOLDS
EPP 1.5 THRESHOLDS
The EC procurement rules do not apply if the estimated value of the

contract (net of value added tax) is less than the threshold specified
in the regulations.
The intention behind the thresholds is to exclude from the EC

requirements contracts which can be assumed to attract only local
competition and where the application of the requirements would
cause unnecessary bureaucracy. It should be borne in mind that
whether or not the threshold applies, the EEC Treaty still prohibits
discrimination or national preference.
The thresholds are set by reference to:
• EC public procurement directives
• The General Agreement on Tariffs and Trade (GATT) rules.
The GATT was signed in 1947 and provides an agreed framework of

rules for the conduct of trade between member states world-wide.
Essentially the rules provide that lower thresholds apply to GATT
contracting entities than non-GATT entities. The GATT rules are
incorporated into the UK SI’s. Until recently the GATT rules only
affected supply contracts, but the rules have now been extended to
include services contracts, for which the lower level applies except for
R&D services and Part B residual services.
A list of GATT entities (Departments) can be found in Schedule 1 to SI

201 - The Public Supply Contracts Regulations 1995.
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THRESHOLDS
The table below sets out the thresholds which apply to the various types of
contract.
THRESHOLDS - PUBLIC SECTOR:

1 JANUARY 2000 TO 31 DECEMBER 2001
Supplies Services Works
GATT Entities1 £93,896 £93,8962 £3,611,3953

(SDR130,000) (SDR130,000) (SDR5,000,000)
(ECU139,312) (ECU139,312) (ECU5,358,153)
Other public £144,456 £144,4562 £3,611,3953

sector (SDR200,000) (SDR 200,000) (SDR5,000,000)
contracting (ECU214,326) (ECU214,326) (ECU5,358,153)
authorities
Indicative £505,500 £505,500 £3,611,395

Notices (ECU750,000) (ECU750,000) (ECU5,358,153)
Small Lots not applicable £53,920 £674,000

(ECU80,000) (ECU1,000,000)
1
Schedule 1 of the Public Supply Contracts Regulations 1995 lists
central government bodies subject to the World Trade Organisation
GPA. These thresholds will also apply to any successor bodies.
2
With the exception of the following services which have a threshold
of £134,800 (ECU200,000):
• Part B (residual) services
• Research & Development Services (Category 8)
• The following Telecommunications services in Category 5:
- CPC 7524 - Television and Radio Broadcast services
- CPC 7525 - Interconnection services
- CPC 7526 - Integrated telecommunications services
• Subsidised services contracts under Regulation 25 of the Public

Services Contracts Regulations 1993.
3
With the exception of subsidised works contracts under Regulation
23 of the Public Works Contracts Regulations 1991 which have a
threshold of £3,370,000 (ECU5,000,000).
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ESTIMATING THE VALUE OF COMMISSIONS AND AGGREGATION
CONTRACTING STRATEGIES
CONTRACTORS
EPP 1.6 ESTIMATING THE VALUE OF COMMISSIONS AND

AGGREGATION
The EC thresholds and the rules that a contracting authority must

follow in deciding whether a particular contract exceeds the
appropriate advertising threshold are set out in regulation 7 of each of
the supplies, works and services regulations.
A fundamental rule within each of the regulations is that the

requirement for work or a quantity of supplies or services may not be
split up in order to avoid the application of the EC procurement rules,
and there must therefore be no deliberate underestimating in order to
avoid complying with the regulations.
A contracting authority cannot break the work down into phases, for
example, in order deliberately to avoid exceeding the thresholds.
Where there is a single requirement for goods, works or services, and
the contracting authority intends to let the work in a number of
discrete parts, then the consideration calculated for comparison to the
threshold must generally be the aggregate value of all of those parts.
In respect of works contracts, the general rule is that where the

contract is one of a number of contracts or ‘Lots’ entered into for the
purpose of carrying out a ‘work’ then it must be aggregated with all the
other associated contracts in deciding whether the threshold applies. It
is necessary to look at the result of the operation to see if it serves a
single purpose. Hence separate contracts to build or extend different
par ts of a single construction such as a road project with bridges,
should be aggregated.
In general, the total cost of any supplies or services required for a

works project, and for which separate contracts are awarded under
either the supplies or services directives, should be included in the total
cost of the project when calculating its value against the threshold.
The exception here would be where separate service contracts are let
well in advance of the main construction contract, for preparation of
tenders for example.
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CONTRACTORS
Reference is made in the table to EPP 1.5 to thresholds in respect of

small lots provisions for public works and public services contracts. This ➧ EPP 1.5
provides for the non-application of the regulations to a contract for

par t of a project requirement which would normally be aggregated
together with other like contracts for evaluation against the advertising
threshold. Non-application can only be relied upon if the contract value
is less than the small lots provision threshold, and is less than 20% of
the aggregate value of all of the contracts to be entered into in order
to fulfil the total requirement
The aggregation rules may also require the aggregation of contracts let
by different Departmental units. Generally the rule is that where the
contracting authority traditionally purchases centrally, the threshold
applies to the aggregated total. But where a discrete unit purchases
locally its purchases need not be aggregated with those of another unit
and the threshold applies to the value of the local purchase only.
Depending on delegation levels, a Department may be deemed to

have discrete operational units (DOU). A DOU is referred to in the
supplies and services regulations. A DOU may avoid the aggregation
rules referred to above if:
• contracting decisions have been devolved to it; and
• it has the power to make contracting decisions independently of any

other part of the contracting authority.
Unless these conditions are met a unit within a contracting authority

cannot be regarded as a DOU and would be subject to the aggregation
rules.
Contracts for the supply of goods or services over a period

of time
There are special valuation rules for public supply and public services
contracts where a contracting authority has a requirement over a
period of time for either a series of contracts or for a contract which is
renewable.
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CONTRACTORS
The value of the contracts in respect of such a requirement shall be

calculated by either:
• taking the total value of such work carried out in the previous
financial year or previous 12 months, and if future requirements are
likely to increase, then the value must be adjusted upwards
accordingly; or
• taking the expected value of the works to be carried out in a period

of 12 months from the first date on which the goods or services will
be delivered, or for the term of the contract where the contract is
of a definite term in excess of 12 months.
Where goods or services are to be provided over a period in excess of

4 years then the value shall be calculated by multiplying the amount
expected to be incurred in respect of each month of the period by 48.
Key Points
• There must be no deliberate dis-aggregation of requirements in

order to avoid complying with the public procurement regulations.
• It costs more to prepare an invitation to tender and place a contract

than it does to place an advert in the OJ. This cost cannot therefore
justify the deliberate dis-aggregation of contracts.
• If there is any uncertainty about whether the procurement rules

apply or not, it is recommended that they be applied.
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PUBLICITY & THE TYPES OF NOTICE REQUIRED
EPP 1.7 PUBLICITY AND THE TYPES OF NOTICE REQUIRED
One of the key elements of the public procurement regime is that

apart from the negotiated procedure without prior contract notice, all
contracts caught under it must be advertised and contractors invited to
tender in the Official Journal of the European Community (the ‘OJ’).
This is known as making a “call for competition”. Once the contract has
been awarded, details of the award must be published in the OJ.
Various types of notice to cover different circumstances must be

published in the OJ, each in standard format. They should also appear in
the EC computer-based information system available on a subscription
➧ EPP 1.11
basis, Tenders Electronic Daily or TED. These are described here, for
ease of reference:
• Periodic (or prior) information notice (PIN): contracting

authorities must publish a notice setting out details of supplies or
part A services contracts to be awarded in the next 12 months in
each product area or service category where the total value of the
contracts exceeds the financial threshold which currently stands at
750,000 ECUs. All major works contracts must be advertised by a
PIN as soon as the decision to proceed with them has been made.
• Notice on the existence of a qualification list: this notice

only applies to contracts regulated under the Utilities Directive.
• Contract notice this is the most important of the procurement

notices, advertising individual contracts to be awarded by
contracting authorities.
• Contract award notice: once a contract has been awarded the

contracting authority must publish the result in the OJ.
The char t in Annex EPP 1.2 at the end of this chapter is a summary of
the notices which must be given in accordance with the public ➧ Annex 1.2
procurement rules.
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PUBLICITY & THE TYPES OF NOTICE REQUIRED
Official Journal of the EC
The notice must not exceed 650 words and should be sent or faxed to:
The Official Journal of the European Community

2 Rue Mercier
L-2985 Luxembourg
Tel: 00 352 2929 1 (switchboard)

Fax: 00 352 2929 42670
00 352 2929 44623
00 352 2929 44619
The OJ has twelve days from receipt of the notice to ensure

publication.
Advertisement Elsewhere
Contracts must not be advertised in the UK before contract notices

are dispatched to the Official Journal of the EC. Subsequent
advertisements in the UK may not contain greater details than those
published in the Official Journal.
Key Points
• For each new commission caught by the regulations the appropriate

notices must be published in the OJ.
• If commission requirements change, or if time lapses without taking

any further procurement action, then the commission should be re-
advertised.
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ADVERTISING & AWARDING CONTRACTS
EPP 1.8 PROCEDURE FOR ADVERTISING AND AWARDING

CONTRACTS
The three different procedures which public authorities must choose

between when awarding contracts are termed the ‘open’, ‘restricted’
and ‘negotiated’ procedures. Of these, all the Directives other than that
for utilities encourage use of either the open or restricted procedure,
specifying situations where the negotiated procedure is permitted. The
Utilities Directive allows any procedure to be chosen.
• Open procedure - all interested suppliers may tender. Anyone

interested in tendering who submits a compliant tender to the
authority within the appropriate time limit, in response to its call for
competition, will be considered for the job.
• Restricted procedure - only those suppliers invited to

participate by the contracting authority may submit a tender. Where
the restricted procedure is used, the tender process has two distinct
stages. After a call for competition has been made in the OJ,
applicants must submit their requests to be selected to tender
within a specified period. The contracting authority then considers
these expressions of interest and excludes non-compliant
respondents, - those who are unable to fulfil the technical
specifications, or who fail to meet the eligibility criteria - before
sending the written invitations to tender with contract
documentation to short-listed candidates. Generally, a sufficient
number of candidates must be selected to tender to ensure
adequate competition. The short listed candidates must then submit
their tenders before a second deadline. In cases of urgency, the
contracting authority may follow an accelerated programme with
shorter time limits. Generally, however, the minimum time limits for
the restricted procedure are longer than for the open procedure,
counter-balancing to some extent the attraction of being able to
select tenderers.
The restricted procedure is recommended for use by Depar tments.

It should be noted that in practice the number of expressions of
interest can be very high making it impossible to carry out extensive
pre-selection procurement procedures, such as pre-selection
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interviews. Pre-selection will invariably have to be on the basis of a
paper sift and therefore the contract notice should specify the
grounds on which pre-selection will be made.
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• Negotiated procedure - direct discussions and negotiations will

take place between the contracting authority and one or more
suppliers of its choice. If the authority makes a call for competition,
the first half of the process will be identical to that used in the
restricted procedure and the strict time limits will apply. In a few
cases the negotiated procedure can be used without a call for
competition being made. In these instances no time limits apply.
Use of the Negotiated Procedure
The negotiated procedure (see above) may be used, without a call for
competition published in the OJ, in the following cases:
• if no (suitable) tenders were received when the same contract was

put to tender under the open or restricted procedure;
• if, for technical or artistic reasons, or because of the protection of

exclusive rights, only a limited number of service providers can fulfil
the contract;
• if the contract follows a design contest and must be awarded to the

successful candidate or one of the successful candidates;
• in cases of extreme urgency resulting from un-foreseeable events;
• for additional (previously un-foreseeable) services which cannot

practically be separated from the original contract, or which are
strictly necessary for completion, so long as they do not exceed half
the amount of the original contract;
• for repeat services within three years of the original contract which
conform to a basic project for which the first contract was awarded
by open or restricted procedure.
Furthermore, even where there has been a call for competition, the
negotiated procedure may still be used in certain prescribed
circumstances. For example:
• when the nature of the services such as intellectual or financial

services is such that the contract specifications cannot be drawn
sufficiently precisely to permit use of the open or restricted
procedures.
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Timescales
Minimum timescales or, if appropriate, maximum timescales are laid

down for:
• expressions of interest to be lodged following publication of the

contract notice;
• the tender period;
• the publication of a contract award notice.
The timescales depend on the procedure being followed. The

procedure and timescales are summarised in the diagrams contained in ➧ Annex 1.3
Annex EPP 1.3 as follows:
Diagram 1 Open procedure

Diagram 2 Restricted procedure
Diagram 3 Negotiated procedure with prior contract notice
Diagram 4 Negotiated procedure without prior publication of
notice.
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ACCELERATED TIMESCALES
EPP 1.9 ACCELERATED TIMESCALES
In respect of supplies, works and services contracts, it is possible to use

reduced timescales for the restricted procedure (see Annex EPP 1.3 -
Diagram 2) and for the negotiated procedure with prior contract notice
(see Annex EPP 1.3 - Diagram 3).
The accelerated timescales may only be used where the normal timescales
are rendered impracticable by reason of urgency.
Key Points
• Accelerated procedures should not be used to circumvent normal time

limits. The proper pre-planning of requirements, taking into account the
time needed to implement EC Directives should make cases in which
accelerated procedures are used, the exception rather than the rule.
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MODEL NOTICES AND THEIR CONTENT
EPP 1.10 MODEL NOTICES AND THEIR CONTENT
A general description of the notices which must be published in the OJ

is given in section EPP 1.7 of the Guide. ➧ EPP 1.7
The structure and content of these notices differ according to the

regulation under which they are issued, and according to the chosen
procedure for advertising and awarding the contract.
Model notices are given at the end of each of the sets of regulations.
These are repeated with some enhancements in Annex EPP 1.4 for
works contracts, and EPP 1.5 for service contracts. The works contract
model notices are as follows:
Reference Description
4A PRIOR INFORMATION
4B CONTRACT NOTICE - OPEN PROCEDURE
4C CONTRACT NOTICE - RESTRICTED PROCEDURE
4D CONTRACT NOTICE - NEGOTIATED PROCEDURE
4E CONTRACT AWARD NOTICE
4F MODEL NOTICE OF PUBLIC WORKS
CONCESSIONS
4G MODEL NOTICE OF WORKS AWARDED BY THE
CONCESSIONNAIRE
The service contract model notices are as follow:
5A INDICATIVE NOTICE
5F DESIGN CONTEST NOTICE
5G RESULT OF DESIGN CONTEST
5H MODEL CANCELLATION NOTICE (ALL SECTORS
AND ALL PROCEDURES
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Cancellation
Note that if for any reason, there are significant changes to the contract
requirements at any stage then this could invalidate the procedure and
necessitate re-commencement of a procedure. If it becomes necessary
for any reason to abandon a project in its entirety or to restart a
procedure then it will be necessary to publish a cancellation notice in
the form given in Annex EPP 1.5H. Firms who have submitted tenders
under the open procedure or submitted expressions of interest under
the restricted procedure should be informed by letter.
Definition and Use of Official Language
In order to promote the greatest clarity in describing the works,

products and services to be purchased specialised vocabularies and the
use of technical standards have been defined. These must be used in
drafting contract notices and tender specifications.
Standards and Technical Specifications
Technical specifications which define the characteristics of a purchase,

including safety, performance, dimensions and quality levels should be
included in contract notices and tender specifications. The Directives
require contract authorities to use a British Standard
implementing European Standards where such a standard exists,
or Common Technical Specifications.
Brand or Process Names
References to goods of specific make, source or process which have

the effect of favouring specific suppliers or products must be not be
used unless the specifications are strictly justified by the subject of the
contract. If one cannot otherwise describe the purchases in a
sufficiently detailed and tangible way, references to trade marks, patents
or brands may only be made provided the words “or equivalent” are
added afterwards.
When this is the case one must consider variants to what has been
specified in the notice. Offers resulting from such notices cannot be
rejected solely on the grounds that they have been drawn up using
different technical specifications from those used in the United
Kingdom, provided that the tender meets the requirements set out in
the contract documents.
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Community Procurement Vocabulary (CPV)
In order to establish the greatest accuracy and clarity in the

management of public procurement the Commission has developed a
Common Procurement Vocabulary. Its main purpose is to ensure speed
and consistency in translation of procurement notices. This vocabulary,
which is updated from time to time, contains technical descriptions of
works, products and services, accompanied by numeric codes which
establish their position in the system. These codes and classifications
should be used in describing the supplies , works and services to be
purchased and should appear in the published notices.
Key Points
• The notices which must be published in the OJ must have

information provided in a standard from of language under standard
headings.
• It may be advisable to subscribe to the OJ to monitor the

publication of the Department’s own notices and to see examples
of notices.
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NUMBER OF TENDERERS
EPP 1.11 NUMBER OF TENDERERS
The number of tenderers which will be selected to tender is specified

in each of the supplies, works and services regulations. These are as
follows:
• Open procedure
An unlimited number, i.e. whoever applies.
• Restricted procedure
The requirements are the same in each of the regulations as follows:
(6) The contracting authority may pre-determine the

range within which the number of persons it
intends to invite to tender for the contract shall be
fixed but only if:
(a) the lower number of the range is not less than 5

and the higher number not more than 20,
(b) the range is determined in the light of the

nature of the services to be provided under the
contract, and
(c) the range is specified in the contract notice.
(7) The number of persons invited to tender shall be

sufficient to ensure genuine competition.’
• Negotiated Procedure
Where there is a sufficient number of persons who are suitable to

be selected to negotiate the contract, the number selected to
negotiate shall not be less than three.
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TENDERER SELECTION
EPP 1.12 TENDERER SELECTION
After publication of the contract notice, and receipt of responses, the

contracting authority may exclude tenderers from the remainder of the
process on certain specified grounds.
Respondents to contract notices should be able to demonstrate their

commercial, technical and financial ability to meet the requirements of
the commission and the contract notice must specify what references
are required in this respect.
Note that those placing notices should not prejudge the responses
expected.
It is likely that some firms will also respond to indicative (prior

information) notices and it is good practice to initiate an appraisal of
such firms as soon as the response is received.
When using the restricted procedure, all candidates who respond to

the contract notice should be appraised but only those qualified to
meet the criteria set out in the notice need be invited to tender.
The selection criteria are set out in similar regulations in respect of

each of the supplies, works and services regulations. These are:
• Regulation 14 - Criteria for rejection of supplies, works or

services providers
• Regulation 15 - Information as to economic and financial

standing
• Regulation 16 - Information as to ability and technical capacity
• Regulation 17 - Supplementary information.
In respect of the open, restricted and negotiated procedures a tenderer

or a firm expressing an interest in tendering or negotiating may only be
excluded if the firm may be treated as ineligible on the grounds
specified in regulation 14 or fails to satisfy minimum standards to be
evaluated in accordance with regulations 15, 16 and 17.
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TENDERER SELECTION
The grounds giving rise to ineligibility in regulation 14 include such

matters as:
• The company or individual is bankrupt
• An administrator or receiver has been appointed
• A criminal offence has been committed
• Failure to pay social security payment, or taxes
• The firm or person is not licensed in a member state
In accordance with regulation 15, evaluation of economic and financial

standing may be made only in connection with the following
information.
• Statements from the firm’s bankers. (Including evidence of PI

insurance in the case of service providers).
• Statements of accounts or extracts therefrom
• Statement of overall turnover and turnover in the previous 3

financial years in respect of the specific supply, works or services
sought.
In accordance with regulation 16, evaluation of ability and technical

capacity may be made only in connection with specified criteria. This
differs slightly between regulations, but the criteria include such matters
as:
• Education and professional qualification.
• Experience.
• Technicians and technical bodies which may be utilised.
• Previous work and track record.
• Tools plant and technical equipment available.
• Technical specifications for products.
• Compliance with BS5750.
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AWARD CRITERIA
EPP 1.13 AWARD CRITERIA
The contract notice must specify the contract award criteria as either:
• the lowest price only, or
• the most economically advantageous tender.
The latter criteria is the appropriate one for evaluating tenders on the
basis of quality and price, particularly when obtaining tenders for
services.
Where the latter criteria is to be applied, the criteria to be used for the
selection shall be stated, where possible in descending order of
importance, in the contract notice or the contract documents.
Only the award criteria specified either in the contract notice or in the
tender documents may be applied in the subsequent evaluation of
tenders and in the debriefing of unsuccessful tenderers.
Variations
Where a contracting authority decides that it will exclude all tenders

which contain variations, it must state this fact in the contract notice.
A contracting authority may otherwise take account of offers

containing variations if:
• the offer meets the minimum requirement of the contracting

authority; and
• it has stated in the contract documents the minimum requirements

and any specific requirements for the presentation of an offer
offering variations.
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CONTRACT NOTICE, DECLINE & DEBRIEFING
EPP 1.14 CONTRACT NOTICE, DECLINE AND DEBRIEFING
Once a tenderer has been selected, a contract award notice must be

published. See Annex EPP 1.4 for works contracts notices and Annex
EPP 1.5 for services contracts notices.
There is no specific obligation to write decline letters to unsuccessful

tenderers, but it is recommended that this is done within 7 days of
publication of the notice.
Debriefing
In accordance with Regulation 22 of the Works and Services

Regulations, and Regulation 23 of the Supply Regulations, there is an
obligation to respond within 15 days of receipt of a request from an
unsuccessful tenderer for further information. The debriefing letter
should set out the following:
• the reasons why the tenderer was unsuccessful;
• the name of the successful tenderer.
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EC/GATT REPORTING REQUIREMENTS
EPP 1.15 EC/GATT REPORTING REQUIREMENTS
By 31 July each year for supplies and every alternate year from
1995 for works and services, each Department is required to
provide reports to Treasury which show the following
information:
• for each contract awarded under the scope of the Directives:
- its value,
- the award procedure used,
- if the negotiated procedure was used, the reason,
- the type or category (classification) of goods/works or

services,
- nationality of the party contracted with;
• for contracts awarded outside the scope of the Directives:
- the aggregate value.
Treasury use this information to collate a statistic report which

each member state must compile and submit to the European
Commission.
It follows that each discrete purchasing unit and Department

must keep a running record of all contracts in order to be in a
position to provide reports promptly. The records must also be
auditable since the European Commission can at any time ask
for information on individual contracts, any such enquiries being
passed through Treasury. Reports in response to such enquiries
must include the following:
• name and address of contracting authority;
• subject and value of the contract;
• names of candidates or tenderers submitted and the reasons

for selection;
• names of candidates or tenderers rejected and the reasons

for rejection;
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CONTRACT NOTICE, DECLINE & DEBRIEFING
• the name of the successful tenderer and the reasons for the
selection of the tender. Also if known, any share of the contract the
successful tenderer may sub-contract to a third party;
• for negotiated procedures, the circumstances which justify its use;
• for accelerated procedures, the circumstances which justify its use.
Key Points
• Careful records must be kept of all purchasing decisions including

those which exclude purchases from the EC procurement rules,
such as threshold calculations.
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ANNEX EPP 1.1
ANNEX EPP 1.1
CATEGORIES OF SERVICES
Referred to in Regulation 5 of the Public Services Contracts Regulations 1993.

(SI 3228/1993)
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ANNEX EPP 1.1
PART A
Category
Reference Service CPC Reference#
1 Maintenance and repair of vehicles and equipment. 6112, 6122, 633,

886
2 Transport by land, including armoured car services 712 (except

and courier services but not including transport of 71235), 7512,
mail and transport by rail. 87304
3 Transport by air but not transport of mail. 73 (except 7321)
4 Transport of mail by land, other than by rail, and 71235, 7321

by air.
5 Telecommunications services other than voice 752

telephony, telex, radiotelephony paging and satellite
services.
6 Financial services 81 (Part), 812, 814

(a) Insurance services
(b) Banking and Investment services other than
financial services* in connection with issue, sale,
purchase or transfer of securities or other
financial instruments, and central bank services
7 Computer and related services 84
8 R&D services where the benefits accrue exclusively 85

to the purchaser for its use in the conduct of its own
affairs and the services are to be wholly paid for by
the purchaser.
9 Accounting, auditing and book-keeping services 862
10 Market research and public opinion polling services 864
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ANNEX EPP 1.1
Category
11 Management consultancy services and related

services, but not arbitration and conciliation services. 865, 866
12 Architectural services: engineering services and 867

integrated engineering services: urban planning and
landscape architectural services: related scientific
and technical consulting services: technical testing
and analysis services.
13 Advertising services. 871
14 Building-cleaning services and property 874, 82201 to

management services. 82206
15 Publishing and printing services on a fee or 88442

contract basis
16 Sewerage and refuse disposal service: sanitation 94

and similar services
#
CPC stands for the Central Product Classification of the United Nations
* This exception does not apply in the utilities sector
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ANNEX EPP 1.1
PART B
Category
17 Hotel and restaurant services 64
18 Transport by rail 711
19 Transport by water 72
20 Supporting and auxiliary transport services 74
21 Legal services 861
22 Personnel placement and supply services 872
23 Investigation and security services, other than 873, (except

armoured car services 87304)
24 Education and vocational education services 92
25 Health and social services 93
26 Recreational, cultural and sporting services 96
27 Other services
#
CPC stands for the Central Product Classification of the United Nations
* This exception does not apply in the utilities sector
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ANNEX EPP 1.2
ANNEX EPP 1.2
NOTICES REQUIRED UNDER EC PUBLIC PROCUREMENT RULES
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ANNEX EPP 1.2
Notices Required Under EC Procurement Rules
Voluntary Notices Indicative Notices: Prior Information

Below Thresholds • Supplies Notice for Works
• Services
Contract Notices Contract Notices Contract Notices

Open Procedure: Restricted Procedure: Negotiated
• Works • Works Procedure:
• Supplies • Supplies • Works
• Priority Services • Priority Services • Supplies
and Design and Design • Priority Services
Contests Contests and Design
Contests
Award Notices:
• Works
• Supplies
• Services
- Priority
- Non-Priority
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ANNEX EPP 1.3
ANNEX EPP 1.3
PROCEDURES AND TIMESCALES FOR ADVERTISING AND AWARDING

CONTRACTS
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ANNEX EPP 1.3
DIAGRAM 1
Open Procedure
Prepare contract Notice and Documents
Send Notice to OJEC
Notice Issued in OJEC
Minimum
Suppliers Respond to Notice
52 Calendar Maximum
Days* 6 Days
Send Contract Documents to Suppliers
Suppliers Return Tender
Suppliers Appraisal/Tender Evaluation
Award Contract
Maximum
48 Days
Send Contract Award Notice to OJEC
Note: * Minimum of 36 days if pre-information or indicative notices have been issued

under the Works and Services Directives.
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ANNEX EPP 1.3
DIAGRAM 2
Restricted Procedure
* Prepare contract notice and documents

* Decide range of tenders sought (between
5 and 20)
Accelerated Normal
Send Notice to OJEC
Minimum Minimum
15 Days Notice issued to OJEC 37 Days
Suppliers respond to notice
Undertake Supplier Appraisal
Minimum
Invite Tenders from Qualified Suppliers 40 Days*
Minimum
10 Days
Suppliers Return Tender
Minimum
1 Day
Award Contract
Maximum
Send Contract Award Notice to OJEC 48 Days
Note: * Minimum of 26 days if prior indicative notices have been issued under the Works
and Services Directives.
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ANNEX EPP 1.3
DIAGRAM 3
Negotiated Procedure with Prior Contract Notice
Accelerated Normal
Departmental approval
Prepare contract notice/documentation
Contract notice to OJEC
Minimum Minimum
15 Days Contract notice published 37 Days
Suppliers respond to notice
Reassess supplier appraisal
Negotiate with qualified suppliers (must include at

least 3 unless there are insufficient qualifed
candidates)
Award Contract
Maximum
48 Days
Send contract award notice to OJEC
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ANNEX EPP 1.3
DIAGRAM 4
Negotiated Procedure without Prior Publication of Notice
Departmental Approval (including draft report for

commission)
Select Qualifed Suppliers
Negotiate with Suppliers
Award Contract
Maximum
48 Days
Send Contract Award Notice to OJEC
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ANNEX EPP 1.4
ANNEX EPP 1.4
WORKS CONTRACTS
Model Notices
4F MODEL NOTICE OF PUBLIC WORKS CONCESSIONS
4G MODEL NOTICE OF WORKS AWARDED BY THE

CONCESSIONNAIRE
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ANNEX EPP 1.4
WORKS CONTRACTS - MODEL CONTRACT NOTICES
1 Name, address, telephone number, telegraphic address, telex and facsimile

numbers of the contracting authority.
2 (a) Site.
(b) Nature and extent of the services to be provided and, where relevant, main
characteristics of any lots by reference to the work.
(c) If available, an estimate of the cost range of the proposed services.
3 (a) Estimated date for initiating the award procedures in respect of the contract
or contracts.
(b) If known, estimated date for the start of the work.
(c) If known, estimated timetable for completion of the work.
4 If known, terms of financing of the work and of price revision and/or references of
the provision in which these are contained.
5 Other information.
6 Date of dispatch of the notice.
7 Date of receipt of the notice by the Office for Official Publication of the European
Communities.
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ANNEX EPP 1.4

2 (a) Award procedure chosen.
(b) Nature of the contract for which tenders are being requested.
3 (a) Site.
(b) Nature and extent of the services to be provided and general nature of
the work.
(c) If the work or the contract is subdivided into several lots, the size of
the different lots and the possibility of tendering for one, for several or
for all of the lots.
(d) Information concerning the purpose of the work or the contract where
the latter also involves the drawing up of projects.
4 Any time limit for completion.
5 (a) Name and address of the service from which the contract documents
and additional documents may be requested.
(b) Where applicable, the amount and terms of payment of the sum to be
paid to obtain such documents.
6 (a) Final date for receipt of tenders.
(b) Address to which tenders must be sent.
(c) Language in which tenders must be drawn up.
7 (a) Where applicable, the persons authorised to be present at the opening

of tenders.
(b) Date, hour and place of opening of tenders.
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ANNEX EPP 1.4
8 Any deposit and guarantees required.
9 Main terms concerning financing and payment and/or references to the

provisions in which these are contained.
10 Where applicable, the legal form to be taken by the grouping of contractors

to whom the contract is awarded.
11 Minimum standards of economic and technical standing and technical capacity

required of the contractor to whom the contract is awarded.
12 Period during which the tenderer is bound to keep open its tender.
13 Criteria for the award of the contract. Criteria other than that of the lowest
price shall be mentioned where they do not appear in the contract
documents.
14 Where applicable, prohibition on variants.
16 Date of publication of the prior information notice in the official journal of the
European communities or reference to its non-publication.
18 Date of receipt of the notice by the Office for Official Publication of the
European Communities.
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ANNEX EPP 1.4

(b) Where applicable, justification for the use of the use of the shorter
time limits (accelerated procedure).
(c) Nature of the contract for which tenders are being requested.
3 (a) Site.
(b) Nature and extent of the services to be provided and general nature of
the work.
(c) If the work of the contract is subdivided into several lots, the size of
the latter also involves the drawing up of the projects.
4 Any time limit for completion.

6 (a) Final date for receipt of requests to participate.
(b) Address to which requests must be sent.
(c) Language or languages in which requests must be drawn up.
7 Final date for despatch of invitations to tender.
9 Main terms concerning financing and payment and/or the provisions in which
these are contained.
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ANNEX EPP 1.4
10 Information concerning the contractor’s personal position and minimum

standards of economic and financial standing and technical capacity required of
the contractor to whom the contract is awarded.
11 Criteria for the award of the contract where they are not mentioned in the invitation
to tender.
14 Date of publication of the prior information notice in the Official Journal of the
European Communities or reference to its non-publication.
16 Date of receipt of the notice by the Office for Official Publications of the European
Communities.
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ANNEX EPP 1.4
1 Name, address, telephone number, telegraphic address telex and facsimile

(b) Where applicable, justification for the use of the use of the shorter
time limits (accelerated procedure).
3 (a) The site.
(b) The nature and extent of the services to be provided and general
nature of the work.
4 Any time limit.

6 (a) Final date for receipt of tenders.
(b) Address to which tenders must be sent.
(c) Language or languages in which tenders must be drawn up.
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ANNEX EPP 1.4
8 Main terms concerning financing and payment and/or provisions in which

these are contained.
9 Information concerning the contractor’s personal position and information and

formalities necessary in order to evaluate the minimum standards of economic
and financial standing and technical capacity required of the contractor to
whom the contract is awarded.
11 Where applicable, name and address of suppliers already selected by the awarding
authority.
12 Where applicable, date(s) of previous publications in the Official Journal of the

14 Date of publication of the prior information notice in the Official Journal of the
15 Date of Dispatch of notice.
Communities.
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ANNEX EPP 1.4
4E CONTRACT AWARDS
1 Name and address of contracting authority.
2 Award procedure chosen.
3 Date of award of contract.
4 Criteria for award of contract.
5 Number of offers received.
6 Name and address of successful contractor(s).
7 Nature and extent of the services provided, general characteristics of the finished
structure.
8 Price or range of prices (minimum/maximum) paid.
9 Where appropriate, value and propor tion of the contract likely to be subcontracted
to third parties.
11 Date of publication of the tender notice in the Official Journal of the European
Communities.
Communities.
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ANNEX EPP 1.4
4F MODEL NOTICE OF PUBLIC WORKS CONCESSIONS
1 Name, address, telephone number, telegraphic address, telex and facsimile numbers
of the contracting authority.
2 (a) Site.
(b) Subject of the concession, nature and extent of the services to be provided.
3 (a) Final date for receipt of candidatures.
(b) Address to which candidatures must be sent.
(c) Language or languages in which candidatures must be drawn up.
4 Personal, technical and financial conditions to be fulfilled by the candidates.
5 Criteria for award of contract.
6 Where applicable, the minimum percentage of the works contracts awarded to third
par ties.
9 Date of receipt of the notice by the office for Official Publications of the European
Communities.
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ANNEX EPP 1.4
4G MODEL NOTICE OF WORKS AWARDED BY THE CONCESSIONAIRE
1 (a) Site.
(b) The nature and extent of the service to be provided and the general nature
of the work.
2 Any time limit for the completion of the works.
3 Name and address of the service from which the contract documents and additional
documents may be requested.
4 (a) The final date for receipt of requests to participate and/or for receipt of
tenders.
(b) The address to which they must be sent.
(c) The language or languages in which they must be drawn up.
6 The minimum standards of economic and financial standing and technical capacity
required of the contractor.
7 The criteria for the award of the contract.
9 Date of despatch of the notice.
10 Date of receipt of the notice by the office for official publications of the European
Communities.
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ANNEX EPP 1.5
ANNEX EPP 1.5
SERVICE CONTRACTS
Model Notices
Standard form responses, where they are relevant, have been included in italics beneath
the relevant sections of each notice.
5H MODEL CANCELLATION NOTICE (ALL SECTORS AND ALL

PROCEDURES)
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ANNEX EPP 1.5
SERVICES CONTRACTS - MODEL NOTICES
1 Name, address, telegraphic address, telephone, telex and fax numbers of the
contracting authority and of the service from which additional information may be
obtained.
2 Intended total procurement in each of the service categories listed in Part A of

Schedule 1 of the Services Regulations (see Annex 1).
3 Estimated date for initiating the award procedures, per category.
Communities.
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ANNEX EPP 1.5
1 Name, address, telephone, telex and fax numbers of the contracting authority.
2 Category of service and description. CPC reference number.
3 Place of delivery.
4 (a) Indication of whether the provision of the service is reserved by law,

regulation or administrative provision to a particular profession.
(b) Reference of the law, regulation or administrative provision.
(c) Indication of whether legal persons should indicate the names and
professional qualifications of the staff to be responsible for the execution of
the service.
5 Indication of whether service providers can tender for some or all of the services
required.
7 Period of contract or time limit, if any, for completion of the service.
8 (a) Name and address of the service from which the contract and additional
documents may be requested.
(b) Final date for making such requests.
(c) Where applicable, the amount and terms of payment of any sum payable for
such documents.
‘Not applicable’
9 (a) Persons authorised to be present at the opening of tenders.
(b) Date, time and place of the opening.
10 Where applicable, any deposits and guarantees required.
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ANNEX EPP 1.5
11 Main terms concerning financing and payment and/or references to the relevant
provisions.
12 Where applicable, the legal form to be taken by the grouping of service providers to
whom the contract is awarded.
‘No special legal form required but each service provider will be
required to become jointly and severally responsible for the
contract before acceptance’
13 The information and formalities necessary for an appraisal of the minimum standards
of economic and financial standing, ability and technical capacity required of the
services provider.
14 Period during which the tenderer is bound to keep open its tender.
15 Criteria for the award of the contract (and if possible their order of importance).
Criteria other than that of the lowest price shall be mentioned where they do not
appear in the contract documents.
‘Tenders and all supporting documents must be priced in sterling and

all payments to be made under the contract shall be in sterling.The
contract shall be considered as a contract made in [England/Scotland]
and according to [English/Scots] Law and subject to the exclusive
jurisdiction of the [English/Scottish] Courts.’
Communities.
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ANNEX EPP 1.5
1 Name, address, telegraphic address, telephone, telex and fax number of the
contracting authority.

(c) Indication whether legal persons should indicate the names and professional
qualifications of the staff to be responsible for the provision of the services.
5 Indication of whether the service provider can tender for a part or all of the services
concerned.
6 If known, the number of services providers which will be invited to tender or the
range within which that number is expected to fall.
8 Duration of contract, or time limit for completion of the service.
9 Where applicable, the legal form to be assumed by the grouping of service providers
‘No special legal form required but each service provider will be
required to become jointly and severally responsible for the contract
before acceptance’
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ANNEX EPP 1.5
10 (a) Where applicable, justification for the use of shorter time limits (accelerated
procedure).
(b) Final date for the receipt of requests to participate.
(c) Address to which they must be sent.
(d) Language(s) in which they must be drawn up.
‘English’
11 Final date for the despatch of invitations to tender.
13 The information and formalities necessary for an appraisal of the minimum standards
of economic and financial standing, ability and technical standards required of the
services provider.
14 Criteria for the award of the contract. Criteria other than that of lowest price shall
be mentioned where these do not appear in the contract documents.
‘Tenders and all supporting documents must be priced in sterling and

all payments made under the contract will be in sterling.The
contract shall be considered as a contract made in [English/Scots] Law
and subject to the exclusive jurisdiction of the [English/Scottish]
Courts.’
Communities.
GACC
Annex EPP 1.5.6 EDITION 2 REV 2: JAN 2000
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ANNEX EPP 1.5
1 Name, address, telegraphic address, telephone, telex and fax number of the

(c) Indication of whether legal persons should indicate the names and
professional qualifications to the staff to be responsible for the provision of
the service.
5 Indication of whether the service providers can tender for some or all of the services
required.
6 If known, the number of service providers which will be invited to tender or the
range within which that number is expected to fall.
7 Where applicable, non-acceptance of variants.
8 Duration of contracts, or time limit for completion of the service.
9 Where applicable, the legal form to be assumed by the grouping of service providers
No special legal form required but each service provider will be
required to become jointly and severally responsible for the contract
before acceptance
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ANNEX EPP 1.5
10 (a) Where applicable, justification for the use of the shorter time limits
(accelerated procedure).
(b) Final date for the receipt of requests to participate.
(c) Address to which they must be sent.
(d) Language(s) in which they must be drawn up.
English
12 The information and formalities for an appraisal of the minimum standards of

economic and financial standing, ability and technical capacity required of the services
provider.
13 Where applicable, the names and addresses of service providers already selected by
the contracting authority.
Communities.
17 Dates of Previous of publications in the Official Journal of the European

Communities.
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ANNEX EPP 1.5
1 Name and address of the contracting authority.
(b) Where applicable, justification for the use of negotiated procedure without
prior publication of a tender notice, (Article 11(3)).
4 Date of award of the contract.
5 Criteria for award of the contract.
6 Number of tenders received.
7 Name(s) and address(es) of service provider(s).
8 Price or range of prices (minimum/maximum) paid.
9 Where appropriate, value and proportion of the contract which may be

subcontracted to third parties.
11 Date of publication of the contract notice in the Official Journal of the European
Communities.
12 Date of despatch of the notice.
Communities.
14. In the case of contracts for services specified in Part B of Schedule 1, agreement by
the contracting authority to publication of the notice (Article 16(3)).
GACC
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ANNEX EPP 1.5
contracting authority and of the service from which additional documents may be
obtained.
2 Project description.
3 Nature of the contest: open or restricted.
4 In the case of open contests: final date for receipt of plans and designs.
5 In the case of restricted contests:
(a) the number of participants envisaged;
(b) where applicable, names of par ticipants already selected;
(c) criteria for the selection of participants;
(d) final date for receipt of requests to par ticipate.
6 Where applicable, indication of whether participation is reserved to a par ticular

profession.
7 Criteria to be applied in the evaluation of projects.
8 Where applicable, names of the selected member of the jur y.
9 Indication of whether the decision of the jury is binding on the contracting authority.
10 Where applicable, number and value of prizes.
11 Where applicable, details of payments to all participants.
12. Indication of whether any follow-up contracts will be awarded to one of the winners.
Communities.
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ANNEX EPP 1.5
2 Project description.
3 Total number of participants.
4 Number of foreign participants.
5 Winner(s) of the contest.
6 Where applicable, the prize(s) awarded.
8 Reference to publication of the design contest notice in the Official Journal of the
10 Date of receipt of the notice by the Office for Official Publications of the
GACC
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ANNEX EPP 1.5
5H MODEL CANCELLATION NOTICE (ALL SECTORS AND ALL PROCEDURES)
By corrigendum to tender notice.
1 Name and address of contracting authority.
2 Nature and brief description of purchase (ie works, supply or services).
3 Date of publication and number of the tender notice in the Official Journal of the
This contract has been cancelled.
GACC
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CST 1.0 COMMISSIONING STRATEGIES
CST 1.1 PROCUREMENT PROCESS AND PROGRAMME
CST 1.2 APPLICATION OF EC PUBLIC PROCUREMENT RULES
CST 1.3 PROPERTY MANAGEMENT TYPE COMMISSIONS
CST 1.4 INDIVIDUAL PROJECT MANAGEMENT TYPE COMMISSIONS
CST 1.5 INDIVIDUAL DISCIPLINE COMMISSIONS
CST 1.6 TERM COMMISSIONS
CST 2.0 COMMISSION FILE

CST 2.1 IDENTIFICATION
CST 2.2 SUB FILES
CST 2.3 RETENTION PERIODS
CST 2.3(SCOT) RETENTION PERIODS
CST 3.0 CONSULTANT SELECTION

CST 3.1 SELECTION OF FIRMS
CST 3.2 DETR NEW QUALIFICATION SYSTEM (NQS)
CST 3.3 THE LONG LISTING PROCESS
CST 3.4 IDENTIFY PRE-SELECTION CRITERIA
CST 3.5 PRE-SELECTION INFORMATION
CST 3.6 COMPILATION OF SHORT LISTS
CST 3.7 THE NUMBER OF TENDERERS
CST 3.8 QUALITY PRICE MECHANISM
CST 3.9 PRE-TENDER INTERVIEW STAGE
CST 3.10 SINGLE TENDER
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CST 4.0 TENDER PROCESS
CST 4.1 GENERAL
CST 4.2 FORMS OF TENDERING
CST 4.3 TENDER DOCUMENTS
CST 4.4 TENDER PERIODS
CST 4.5 TENDER BOXES
CST 4.6 SECURE INFORMATION
CST 4.7 DOCUMENTATION STANDARDS
CST 4.8 DISPATCH OF TENDERS
CST 4.9 QUERIES BY TENDERERS
CST 4.10 TENDER BOARDS
CST 4.11 OPENING THE TENDER BOX
CST 4.12 OPENING OF TENDERS
CST 4.13 THE TENDER RECORD BOOK

CST 4.14 LATE TENDERS
CST 5.0 TENDER EVALUATION

CST 5.1 EVALUATION CRITERIA
CST 5.2 FEE SCHEDULES
CST 5.3 INCENTIVE FEES
CST 5.4 EVALUATION PROCEDURE
CST 5.5 TENDER ANOMALIES
CST 5.6 QUALIFIED TENDERS
CST 5.7 AMENDED TENDERS
CST 5.8 AMENDED TENDER DOCUMENTS
CST 5.9 RE-INVITATION OF TENDERS
CST 5.10 RECOMMENDATION FOR ACCEPTANCE
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CST 6.0 AWARDING COMMISSIONS AND DECLINING
TENDERS
CST 6.1 LEGAL CONTRACT FORMATION
CST 6.2 ACCEPTANCE OF A TENDER
CST 6.3 LETTER OF ACCEPTANCE
CST 6.4 DECLINE OF UNSUCCESSFUL TENDERS
CST 6.5 EXECUTION OF FORMAL AGREEMENT
CST 7.0 DEBRIEFING

CST 7.1 REQUEST FOR DEBRIEFING
CST 7.2 DEBRIEFING INTERVIEWS
CST 8.0 MANAGEMENT COMMISSIONS

CST 8.1 ROLES AND RESPONSIBILITIES OF THE COMMISSION MANAGER/
THE P ROJECT SPONSOR
CST 8.2 CONSULTANT AND SUB-CONSULTANTS

CST 8.3 PROFESSIONAL INDEMNITY INSURANCE
CST 8.4 BILL PAYING AND CHECKING PROCEDURES
CST 8.5 DETERMINATION/TERMINATION PROCEDURES
CST 8.6 DETERMINATION/TERMINATION DUE TO DEFAULT
CST 9.0 CLAIMS AND DISPUTES

CST 9.1 HANDLING OF CLAIMS BY AND AGAINST THE DEPARTMENT
CST 9.2 CLAIMS ARISING FROM DEFAULT OR NEGLIGENCE BY A DEPARTMENT,
CONSULTANT OR CONTRACTOR
CST 9.3 ALTERNATIVE DISPUTE RESOLUTION PROCEDURES
CST 9.4 ARBITRATION
CST 9.5 WRITS AND SUMMONSES
CST 9.6 EX GRATIA CLAIMS
CST 9.7 PERSONAL INJURY CLAIMS
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CST 10.0 PERFORMANCE REPORTING
CST 10.1 PERFORMANCE REPORTING GENERALLY
CST 10.2 PERFORMANCE REPORTING TO THE NEW QUALIFICATION SYSTEM
(NQS)
CST 10.3 CONSULT NOTICES WITHIN NQS
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PROCUREMENT PROCESS & PROGRAMME
COMMISSIONING STRATEGIES
CONSULTANTS SECTION
CST 1.0 COMMISSIONING STRATEGIES
CST 1.1 PROCUREMENT PROCESS AND PROGRAMME
A guide to the steps involved in the procurement of professional

services is as follows:
Determine requirements and develop detailed brief ➧ PS2.1-2.5
Identify capable consultants to form a long list or if EC regulations

apply, adver tise contract notice to invite expressions of interest ➧ CST 3.3
Undertake pre-selection interviews where appropriate or if EC

regulations apply, carry out pre-selection paper sift ➧ CST 3.5
Compile short lists for tendering

➧ CST 3.6
Develop tender documents which clearly define the brief

➧ CST 4.3
Pre-tender interviews as part of quality assessment

➧ CST 3.9
Invite tenders from short listed consultants

➧ CST 4
Hold mid-tender interviews where appropriate

➧ CST 4.9
Evaluate tenders
➧ CST 5
➧
Make the award and if EC regulations apply publish contract award CST 6
notice
De-brief unsuccessful tenders where necessary

➧ CST 7
Post tender performance evaluation

➧ CST 10
GACC
EDITION 2: FEB 1998 CST 1.1.1
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CONSULTANTS SECTION
It should be borne in mind that this is only a guide to the steps

involved. The more complex or costly the service being procured then
the greater the amount of time and care that should be taken in the
pre-selection and selection processes.
Where the EC procurement rules apply then the pre-selection process

with the restricted procedure will necessarily require a paper sift to
➧ EPP 1.8
➧
reduce what is likely to be an otherwise unmanageable number of CST 3.1
expressions of interest.
A similar approach is required where a large number of consultants are

invited to tender in order to establish a panel of consultants on the
basis of frameworks agreements, this being a strategy that some
Depar tment have successfully adopted. A panel is a set of consultants
who are selected for a term, without any guarantee of work, and might
be established by seeking tenders for all regions at once.
The form and basis of competition will need to be determined early in

the procurement process. This will involve deciding upon which
procedures it is appropriate to follow, and most importantly the
evaluation criteria which will be used to determine the successful
tenderer. In particular the basis on which the price will be sought and
the way in which quality will be evaluated should be decided at the
➧ CST 3.8
outset.
Procurement Programme
It is recommended that careful consideration is given to the production

of a procurement programme immediately following identification of
commission or project objectives. Clearly this programme should be
developed in the context of the overall objectives and timetable. The
procurement programme will to a large extent depend upon the
procurement strategy which is to be followed, and should be updated
at each stage of the procurement process. The Department should
ensure that there is sufficient time allowed in the programme and
expertise is available to carry out each of the above steps.
GACC
CST 1.1.2 EDITION 2: FEB 1998
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CONSULTANTS SECTION
It is recommended that the greater the complexity of the commission,

then the greater the time that should be allowed to tenderers to
consider, price and submit their tender bids. Tender periods which are
too short can lead to an inadequate consideration of the requirements
of the commission by tenderers which may lead to under-pricing or
over-pricing and possibly to unwanted misunderstandings.
Where the EC procurement directives apply, then specific procedures
➧ Anx EPP 1.3

apply and there are specific minimum or maximum time limits for the
various stages of the process depending on which procedure is
followed. These will need to be reflected in the procurement
programme.
GACC
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EC PUBLIC PROCUREMENT RULES
CONSULTANTS SECTION
CST 1.2 APPLICATION OF EC PUBLIC PROCUREMENT RULES
It is mandatory that EC public procurement rules are complied with

where they are applicable. It is also essential that consultants apply the ➧ EPP
rules on behalf of the Department, where they are dealing with sub-
consultants. A clear obligation to do so should be included in the terms
of appointment of such consultants (see for example service A1.2.16
for the project manager in the Consultant Commissioning
Documentation - GC/Works/5 - General Conditions for the
Appointment of Consultants (1998) (ISBN 0-11-7023108).
The EC procurement rules, govern the procurement of most of the

services required by Government bodies.
A commission will be subject to the Services Directive if:
• the buyer is a contracting authority subject to the regulations;
• the value of the contract is above the threshold. The construction

services generally procured by Departments will fall under Part A of
the Public Services Contracts Regulations to which the GATT ➧ EPP 1.5
threshold of 130,000 SDR applies. The pound sterling equivalent is
revised every two years, and as of 1 January 2000 this figure is
£93,896;
➧ EPP 1.4
• it is not the subject of one of the exclusions.
It is illegal to split the contract into two or more parts or breakdown

what is normally a centrally purchased aggregated contract to avoid the
application of the rules. In addition there should be no deliberate
underestimating to avoid compliance.
▲
!
Key Points
• If the value of the commission exceeds £93,896 (as of 1 January

2000) the EC services regulations may apply.
• A more detailed consideration of whether the regulations apply is

given in chapter EPP - EC Procurement Procedures, which also sets
out the specific timetables and recommended procedures, for
inviting and evaluating tenders in accordance with the rules.
➧ EPP 1
GACC
EDITION 2 REV 2: JAN 2000 CST 1.2
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PROPERTY MANAGEMENT TYPE COMMISSIONS
CONSULTANTS SECTION
CST 1.3 PROPERTY MANAGEMENT TYPE COMMISSIONS
The Property Management Commission will usually be awarded to a

consultant for a three year term.
The proper ty manager will effectively take control of all functions

including:
• estates services;
• maintenance;
• works.
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INDIVIDUAL PROJECT MANAGEMENT TYPE COMMISSIONS
CONSULTANTS SECTION
CST 1.4 INDIVIDUAL PROJECT MANAGEMENT TYPE COMMISSIONS
A project manager (PM) will generally be appointed for major Works

Projects and will be appointed to take overall control of the Project.
The PM is required at two discrete stages:
• for feasibility studies and development of the Department’s brief;

➧ CRS 9.1
• for managing the works on site.
It is generally recommended that the two stages are fulfilled by two

separate project management organisations.
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INDIVIDUAL DISCIPLINE COMMISSIONS
CONSULTANTS SECTION
CST 1.5 INDIVIDUAL DISCIPLINE COMMISSIONS
Where there are specific or one-off requirements for consultant

services it is not appropriate to appoint consultants on a term contract.
Terms and conditions in respect of the following services are contained

in the Works Commission consultant documentation - GC/Works/5
General Conditions for the Appointment of Consultants (1998) - ISBN
0-11-7023108:
• project manager or lead consultant
• architect/building surveyor
• quantity surveyor
• structural engineer
• building services engineer
GACC
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TERM COMMISSIONS
CONSULTANTS SECTION
CST 1.6 TERM COMMISSIONS
A term commission can be used where there is definable and expected

repetitive work over a period of time. The recommended duration for
term commissions is three years.
The principal advantages of term commissions are:
• three year terms reduce the cost to the Department of the

procurement activity;
• consultants will bid competitively if they can be assured of a

continuous flow of work for a known period;
• consultants have time to develop a clear understanding of the

Department’s needs and should be able to work more effectively to
satisfy those needs.
The types of activities which are generally appropriate for term

commissions are:
• property management commissions;
• project management and design and cost services where there is an

ongoing building programme;
• audit services;
• legal services.
GC/Works/5, General Conditions of Appointment of Consultants:

Framework Agreement (1999) (ISBN 0-11-7023329) is suitable for
appointing a range of construction professionals for a period of three
to five years on a ‘call off ’ basis.
GACC
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IDENTIFICATION
COMMISSION FILE
CONSULTANTS SECTION
CST 2.0 COMMISSION FILE
CST 2.1 IDENTIFICATION
Each Department is likely to have an existing system for numbering

identifying and opening new commission files. This section is therefore
provided by way of guidance and describes points of general
impor tance and application. When the need for a commission has been
identified, consideration should be given to the following important
points:
• each commission should have a reference code assigned to it. It

should identify the Depar tment as well as a unique reference
number for the commission;
• it is generally common practice to open a registered file which is

assigned the commission reference number, and which contains all
of the papers relating to the commission;
• it is good practice to use the unique reference number in all

correspondence relating to the commission, and to insist that all
par ties to the commission also use the reference number in their
correspondence;
• it is likely that the commission file will comprise a number of files

and sub files and all such files should also be assigned the unique
reference number;
• an important aspect of the commissioning file is that it provides a

record of procurement practice adopted. The file or files are then
available to demonstrate that steps have been taken to procure
services in a way which aims to achieve best value for money.
The documents in the commission file are likely to include:
• records of meetings at which matters affecting the setting up of the

commission were discussed;
• minutes requesting and giving financial and contractual approval to

further action;
• records of the pre-selection process for choosing the firms (copies

of the corporate brochure or general information about a firm need
not be retained on the commission file);
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IDENTIFICATION
COMMISSION FILE
CONSULTANTS SECTION
• records of formal interviews and recommendations therefrom;
• records of EC advertisement and replies, if applicable;
• the business case including:
- a record of the pre-tender estimate;
- a schedule of potential project risks;
- a record of the consideration of PFI alternatives, where

appropriate;
• a record of the proposed tender evaluation criteria;
• a set of the tender documents as issued to tenderers (other than

standard printed documents);
• copies of correspondence during the tender period;
• admissible tenders received, placed in a folder;
• the tender summary sheet;
• any correspondence pertaining to consideration of the tenders;
• the evaluation report and recommendation to accept a tender;
• the appropriate delegated approval to accept a tender;
• a copy of the acceptance letter together with the acknowledgement

of acceptance by the successful tenderer;
• a copy of the decline letter sent to unsuccessful tenderers;
• copies of any requests for debriefing by unsuccessful tenderers

together with the Depar tment’s response.
Key Points
• Records are required to demonstrate that best value for money has
been sought.
• Records may also be essential to demonstrate that tenderers have

not been unfairly excluded in the event that EC Procurement
procedures have to be followed, and a challenge is raised by an
unsuccessful tenderer.
GACC
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SUB FILES
COMMISSION FILE
CONSULTANTS SECTION
CST 2.2 SUB FILES
Each stage of the commission process can produce bulky documents

(firms’ presentation documents, tender documents, firms’ bids, and
evaluation reports etc.). It is therefore recommended that, where such
documents may be easily separated from the main file, sub files are
created to hold these documents.
Each sub file should carry the unique commission reference number,
and it is common to give each sub file an alphabetical suffix. Where sub
files are created, it is recommended that an index of sub files is held at
the front of the main file.
GACC
EDITION 2: FEB 1998 CST 2.2
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RETENTION PERIODS
COMMISSION FILE
CONSULTANTS SECTION
CST 2.3 RETENTION PERIODS
There are four principle reasons for retaining commission files:
1. To provide records for use as an aide memoire for future projects.
2. To provide a record for auditing purposes, especially in respect of

commissions procured in accordance with EC public procurement
rules.
3. To comply with legal obligations to do so. In accordance with the

CDM Regulations the Depar tment is under an obligation to keep
available for inspection a health and safety file for what amounts to ➧ LE 2.1
the entire life of the building.
4. To provide evidence of the agreement and of the conduct of the

commission in the event of legal action, which either the
Depar tment feels appropriate to take, or against which the
Depar tment is required to mount a defence.
In the case of legal action the periods for which the Department may
have legal liability are limited by statute, and vary depending on the ➧ LE 1.9
circumstances.
The minimum period is six years from the date of the breach. If the
contract is by deed, however, the period is 12 years. The position is
more complex in respect of liability for negligence where the periods of
liability may be determined by reference to the Latent Damages Act
1986. Duties of care may be owed by the project manager, the
designers and the contractor for periods of up to 15 years, and in some
cases beyond. This should therefore be taken into account when
assessing the retention period for all documents relating to major
works projects.
It is recommended that documents relating to unsuccessful tenders

should be retained until completion of the commission.
GACC
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RETENTION PERIODS
COMMISSION FILE
CONSULTANTS SECTION
CST 2.3(SCOT) RETENTION PERIODS
1. To provide records for use as an aide-memoire for future projects.

rules.
ç
CDM Regulations the Department is under an obligation to keep
LE 2.1
available for inspection a health and safety file for what amounts to

Department feels appropriate to take, or against which the
Department is required to mount a defence.
ç
LE 1.9
have legal liability are limited by statute, and vary depending on the
circumstances.
Remember that the vast majority of all contractual obligations will

expire under the ‘short negative prescription’, ie after five years from
the date when the obligation becomes enforceable, if the necessary
conditions are satisfied. Before an obligation prescribes, however, the
relevant period of time must have passed without any ‘relevant claim’
(see LE 1.9) by the creditor, or any ‘relevant acknowledgement’ (again,
ç LE 1.9
see LE 1.9) by the debtor.

should be retained until completion of the contract.
GACC
EDITION 2 REV 2: JAN 2000 CST 2.3(S)
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SELECTION OF FIRMS
CONSULTANT SELECTION
CONSULTANTS SECTION
CST 3.0 CONSULTANT SELECTION
CST 3.1 SELECTION OF FIRMS
The principle aim of the procurement process is to select a consultant

which offers the best value for money. This will nearly always involve a
process of competitive tendering. Value for money for a particular
commission means optimising the balance between best performance
or quality of service and lowest price. The aim is always to secure and
maintain the quality of service received.
To avoid complacency and therefore secure ongoing competitive

performance, as well as avoiding questions of favouritism, it is
recommended that the frequent use of the same consultant or the
same list of consultants is avoided. Care must also be taken to enforce
standard conditions of consultancy contracts if an ex-employee of a
Department is contracted with, and this should only be as the result of
an open tender. As with using the same consultant frequently, such
consultancies can be viewed with suspicion, resulting in accusations of
favouritism or nepotism. Finally, it should be kept in mind that
consultants are not employees of the Department, and should
therefore be maintained at arm's length contractually.
It may be that in exceptional circumstances the timescale or the type of

commission necessitate the appointment of a consultant on the basis of
a single tender action. This means that the competitive process is not
followed and generally that the contract and in particular price are
negotiated with one consultant. Where such a procedure is unavoidable
it will normally be necessary to obtain the appropriate delegated ➧ CST 3.10
authority before proceeding.
Because of the difficulty of assessing and evaluating quality prior to

delivery of the service, it is important to have in place procurement
procedures which provide as early as possible to the Department, as
much information as possible about the likely quality of the service
offered by tenderers.
It should also be borne in mind that if any consultant has a role in the
direct commissioning of construction works or where he acts on behalf
of a Department, he will be covered by the Construction Industry Tax ➧ LE 2.11
Scheme.
GACC
EDITION 2 REV 2: JAN 2000 CST 3.1.1
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SELECTION OF FIRMS
CONSULTANTS SECTION
The following steps are therefore recommended in order to obtain a

short-list of suitable consultants for tender :
Consult DETR Gather market Keep a list of

Constructionline intelligence about consultants who
Register (NQS) consultants serve you well or
for development including have served you
of the long list references well in the past
regarding past
performance
Identify long list
Confirm consultant’s interest
Identify pre-selection criteria
For larger commissions eg Where unfamiliar with

for project management, consultants arrange pre-
request a statement of selection interviews to
interest in the form of a assess basic abilities
questionnaire
Evaluate pre-selection data and form short list
Inform consultants of outcome
Where the EC procurement rules apply then the pre-selection process,

using the restricted procedure, will be as follows:
GACC
CST 3.1.2 EDITION 2 REV 2: JAN 2000
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SELECTION OF FIRMS
CONSULTANTS SECTION
OJ contract notice and UK advertisements specifying the basis on

which the pre-selection will be carried out.
Initial paper sift
Appraisal of expressions of interest
Office visits (optional)
Financial checks
Pre-qualification interview (optional)
Pre-qualification scoring
The next stage of the selection process is the invitation of tenders and
choice of consultant. The following steps are recommended in order to
select a consultant from the short list:
Decide on award criteria, in particular weighting of quality

and price
Send out tender documents including detailed brief requesting a

submission by consultant of method statement prior to attending a
pre-tender interview
Decide on need for pre-tender interview at which quality of service

required and understanding of the brief is considered
Check consultant tenders for conformity and evaluate price and

quality against stated criteria
Award contract
(continued
overleaf)
GACC
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SELECTION OF FIRMS
CONSULTANTS SECTION
Advise all consultants
Debrief if requested
The steps involved in obtaining a short list and in selecting the

successful consultant set out above need not be rigidly adhered to in
every case.
Simple or small standard commissions may not require either pre-

selection or pre-tender interviews for example.
The remainder of part CST 3 and parts CST 4-7 of this section give
detailed guidance in relation to each of the above steps.
In certain circumstances the negotiated procedure, with advertising,

may be used instead of the restricted procedure if one or more of the
following derogations apply:
• exceptionally, when the nature of the services to be provided, or the

risks attaching thereto, are such as not to permit prior overall
pricing;
• when the nature of the services to be provided, in particular in the

case of intellectual services or financial services specified in category
6 of Part A of Schedule 1 of the Public Services Contracts
Regulations, is such that specifications cannot be drawn up with
sufficient precision to permit the award of the contract using the
open or restricted procedure.
Under the negotiated procedure the process is the same as the

restricted procedure up to pre-qualification scoring. Following this, the
contracting authority may negotiate the terms of the contract with
those companies it has selected. These negotiations should be
consistent with the agreed award criteria. Authorities can choose to
invite initial proposals and further sift the candidates, following which
they may invite tenders or even, if they so choose, negotiate down
from the short list to a single provider and ask him to submit a bid.
Key Point
• A consultant is covered by the Construction Industry Tax Scheme if

he has a role in the direct commissioning of construction works or ➧ LE 2.11
where he acts on behalf of a Department in this context.
GACC
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NEW QUALIFICATION SYSTEM (NQS)
CONSULTANTS SECTION
CST 3.2 NEW QUALIFICATION SYSTEM (NQS - FORMERLY CONREG)
Constructionline is the name of the service which utilises the NQS

database. Where the EC procurement rules do not apply, then the long
list of contractors can normally be obtained from the NQS.
Its purpose is to validate prior to tender, the financial standing,

managerial capability, technical competence and resource capacity of
bona fide firms wishing to undertake a wide variety of construction and
property related services. The NQS is free of charge to clients and is a
powerful tool designed to minimise the risk of the user against
company failure, poor workmanship and fraud. The data helps to ensure
that public bodies only deal with reputable firms and financially sound
companies and saves time and valuable resources in the vetting of firms
being considered for an invitation to tender.
The NQS includes details of a firm’s staffing, specialisms of work a

consultant can undertake, current and completed work recorded as
‘feedback’ by the users, and an assessment of the maximum individual
contract value a firm may accommodate (the notation).
Departments can access the NQS on-line, under the auspices of a BT

managed telecommunications service. The IT Helpdesk and client
liaison responsibility are located in Edinburgh.
Any depar tment, agency or NDPB wishing to access the NQS will
need to do so via an on-line computer link. Any requests for Access
Packs or additional information/advice can be obtained from the
contacts listed overleaf.
Key Point
• More detailed information on the NQS is contained in CAU

Information Note 27/98. A copy can be obtained by phoning the
CAU Helpdesk on 020 7271 2833.
GACC
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NEW QUALIFICATION SYSTEM (NQS)
CONSULTANTS SECTION
Organisation Structure of Constructionline
Head Office for Constructionline and the processing responsibility for

firms based in England, Wales, Scotland and Northern Ireland is located
at:
Constructionline
Great West House
Great West Road
Brentford
Middlesex
TW8 9DF Tel: 020 8380 4600
Constructionline Director: Chris Leggett

Development Director: Colin Garton
Operations Manager: Paula Beresford
* Client helpdesk and technical support is currently located at:
Constructionline
The Basement
17 Atholl Crescent
Edinburgh
EH3 8HA Tel: 0131 229 9449
*Note: the processing responsibility for firms based in Scotland moved to

the Brentford office in October 1998 but the client helpdesk and technical
support responsibilities have been retained.
IT Helpdesk Tel: 0870 607 1602
Client Services Manager Tel: 0870 607 1602
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THE LONG LISTING PROCESS
CONSULTANTS SECTION
CST 3.3 THE LONG LISTING PROCESS
The production of the long list is the first step towards establishing a
viable tender list which will ensure genuine competition among capable
suppliers.
The long list will be compiled from the following possible sources:
• NQS;
• market intelligence gathered by the Department;
• list of consultants who have serviced the Department well in the

past.
It is recommended that the long list be limited to 10 in number.

The key criteria for selection of firms for the long list are:
• experience in the general area of the commission;
• track record on similar commissions.
It may be useful at this stage to ask firms who are not known to the
Department to provide brochures and possibly references to confirm
experience and track record.
When the long list has been fixed, a preliminary enquiry should be sent
to each firm on the list to ask them to confirm without obligation that
they are interested, that they have the resources and that they will
submit a tender if asked.
It is recommended that replies are requested in writing and by a given

date.
Key Points
• An example preliminary enquiry is given in the form of CST/SF1

overleaf.
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CONSULTANTS SECTION
STANDARD FORM 1 - LETTER

CST3/SF1
Preliminary Enquiry Letter
Dear Sir
PRELIMINARY ENQUIRY RE [TITLE OF PROJECT]
The [Scottish Ministers]/[Secretary of State] acting through [Department] intend(s) to

commission [state professional service] in connection with the above project. Brief
particulars are [enclosed/as follows:]
The following is the proposed procurement programme in connection with this

commission:
• Date of invitation to tender: ..............................................................................
• Date of contract award: ........................................................................................
• Commencement of Commission: ...................................................................
• Duration of Commission: .....................................................................................
You are invited to confirm in writing your interest in being included in the tender list by
....................... [Date]. Please also advise us of any special reasons which you consider support
the inclusion of your company on the tender list.
You should note that a negative response will not prejudice your company’s prospects of
being invited to tender in the future.
Please also note that the details given in this preliminary enquiry may change and neither
this enquiry nor your positive reply to it in any way guarantee that you will be included on
the final tender list or that the commission will proceed at all. In addition the above
information is to be treated as strictly confidential.
Yours faithfully
GACC
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IDENTIFY PRE-SELECTION CRITERIA
CONSULTANTS SECTION
CST 3.4 IDENTIFY PRE-SELECTION CRITERIA
In order to form a final short list, it is necessary to establish the criteria

to be applied in evaluating those firms on the long list, and to decide
which criteria are most impor tant given project requirement. The
greater the extent to which the brief has been defined, then the more
focused the pre-selection evaluation can be.
The key criteria for pre-selection are as follows:
• track record on similar commissions, in terms of:
- approach (method of working, management, client liaison),
- technical ability,
- performance to quality, time and cost constraints,
- professional resources and support facilities available;
• qualification of key staff;
• financial standing;
• adoption of a quality management system;
• outline suggestions for approaching the commission, in terms of:
- experience of the proposed project manager/team leader,
- how the commission will be organised and managed,
- technical, managerial or design method;
and any project specific requirements such as:
• location of consultant’s offices;
• specific expertise, such as knowledge of language or procedures.
Once these criteria have been established then the pre-selection

information must be obtained for evaluation.
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PRE-SELECTION INFORMATION
CONSULTANTS SECTION
CST 3.5 PRE-SELECTION INFORMATION
Having compiled the long list and decided upon the pre-selection
criteria to be used to evaluate those on the list, pre-selection
information must be gathered.
Where the Department is unfamiliar with a firm on the long list, or

uncertain about the firm’s abilities in a certain field, then the best means
of gathering information is by arranging a pre-selection interview.
A brief should have been developed by this stage, and more value can
be obtained from the meeting if the project specific brief is provided to
the consultant before the meeting. Specific questions can be asked
about the firm’s initial views on how they would approach the
commission and who might be expected to do the work. If a
preliminary enquiry has been sent, and the firm has responded
positively, then standard form 2 - Request for preliminary interview may
be sent enclosing the brief. (See CST3/SF2).
It is recommended the two members of the Department attend the

interview. Neither member should have any conflict of interest with the
firm being visited.
The meeting should be arranged with the firm’s key personnel at the
consultant’s offices. Much information may be gathered from such a
meeting, such as:
• overall expertise;
• the range of work that the firm would be interested in doing;
• any special areas of Consultant expertise;
• resources and support facilities;
• use of IT;
• financial soundness;
• apparent efficiency of staff and the way the office is run;
• nature of staff employed;
• office size and location.
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CONSULTANTS SECTION
The purpose of the interview is for the Department to assess the

suitability of the firm for Government work in the required area. It is
also an opportunity for the firm to get to know you and find out more
about your specific needs, potential work programme, and way of
working.
For larger type commissions it is advisable to prepare a questionnaire

which specifically addresses the chosen pre-selection criteria. A
response should be requested by a specific date. The consultant should
be asked to give information about each of the pre-selection criteria
and specifically to indicate likely team size, members and relevant
experience.
Key Points
• Pre-selection interviews are a useful way of finding out about

companies and the market generally.
GACC
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CONSULTANTS SECTION

CST3/SF2
Request for Pre-Selection Interview
Dear Sir
[TITLE OF PROJECT]
Thank you for you positive response to our preliminary enquiry dated [date].
A copy of the provisional brief is enclosed. We will shortly be inviting competitive bids for
this commission and intend to select a short list of consultants for the competition. We
would therefore like to meet you at your offices to discuss the type of work you undertake
and to assess you suitability for this commission in terms of the following:
For example:
• overall expertise and experience;
• the range of work that you are interested in doing;
• special areas of consultant expertise;
• expertise and experience relevant to this project;
• resources and support facilities;
• use of IT;
• financial soundness.
Please contact me to arrange a suitable appointment
Yours faithfully
GACC
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COMPILATION OF SHORT LISTS
CONSULTANTS SECTION
CST 3.6 COMPILATION OF SHORT LISTS
When all pre-selection information has been gathered, and evaluated,

the shor t-list can be produced. The number of tenderers selected for
the shor t list will depend on the size and complexity of the project. ➧ CST 3.7
Those who are not shor t listed should be advised in writing. Standard
Form 3 - exclusion notification, may be sent (see CST 3/SF3). There are
two alternative paragraphs depending on whether or not a pre-
selection interview was held.
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COMPILATION OF SHORT LISTS
CONSULTANTS SECTION

CST3/SF3
Exclusion Notification
Dear Sirs
[TITLE OF PROJECT]
Thank you for your letter of [date] expressing an interest in being invited to tender for the
above contract.
[or, (if attended pre-selection interview): Thank you for the opportunity of meeting you on
[date] to discuss your firm and the above project].
After careful consideration I must advise you that on this occasion the Department does
not intend to invite you to tender.
Please be assured that this decision in no way affects the prospect of you being invited to
tender for suitable work in the future.
Yours faithfully
GACC
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NUMBER OF TENDERERS
CONSULTANTS SECTION
CST 3.7 NUMBER OF TENDERERS
Other than in very unusual circumstances, contractors and consultants

are not directly reimbursed for the costs they incur in preparing
tenders. This is an overhead to the business in question. One of the
ways of contributing to increased industry efficiency encouraged by the
Latham Report, is to reduce the cost of tendering. Departments may
make an important contribution in this respect by keeping to a
minimum the number of firms who are invited to tender.
The number of firms selected for the short list would depend on the
type and size of commission, but it is generally recommended that 3 or
4 firms are selected.
Where the EC rules apply and the restricted procedure is being used,
the contracting authority may specify the range in the Contract Notice
from within which the number of tenderers will be invited to bid. The ➧ EPP 1.11
lower number of the range must not be less than 5 and the higher
number not more than 20.
If an authority chooses not to specify a range then it is free to invite

any number of bidders provided it is sufficient to ensure genuine
competition (normally not less than 3).
It is recommended that in any event no more than 6 consultants are

invited to tender.
Where the Department is seeking to establish a national panel of say

10 architectural consultants on the basis of framework agreements
then it is appropriate to invite tenders from say 30 consultants in one
go. Clearly this is the equivalent of 10 separate commissions and so the
ratio of three tenderers to one contract is maintained.
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QUALITY PRICE MECHANISM
CONSULTANTS SECTION
CST 3.8 QUALITY PRICE MECHANISM
The final decision as to which consultant offers the best value for
money will be determined by:
• the size and scope of the commission;
• the complexity of the commission;
• quality considerations of tenderers, such as qualifications, experience

and track record etc.;
• the prices offered by tenderers.
In coming to a final decision it is worth bearing in mind that the

labourer is worthy of his or her hire. Best practice private sector clients
and Departments have all learnt to their cost that the cheapest bid
does not necessarily result in overall long term best value for money.
Cut price tenders usually result in cut price inputs, where more work is
carried out by less experienced professionals or technicians, and the
Department suffers as a result of a less attentive service provider.
It is therefore important to consider both quality and price during the

evaluation. The term best value for money means selecting a consultant
who offers the optimum combination of quality and price. Hence, these
factors should be considered in the final choice of consultant.
A very useful approach to tender evaluation is to use a quality/price

mechanism which is based on a numerical scoring and weighting
system. The advantages of this are that:
• it formalises what can be a very subjective evaluation process;
• it requires forethought as to what are the most important criteria

for selection;
• it can be transparent;
• it can be audited.
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CONSULTANTS SECTION
The quality/price mechanism should be decided upon at the outset of

consultant procurement. The Tender Board should be appointed at this
stage for this purpose. If the brief continues to be developed it may be
ç CST 4.10
necessary to change some of the evaluation criteria and or their

weightings, but the mechanism should be finalised before pre-tender
interviews commence.
The finalisation of the quality/price mechanism involves deciding upon

the following:
• the quality criteria which will be used; standard form CST3/SF7 is an

example of quality marking sheet; ç CST 3.9
• the weighting which should be attached to each of the chosen

criteria;
• the quality price ratio; in other words the relative importance of

quality and price.
The weighting of quality against price will be influenced by the

complexity of the project and the degree of creativity or flexibility that
is required in its execution. For example the more complex the project,
the harder the project will be to manage and control; the more unusual
the project the harder it will be to make predications about resource
levels and the more skill that will be required of the consultant.
Experience, technical competence, management skill and management
systems will take on a far more significant level of importance for
complex projects. For the quality/price mechanisms to reflect this shift
in balance, more weight should be given to quality criteria than to
price.
Indicative quality/price ratios for consultant services are as follows:
Type of project Indicative quality/price ratio
Feasibility studies 80/20 to 90/10
Innovative projects 70/30 to 85/15
Complex projects 60/40 to 80/20
Straightforward projects 30/70 to 60/40
Repeat projects 10/90 to 30/70
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CONSULTANTS SECTION
Key Points
• The final selection should be based both on quality and price.
• The numerical/price mechanism is a useful decision support tool but

there may be good reasons why the final choice may nevertheless
require some subjective judgement.
• Any decision as to the final choice of consultant must be justifiable

on the basis that the consultant offers overall long-term best value
for money.
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PRE-TENDER INTERVIEW STAGE
CONSULTANTS SECTION
CST 3.9 PRE-TENDER INTERVIEW STAGE
Purpose
The pre-tender interview stage is the first of a two par t tender

evaluation process. The purpose behind the pre-tender interview is to
provide for the separate initial evaluation of quality. The short list may
be further reduced as a result of this quality evaluation, and only those
who satisfy the quality requirements/quality threshold of the
commission will be invited to submit a price.
Enquiry
A date and time should be arranged for pre-selection interviews with

each of the shor t listed consultants. Each consultant should be
contacted to confirm their availability to attend a meeting at the
required time.
It is essential that the consultant, or principal consultants, who will be

expected by the consultant firm to carry out the commission is/are
actually available to attend the interview. If the consultant already has
the brief then this should be stipulated at the time of arranging the
meeting. If not then this should be confirmed after the consultant has
received the full tender documents referred to below.
Send out Tender Documents
Having determined availability to attend the pre-tender interview, an

invitation letter is sent (see CST3/SF4). The consultant is not actually
invited to tender at this stage, but is provided with the brief and
conditions of engagement so that the consultant may give detailed
consideration to the project requirements and determine which
resources are appropriate to carry out the commission. If any of the
➧ CST 4.3
consultants have not already done so then they should be provided

with a questionnaire to be completed and returned prior to the
interview. (An example questionnaire is provided in the form of
CST3/SF5).
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CONSULTANTS SECTION
Reasonable time should be allowed for the following:
• consultant’s preparation of their submission;
• consultant’s response to the questionnaire;
• consideration of submissions and any questionnaire by the proposed

members of the interview panel (usually three members of the
Department);
• confirming attendance of each consultant’s proposed team.
When submissions are received they should be circulated to all

members of the panel for their scrutiny. The panel should focus on any
areas of weaknesses, and highlight the need for specific questions in the
interview.
Although optional, a Department may choose to carry out a

preliminary scoring of each of the consultants submissions prior to
interview, on a score sheet (See CST/SF7). These scores can then be
re-visited post-interview.
The Interview
The pre-tender interviews should be held at the Department’s offices.

It is recommended that consultants are kept from meeting one-another,
otherwise this may affect prices subsequently submitted.
It is also recommended that the pre-tender interview is attended by a

panel of three members of the Department, one of whom is
nominated chairman to lead the meeting, and that the meeting is
limited to a duration of one hour. For an example of an agenda see
CST3/SF6.
It is advisable to allow sufficient time between interviews to allow for

an overrun in interview time and to allow for the quality scoring of the
consultant by each panel member.
Each consultant should be treated fairly and equally and each

interviewer should be objective. Prior to the interviews, the panel
should set aside time to discuss and agree the nature of questions and
specific questions to be asked of each consultant.
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CONSULTANTS SECTION
Within the framework of the example agenda (see CST3/SF6), the

principal areas which should be covered in the interview are:
• the consultant’s understanding of the commission;
• the way in which the consultant might expect to handle the

commission;
• the clarification of ambiguities by either side;
• the clarification of any particular areas of concern amongst panel

members;
• the development of a clearer understanding of each others

requirements.
Questions should be directed to ensure that each panel member has

sufficient information to score each consultant. An example score sheet
is given at CST3/SF7, and this will be completed by each panel member
at the conclusion of each interview. Note that this sheet has examples
of weightings for each criteria, but that each one is scored out of 100.
The weightings are subsequently applied to determine the overall
weighted average quality score.
It is also essential that one of the panel members keeps notes of who
attended, answers to questions, and in particular any undertakings given
by a consultant.
At the completion of all interviews, the chairman leads a review of the

comparative findings of the panel, and produces a summary sheet for
each consultant which consolidates the marks of individual panels
members. An example summary sheet is given at CST3/SF8. Formal
recommendation will than be prepared which identifies those which
should be included on the final tender list.
It is not the intention of this process to result in the selection of a final

short list of consultants who all have an equal quality score, but merely
to exclude those who are considered unsuitable or fall short of a pre-
determined quality threshold.
If it is decided to exclude any firms from the short list at this stage then
they should be sent a decline letter in the form suggested by CST3/SF9.
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CONSULTANTS SECTION
Key Points
• The purpose of the pre-tender interview is to assess quality not

price.
• Each consultant should be treated equally and fairly.
• It is essential to keep records of all questions, scoring and decisions

so that an audit trail is available.
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CONSULTANTS SECTION
STANDARD FORM 4 - LETTER CST3/SF4
INVITING CONSULTANT TO ATTEND FORMAL INTERVIEW
Dear Sirs
[TITLE OF PROJECT]
The [Scottish Ministers]/[Secretary of State] acting through [Department] intend(s) to

commission ........................... [state professional service] in connection with the above .
The provisional brief and Conditions of Engagement for the commission is enclosed, and it
is anticipated that the following services, as defined in the conditions of appointment
described above, will be required:
It must not be assumed that conditions are unchanged from previous editions.
It is expected that the fee competition for this commission will be on the basis of a
..................................... [specify either lump sum, or time charges or percentage of the project
value].
You are invited to attend a selection interview which will last an hour with representatives
of [Department] on ....................[date] at ...................... [time] in ..................................... [address] to
discuss how you would propose to carry out the services required, your experience of
similar projects the structure and available resources of your practice, workloads, facilities,
special expertise and the details of the principal and senior staff whom you propose would
be responsible for the project. The [Department] will detail its requirements and method of
working and will answer questions you may have during the interview. [A questionnaire is
enclosed which I would be grateful if you would complete and return to me by ................].
Following the interviews, [selected] consultants will be invited to submit their fee proposals
which will be taken into account when deciding which consultants should be awarded the
commission.
Will you please confirm as soon as possible that the proposed date and time for the
interview is convenient to you and let me know who will be attending. It is of course, for
you to decide who should attend the interview but we would expect to meet the
proposed account manager and senior consultant who will be responsible for the day to
day operation of this commission.
Please note the [Department] is not bound to accept your proposal.
Yours faithfully
GACC
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CONSULTANTS SECTION
STANDARD FORM 5 - QUESTIONNAIRE CST3/SF5
FOR COMPLETION AND SUBMISSION BY CONSULTANT PRIOR TO

ATTENDING PRE-TENDER INTERVIEW
QUESTIONNAIRE
Please give details of the following:
(1) Outline how the brief would be tackled.
(2) The structure, resources, organisation, and location of the office which would
undertake the commission.
(3) Name, qualifications and summary of relevant experience of Partner/Principal/

Director proposed as responsible for the commission and any other Partners/
Principals/Directors who may be involved and the anticipated extent of their
involvement.
(4) Names and qualifications of senior staff likely to have involvement with the
commission and the input they are likely to have over the life of the commission.
(5) Experience of commissions of comparable size, complexity and nature in UK and

overseas.
(6) Previous experience in working for Departments and other public authorities.
(7) Confirmation of whether all the specialist experience or expertise necessary for this
commission is available from within the practice. If this specialist experience or
expertise is not so available how and from whom it would be obtained.
(8) Computer facilities and experience which are available, highlighting any specialist
techniques.
(9) Insurances, indemnities, securities which are held; or would be taken out for this
commission. The level of insurance must meet the [Department’s] requirements.
(10) What Quality Assurance schemes/systems operate.
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CONSULTANTS SECTION
STANDARD FORM 6 - AGENDA CST3/SF6
SAMPLE AGENDA FOR FORMAL INTERVIEW OF CONSULTANTS
AGENDA
(Allow maximum of 1 hour to complete)
a) Chairman welcomes Firms’ representatives and introduces interviewing panel

members.
b) Chairman outlines purpose and structure of interview and time to be allowed.
c) Firms’ presentation (approx. 20 mins)
d) Interview panel questions (approx. 30 mins)
e) Questions from Firm/Clarification of any point.
f) Chairman to close
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CONSULTANTS SECTION
STANDARD FORM 7 - SCORE SHEET CST3/SF7
INTERVIEW ASSESSMENT FORM
Commission Title Title:

.........................................................................................................................................................................
..........................................................................................
Firm:
......................................................................................................................................................................
............................................................................................................................... .......................
Represented by:
.......................................................................................................................................................................
..........................................................................................
Panel Member:
......................................................................................................................................................................
..........................................................................................
Comments (A) (B) (A) x (B)

Weight in g Marks weighted
(out of 100) marks
1. Appreciation of the commission 20
2. Calibre of relevant professional staff. 20

Accounting and management skills
and depth of experience
3. Quality of account manager (for the 20

whole commission)
4. Approach to undertaking the 20

commission, including resources
allocated and ability to cope with
peak workloads
5. Experience of similar commissions 5
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CONSULTANTS SECTION
Comments (A) (B) (A) x (B)

Max Marks weighted
(out of 100) marks
6. Experience of public sector work 5
7. Quality Assurance/Checking systems 10
8. Specialist advice to be bought in N/A N/A N/A
Mark awarded 100
SIGNATURE: DATE:
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CONSULTANTS SECTION
STANDARD FORM 8 - SCORE SHEET CST3/SF8
INTERVIEW SUMMARY SHEET
1. Name of Company: ...................................................................................................................................................
2. Represented By: ...........................................................................................................................................................
3. Name of Commission: .............................................................................................................................................
4. Commission Ref No: ................................................................................................................................................
5. Date of Interview: ......................................................................................................................................................
6. Time of Interview: ......................................................................................................................................................
7. Summary of Overall Assessment Markings: ..............................................................................................
PANEL MEMBERS MARKING TOTALS

(WEIGHTED SCORE)
PANEL MARKING TOTAL
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CONSULTANTS SECTION
8. Comments: ..........................................................
..........................................................
..........................................................
..........................................................
9. Chairman’s Signature: ..........................................................
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CONSULTANTS SECTION
MODEL LETTER TO UNSUCCESSFUL SHORT LISTED FIRMS
Dear Sir
[TITLE OF PROJECT]
Thank you for attending at these offices for interviews on
After careful evaluation of your proposal I must advise you that yours was unsuccessful and
you will not be invited to provide a fee bid on this occasion.
Please be assured that this decision in no way affects the prospect of you being invited to
tender for suitable work in the future.
Yours faithfully
GACC
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SINGLE TENDER
CONSULTANTS SECTION
CST 3.10 SINGLE TENDER
In the case of some specialist works or work of an experimental

nature, competition may not always be possible or practicable. In such
situations single tender action may be unavoidable.
Before single tender action is sanctioned, special care should be taken

to ensure that other consultants are not capable of providing the
required service.
It should be remembered that single tender action may not lead to the
best possible value for money.
Single tender action must be sanctioned by the appropriate authority in

accordance with the laid down delegations.
The submission for authority to proceed with single tender action

should give clear and convincing reasons for taking such action and a
copy of that submission and subsequent approval must be kept on the
commission file for future reference.
The EC Services Directive sets restrictions on negotiated commissions

which exceed the EC thresholds and these must be considered prior to ➧ EPP 1.8
approving single tender action.
Key Points
• It may be acceptable in exceptional circumstances to pursue a single

tender action procurement route, but this will usually require
obtaining the appropriate delegated authority.
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GENERAL
TENDER PROCESS
CONSULTANTS SECTION
CST 4.0 TENDER PROCESS
CST 4.1 GENERAL
The tender process involves the invitation by the Department to

tenderers to submit their price in respect of the proposed commission.
Where the consultant procurement procedures recommended by the
guide are being followed, then the quality assessment will already have
been carried out. If this is the case, then during the tender period the
consultant will have only to review the level of resources required and
submit the price. However, the price itself may have implications
regarding resourcing. Since resourcing is a quality issue this aspect in
par ticular may necessitate a re-appraisal of the quality score arrived at
after completion of pre-tender interview.
The principal stages in the tender process are as follows:
Prepare clear, consistent and comprehensive tender documents
Determine sufficient time for tender period
Issue tender invitation and tender documents to tenderers enclosing

label and specific date time and address for return
Facilitate any site visits required by tenderers
Deal with tenderers queries promptly - and advise all other

tenderers of information given
Place all tenders received in the tender box
Sor t tenderers by name or preferably by price and assign a unique

tender number to each
List tenders received, not received, on tender summary sheet
List tender number, opening date, name and price in tender

record book
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GENERAL
TENDER PROCESS
CONSULTANTS SECTION
By way of introduction, the following are the key points which relate to
the tender invitation and operating process:
• the guidance given here applies not only to the Department but to
any consultants procuring consultant commissions on behalf of the
Depar tment;
• it may be appropriate to check tenderers against NQs to ensure

that there has been no change of status since the longlist was ➧ CST 3.2
prepared;
• in order to ensure consistency of information provided to tenderers

it is recommended that only one person in the Department acts as
a contact; this helps to ensure the fair treatment of all tenderers;
• it is recommended that tenders are always returned to the

Depar tment’s offices, where they should be kept securely (in a
tender box) until they are opened;
• from the time of opening to award of contract, tenders should be

kept securely and all tender information treated as strictly
confidential;
• a clear audit trail should be established.
The procedures for tender receipt, opening and evaluation which

follow may seem onerous, but it is essential to have procedures in place
which protect the individuals involved from claims of corruption or
impropriety, and which ensure that the tenderers are par ticipating in a
fair competition.
Key Points
• Tenders should be kept secure from the time of receipt until the
final award of contract.
• Clear records must be kept of each step.
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FORMS OF TENDERING
TENDER PROCESS
CONSULTANTS SECTION
CST 4.2 FORMS OF TENDERING
The intention behind the pre-tender interview stage is to evaluate

quality separately from and ahead of price, before a final decision which ➧ CST 3.9
combines the two.
Although not the preferred approach, there is an alternative method of

keeping tenderer’s submissions on quality and price separate. This is
known as the double - envelope method. Where the quality and price
elements of the tender are submitted in separate envelopes. This may
take two different forms:
• the common approach is for all consultants technical envelopes to

be opened and evaluated; all consultant’s price envelopes are then
opened and evaluated separately; the consultant with the most
favourable combination is then selected;
• the alternative approach is that selection is on quality only; i.e. only

one price envelope is opened, that of the best quality tenderer ; the
price envelopes of the unsuccessful tenderers are returned.
The problem with the latter option is that there is no way of ranking all
consultants by combination of quality and price and therefore no way
of knowing whether the selected tender offers the best value for
money option.
GACC
HOME
TENDER DOCUMENTS
TENDER PROCESS
CONSULTANTS SECTION
CST 4.3 TENDER DOCUMENTS
The tender documents should specify the Department’s requirements

as well as the consultant’s obligations, particularly since this information
is the basis of the contract price.
The tender documentation will therefore consist of the following main

elements:
• the conditions of engagement;
• the specific duties required of the consultant;
• the brief related to the commission.
The conditions of engagement or contract will define the allocation of

risks, obligations of the parties, the basis on which the price is to be
tendered (e.g. hourly rates, lump sum, ad valorem (percentage of overall
capital cost) remedies in the event of failure by a party to perform its
obligations etc.
The specific duties are normally a schedule of duties, in the form of a

‘shopping list’ which the consultant will be expected to carry out. These
will obviously vary according to the scope of the commission and the
type of consultant being engaged.
The brief can be considered as a specification of the Department’s

needs in respect of the work required. In the case of a major works
commission this will normally be a fairly detailed specification of
premises needs, service requirements etc. In the case of estates services
commissions the brief would commonly set out a schedule of premises,
lease terms, anticipated rent review periods and property management
requirements.
Lack of clarity or ambiguity in documents, create weaknesses or

oppor tunities which the consultant may exploit in order to increase the
final cost and/or delay the time for delivery.
GACC
HOME
TENDER DOCUMENTS
TENDER PROCESS
CONSULTANTS SECTION
It is important therefore that the tender documents satisfy the

following essential requirements:
• the documents should be specific about what is required;
• the documents should be without ambiguity; these and any

documents which are a record of negotiations that are subsequently
incorporated as contract documents, should all be consistent with
one another;
• the conditions must clearly allocate risks as between consultant and

Department and specify who must pay what in the event of
variations or delay.
Documentation for inviting tenders whether compiled by the

consultant or the Department, should ideally comprise the following:
• invitation letter;
• the brief;
• list of tender documents;
• conditions of engagement;
• notes for tenderers;
• standard acknowledgement slip (See CST4/SF1);
• instructions for submitting tenders;
• tender offer form;
• tender return Label (See CST4/SF2).
Note that the instructions to tenderers should include information

about a point of contract (the premises manager for example) with
whom tenderers can make arrangements to visit a site or building,
where this is the subject of a commission.
GACC
HOME
TENDER DOCUMENTS
TENDER PROCESS
CONSULTANTS SECTION
To minimise the risk and impact of individual consultants, or members

of a consultant’s team, switching employers during a construction
related negotiation and re-appearing as an adviser to the opposing side,
precautionary measures should be put in place. This might be especially
pertinent, for example in the case of a claims negotiation on a building
contract or during lease or rent negotiations.
Therefore Depar tments should ensure that conditions of engagement

for property or works consultants include a requirement for each
individual member of the consultant’s team to sign a confidentiality
under taking before commencing work in connection with the
commission.
A model clause is shown at CST4/SF3 whilst a model under taking is

shown at CST/SF4.
GACC
HOME
TENDER DOCUMENTS
TENDER PROCESS
CONSULTANTS SECTION
STANDARD FORM 1 CST4/SF1
ACKNOWLEDGEMENT SLIP
Tenderers are requested to complete this slip and return it to
....................................................................................................................................................................................................
[Departmental address] immediately upon receipt of the tender documents.
PROJECT/COMMISSIONTITLE: ..........................................................................................................................
DEPARTMENT REFERENCE NO: .......................................................................................................................
DEPARTMENT LIAISON OFFICER: ...................................................................................................................
(as stated in the invitation letter)
1. I acknowledge receipt of tender documents for the above project/commission.
(either)*
2. I will submit my tender by the due date.
(or)*
2. I do not wish to tender on this occasion and return the documents herewith.
Signed: ........................................................................................................................
For and on behalf of ..........................................................................................

..........................................................................................................................................
..........................................................................................................................................
Date: ...........................................................................................................................*
*Delete as appropriate
GACC
HOME
TENDER DOCUMENTS
CST 4.3.5
TENDER RETURN SLIP
TENDER PROCESS
CONSULTANTS SECTION
AFFIX
POSTAGE
STAMPS
Tender
HERE
FOR CONTRACT NO:
.......................................................................................................................................
Returnable not later than 11.00 hrs on:
.........................................................................................................................................
HOME
Notes: DEPARTMENTAL ADDRESS
1. The envelope to which this label is attached must not
bear any indication of the tenderer’s name.
2. It is the tenderers responsibility to ensure that the
tender is delivered by the due time. Tenders received
after this time will not be considered.
3. Tenders to be delivered by hand are to be handed in at
the reception desk and/or placed in the
[DEPARTMENT’S] TENDER BOX.
EDITION 2: FEB 1998

GACC
TENDER DOCUMENTS
TENDER PROCESS
CONSULTANTS SECTION
CONFIDENTIALITY
Each party:
a) shall treat as confidential all information obtained from the other

Party under or in connection with the Contract;
b) shall not disclose any of that information to any third par ty without
the prior written consent of the other Party, except to such persons
and to such extent as may be necessary for the performance of the
Contract; and
c) shall not use any of that information otherwise than for the
purposes of the Contract.
The Contractor shall take all necessary precautions to ensure that all
information obtained from the Authority under or in connection with
the Contract:
a) is given only to the minimum number of Staff and then only to the
extent necessary for each member of Staff ’s activities in the
provision of the Services; and
b) is treated as confidential and not disclosed (without prior Approval)

or used by any Staff otherwise than for the purposes of the
Contract.
Where it is considered necessary in the opinion of the Authority’s

Representative, the Contractor shall ensure that Staff sign a
confidentiality undertaking before commencing work in connection
with the provision of the Services.
The provisions of this Condition shall not apply to any information:
a) which is or becomes public knowledge (otherwise than by breach of

this Condition); or
b) which is in the possession of the Party concerned, without

restriction as to its disclosure, before receiving it from the disclosing
Party; or
c) which is receiving from a third par ty who lawfully acquired it and

who is under no obligation restricting its disclosure.
GACC
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TENDER DOCUMENTS
TENDER PROCESS
CONSULTANTS SECTION
Nothing in this Condition shall prevent the Authority:
a) disclosing such information relating to the outcome of the

procurement process for the Contract as may be required to be
published in the Supplement to the Official Journal of the European
Communities in accordance with EC directives or elsewhere in
accordance with requirements of Scottish Government and/or
United Kingdom government policy on the disclosure of information
relating to government contracts;
b) disclosing any information obtained from the Contractor:
i) to any Scottish Minister, Minister of the Crown, government

agency or department (including the Comptroller and Auditor
General, National Audit Office, the Auditor General for Scotland
and Audit Scotland), regulatory or fiscal body, or the Scottish
Parliament or the United Kingdom Parliament (including, in both
cases, its committees), each of whom may disclose the
information in their reports. For the avoidance of doubt, the
Authority shall have no responsibility for Confidential
Information which appears in reports of the activities or
proceedings of any of the foregoing; or
ii) to any Person engaged in providing any services to the Authority

for any purpose relating to or ancillary to the Contract, provided
that in disclosing information under sub-paragraph (i) or (ii) the
Authority discloses only the information which is necessary for
the purpose concerned and requires that the information is
treated in confidence and that a confidentiality undertaking is
given where appropriate.
Nothing in this Condition shall prevent either Party from using any
techniques, ideas or know-how gained during the performance of the
Contract in the course of its normal business, to the extent that this
does not result in a disclosure of confidential information or an
infringement of any Intellectual Property Rights.
The Contractor shall not use any confidential information obtained

from the Authority for the solicitation of business from the Authority
or any other par t of the Crown in right of Her Majesty's Government
in the United Kingdom or in right of the Scottish Administration.
The obligations imposed by this Condition shall continue to apply after

the expiry or termination of the Contract.
GACC
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TENDER DOCUMENTS
TENDER PROCESS
CONSULTANTS SECTION
CONFIDENTIALITY UNDERTAKING
In connection with a contract between [..................................] and

[..................................] for the provision of .................................. services.To be
signed by persons employed in providing the services before being
given access to Government information.
I am employed by [name of Consultant]. I have been informed that I

may be required to work for my employer in providing services to the
[full name of Authority].
I understand that information in the possession of the [..................................]

or obtained from the [..................................] must be treated as confidential.
I hereby give my formal undertaking, as a solemn promise to the

[..................................], that:
1 I will not communicate any of that information, or any other

knowledge I acquire about the [..................................] in the course of my
work, to anyone who is not authorised to receive it in connection
with that work.
2 I will not make use of any of that information or knowledge for any
purpose apart from that work.
I acknowledge that this applies to all information that is not already a

matter of public acknowledge and that it applies to both written and
oral information.
I also acknowledge that this undertaking will continue to apply at all

times in the future, even when the work has finished and when I have
left my employment.
GACC
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TENDER DOCUMENTS
TENDER PROCESS
CONSULTANTS SECTION
I have also been informed that I will be bound by the provisions of the
Official Secrets Acts 1911 to 1989. I am aware that under those
provisions it is a criminal offence to disclose information which has
been provided by [Department] in connection with the above contract.
I am aware that serious consequences may follow any breach of those
provisions.*
SIGNED: ................................................................
Surname: ................................................................
Forenames: ................................................................
Date: ................................................................
Consultant’s Name ................................................................
Contract Reference No. ................................................................
*This optional paragraph may be deleted if the consultant is unlikely to

come into contact with material which carries a security classification.
GACC
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TENDER DOCUMENTS
TENDER PROCESS
CONSULTANTS SECTION
MODEL SIGNATURE FORMAT FOR USE UNDER SCOTTISH REGIME
1 I acknowledge and agree that this Undertaking shall be governed by, and construed in
accordance with, the law of Scotland and the parties prorogate the jurisdiction of the
Scottish courts so far as not already subject thereto: IN WITNESS WHEREOF these
presents consisting of this and the [insert no] preceding page(s) are executed as follows:
for and on behalf of [insert name of consultant] (Consultant)
at .................................. on .................................. 200[ ] by:
....................................... (Director's signature) .................................. (Director/Co Sec's signature)
....................................... (full name) .................................... (full name)
(use style above if company) / (use style below if individual or firm)
by the Consultant:
At .................................. on .................................. 200[ ]
.................................................................... (signature)
.................................................................... (full name)
.................................................................... (title)
in the presence of:
.................................................................... (signature of witness)
..................................................................... (full name)
...................................................................... (address)
.......................................................................
GACC
HOME
TENDER PERIODS
TENDER PROCESS
CONSULTANTS SECTION
CST 4.4 TENDER PERIODS
The time allowed from issue of tender documents to the date by which
the tenderers offer must be returned is known as the tender period.
The tender period allowed to tenderers to submit their bid will depend
on the nature and complexity of the project. A minimum of 2 weeks
and a maximum of 6 weeks should be allowed for tendering depending
on the size and complexity of the services. Allowance should be made
for the need for site visits or for gathering information or quotations
necessary to prepare the offer, as well as for public holidays.
If pre-tender interviews have been held then consultants will already

have given consideration to the requirements of the commission and
the resources they anticipated will be required to carry out the
commission. If this is so then, subject to the need for information
gathering, the lower end of the range i.e. 2-3 weeks ought to be
adequate time for consultants to submit their price.
Where the EC procurement rules apply, minimum tender periods are

stipulated.
➧ EPP 1.8
Key Points
• It is suggested that the tender period should be a minimum of 2

weeks and a maximum of 6 weeks.
• It may be advisable to contact tenderers before hand to ensure that

tender periods are feasible.
GACC
HOME
TENDER BOXES
TENDER PROCESS
CONSULTANTS SECTION
CST 4.5 TENDER BOXES
Arrangements should be made for a suitably-sized tender box to be

provided marked “[Depar tment] TENDER BOX”. The box should be
designed so that it is secure and all tenders received can be placed in
the box and remain there until the date and time for opening.
Tenders received should be stamped with the date and time received
before being placed in the tender box.
The box should be solidly built and be large enough to hold all the
tenders likely to be received during the period between tender boards,
bearing in mind that tenderers often include large or bulky documents
as par t of their submission.
The box should be fitted with two separate locks and the keys should
be held by two different individuals nominated by the commission
manager/project sponsor. The box should have a letter-box type
opening so that tenders can be inserted but cannot be taken out
without opening the locks.
GACC
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SECURE INFORMATION
TENDER PROCESS
CONSULTANTS SECTION
CST 4.6 SECURE INFORMATION
No classified information should be disclosed in tender documents or

drawings unless the disclosure is absolutely necessary for the
preparation of tenders. In such cases the tender documents should be
drawn up so that documents containing classified information may
easily be identified and isolated.
Classified documents should be transmitted in accordance with the

instructions in the Departmental Security Handbook and consultants
should be acquainted with these procedures where applicable.
GACC
HOME
DOCUMENTATION STANDARDS
TENDER PROCESS
CONSULTANTS SECTION
CST 4.7 DOCUMENTATION STANDARDS
All tender documentation must be type-written and documents that

are required to be completed and returned with the tender SHOULD
BE ISSUED IN DUPLICATE with an instruction to the tenderer to
retain a copy for its records.
An adhesive tender return label showing the tender reference number

together with the time, address and date of return should be issued
with the invitation documents. An example of a tender label is shown
at CST4/SF2.
In the case of single tenders there should be nothing either in the

tender documents or on the return label to indicate to the tenderer
that it is a single tender.
GACC
HOME
DISPATCH OF TENDERS
TENDER PROCESS
CONSULTANTS SECTION
CST 4.8 DISPATCH OF TENDERS
The current addresses of all tenderers should be established before

sending out tenders. It is also important that the tender is marked for
the attention of the correct person within each organisation, otherwise
the tenderer may lose valuable time in preparing the tender.
The sender’s name and address (either the Department’s or the

Consultant’s address) should be entered on the back of each
dispatched tender envelope to ensure the quick return of any tender in
the event of non-delivery. A locally produced rubber stamp could be
used for this purpose.
If a tenderer’s documentation is returned by the Post Office marked

“GONE AWAY”, enquiries should be made to try and ascertain the
correct address.
Once this has been established, the NQS should be notified so that the
relevant database can be updated. ➧ CST 3.2
Dependant on the speed with which the tender has been returned,
consideration should be given to dispatching the tender again to the
correct address, and perhaps consideration given to extending the
tender period.
GACC
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QUERIES BY TENDERERS
TENDER PROCESS
CONSULTANTS SECTION
CST 4.9 QUERIES BY TENDERERS
All firms should be dealt with in exactly the same way. They should be
given the same documentation and the same access to further
information.
Ideally there should be a clarification period following the issue of the

tender documents during which the Depar tment may provide further
information in response to queries by tenderers. The answer to a query
from a tenderer, should be confirmed in writing and any supplementary
information which has to be issued as a result, should be copied
simultaneously to all other tenderers, without making reference to the
questions.
Although it is intended that questions pertaining to the commission

should be dealt with during the pre-tender interview, it may be
appropriate to hold mid-tender interviews. Mid-tender interviews can
be very useful for exchanging information. The Department can
frequently benefit from the questions posed by tenderers and any
constructive comment from them. Mid-tender interviews should be
held separately with each tenderer. Avoid allowing tenderers to attend
the offices at the same time or to see other names in a signing-in book.
▲
!
Where queries result in a significant change then an extension of the
tender period should be considered.
Viewing of Properties
If tenderers ask to view properties during the tender period, this may
be arranged by the Department through the premises manager for the
building in question.
Standard form CST4/SF5 is an example letter that may be sent to a

premises manager instructing him or her to co-ordinate appointments
to view the proper ty. Any queries should be referred back to the
depar tmental representative responsible for inviting tenders.
Key Points
• All tenderers should be dealt with equally and fairly.
• Additional information should be provided in writing to all

tenderers.
GACC
HOME
QUERIES BY TENDERERS
TENDER PROCESS
CONSULTANTS SECTION
LETTER TO PREMISES MANAGERS REGARDING VIEWING OF PROPERTIES BY

TENDERERS
COMMERCIAL-IN-CONFIDENCE
Dear ............................................................................................................................
[Premises Manager]
................................................................................................................................................................................................................
[Title of Project/Commission]
1. You may be aware that it is the intention of [Department] to appoint a consultant

to undertake the above mentioned project/commission.
2. Following recent selection interviews ....... companies, namely .............................................. ......

.................................................................................................................................................................................................
.................................................................................................................................................................................................
.................................................................................................................................................................................................
.................................................. [list tenders names] will be invited to tender. During the
tender period [state tender period included dates] the selected firms may wish to
view the following proper ties:
............................... .................................................................................................................................................................
............................................................... [list properties].
The firms will be given your name as a contact point and asked to contact you to
arrange a convenient time to view.
3. You will appreciate that during the tender period, the list of companies invited to
tender must remain confidential and that in order to ensure parity of tendering,
tenderers must be allowed to inspect the properties individually. Tenderers should
not be brought into contact with one another.
4. The person responsible for showing tenderers around the property should
therefore be made aware of the need for maintaining confidentiality with regard to
the names of other tenderers and should resist pressure from tenderers to divulge
information that may be to the tenderers’ advantage but which is not given in the
tender documents. The [Depar tment] commission manager/project sponsor for this
commission is...................... [name] who should be contacted immediately if any
problems are encountered during this period.
5. May I take this opportunity to thank you for you co-operation in this matter.
Yours sincerely
GACC
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TENDER BOARDS
TENDER PROCESS
CONSULTANTS SECTION
CST 4.10 TENDER BOARDS
A tender board, typically comprising three people should be appointed

to open and record bids. It is recommended that the following
conventions be followed:
• one member should be a senior chairperson;
• one member should be completely independent from the

commission; this helps to establish the credibility of the board, as
impar tial;
• total impartiality is achieved through choosing different tender

board members from those on the tender evaluation panel.
To promote propriety, it helps if a member of the board appoints no

more than one other member, i.e. chairman appoints the secretary, the
secretary appoints the third person.
It is the responsibility of the senior board member to ensure that all

members are conversant with tender board and tender opening
procedures and the tender documents.
GACC
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OPENING THE TENDER BOX
TENDER PROCESS
CONSULTANTS SECTION
CST 4.11 OPENING THE TENDER BOX
Tenders should be opened on the same day as the date for return and
shortly after the hour specified for return.
If, as is recommended, a tender box is being used, then the joint key
holders will have to first open the tender box. Only those tenders
relevant to the commission in question should be removed.
Late Tenders
The tender box should be checked daily after the required tender
return date to check for late tenders. Late tenders should be dealt with
in accordance with section CST 4.14.
➧ CST 4.14
GACC
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OPENING OF TENDERS
TENDER PROCESS
CONSULTANTS SECTION
CST 4.12 OPENING OF TENDERS
Prior to the opening of tenders, the commission manager/project

sponsor should provide the tender board with a list of all those invited
to tender. This enables the tender board to identify those who have not
submitted tenders or subsequently those whose tenders are received
late.
When the tender box is opened, the unopened tenders should be

passed directly to the tender board, and to no-one else.
The following steps should then be followed by the tender board:
• tenderers should ideally be opened in a locked room with no

working telephone;
• if the tender board is dealing with tenders for a number of

commissions then it will need to sor t tenders by their unique tender
number and deal separately with the tenders for each commission;
• opened tenders for a commission should be sorted according to

price or in the alphabetical order of the tenderers’ name;
• any unpriced tenders are not complete tenders and should

therefore be rejected and returned stating the reason for rejection;
• where a tender document has a tenderer’s signature at the end of it,

each page of that document should be signed by the senior
member of the tender board; this may be speeded up by the use of
a personal facsimile signature stamp;
• each tender should then be given a sequential number to prevent

later inser tion of other tenders.
• a tender summary sheet should then be completed (CST4/SF6); on

the sheet should be listed the sequential tender numbers names of
tenderers from whom tenders were received and their price; names
of those who did not submit tenders, should also be given together
with the reason if known;
• the tender summary sheet relates to the tenders for a particular

commission and should be completed and signed by the senior
tender board officer;
• the tender summary sheet and opened tenders should be delivered

by hand or, if necessary sent by registered post to a member of the
tender evaluation panel.
GACC
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OPENING OF TENDERS
TENDER PROCESS
CONSULTANTS SECTION
TENDER SUMMARY SHEET
[Department]
TENDERS - SUMMARY SHEET
Commission/Contract File No:
...................................................................................................................................................................................
........................................................
LOCATION
NAME OF CONTRACT/COMMISSION
ESTIMATED COST £
DATE
Tenders as listed below, have today been opened and authenticated by the Tender Opening
Board. Also listed are the names of those firms that did not wish to tender, together with
those that did not respond to the tender invitation
To:
...................................................................................................................................................................................
..................................................................
Will you please examine the enclosed tenders and provide your recommendation as soon
as possible
Signed: ..............................................................................................................................................................................................
Senior Tender Board Officer
GACC
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THE TENDER RECORD BOOK
TENDER PROCESS
CONSULTANTS SECTION
CST 4.13 THE TENDER RECORD BOOK
A Tender Record Book is a proforma book used for recording all

tenders for all commissions opened on a given day. It is therefore a
running record of all tenders opened. An example format is given at
CST4/SF7.
The Tender Record Book is invaluable for senior officers and auditors,
as the first step in any review of tendering activity since it provides a
complete reference record of allocated tender numbers.
It is important that the sequence of numbers should remain unbroken.

Tender board members should sign the tender record book once
tender opening has been completed, confirming the next number in
the sequence.
This prevents any irregularities such as the addition of a late tenderer

to the tender list without prior approval of the tender board and ➧ CST 4.14
without clear reasons for so doing.
GACC
HOME
CST 4.13.2
Tender Record Book
TENDER RECORD BOOK
[DEPARTMENT]
SERIAL NO CONTRACT/ TITLE OF NAME OF TENDER DATE AND TIME NOTES ON SIGNATURE OF
OF TENDERS COMMISSION NO CONTRACT/COMMISSION FIRM PRICE TENDERS OPENED COMPLETENESS OF TENDER BOARD
(SEE NOTE 2) TENDERING TENDER/ MEMBERS
IRREGULARITIES
HOME
Notes:
1. Details of all Contractors/Consultants who were invited to tender must be included. Tender prices should be entered where it is clear from the tender
documents, otherwise “see tender” should be entered.
2. Below the last tender number enter “Next Tender Number To Be Used” and insert Tender No.
CONSULTANTS SECTION
TENDER PROCESS
GACC
EDITION 2: FEB 1998

LATE TENDERS
TENDER PROCESS
CONSULTANTS SECTION
CST 4.14 LATE TENDERS
Late tenders are not acceptable and should be rejected. However, it

may be unfair to reject a posted tender if it has been held up in the
post. The tender board should be re-commenced on receipt of late
tenders. Late tenders might be accepted in the following circumstances:
• first class posted tenders - the date stamp should be at least

one day before tenders were due to return;
• second class posted tenders - the date stamp should be at least

two days before tenders were due to return.
If the date stamp or class of postage are difficult to ascertain - treat as

second class postage. If the date stamp and class are made with the
tenderer’s franking machine, the tender should be rejected.
Tenders should not be accepted by facsimile under any circumstances.
A record of all rejected tenders should be kept at the back of the

tender record book, and the price should not be recorded or disclosed.
(See CST4/SF8)
Should the tender opening board decide to admit a late tender into
competition it should be inserted in sequence into the list of tenders
and given a suffix to the preceding number i.e.:
Tender numbers Tenderers Price

248 J Bloggs £265,498
249 J Smith £265,501
249A* T Jones £270,995
250 F Black £276,222
251 B White £292,543
* admitted late tender
The envelope of any rejected tenderer should be retained and should

be endorsed with the tenderers name together with the reasons for
rejection and signed by a senior member of the tender evaluation
board. The contents should then be returned to the tenderer with a
short explanation for rejection (see CST4/SF9).
The envelopes for admitted and rejected late tenderers should be filed
and used if the decision is challenged.
GACC
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CST 4.14.2
Record of Rejected Tenders
RECORD OF REJECTED TENDERS
[DEPARTMENT]
CONTRACT/ TITLE OF NAME OF DATE DATE AND TIME REASON FOR REJECTION SIGNATURE OF
COMMISSION CONTRACT/COMMISSION FIRM TENDERS TENDERS OF TENDER TENDER BOARD
NO DUE RECEIVED MEMBERS
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CONSULTANTS SECTION
TENDER PROCESS
GACC
LATE TENDERS
EDITION 2: FEB 1998

LATE TENDERS
TENDER PROCESS
CONSULTANTS SECTION

CST4/SF9
REJECTION AND RETURN OF TENDER
[Department]
Our Ref
Your Ref
Date
Dear Sirs
Location: ................................................................................................................................................................................
Commission: ................................................................................................................................................................................
Thank you for your tender for the above contract. It is very much regretted that it was
received after the time appointed for delivery and therefore cannot be considered. It is
returned herewith.
Should further opportunities arise for you to tender, it would be appreciated if you would
ensure that your offers arrive in time to be admitted.
Yours faithfully
GACC
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EVALUATION CRITERIA
TENDER EVALUATION
CONSULTANTS SECTION
CST 5.0 TENDER EVALUATION
CST 5.1 EVALUATION CRITERIA
The chosen quality/price mechanism will have established the relative

weighting that is to be given to quality and price.
➧ CST 3.8
Although quality will already have been evaluated at the pre-tender

interview, receipt of the full tender from each consultant may
necessitate a rescoring of quality using a form similar to CST5/SF1. This
is an example of a tender assessment sheet which takes account of the
quality/price ratio and provides for the calculation of a score which
combines quality and price.
Quality Scoring
The score for each quality attribute should be an absolute score out of
100 and is multiplied by the weighting. It may be that failure to achieve
a minimum level in key criterion will result in rejection, as will a failure
to satisfy the quality threshold.
Price Scoring
The price score is calculated for each tender by reference to the lowest
tenderer, which is given a score of 100. One point is deducted from the
other tenderers for each percentage point above the lowest. The
formula for the score is therefore:
100 x (1 - ((a - b)/b))
a = price of tenderer being evaluated

b = lowest tender price.
GACC
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EVALUATION CRITERIA
TENDER EVALUATION
CONSULTANTS SECTION
When scoring price it is recommended that the following factors be

considered:
• price should only be considered after the tenderer has satisfied the
quality threshold;
• very low tenders should be carefully scrutinised to ensure that this

is not as a result of failure to understand the commission; note that ➧ CST 5.4
this should have been resolved at the pre-tender stage;
• compare resourcing levels and cost as low tenders may be under -

resourced;
• tenders must be comparable; an essential aspect of tender

evaluation is to confirm that tenders are on a par, i.e. that deliberate ➧ CST 5.5
amendments to the conditions, or qualification have not created

anomalies between tenders. ➧ CST 5.6
Final Choice
Once each tender has been scored, they should be ranked by score,
the tenderer with the highest overall score chosen.
Key Point
The price scoring and quality scoring systems should be compatible

with each other. There are a number of options and the formula
outlined earlier in this section would be suitable for evaluating
consultants in many circumstances.
A further option would be to use the mean price (rather than the
lowest price). A point would be deducted from the score of each
tenderer for each percentage point above the mean. Conversely a
point would be added for each percentage point below the mean. This
option would be even less likely to be subject to distortion if it utilised
the average of the three lowest tenders.
GACC
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EVALUATION CRITERIA
TENDER EVALUATION
CONSULTANTS SECTION
STANDARD FORM CST5/SF1
TENDER ASSESSMENT SHEET

Confidential- not for public distribution
Project Quality Weighting: 65% Project: .........................................
Project Price Weighting: 35% Tenderer: ...................................
Quality Threshold: 65 (to be compared Assessor : ....................................
with total quality score)
Quality Criteria Project Marks Weighted

Weighting Awarded Marks
(A) (B out (A x B)
of 100)
1. Appreciation of the 20
commission.
2. Calibre of relevant 20
professional staff.
Accounting and management
skills and depth of
experience.
3. Quality of account manager 20

(for the whole commission).
4. Approach to undertaking the 20

commission, including
resources allocated and
ability to cope with peak
workloads.
GACC
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EVALUATION CRITERIA
TENDER EVALUATION
CONSULTANTS SECTION
Quality Criteria Project Marks Weighted

Weighting Awarded Marks
(A) (B out (A x B)
of 100)
5. Experience of similar 5
commissions
6. Experience of public sector 5

work.
7. Quality Assurance/checking 10
systems.
8. Specialist advice to be bought in. N/A N/A
Total Quality Score (Q)
Price Criterion
Tender Price ........................................................
Price Score ........................................................ (P) .................................................
Overall Assessment
Quality Weighting x Quality Score 65% x ...................... (Q) = ......................
Price Weighting x Price Score 35% x ...................... (P) = ......................
Overall Score = ..........
SIGNATURE: DATE:
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FEE SCHEDULES
TENDER EVALUATION
CONSULTANTS SECTION
CST 5.2 FEE SCHEDULES
The use of fee schedules in commission contract documents is highly

recommended. These provide for structured headings and price
categories. They make pricing and subsequent evaluation and
comparison of prices considerably easier.
The tender documents should make it clear on what basis the price is
sought:
• hourly rates;
• lump sum;
• ad valorem (percentage of works contract price).
The tender should be priced by the tenderer on the basis required.
GACC
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INCENTIVE FEES
TENDER EVALUATION
CONSULTANTS SECTION
CST 5.3 INCENTIVE FEES
It should be noted that the documentation for PMCs, EMCs and estate
surveying term and individual commissions often invite the tenderer to
submit proposals for alternative incentive fee proposals for lease
renewals and rent reviews together with their compliant bid.
These will necessitate careful evaluation to ascertain the bid that offers
the most economically advantageous deal, bearing in mind the likely
incidence of such negotiations and transactions during the life of the
commission.
GACC
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EVALUATION PROCEDURE
TENDER EVALUATION
CONSULTANTS SECTION
CST 5.4 EVALUATION PROCEDURE
The sequence of activity for the evaluation of bids is usually as follows:
• check all bids for completeness and arithmetic accuracy;
• compare the proposal document with that originally received; check

and reconcile significant differences;
• under take a section by section analysis of the bids including cost

evaluation of alternative incentive fee proposals and sensitivity
analysis;
• compare most satisfactory bid with initial estimate and funding

available;
• make recommendation for acceptance, non-acceptance or re-

tender.
Circumstances may arise where consideration must be given to either

requesting further information from tenderers or recommending re-
invitation.
GACC
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TENDER ANOMALIES
TENDER EVALUATION
CONSULTANTS SECTION
CST 5.5 TENDER ANOMALIES
Anomalies within a tender bid may be taken up with the tenderer

concerned in writing provided that such clarification does not put
other tenders at a disadvantage or distort the competition element of
the tender. Any written enquiry should always include the expression
“This letter does not imply, expressly or otherwise, acceptance of your
tender.”
GACC
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QUALIFIED TENDERS
TENDER EVALUATION
CONSULTANTS SECTION
CST 5.6 QUALIFIED TENDERS
Qualified tenders are difficult if not impossible to compare with others,

and for this reason they should be actively discouraged. It may be
decided for example to state in the invitation to tender that qualified
bids will be automatically disqualified, (except where alternatives are
sought). Where the EC procurement rules apply, the procurer has the
option of stating in the contract notice that qualified tenders will not
be considered.
If a qualified tender is received, the tenderer should be given the

oppor tunity to withdraw the qualification without amendment to its
tender price. This should be done through correspondence, copies of
the Department’s letter and the tenderer’s reply being kept on the
commission file.
Should a tenderer refuse to withdraw its qualification, then the

impor tance of the qualification and the effect on the tender price will
need to be assessed as precisely as possible.
The file should show a fully reasoned explanation if an otherwise good

offer is passed over due to a qualification, and likewise if an offer is
recommended for acceptance despite a qualification.
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AMENDED TENDERS
TENDER EVALUATION
CONSULTANTS SECTION
CST 5.7 AMENDED TENDERS
Legally, a tender can be withdrawn or amended at any time before

acceptance (i.e. the posting of the letter of acceptance). The
Depar tment is not obliged however, to accept such an amendment for
consideration if received outside the tender period.
Tenders must, as far as possible, be evaluated on the same basis and to

allow amendments to a bid after the tender period could call into
question the propriety of both the Department and the tenderer.
If an amendment flows from a genuine error or unforeseeable

circumstance that implies no advantage to the tenderer, such
amendments may be considered. It is recommended that the reason
for amendment should be considered credible, beyond doubt and the
full history recorded on the commission file.
Key Points
• Different Departments have different policies on the treatment of

post-tender negotiations. Commission managers should refer to
their Departmental handbooks.
• Post tender negotiations are only likely to be permissable on the

grounds that the selected tenderers’ offer still represents best value
for money.
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AMENDED TENDER DOCUMENTS
TENDER EVALUATION
CONSULTANTS SECTION
CST 5.8 AMENDED TENDER DOCUMENTS
It is recommended that deliberate amendments to tender documents

are not accepted without good reason. These are not always easily
detectable e.g. firms typing out their own fee offer in order to distor t
cer tain bandings, and accordingly, amendments to tenders should
always be made clearly in writing, adjacent to the amended item, and
signed by the tenderer.
If tenders are rejected on these grounds, then the tenderer should be

reminded that only tenders based on the documents issued will be
considered in future.
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RE-INVITATION OF TENDERS
TENDER EVALUATION
CONSULTANTS SECTION
CST 5.9 RE-INVITATION OF TENDERS
If no tender is considered acceptable, then all tenders should be

declined and formal re-tendering undertaken (including EC/Official
Journal advertising if applicable).
If malpractice is suspected amongst those invited to tender then,

subject to departmental procedure, a report should be made to the
officer with the appropriate delegation to deal with irregularities and
re-invitation. If re-invitation is recommended due to sharp practice
amongst tenderers, then all the tenderers involved may be dropped
from the new tender list.
Tenderers who are re-invited to bid should be advised as to why the

original offer was not acceptable as not to do so may lead tenderers to
question the value of submitting further bids.
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RECOMMENDATION FOR ACCEPTANCE
TENDER EVALUATION
CONSULTANTS SECTION
CST 5.10 RECOMMENDATION FOR ACCEPTANCE
Once the Tender Board has completed its evaluation, it should report
its recommendations to the Budget Holder for approval and
subsequent acceptance.
The evaluation report should include:
• an explanation of the background to and scope of the commission;
• a summary of the recommendation;
• a description of the pre-qualification criteria;
• a description of the tender evaluation criteria;
• a description of the sensitivity analysis undertaken or reasons why

not;
• the reasons for rejection of unsuccessful bids;
• an indication of the cost implications of the recommended bid;
• a comparison with pre-tender estimate and confirmation that funds

are available;
• a confirmation that the tenderer satisfied the quality threshold at

interview stage.
The objective of competitive tendering is to achieve value for money.
GACC
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LEGAL CONTRACT FORMATION
AWARDING COMMISSIONS & DECLINING TENDERS
CONSULTANTS SECTION
CST 6.0 AWARDING COMMISSIONS AND

DECLINING TENDERS
CST 6.1 LEGAL CONTRACT FORMATION
The legal process of contract formation is set out at Section LE 1.2 -

Simple Contracts. Provided that all of the other elements of formation ➧ LE 1.2
exist, then an unqualified acceptance of an offer gives rise to a legally
binding contract.
It should be noted that unless an offer is open for acceptance for a

specified period it may be withdrawn at any time up until acceptance.
To ensure proper formation of contract it is recommended that the
following conventions be observed:
• all qualifications to the tender should have been removed

➧ CST 5.6
(negotiated out);
• the offer must be capable of acceptance (an unqualified yes);
• the offer must not have lapsed; the offer may be stated as being
open for acceptance within a specified period; if this has elapsed
then confirmation must be sought from the tenderer that the offer
remains open for acceptance;
• all subsequent undertaking by the tenderer and amendments to the

tender must be confirmed in writing; it is recommended that at the
very least all such amendments be aggregated into a schedule of
amendments which can be referred to in the acceptance; with time
permitting it is better to incorporate amendments directly into the
contract and initial them;
• the tender must represent best value for money;
• it is recommended that a depar tmental procedure is in place which

requires approval by an officer with the appropriate delegation prior
to accepting an offer.
GACC
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ACCEPTANCE OF TENDER
CONSULTANTS SECTION
CST 6.2 ACCEPTANCE OF TENDER
Once the requirements relating to the tender have been satisfied then
the offer may be accepted. To ensure proper acceptance of the tender
the following conventions should be followed:
➧ CST 6.1
• acceptance must be unqualified; purpor ted acceptance with

qualifications represents a counter-offer which may be accepted by
the consultant; this may lead to unnecessary argument about how
and when acceptance occurred and what is or is not part of the
contract; this should always be avoided;
• acceptance should be communicated in writing; in law, the ‘postal

rule’ is that acceptance is communicated when the letter is posted ➧ CST 6.3
not when it is received; proof of posting can be ensured by sending

the acceptance by Registered Post;
• acceptance should be notified with the minimum delay following

receipt of tenders.
Key Points
• Acceptance should be unqualified.
• Acceptance should be in writing.
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LETTER OF ACCEPTANCE
CONSULTANTS SECTION
CST 6.3 LETTER OF ACCEPTANCE
A suggested letter of acceptance is given at CST6/SF1.
It is best practice in the letter to list by reference all documents which

are to be incorporated into the agreement and which form the basis of
the acceptance. An alternative is to attach a schedule, but it is essential
that this is given a recognisable and unique reference number.
It is essential that any correspondence or references to negotiations on

fees or alteration to the services which have been agreed with the
tenderer are referred to in the letter of acceptance.
For the avoidance of doubt it is recommended that the successful

tenderer is asked to complete and return a ‘confirmation of receipt slip’
on receipt of the letter of acceptance.
Note that it is usual for the tenderer, in the form of tender, to give an
under taking to execute the formal conditions of contract, when they
are provided for signing.
Contract documents should be prepared and provided to the tenderer

with the letter of acceptance or as soon as possible thereafter.
GACC
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CONSULTANTS SECTION
Dear Sirs
[TITLE OF PROJECT]
[CONTRACT/TENDER NUMBER]
Further to our invitation to tender dated ............................................................... and your tender

submission provided under cover of your letter of..........................................................., I accept on
behalf of the [.................................], your offer to carry out [.................................] in connection with
the above project.
The [following documents or the documents referred to in Schedule [Contract No]/1]

attached are the basis of this acceptance; and together with this letter of acceptance form a
binding contract between us.
[LIST DOCUMENTS SUCH AS:
• Invitation to tender
• Instructions to tenderers
• Schedule of duties
• Brief
• Tender submission from tenderer
• Schedule of amendments or price schedule and basis of payment
• Correspondence/minutes confirming undertakings by tenderer
• Relevant correspondence from Department.]
Will you please contact ........................................................................................................ [Project Sponsor/

Commissions Manager] as soon as possible to make arrangements for the formal
execution of contract documents, and subsequently for commencing work. Will you please
complete and return the attached acknowledgement slip.
Yours faithfully
GACC
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CONSULTANTS SECTION
STANDARD FORM 1 - LETTER CST6/SF1 Cont’d
Confirmation of Receipt Slip
[TITLE OF PROJECT]
I acknowledge receipt of your letter of acceptance dated ............................... .
Name: .......................................................................... (name in block capitals)
Signed: ..........................................................................
in the capacity of ...................... authorised to sign for and on behalf of .......................................................
Date: ....................................................................... Telephone No.: ...................................................................
Address: ..........................................................................
..........................................................................
..........................................................................
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DECLINE OF UNSUCCESSFUL TENDERS
CONSULTANTS SECTION
CST 6.4 DECLINE OF UNSUCCESSFUL TENDERS
It is advisable to notify the successful tenderer of the intention to

accept their offer before sending decline letters to unsuccessful
tenderers. Following confirmation from the successful tenderer, decline
letters should be sent immediately to all unsuccessful tenderers.
Standard Form CST6/SF2 is an example decline letter. To an extent the

wording of the letter will be determined by the type of procurement
effected and what issues were subsumed within the evaluation.
There are two principal reasons for responding as fully as possible:
• it gives consultants confidence in the process;
• it gives consultants market information which helps to encourage

competitive market performance.
GACC
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CONSULTANTS SECTION
Decline Letter
Dear Sirs
[TITLE OF PROJECT/COMMISSION] ........................................................................................................................
Your tender for the above mentioned project/commission has been evaluated but I must
inform you that you were not successful on this occasion. The successful tenderer
was........................................................................................................................................................................................................
This was the successful tenderer because...................................................................................................................
I would like to take this opportunity to thank you for your considerable efforts in
submitting a tender and for your interest.
Yours faithfully
GACC
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EXECUTION OF FORMAL AGREEMENT
CONSULTANTS SECTION
CST 6.5 EXECUTION OF FORMAL AGREEMENT
Although the posting of the letter of acceptance should result in the

formation of a legally binding contract, it is essential that for the
avoidance of doubt a set of contract documents is properly executed
by both parties.
There ought to be no reason why this cannot be done at the time of

acceptance, such contract documents should be prepared in
anticipation of this event. It is however essential that the contract
documents are signed before commencement of any work by the
consultant. The scope for negotiation, if any is still required, is
significantly reduced after this time.
GACC
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REQUESTS FOR DEBRIEFING
DEBRIEFING
CONSULTANTS SECTION
CST 7.0 DEBRIEFING
CST 7.1 REQUEST FOR DEBRIEFING
Debriefing is the only way in which unsuccessful tenderers are able to

find out why they were not selected, and therefore to obtain information
about areas where they need to improve their future performance. This
positive feedback encourages competitive performance and is therefore
recognised as best practice.
CUP Guidance Note No.45 provides useful guidance on debriefing. &

On receipt of a decline letter either at interview stage or tender stage a
consultant may request more information regarding their performance,
so that they may:
➧ CST 6.4
• address par ticular problems;
• improve competitiveness of future bids.
A letter requesting further information should be answered with a letter

offering the tenderer the opportunity for a formal debriefing interview. ➧ CST 7.2
Where the EC procurement rules apply then a request for debriefing

must be responded to within 15 days of receipt of the request ➧ EPP 1.14
Dealing with a Telephone Call
A consultant who has received a decline letter is likely to make a

telephone call to the Department.
This should be handled with care. It is recommended that the following

conventions be observed:
• do not discuss the performance of other tenderers; bear in mind that

the solutions and price offered by other contractors are confidential;
• offer a confirmation of the points made in the decline letter;
• confine the information given to matters that would be covered in a

debriefing interview;
• keep a record of the conversation.
GACC
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DEBRIEFING INTERVIEWS
DEBRIEFING
CONSULTANTS SECTION
CST 7.2 DEBRIEFING INTERVIEWS
If unsuccessful tenderers request a debriefing interview, this should be

agreed to if possible. Any such interview should be undertaken as soon
after the contract/commission award date as practicable, generally
between three to six weeks.
Debriefing interviews for commissions are conducted by the

commission manager/project sponsor but debriefing interviews for
contracts may be conducted by the consultant who invited and
subsequently evaluated the tenders.
Valuable time and money is spent in debriefing, but should always be

considered worthwhile on large contracts/commissions as there are
certain long term benefits. These are:
• to establish a reputation in the market place as a strictly fair, honest

and ethical Department, which will encourage the best firms to
submit their best offer first time around;
• to offer unsuccessful tenderers some return for the time and money
expended in preparing their tenders;
• to assist firms to improve their performance.
Interview Format
The agenda for the interview will be dependent upon the individual
commission/contract but generally the person conducting the interview
should be accompanied by at least one other person and an agenda
agreed between them prior to the meeting. If possible the agenda
should follow the evaluation criteria set out prior to receipt of tenders
and where applicable, listed in the EC/Official Journal adver tisement.
The meeting should allow sufficient time for the unsuccessful tenderer
to be told the reasons for failure in this instance and for the firm to ask
any questions that they feel are relevant.
The inter viewers should be aware that the reason for the interview is
diplomatically to convey to the tenderer weaknesses and strengths
within cost, schedule, design, delivery, experience etc. It must be made
clear that only the unsuccessful tender will be discussed and not a
comparison with the other tenderers or competitors.
GACC
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DEBRIEFING
CONSULTANTS SECTION
Formal minutes are not distributed following the meeting but it is

recommended that a copy of notes taken at the meeting should be
kept on the commission file for future reference by the Depar tment.
GACC
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ROLES & RESPONSIBILITIES
MANAGEMENT OF COMMISSIONS
CONSULTANTS SECTION
CST 8.0 MANAGEMENT OF COMMISSIONS
CST 8.1 ROLES AND RESPONSIBILITIES OF THE COMMISSION

MANAGER/THE PROJECT SPONSOR
The primary role of the commission manager is to ensure that the

requirements of the commission are delivered.
It is strongly recommended therefore that consultants/service providers

are actively managed and monitored. It may be unwise to leave
consultants to their own devices. It is suggested that the best results
can be achieved by doing the following:
• ensuring that Department expectations and timescales are properly

defined and communicated;
• monitor performance in terms of time and cost against the agreed

programme;
• holding regular review meetings with the consultant and review

progress of interim activities; this can include the requirement for
the consultant to produce reports before progress meetings; this is
especially important in the case of projects such as major works
where the activities of others are reliant on timely performance by
the consultant;
• keep the consultant’s performance up to the required standards;
• ensure that the terms of the commission are followed;
• provide clear and documented evidence when necessary to invoke

the default provisions in the commission;
• provide a clear assessment that value for money is being obtained;
• anticipate problems and assess proposed solutions.
The commission manager is the representative of the Department. The

Department will have specific obligations in accordance with the terms
of the commission agreement. The roles and responsibilities of the
commission manager will therefore depend to some extent upon the
consultant’s terms of appointment. This section makes reference to
commissions let under GC/Works/5 General Conditions for the
Appointment of Consultants (1998) - available from TSO.
GACC
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ROLES & RESPONSIBILITIES
CONSULTANTS SECTION
The commission manager role is often set out in the terms and
conditions of Property Management Commissions as follows:
‘The commission manager is authorised to receive and conduct all

communications between the Managing Agent or the Account
Manager and the Department, and has authority to act on behalf of
the Department for all purposes connected with the Commission.’
Within the Consultant Commissioning Documentation the project

sponsor is usually designated as the Department representative with
the following role:
‘The Department representative ...... shall act on behalf of the

Department in issuing instructions to the consultants and for
receiving reports, notices, requests, statements or in dealing with any
other matter concerning the Consultant’s commission.’
In principle, a project sponsor fulfils the same functions as a commission

manager and the general principles put forward in this section are
therefore applicable to both posts unless otherwise stated,.
Key Points
• Effective management means setting clear specific, measurable and

achievable objectives, and motivating and monitoring consultants to
deliver the service to the best of their ability.
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CONSULTANT & SUB-CONSULTANTS
CONSULTANTS SECTION
CST 8.2 CONSULTANT AND SUB-CONSULTANTS
For any type of commission, the consultant is required to name one or

more (as specified in the terms and conditions of the commission)
members of their staff to act as their representative for the purposes of
the particular commission (for Property Management commissions this
person is known as the account manager).
Since this person is likely to have been one of the factors considered in
the quality evaluation of the tender bid, any change in such personnel
must only be effected with the prior approval of the commission
manager/project sponsor.
The commission manager/project sponsor must arrange to be provided

with regular progress reports from the consultant as specified in the
commission documentation. These reports should cover the areas of
financial management, works management and, in the case of property/
estate management commissions, estate management.
Face-to-face meetings with the consultant should be arranged as often,

but not more often than necessary. Within the property management
documentation it is stated that meetings will be monthly. No such
specification is given in project documentation but it must be
remembered that meetings demand a cost in both time and money
from all participants and should not be held if they are unnecessary or
have no identifiable purpose. (The purpose should be determined and
communicated in advance).
At the time of submitting the tender, the consultant should also list
those companies whom they propose to employ as sub-consultants
and obtain the commission manager/project sponsor’s approval of
those companies.
At all times the consultant is deemed responsible for the actions of any
nominated sub-consultants and for the payment of monies to the sub-
consultant.
GACC
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CONSULTANT & SUB-CONSULTANTS
CONSULTANTS SECTION
Key Points
• The Department is entitled to expect continuity of consultant staff.

Since the quality of such staff is likely to have been important in
winning the tender, any change of staff, especially after time has been
spent on complex commissions, should be strongly resisted.
GACC
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PROFESSIONAL INDEMNITY INSURANCE
CONSULTANTS SECTION
CST 8.3 PROFESSIONAL INDEMNITY INSURANCE
Professional Indemnity Insurance (PII) is a form of specialised cover

directed at damage or loss arising from negligence in the provision of
professional services. Liability is not limited to the Department but is
also extended to third parties.
PII works on a “claims-made” basis in that insurance must be held when

the claim is made not when the culpable act took place. PII is
mandatory for all building-works consultants commissioned by
Depar tments and insurance to the level prescribed in the commission
documentation must be maintained for the period of the commission
and six years beyond.
The consultant must be able to produce a certificate of their

professional indemnity insurance, and any further particulars as may be
required by the Department.
If the consultant fails to maintain indemnity insurance in accordance

with the terms of the commission, the Depar tment may, in its own or
in the consultant’s name, take out and maintain a policy of indemnity
insurance in reasonably equivalent terms and shall be entitled to
recover all costs thereby incurred from the consultant. (There should
be a clause in the conditions which provides for this right.)
If a situation arises where a consultant is unable to obtain or maintain

sufficient cover in the commercial market a report should immediately
be sent to the Department.
Key Points
• If the consultant fails to maintain cover, the Department may obtain

such cover and charge the consultant.
GACC
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BILL PAYING & CHECKING PROCEDURES
CONSULTANTS SECTION
CST 8.4 BILL PAYING AND CHECKING PROCEDURES
It is essential that the Department has in place effective systems for

checking bills and for paying them promptly.
In general it is suggested that the following principles apply:
• the bill should be checked; depending on the number of bills, either

all bills should be checked or at least a representative but
RANDOM sample; there must be a contract which gives rise to
Departmental liability; the bill, e.g. rates, must be in accordance with
the terms of the contract; and the work said to have been done,
must have been done to the satisfaction of the Department;
• cash flow is the life-blood of the industry; late payment or failure to

pay may affect the health of the business being employed, which
could seriously affect the commission being undertaken;
• where the contract specifies periods for payment, these should be

honoured;
• the Late Payments of Commercial Debts (Interest) Act 1998

introduces a statutory right to interest on late payment of a debt.
Additionally there may be a contractual right to interest (e.g. on late
payment of a certificate for Government works contracts); late
payment in this situation clearly affects the project cost and
approved budget;
• the Government is committed to ensuring that where there is no

contractual provision or other understanding or accepted practice
governing the timing of payment, payment should be made within
30 days of receipt of a valid invoice or similar demand for payment.
Key Point
A consultant is covered by the Construction Industry Tax Scheme if he

has a role in the direct commissioning of construction works or where ➧ LE 2.11
he acts on behalf of a Department in this context.
GACC
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DETERMINATION/TERMINATION PROCEDURES
CONSULTANTS SECTION
CST 8.5 DETERMINATION/TERMINATION PROCEDURES
Determination/termination of a commission will generally arise by

reason of one of the following:
• bankruptcy or liquidation of consultant firm;
• the committing of an act of bribery or corruption by the consultant

in connection with Government contracts;
• default on the part of the consultant in respect of one or more of

its contractual obligations;
• in exceptional circumstances where for example because of

budgetary considerations it becomes necessary not only for the
Department to suspend work but also to cease it.
In standard forms of contract there are usually contractual provisions

which set out circumstances in which either one or both parties may
determine/terminate the contract.
It is important to note that there is also the common law doctrine of

ç
LE 1.4
material breach of a contract condition (see LE 1.4 and LE 1.5 for other LE 1.5
grounds for termination).
It is therefore essential that contractual procedures for determination/

termination are followed and that the specified grounds for
determination/termination are properly established. Wrongful
determination/termination may in itself amount to a material breach
giving rise to an entitlement on the part of the consultant to claim
damages such as lost profit etc.
The determination/termination provisions commonly provide for the

following:
• notice to be served on the defaulting party stating the nature of the

default and specifying a period within which the default should be
rectified;
• if the default persists beyond the specified duration, notice may be

sent by registered post to the defaulting party confirming
determination/termination of the contract;
• any costs arising from obtaining a new consultant to complete the

commission may be set off against any outstanding monies owed or
become payable as a debt to the Department.
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DETERMINATION/TERMINATION PROCEDURES
CONSULTANTS SECTION
It is common for term commissions to contain a break clause which

may or may not allow a notice period and which enables the
Department to determine/terminate the contract without cause or
default on the part of the consultant.
Key Points
▲
• Where there are contractual provisions which entitle the
Department to determine/terminate the contract, and there is
occasion to operate them, the provisions in question should be
!
followed to the letter.
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DETERMINATION/TERMINATION DUE TO DEFAULT
CONSULTANTS SECTION
CST 8.6 DETERMINATION/TERMINATION DUE TO DEFAULT
In cases of default due to breach of the terms of a commission, an

official notice should be served on the consultant advising that should
the instructions given in the notice fail to be carried out within a
specified period then the commission will be determined.
Great care must be taken in drafting notices of default to ensure that

the Department’s rights are not unwittingly prejudiced by the terms of
the notice. It is important that the wording of the condition under ➧ CST 8.5
which the notice is issued should be reflected exactly in the notice and
it is suggested therefore that legal advice be sought.
If the giving of a notice of default is actually followed by determination/

termination of the commission, arrangements should be made to
complete the commission without delay as the amount of any
additional costs which may be claimed from the original consultant may
be reduced if it can be shown that unreasonable delay has increased
these costs.
Commission managers/project sponsors should ensure that for each

commission within their control, they are aware of the timescales for
giving notice to consultants, the procedures for determining/terminating
the commission and the method of calculating fees due to a consultant
whose commission has been determined/terminated since these may
vary from commission to commission.
When a commission is determined/terminated due to default, it is

recommended that a full report should be sent to the appropriate
senior departmental officer. An adverse performance report should be
sent to NQS as soon as possible.
Key Points
• Seek legal advice before issuing a notice of default.
• The Department should be sure of its grounds before serving a

notice and clearly communicate them in the notice. ▲
!
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HANDLING OF CLAIMS
CLAIMS & DISPUTES
CONSULTANTS SECTION
CST 9.0 CLAIMS & DISPUTES
CST 9.1 HANDLING OF CLAIMS BY AND AGAINST THE

DEPARTMENT
Types of Claim
Claims include all matters from a routine request for additional time to
complete, to a major allegation of breach of contract. In fact a claim is
simply a demand by one party on the other that a particular
entitlement is due. Not all claims signify a dispute. But where a claim is
not met in full and there is disagreement by one party as to the
entitlement of the other then unless agreement can be reached
through negotiation, it can be said that a dispute or difference has
arisen between the parties.
The majority of claims arise from a failure or an alleged failure of one

party fully to comply with the requirements of the contract or in some
➧ LE 1.7
instances conditions implied by the common law. The remedy sought to

an alleged breach is usually damages.
➧ LE 1.8
Claims generally fall into the categories listed below (examples are
given of each):
Contractual Claims (specific entitlement in accordance with the

terms of the contract):
• for delay/additional time for specified reasons such as:
- issue of variations expanding the scope of the contract,
- late issue of information and/or variations,
• for the additional cost of variations;
• for disruption or lost productivity due to interference by the

Department;
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HANDLING OF CLAIMS
CLAIMS & DISPUTES
CONSULTANTS SECTION
Common Law Claims (ex-contractual claims):
• damages for breach of contract;
• damages in tort/delict (e.g. negligence - breach of a duty of care);
• damages for breach of copyright;
Third Party Claims:
• personal injury claims;
• employee claims;
• estates claims;
Quantum Meruit Claims: ➧ LE 1.8
Ex Gratia Claims (‘out of kindness’). ➧ CST 9.6
From the Department’s viewpoint claims should be avoided if only

because financial control becomes extremely difficult, especially for
claims produced long after the event.
In practice it is difficult to avoid claims, but it is possible to deal with

them intelligently and expeditiously so as to avoid disputes.
Steps to minimise the likelihood of a dispute are as follows:
• ensure that the brief is well defined and contractual requirements

are consistent;
• ensure that the consultant has the information required, preferably

before he or she requires it;
• avoid variations;
• where variations are required, agree time and cost increases prior to
instruction or as soon as possible thereafter;
• keep good records of all events which may lead to a claim;
• insist on compliance with the contract where contractual claims are

being made and evaluate them as quickly as possible;
• negotiate with the consultant.
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HANDLING OF CLAIMS
CLAIMS & DISPUTES
CONSULTANTS SECTION
If a dispute does arise or the Department is contemplating making a

claim against a consultant then the following principles should be
noted:
• there must be a basis for the claim in law, either under the contract
or otherwise;
• there must be some loss which arises by reason of the legal right to
claim;
• the connection between the legal right and the damages sought
must as far as possible be proven by the party claiming the damages;
• the matters in dispute should be set down on paper as soon as

possible and communicated in a cogent and persuasive manner;
• if in receipt of a claim, evaluate it, determine the value of any

counter-claim the Department may wish to make and make a
realistic offer as soon as possible.
Key Points
• A claim is more often than not an expression of the additional

entitlement of a par ty specifically provided for under the terms of
the contract for specified matters.
• The better the Department’s records, the better its ability to make
and defend claims and to negotiate them.
▲
• The legal principles involved in making or defending claims can be
complex and the preparation of a good claim document is an art. If
in any doubt seek professional advice.
!
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CLAIMS ARISING FROM DEFAULT OR NEGLIGENCE
CLAIMS & DISPUTES
CONSULTANTS SECTION
CST 9.2 CLAIMS ARISING FROM DEFAULT OR NEGLIGENCE BY

A DEPARTMENT, CONSULTANT OR CONTRACTOR
Claims generally represent an unbudgeted increase in cost to the

Depar tment. In addition, unless they are based on good grounds they
can represent a fruitless exercise, and a substantial cost risk. It is
impor tant that the effor t and cost of resolving a dispute is kept in
proportion with the amount in dispute.
A substantial cost risk may arise where:
• the Department unreasonably objects to a claim from a consultant

where the claim has some merit;
• the Department pursues a claim where the claim has little merit, or
more par ticularly represents difficulties in proving the case on the
‘balance of probabilities’.
For these reasons it is recommended that the following procedures be

followed:
• contractual claims should be dealt with quickly and expeditiously

and negotiated by the commission manager; the appropriate senior
officer should be kept advised, and budgetary provision made for
the claim;
• claims relating to professional negligence should be referred to the

appropriate senior officer, and legal advice sought; ▲
!
• any claim that appears to be sensitive novel or to have political
implications should be referred to the appropriate senior officer;
• any undisputed contractual claims which do not require

consideration of matters of law should be evaluated and paid
immediately.
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ALTERNATIVE DISPUTE RESOLUTION PROCEDURES
CLAIMS & DISPUTES
CONSULTANTS SECTION
CST 9.3 ALTERNATIVE DISPUTE RESOLUTION PROCEDURES (ADR)
ADR is a method of dispute resolution which has been impor ted from
the United States. ADR is a generic term to describe methods of
dispute resolution in which the aim is that a third party is instrumental
in bringing about a quick and effective resolution to a dispute. ADR can
be an effective means of dispute resolution as a pre-cursor to
arbitration or litigation. An ADR clause can be included in the contract,
or ADR may be used by subsequent agreement between the parties.
The various ADR procedures are:
• Mediation/Conciliation - a private voluntary dispute resolution

procedure in which a mediator facilitates dialogue between the
parties; helps each party to see the strengths and weaknesses of its
case and encourages settlement. Mediations are ‘without prejudice’
to further negotiations. The parties may ask the mediator to provide
a written evaluation or recommendation. If settlement is reached
then it is advisable for the parties to draw up a settlement
agreement.
• Mini Trial - a more formalised mediation involving a panel

comprising the mediator and a senior executive from each party.
Representations are made to the panel by each party and the panel
retires to mediate the dispute. The procedure is also private and
voluntary with no formal rules. Again the dispute is only resolved by
agreement between the parties.
• Judicial Appraisal - whereby the parties agree in advance to

submit their respective cases, including oral submissions if preferred,
to a senior legal figure such as a QC for him to carry out a review
and prepare a written appraisal of the case before him. The parties
can agree to be bound by the appraisal or it may simply ease the
way for further negotiations. This can be very effective in helping to
resolve any points of law which are central to the dispute.
• Early Neutral Evaluation - this is similar in nature to the judicial

appraisal, but is carried out by an independent expert where
technical issues are at the centre of the dispute.
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ALTERNATIVE DISPUTE RESOLUTION PROCEDURES
CLAIMS & DISPUTES
CONSULTANTS SECTION
• Adjudication - involves the appointment of an adjudicator who is
ç
commonly a valuer or expert and who receives written and/or oral
LE 2.9
submissions before coming to a decision. The adjudicator’s decisions
are binding on the parties.
• Part II of the Housing Grants, Construction and Regeneration Act

1996 requires that a party to any construction contract has a right
to refer any dispute for impartial adjudication. Any such adjudication ç LE 2.9
must be effected within a certain timescale during the contract.
• Dispute Review Board - a panel of experts who are appointed

by the parties at the outset of the works to monitor and resolve
claims. They are there to foster good relations between the parties.
This is most appropriate on large complex projects.
Key Points
• For ADR to be effective, the parties must be willing to submit to

and be influenced by the process.
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ARBITRATION
CLAIMS & DISPUTES
CONSULTANTS SECTION
CST 9.4 ARBITRATION
If a resolution to a claim cannot be reached following negotiations and/

or Alternative Dispute Resolution, it may be appropriate to refer the
dispute to a third party for determination. In fact where the form of ➧ CST 9.3
contract has provided for arbitration this may be a necessary pre-

condition to litigation.
For arbitration to be an option there must be a written agreement in

the contract to arbitrate (an arbitration clause); or there may be
subsequent written agreement to arbitrate.
The advantages of arbitration are as follows:
• the parties may choose the arbitrator/arbiter;
• confidentiality - arbitration is private;
• should be faster ;
• flexibility - parties may agree to relax procedural rules or rules of

evidence;
• the parties do not have to be represented by counsel;
• limited appeals (on points of law);

➧ LE 2.10
• no reliance on Rules of Cour t.
The conditions of contract usually set out the procedure to be adopted

for the arbitration however, the parties are free to agree on their own
procedures.
Once an arbitration notice has been issued by either party, failure to

respond may be a breach of contract.
Key Points
• Arbitration is a means of dispute resolution by the decision of a

third par ty.
• The service of a notice of arbitration may be a very effective means

of encouraging settlement, however, it is not a step that should be
taken lightly. There must be a case to argue, and there must be a
reasonable prospect of success.
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ARBITRATION
CLAIMS & DISPUTES
CONSULTANTS SECTION
• It is often cheaper and less time consuming to try to settle disputes

through a settlement or ADR.
• Seek professional advice before issuing a notice of arbitration or

upon receipt of one. ▲
!
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WRITS & SUMMONSES
CLAIMS & DISPUTES
CONSULTANTS SECTION
CST 9.5 WRITS AND SUMMONSES
The receipt of an initial writ or summons generally attaches with it a

strict timetable for response or action and must be complied with.
The appropriate senior officer within the Department should be

advised immediately by the solicitors representing the Department as
to the receipt of an initial writ or summons, and appropriate legal
➧ LE 1.17
advice as to actions and strategy given.
If the Department is considering the service of a writ in contemplation

of litigation, then this is likely only to follow the failure of other means
of dispute resolution and should only be done in the context of clear
legal advice on the matter in dispute.
Key Point
• A Minister of the Crown may not sue another Minister of the

Crown. However, since 1 July 1999, rights and liabilities may arise
between the Crown in right of Her Majesty's Government in the
United Kingdom and the Crown in right of the Scottish
Administration by virtue of a contract, by operation of law or by
virtue of an enactment as they may arise between subjects. The
Scottish Ministers may therefore sue, and be sued by, Ministers of
the Crown. Notwithstanding this, every attempt should be made by
Departments to resolve disputes without recourse to court
proceedings. This would in any case only arise where the Scottish
Ministers contract with a Minister of the Crown, if perhaps using an
English Department as consultants, or vice versa.
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EX GRATIA CLAIMS
CLAIMS & DISPUTES
CONSULTANTS SECTION
CST 9.6 EX GRATIA CLAIMS
These claims usually arise where the claimant has no grounds (other
than possibly moral) for additional costs.
Ex-gratia payments are generally made in exceptional circumstances

and with the agreement of the finance section of the Department.
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PERSONAL INJURY CLAIMS
CLAIMS & DISPUTES
CONSULTANTS SECTION
CST 9.7 PERSONAL INJURY CLAIMS
Depar tments should have their own procedures in place for dealing
with personal injury claims (usually dealt with by the finance division). A
full repor t should be prepared by the Department or consultants
representing them on all circumstances surrounding the claim.
Claims for personal injury which arise by reason of negligence on the

par t of a consultant or contractor acting for the Department, may also
give rise to contractual claims and copy papers should be provided to
the commission manager.
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PERFORMANCE REPORTING GENERALLY
PERFORMANCE REPORTING
CONSULTANTS SECTION
CST 10.0 PERFORMANCE REPORTING
CST 10.1 PERFORMANCE REPORTING GENERALLY
Performance reporting is the last stage in the procurement process and

closes the procurement cycle by providing feedback into the long-listing
process for future work.
The advantages of performance evaluation and reporting are:
• feedback for future procurement;
• feedback to NQS;
➧ CST 10.2
• a sharing of knowledge with other Departments;
• it represents additional pressure on consultants to perform well.
The performance evaluation should also involve a separate critique of

the Department’s own performance in respect of the consultant
commission so that lessons learnt may be used as a resource for future
projects.
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REPORTING TO THE NEW QUALIFICATION SYSTEM
CONSULTANTS SECTION
CST 10.2 PERFORMANCE REPORTING TO THE NEW QUALIFICATION

SYSTEM (NQS)
NQS is a computerised database of information on consultants

approved as being eligible for the provision of services to Departments.
Applications to the Consultant’s Register for a list of suitable

consultants for long-listing is briefly described at Section CST 3.2. ➧ CST 3.2
Commissions feedback is a crucial par t of the NQS system. It is

therefore important to ensure that all tendering and performance
information is passed to NQS for entry onto the database. Standard
feedback forms should be completed promptly and forwarded through
Heads of Division to provide information on:
• all offers received, in addition to the commission award details;
• the performance of the consultants at the appropriate stage

(interim/final).
It is recommended that these forms should be used on all new

commissions and on all existing commissions where reports have not
already been submitted. They also represent a useful internal appraisal
record and resource for the tendering of subsequent commissions.
The NQS Performance Repor t provides separate assessment tables for

either building services or estates commissions; only one table should
be completed for each commission. This will enable future enquirers of
NQS to obtain more relevant performance details according to the
type of commission.
When completing the report for a Property Management Commission,

the commission manager should assess whether the commission has
included a predominance of works management or estate management
ser vices and complete the relevant table.
In the longer term, NQS are looking into the possibility of including the
detailed performance breakdown on the computerised system but in
the meantime, such details can be requested from NQS’s manual
records for particular consultants.
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CONSULT NOTICES WITHIN NQS
CONSULTANTS SECTION
CST 10.3 ‘CONSULT’ NOTICES WITHIN NQS
A ‘CONSULT’ notice shown against a firm on the database indicates

that NQS need to be consulted before tender invitations are sent out.
There may be several reasons why a firm has such a notice against it. It
could be for financial reasons where the firm’s audited accounts show
the firm to be financially unstable; the firm could be reorganising itself; it
could be under investigation, or it could be overloaded with work.
A ‘CONSULT’ notice may simply ensure a referral to NQS because

there may be additional information that the Budget Holder should
consider before inviting the consultant to tender.
A ‘CONSULT’ notice against a firm should not be regarded as a

prohibition on dealing with the firm and in some cases the firm may still
be invited to tender. ‘CONSULT’ notices against consultants on NQS
should be treated confidentially and should not be disclosed to any
consultant without the authority of NQS.
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CRS 1.0 CONTRACTING STRATEGIES
CRS 1.1 PROCUREMENT PROCESS AND PROGRAMME
CRS 1.2 APPLICATION OF EC PUBLIC PROCUREMENT RULES
CRS 1.3 INTRODUCTION TO THE CHOICE OF CONTRACT
CRS 1.4 CONTRACTS USING BILLS OF QUANTITIES
CRS 1.5 CONTRACTS USING SCHEDULES OF RATES
CRS 1.6 SIMPLE LUMP SUM CONTRACTS
CRS 1.7 TRADITIONAL LUMP SUM CONTRACTS
CRS 1.8 DESIGN AND BUILD CONTRACTS
CRS 1.9 PRIME COST CONTRACTS
CRS 1.10 MANAGEMENT CONTRACTS
CRS 1.11 CONSTRUCTION MANAGEMENT CONTRACTS
CRS 1.12 DESIGN AND MANAGE CONTRACTS
CRS 1.13 EXTENSION CONTRACTS AND VARIATIONS
CRS 1.14 TERM CONTRACTS
CRS 1.15 STANDARD GOVERNMENT CONTRACTS
CRS 1.15.1 GC/WORKS/1 (1998) - LUMP SUM WITH QUANTITIES
CRS 1.15.2 GC/WORKS/1 (1998) - LUMP SUM WITHOUT QUANTITIES
CRS 1.15.3 GC/WORKS/1 (1998) - SINGLE STAGE DESIGN AND BUILD
VERSION
CRS 1.15.4 GC/WORKS/1 (1999) - TWO STAGE DESIGN AND BUILD
VERSION
CRS 1.15.5 GC/WORKS/1 (1999) - WITH QUANTITIES CONSTRUCTION
MANAGEMENT TRADE CONTRACT
- WITHOUT QUANTITIES
CONSTRUCTION MANAGEMENT
TRADE CONTRACT
CRS 1.15.6 GC/WORKS/2 (1998) - BUILDING AND CIVIL ENGINEERING
MINOR WORKS
CRS 1.15.7 GC/WORKS/3 (1998) - MECHANICAL AND ELECTRICAL
ENGINEERING WORKS
CRS 1.15.8 GC/WORKS/4 (1998) - BUILDING, CIVIL ENGINEERING,
MECHANICAL AND ELECTRICAL
WORKS
CRS 1.15.9 GC/WORKS/6 (1999) - DAYWORK TERM CONTRACT
CRS 1.15.10 GC/WORKS/7 (1999) - MEASURED TERM CONTRACT
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CRS 1.15.11 GC/WORKS/8 (1999) - SPECIALIST TERM CONTRACT FOR
MAINTENANCE OF EQUIPMENT
CRS 1.15.12 GC/WORKS/9 (1999) - OPERATION, REPAIRS AND
MAINTENANCE CONTRACT FOR
MECHANICAL AND ELECTRICAL
PLANT, EQUIPMENT AND
INSTALLATIONS, ETC.
CRS 1.15.13 C1303 - WINDOW CLEANING AND
CRS 1.15.14 C1306 - MAINTENANCE OF GARDENS, GROUNDS, ETC. AND
CRS 1.15.15 C1804 - REPAIR OF PLANT
CRS 2.0 CONTRACTS FILE

CRS 2.1 IDENTIFICATION
CRS 2.2 SUB-FILES
CRS 2.3 RETENTION PERIODS
CRS 2.3(SCOT) RETENTION PERIODS
CRS 3.0 CONTRACTOR SELECTION

CRS 3.1 SELECTION OF FIRMS
CRS 3.2 NEW QUALIFICATION SYSTEM (NQS - FORMERLY CMIS)
CRS 3.3 THE LONG LISTING PROCESS
CRS 3.4 PRE-SELECTION PROCEDURES
CRS 3.5 COMPILATION OF SHORT LISTS
CRS 3.6 THE NUMBER OF TENDERERS
CRS 4.0 TENDERING PROCESS

CRS 4.1 DOCUMENTATION
CRS 4.2 INSTRUCTIONS/NOTICES TO TENDERERS/TENDER PERIODS
CRS 4.3 MID TENDER INTERVIEWS
CRS 4.4 TENDER BOARDS
CRS 4.5 OPENING OF TENDERS
CRS 4.6 THE TENDER RECORD BOOK

CRS 4.7 LATE TENDERS
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CRS 5.0 TENDER EVALUATION
CRS 5.1 GENERAL
CRS 5.2 CRITERIA FOR EVALUATION
CRS 5.3 QUALIFIED TENDERS
CRS 5.4 ALTERNATIVE OFFERS
CRS 5.5 AMENDED TENDERS
CRS 5.6 ERRORS IN PRICED BILLS
CRS 5.7 POST TENDER NEGOTIATION
CRS 5.8 RE-INVITATION OF TENDERS
CRS 5.9 TENDER REPORTING
CRS 6.0 AWARDING CONTRACTS & DECLINING TENDERS

CRS 6.1 LEGAL CONTRACT FORMATION
CRS 6.2 ACCEPTANCE OF TENDER
CRS 6.3 LETTER OF ACCEPTANCE

CRS 6.4 DECLINE OF UNSUCCESSFUL TENDERS
CRS 6.5 EXECUTION OF FORMAL AGREEMENT
CRS 7.0 DEBRIEFING

CRS 7.1 REQUESTS FOR DEBRIEFING
CRS 7.2 DEBRIEFING INTERVIEWS
CRS 8.0 NOMINATION OF SUB-CONTRACTORS

CRS 8.1 NOMINATION PROCEDURES
CRS 8.2 PRIME COSTS
CRS 8.3 ARRANGING A NOMINATED SUB-CONTRACT
CRS 8.4 ESTABLISHING A CONTRACT
CRS 8.5 LIQUIDATION OF A NOMINATED SUB-CONTRACTOR
CRS 8.6 SELECTED OR APPROVED SUB-CONTRACTORS
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CRS 9.0 MANAGEMENT OF CONTRACTS
CRS 9.1 ROLE OF THE PROJECT MANAGER
CRS 9.2 ROLE OF THE PROJECT SPONSOR
CRS 9.3 BILL PAYING
CRS 9.4 CHECKING PROCEDURES
CRS 9.5 DETERMINATION/TERMINATION PROCEDURES
CRS 10.0 CLAIMS & DISPUTES

CRS 10.1 GENERAL
CRS 10.2 CONTRACT CLAIMS AGAINST THE DEPARTMENT
CRS 10.3 AVOIDANCE OF CLAIMS
CRS 10.4 MANAGING CLAIMS
CRS 10.5 PRESENTATION OF CLAIMS
CRS 10.6 CLAIMS AGAINST CONTRACTORS
CRS 10.7 ARBITRATION
CRS 10.8 EX GRATIA CLAIMS
CRS 11.0 MATTERS ARISING ON COMPLETION

CRS 11.1 LIQUIDATED AND ASCERTAINED DAMAGES
CRS 11.2 MAINTENANCE PERIODS
CRS 11.3 PAYMENTS
CRS 11.4 OVERPAYMENTS
CRS 11.5 HANDOVER
CRS 12.0 PERFORMANCE REPORTING

CRS 12.1 GENERAL
CRS 12.2 PERFORMANCE REPORTING TO NQS
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PROCUREMENT PROCESS AND PROGRAMME
CONTRACTORS
CRS 1.0 CONTRACTING STRATEGIES
CRS 1.1 PROCUREMENT PROCESS AND PROGRAMME
A guide to the steps involved in the procurement of works contractors

is as follows:
Determine requirement, develop detailed brief and decide on

➧ PS 2.1-2.5
contract strategy
➧ PS 2.4
Identify capable contractors to form a long list or if EC regulations

apply, advertise contract notice to invite expressions of interest ➧ CRS 3.3
Under take pre-selection interviews where appropriate or if EC

regulations apply, carry out pre-selection paper sift ➧ CRS 3.4
Complile short lists for tendering

➧ CRS 3.5
Develop tender documents which define the brief

➧ CRS 4.1
Invite tenders from short-listed consultants

➧ CRS 4
Hold mid-tender interviews where appropriate

➧ CRS 4
Evaluate tenders
➧ CRS 5
Make the award and if EC regulations apply publish contract award

notice ➧ CRS 6
De-brief unsuccessful tenders where necessary

➧ CRS 7
Post tender performance evaluation

➧ CRS 12
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EDITION 2: FEB 1998 CRS 1.1.1
HOME
CONTRACTORS
It should be borne in mind that this is only a guide to the steps

involved. The more complex or costly the work being procured then
the greater the amount of time and care that should be taken in the
pre-selection and selection processes.
Where the EC procurement rules apply then the pre-selection process

with the restricted procedure will necessarily require a paper sift to
➧ EPP 1.8
reduce what is likely to be an otherwise unmanageable number of

expressions of interest.
➧ CRS 3.1
A similar approach is required where a large number of contractors are

invited to tender in order to establish a panel of contractors on the
basis of framework agreements, this being a strategy that some
Depar tment have successfully adopted. A panel is a set of contractors
who are selected for a term, without any guarantee of work, and might
be established by seeking tenders for all regions at once.
The form and basis of competition will need to be determined early in

the procurement process. This will involve deciding upon which
procedures it is appropriate to follow, and most importantly the
evaluation criteria which will be used to determine the successful
tenderer. In particular the basis on which the price will be sought and
the way in which quality will be evaluated should be decided at the ➧ CST 3.8
outset.
Procurement Programme
It is recommended that careful consideration is given to the production

of a procurement programme immediately following identification of
the objectives of the project or works contract. Clearly this programme
should be developed in the context of the overall objectives and
timetable. The procurement programme will depend upon the contract
procurement strategy which is to be followed, and should be updated
at each stage of the procurement process. The Department should
ensure that there is sufficient time allowed in the programme and
expertise is available to carry out each of the above steps.
It is recommended that the greater the complexity of the contract,

then the greater the time that should be allowed to tenderers to
consider, price and submit their tender bids. Tender periods which are
too short can lead to an inadequate consideration of the requirements
of the contract by tenderers which may lead to under-pricing or over-
pricing and possibly to unwanted misunderstandings.
GACC
CRS 1.1.2 EDITION 2: FEB 1998
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CONTRACTORS
Where the EC procurement directives apply, then specific procedures

apply and there are specific minimum or maximum time limits for the
various stages of the process depending on which procedure is
followed. These will need to be reflected in the procurement
programme.
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EC PUBLIC PROCUREMENT RULES
CONTRACTORS
CRS 1.2 APPLICATION OF EC PUBLIC PROCUREMENT RULES
It is mandatory that EC public procurement rules are complied with

where they are applicable. It is also essential that consultants apply the ➧ EPP
rules on behalf of the Department, where they are dealing with

contractors. A clear obligation to do so should be included in the terms
of appointment of such consultants (see for example service A1.2.16
for the project manager in GC/Works/5 - General Conditions for the
Appointment of Consultants (1998), ISBN 0-11-7023108).
The Works Directive and UK Regulations govern the procurement of

works contracts required by Government bodies.
A commission will be subject to the Works Regulations if:
• the buyer is a contracting authority subject to the regulations;
• the aggregated value of the contract together with any other

contracts associated with a single ‘work’ is above the threshold,
➧ EPP 1.6
which for works contracts is 5,358,153 ECU. The pound sterling ➧ EPP 1.5
equivalent is revised every two years, and as of 1 January 2000 this
figure is £3,611,395; ➧ EPP 1.4
• it is not the subject of one of the exclusions.
▲
It is illegal to split the contract into two or more parts or breakdown
what is normally a centrally purchased aggregated contract to avoid the
application of the rules. In addition there should be no deliberate
!
underestimating to avoid compliance.
Key Points
• If the value of the commission exceeds £3,611,395 (as of 1 January

2000) the EC Works Regulations may apply.
• A more detailed consideration of whether the regulations apply is

given in chapter EPP - EC Procurement Procedures, which also sets
out the specific timetables and recommended procedures, for
inviting and evaluating tenders in accordance with the rules. ➧ EPP 1
GACC
EDITION 2 REV 2: JAN 2000 CRS 1.2
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INTRODUCTION TO THE CHOICE OF CONTRACT
CONTRACTORS
CRS 1.3 INTRODUCTION TO THE CHOICE OF CONTRACT
Guidance on the choice of contract strategy is given in the Procurement

Strategies chapter of the Guide. ➧ PS 2
The remainder of CRS 1 is devoted to explaining in more detail each of

the principal types of works contract, when it might be appropriate to
use them and their advantages and disadvantages. Guidance is also
given in the Procurement Guidance Note No. 5, available from HM
Treasury (tel. 020 7270 4558).
There are two aspects to the type of contract which may be adopted
for a particular works contract or project strategy:
• the basis on which the price is to be sought; using:

➧ CRS 1.4
- bills of quantities,
- schedules of rates, or
➧ CRS 1.5
- simple lump sum contracts;

➧ CRS 1.6
• the type of contract including:
- traditional lump sum contracts,

➧ CRS 1.7
- design and build contracts,

➧ CRS 1.8
- prime cost contracts,

➧ CRS 1.9
- management contracts,
➧ CRS 1.10
- construction management contracts, ➧ CRS 1.11
- design and manage contracts, ➧ CRS 1.12
- extension contracts and variations, ➧ CRS 1.13
- term contracts. ➧ CRS 1.14
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EDITION 2 REV 2: JAN 2000 CRS 1.3.1
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CONTRACTORS
There are a number of bodies who produce families of standard forms

of contract which include to a greater or lesser extent those listed
above. These bodies include:
• The Government’s ‘GC’ Contracts (excluding management,

construction management and design and manage); ➧ CRS 1.15
• Joint Contracts Tribunal (JCT) Contracts (excluding construction

management and design and manage);
• Institute of Civil Engineers (ICE) 5th and 6th Edition Contracts (bill
of approximate quantities forms for civil engineering work);
• The ICE Engineering and Construction Contract (2nd Edition)

Series (formerly the New Engineering Contract);
• The Institute of Chemical Engineers (IChemE) Contracts;
• The Association of Consultant Architects (ACA) Contracts;
• The British Property Federation (BPF) Contracts;
• The Scottish Building Contract Committee (SBCC) Contracts; and
• others.
Having decided on which type of contract is most appropriate, it must

then be decided which standard form is most appropriate.
Many of the above bodies provide similar types of contact, for example,
traditional lump sum contracts based on firm bills of quantities; but they
have their differences in terms of:
• risk allocation;
• payment mechanisms;
• variation instruction and valuation mechanisms;
• loss and expense or costs provisions; and
• others.
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CRS 1.3.2 EDITION 2 REV 2: JAN 2000
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CONTRACTORS
It is not the place of the Guide to attempt to analyse all the relative
advantages and disadvantages of each form, but the following
recommendations are given:
• each standard form is produced by different bodies whose interests

are reflected in their form;
• provided the form satisfies the required scheme of risk allocation

and the project objectives, it is better to use a form with which the
Department and professional team are familiar than one with which
they are not;
• the Government’s ‘GC’ contracts are recommended for use by

Departments because they:
- were drafted by Government for Government and generally

represent the best interests of Departments,
- are relatively simple to understand and administer,
- are less prone to litigation than other more complex forms,
- contractors once familiar with the forms generally know where

they stand.
It should be noted that the 1998 and 1999 editions of the GC/Works
contracts have been amended to take account of the CDM regulations.
Users of the earlier editions should refer to Information Note (No.6/
95) which advises Departments of the amendments necessary to
enable these forms to take account of the CDM regulations.
➧ LE 2.1
Key Points
• The choice of contract form depends on the basis on which the

price is to be sought, (whether by bill of quantities or otherwise),
and upon the contract strategy which best meets the project
objectives.
• The Government’s ‘GC’ contracts are generally recommended for

use by Departments.
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• Some standard conditions (eg ICE) contain clauses providing for
application of Scots law to the contract where the works are
situated in Scotland. If the standard conditions to be used do not
contain such a provision, then a suitable clause must be inserted in
the supplementary or special conditions which form part of the
contract. Even if such a condition does appear in the standard
conditions, there is no harm in a ‘belt and braces’ approach by also
providing for this in the supplementary conditions. If in doubt as to
wording, seek legal advice.
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CONTRACTS USING BILLS OF QUANTITIES
CONTRACTORS
CRS 1.4 CONTRACTS USING BILLS OF QUANTITIES (BQ)
General
The use of a BQ in suppor t of a contract is the traditional and proven

means of securing a lump sum price for under taking the works. BQs
may be:
• firm;
• approximate;
• provisional.
The firmer the quantities, in other words the more precisely the work
is measured and itemised, the more reliable is the tender price. In
theory, were there no design development or departmental changes,
then a firm BQ would provide a price at the tender stage which would
equal the final cost. In practice there are changes, and the BQ provides
a good basis for cost control since the direct cost of changes to the
contract can be assessed with reference to the BQ rates. Such changes
from the tender drawings to the final construction detail are known as
variations. The firmer the BQ the better it is as a means of post-
contract financial control. BQs also provide one of the best resources
for estimating the value of future work.
➧ CRS 1.13
A BQ is an itemised list of all the work required to carry out the

contract works. The BQ generally comprises the following sections:
• Preliminaries - which describe the project particulars, the

drawings upon which the BQ is based, the site, the work in general,
the form of contract and any supplementary conditions, the
Depar tment’s requirements, and all of the contractor’s general cost
items including management and staff, site accommodation, services
and facilities, mechanical plant, and temporary works items.
• Preambles - contain the descriptions of materials and

workmanship applicable to the measured items, and generally more
fully describe what work is included in abbreviated descriptions,
including any special methods of measurement. The preambles have
to be read in conjunction with the measured items and significantly
reduce the need for long and full descriptions of materials and
standard of work.
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CONTRACTS USING BILLS OF QUANTITIES
CONTRACTORS
• Measured Work - is the main part of the BQ which lists all of the
items of work to be undertaken under separate sections for each
element or trade such as brickwork or joinery etc. Each item
comprises a description of labour and/or materials with a quantity
measured as finished work taken from the completed design
drawings and specification.
• Provisional Sums - are included for any items of work which

might be anticipated but for which no firm design has been
developed.
• Prime Cost Sums - are sums allowed for specialist work such as
mechanical and electric work which is carried out by nominated
sub-contractors, provided for under some standard forms of ➧ CRS 8.1-8.3
contract such as JCT80.
• Contingency Sum - it is often tempting for a quantity surveyor to

include in the BQ a specific sum for contingencies (say 5%) in
respect of unexpected expenditure. It is recommended that
contingency sums are allowed for, but that they be kept within the
knowledge of the Depar tment.
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Recommended Value
A firm BQ will normally be prepared when full design information is

available. The firmer the BQ the longer and more costly the
preparation time. BQs can be produced for work of any value, but the
time and cost of doing so must be looked at in light of the level of
post-contract cost control that is required.
It will normally be appropriate to use BQs for work in excess of

£500,000 in value.
Approximate BQs
Approximate or provisional BQs are used when there is insufficient

detail to prepare firm BQs or where it is decided that the time or cost
of a firm BQ is not warranted. Such contracts do not provide a lump
sum price, but rather tender totals, since the quantities are subject to
re-measurement on completion by the quantity surveyor. These
contracts are usually subject to greater variation than lump sum
contracts and therefore should only be used where time is a limiting
factor or where there is great uncertainty in respect of cer tain
elements such as major excavation and earthworks.
The initial resource cost of approximate BQs is likely to be lower than

for a firm BQ, but the need for re-measurement invariably results in a
higher overall resource cost.
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CONTRACTS USING SCHEDULES OF RATES
CONTRACTORS
CRS 1.5 CONTRACTS USING SCHEDULES OF RATES
Schedules of rates are generally used in one of two ways:
• they are prepared by a contractor in support of its price, based on

specification and drawings, when tendering for lump sum contracts
without quantities; and
• published standard schedules or bespoke schedules are provided to

the contractor who tenders a percentage adjustment to the
schedule; this approach being used for measured term contracts
covering such work as repair and maintenance.
In the former case the contractor provides the schedule, which is then
used as a basis for valuing post-contract variations. This effectively
transfers the work and cost of quantifying the works onto the
contractor and usually requires a longer tender period which is
sufficient to reflect the extra effort required of the contractor to
prepare the tender.
Schedules of Rates with Measured Term Contracts
Schedules of rates for measured term contracts are available for a

variety of types of work and are generally extensive to cover most ➧ LE 2.7
work items.
The precise quantity of work is unknown at tender stage. Neither the

Depar tment’s quantity surveyor nor the contractor produce a bill of
quantities or otherwise quantify the work, resulting in a shorter
procurement programme than otherwise.
The value of any work carried out in accordance with such contracts is
ascer tained on completion of the work by measurement and valuation
in accordance with the rates in the schedule, any percentage
adjustment tendered by the contractor and the updating percentages
➧ LE 2.7
to cover inflation.
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EDITION 2: FEB 1998 CRS 1.5
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SINGLE LUMP SUM CONTRACTS
CONTRACTORS
CRS 1.6 SIMPLE LUMP SUM CONTRACTS
With a simple lump sum contract the contractor commits itself to a

price on the basis of the work shown on the drawings and in the
specification. A quantity surveyor is not usually employed and BQs are
not used; this means that preliminary cost forecasting, budgeting, and
valuing of changes in the scheme may be unsatisfactory. However,
where the Depar tment’s requirements are firm, and the drawings and
specification are fully developed, this is a very simple and effective
contractual basis.
It is generally only appropriate to use this type of arrangement for small

schemes, otherwise it may be difficult to obtain prices in competition.
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TRADITIONAL LUMP SUM CONTRACTS
CONTRACTORS
CRS 1.7 TRADITIONAL LUMP SUM CONTRACTS
With this type of contract the design team are engaged directly by the
Depar tment to fully develop the design prior to going out to tender. A
firm BQ is generally prepared which is priced by the contractor to give ➧ CRS 1.4
a fixed price at the outset of the contract. This BQ also forms the basis
of post contract cost control. The contract is with a main contractor
who has responsibility only for the construction works.
This is a medium risk strategy for the Depar tment, since the
Depar tment takes the responsibility and risk for design team
performance and the contractor takes responsibility and financial risk
for the building works which it prices in advance of carrying them out.
The contractor is responsible for workmanship as well as for meeting
the programme.
If the design has been fully developed and sufficient time has been
devoted to the production of a firm BQ, then in theory this type of
contact should lead to a high level of cost certainty at tender stage. In
addition, if the design has been fully co-ordinated and there are no
clashes or other variations due to design development, then it might be
possible to avoid delays and thus construct the works more quickly.
The development of a full design pre-tender is time consuming and

often an ideal which is not consistent with meeting frequently very
tight timescales for works contracts. Often the extra time is not
warranted and other types of contract can be cost effective whilst
meeting shor ter timescales.
It is possible to have an accelerated traditional contract strategy by

overlapping some design with construction. This is often done with the
early appointment of enabling contractors to carry out such work as:
• demolition;
• site levelling;
• piling;
• infrastructure works including service mains and roads, etc.
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Such work is let and carried out whilst the design for the rest of the
work is carried out. This approach, whilst shortening the overall
programme, can create two principal problems:
• Depar tments may be unwilling to commit to such work prior to

overall project cost being clearly defined; and
• the main contractor is very unlikely to be prepared to assume the

risk of works carried out by others, especially foundations.
Examples of this traditional type of contract are:
• GC/Works/1 (1998) (with quantities)

➧ CRS 1.15.1
• JCT80 Local Authorities Edition (with quantities)
Advantages of Traditional Lump Sum Contracts:
• the Department maintains control over the design team and cost
consultant through direct contractual relationships with them;
• the Department has a direct contract with the contractor and is

able to some extent to influence the contractor’s performance;
• it is possible to achieve high levels of design and construction

quality;
• liquidated damages provisions provide for the recovery of funds due

to culpable delay by the contractor ; ➧ LE 2.8
• the BQ provides one of the best bases for post-contract cost

control.
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Disadvantages:
• the Department must have the appropriate expertise to ensure

effective management of the design risk, the timely provision of
accurate design information being essential to avoid claims;
• the contractor is separated from the design phase, which means

that there is:
- no design input from the contractor, which can otherwise lead

to design solutions which are more buildable and possibly
cheaper,
- the possibility of the traditional barriers between consultants and

the contractor giving rise to poor co-operation;
• the overall programme may be longer than for other contract

strategies because of the time taken for full design development and
preparation of BQs.
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DESIGN AND BUILD CONTRACTS
CONTRACTORS
CRS 1.8 DESIGN AND BUILD CONTRACTS (D&B)
General
With this procurement strategy, the contractor takes responsibility and

risk for both the design and the construction of the works for a fixed
price lump sum.
The D&B strategy generally represents the lowest risk strategy for
Depar tments, and the D&B contractor offers a single point of
responsibility. For certain types of work such as piling, it may be more
appropriate to engage specialist contractors on a D&B basis since they
may be better able to provide the required design expertise.
This procurement strategy has variants depending on the status of the

design, such as:
• Direct - where a designer/contractor is appointed without

competition on account of prior knowledge or commercial
expediency. This is generally not the recommended approach, and
would only be used in exceptional circumstances.
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• Competitive - where a limited number of contractors are invited
to submit designs and prices in competition on the basis of
documents defining the project. These may be prepared by in-house
professional advisors or by consultants.
• Develop and Construct - where consultants (or in-house

designers as appropriate) are appointed to design the project to a
certain stage including securing any planning permission. Tenders are
then invited from contractors to develop and complete the design
and construction of the building. This may be undertaken by the
contractor’s own design team, or if design continuity is important, it
may be stipulated that the design team originally appointed be
transferred (in the case of external design consultants) to the
contractor, for completion of the design under the responsibility of
the contractor. This process is commonly known as ‘novation’. ➧ LE 1.12
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CONTRACTORS
The project brief and the requirements of the Department are set out
in a document called the ‘Employer’s Requirements’ or ‘Authority’s
Requirements’. This is a key tender document and is the basis on which
the D&B contractor provides the contractor’s proposals and its tender
price and develops and completes the detailed design.
If the requirements are not properly developed and defined with clarity
then this can be very costly, since any requirements which are not
specified or are changed will be variations to the contract. This strategy
works best when there are few variations or changes to the
Depar tment’s requirements, since such changes tend to be more
expensive than other strategies.
Because the design risk is transferred to the contractor, the

Depar tment loses some control over the project. It should be borne in
mind that D&B contracts secured under competition lead to the
contractor adopting the simplest and cheapest specifications required
to meet the Department’s requirements. There is generally a trade-off
between the time saving and risk transfer, and quality control. The
Depar tment’s requirements should therefore include performance
specifications and clearly state the minimum acceptable standards of
design and specification.
For the reasons stated above, the use of the D&B strategy is generally
not recommended for complex buildings or for work where the
Depar tment wish to have a high level of involvement in design
development.
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Design Liability
There are two alternative standards of design liability which are implied
by law or expressly required by the contract:
• reasonable skill and care; and
• fitness for purpose.
Fitness for purpose is a greater obligation than the use of reasonable

skill and care. Generally the professional designer is under an implied
obligation to exercise reasonable skill and care in carrying out its design
duties. On the other hand a builder who undertakes both the design
and the construction of work will be under an implied duty to ensure
that the work is fit for the purpose for which it was intended (unless
stated otherwise in the contract).
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If things go wrong, a professional designer may be able to show that it

used reasonable skill and care, i.e. the ‘ordinary skill of an ordinary
competent man exercising that particular art’. In other words the test is
by reference to the level of skill and care which would reasonably by
expected of other professionals of that discipline. In addition,
consultants may rely upon the ‘state of the art’ defence - that specified
materials which are subsequently found to be inadequate were at the
time of being specified untried and untested but that their specification
was nevertheless reasonable.
A contractor, whose standard of design liability is ‘fitness for purpose’

cannot rely on such defences, and for example a contract for the
design, supply and installation of a radio mast must result in a radio
mast which stands up as well as operates as a radio mast. In the event
of a failure of the mast the contractor will be responsible for providing
or paying for a replacement which is fit for its purpose. The contractor
cannot rely, as it would under the traditional contract strategy, on the
fact that the Department’s designer specified the mast and that it may
have been the specification which led to the failure rather than the
method of installation.
Because contractors are generally unwilling to accept design liability on

the basis of fitness for purpose, the commonly used standard forms of
D&B contract specify a duty of reasonable skill and care.
Single Stage D&B Contracts
These contracts are widely used for standardised relatively simple

buildings such as houses and individual units.
On the basis of the Department’s requirements, it is necessary for

tenderers to under take a certain amount of design in order to submit a
tender for this approach. It is common practice to invite no more than
3 tenderers following an interview with 6 or more firms. The purpose
of restricting the tender list to 3 is to avoid, as much as possible, the
abor tive tendering cost arising from design production by unsuccessful ➧ CRS 3.4
tenderers.
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Two Stage D&B Contracts
These contracts are recommended for projects of a more complex

nature where the Department may require a higher standard of quality
and prestigious finishes. This process requires a clearly defined brief
from the outset to achieve the requisite level of quality.
• Stage 1 - the Department should invite tenders requesting the

following submissions:
- outline design
- price for completion of design
- estimated price for construction
- outline programme showing estimated start and finish dates.
The tenderers whose proposals are judged to be the most

economically advantageous are awarded the first stage contract.
• Stage 2 - If at the end of Stage 1 the contractor has produced an

acceptable design and offers an acceptable price for construction
they are awarded Stage 2. In Stage 2 the contractor is required to
complete the contract within the agreed programme and cost.
The contractor may attempt to price the construction work above

their estimated price after they have won Stage 1. In order to combat
this it is recommended that the Department should:
• specify in the Stage 1 conditions of contract that the Depar tment is

entitled to use the design for tendering the works contract;
• employ a QS to control the cost of transition from Stage 1 to

Stage 2;
• ensure that the Stage 1 design is readily capable of being built by

another contractor.
The Department should also guard against any undue interference with
the contractor’s design which may lead to an unwanted transfer of
design liability.
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CONTRACTORS
Examples of D&B contracts are:
• GC/Works/1(1998) - Single Stage Design and Build Version;

➧ CRS 1.15.3
• JCT81 - with Contractor’s Design.
Advantages of D&B contracts:
• the risk of design, cost and time are transferred to the contractor
who represents a single point of responsibility in the event of
problems;
• completion may be achieved earlier because there is scope for

overlapping design and construction;
• price certainty is obtained at tender stage, provided the

Depar tment’s requirements are adequately drafted and there are no
changes;
• it is possible to require of the contractor a greater duty of care than

would normally be required of a design consultant.
Disadvantages:
• the Department loses control over design development and quality;
• contractors are likely to opt for minimum cost design solutions;
• variations can be more costly;
• price certainty may not be as attractive as it seems if, for example,

the contractor fails properly to understand and manage the design
process, and/or exploits uncertainties in the client’s requirements;
• the strategy is not recommended for complex buildings.
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PRIME COST CONTRACTS
CONTRACTORS
CRS 1.9 PRIME COST CONTRACTS
General
With prime cost, or cost plus contracts the Department pays the prime
cost of the work carried out, plus a fee to the contractor. The
contractor does not tender a contract price but instead tenders a
percentage fee, and possibly plant rates. The final cost is therefore
whatever it costs ‘plus’ the contractor’s fee.
Prime cost contracting represents a high risk strategy for a

Depar tment, since the final cost is open-ended and post contract cost-
control is difficult. Because of the uncertainty of the final cost, it is
generally recommended that the use of prime cost contracts is avoided
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unless absolutely necessary.
Exceptionally it may be necessary to use prime cost contracts where

the requirements of the work are not known in detail either because
of:
• the nature of the work, such as emergency maintenance or damage

repair, e.g. fire damage; and/or
• an acute shor tage of time.
Prime cost contracts will generally only be used where it is necessary

to procure a contractor very quickly. Normal procurement procedures
are not normally possible and it is recommended that the selected
contractor is one which has a proven track record with the
Depar tment for reliability and integrity.
Prime cost contracts often have the following characteristics:
• since the scope of work is ill-defined the specification and quantity

of work is often vague;
• resource limits and time limits are agreed, although they are often
revised when more information is available;
• the contractor undertakes work through instructions from the

supervising officer or the project manager ;
• they are expensive to administer because of the amount of checking

of invoices and supporting paperwork.
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CONTRACTORS
It is essential to clearly define what is included in the prime cost and

what is included in the fee. Typically the split will be as follows:
• prime cost items:
- material costs supported by invoices,
- labour costs supported by labour returns, salary slips etc.,
- services and charges such as insurances,
- sub-contracted work,
- plant costs (time or usage rates possibly tendered by contractor);
• contractors tendered fee to include such things as:
- management costs,
- temporary site accommodation and office equipment etc.,
- small tools,
- consumables,
- overheads and profit.
With a simple percentage ‘plus’ fee, it is very much in the contractor’s

interest to expend as much prime costs as possible. Other than the
contractor’s goodwill, there is no incentive for the contractor to use
resources effectively or to keep costs to a minimum. Better cost
control should be achieved by changing the basis of the fee. The
following are examples:
• fixed lump sum fee - the contractor gains nothing by increasing the
cost, (see for example the JCT Prime Cost Plus Fixed Fee Contract);
a problem with this approach is that the contractor may be unfairly
penalised if the scope of the work increases;
• sliding scale fee - the percentage addition for the fee reduces as the
prime cost increases;
• target cost plus contractor’s percentage fee.
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Target Cost
Target cost contracting requires the agreement of target costs for each
of the elements of the work to be carried out. This therefore
necessitates a reasonable knowledge of the work required and
estimates of the likely cost. The target cost comprises the estimated
prime cost plus the contractor’s fee. The incentive for reducing costs
comes by allowing the contractor a percentage share of any saving to
the target cost. If the actual cost exceeds the target then the
contractor may receive full payment for the excess or have to pay a
percentage contribution to the excess depending on the basis of the
contact. An example of a target cost contract is the Engineering and
Construction Contract (2nd Edition)- Target Contract with Activity
Schedule.
Advantages of Prime Cost Contracts:
• they enable a very quick mobilisation of the contractor before the

workscope is defined or designed.
Disadvantages:
• the final cost is not known until the work is complete;
• costs are difficult to control;
• it costs more for the Department to administer, since all invoices

etc. have to be checked;
• timescales may be difficult to define.
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MANAGEMENT CONTRACTS
CONTRACTORS
CRS 1.10 MANAGEMENT CONTRACTS
A management contract is where a management contractor is

appointed by the Department to manage the overall contract works in
return for a management fee (usually a percentage of the cost of the
works). The idea behind management contracting is that the
management contractor is appointed early, before the design is
complete, to advise on buildability, programme, sequencing and
procurement of works packages, and is intended to have a closer
relationship with the Department.
This is a ‘fast track’ procurement strategy whereby the early packages

are let before the rest of the design is complete. Works packages are
commonly secured on a lump sum basis with a bill of quantities or
schedule of rates. This means that cost certainty is not achieved until
the last package is let.
The Department engages the design team, and therefore retains the
risk of design development and it also engages the management
contractor. The management contractor procures and contracts with
each of the works contractors whose packages are designed and let in
order of construction and in accordance with a detailed package
procurement programme. The management contractor might provide
site offices and other common services, such as welfare and site
cleaning, etc., but does not otherwise carry out any of the work. The
management contractor will normally have joint responsibility with the
quantity surveyor for developing and managing the budget and for
post-contract cost control.
Whilst it may appear that the management contractor takes the

financial risk of construction, it is common for management contracts
to contain a provision to the effect that in the event of a default by a
works package contractor, the Depar tment will be liable for the cost of
that default to the extent that the management contractor is unable to
recover such costs from the defaulting works contractor itself. In this
way the management contractor has to manage failures and do all it
can to resolve them, but the Depar tment may foot the bill if the
management contractor would otherwise be out of pocket. This is the
trade-off for securing the management contractor’s expertise as par t of
the professional team.
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CONTRACTORS
Because of the sequenced way of letting packages, procurement and

therefore works package costs can be adversely affected by design
delays, design development, and changing market conditions. Good
management and in par ticular design and cost management is therefore
essential to reap the maximum advantage of the time saving that this
procurement method can provide. This strategy requires more effort
and involvement from the quantity surveyor in preparing tender
documents of works packages and in monitoring and managing costs.
Therefore where this strategy is opted for, it is recommended that
consultants should be so advised at the time they are procured.
By way of general guidance, this strategy is generally appropriate for

major works schemes in excess of say £5 million in value.
Management contractors’ fees vary around 2½%-3% of total works

package costs. Site facilities etc. are usually reimbursed at cost. The
quality of the management contractor’s team is therefore probably the
single most important factor in choosing a firm in a competition.
Selecting a firm who offers the lowest price could be a very poor
decision and provide poor value for money in the long term.
If the management contracting strategy is chosen it is important to

note that there is no standard set of Government conditions. Examples
of standard forms are:
• the JCT87 Standard Form of Management Contract;
• the Engineering and Construction Contract (2nd Edition) -

Management Contract;
• many contractors provide their own forms.
Advice should be sought on the choice of form to be adopted since

standard forms may not provide the Depar tment with the safeguards
and risk transfer it requires.
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Advantages of Management Contracting:
• the overlapping of design and construction provides fast track

development;
• the management contractor brings its construction exper tise to the

design team earlier, when design, buildability and programming and
management can be of most value;
• it can be used for complex buildings;
• the Department retains control of design development and design

quality;
• changes can be accommodated in later packages;
• the management contractor takes some of the risk for the

performance of works contractors.
Disadvantages:
• the cost is not known with any cer tainty until the last package is let;
• careful and effective management of the design team is required,

design development in particular has to be closely controlled;
• higher standards of cost management are required;
• there is no direct contractual relationship between works

contractors and the Department, possibly requiring the use of
warranties;
• the Department must have the exper tise and/or resources to

administer the management contractor as well as the design team.
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CONSTRUCTION MANAGEMENT CONTRACTS
CONTRACTORS
CRS 1.11 CONSTRUCTION MANAGEMENT CONTRACTS
Construction management is generally applicable for use with complex

major works projects where the Department has the need and the
exper tise and resources to have a high level of involvement in both the
design development and the construction of the work.
A construction manager is appointed for a fee to provide buildability

and design input advice, and to programme and co-ordinate the design
and construction activities, as well as managing key dates when input
from the Department is required. Trade contractors have a direct
contract with the Depar tment and the construction manager carries
out only planning, site management and co-ordination of the trade
contractors.
The construction manager effectively has the role of managing the

construction work with no financial risk.
This is also a ‘fast track’ procurement method since packages are let, on
a lump sum basis, before the design for subsequent packages has been
let. For the Department this is a high risk strategy, but one which
enables a high level of Departmental influence. For social contracts
such as Housing Action Trust work, this level of involvement may ideally
suit a Trust’s objectives.
The construction manager should be selected for his or her skills in

programming, management and control and for an ability clearly to
understand and align with the objectives of the Department.
Effectively this strategy enables shorter programmes, and secures high

quality buildings with high levels of input from the Department, but at
the expense of cost cer tainty.
There are no standard forms of construction management contract,

although many construction management companies have developed
their own forms.
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CONSTRUCTION MANAGEMENT CONTRACTS
CONTRACTORS
Advantages of Construction
Management Contracts:
• ‘fast track’ development is possible because design and construction

can be overlapped;
• it can be used for complex buildings - London’s Broadgate

development was constructed using this strategy for example;
• the Department retains high levels of involvement and influence;
• the Department retains direct control over the design team and
over output quality;
• advantage can be gained from procuring the exper tise of specialist

contractors in providing early design input advice;
• the project manager and construction manager can better develop

relationships with the trade contractors, rather than a main
contractor, in order to create close co-operation and direct
resolution of problems and claims;
• information flow can be quicker and therefore more effective;
• this is a flexible strategy where, for example, elements of design can

be included in some packages and not others;
• changes can be accommodated in later packages;
• the construction manager is effectively a member of the professional

team and more closely aligned to the Department.
Disadvantages:
• the construction manager takes no financial risk in the construction

project;
• the level of risk transfer to the construction manager and trade

contractors is lower than traditional contract strategies, because the
Depar tment is responsible for delays by one trade contractor which
may affect others, (although the Department can claim against a
trade contractor who causes delay to others);
• price certainty is not achieved until the last package is let;
• the Department must have the resources and expertise to

administer the design team and each of the trade contractors.
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DESIGN AND MANAGE CONTRACTS
CONTRACTORS
CRS 1.12 DESIGN AND MANAGE CONTRACTS
A design and manage strategy is similar to management contracting.

The difference is that the management contractor’s fee also covers the
responsibility for design as well as for managing the works contract ➧ CRS 1.10
packages.
This is also a ‘fast track’ method but one which provides for design risk
transfer. Where the work is not overly complex and where quality is
not a major issue, then it may be more appropriate to consider the use
of a design and build contract. Some of the differences between the
design and manage approach and the design and build strategy are: ➧ CRS 1.8
• design and manage can be used for complex buildings whereas

design and build is not recommended for such buildings;
• the design and manage contractor is unlikely to take full financial risk
in the way that a design and build contractor does;
• with design and manage, quality is more controllable and design

development is more flexible than design and build but at the
expense of losing cost certainty until much later in the project.
There are no standard forms of design and manage contract.
Advantages of Design and Manage Contracts:
• the contractor takes responsibility for integrating design and

construction, thus overcoming the traditional design team/
contractor barriers;
• the contractor offers a single point of responsibility;
• completion can be achieved earlier because of the scope for

overlapping design with construction;
• it can be used for complex buildings.
Disadvantages:
• price certainty is not achieved until the last package is let;
• the Department loses direct control over design quality;
• there is no direct contractual relationship between works

contractors and the Department, possibly requiring the use of
warranties.
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EXTENSION CONTRACTS AND VARIATIONS
CONTRACTORS
CRS 1.13 EXTENSION CONTRACTS AND VARIATIONS
General
These contracts are also referred to as continuity contracts, whereby a

contractor already present on site is instructed to undertake
modification or additional work under a variation instruction. In order
for a variation to be valid under the contract, the work should not be
beyond the scope of the original contract, such that it would represent
a substantial departure from the original contract in terms of character,
extent and time. If the additional works are beyond the scope of the
original contract then they should be let under a separate contract.
Provided that the work can be agreed satisfactorily between the

Depar tment and the contractor, the work will be subject to the original
conditions of contract and valued in accordance with the rules for
valuation of variations appropriate to that contract.
Claims and Cost Control
Instructing additional work will present the contractor with scope to

claim extra time and additional cost due to increased preliminaries
(prolongation) and disruption to the contract works. Quite often the
contractor can successfully sustain its argument since there is a limit to
the amount variations which can be absorbed without affecting the
completion date. Perhaps the best method for controlling the cost of
variations is to agree the time and cost implication as a lump sum
quotation ahead of the work being carried out, which for example may
be instructed under Condition 40(5) GC/Works/1 (1998). This
approach has been further endorsed in the Engineering and
Construction Contract (2nd Edition), (formerly the New Engineering
Contract) as a way of reducing conflict under contracts.
It is recommended that Departments have in place effective ‘change

control’ procedures which ensure that the Department has the final say
over the issue of significant variations (by setting a value threshold for
example) and that time, cost and quality issues are properly evaluated
and balanced against the benefit of instructing the variations.
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EXTENSION CONTRACTS AND VARIATIONS
CONTRACTORS
Forms of Contract
This process can be initiated on all contracts containing variation

provisions. The ascertainment of the value of the variation is generally
easier where the contract is based on a firm BQ, and potentially more
difficult with specification and drawings contracts.
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TERM CONTRACTS
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CRS 1.14 TERM CONTRACTS
General
Term contracts are often referred to as call-off contracts and they are
usually suitable where a continuous programme of work is required of
a par ticular type for which the scope can be approximately defined in a
schedule of rates. The term or duration of these contracts tend to run
for 3 to 5 years but can often be terminated by notice by either par ty.
These type of contracts are often favoured by Departments which

have a continuous requirement for maintenance or minor work at
either regular or irregular intervals.
It is recommended that a ‘break clause’ is included which enables the

Depar tment to bring the contract to an end in the event of a change
of requirements or because of budgetary constraints.
▲
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Term contracts generally exhibit the following characteristics:
• the contract is usually for a particular type of work i.e. general

repairs, stating the maximum and minimum order value;
• the contract states specific response times to various categories of

order e.g. urgent repairs;
• the contract is usually confined to a geographic area;
• the value of the work is ascertained in accordance with agreed

rates and prices usually on the basis of a schedule of rates;
• the cost of setting up and administering these contracts tend to be

comparatively lower than the cost of a series of one-off contracts.
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TERM CONTRACTS
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Advantages of Term Contracts:
• the procurement cycle is short and the costs of preparing tender

documents is low;
• the cost of work is fixed in advance, with some allowance for

fluctuations; ➧ LE 2.7
• procurement costs are cheap because only one contractor is

secured for the term;
• one contractor is in place to carry out the work whenever required;
• a continuity of labour reduces the burden on security clearance.
Disadvantages:
• since no guarantee of work is given, the contractor’s performance

can deteriorate if the contract is not much used by the Department;
• it is difficult to estimate resource costs and therefore to accurately

predict the rate to undertake a particular element of work where
future quantities and costs are unknown;
• schedules of rates/prices tend to encompass a wide range of items.

When the contractor’s profit is spread over these items, especially
where many of the items are never required, the contractor may
find these prices uneconomical over the term and may issue notice
of termination;
• on a long running term contract, the convenience and expediency

may take precedence over commercial considerations i.e. the cost
of undertaking the work may be cheaper on an ad hoc basis due to
changes in the market conditions;
• all works must be inspected by the supervising officer and the value
of each order re-measured on completion.
It is recommended that the market should be regularly tested to

monitor fluctuations in market conditions and therefore the continuing
competitiveness of any rates or prices.
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TERM CONTRACTS
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Types of Term Contracts
• Measured Term Contracts - these contracts are often based on

a schedule of rates or prices;
• Specialist Term Contracts - these contracts are often based on

lump sum quotations for works of a specialist nature e.g. lift
maintenance, window cleaning etc.;
• Daywork Term Contracts - this arrangement is often used for

small works where the work is paid for on a ‘prime cost’ basis.
Measured Term Contract (MTC)
The features of an MTC are as follows:
• They are usually based on a schedule of rates, which are often

published on standard forms. Tenders are obtained by firms quoting
percentage adjustments i.e. addition to or deductions from the
➧ LE 2.7
schedule of rates.
• The percentage adjustment applies to all orders issued pursuant to

the MTC. However, Government contracts for electrical services,
mechanical services and grounds maintenance allow differing
percentage adjustments to different categories of item in the
schedule of rates.
• In order to provide the contractor with some basis for pricing and in
order not to over stretch the contractor, it is usual to specify in the
contract minimum and maximum order values. Under the
Government’s standard form GC/Works/7(1999) any order is priced
at the net value of measured work which comprises the contractor’s
tendered adjustment applied to the rates in the schedule. ➧ CRS 1.15.12
• To allow for labour and material cost inflation, the rates are adjusted
each month by the appropriate Updating Percentages for MTC’s. ➧ LE 2.7
The resulting value is then identified as the Net Updated Value of
measured work. It should be noted that the Schedule of Rates and
Updated Percentages only reflect national price levels not regional
levels.
▲
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• The Department’s position is protected as far as possible by
provisions which provide for each order to specify a completion
date and an obligation on the contractor to proceed regularly and
diligently with the work so as to complete by the completion date
on the order. The work is required to be carried out to the
satisfaction of the supervising officer.
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TERM CONTRACTS
CONTRACTORS
• An MTC can accommodate a Lump Sum Maintenance Element

(LSME) i.e. where the contractor operates, maintains and repairs
plant, usually for an annual sum. The lump sum is adjusted annually
on the anniversary of the commencement date in accordance with
the variation of price (VOP) formula set out in the conditions of
contract. Payment of the annual lump sum is usually paid in 12 equal
monthly instalments. LSME is often used for the following works:
- heating and air-conditioning in a crown court etc.;
- domestic boilers on a married quarters site;
- specialist equipment in a hangar etc.
As with any lump sum contract, there is a danger that the contractor
will carry out minimal repairs which may result in the plant
deteriorating more rapidly than otherwise. Consequently continual
performance monitoring and supervision is required to reduce this risk.
▲
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Specialist Term Contracts
These contracts are particularly useful for the servicing and inspection
of M&E plant and the like. The contractor has the primary responsibility
to maintain the plant through routine servicing and in the event of
breakdown or failure the contractor carries out the necessary repairs
without reference to the Department.
The contractor quotes annual lump sums for the tasks and is paid 12
equal monthly payments. The Department must ensure that the work is
carried out in accordance with the contract, by monitoring and
checking the plant and site records etc.
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Daywork Term Contracts
This contracting strategy is recommended only where order values are

likely to be low and where security and familiarity with the site is
necessary. The two major reservations with this approach are:
• contractors tend to complete tasks more slowly than they would for
a lump sum contract due to the lack of incentive;
• supervision of the works is necessary to verify accounts.
This type of contract can be a license to print money for a contractor

and should be used with great care. ▲
!
In order for contracts to operate successfully the Depar tment should
carry out all necessary checks and audits to the contractor’s daywork
sheets and records. These include:
• checking that there is no double counting i.e. same person on 2

separate sites at the same time;
• verifying the hours charged against office pay records;
• checking the reasonableness of the hours and materials used;
• ensuring that the rates are correct;
• making sure that travel time is chargeable.
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STANDARD GOVERNMENT CONTRACTS
CONTRACTORS
CRS 1.15 STANDARD GOVERNMENT CONTRACTS
All GC/Works forms of contract are essentially developed from the

GC/Works/1 Edition 3 version (Revised 1990) which was first
published in 1989. Edition 3 was a more management-orientated
contract than its predecessor (Edition 2) and makes specific provision
for administration of the contract by a Project Manager on behalf of
the Employer.
GC/Works/1 contract forms can be used to procure major building and

civil engineering works and are suitable for use on either major
refurbishment or new works projects. Six versions are available
together with a comprehensive Model Forms and Commentary
volume, as follows:
• GC/Works/1 (1998) Lump Sum with Quantities;
• GC/Works/1 (1998) Lump Sum without quantities;
• GC/Works/1 (1998) Single Stage Design & Build;
• GC/Works/1 (1999) Two Stage Design & Build;
• GC/Works/1 (1999) With Quantities Construction Management

Trade Contract;
• GC/Works/1 (1999) Without Quantities Construction Management

Trade Contract.
• GC/Works/1 (1998) Model Forms and Commentary;
Each of the individual versions is suitable for use in conjunction with a

particular procurement strategy selected by a Department.
Other standard ‘property-related’ Government forms of contract are:
• GC/Works/2 (1998) For use with Building and Civil

Engineering Minor Works
• GC/Works/3 (1998) For use with Mechanical and Electrical

Engineering Works
• GC/Works/4 (1998) For use with Building, Civil Engineering,

Mechanical and Electrical Small Works
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• GC/Works/5 (1998) For Appointment of Consultants (Single

Project) (see CST 1.5)
• GC/Works/5 (1999) For Appointment of Consultants:

Framework Agreement (see CST 1.6)
• GC/Works/6 (1999) Daywork Term Contract
• GC/Works/7 (1999) Measured Term Contract
• GC/Works/8 (1999) Specialist Term Contract for Maintenance

of Equipment
• GC/Works/9 (1999) Operation, Repair and Maintenance

Contract for M & E Plant, Equipment and
Installations etc
• C1303 Window Cleaning
• C1304 Chimney Sweeping
• C1306 Maintenance of Gardens, Grounds, etc
• C1312 Supply and Application of Herbicides etc
• C1804 Repair of Plant.
A brief commentary on the major features of each of these standard

Government forms is outlined in sections 1.15.1 to 1.15.15 with the
exception of GC/Works/5 (which relates to the appointment of
consultants, CST 1.5 and 1.6 refer).
Note: An ‘approximate quantities’ version of GC/Works/1 is currently

being tested on a number of trial .
A new GC/Works/Subcontract form, suitable for use between the Main

Contractor and his Subcontractor, is in the process of being developed.
It is due to be published by March 2000.
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CRS 1.15.1 GC/WORKS/1 (1998) - LUMP SUM WITH QUANTITIES

(TSO - ISBN 0-11-702186-5)
Recommended Value
Value thresholds will be a matter of policy for each Department and

will depend on the scale of work normally carried out by the
Department.
By way of general guidance, it is recommended that where the chosen

strategy is the traditional lump sum contract strategy, then it is
appropriate to use the ‘with quantities’ version of this contract where
the works element of major alterations refurbishment or new work
exceeds £250,000.
Major Features
The major features of this contract are as follows:
• the contract is administered by a Project Manager (PM) on behalf of

the Employer;
• Condition 1A imposes a duty on all of the parties to the contract to

deal fairly with each other and as a team;
• in line with ‘Constructing the Team’ recommendation that there be

flexibility in payment methods, Condition 48 (Advances on account)
has been amended to offer three alternative payment methods. The
alternatives are stage payments based on the contractor’s progress
measured against his latest accepted programme, payments based
on the achievement of Milestones by the contractor which have
been agreed pre-contract and recorded in the Milestone Payment
Chart and payment based on the measurement and validation of
work executed and materials on site;
• the contractor is paid 95% of the total sum payable in each month;
• a 5% reserve is withheld from each interim payment as security in

respect of defects (see Condition 21);
• a new optional condition has been introduced which enables the

Employer to make payments to the contractor to cover high
mobilisation costs (see Condition 48B);
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• a new optional condition has been introduced allowing payment to

be made for things off site (see Condition 48C (not applicable in
Scotland));
• there is a heavy focus on valuing variations at the time they arise

and preferably before the works are carried out;
• in order to reduce the scope for claims after the majority of the
works have been completed, in accordance with Condition 41(2)
the value of variations is to include any disruption to or
prolongation of both varied and unvaried work;
• in accordance with Condition 42(6) if in the opinion of the QS a

variation has a disruptive effect on other work then the QS may
adjust the rates for such work to make due allowance for the
disruptive effect;
• the recovery of expenses incurred because of prolongation and

disruption caused by such matters as late issue of information is
dealt with by Condition 46;
• the obligations imposed by the Construction (Design and

Management) Regulations (1994) have been incorporated in the
contract (see Condition 11);
➧ LE 2.1
• finance charges are excluded from the contractor’s loss or

disruption costs, but are paid instead (at a rate decided by the
Employer) on any sums outstanding, only if the Employer or Project
Manager have failed to comply with any time limits in the contract
or if the QS revalues work, provided such failure is not consequent
on further particulars presented by the contractor ;
• Condition 33 now requires the contractor to submit his programme

with his tender. The little used Edition 3 provision for submission of
the programme post award has been dropped. The programme
must show the sequence of work and must be in sufficient detail to
enable effective monitoring of the progress. It must allow reasonable
periods for the provision of information and identify any events
which are critical to completion of the work. The programme
cannot include any float time, and it can only be varied by
agreement;
• the contractor is given possession of the site by specific notice in

accordance with Condition 34;
• the contractor is entitled to an extension of time in accordance

with Condition 36;
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• provision is made in Condition 55 for the Employer to deduct or

seek the payment of liquidated damages for culpable delay;
• a measure of design liability is imposed on the contractor by

Condition 10, in recognition of the fact that contractors are often
involved in the design;
• time limits and notice requirements have been placed throughout

the contract which fully comply with the requirements of Part II of
the Housing Grants, Construction and Regeneration Act 1996 (for
example see Condition 50A);
• Condition 51 provides that defects notified to the contractor which

the Employer believes to be the responsibility of the contractor
must be remedied; if the contractor can show that any defect was
not due to his default then he will be entitled to payment for the
remedy;
• Condition 52 allows the contractor to suspend work on the

contract due to non-payment by the Employer;
• the adjudication procedures introduced in Edition 3 have been

amended to bring them into line with the requirements of Part II of
the Housing Grants, Construction and Regeneration Act 1996 (see
Condition 59);
• acceleration is provided for should it be required;
• Condition 56(8) allows the Employer to determine the contract at

any time without reason. This might be useful if, for example, policy ➧ LE 1.4
is changed or funds are withdrawn with little or no notice;
• optional Condition 66 enables the Employer to require the

contractor to maintain a performance bond;

contractor to provide a Parent Company Guarantee.
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Model Forms
The following contract specific model forms are included in the

document;
• abstract of contract particulars;
• Invitation to Tender and Schedule of Drawings;
• Tender and Tender Price Form;
• Contract Agreement.
Other forms and detailed guidance required by this and other versions
of the GC/Works/1 (1998) are included in the Model Forms Volume
(GC/Works/1 (1998) - Contract for Building and Civil Engineering
Major Works - Model Forms and commentary: TSO
ISBN 0-11-702184 -9)
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CRS 1.15.2 GS/WORKS/1 (1998) - LUMP SUM WITHOUT QUANTITIES

(TSO ISBN-0-11-702185-7)
This is the traditional lump sum contract for large value refurbishment
and new works projects based on a lump sum without quantities.
Recommended Value
Value thresholds will be a matter of policy for each Department.
By way of general guidance it is recommended that where the chosen

strategy is the traditional lump sum contract strategy, then it is
appropriate to use the without quantities version of this contract
where the value of the works element of major alterations,
refurbishment or new work exceeds £250,000.
Major Features
The principal differences between this and the with quantities version
are:
• the without quantities version is supported by a schedule of rates

provided by the contractor with the tender and which is used for
valuing variations in accordance with Clause 41;
• all reference to bills of quantities is removed including Clause 3 in

the with quantities version which deals with errors and omissions
etc. in bills of quantities.
Otherwise the other conditions of contract are essentially the same as

the with quantities version.
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Model Forms
These conditions include the following model forms;
• Contract Agreement.
Other forms required by this and the other versions of the

GC/Works/1 (1998) are included in the Model Forms and commentary. ➧ CRS 1.15.1
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CRS 1.15.3 GC/WORKS/1 (1998) - SINGLE STAGE DESIGN AND

BUILD VERSION
(TSO - ISBN 0-11-702187-3)
This is a lump sum design and build contract which envisages a single
stage tender procedure. Single stage means that a separate design stage
is not anticipated.
This standard form is based on the with quantities version of

GC/Works/1 (1998). The main changes from the with quantities version
are described in the Model forms and Commentary Volume. Some of
the principal differences are as follows:
Condition 1 - New Definitions:
• The Authority’s Requirements - this document (which may include

drawings) replaces specification and drawings. It is this document
that must describe the requirements and objectives of the authority
in sufficient detail to enable the contractor to submit the tender. It
should also define the site boundary.
• The Contractor’s Proposals - this is the response to the authority’s

requirements which must include drawings and specification and
describe how the contractor proposes to satisfy the authority’s
requirements.
• The Design - this is defined as being the sum total of the accepted
contractor’s proposals and subsequent design documents.
• Design Document - any document prepared by the contractor as a

result of the design process and subject to a procedural process
detailed within Condition 10a.
• Pricing Document - this document gives details of the build up of

the contractor’s lump sum offer.
Note that the pricing document replaces the bills of quantities and is
the basis for valuing variations in accordance with Clause 42.
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Condition 2 - Contract Documents
• This condition deals with mismatch within and between contract

documents. It is made clear that should there be a discrepancy
between the authority’s requirements and the contractor’s
proposals, it is the Employer’s requirements which will prevail.
Discrepancies in or between the Employer’s requirements and any
statutory requirement, building regulation or planning permission are
resolved by the Project Manager.
Condition 3 - Pricing Document
• Under this condition, any errors found in the bills of quantities after
the contract has been awarded cannot be amended.
Condition 8A - Insurance for Design Indemnity
• A contractor’s normal insurance cover does not extend to design

liability. This form therefore includes a condition requiring the
contractor to hold professional indemnity insurance in respect of its
design.
Condition 10 - Design of the Works
• This condition imposes a duty upon the contractor to use all

reasonable skill and care when carrying out design work.
Condition 10a - Design Documents
• This condition deals with the procedure for issuing design

documents by the contractor to the project manager. It is important
that contractors are aware that they cannot start any work for
which a design document has been prepared until the
manager has had an opportunity to be satisfied that the authority’s
requirements will be met, to raise queries and receive satisfactory
explanations. The liability in respect of any design document remains
firmly with the contractor. The contractor must submit two copies of
each design document to the project manager and a basic quality
control procedure for queries and changes is built-in to the
condition.
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Condition 33 - Programme
• The authority’s requirements should specify that the contractor

must submit a programme with the tender. As well as forming part
of the tender evaluation the programme is required in order to
review (or negotiate) the actions which involve the authority/
project manager (e.g. sequence of delivery and periods for
examination of design documents) prior to tender acceptance.
There is therefore no provision in this contract for the contractor to
submit the programme within 21 days after acceptance of its tender.
• The programme must incorporate the design activity and identify

when possession of the site is required. Periods of time for the
project manager to examine design documents must also be shown.
Condition 36 - Extensions of Time
• The entitlement for an extension for any delay caused by the

execution of modified or additional work, has been replaced by an
entitlement only where there is a change in the authority’s
requirements.
Condition 40 - Project Manager’s Instructions
• The project manager may issue variations in the form of a change in

the authority’s requirements.
Condition 63 - Nomination
• This condition has been omitted from this version of the

GC/Works/1 (1998) contract.
Condition 63A - Insolvency of Nominated Sub-contractors or

Suppliers
• This condition from the with quantities version of GC/Works/1

(1998) has been omitted as a natural consequence of the omission
of Condition 63 - Nomination.
Condition 64 - Provisional Sums
• This condition omitted from the Edition 3 Design and Build version
of the contract has been reinstated into the 1998 edition as a
means of incorporating sums into the contract for the work of
statutory undertakers undertaking their statutory duties.
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Amendments to the Conditions of Contract
• Any amendments or additions to the standard form of contract to

suit particular circumstances must, to comply with Condition 2(1),
be incorporated by the use of supplementary conditions. They are
incorporated into the conditions by listing in the abstract of
particulars. Copies should be included with the tender documents.
Stage Payment Chart - General Note
• A stage payment char t will need to be compiled to suit each

particular project and included with the invitation to tender. Ready
prepared charts may be commercially available but it may be
appropriate to require the contractor to prepare and present a
stage payment chart as part of its tender submission. This should be
suppor ted by a resourced draft programme together with
calculations.
Model Forms
These conditions include the following model forms;
• Tender and Tender Price Form.
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CRS 1.15.4 GC/WORKS/1 (1999) TWO STAGE DESIGN AND BUILD

VERSION
(TSO - ISBN 011 702326 4)
The GC/Works/1 Design and Build (1998) contract is a lump sum form
described in CRS 1.15.3 and is intended to support a single stage
tendering procedure, without a separate design stage. It is sufficiently
flexible to allow for varying amounts of design input from the
Contractor. The Employer provides Employer’s Requirements, to which
the Contractor responds with Contractor’s Proposals, and the
Contractor develops the detailed design on the basis outlined in those
documents.
This ‘Two Stage’ Design and Build form supports a separate design
stage. It is also a lump sum form of contract but the lump sum is
arrived at in two stages, as explained below.
Naturally, the two documents are very similar. The new features of
GC/Works/1 ‘Two Stage’ Design and Build (1999) are as follows:
• at the time the Contract is entered, the Contract Sum is not

ascertained, owing to the lack at that time of design and other
information upon which to base the Contract Sum. However, a
separate Design Fee is ascertained at that time and the Contractor
will have submitted a Pricing Document as an aid to the subsequent
ascertainment of the Contract Sum
• a Design Process Event is identified. This consists of two distinct

elements:
- determination of the Contract Sum during the design stage

either by agreement of the parties or, in the absence of
agreement, by the QS (subject to later adjudication and
arbitration at the instance of the Contractor)
- achievement of a certain design progress milestone. This may

be completion of the Design, or some earlier design stage,
which must be identified in the entry in the Abstract of
Particulars relating to the new Condition 10B (Design
process and Contract Sum)
• the Contractor proceeds with site and/or soil investigations and the
Design, but generally with no other work until given notice of
possession of the Site
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• the Contractor is paid the Design Fee monthly, without retention
• under Condition 10B(10) (Design process and Contract Sum), the

PM certifies when the Design Process Event has been achieved
• the Employer elects at his absolute discretion whether or not to

proceed with the Contract and give the Contractor notice of
possession of the Site. If he does not do so within a limited time, the
Contract is deemed determined, and the Contractor is entitled to
be paid for work done to that time
• if the Employer elects to let the Contract determine, but later

decides to proceed with the Works, he may use the initial
Contractor’s design, whether or not he further employs that
Contractor in connection with the Works
• if the Employer elects to give notice of possession of the Site, the

time for the Contractor to provide the performance bond, retention
payment bond and mobilisation payment bond (if any) runs from
the giving of that notice.
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CRS 1.15.5 GC/WORKS/1 WITH QUANTITIES CONSTRUCTION

MANAGEMENT TRADE CONTRACT (1999)
(TSO ISBN 011 702327 2)
GC/WORKS/1 WITHOUT QUANTITIES CONSTRUCTION

MANAGEMENT TRADE CONTRACT (1999)
(TSO ISBN 011 702401 5)
These two forms adapt the respective GC/Works/1 ‘With’ and

‘Without’ Quantities forms for use in ‘construction management’, a
contractual structure under which:
• there is no single main contractor
• the Employer enters into a number of direct contracts (usually

called Trade Contracts) with several separate contractors (usually
called Trade Contractors) for separate works packages together
comprising a larger
• the Employer instructs a construction manager to run the .
These ‘Construction Management’ Contracts differ from the

GC/Works/1 (1998) ‘With’ and ‘Without’ Quantities contracts in the
following areas:
Condition 1 (Definitions)
• The definition of ‘Principal Contractor’ has been amended to reflect

that the Contractor may not be the Principal Contractor for the
Purposes of the Construction (Design and Management)
Regulations 1994 and their Northern Ireland equivalent;
• A new definition has been added - ‘the Project’. This relates to the
project which are described in the Abstract of Particulars of which
the Works under the par ticular Trade Contract form a part.
Condition 8 (Insurance)
• This condition has effectively been edited to adopt the provisions of

Alternative C under Condition 8 (Insurance) of GC/Works/1 With
Quantities (1998). Under that alternative, the Employer assumes
responsibility for construction ‘all risks’ and public liability insurance;
and, while the Crown is the Employer, the Employer does not have
to insure, but may assume the relevant risks - the Crown as a
matter of policy, generally does not effect insurance.
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Condition 13 (Protection of Works)
• This Condition has been amended to reflect that the Contractor

under Construction Management can only be responsible for his
own Work and Things (as defined under the Contract). If the
Contractor is to have wider responsibilities in respect of the whole
Site, these must be ‘specified by the contract’.
Condition 21 (Defects in Maintenance Periods)
• Whilst this Condition is unamended various changes have been

introduced into the Abstract of Particulars relating to it which
enable the Employer to set specific maintenance periods in relation
to the Works.
Condition 22 (Occupier’s and Employer’s rules and regulations)
• The title of this Condition has been amended to refer to the

Employer’s, as well as the occupier’s rules and regulation, and the
Condition assumes very great importance under CM. It is not an
optional Condition as under the GC/Works/1 With and Without
Quantities (1998) contracts.
Condition 26 (Site admittance)
• This Condition has been amended to reflect that each Contractor

under Construction Management cannot be responsible for the
admittance of persons to the Site. Therefore, the Contractor is
required to take ‘the steps specified by the Contract, or Instructed
by the PM’ to prevent unauthorized persons being admitted to the
Site.
Condition 34 (Commencement and completion)
• This Condition has been amended to reflect that under

Construction Management the Contractor is only given access to
the Site rather than possession. The Condition also places a
responsibility on the Contractor to keep his area of the works clear
of debris and rubbish.
Condition 46 (Prolongation and disruption)
• This Condition has been amended in recognition that under

Construction Management there is a greater risk of the activities of
other Works adversely affecting the Contractor's work.
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Condition 55 (Damages for delay)
• This Condition has been amended to enable the Employer to claim

either liquidated damages or damages at large in respect of the
Contractor's failure to complete the Works on time.
Condition 65 (Other works)
• This Condition assumes great importance under Construction

Management as all the other Trade Contractors will be working in
accordance with it.
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CRS 1.15.6 GC/WORKS/2 (1998) - BUILDING AND CIVIL ENGINEERING

MINOR WORKS
(TSO - ISBN 0-11-702152-0)
GC/Works/2 (1998) is a new edition of the standard Government

form of contract for minor UK building, civil engineering and demolition
works, replacing General Conditions of Government contracts for Building
and Civil Engineering Minor Works: Form GC/Works/2 (incorporating
amendments 1 to 5) Edition 2 1990 and General Conditions of Contract
for demolition Works: Form C1010 (September 1990)
GC/Works/2 (1998) is for use where lump sum tenders are to be

invited on the basis of the specification and drawings only, with an
Employer’s option to require the contractor to provide a schedule of
rates in order to value variations ordered.
Recommended Value
By way of general guidance it is suggested that this type of contract is

suitable for building and civil engineering works with a value between
£25,000 and £200,000 and demolition contracts of any value.
Major Features
• the contract is administered by the person designated as the Project

Manager (PM) by the Employer;
• in accordance with Condition 1A, the parties to the contract are

required to deal fairly, in good faith and in mutual cooperation with
each other;
• in accordance with Condition 30, the contractor is entitled to apply

for monthly payments, provided the application is supported by a
valuation which is to be agreed by the PM; the contractor is paid 97
percent of the value of the work executed on site to the satisfaction
of the PM and of things (materials) brought to site for incorporation
into the works;
• the 3 per cent ‘reserve’ is held as security in respect of any defects

which may arise in the maintenance period (see Condition 19);
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• the PM may issue instructions to vary or further explain the works

in accordance with Condition 25. All instructions are to be
confirmed in writing;
• variations are valued in accordance with Condition 26 and on the

basis of either fair rates to be agreed between the Department and
the contractor or on the basis of the contractor’s schedule of rates
if one was requested;
• Condition 6 incorporates into the contract the obligations imposed

by the Construction (Design and Management) Regulations 1994; ➧ LE 2.1
• Condition 23 provides for extensions of time to the contractor for

any matters which are wholly beyond the control of the contractor;
for example unforeseen ground conditions (only if certified as such
by the PM under Condition 4);
• Condition 28 allows the contractor to receive additional funds for

delay provided he can satisfy the requirements imposed by 28(1)
and (3);
• under Condition 29 the contractor has a right to interest payments

at the rate specified in the Abstract of Particulars due to the
circumstances listed in Condition 29(1);
• Condition 37 introduces the employers right to claim liquidated

damages in the event of loss being incurred due to delay by the
contractor;

contractor to maintain a performance bond;

contractor to provide a Parent Company Guarantee.
Model Forms and Commentary
A separate volume is available, entitled “GC/Works/2 (1998) Contract

for Building and Civil Engineering Minor Works - Model Forms and
Commentary” (TSO ISBN 0-11-702153-9)), which includes model
forms such as:
• Adjudicator’s Appointment;
• Certificate of Completion; and
• detailed guidance on each of the conditions.
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CRS 1.15.7 GC/WORKS/3 (1998) CONTRACT FOR MECHANICAL AND

ELECTRICAL ENGINEERING WORKS
(TSO - ISBN 0-11-702153-9)
GC/Works/3 (1998) is a new standard form of contract for UK

mechanical and electrical engineering works replacing General
Conditions of Contract for Minor Mechanical & Electrical Services and Plant:
Form C1020 (September 1990) and General Conditions of Contract for
Mechanical & Electrical Services and Plant: Form C1030 (September
1990). Because C1020 was almost as long and complex as C1030, it
was considered unnecessary to continue publication of separate forms
of contract respectively for minor and major mechanical and electrical
engineering work.
GC/Works/3 General Conditions are based upon GC/Works/1 With

Quantities (1998). GC/Works/3 is for use on lump sum contracts for
UK mechanical and electrical engineering works of any value based
upon a Specification and Drawings, with the optional use of Bills of
Quantities or a Schedule of Rates. Options are also given for liquidated
damages at large in respect of delay in completion of the works.
Recommended Value
By way of general guidance, it is suggested that this type of contract is

suitable for works contracts of any value.
GC/Works/3 (1998) differs from GC/Works/1 With Quantities (1998)

in the following areas:
Condition 1 Definitions
• ‘Bills of Quantities’ definition expanded to reflect their optional use;
• in the definition of ‘Contract’ the words ‘(if used)’ after ‘Specification’

have been deleted as the specification is an essential item for
mechanical and electrical engineering works;
• definition of ‘Programme’ expanded to reflect that its use is optional

in GC/Works/3;
• definition of ‘Schedule of rates’ added;
• definition of tests on and after completion have been added.
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Condition 9 Setting Out and ‘as built’ drawings
• New paragraph (3) has been added to this condition which requires
the contractor to supply ‘as built’ drawings to the Employer within
14 days of a section of, or all of the works being signed off as
complete. Failure to comply with this condition allows the Employer
to withhold further payments.
Condition 10 Design
• Paragraph (1) refers to ‘the design of the whole or any part of the
Works’.
Condition 33 Programme
• This condition is optional.
Condition 39 Tests on Completion and certifying work
• Paragraphs 1-5 are new and deal with the Making of Tests on
completion and the issue by the Project Manager of certificates of
satisfactory completion in respect of all or any par t of the works.
Repeated failure of Tests on Completion is a ground for
determination of the contract by the Employer under Condition 56.
Condition 39A Tests after Completion
• This new optional condition sets out the procedures for testing the
works after completion, with liquidated damages for shortfall in
performance.
Condition 55 Damages for Delay
• This condition provides alternatives respectively for liquidated

damages and damages at large.
Condition 56 Determination by Employer
• Paragraph (6)(i) is new to reflect Condition 39 and enables the

Employer to determine the contract due to repeated test failures on
completion.
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CONTRACTORS
A separate volume entitled “GC/Works/3 (1997) Contract for

Mechanical and Electrical Engineering Works: Model Forms and
Commentary” (TSO ISBN 0-11-702153-9) is also available. This
includes all of the model forms required to successfully utilise the
GC/Works/3 contract and includes:
• Contract Agreement;
• Retention Payment Bond; together with detailed guidance on each

of the conditions.
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CRS 1.15.8 GC/WORKS/4 (1998) CONTRACT FOR BUILDING, CIVIL

ENGINEERING, MECHANICAL AND ELECTRICAL SMALL
WORKS
(TSO - ISBN 0-11-702154-7)
GC/Works/4 (1998) is a new edition of the Standard Government

form of contract for small UK building, civil engineering, mechanical and
electrical works and replaces General Conditions of Government Contract
for Building, Civil Engineering, Mechanical & Electrical Small Works: Form
C1001 (September 1990).
Recommended Value
By way of general guidance it is recommended that this type of

contract is suitable for contracts with a maximum value of £75,000.
Although GC/Works/4 (1998) is intended for use on low value

projects, Departments may occasionally need to consider using
GC/Works/2 (1998) as this incorporates a number of conditions which
do not feature in GC/Works/4 (1998). For example, under
GC/Works/4 neither the contractor or the Employer is required to
maintain insurance. The contractor is also unable to claim additional
funds or time due to delay caused by unforeseen ground conditions.
Major Features
The major features are as follows:
• the contract is administered by the person designated as the Project

Manager (PM);
• variation instructions may be issued by the PM in accordance with

Condition 17(2);
• in accordance with Condition 1A, the parties to the contract are

required to deal fairly, in good faith and in mutual cooperation with
each other. Variations are valued in accordance with Condition 18;
• Condition 20 gives the Employer the option of paying advances on

account based on progress;
• under Condition 28, both parties have the right to refer disputes to
an adjudicator. In all cases, the adjudicators decision is final and
cannot be subjected to arbitration post completion.
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A separate model forms and commentary volume is also available for

GC/Works/4 1998 entitled “Contract for Building, Civil Engineering,
Mechanical and Electrical Small Works: Model Forms and Commentary”
(TSO ISBN 0-11-702154-7)).
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CRS 1.15.9 GC/WORKS/6 (1999) - DAYWORK TERM CONTRACT

(REPLACES C1401 PUBLISHED 1990, REVISED 1993)
This is the standard form of daywork term contract. The competition is

in the percentage on-cost quoted by the tenderers. Payment is based
on hourly rates for labour which include the contractor's overheads
➧ CRS 1.14
etc. Materials are paid for at cost plus a percentage addition.
It is intended that this form be used for work of a jobbing nature.
Major Features
• the contract is administered by a Project Manager (PM);
• in accordance with Condition 7, the contractor is required to carry

out work described in the tender as ordered by the PM;
• in accordance with Condition 7, the contract may be determined by

either party following three months notice;
• payment for labour is made in accordance with Condition 23, which

specifies what is deemed to be included in the contractor’s hourly
rates; in accordance with Condition 17 the contractor must keep all
relevant time sheets;
• Condition 24 states that the contractor is entitled to payment of

the prime cost of materials;
• payment for plant is in accordance with Condition 24.
Model Forms
These conditions include the following model forms:
• invitation to tender (specifying works and payments etc.);
• form of tender.
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CRS 1.15.10 GC/WORKS/7 (1999) - MEASURED TERM CONTRACT

(REPLACES C1501, PUBLISHED 1990, REVISED 1993)
This is the standard form of measured term contract, based on a

schedule of rates provided by the Department. The contractor’s
tendered price is a percentage addition or deduction from the rates in
➧ CRS 1.14
the schedule for orders in three price ranges:
• £0 - £5,000;
• £5,000, and £50,000;
• greater than £50,000.
The contract can be applied to multiple sites.
Major Features
• the contract is administered by a Project Manager (PM);
• the contract includes duties to be carried out by a quantity surveyor

who is appointed by the Employer;
• each order issued in accordance with Condition 8 is effectively a

separate contract for a specified task and states the date of
commencement and completion;
• in accordance with Condition 7, the whole contract may be

terminated by either party provided three months prior notice has
been given;
• under Condition 29, stage or interim payments can be made if the

total estimated value of an order exceeds the sum stated in the
abstract of particulars or the duration of the works exceeds 45
calendar days;
• there is no provision for a reserve as security in respect of defects;
• orders are valued in accordance with Condition 27, on the basis of

the net rates in the schedule of rates, adjusted by the relevant
‘Updating Percentage’ and then adjusted by the contractor’s
➧ LE 2.7
tendered percentage adjustment;
• Condition 26 sets out the procedure for measurement of the work

on site and submission by the contractor of its account for work
carried out in connection with an order.
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Model Forms
• form of invitation;
• form of tender;
• abstract of particulars.
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CRS 1.15.11 GC/WORKS/8 (1999) - SPECIALIST TERM CONTRACT FOR

MAINTENANCE OF EQUIPMENT
(REPLACES C1301, PUBLISHED 1990)
This form of contract is a specialist term contract for use where

specified maintenance of equipment is required and can be costed per
task. One of the principal differences between this form and form
GC/Works/9 (1999) is that under this form a schedule of work is
➧ CRS 1.14
priced by the contractor and interim payments are based on the

measured work actually carried out. The price is not based on single
annual cost.
Main Features
• the contract covers the periodic servicing and inspection of

equipment (including specialist plant), repair of equipment due to
faults discovered during inspection, and repairs ordered by the
Project Manager (PM);
• the contract is administered by the PM;
• Condition 23 provides for the valuation of work at the rates and

prices in the schedules;
• Condition 24 provides for the separate payment of travelling time;
• the form of tender allows for price limits to be set by the

Department for each repair in respect of routine minor repairs and
any repairs separately ordered;
• the prices in the schedule will be subject to VOP adjustment in

accordance with the formula in Condition 25 and using the indices
in the DETR publication “Price Adjustment Formula for Building ➧ LE 2.7
Contracts (Series 2)”;
• in accordance with Condition 27, separate monthly accounts are

submitted by the contractor for period servicing/inspection and for
minor repairs; accounts for repairs separately ordered are to be
submitted within 14 days after completion of each order;
• Condition 22 provides for emergency call-outs.
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Model Forms
• form of tender;
• Schedule A: items of periodic servicing and inspection.
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CRS 1.15.12 GC/WORKS/9 (1999) - OPERATION, REPAIR AND

MAINTENANCE CONTRACT FOR MECHANICAL AND
ELECTRICAL PLANT, EQUIPMENT AND INSTALLATIONS, ETC.
(REPLACES C910, PUBLISHED 1990)
This form of contract is a lump sum maintenance term contract for the
operation, maintenance and repair of fixed M&E plant, equipment and
installations, for a single establishment or complex of buildings close
enough to be conveniently covered by a single contract. The term of
the contract is for a period of one to five years and the price includes
one-off repairs up to a specified maximum cost per repair. The price is
based on a performance based specification which sets out operational
requirements and plant operating criteria.
Major Features
• the contract is administered by the Project Manager (PM);
• the contractor must appoint an agent in accordance with Condition

5 who will supervise the work and to whom directions may be
given by the PM;
• the contract sum is a lump sum for the service to be provided in

the first year, to be paid in 12 equal monthly payments commencing
one month after the commencement date, in accordance with
Condition 26;
• on the anniversary of the commencement date in each subsequent

year of the term, the annual lump sum is adjusted for inflation using
the VOP formula set out in Condition 25 and using the indices
published in the DETR publication “Price Adjustment Formula for
Building Contracts (Series 2)”;
➧ LE 2.7
• in accordance with Condition 1, the contractor will not be entitled

to any additional payment for any repairs which do not exceed the
cost threshold set for individual repairs.
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Model Forms
• form of tender;
• list of sites and summary of tender;
• schedule of information to be supplied by the tenderer.
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CRS 1.15.13 C1303 - WINDOW CLEANING

(TSO - ISBN 0-11-671539-1)
These specialist term contracts are very similar and are both for use
where work is required at specified intervals. The contractor prices a
schedule of work which sets out what has to be cleaned and how
regularly.
Main Features
• there is no Superintending Officer; the Department takes

responsibility for contract management;
• prices remain fixed for the first year and are then negotiated at
twelve month intervals thereafter;
• the period of the contract may be from one to three years;
• the contract may be determined by either party provided three

month’s notice is given and the contract is not determined before
the expiry of the first year;
• the work shall be carried out at the times stated in the schedule or
at such times as the Department may direct.
Model Forms
• form of tender;
• schedule of work.
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CRS 1.15.14 C1306 - MAINTENANCE OF GARDENS, GROUNDS, ETC.

(TSO - ISBN-0-11-671539-1)
These specialist term contracts are very similar to C1303 and C1304,
but they differ in the way in which prices are updated. Both of these
contracts are for use where work is required at specified intervals. The
contractor prices a schedule of work which specifies what has to be
done at what locations, and how frequently.
Main Features
• there is no Superintending Officer; the Department takes

responsibility for contract management;
• prices remain fixed for the first year, and are adjusted at 12 monthly
intervals thereafter;
- in the case of C1306, the price is adjusted in accordance with

a formula given at Condition 5,
- in the case of C1312, the price is adjusted in accordance with

the formula given at Condition 8 and the updating
percentages specified at Condition 5;
➧ LE 2.7
• the contract period may be from one to three years;
• the contract may be determined by either party provided three

month’s notice is given and the contract is not determined before
the expiry of the first year;
• the work shall be carried out at the times stated in the schedule or
at such times as the Department may direct.
Model Forms
• form of tender;
• schedule of work.
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CRS 1.15.15 C/804 - REPAIR OF PLANT
This is a standard form of contract for repair of plant. It is a non-

competitive two stage contract. The contractor strips the plant and
repor ts on the degree of repairs required. If the contractor’s quotation
for repair is considered fair and reasonable the contractor can be
instructed to proceed. If it is not considered reasonable the contractor
is merely paid for the work carried out i.e. the stripping and report.
The repair work can then be carried out by alternative means e.g.
GC/Works/4 (1998), using the report as a basis for the specification.
➧ CRS 1.15.7
➧ CRS 1.15.12
Alternatively it may be considered uneconomic to repair the plant and
it can be replaced by new.
Model Forms
• instructions to proceed;
• form for quotations, report, and details of replacement parts and

tests.
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IDENTIFICATION
CONTRACTS FILE
CONTRACTORS
CRS 2.0 CONTRACTS FILE
CRS 2.1 IDENTIFICATION (THIS SECTION DUPLICATES CST 2.1)
Each Department is likely to have an existing system for numbering

identifying and opening new contract files. This section is therefore
provided by way of guidance and describes points of general
importance and application. When the need for a contract has been
identified, consideration should be given to the following important
points:
• each contract should have a reference code assigned to it; it should

identify the Department as well as a unique reference number for
the contract;
• it is generally common practice to open a registered file which is

assigned the contract reference number, and which contains all of
the papers relating to the contract;
• it is good practice to use the unique reference number in all

correspondence relating to the contract, and to insist that all parties
to the contract also use the reference number in their
correspondence;
• it is likely that the contract file will comprise a number of files and
sub files and all such files should also be assigned the unique
reference number;
• an important aspect of the contract file is that it provides a record

of procurement practice adopted; the file or files are then available
to demonstrate that steps have been taken to procure services in a
way which aims to achieve best value for money.
The documents in the contract file are likely to include:
• records of meetings at which matters affecting the setting up of the

contract were discussed;
• minutes requesting and giving financial and contractual approval to

further action;
• records of the pre-selection process for choosing the companies

(copies of the corporate brochure or general information about a
company need not be retained on the contract file);
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IDENTIFICATION
CONTRACTS FILE
CONTRACTORS
• records of formal interviews and recommendations therefrom;
• records of EC advertisement and replies, if applicable;
• the business case including:
- a record of the pre-tender estimate;
- a schedule of potential project risks;
- a record of the consideration of PFI alternatives, where

appropriate;
• a record of the proposed tender evaluation criteria;
• a set of the tender documents as issued to tenderers (other than

standard printed documents);
• copies of correspondence during the tender period;
• admissible tenders received, placed in a folder;
• the tender summary sheet;
• any correspondence pertaining to consideration of the tenders;
• the evaluation report and recommendation to accept a tender;
• the appropriate delegated approval to accept a tender;
• a copy of the acceptance letter together with the acknowledgement

of acceptance by the successful tenderer;
• a copy of the decline letter sent to unsuccessful tenderers;
• copies of any requests for debriefing by unsuccessful tenderers

together with the Depar tment’s response.
Key Points
• Records are required to demonstrate that best value for money has
been sought.
• Records may also be essential to demonstrate that tenderers have

not been unfairly excluded in the event that EC Procurement
procedures have to be followed, and a challenge is raised by an
unsuccessful tenderer.
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SUB-FILES
CONTRACTS FILE
CONTRACTORS
CRS 2.2 SUB FILES (THIS SECTION DUPLICATES CST 2.2)
Each stage of the contract process can produce bulky documents

(companies’ presentation documents, tender documents, companies’
bids, and evaluation reports etc.). It is therefore recommended that,
where such documents may be easily separated from the main file, sub
files are created to hold these documents.
Each sub file should carry the unique contract reference number, and it
is common to give each sub file an alphabetical suffix. Where sub files
are created, it is recommended that an index of sub files is held at the
front of the main file.
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RETENTION PERIODS
CONTRACTS FILE
CONTRACTORS
CRS 2.3 RETENTION PERIODS (THIS SECTION DUPLICATES CST 2.3)
There are four principle reasons for retaining contract files:
1. To provide records for use as an aide memoire for future projects.

contracts procured in accordance with EC public procurement rules.

CDM Regulations the Depar tment is under an obligation to keep ➧ LE 2.1

contract in the event of legal action, which either the Department
feels appropriate to take, or against which a Department is required
to mount a defence.
have legal liability are limited by statute, and vary depending on the ➧ LE 1.9
circumstances.
The periods of liability are determined by reference to the Latent

Damages Act 1986. The minimum period is six years from the date of
the breach. If the contract is by deed, however, the period is 12 years.
The position is more complex in respect of liability for negligence.
Duties of care may be owed by the project manager, the designers and
the contractor for periods of up to 15 years, and in some cases beyond.
This should therefore be taken into account when assessing the
retention period for all documents relating to major works projects.

should be retained until completion of the contract.
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RETENTION PERIODS
CONTRACTS FILE
CONTRACTORS
CRS 2.3(SCOT) RETENTION PERIODS
1. To provide records for use as an aide-memoire for future .

rules.
3. To comply with legal obligations to do so. In accordance with the ç LE 2.1

CDM Regulations the Department is under an obligation to keep

Department feels appropriate to take, or against which the
Department is required to mount a defence.
In the case of legal action the periods for which the Department may ç LE 1.9
have legal liability are limited by statute, and vary depending on the
circumstances.
Remember that the vast majority of all contractual obligations will

expire under the ‘short negative prescription’, ie after five years from
the date when the obligation becomes enforceable, if the necessary
conditions are satisfied. Before an obligation prescribes, however, the
relevant period of time must have passed without any ‘relevant claim’
(see LE 1.9) by the creditor, or any ‘relevant acknowledgement’ (again,
ç LE 1.9
see LE 1.9) by the debtor.
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SELECTION OF FIRMS
CONTRACTOR SELECTION
CONTRACTORS
CRS 3.0 CONTRACTOR SELECTION
CRS 3.1 SELECTION OF FIRMS
The principle aim of the procurement process is to select a contractor

which offers the best value for money. This will nearly always involve a
process of competitive tendering. Value for money means the “most
economically advantageous to the contracting authority” and not
lowest cost alone (see PPD Guidance Note No. 3).
Much of the work let in accordance with this chapter is likely to be of a

specialist service or maintenance type contract for a term of say 3
years. It is recommended that the frequent use of the same contractor
or the same list of contractors is avoided.
It may be that in exceptional circumstances the timescale or the type of

work necessitate the appointment of a contractor on the basis of a
single tender action. This means that the competitive process is not
followed and generally that the contract and in particular price are
negotiated with one contractor. Where such a procedure is unavoidable
it will normally be necessary to obtain the appropriate delegated
authority before proceeding.
It will be appreciated that the precise steps involved in procuring a

contractor or a number of contractors depend very much on the
selected contract strategy and whether or not the public procurement
rules apply. The steps which are followed in this chapter assume a single
stage selective tendering process.
For the selection of contractors, the weight attached to quality is likely

to be less than it is for consultants. The extent of quality evaluation will
vary from one contract strategy to another. It is suggested that with the
traditional strategy, pre-selection and short listing are when the
principal quality evaluation will be done. For certain strategies, in
particular construction management and to some extent management
contracting, it is recommended that quality is further evaluated by
holding pre-tender interviews.
➧ CST 3.9
It should also be borne in mind that under the Construction Industry

Tax Scheme all firms must be in possession of a valid registration card
or tax certificate and produce it for inspection whenever requested to ➧ LE 2.11
do so.
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SELECTION OF FIRMS
CONTRACTORS
The adopted procedure should be transparent and auditable and

should operate fairly between each tenderer.
The following steps are therefore recommended in order to obtain a

short-list of suitable contractors for tender:
Consult Gather market Keep a list of

New Qualification intelligence about contractors who
System (NQS) for contractors including serve you well or
development of the references regarding have served you well
longlist past performance in the past
Identify long list
Confirm contractor’s interest
Identify pre-selection criteria
Where unfamiliar with contractors arrange pre-selection interviews to

assess basic abilities
Evaluate pre-selection data and form short list
Inform contractors of outcome
Where the EC procurement rules apply then the pre-selection process,

using the restricted procedure, will be as follows:
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SELECTION OF FIRMS
CONTRACTORS
OJ contract notice and UK advertisements specifying the basis on

which the pre-selection will be carried out
Initial paper sift
Appraisal of expressions of interest
Office Visits (optional)
Financial checks
Pre-qualification interview (optional)
Pre-qualification scoring
A paper sift will also be required if a large number of tenders are

sought in order to establish a panel of contractors.
The next stage of the selection process is the invitation of tenders and
choice of contractor. The following steps are recommended in order to
select a contractor from the short list:
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SELECTION OF FIRMS
CONTRACTORS
Invite contractors to submit prices
Hold mid-tender interviews if appropriate
Check contractors’ tenders for conformity and evaluate price
Advise all contractors
Debrief if requested
The steps involved in obtaining a short list and in selecting the

successful contractor set out above need not be rigidly adhered to in
every case. Simple or small standard contracts may not require pre-
tender interviews for example.
Key Point
The Construction Industry Tax Scheme requires that any firm must be
in possession of a valid registration card or tax certificate. ➧ LE 2.11
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NEW QUALIFICATION SYSTEM
CONTRACTORS
CRS 3.2 NEW QUALIFICATION SYSTEM (NQS - FORMERLY CMIS)
Constructionline is the name of the service which utilises the NQS

database. Where the EC procurement rules do not apply, then the long
list of contractors can normally be obtained from the NQS.
Its purpose is to validate prior to tender, the financial standing,

managerial capability, technical competence and resource capacity of
bona fide firms wishing to undertake a wide variety of construction and
property related services. The NQS is free of charge to clients and is a
powerful tool designed to minimise the risk of the user against
company failure, poor workmanship and fraud. The data helps to ensure
that public bodies only deal with reputable firms and financially sound
companies and saves time and valuable resources in the vetting of firms
being considered for an invitation to tender.
The NQS includes details of a firm’s staffing, categories of work a

contractor can undertake, current and completed work recorded as
‘feedback’ by the users, and an assessment of the maximum individual
contract value a firm may accommodate (the notation).
Departments can access the NQS on-line, under the auspices of a BT

managed telecommunications service. The IT Helpdesk and client
liaison responsibility are located in Edinburgh.
Any depar tment, agency or NDPB wishing to access the NQS will
need to do so via an on-line computer link. Any requests for Access
Packs or additional information/advice can be obtained from the
contacts listed overleaf.
Key Point
More detailed information on the NQS is contained in CAU

Information Note 27/98. A copy can be obtained by phoning the CAU
Helpdesk on 020 7271 2833.
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NEW QUALIFICATION SYSTEM
CONTRACTORS
Organisation Structure of Constructionline
Head Office for Constructionline and the processing responsibility for

firms based in England, Wales, Scotland and Northern Ireland:
Constructionline
Great West House
Great West Road
Brentford
Middlesex
TW8 9DF Tel: 020 8380 4600
Constructionline Director: Chris Leggett

Development Director: Colin Garton
Operations Manager: Paula Beresford
* Client helpdesk and technical support is currently located at:
Constructionline
The Basement
17 Atholl Crescent
Edinburgh
EH3 8HA Tel: 0131 229 9449
*Note: the processing responsibility for firms based in Scotland moved to

the Brentford office in October 1998 but the client helpdesk and technical
support responsibilities have been retained.
IT Helpdesk Tel: 0870 607 1602
Client Services Manager Tel: 0870 607 1602
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CONTRACTORS
CRS 3.3 THE LONG LISTING PROCESS
The production of the long list is the first step towards establishing a
viable tender list which will ensure genuine competition among capable
suppliers.
Where the EC public procurement rules apply, the long list will
generally be established through inviting expressions of interest by
advertising in the Official Journal of the European Community. It is
recommended that such expressions of interest are checked with NQS
in respect of their financial position. Otherwise, the long list will be
compiled from the following possible sources:
• NQS;
• market intelligence gathered by the Depar tment;
• list of contractors who have serviced the Department well in the

past.
It is recommended that the long list be limited to 10 in number. The

key criteria for selection of firms for the long list are:
• experience in the general area of construction work;
• track record on similar work;
• experience with the size of works contract envisaged.
It may be useful at this stage to ask firms who are not known to the
Depar tment to provide brochures and possibly references to confirm
experience and track record.
When the long list has been fixed, a preliminary enquiry should be sent
to each firm on the list to ask them to confirm without obligation that
they are interested, that they have the resources and that they will
submit a tender if asked.
It is recommended that replies are requested in writing and by a given

date.
Key Points
• An example preliminary enquiry is given in the form of CRS3/SF1

overleaf.
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CONTRACTORS
STANDARD FORM 1 - LETTER CRS3/SF1
Preliminary Enquiry Letter
Dear Sir
PRELIMINARY ENQUIRY RE [TITLE OF PROJECT]
The [Secretary of State] acting through [Department] intends to tender the construction
of the works described below. Particulars of the works are
[enclosed/as follows:]
Include details such as:
• project;
• nature of work;
• location;
• estimated value;
• contract period;
• contract strategy;
• proposed number of tenderers.
The following is the proposed procurement programme in connection with this

commission:
• Date of invitation to tender: ..................................................
• Date of contract award: .............................................................
• Commencement of works: .....................................................
• Duration of works: .......................................................................
You are invited to confirm in writing your interest in being included in the tender list by
....................... [Date]. Please also advise us of any special reasons which you consider to
support the inclusion of your company on the tender list.
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CONTRACTORS
You should note that a negative response will not prejudice your company’s
prospects of being invited to tender in the future.
Please also note that the details given in this preliminary enquiry may change and
neither this enquiry nor your positive reply to it in any way guarantee that you will
be included on the final tender list or that the work will proceed at all. In addition
the above information is to be treated as strictly confidential.
Yours faithfully
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PRE-SELECTION PROCEDURES
CONTRACTORS
CRS 3.4 PRE-SELECTION PROCEDURES
Once the long list has been formed, then pre-selection information is
gathered in order to produce the final short list of contractors. The
object of contractor pre-selection is to determine a short list of firms,
any one of which could be entrusted with the work. The final choice of
contractor on this basis is therefore simpler. The following criteria (and
any other criteria considered appropriate to the contract) are among
the points which should be considered in formulating the short list:
• contractor staff: availability and track record of key personnel; note

that contractors will tend to field their best team to win the job;
• availability and ownership of plant;
• ratio of contracted to permanent staff;
• turnover of company in relation to project size and expenditure

profile;
• company status: relationship to parent company, joint ventures etc.;

is it a shell company or dormant;
• contractor’s policy with regard to sub-contract work;
• safety policy and record;
• attitude of contractor to “claims”: check references and other

experience;
• capability, experience and standard procedures in such areas as

project management, cost control, procurement, design services etc.
A full evaluation of these factors should generate a short list of

contractors suitable for the works.
Where the EC public procurement rules apply, and the restricted

procedure is being followed, then each of the expressions of interest
will be evaluated on the basis of a paper sift in order to arrive at a
➧ EPP 1
short list.
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PRE-SELECTION PROCEDURES
CONTRACTORS
Pre-Selection Interview
In certain circumstances depending on the size and importance of the

contract it may be necessary to carry out an interview of all the
potential bidders as part of the pre-selection procedure. This allows
firms to highlight their strengths and for Departments to expose any
weaknesses and also to meet the firms staff.
It is recommended that the following issues are considered in respect

of pre-selection interviews:
• plan the interview;
• ensure each interviewer has an agreed area on which to

concentrate and standard check lists are prepared covering these
areas;
• have a standard agenda and a priority marking system;
• analyse capability against a series of key areas for the specific project;
• take up other private or Department references;
• determine resource strength in depth;
• look for real experience and track record rather than impressive
presentational skills;
• for contracts subject to the EC Works Directive, make sure to stay

within the bounds of the evidence that is required; and
• treat all contractors identically to avoid any hint of discrimination.
The interview provides an opportunity for the Department to learn

about the industry and market conditions first hand. Other issues may
be discussed such as payment terms, insurance, pre-ordering materials,
subcontracting etc.
Key Points
• The idea behind contractor pre-selection is to result in a short list of

contractors which can all be entrusted with the works.
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COMPILATION OF SHORTLISTS
CONTRACTORS
CRS 3.5 COMPILATION OF SHORT LISTS
When all pre-selection information has been gathered, and evaluated,

the short list can be produced. The number of tenderers selected for
the shor t list will depend on the size and complexity of the works
➧ CST 3.6
contract.
Those who are not short listed should be advised in writing. Standard
Form 2 - Exclusion Notification, may be sent (see CRS 3/SF2). There
are two alternative paragraphs depending on whether or not a pre-
selection interview was held.
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COMPILATION OF SHORTLISTS
CONTRACTORS
Exclusion Notification
Dear Sirs
[TITLE OF PROJECT]
Thank you for your letter of [date] expressing an interest in being invited to tender
for the above contract.
[or, (if attended pre-selection interview): Thank you for the opportunity of meeting
you on [date] to discuss your firm and the above project].
After careful consideration I must advise you that on this occasion the Department
does not intend to invite you to tender.
Please be assured that this decision in no way affects the prospect of you being
invited to tender for suitable work in the future.
Yours faithfully
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THE NUMBER OF TENDERERS
CONTRACTORS
CRS 3.6 THE NUMBER OF TENDERERS
A balance must be struck between encouraging competition and

providing each tenderer with a reasonable chance of success. In respect
of major works contracts it is recommended that tenderers are invited
from six tenderers, however, it should generally be not less than three
and no more than ten for selective (restricted) tendering. Each contract
should be decided on its individual merits, but the following is an
indicative guide for deciding on the number of tenderers.
• B&CE
up to £1 million estimated value 5 or 6 firms
£1 million and over 6 to 10 firms
• M&E
up to £250,000 estimated value 4 to 6 firms
£250,000 and over 6 to 8 firms
In respect of design and build contracts where the contractor can be

involved in expensive design work as part of the tender, it is
recommended that tenders are sought from no more than three
contractors unless the EC public procurement rules apply.
Where the EC rules apply and the restricted procedure is being used,
the contracting authority may specify the range in the Contract Notice
from within which the number of tenderers will be invited to bid. The
lower number of the range must not be less than 5 and the higher
➧ EPP 1.11
number not more than 20.
If an authority chooses not to specify a range, then it is free to invite

any number of bidders provided it is sufficient to ensure genuine
competition (normally not less than 3).
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DOCUMENTATION
TENDERING PROCESS
CONTRACTORS
CRS 4.0 TENDERING PROCESS
CRS 4.1 DOCUMENTATION
The information must be as comprehensive as possible and it must be

clear which elements are meant to be contractual and which parts are
for information or guidance.
This documentation is the basis of the contractor’s price. Lack of clarity

or ambiguity in documents, create weaknesses or opportunities which
the contractor may exploit in order to increase the final cost and/or
delay the time for delivery.
It is important therefore that the tender documents satisfy the

following essential requirements:
• the documents should be specific about what is required;
• the documents should be without ambiguity; these and any

documents which are a record of negotiations that are subsequently
incorporated as contract documents, should all be consistent with
one another;
• the conditions must clearly allocate risks as between contractor and

Depar tment and specify who must pay what in the event of
variations or delay.
The content of tender documentation for a works contract will

typically comprise:
• instruction to tenderers;
• general conditions of contract;
• special conditions of contract;
• scope of work;
• standards and specifications;
• schedules and drawings;
• pricing schedules as required by the form of contract (e.g. BQs);
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DOCUMENTATION
TENDERING PROCESS
CONTRACTORS
• schedule of rates; and
• administration procedures
• standard acknowledgement slip (see CRS4/SF1)
• tender return label (see CRS4/SF2)
Invitations to Tenderers
It is suggested that these should include, inter alia, the following

information (when not included within the instructions to tenderers):
• the point of contact to which queries should be sent by tenderers;
• the address to which tenders should be returned;
• the time and date of the return of tenderers;
• the address where additional documents and information may be

inspected;
• any expected delays to possession of site or commencement of the

works;
• timings for the appointment of nominated sub-contractors;
• any key design phases and timings;
• qualification or amendments to standard conditions of contract;
• brief details of the Department’s insurances;
• rates for liquidated damage (where applicable);
• length of maintenance period e.g. B&CE 6 months, M&E 12 months.
The Government forms of contract include standard forms of invitation

to tender and forms of tender which are recommended for use with
these forms.
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INSTRUCTIONS
TENDERING PROCESS
CONTRACTORS
CRS 4.2 INSTRUCTIONS/NOTICES TO TENDERERS/

TENDER PERIODS
Instructions to Tenderers
These will usually not form part of the contract documentation since
their purpose is for guidance to tenderers in submitting a compliant bid.
Typical guidance within the instructions include:
• advice on how to respond to the invitation to tender;
• complete schedule of all tender documents;
• a possible checklist for tender returns.
It is suggested that the instructions make it clear that the Department

is not bound to accept the lowest price, in other words the selection
criteria should be value for money. Additional information may include:
• arrangements for the acceptance of telephoned, faxed or telexed

tenders - stating whether they are acceptable or not;
• the criteria for accepting late tenders; ➧ CRS 4.7
• procedure for dealing with qualified tenders;

➧ CRS 5.3
• policy on alternative tenders which are non-compliant bids;

➧ CRS 5.4
• arrangements for receipt, opening and recording of bids;
• procedure for dealing with arithmetical errors;

➧ CRS 5.6
• policy for debriefing unsuccessful tenderers;

➧ CRS 7.0
• instructions with regards to confidentiality of tenders i.e. to mark

clearly “In confidence”;
• the requirement to be registered with Inland Revenue under the

Construction Industry Tax Scheme. ➧ LE 2.11
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INSTRUCTIONS
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CONTRACTORS
Tender Periods
The time allowed to prepare the bid must be adequate in order to

submit a comprehensive bid. For lump sum contracts (i.e. BQs) it is time
consuming to estimate the cost of all the resources required to provide
the works and where a design is sought this is even more onerous.
Approximately six weeks is recommended for traditional procurement,

however, the requirements of each contract must be considered
separately. Minimum periods are specified when the contract is subject
to the EC public procurement rules.
➧ EPP 1.8
Extensions of Time
Tenderers, from time to time, may request an extension to time for

preparing their tender. In principle there is no justification for extending
the tender period. However, Departments may wish to consider such
requests where, for example, there have been a change in the
circumstances, usually by way of a tender amendment.
Key Points
• It is suggested that a tender period around six weeks is appropriate

for traditional procurement. Appropriate periods vary according to
project value and complexity.
• It may be advisable to contact tenderers beforehand to ensure that

tender periods are feasible.
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INSTRUCTIONS
TENDERING PROCESS
CONTRACTORS
STANDARD FORM 1
CRS4/SF1
ACKNOWLEDGEMENT SLIP
Tenderers are requested to complete this slip and return it to:
..................................................................................................................................................................................................
[Departmental address] immediately upon receipt of the tender documents.
PROJECT/COMMISSION TITLE: ....................................................................................................................
DEPARTMENT REFERENCE NO: ..................................................................................................................
DEPARTMENT LIAISON OFFICER: ..................................................................................................................
(as stated in the invitation letter)
1. I acknowledge receipt of tender documents for the above project/commission.
(either)*
2. I will submit my tender by the due date.
(or)*
2. I do not wish to tender on this occasion and return the documents herewith.
Signed: .................................................................................................
For and on behalf of .................................................................................................
.................................................................................................
.................................................................................................
Date: .................................................................................................
* Delete as appropriate
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Tender AFFIX
POSTAGE
CRS 4.2.4
FOR CONTRACT NO: STAMPS
HERE
...........................................................................................................................................
......................................................................
Returnable not later than 11.00 hrs on:
...........................................................................................................................................
Notes:
1. The envelope to which this label is attached

Tender Return Slip
DEPARTMENTAL ADDRESS
STANDARD FORM 2
must not bear any indication of the tenderer’s
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name.
2. It is the tenderer’s responsibility to ensure

that the tender is delivered by the due time.
Tenders received after this time will not be
considered.
3. Tenders to be delivered by hand are to be

INSTRUCTIONS
CRS4/SF2
handed in at the reception desk and/or placed

CONTRACTORS
in the [DEPARTMENT’S] TENDER BOX.
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TENDERING PROCESS
EDITION 2: FEB 1998

MID-TENDER INTERVIEWS
TENDERING PROCESS
CONTRACTORS
CRS 4.3 MID-TENDER INTERVIEWS
Mid-tender interviews are held with tenderers after the tenders have
been invited. The interview should be timed such that tenderers have
had sufficient time to give detailed consideration to the requirements
of the tender.
The requirement for mid-tender interviews is optional. However, the

more complex the work the more likely it is that a mid-tender
interview will be of value.
Mid-tender interviews should be held separately with each tenderer.

Avoid allowing tenderers to attend the offices at the same time or to
see other names in a signing-in book.
▲
!
The principle functions of a mid-tender interview are that it provides:
• a further oppor tunity for the Department and its advisers to meet
the tenderers;
• an opportunity for contractors to raise any specific queries they may

have concerning incomplete tender information or ambiguities in
the information;
• an opportunity for contractors to raise questions about potential

qualifications or alternative tenders;
• a chance for the Department to issue any further information, the

need for which may already have been flagged up by the design
team or tenderers.
The Department may gain very useful information about design

problems and an insight into some of the risks it may not have fully
considered at the pre-tender stage. All requests for information should
be consolidated and all answers provided to all tenderers to ensure
consistent and fair dealing.
Where queries result in a significant change then an extension of the

tender period should be considered.
Key Points
• All tenderers should be dealt with equally and fairly.
• Additional information should be provided in writing to all

tenderers.
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TENDER BOARDS
TENDERING PROCESS
CONTRACTORS
CRS 4.4 TENDER BOARDS
A tender board, typically comprising three people should be appointed

to open and record bids. It is recommended that the following
conventions be followed:
• one member should be a senior chairperson;
• one member should be completely independent from the

commission; this helps to establish the credibility of the board, as
impartial;
• total impartiality is achieved through choosing different tender

board members from those on the tender evaluation panel.
To promote propriety, it helps if a member of the board appoints no

more than one other member, i.e. chairperson appoints the secretary,
the secretary appoints the third person.
It is the responsibility of the senior board member to ensure that all

members are conversant with tender board and tender opening
procedures and the tender documents.
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OPENING OF TENDERS
TENDERING PROCESS
CONTRACTORS
CRS 4.5 OPENING OF TENDERS
Once the tenders have been received they should be securely locked
away in a cabinet or tender box until they are due to be opened (i.e.
the advertised time).
Prior to the opening of tenders, the commission manager/project

sponsor should provide the tender board with a list of all those invited
to tender. This enables the tender board to identify those who have
not submitted tenders or subsequently those whose tenders are
received late.
When the tender box is opened, the unopened tenders should be

passed directly to the tender board, and to no-one else.
The following steps should then be followed by the tender board:
• tenders should ideally be opened in a locked room with no working

telephone;
• if the tender board is dealing with tenders for a number of contracts

or commissions then it will need to sort tenders by their unique
tender number and deal separately with the tenders for each
contract;
• opened tenders for a contract should be sorted according to price

or in the alphabetical order of the tenderers’ name;
• any unpriced tenders are not complete tenders and should

therefore be rejected and returned stating the reason for rejection;
• where a tender document has a tenderer’s signature at the end of

it, each page of that document should be signed by the senior
member of the tender board; this may be speeded up by the use of
a personal facsimile signature stamp;
• each tender should then be given a sequential number to prevent

later insertion of other tenders;
• a tender summary sheet should then be completed (CRS4/SF3); on

the sheet should be listed the sequential tender numbers names of
tenderers from whom tenders were received and their price; names
of those who did not submit tenders, should also be given together
with the reason if known;
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OPENING OF TENDERS
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CONTRACTORS
• the tender summary sheet relates to the tenders for a particular

contract and should be completed and signed by the senior tender
board officer;
• the tender summary sheet and opened tenders should be delivered

by hand or, if necessary sent by registered post to a member of the
tender evaluation panel.
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OPENING OF TENDERS
TENDERING PROCESS
CONTRACTORS
STANDARD FORM 3 CRS4/SF3
Tender Summary Sheet
[Department]
TENDERS - SUMMARY SHEET
Commission/Contract File No: ........................................................................................................................................
LOCATION
NAME OF CONTRACT/COMMISSION
ESTIMATED COST £
DATE
Tenders as listed below, have today been opened and authenticated by the Tender
Opening Board. Also listed are the names of those firms that did not wish to tender,
together with those that did not respond to the tender invitation
To:
........................................................................................................................................................................................................
Will you please examine the enclosed tenders and provide your recommendation as soon
as possible
Signed: ...............................................................................................................................................................................................
Senior Tender Board Officer
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TENDERING PROCESS
CONTRACTORS
CRS 4.6 THE TENDER RECORD BOOK

(THIS SECTION DUPLICATES CST 4.13)
A tender record book is a proforma book used for recording all

tenders for all contracts opened on a given day. It is therefore a
running record of all tenders opened. An example format is given at
CRS4/SF4.
The tender record book is invaluable for senior officers and auditors, as
the first step in any review of tendering activity since it provides a
complete reference record of allocated tender numbers.
It is important that the sequence of numbers should remain unbroken.

Tender board members should sign the tender record book once
tender opening has been completed, confirming the next number in
the sequence.
This prevents any irregularities such as the addition of a late tenderer

to the tender list without prior approval of the tender board and
without clear reasons for so doing.
➧ CRS 4.7
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COMMERCIAL IN CONFIDENCE
TENDER RECORD BOOK
CRS 4.6.2
[DEPARTMENT]
SERIAL NO CONTRACT/ TITLE OF NAME OF TENDER DATE AND TIME NOTES ON SIGNATURE OF
OF TENDERS COMMISSION NO CONTRACT/COMMISSION FIRM PRICE TENDERS OPENED COMPLETENESS TENDER BOARD
(SEE NOTE 2) TENDERING OF TENDER/ MEMBERS
IRREGULARITIES
STANDARD FORM 5
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TENDER RECORD BOOK
Notes:
1 Details of all Contractors/Consultants who were invited to tender must be included. Tender prices should be
entered where it is clear from the tender documents, otherwise ‘see tender’ should be entered.
2 Below the last tender number enter ‘Next Tender Number To Be Used’ and insert Tender No.
CRS4/SF4
CONTRACTORS
GACC
TENDERING PROCESS
EDITION 2: FEB 1998

LATE TENDERS
TENDERING PROCESS
CONTRACTORS
CRS 4.7 LATE TENDERS
Late tenders are not acceptable and should be rejected. However, it

may be unfair to reject a posted tender if it has been held up in the
post. The tender board should be re-commenced on receipt of late
tenders. Late tenders might be accepted in the following circumstances:
• first class posted tenders - the date stamp should be at least

one day before tenders were due to return;
• second class posted tenders - the date stamp should be at least

two days before tenders were due to return.
If the date stamp or class of postage are difficult to ascertain - treat as

second class postage. If the date stamp and class are made with the
tenderer’s franking machine, the tender should be rejected.
Tenders should not be accepted by facsimile under any circumstances.
A record of all rejected tenders should be kept at the back of the

tender record book, and the price should not be recorded or disclosed.
(See CRS4/SF5)
Should the tender opening board decide to admit a late tender into
competition it should be inserted in sequence into the list of tenders
and given a suffix to the preceding number i.e.:
Tender numbers Tenderers Price

248 J Bloggs £265,498
249 J Smith £265,501
249A* T Jones £270,995
250 F Black £276,222
251 B White £292,543
* admitted late tender
The envelope of any rejected tenderer should be retained and should

be endorsed with the tenderers name together with the reasons for
rejection and signed by a senior member of the tender evaluation
board. The contents should then be returned to the tenderer with a
short explanation for rejection (see CRS4/SF6).
The envelopes for admitted and rejected late tenderers should be filed
and used if the decision is challenged.
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COMMERCIAL IN CONFIDENCE
CRS 4.7.2
[DEPARTMENT]
CONTRACT/ TITLE OF NAME OF DATE DATE AND TIME REASON FOR SIGNATURE OF
COMMISSION NO CONTRACT/COMMISSION FIRM TENDERS TENDERS RECEIVED REJECTION OF TENDER BOARD
DUE TENDER MEMBERS
STANDARD FORM 6
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LATE TENDERS
CONTRACTORS
CRS4/SF5
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TENDERING PROCESS
EDITION 2: FEB 1998

LATE TENDERS
TENDERING PROCESS
CONTRACTORS
REJECTION AND RETURN OF TENDER
[Department]
Our Ref
Your Ref
Date
Dear Sirs
Location: ................................................................................................................................................................................
Commission: ................................................................................................................................................................................
Thank you for your tender for the above contract. It is very much regretted that it was
received after the time appointed for delivery and therefore cannot be considered. It is
returned herewith.
Should further opportunities arise for you to tender, it would be appreciated if you would
ensure that your offers arrive in time to be admitted.
Yours faithfully
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GENERAL
TENDER EVALUATION
CONTRACTORS
CRS 5.0 TENDER EVALUATION
CRS 5.1 GENERAL
The most important principle with this process is that it must be open,
clear, systematic, fair, thorough and seen to be so.
The following are some of the key issues to be considered:
• the purpose of the evaluation is to identify the best value for money
by comparing the price against the assessed benefits (under EC
procurement this is known as the most ‘economically advantageous’
tender);
• parity of tendering must be observed, in other words, tender

documents should not generate tenders based on unequal criteria;
• correspondence should be channelled though a single officer to

ensure that a fair and consistent approach is adopted with all
tenderers; such correspondence should be allocated a unique
reference or job number since all amendments must be clearly
referenced at contract award stage.
Procedure Prior to Evaluation
Prior to evaluation consideration should be given to the following

points:
• ensure that the tender returns have been signed;
• the lowest tenderers should be asked to provide their BQ as soon

as possible;
• incomplete tender returns must be taken up with the tenderer (this

may be classed as a non-compliant bid and therefore unacceptable).
It is recommended that the invitation to tender should state that
the Department is under no obligation to check the completeness
of a tender and that incomplete tenders may be rejected;
• arithmetical check on tender prices;
• where bids are not exactly comparable because, for example, of

different proposals from contractors, then the tender board must ➧ CST 5.3
choose either to reject non-compliant bids or to ‘condition’ bids as

far as possible such that they are comparable.
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GENERAL
TENDER EVALUATION
CONTRACTORS
• identification of qualified tenders and additional terms inser ted;
• is the tender exceptionally low (abnormally low in EC procurement

vocabulary).
Key Points
• The tendering process should be fair and scrupulous.
• Any contacts with tenderers should be consistent and information

should be distributed to all tenderers.
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CRITERIA FOR EVALUATION
TENDER EVALUATION
CONTRACTORS
CRS 5.2 CRITERIA FOR EVALUATION
It is impor tant that the tender evaluation panel decide on the criteria
which are most important to the contract before tender opening and
preferably before invitation to tender. Each criterion should be
weighted and agreed before bids are opened and if the contract is
subject to the EC Works Directive the criteria must be stated in the
tender notice or bid documents.
The appropriate criteria will heavily depend on the chosen contract

strategy. The following are commonly used but there are others:
Lump Sum Tender
• Technical
- checking for compliance with specification;
- resolving any stated deviations from specification;
- evaluating benefits of alternative proposals;
- if the bidders are to do any design, evaluating their design

capability and any design proposals for ease of construction and
operability.
• Execution proposal
- evaluating proposed programme;
- evaluating execution proposals: e.g. management organisation

and support, resources of plant and labour proposed;
- plant and labour availability (which may be very different);
- reviewing key project personnel.
• Commercial
- reviewing sensitivity to changes imposed by Department;
- if the price includes a BQ do the rates reflect the true costs of

the items concerned, or are they unbalanced?;
- evaluating any exceptions to conditions of contract.
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TENDER EVALUATION
CONTRACTORS
Cost Reimbursable Tenders
• Technical
- quality and completeness of proposals;
- cost evaluation of benefits of one proposal compared with

another;
- design office productivity particularly the use of modern

technology such as computer aided design (CAD) and
derivatives;
- construction/supervision track record: labour management, sub-

contractor management, claims settlement, construction
techniques and experience on other jobs etc.;
- potential programme differences;
- personnel quality - this is really the key issue for reimbursable

cost or management contracts. The cost of management
personnel will typically represent some 5 to 15 percent of the
contract value but their level of competence will have an
enormous effect on the end costs;
- reviewing all key posts and in particular looking at strength in

depth;
- taking up other private or Department references;
- procurement procedures;
- cost management procedures;
- evaluation of operating costs and overheads;
- comparing quoted fee with estimated man-hours;
- reviewing cost audit, reporting, and control mechanisms.
The evaluation exercise can then proceed following a similar method

and taking account of the principles espoused in CST 5.1.
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TENDER EVALUATION
CONTRACTORS
Key Points
Useful further guidance can be found in HM Treasury Procurement

Guidance (No. 3), available from:
HM Treasury
Public Enquiry Unit
Room 89/2
Parliament Street
London SW1P 3AG
Tel. 020 7270 4558
Within the document is an illustrative example of an award mechanism

which could be adopted. It would of course need to be amended to
suit the individual circumstances of each project.
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QUALIFIED TENDERS
TENDER EVALUATION
CONTRACTORS
CRS 5.3 QUALIFIED TENDERS
Qualified tenders are difficult if not impossible to compare with others,

and for this reason they should be actively discouraged. It may be
decided for example to state in the invitation to tender that qualified
bids will be automatically disqualified, unless alternatives are sought.
Where the EC procurement rules apply, the procurer has the option of
stating in the contract notice that qualified tenders will not be
considered.
Although qualified tenders will generally not be accepted, in certain

circumstances it is advisable that they are given consideration. If a
qualified tender is received, the tenderer should be given the
opportunity to withdraw the qualification without amendment to its
tender price. This should be done through correspondence, copies of
the Department’s letter and the tenderer’s reply being kept on the
commission file.
Should a tenderer refuse to withdraw its qualification, then the

importance of the qualification and the effect on the tender price will
need to be assessed as precisely as possible.
If the tenderer is otherwise in the running and the qualification is a

technical one imposed by a specialist company and offers the possibility
of innovation and best value for money, professional advice will need
to be sought on the importance of the qualification. It may be possible
to give a fully reasoned explanation not to pass over an otherwise
➧ CRS 5.4
good offer containing an acceptable qualification, e.g. shorter

completion date. Sometimes a price reduction will be offered if such
qualifications are accepted.
The file should show a fully reasoned explanation if an otherwise good

offer is passed over due to a qualification, and likewise if an offer is
recommended for acceptance despite a qualification.
Key Points
• It may be appropriate to consider qualifications to tenders if they

provide best value for money.
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ALTERNATIVE OFFERS
TENDER EVALUATION
CONTRACTORS
CRS 5.4 ALTERNATIVE OFFERS
Tenderers will sometimes propose an alternative offer, e.g. an

alternative material, method or specification, which they think could
meet the requirements in a better, cheaper or faster way. Innovation by
tenderers should not be discouraged.
Generally an alternative offer should be a separate, second offer, to the

main (or compliant) bid. The alternative offer should not be qualified in
any way and will be fully priced to show clearly how and where costs
would differ from the price based on the original specification.
If the alternative offer demonstrates savings and added value this will
have a bearing on its acceptability.
The alternative offer may be exposed to competition especially if the

alternative offer is not the lowest. This may however, discourage
tenderers from introducing further innovative ideas. In cases where the
alternative is subject to a patent this is not an issue. It is important to
consider whether the alternative fundamentally undermines the original
pricing assumptions, in this case further competition may be regarded
as essential.
Key Points
• It may be appropriate to consider alternative offers if they provide

best value for money.
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AMENDED TENDERS
TENDER EVALUATION
CONTRACTORS
CRS 5.5 AMENDED TENDERS
Depar tments should decide before evaluation of tenders begins, the

extent to which they will permit tenderers to change bids following the
closing date for receipt. It is usual practice not to accept such
amendments and to ask the contractor either to:
• absorb the effect of any errors in pricing found post-tender; or
• withdraw the offer.
Alternatively, Departments may opt to admit amendments if they are

satisfied that the errors are genuine and thereby maintain competition,
especially if the errors relate to what would otherwise be the preferred
tender.
If the amendment is due to an alleged clerical error or

misinterpretation of specification or drawings and is considered not to
be credible reasoning, then the tenderer should be told that its original
offer must stand, or be withdrawn.
Key Points
• It is usual to refuse to accept amendments due to errors unless it is

clearly a genuine error and/or that might seriously prejudice the
contractor.
• The lowest tenderer should not be so advised at this stage.
• Provided the contractor is unaware of the other bids, then it will be

at its risk whether or not the contractor wants to request an
amendment that may result in it not being the lowest.
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ERRORS IN PRICED BILLS
TENDER EVALUATION
CONTRACTORS
CRS 5.6 ERRORS IN PRICED BILLS
General
It is recommended that Departments are clear on their policy for

handling obvious errors in BQs or schedules of rates found during
evaluation.
The object of examining prices is to detect errors in computation and

to avoid BQs that undermine the reliability of the tender rankings.
Errors in pricing due to poor estimating would be absorbed by
contractors if discovered after contract award, however it is sensible
and professional practice to identify errors in pricing. It is recommended
that misplaced decimal points etc., or patent errors in arithmetic, should
be notified to tenderers during evaluation so they can either:
• confirm their tender;
• withdraw their tender;
• amend their tender.

➧ CRS 5.5
The Department should ensure that the chosen alternative is clearly

expressed in the Form of Tender.
Deliberate Errors
If the Department suspects that the “error” was deliberate to allow an

amended price or if it seems to be so abnormally high or low, it is
recommended that they reject it and insist on the original bid being
confirmed or withdrawn.
Abnormally Low Tenders
In contracts without BQs, errors resulting in abnormally low or

uneconomic bids should incorporate similar procedures as above, i.e.
challenge the price and allow amendment (if the error is satisfactorily
explained) or the bid to be confirmed or withdrawn.
The rejection of ‘abnormally low’ tenders is not only highly

questionable in terms of best value for money, but also a contravention
to the EC Works/Ser vices Directives. The Directives require that
tenderers be provided with the opportunity to justify apparently
uneconomic bids.
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POST TENDER NEGOTIATION
TENDER EVALUATION
CONTRACTORS
CRS 5.7 POST TENDER NEGOTIATION
Post tender negotiation (PTN) may exceptionally be appropriate or

necessary. It involves the negotiation of the leading tenderer’s bid with
the tenderer, and is carried out after bid conditioning and bid
evaluation are complete.
Procedure
The purpose is to obtain an improvement in content and circumstances

which do not put the other tenderers at a disadvantage or distort
competition, and results in best value for money. If it is to be done then
it is recommended that PTN is carried out after receiving tenders and
before the letting of the contract.
PTN may be necessary where part of a specification needs clarification

or because there are insufficient funds available to cover the price
submitted by the lowest acceptable tender. The aim of PTN, is to
secure value for money and definitely not to start a ‘dutch auction’.
All negotiations should be fully recorded or minuted so as to provide

an audit trail. PTN can be undertaken by revising drawings or BQ’s etc.,
should negotiations founder, attempts can be made to negotiate with
the next lowest tenderer and so on in ascending order of tendered
sums. It is recommended that only the three lowest tenderers should
be approached for negotiation.
EC Implication
Where PTN is being considered for projects that are subject to the EC
Directive, negotiations are only permissible to clarify points; this process
would be more correctly termed post tender clarification.
Key Points
• Different Departments have different policies on the treatment of

post-tender negotiations. Project sponsors should refer to their
Depar tmental handbooks.
• Post-tender negotiations are only likely to be permissible on the

grounds that the selected tenderer’s offer still represents best value
for money.
• If negotiations are required to reduce the scope of the work to

secure a price within budget, then it may be appropriate to re- ➧ CRS 5.8
tender the works, if the scope has to be changed significantly.
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TENDER EVALUATION
CONTRACTORS
CRS 5.8 RE-INVITATION OF TENDERS
Circumstances
On the assumption that none of the tenders are acceptable then all
tenders will need to be declined and formal re-tendering undertaken.
Some potential reasons for such an action are where:
• a high number of short listed tenderers drop out or fail to submit

bids;
• the bids are all substantially higher than expected in light of current
market conditions;
• where significant changes in scope of the work are required in order

to obtain a price which might conform to budget;
• collusive tendering.
It should be noted that the decision to re-tender should not be taken

lightly. The Department should be very cer tain of its grounds for doing
so. Tenders can cost contractors a lot of money to prepare. A re-
tender situation causes much unhappiness amongst contractors, and
may prejudice a contractor’s desire to tender in the future, especially
when market conditions are good.
Re-invitation of Original Tenderers
If the original tender list foundered largely because it was not feasible
to negotiate-in substantial changes to the Department’s requirements,
then the original tender list could stand. If
re-invitation is the result of high tenders and unsuccessful
post-tender negotiation, then new firms should replace the highest
original bidders e.g., top 3 out of 6. Where re-invitation is due to sharp
or corrupt practice amongst tenderers e.g., the detection of collusive
bidding or cover-pricing, then all the firms involved in the malpractice
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should be dropped from the new tender list.
It is recommended that re-invited firms to tender should be provided

reasons as to why the original offer was not acceptable so as to allow
tenderers to decide on the value of submitting further tenders.
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TENDER EVALUATION
CONTRACTORS
Key Points
• Re-invitation of tenders may exceptionally be appropriate.
• The Department should keep clear and auditable records of its

reasons for such an action.
• It is recommended that tenderers in the rejected round of tenders

should be advised of the reasons for re-tendering.
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TENDER REPORTING
TENDER EVALUATION
CONTRACTORS
CRS 5.9 TENDER REPORTING
For all contracts, the tender evaluation team must formalise their
recommendation for the award of the contract. This process is called
tender reporting and it sets out the background and basis for the
decision to provide an audit trail and opportunity for department
managers to ratify the recommendation. The tender report should
include:
• an explanation of the background to the scope of the contract;
• a summary of the recommendation;
• a description of the pre-qualification criteria;
• a description of the bid opening and initial position;
• a description of the bid conditioning process;
• a description of the tender evaluation criteria;
• a description of any post-tender negotiation actions;
• the reasons for rejection of unsuccessful bids;
• summarise reasons for recommendation;
• a comparison with the pre-tender estimate and confirmation that

funds are available;
• indicate cost and time implications for the project.
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LEGAL CONTRACT FORMATION
AWARDING CONTRACTS & DECLINING TENDERS
CONTRACTORS
CRS 6.0 AWARDING CONTRACTS & DECLINING

TENDERS
CRS 6.1 LEGAL CONTRACT FORMATION

The legal process of contract formation is set out at Section LE1.2 -

Simple Contracts. Provided that all of the other elements of formation ➧ LE 1.2
exist, then an unqualified acceptance of an offer gives rise to a legally

binding contract.
It should be noted that an offer may be withdrawn at any time up until

acceptance. To ensure proper formation of contract it is recommended
that the following conventions be observed:
• all qualifications to the tender should have been removed

(negotiated out); ➧ CRS 5.3
• the offer must be capable of acceptance (an unqualified yes);
• the offer must not have lapsed; the offer may be stated as being
open for acceptance within a specified period; if this has elapsed
then confirmation must be sought from the tenderer that the offer
remains open for acceptance;
• all subsequent undertaking by the tenderer and amendments to the

tender must be confirmed in writing; it is recommended that at the
very least all such amendments be aggregated into a schedule of
amendments which can be referred to in the acceptance; with time
permitting it is better to incorporate amendments directly into the
contract and initial them;
• the tender must represent best value for money;
• it is recommended that a departmental procedure is in place which

requires approval by an officer with the appropriate delegation prior
to accepting an offer.
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ACCEPTANCE OF TENDER
CONTRACTORS
CRS 6.2 ACCEPTANCE OF TENDER
When contracts are awarded following competitive tendering they are

usually placed with the lowest satisfactory tenderer who is considered
to provide the best value for money. Reasons should be given if the
lowest tender is not accepted so as to defend any potential challenge.
Once the requirements relating to the tender have been satisfied, the
offer may be accepted. To ensure proper acceptance of the tender the ➧ CRS 6.1
following conventions should be followed:
• acceptance must be unqualified; purported acceptance with

qualifications represents a counter-offer which may be accepted by
the contractor; this may lead to unnecessary argument about how
and when acceptance occurred and what is or is not part of the
contract; this should always be avoided;
• acceptance should be communicated in writing; in law, the ‘postal

rule’ is that acceptance is communicated when the letter is posted
not when it is received; proof of posting can be ensured by sending
➧ CRS 6.3
the acceptance by registered post;
• acceptance should be notified with the minimum delay following

receipt of tenders.
Key Points
• Acceptance should be unqualified.
• Acceptance should be in writing.
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CONTRACTORS
CRS 6.3 LETTER OF ACCEPTANCE

A suggested letter of acceptance is given at CRS6/SF1.
It is best practice in the letter to list by reference all documents which

are to be incorporated into the agreement and which form the basis of
the acceptance, e.g. exchanges of correspondence prior to award. An
alternative is to attach a schedule, but it is essential that this is given a
recognisable and unique reference number.
It is essential that any correspondence or references to negotiations on

fees or alteration to the services which have been agreed with the
tenderer are referred to in the letter of acceptance.
For the avoidance of doubt it is recommended that the successful

tenderer is asked to complete and return a ‘confirmation of receipt slip’
on receipt of the letter of acceptance.
Note that it is usual for the tenderer, in the form of tender, to give an
undertaking to execute the formal conditions of contract, when they
are provided for signing.
Contract documents should be prepared and provided to the tenderer

with the letter of acceptance.
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CONTRACTORS

CRS6/SF1
Dear Sirs
[TITLE OF PR OJECT]]
PROJECT
OJECT
Further to our invitation to tender dated .................... and your tender submission provided
under cover of your letter of...................., I accept on behalf of the [Secretary of State], your
offer to carry out [contract works] in connection with the above project.
The [following documents or the documents referred to in Schedule [Contract No]/1]

attached are the basis of this acceptance; and together with this letter of acceptance form
a binding contract between us.
LIST DOCUMENTS SUCH AS:
• invitation to tender
• instructions to tenderers
• form of tender
• bills of quantities
• specification
• drawings
• schedule of Work
• abstract of contract particulars
• tender submission from tenderer
• schedule of amendments or price schedule and basis of payment
• correspondence/minutes confirming undertakings by tenderer
• relevant correspondence from Department.]
Will you please contact .................... [project sponsor/commissions manager] as soon as

possible to make arrangements for the formal execution of contract documents, and
subsequently for commencing work. Will you please complete and return the attached
acknowledgement slip.
Yours faithfully
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CONTRACTORS
CRS6/SF1 cont’d
Confirmation of Receipt Slip
[TITLE OF PR OJECT
OJECT]]
PROJECT
I acknowledge receipt of your letter of acceptance dated ............................... .
Name: .......................................................................... (name in block capitals)
Signed: ..........................................................................
in the capacity of ................................................ authorised to sign for and on behalf of

.......................................................
Date: ....................................................................... Telephone No.: .........................................
Address: ............................................................................................................................................................
............................................................................................................................................................
............................................................................................................................................................
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CONTRACTORS
CRS 6.4 DECLINE OF UNSUCCESSFUL TENDERS (This section duplicates

CST 6.4)
It is advisable to notify the successful tenderer of the intention to

accept their offer before sending decline letters to unsuccessful
tenderers. Following confirmation from the successful tenderer, decline
letters should be sent immediately to all unsuccessful tenderers.
Standard Form CRS6/SF2 is an example decline letter. To an extent the

wording of the letter will be determined by the type of procurement
affected and what issues were subsumed within the evaluation.
There are two principal reasons for responding as fully as possible:
• it gives contractors confidence in the process;
• it gives contractors market information which helps to encourage

competitive market performance.
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CONTRACTORS
Model Letter of Decline
Dear Sirs
[TITLE OF PROJECT/COMMISSION]
.......................................................................................................................................................... .....................................................
Your tender for the above mentioned project/commission has been evaluated but I must
inform you that you were not successful on this occasion. The successful tenderer was
..................................................................................................................................................................................................................
This was the successful tenderer because
.................................................................................................................................................................................................................
I would like to take this opportunity to thank you for your considerable efforts in
submitting a tender and for your interest.
Yours faithfully
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EXECUTION OF FORMAL AGREEMENT
CONTRACTORS
CRS 6.5 EXECUTION OF FORMAL AGREEMENT (THIS SECTION

DUPLICATES CST 6.5)
Although the posting of the letter of acceptance should result in the

formation of a legally binding contract, it is essential that for the
avoidance of doubt two sets of contract documents are properly
executed by both par ties.
There ought to be no reason why this cannot be done at the time of

acceptance, such contract documents should be prepared in
anticipation of this event. It is however essential that the contract
documents are signed before commencement of any work by the
contractor. The scope for negotiation, if any is still required, is
significantly reduced after this time.
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REQUESTS FOR DEBRIEFING
DEBRIEFING
CONTRACTORS
CRS 7.0 DEBRIEFING
CRS 7.1 REQUESTS FOR DEBRIEFING (This section duplicates CST 7.1)
Debriefing is the only way in which unsuccessful tenderers are able to

find out why they were not selected, and therefore to obtain
information about areas where they need to improve their future
performance. This positive feedback encourages competitive
performance and is therefore recognised as best practice.
CUP Guidance Note No.45 provides useful guidance on debriefing.
On receipt of a decline letter either at inter view stage or tender stage

a contractor may request more information regarding their ➧ CRS 6.4
performance, so that they may:
• address par ticular problems;
• improve competitiveness of future bids.
A letter requesting further information should be answered with a

letter offering the tenderer the opportunity for a formal debriefing ➧ CRS 7.2
interview.
Where the EC procurement rules apply then a request for debriefing

must be responded to within 15 days of receipt of the request.
➧ EPP 1.14
Dealing with a Telephone Call
A contractor who has received a decline letter is likely to make a

telephone call to the Department.
This should be handled with care. It is recommended that the following

conventions be observed:
• do not discuss the performance of other tenderers; bear in mind

that the solutions and price offered by other contractors are
confidential;
• offer a confirmation of the points made in the decline letter;
• confine the information given to matters that would be covered in a

debriefing interview;
• keep a record of the conversation.
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DEBRIEFING
CONTRACTORS
CRS 7.2 DEBRIEFING INTERVIEWS (This section duplicates CST 7.2)
If unsuccessful tenderers request a debriefing interview, this should be

agreed to if possible. Any such interview should be under taken as soon
after the contract/commission award date as practicable, generally
between three to six weeks.
Debriefing interviews for commissions are conducted by the

commission manager/project sponsor but debriefing interviews for
contracts may be conducted by the consultant who invited and
subsequently evaluated the tenders.
Valuable time and money is spent in debriefing, but should always be

considered worthwhile on large contracts/commissions as there are
cer tain long term benefits. These are:
• to establish a reputation in the market place as a strictly fair, honest

and ethical client, which will encourage the best firms to submit
their best offer first time around;
• to offer unsuccessful tenderers some return for the time and money
expended in preparing their tenders;
• to assist firms to improve their performance.
Interview Format
The agenda for the interview will be dependent upon the individual
commission/contract but generally the person conducting the interview
should be accompanied by at least one other person and an agenda
agreed between them prior to the meeting. If possible the agenda
should follow the evaluation criteria set out prior to receipt of tenders
and where applicable, listed in the EC/Official Journal adver tisement.
The meeting should allow sufficient time for the unsuccessful tenderer
to be told the reasons for failure in this instance and for the firm to ask
any questions that they feel are relevant.
The inter viewers should be aware that the reason for the interview is
diplomatically to convey to the tenderer weaknesses and strengths
within cost, schedule, design, delivery, experience etc. It must be made
clear that only the unsuccessful tender will be discussed and not a
comparison with the other tenderers or competitors.
Formal minutes are not distributed following the meeting but it is

recommended that a copy of notes taken at the meeting should be
kept on the commission file for future reference by the Depar tment.
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NOMINATION PROCEDURES
NOMINATION OF SUB-CONTRACTORS
CONTRACTORS
CRS 8.0 NOMINATION OF SUB-CONTRACTORS
CRS 8.1 NOMINATION PROCEDURES
General
Nomination is widely used in the construction industry for the

appointment on major works contracts, of specialist contractors, such
as piling, earthworks and mechanical and electrical services.
Depar tments who wish to secure the work of a particular specialist as
par t of the overall works contract can do so by nominating such a
contractor. It can be used for both the provision of services (sub-
contractors) and for plant and materials. It generally requires the
inclusion of specific sums (Prime Cost or Provisional Sums) in contracts
to be expended only on the nomination of a sub-contractor or supplier.
GC/Works/1 (1998) makes provision for nomination at Clause 63 for
example.
The problem with nomination, particularly under JCT contracts, is that

it creates a transfer of risk back to the Department particularly for
delay on the part of the nominated sub-contractor. Thus depending on
the choice of contract strategy, experienced Departments operate on
the basis that wherever possible, works should be as fully pre-planned
and designed as possible. A fully pre-planned and designed project will
obviate the need to:
• include Prime Cost (PC) items in respect of work to be executed or

materials supplied by specialists or others;
• include Provisional Sums (both defined and undefined) for work

which may or may not be required to be carried out by the main
contractor ;
• enter into direct contracts for services or materials which may

interfere with the main contractor’s control of the contract.
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NOMINATION PROCEDURES
CONTRACTORS
Nominated Sub-Contractors
If a contractor has not got the resources to under take such works or
ser vices within its own organisation, the main contractor should be
permitted, wherever possible, to enter into sub-contracts, subject to
Depar tmental approval, with firms of its own choice. On the other
hand, should the Department require a sub-contractor to undertake
works, outside the expertise of the main contractor, it is recommended
that they appoint such a sub-contractor through the nomination
process. This means that the main contractor takes on the
sub-contractor, making the main contractor fully responsible for its
performance and default.
Key Points
• PC sums are included in a contract to cover the nomination of

specialist contractors.
• Ideally, the need for PC and provisional sums should be avoided

through the development of full design, although this will clearly
depend on other objectives and the chosen contract strategy.
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PRIME COSTS
CONTRACTORS
CRS 8.2 PRIME COSTS
General
For specialist work which cannot be described in the specification or

BQ as a priceable item, the estimated value may be included as a PC
sum and the work and/or supply involved is under taken by a
nominated or named sub-contractor/supplier. The agreed sum for the
contract is then subject to appropriate adjustment on nomination. The
main contractor is entitled to payment for attendance on the sub-
contract and for its profit in accordance with the rates included in the
BQs or Schedule of Rates.
Inclusion of PC Items in Contract Documentation
PC sums are not appropriate for non-lump sum contracts since their
purpose is to achieve a fully inclusive fixed price for the Works at
tender stage by allowing the main contractor to quote a price or
percentage addition for profit and providing attendance. PC sums are
used in the following documentation:
• Bills of Quantities - billed following the last work section in each

measured bill and forming a separate section to each measured bill;
• Lump Sum Contracts Without BQs - detailed as a Summary

of Prime Cost and Provisional Sums which can be associated with
the tender form and make clear that the tender figure is intended to
include all prime cost sums (including profit thereon) and provisional
sums.
Removal of PC Sums
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Depar tments should be careful over the decision to include PC sums
since their removal once the contract has been let may cause nugatory
expenditure.
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ARRANGING NOMINATED SUB-CONTRACT
CONTRACTORS
CRS 8.3 ARRANGING A NOMINATED SUB-CONTRACT
When a PC Sum is Included
In general, specialist work should be invited concurrently with the

tenders for the main contract, so that nomination of the preferred sub-
contractor may be made as soon as the main contract is let.
Late nomination is a major contributor to delay and disruption to

project completion and consequent claims, it should therefore be
avoided.
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If the specialist work is not required until later in the contract period it
may be easier for the main contractor to appoint the sub-contractor
provided this is agreed prior to the formation of the main contract. This
will prevent the main contractor seeking additional costs for delay and
disruption due to programming difficulties. It may also be prudent to
delay inviting main contract tender until tender nominations for
nominated sub-contract are ready. This allows co-ordination between
both and reduces the risk of delay and disruption which may otherwise
occur.
Invitation of Nominated Sub-Contracts Well in Advance of a

Main Contract
On occasion nomination and appointment of sub-contracts well in

advance of the invitation of the main contract tenders may be required.
This may be necessary because the design of the main project cannot
be completed until:
• a sub-contractor is known;
• because an item like a special boiler will take many months to

manufacture;
• because the sub-contract includes preliminary work such as design

and/or fabrication of materials (e.g., structural steel).
In exceptional circumstances it is necessary to invite tenders well in

advance of the main contract, where it should be made clear in the
invitation that the work is to be the subject of a sub-contract to a main
contractor not yet appointed.
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CONTRACTORS
The tender documents in this case should state:
• the responsibilities of the main contractor ;
• the anticipated form of main contract e.g. GC/Works/1 (1998);
• contract particulars such as contract period, start date and level of

liquidated damages etc.
Main Contractor’s Responsibilities for Sub-Contractor’s Design
The Department should ensure that the specification for the main
contract contains an appropriate description of the scope and nature of
the work to which the PC sum relates. Equally the sub-contract
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specification should be clear and consistent with the above, in order
that the main contractor will be able to seek redress from the
sub-contractor in the event of failure of the sub-contractor’s design
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(not through the Department).
Specialist Design
Exceptionally, the design element may be such that neither the main
contractor nor the design team leader has the expertise to undertake
the specialist design proposals (e.g., novel or innovative proposals). In
such cases a separate design contract can be arranged directly with the
specialist (wherever possible in competition) with an understanding
that, subject to a satisfactory lump sum, the successful specialist will be
nominated as a sub-contractor to the main contractor.
Warranties
It is recommended that where nomination is envisaged that the main

contractor becomes liable for the design liability of the nominated sub-
contractors. Accordingly, any direct design warranties suggested by the
main contractor between the sub-contractor and the Department
would only serve to obscure the main-contractor’s design liability.
It is to be noted that this is not the approach adopted in the JCT forms
of contract, where liability for the design of nominated sub-contract
works will bypass the main contractor, unless alternative arrangements
are made.
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CONTRACTORS
Where the design responsibility of the specialist sub-contractor forms a

major part of the total cost of the project, consideration can be given
to appointing the specialist contractor as the main contractor.
Key Points
• Depending on circumstances it is recommended that the

specification and requirements of any nominated sub-contractors
are developed concurrently with the main contract specification and
drawings such that conditions imposed on nominated sub-
contractors and the main contractors are consistent.
• Late nomination can cause serious delays to a works project.

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ESTABLISHING A CONTRACT
CONTRACTORS
CRS 8.4 ESTABLISHING A CONTRACT
General
It is recommended that where the Department chooses to nominate,

the main contractor should enter into a sub-contract with the
nominated sub-contractor without delay.
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Problems with Establishing a Contract
In certain circumstances the main contractor and the proposed

nominated sub-contractor may not reach agreement. The most
common causes of failure to agree between main and sub-contractor
are:
• disagreement over the programme;
• the sub-contractor’s reluctance to accept conditions imposed by the

main contractor ;
• the main contractor’s doubts about the financial stability of the

nominated sub-contractor ;
• the main contractor’s dislike of the nominated firm.
Resolution to Problems
Most problems may be resolved by the Department mediating

between both parties. Most conditions of contract provide that, if the
main contractor has valid objections regarding a par ticular nominee
that another firm should be nominated or that the main contractor is
permitted to execute the work or appoint its own sub-contractor, as
appropriate. The Department may be liable for any increase in price
but this will depend on the terms of the main contract.
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LIQUIDATION OF A NOMINATED SUB-CONTRACTOR
CONTRACTORS
CRS 8.5 LIQUIDATION OF A NOMINATED SUB-CONTRACTOR
Once the contract is made between the main and sub-contractor, it

should be clear in the main contract conditions that the main
contractor is fully responsible for the work including all design.
Employer/sub-contractor agreements provided for under JCT 80 forms
give the employers direct redress against the sub-contractor in certain
circumstances, e.g. design liability. These agreements are not used in GC
forms since they may affect the contractual relationship between the
main contractor and sub-contractor.
Under the GC forms, the contractor assumes responsibility for any

nominated sub-contractors and if the sub-contract is terminated due to
the liquidation or bankruptcy of the sub-contractor then the main
contractor may be required to find other means of completing the
work. The Department carries the risk of any extra cost of securing a
replacement.
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SELECTED OR APPROVED SUB-CONTRACTORS
CONTRACTORS
CRS 8.6 SELECTED OR APPROVED SUB-CONTRACTORS
Nomination and Naming
For a sub-contractor to be contractually “nominated” its selection must

be the subject of a PC sum. Sub-contractors who may be approved by
the architect or engineer, under other provisions of the contract (e.g.
listing or naming) are effectively domestic sub-contractors.
It is recommended that listing is not used unless the specialist firm is

willing to take on the work as a domestic sub-contractor. The reason is
that if difficulties occur in establishing the sub-contract many of the
problems and delays associated with formal nomination can arise.
Once the Department has accepted the domestic arrangements of the

main contract they cannot later choose to nominate formally.
The practice should be to use selected or approved

sub-contractor lists carefully and not to treat them as an easy way of
nominating by the back-door.
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ROLE OF THE PROJECT MANAGER
MANAGEMENT OF CONTRACTS
CONTRACTORS
CRS 9.0 MANAGEMENT OF CONTRACTS
CRS 9.1 ROLE OF THE PROJECT MANAGER
General
The project manager is usually appointed on major works contracts to

manage the contract from design and construction through to
completion. The appointment of a project manager should not be an
➧ PS 3.1
automatic decision, for instance it is unlikely that a project manager is

required for maintenance works.
➧ CST 1.4
The Department will normally appoint a project manager at the

feasibility stages of a Project. The project manager’s duties include acting
on behalf of the Department and advising them on the procurement of
design resources, on estimates of costs and time, on the merits of
alternative schemes and on choosing the most appropriate contract
strategy.
Project Manager Appointed for the Duration of the Project
As contracts are placed for construction work, it is preferable to

appoint the person or organisation already appointed for the whole
project to act as the project manager on a particular contract.
However, it is essential that the project manager for a par ticular
contract is sufficiently close to the work and has the time to carry out
his or her duties effectively. On very large projects, especially where
there are several contracts to be placed, it may be necessar y to appoint
a different project manager for each contract or for the project
manager to delegate responsibilities for some of the contracts.
On cer tain contracts e.g. GC/Works/1 (1998) the project manager may
take on the role of the lead consultant.
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ROLE OF THE PROJECT MANAGER
CONTRACTORS
Project Manager’s Responsibilities
Clearly the project manager will have important obligations under the
contract entered into between the Department and the contractor.
Where other duties are considered to exist they must be stated clearly
and without ambiguity to avoid disputes.
Throughout each of the stages it should be stated that it is the project

manager who is responsible for the overall success of the project
including responsibility for the Depar tment’s team and ensuring each
consultant performs in a manner which will bring about the success
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required.
Design Co-ordination
The project manager’s role includes the important one of design co-
ordination, and to keep the Department properly and fully informed
throughout each stage.
Employer’s Agent
At the construction stage it must be remembered that the project

manager will have obligations under the contract as the Employer’s
Agent, i.e. issue of certificates, instructions etc.
Claims and Disputes
With respect to contractual claims the project manager must be seen

to be impar tial and act independently.
If the Depar tment finds itself locked in a dispute going all the way to a
formal hearing, the project manager is likely to be a key witness but he
or she will of course be a witness as to fact and not opinion, which
would indeed be the role of an independent expert if required.
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ROLE OF THE PROJECT SPONSOR
CONTRACTORS
CRS 9.2 ROLE OF THE PROJECT SPONSOR (PS)
Where a major works project is being procured then it is

recommended that a project sponsor is appointed, and the appropriate
management structure is in place to ensure the sponsor can be an ➧ PS 1.5
effective representative of the Department.
The sponsor will commonly have a number of key duties including:
• monitoring the performance of the project manager, and indirectly

that of the design team and contractor ;
• acting as the channel for Departmental changes or information flow;
• monitoring the budget and obtaining necessary financial

authorisation;
• other duties. ➧ INT 1.7
Key Points
• The project sponsor should be sufficiently empowered to make

quick and effective decisions covering project execution; however it
should be kept in mind that the project manager is engaged to
manage and advise not to delegate responsibility back to the
Depar tment.
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BILL PAYING
CONTRACTORS
CRS 9.3 BILL PAYING
Function of the Quantity Surveyor (QS)
Only under some of the Government contracts forms is there a specific

role for a QS but it will be usual to appoint a QS where the work
requires regular measurement and/or valuation. It will ordinarily be the
function of the QS to prepare interim valuations in accordance with
the contract and such valuations will be submitted to the project
manager for approval.
Gross Valuation
Once the project manager is satisfied as to the valuation of the sums

due he or she should inform the main contractor of the amount to be
certified for payment. The gross valuation is calculated as the sum of
work executed, the value of materials on site, the value of any
variations and the gross amount of VAT. Where nominated sub-
contractors are present the gross valuation shall normally include the
value of work undertaken by the sub-contractor, exclusive of VAT.
Advanced Payment
In certain circumstances the Department may consider it appropriate

to pay advances on account for goods and materials to be
incorporated into the works. This may be reasonable when the goods
and materials have been brought on site and are adequately stored and
protected. In exceptional circumstances advance payment for materials
held off-site may be appropriate, e.g. where materials cannot be
➧ LE 1.19
brought on site as programmed possibly due to a failing on the part of

the Department. The purpose of such advance payment is to protect
the Department against claims for loss and/or expense due to delay ➧ LE 1.19
and disruption The payment for materials off-site raises questions of
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ownership and may expose the Department to further financial risk.
It is therefore recommended that clear professional advice is sought
regarding such action.
Key Point
The Construction Industry Tax Scheme requires that any firm must be
in possession of a valid registration card or tax certificate before any
payments are made.
➧ LE 2.11
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CHECKING PROCEDURES
CONTRACTORS
CRS 9.4 CHECKING PROCEDURES
Cost Control
The project manager will usually be responsible for maintaining control

of the costs for the contract within his delegated limits, and should
repor t regularly to the project sponsor, using a suitable commitment
and forecasting record system.
The system should show a running record of expenditure through

variation orders which can be readily checked against the project
manager’s financial delegation. It should also record the letting of
nominated sub-contracts and the expenditure of provisional sums.
These records should be brought together to show, month by month,

funds committed and those yet uncommitted. This can be readily
compared with the physical progress of the project.
Limits on the Project Manager’s Authority
It is recommended that the project manager’s authority to commit

money beyond the contract sum is limited as follows:
• to the limit of contingencies and daywork provision; and
• to a maximum limit on individual variations.
Financial Reporting
The QS should be required to submit to the project manager a

monthly financial report showing current and future commitment. From
this information the project manager will update and summarise the
financial position.
Each month the project manager should send to the project sponsor a
statement of the financial position of the work.
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DETERMINATION PROCEDURES
CONTRACTORS
CRS 9.5 DETERMINATION PROCEDURES
General
Failure by the contractor to carry out his or her obligations under the
contract, is grounds under most contracts for the Depar tment to
determine the contract. Furthermore some Government forms of
➧ LE 1.4
contract often give the Department discretionar y powers to determine

the contract at any time by notice to the contractor.
Default Notices
Great care should be taken in producing notices of default, warning

letters and notices of determination to ensure that the Department’s
rights under the contract are not prejudiced in any way by the terms of
the letter. It is recommended that the wording of the condition under ▲
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which any letter or notice is issued should be reflected exactly in the
letter of notice.
Default Procedure
The following is a recommended procedure for dealing with default,

but any specific requirements of the contract must be adhered to:
• as soon as the project manager is convinced that normal day to day

communications with the contractor is not achieving the desired
improvement/remedial action the project manager should issue a
Notice of Default. The notice should specify not only the defective
work, or work which is being improperly performed but also any
remedial measures required;
• if the project manager considers the contractor is still in default

seven days after the receipt of the Notice of Default, he or she
should discuss with the Department and, if instructed, initiate action
to determine the contract;
• in the event that the contractor has suspended the works, or, in the
project manager’s opinion, the contractor’s progress is such that the
contract will not be completed by the date for completion of the
contract, or the project manager experiences difficulty in obtaining
the contractor’s full compliance with the requirements of the
contract, he or she should report the position to the Department
and recommend the issue of a Formal Final Warning Letter or
Notice of Determination;
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DETERMINATION PROCEDURES
CONTRACTORS
• if a satisfactory response has not been received from the contractor

within seven days of the receipt of the warning, the project manager
should immediately take action to determine the contract;
• once the decision is taken to determine the contract the quantity

surveyor should be advised of the effective date of determination in
order that a certificate may be prepared on the status and valuation
of the works on the day of determination and for instructions to be
issued to cover the security of the site on and after the day of
determination.
Completion of the Works in Case of Default
The following procedure is recommended on determination:
• upon determination of a contract due to default, arrangements

should be made for the work to be completed by another
contractor, any additional cost being claimed from the original
contractor, or deducted from sums due to him;
• the project manager should recommend as soon as possible to the

Depar tment his or her proposals for completing outstanding work
on the contract; whatever the course recommended, it is essential
that excess costs over the balance of the contract price should be
avoided or, if unavoidable, kept to an absolute minimum consistent
with obtaining a satisfactory completion of the works;
• any contract to complete the works must be placed without delay

and be based, as far as possible, on the same specification and
conditions as the original contract;
• any additional cost incurred as a result of determination may not be

recoverable from the original contractor if they could reasonably
have been mitigated by prompt or decisive action, on the par t of
the depar tment.
Key Points
• Where there are contractual provisions which entitle the

Depar tment to determine the contract, and there is occasion to
operate them, the provisions in question should be followed to the
letter.
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GENERAL
CLAIMS AND DISPUTES
CONTRACTORS
CRS 10.0 CLAIMS AND DISPUTES
CRS 10.1 GENERAL
Claims include all matters from a routine request for additional time to
complete, to a major allegation of breach of contract. In fact a claim is
simply a demand by one party on the other that a particular
entitlement is due. Not all claims signify a dispute. But where a claim is
not met in full and there is disagreement by one party as to the
entitlement of the other then unless agreement can be reached
through negotiation, it can be said that a dispute or difference has
arisen between the parties.
The majority of claims arise from a failure or an alleged failure of one

party to fully comply with the requirements of the contract or in some
➧ LE 1.7
instances conditions implied by the common law. The remedy sought

for an alleged breach is usually damages. ➧ LE 1.8
Claims generally fall into the categories listed below (examples are
given of each):
Contractual Claims (specific entitlement in accordance with the

terms of the contract):
• for delay/additional time for specified reasons such as:
- issue of variations expanding the scope of the contract,
- late issue of information and/or variations;
• for the additional cost of variations;
• for disruption or lost productivity due to interference by the

Department;
Common Law Claims (ex-contractual claims):
• damages for breach of contract;
• damages in tort/delict (e.g. negligence - breach of a duty of care);
• damages for breach of copyright;
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GENERAL
CLAIMS AND DISPUTES
CONTRACTORS
Third Party Claims:
• personal injury claims;
• employee claims;
• land compensation claims;
Quantum Meruit Claims:

➧ LE 1.8
Ex Gratia Claims (‘out of kindness’).

➧ CRS 10.8
From the Department’s viewpoint claims should be avoided if only

because financial control becomes extremely difficult, especially for ➧ CRS 10.3
claims produced long after the event.
In practice it is difficult to avoid claims, but it is possible to deal with

them intelligently and expeditiously so as to avoid disputes.
Key Points
• A claim is more often than not an expression of the additional

entitlement of a party specifically provided for under the terms of
the contract for specified matters.
• The better the Department’s records, the better its ability to make
and defend claims and to negotiate them.
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• The legal principles involved in making or defending claims can be
complex and the preparation of a good claim document is an art.
If in any doubt seek professional advice.
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CONTRACT CLAIMS AGAINST THE DEPARTMENT
CLAIMS AND DISPUTES
CONTRACTORS
CRS 10.2 CONTRACT CLAIMS AGAINST THE DEPARTMENT
Claims often involve dealing with parties perceptions, which although

often held very strongly are not always supportable. The manner and
the speed in which claims are dealt with can, and in most cases do,
have a major bearing on the eventual outcome of the claim.
Damages
The remedy for a breach of contract which has not been excused is
damages. Damages are awarded to put the innocent par ty, as nearly as
possible, into the position that party would have been in had the
➧ LE 1.8
contract been performed. There are well established criteria for the
determination of the amount of damages at common law, but these
must be considered in light of what the express terms of the contract
have to say about recovery.
Problems with Quantification and Evaluation of Claims
The difficulty with many claims arising out of construction contracts are
that they are often very difficult to evaluate, and are seldom clear cut.
These difficulties are as follows:
• construction projects are frequently very complex involving the

interaction of many trades thereby often making it very difficult to
determine the connection between an alleged breach of contract
(cause) and the loss suffered by the injured party as a result (effect);
claims in construction projects often arise out of claims for
extensions of time; without the use of up to date computerised
planning/network packages, the determination of the Critical Path
through a par ticular project, itself a dynamic entity, can be near
impossible;
• the area of construction law is extremely specialised; further, statute

and case law is constantly being updated and the boundaries
redefined; it is recommended professional advice is sought when
considering how the terms of the contract should be interpreted in
the event of a dispute, and in considering the Depar tment’s liability;
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CONTRACT CLAIMS AGAINST THE DEPARTMENT
CLAIMS AND DISPUTES
CONTRACTORS
• even with professional advice there can and often are ‘grey’ or
indefinable areas within a particular claim, but clearly it is in the
Depar tment’s interests to narrow down the issues and determine
the validity or otherwise of a particular claim as quickly as possible
so that it can properly consider/advise on:
- budgets : their accuracy/likely overspend,
- estimated time of completion of the project,
- legal action it needs to take or prepare for,
- negotiation of claims leading to settlement; it is the par ty who is

armed as fully as possible with the facts who is likely to bring
about or induce a negotiated settlement.
Key Points
• Construction works contract claims tend to be complex and may

include heads of claim which are difficult to prove or evaluate.
• Seek professional advice. ▲

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AVOIDANCE OF CLAIMS
CLAIMS AND DISPUTES
CONTRACTORS
CRS 10.3 AVOIDANCE OF CLAIMS
The main source of claims under the contract are:
• discrepancies between drawings, schedules and bills of quantities;
• late submission of information;
• variations and their valuation;
• poor communication or attitude on the part of members of the

construction team;
• the contractor discovering, towards the end of the job, that it has
lost money through mis-management or otherwise.
Throughout the duration of the project it is constantly necessary to

hold meetings, monitor progress and budgets etc. so that as soon as a
problem or potential problem arises it can be dealt with in the most
expedient manner. Of course it depends on the nature and size of the
project being worked upon, but in the vast majority of cases the same
holds true for dealing with contractual claims. Resources expended ‘up
front’ in ensuring the brief is properly delivered, contractual roles and
obligations clearly set out, the contractual arrangements entered into
properly reflect the agreement required, including the contract strategy
adopted, etc., can only help to ensure that the risk of contractual claims
is reduced and/or minimised.
Key Points
• In practice it is difficult to avoid claims but the early identification

and prompt resolution of problems through good management will
do much to prevent or control the risk of claims.
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MANAGING CLAIMS
CLAIMS AND DISPUTES
CONTRACTORS
CRS 10.4 MANAGING CLAIMS
The main steps to be followed in order to manage claims are:
• ensure that the brief is well defined and contractual requirements

are consistent;
• ensure that the contractor has the information required, preferably

before it is required;
• avoid variations;
• where variations are required, agree time and cost increases prior
to instruction or as soon as possible thereafter;
• keep good records of all events which may lead to a claim;
• insist on compliance with the contract where contractual claims are

being made and evaluate them as quickly as possible;
• negotiate with the contractor.
Once a claim has been received a repor t (with privilege status) should
be drafted to include the following:
• details of the claim and why there is a dispute;
• an assessment of the extent of liability;
• include negotiating proposals;
• give an assessment of the likely outcome in financial terms.
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PRESENTATION OF CLAIMS
CLAIMS AND DISPUTES
CONTRACTORS
CRS 10.5 PRESENTATION OF CLAIMS
The degree and type of evidence required to establish monetary claims

arising under a building contract will generally be a matter safely left in
the hands of the professional advisers acting for a Department. But
some impor tant general principals are as follows:
• there must be a basis for the claim in law, either under the contract
or otherwise;
• there must be some loss which arises by reason of the legal right to
claim;
• the connection between the legal right and the damages sought
must as far as possible be proven by the party claiming the damages;
• the matters in dispute should be set down on paper as soon as

possible and communicated in a cogent and persuasive manner;
• if in receipt of a claim, evaluate it, determine the value of any

counter-claim the Department may wish to make and make a
realistic offer as soon as possible.
Key Points
• Claims once established by the contractor should be promptly

settled or at least paid to the extent of the Department’s liability
that can be evaluated.
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• Officers will not normally have any authority to deal with ex-
contractual claims, and should consult their Departmental
handbooks in this respect.
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CLAIMS AGAINST CONTRACTORS
CLAIMS AND DISPUTES
CONTRACTORS
CRS 10.6 CLAIMS AGAINST CONTRACTORS
General
The principal claim which a Department is likely to make is one for the
costs of delay by the contractor. Where liquidated damages provisions
exist in the contract, then the recovery of such costs is covered by the
deduction of LADs. Where there are no LAD provisions and the
➧ CRS 11.1
contractor is in breach of contract, for example because of delay or

defective workmanship, then the Department may wish to make a
claim provided it can show that it has suffered loss as a result of the
breach or breaches. Claims are best dealt with by the architect,
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superintending officer or project manager on behalf of the Department
since they should be familiar with the background to the claims. If the
claim is a complex one then it may pay dividends to seek legal advice
to prepared a high quality claim at the outset.
Loss and Damages
Once the alleged breach has been confirmed by the Department it is

prudent to issue a notice of default to the contractor explaining that a
claim is being considered. It is recommended that as soon as a breach
of contract has been confirmed, the Department should calculate the
additional cost and loss suffered as a result of the contractor’s breach.
Potential losses or damages may occur at a later date in which case
these losses would be considered speculative since the contractor may
be able to limit its liability by mitigating the extent of any future loss. It
is recommended that any such future loss is periodically notified to the
contractor as it occurs.
Insurance
If the breach alleged is the kind of liability which should be covered by

the contractor’s standard policy of insurance, then the insurer may
become involved.
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CLAIMS AGAINST CONTRACTORS
CLAIMS AND DISPUTES
CONTRACTORS
Procedure
As soon as it becomes reasonably apparent that a claim against the

contractor is likely, the Department should put in place adequate
procedures to compile evidence which can be used to support the
claim. The following are recommended procedures for dealing with
damaged or defective work:
• inspect the damage, take any necessary photographs and record the
details in the site diary;
• arrange a meeting on the site with the contractor to establish what

is agreed or disagreed as to fact and press for a written acceptance
of liability to either indemnify, reinstate, make good or compensate
with regard to the damage;
• if the contractor asser ts that the damage was not due to its neglect
or default then request its case in writing;
• in the event that the contractor admits liability the PM or

superintending officer must ensure that the remedial works are put
in hand; any resultant delay in the programme may give rise to the
Depar tment’s right to deduct liquidated damages (where
appropriate);
• if a contractor has acknowledged liability or where there is a strong

case against them (but they deny liability), should they delay in
carrying out remedial work, the depar tment should consider having
the work under taken by an alternative contractor at the original
contractor’s cost.
Dispute Resolution
Where the contractor formally disputes its responsibility to make good

or compensate damage the aim must be to resolve the argument by
negotiation, rather than resor ting to arbitration or litigation. But a legal
opinion is generally necessary at an early stage, and protracted
negotiation should be avoided.
In the event that the contractor is causing problems on a contract, a

full report should be sent to NQS so that other possible users of the ➧ CRS 12.2
contractor are alerted.
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ARBITRATION
CLAIMS AND DISPUTES
CONTRACTORS
CRS 10.7 ARBITRATION
For arbitration to be an option there must be a written agreement in

the contract to arbitrate (an arbitration clause); or there may be
subsequent written agreement to arbitrate.
The Government works contracts generally include contractual

provisions for resolution of disputes by arbitration after completion,
abandonment of the works, or determination (for example see
Condition 60 of GC/Works/1 (1998)). This amounts to a written
agreement to arbitrate. Where there is such an agreement, arbitration
is a pre-condition to litigation.
The advantages of arbitration are as follows:
• the parties may choose the arbitrator (tribunal);
• confidentiality - arbitration is private;
• should be faster ;
• flexibility - parties may agree to relax procedural rules or rules of

evidence;
• the parties do not have to be represented by counsel;
• limited appeals;
• no reliance on Rules of Cour t.
The conditions of contract usually set out the procedure to be adopted

for the arbitration however, the parties are free to agree on their own
procedures.
Once an arbitration notice has been issued by either party, failure to

respond may be a breach of contract.
As an alternative to arbitration, it may be possible to agree with the

contractor to attempt a method of alternative dispute resolution. If
successful this can be a cheaper and quicker method of resolution.
➧ CST 9.3
All the GC/Works/1 contracts include an adjudication clause which

provides for an independent adjudicator to find on disputes which
occur during the progress of the works. The adjudicator’s decision is ➧ LE 2.9
binding until the completion, abandonment of the works or

determination.
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ARBITRATION
CLAIMS AND DISPUTES
CONTRACTORS
Key Points
• Part II of the Housing Grants, Construction and Regeneration Act

1996 requires that a party to any construction contract has a right
to refer any dispute for impartial adjudication. Any such adjudication ➧ LE 2.9
must be effected within a certain timescale.
• Arbitration is a means of dispute resolution by the decision of a

third par ty.
• The service of a notice of arbitration may be a very effective means

of encouraging settlement, however, it is not a step that should be
taken lightly. There must be a case to argue, and there must be a
reasonable prospect of success.
• Seek professional advice before issuing a notice of arbitration or

upon receipt of one. ▲
!
• It should be cheaper and less time consuming to attempt to settle
the dispute either through settlement negotiations or ADR.
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EX GRATIA CLAIMS
CLAIMS AND DISPUTES
CONTRACTORS
CRS 10.8 EX GRATIA CLAIMS (THIS SECTION DUPLICATES CST 9.6)
These claims usually arise where the claimant has no grounds (other
than possibly moral grounds) for additional costs.
Ex-gratia payments are generally made in exceptional circumstances

and with the agreement of the finance section of the department.
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MATTERS ARISING ON COMPLETION
CONTRACTORS
CRS 11 MATTERS ARISING ON COMPLETION
CRS 11.1 LIQUIDATED AND ASCERTAINED DAMAGES
General
Liquidated and Ascertained Damages (LADs) are contractual damages

which do not have to be proved and they are independent of the
actual loss suffered by the Department due to the contractor’s failure ➧ LE 2.8
to complete the works by the contract completion date.
Quantum of Damages
Damages are levied at the rate set out in the contract by the period of
the delay (i.e. the period between certified completion and the
extended date for completion). The damages may be deducted from
any amounts due to the contractor, or the sum may be claimed from
him as a debt.
Calculation of the amount due as LADs is straightforward, requiring

merely that the rate per day or week be multiplied by the number of
days or weeks the work overran. Under some forms of contract e.g.,
GC/Works/1 (1998), this calculation will be essentially a confirming one
if the employer has elected to deduct damages from interim payments
after expiry of the contract period but before certifying completion.
Extensions of Time
For the Depar tment to be entitled to deduct LADs, the superintending

officer or project manager must have properly applied the extension of
time provisions. For this reason, the deduction of LADs often gives rise
to disputes over extensions of time to the contract period. Some
claims may be rejected in whole or in part by the superintending officer
or project manager, as not falling within the conditions of contract.
Some forms of contract e.g., JCT 80, GC/Works/1 (1998), provide for
the review by the architect or project manager of extension of time
decisions already made. Review is not about whether the Department
should waive LADs, but whether the grounds for extra time have been
properly and reasonably evaluated.
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CONTRACTORS
It is solely a matter for the Department (i.e. Authority) whether LADs

will be deducted or waived, not that of the superintending officer or
project manager.
Key Points
• In the event that a contractor is in culpable delay, then under many

forms of contract the Department has a contractual right to deduct
LADs.
• Contractors are likely to respond either by claiming that an

extension of time is due or that matters for which extensions were
previously requested have not been fairly or properly considered.
• Contractors may offer to trade off a loss and expense claim against
an LAD deduction. It is recommended that professional advice is
sought if faced with this type of situation. ▲
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MAINTENANCE PERIODS
CONTRACTORS
CRS 11.2 MAINTENANCE PERIODS
General
Cer tain contracts provide for a maintenance period, where the

contractor is required to rectify any defects in work resulting from
improper workmanship and materials which may arise during the
maintenance period. The period usually commences from the day after
the certified date for completion. When the contract envisages
sectional completion each maintenance period is calculated from the
day after the certified completion date of the relevant section of the
works. The length of the period varies according to the work. Typical
periods are:
• building and civil engineering work - 6 months;
• mechanical and electrical work - 12 months (to allow for operation

in one complete cycle of seasons).
Main Contractors Responsibility for Specialist Sub-Contractors
Where a specialist sub-contract is involved in a main building contract

and it carries a maintenance period that extends beyond that of the
main building contract, the main contractor’s responsibility for
maintenance of the specialist works continues until the end of the
appropriate period stated in the Abstract of Particulars for the specialist
works.
Payment
If on expiry of the maintenance period of the main building contract

the Architect/SO etc., is satisfied about the state of the works, he or
she cer tifies this. Each section will have its cer tificate issued at the
expiry of the appropriate maintenance period. These certificates allow
the final payments under the contract to include any retention made
subject to any outstanding claims.
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PAYMENTS
CONTRACTORS
CRS 11.3 PAYMENTS
General
It is recommended that payments are made promptly at all stages in

accordance with the terms of that contract. The timely payment of
sums which become due on contracts can be significant in reducing the
cost to companies through financing their operations. When disputes
arise over single items of payment, the undisputed items should be paid
immediately, leaving the disputed items for later settlement.
Late Payment and Interest
Where payment is due in respect of work it is not reasonable to

withhold payments due to a contractor on the grounds that internal
procedure has not been complied with or completed. Provided that the
arrangements made with the contractor for valuation of the
unauthorised work are satisfactory the contractor may receive the
money due to him. Internal procedures should be such as to ensure
that the Department’s obligations under the contract are complied
with.
Where a Department has failed to make payment due to the

contractor by the agreed date, or has otherwise unreasonably withheld
a sum due to a contractor, certain Government forms provide for the
payment of contractual interest to the contractor.
Key Points
• It is Government policy to make prompt payment in respect of

bona fide liabilities especially to small companies.
• Late payment may result in the need to increase the overall budget
because of the contractor’s entitlement to interest.
• Depar tments should ensure that they comply with the principles of
prompt payment as contained in Government Accounting and the
various Charter initiatives.
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OVERPAYMENTS
CONTRACTORS
CRS 11.4 OVERPAYMENTS
Potential debts can arise under the contract for overpayments to

contractors by reason of excess advances.
Overpayments - Recovery by Way of “Set-off”
Cer tain Government forms of contract provide for the recovery of

sums due under the contract by reason of overpayment as a “set-off ”,
see GC/Works/1 (1998), Condition 51. Condition 51 also provides for
the recovery of sums due under one contract from payments due to
the contractor under any other contract with any other Department.
The Depar tment should be certain of its right to deduct such monies
before it proceeds with such a course of action. If in doubt seek
professional advice.
▲
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Interest on Overpayments
Where overpayments have been made to contractors and the debts

arising are to be discharged within a short period, interest may be
charged only where provision for the charging of interest is expressly
included in the terms of the contract. Since there is no provision in the
‘GC’ and ‘C’ series of contracts to claim interest for overpayments it
would be improper to seek to deduct such monies, under these forms.
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HANDOVER
CONTRACTORS
CRS 11.5 HANDOVER
Once the works (or any section) have been satisfactorily completed,
the project manager or supervising officer will issue a cer tificate after
the maintenance period to that effect.
It is recommended that copies of the cer tificate are distributed by the

project manager to the:
• contractor ;
• quantity surveyor;
• project sponsor or works contract manager.
Effect of Certificate of Completion
As a result of case law in 1994, the final certificate issued by the

architect under JCT80, which was issued on the basis that the works
were complete to the satisfaction of the architect, was found to have
the effect of relieving the contractor of liability for any defects in the
work thereafter.
It was not the intention of the drafters of the JCT forms that a final
cer tificate should have this effect, and as a result amendment 15 was
issued in July 1995 which redrafted Clause 30.9.1.1 to limit the effects
of the final certificate. It is now only conclusive evidence of the fact that
only matters expressed in the contract documents or instructions, as
being for the approval of the architect, were to the reasonable
satisfaction of the architect. The contractor retains liability for all other
matters.
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HANDOVER
CONTRACTORS
The 1998 editions of the GC/Works contracts have overcome this

problem as illustrated by clause 39 (Certifying Works) which states:
“The PM shall certify the date when the Works, or any Section, or any
completed part within the meaning of Condition 37 (Early Possession) are
completed in accordance with the contract. Such completion shall include
sufficient compliance by the contractor with Condition 11(7) (Statutory
Notices and CDM Regulations). After the end of the last Maintenance
Period to expire, he shall issue a certificate when the contractor has
complied with Condition 21 (Defects in Maintenance Periods).
Key Points
• Care should be taken over the issue of a final certificate or

cer tificate of completion.
• Seek legal advice where in doubt about the effect of such

cer tificates.
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GENERAL
CONTRACTORS
CRS 12.0 PERFORMANCE REPORTING
CRS 12.1 GENERAL
Performance reporting is the last stage in the procurement process and

closes the procurement cycle by providing feedback into the long listing
process for future work.
On completion of the works contract the project manager or

supervising officer should prepare a report for the Department on the
performance of the contractor, at least one year from completion of
the construction period. In respect of a major works contract, the
appraisal may include the following:
• whether the premises meet the original brief satisfactorily;
• whether the premises are operationally satisfactory or need

modification, either because of unforeseen problems or changes in
departmental requirements;
• whether the engineering services are operating satisfactorily or

require any alteration;
• whether there are any signs of premature wear or failure in the

building fabric or engineering services;
• whether there are any features of the design or brief that should
not be repeated in a future similar project;
• the cost of operation and maintenance of the premises in

comparison with anticipated running costs;
• any recommended economies in running costs;
• any recommended alterations to the premises or installations to

provide a better service to the depar tment.
Key Points
• Performance reporting provides invaluable intelligence for the

Depar tment and assists with future procurement decisions.
• Performance reporting provides feedback to NQS.

➧ CRS 12.2
• Performance reporting provides the Department with an

oppor tunity to learn.
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PERFORMANCE REPORTING TO NQS
CONTRACTORS
CRS 12.2 PERFORMANCE REPORTING TO NQS
Performance Report
As soon as the contract is complete it is recommended that the project

manager prepares a performance repor t on behalf of or together with
the Department and forwards it to the designated NQS section for the
benefit of future users.
It is recommended that the Department uses its discretion and

judgement in making its assessment. The box for “Contract Period”
should state the time allowed under the contract including extensions
of time awarded. This can then be compared with the entry for “Time
Taken” and the actual duration of construction work. The assessment
for “Speed” should be consistent with the other information.
Markings
Where classifications of performance indicate problems, NQS requires

that supporting correspondence and other information should be
attached to the report indicating that problems have been brought to
the contractor’s attention together with any replies received.
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INDEX
Abbreviations Used in this Document .................................................................................................................................................................. INT 1.7

Acceptance of a Tender ............................................................................................................................................................................ CST 6.2, CRS 6.2
Adjudication .............................................................................................................................................................................................................................. LE 2.9
Alternative Dispute Resolution Procedures ................................................................................................................................................. CST 9.3.1
Alternative Offers ............................................................................................................................................................................................................. CRS 5.4
Amended Tender Documents ................................................................................................................................................................................... CST 5.8
Amended Tenders ........................................................................................................................................................................................ CST 5.7, CRS 5.5
Appointment Through Competition .......................................................................................................................................................................... PS 3.3
Arbitration ................................................................................................................................................................................. LE 2.9, CST 9.4, CRS 10.7.1
Assignment ............................................................................................................................................................................................................................. LE 1.11
Avoidance of Claims .................................................................................................................................................................................................... CRS 10.3
Award Criteria .................................................................................................................................................................................................................. EPP 1.13
Background ............................................................................................................................................................................................................................ INT 1.1
‘Best Practice Client’, Principles of ............................................................................................................................................................................... PS 1.3
Bill Paying ............................................................................................................................................................................................................................... CRS 9.3
Bill Paying and Checking Procedures .................................................................................................................................................................... CST 8.4
Breach of Contract ............................................................................................................................................................................................................... LE 1.7
C1303 - Window Cleaning and C1304 - Chimney Sweeping ..................................................................................................... CRS 1.15.13
C1306 - Maintenance of Gardens, Grounds, Etc. and
C1312 - Supply and Application of Herbicides, Etc. ........................................................................................................................... CRS 1.15.14
C1804 - Repair of Plant ....................................................................................................................................................................................... CRS 1.15.15
Checking Procedures ..................................................................................................................................................................................................... CRS 9.4
Choice of Contract, Introduction to the ........................................................................................................................................................ CRS 1.3.1
Claims Against Contractors .................................................................................................................................................................................. CRS 10.6.1
Claims and Disputes, General ............................................................................................................................................................................. CRS 10.1.1
Claims Arising from Default or Negligence by a Department Consultant or Contractor ................................................... CST 9.2
Claims by and Against the Department, Handling of .............................................................................................................................. CST 9.1.1
Claims, Presentation of ............................................................................................................................................................................................... CRS 10.5
Commission Manager/the Project Sponsor, Roles and Responsibilities of the ........................................................................ CST 8.1.1
Conduct of Staff, The ........................................................................................................................................................................................................... PS 1.4
Construction Industry Tax Scheme .......................................................................................................................................................................... LE 2.11
Construction Management Contracts ........................................................................................................................................................... CRS 1.11.1
Consult Notices with NQS ..................................................................................................................................................................................... CST 10.3
Consultant’s Section, General ............................................................................................................................................................................... CST 4.1.1
Consultant and Sub-Consultants ......................................................................................................................................................................... CST 8.2.1
Contract Claims Against the Department ................................................................................................................................................... CRS 10.2.1
Contract Notice, Decline and Debriefing ......................................................................................................................................................... EPP 1.14
Contract Strategy .......................................................................................................................................................................................................... PS 2.4.1.1
General .............................................................................................................................................................................................................. PS 2.4.1.1
Property Management Functions ....................................................................................................................................................... PS 2.4.2.1
Facilities Management Strategies ......................................................................................................................................................... PS 2.4.3.1
Works Contract Strategies .................................................................................................................................................................... PS 2.4.4.1
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Contractor’s Section, General ............................................................................................................................................................................... CRS 5.1.1
Contracts by Deed ............................................................................................................................................................................................................... LE 1.3
Contracts File, Retention Periods ....................................................................................................................................................... CST 2.3, CRS 2.3
Contracts using Bills of Quantities ...................................................................................................................................................................... CRS 1.4.1
Contracts using Schedules of Rates ....................................................................................................................................................................... CRS 1.5
Criteria for Evaluation ................................................................................................................................................................................................ CRS 5.2.1
Damages for Breach of Contract ................................................................................................................................................................................. LE 1.8
Debriefing Interviews ................................................................................................................................................................................................. CST 7.2.1
Decline Of Unsuccessful Tenderers ........................................................................................................................................... CRS 6.4.1, CST 6.4.1
Departmental Management Roles .......................................................................................................................................................................... PS 1.5.1
Design and Build Contracts .................................................................................................................................................................................... CRS 1.8.1
Design and Manage Contracts .............................................................................................................................................................................. CRS 1.12
Determination Due to Default ................................................................................................................................................................................ CST 8.6
Determination Procedures ............................................................................................................................................................. CST 8.5.1, CRS 9.5.1
Discharge of a Contract .................................................................................................................................................................................................... LE 1.5
Dispatch of Tenders ......................................................................................................................................................................................................... CST 4.8
Documentation .............................................................................................................................................................................................................. CRS 4.1.1
Documentation Standards .......................................................................................................................................................................................... CST 4.7
EC Procurement Procedures, Accelerated Timescales ................................................................................................................................. EPP 1.9
EC Procurement Procedures, Directives, The ................................................................................................................................................ EPP 1.2.1
EC Procurement Procedures, General .............................................................................................................................................................. EPP 1.1.1
EC Procurement Procedures, Procedures and Timescales for
Advertising and Awarding Contracts ................................................................................................................................................. Annex EPP 1.3.1
EC Procurement Procedures, Application of ............................................................................................................................... CST 1.2, CRS 1.2
EC Procurement Procedures, Categories of Services ............................................................................................................. Annex EPP 1.1.1
EC Procurement Procedures, Deciding which Directive Applies ...................................................................................................... EPP 1.3.1
EC Procurement Procedures, Estimating the Value of Commissions and Aggregation ......................................................... EPP 1.6.1
EC Procurement Procedures, Notices Required under ......................................................................................................... Annex EPP 1.2.1
EC Procurement Procedures, Number of Tenderers ................................................................................................................................ EPP 1.11
EC Procurement Procedures, Procedure for Advertising and Awarding Contracts .............................................................. EPP 1.8.1
EC Procurement Procedures, Services Contract - Model Notices ................................................................................. Annex EPP 1.5.1
EC Procurement Procedures, Works Contracts - Model Contract Notices ............................................................. Annex EPP 1.4.1
EC/GATT Reporting Requirements ................................................................................................................................................................. EPP 1.15.1
Effective Decision-Making ................................................................................................................................................................................................. PS 1.6
Errors in Priced Bills ........................................................................................................................................................................................................ CRS 5.6
Establishing A Contract ................................................................................................................................................................................................. CRS 8.4
Evaluating Performance ...................................................................................................................................................................................................... PS 4.1
Evaluation Criteria ........................................................................................................................................................................................................ CST 5.1.1
Evaluation Procedure ..................................................................................................................................................................................................... CST 5.4
Evidence of Contract ....................................................................................................................................................................................................... LE 1.10
Ex Gratia Claims ......................................................................................................................................................................................... CST 9.6, CRS 10.8
Exclusions ............................................................................................................................................................................................................................ EPP 1.4.1
Execution of Formal Agreement ......................................................................................................................................................... CST 6.5, CRS 6.5
Extension Contracts and Variations ................................................................................................................................................................. CRS 1.13.1
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Facilities Management Strategies ........................................................................................................................................................................... PS 2.4.3.1
Fair Employment (Northern Ireland) Acts ......................................................................................................................................................... LE 2.4.1
Fee Schedules ..................................................................................................................................................................................................................... CST 5.2
Firm Price and Variation of Price .............................................................................................................................................................................. LE 2.7.1
Focus on Output Value .................................................................................................................................................................................................. PS 1.7.1
Forms of Tendering .......................................................................................................................................................................................................... CST 4.2
Fostering Teamwork ............................................................................................................................................................................................................. PS 3.4
GC/Works/1 (1998) - Lump Sum with Quantities ............................................................................................................................ CRS 1.15.1.1
GC/Works/1 (1998) - Lump Sum without Quantities .................................................................................................................... CRS 1.15.2.1
GC/Works/1 (1998) - Single Stage Design and Build Version ..................................................................................................... CRS 1.15.3.1
GC/Works/1 (1999) - Two Stage Design and Build Version ........................................................................................................ CRS 1.15.4.1
GC/Works/1 (1999) - With Quantities Construction Management Trade Contract
- Without Quantities Construction Management Trade Contract ............................................ CRS 1.15.5.1
GC/Works/2 (1998) - Building and Civil Engineering Minor Works ....................................................................................... CRS 1.15.4.1
GC/Works/3 (1998) - Mechanical and Electrical Engineering Works .................................................................................... CRS 1.15.5.1
GC/Works/4 (1998) - Building, Civil Engineering, Mechanical and Electrical Works ..................................................... CRS 1.15.6.1
GC/Works/5 (1998) - Works Commission Consultant Documentation ....................................................................................... CST 1.5
GC/Works/5 (1999) - Works Commission Consultant Document (Framework/Term) ..................................................... CST 1.6
GC/Works/6 (1999) - Daywork Term Contract ................................................................................................................................. CRS 1.15.9.1
GC/Works/7 (1999) - Measured Term Contract ............................................................................................................................ CRS 1.15.10.1
GC/Works/8 (1999) - Specialist Term Contract for Maintenance of Equipment ......................................................... CRS 1.15.11.1
GC/Works/9 (1999) - Operation, Repairs and Maintenance of Equipment for Mechanical and
Electrical Plant, Equipment and Installations etc ................................................................................................................................ CRS 1.15.12.1
Guide to the Appointment of Consultants and Contractors - Edition 2 ........................................................................................ INT 1.2
Handover ......................................................................................................................................................................................................................... CRS 11.5.1
Health & Safety (CDM) ................................................................................................................................................................................................. LE 2.1.1
Identification ............................................................................................................................................................................................. CST 2.1.1, CRS 2.1.1
Incentive Fees ...................................................................................................................................................................................................................... CST 5.3
Individual Discipline Commissions .......................................................................................................................................................................... CST 1.5
Individual Project Management Type Commission ........................................................................................................................................ CST 1.4
Insolvency and Bankruptcy ........................................................................................................................................................................................ LE 1.18.1
Instructions/Notices To Tenderers/Tender Periods ................................................................................................................................... CRS 4.2.1
Intellectual Property, Copyright, and Royalties Etc. ....................................................................................................................................... LE 2.5.1
‘Intelligent Customer’ and the Role of CAU/PACE, The ........................................................................................................................ PS 1.2.1.1
Intelligent Customer Role ....................................................................................................................................................................... PS 1.2.1.1
The Role of CAU/PACE .......................................................................................................................................................................... PS 1.2.2.1
Late Tenders .......................................................................................................................................................................................... CST 4.14.1, CRS 4.7.1
Law of Contract in England & Wales, Principles Covering the ............................................................................................................... LE 1.1.1
Legal Advice ........................................................................................................................................................................................................................... LE 1.21
Legal Contract Formation ....................................................................................................................................................................... CST 6.1, CRS 6.1
Letter of Acceptance .......................................................................................................................................................................... CST 6.3.1, CRS 6.3.1
Limitation .................................................................................................................................................................................................................................... LE 1.9
Liquidated and Ascertained Damages ....................................................................................................................................... LE 2.8.1, CRS 11.1.1
Liquidation of a Nominated Sub-Contractor .................................................................................................................................................. CRS 8.5
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List of Related Reference Documents .................................................................................................................................................................. INT 1.6
Long Listing Process, The .................................................................................................................................................................. CST 3.3.1, CRS 3.3.1
Maintenance Periods .................................................................................................................................................................................................... CRS 11.2
Management Contracts .......................................................................................................................................................................................... CRS 1.10.1
Managing Claims ............................................................................................................................................................................................................. CRS 10.4
Mid-Tender Interviews ................................................................................................................................................................................................... CRS 4.3
Mistake and Misrepresentation .................................................................................................................................................................................. LE 1.6.1
Model Notices and Their Content .................................................................................................................................................................... EPP 1.10.1
Monitoring Performance ................................................................................................................................................................................................... PS 3.6
Nominated Sub-Contract, Arranging a ............................................................................................................................................................ CRS 8.3.1
Nomination Procedures ........................................................................................................................................................................................... CRS 8.1.1
Novation .............................................................................................................................................................................................................................. LE 1.12.1
NQS, New Qualification System ......................................................................................................................................................................... CST 3.2.1
Number of Tenderers, The ...................................................................................................................................................................... CST 3.7, CRS 3.6
Opening of Tenders .......................................................................................................................................................................... CST 4.12.1, CRS 4.5.1
Opening the Tender box ........................................................................................................................................................................................... CST 4.11
Overpayments ................................................................................................................................................................................................................. CRS 11.4
Parent Company Guarantees .................................................................................................................................................................................. LE 1.14.1
Partnering ............................................................................................................................................................................................................................... PS 5.1.1
Payments ............................................................................................................................................................................................................................. CRS 11.3
Performance and Determination ............................................................................................................................................................................. LE 1.4.1
Performance Bonds ....................................................................................................................................................................................................... LE 1.15.1
Performance Incentives .................................................................................................................................................................................................. PS 3.5.1
Performance Reporting Generally ....................................................................................................................................................................... CST 10.1
Performance Repor ting to CMIS ......................................................................................................................................................................... CRS 12.2
Performance reporting to the Register of Consultants (CONREG) ............................................................................................. CST 10.2
Performance Reporting, General ......................................................................................................................................................................... CRS 12.1
Personal Injury Claims ................................................................................................................................................................................................... CST 9.7
Post Tender Negotiation ............................................................................................................................................................................................... CRS 5.7
Pre-selection Criteria, Identify ................................................................................................................................................................................... CST 3.4
Pre-Selection Information ........................................................................................................................................................................................ CST 3.5.1
Pre-Selection Procedures ........................................................................................................................................................................................ CRS 3.4.1
Pre-tender Interview Stage ..................................................................................................................................................................................... CST 3.9.1
Prime Cost Contracts ................................................................................................................................................................................................ CRS 1.9.1
Prime Costs .......................................................................................................................................................................................................................... CRS 8.2
Principal Terms and Concepts in the Construction Industry .................................................................................................................. INT 1.8
Private Finance Initiative ................................................................................................................................................................................................. PS 5.2.1
Proceedings Instituted Against Departments ..................................................................................................................................................... LE 1.17
Procurement Process and Programme ................................................................................................................................... CST 1.1.1, CRS 1.1.1
Procurement Strategies, General ......................................................................................................................................................................... PS 2.4.1.1
Professional Indemnity Insurance ............................................................................................................................................................................ CST 8.3
Project Brief, Defining the ............................................................................................................................................................................................. PS 2.5.1
Project Critiques ................................................................................................................................................................................................................ PS 4.2.1
Project Identification ........................................................................................................................................................................................................ PS 2.1.1
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Project Manager, Role of the ................................................................................................................................................................................. CRS 9.1.1
Project Manager, The Need for a ................................................................................................................................................................................. PS 3.1
Project Objectives, Defining ............................................................................................................................................................................................. PS 2.2
Project Sponsor, Role of the ...................................................................................................................................................................................... CRS 9.2
Project Team, Defining the ............................................................................................................................................................................................ PS 3.2.1
Property management Functions ......................................................................................................................................................................... PS 2.4.2.1
Property Management Type Commissions ........................................................................................................................................................ CST 1.3
Proprietary Components/Articles ............................................................................................................................................................................... LE 2.6
Publicity and the Types of Notice Required .................................................................................................................................................... EPP 1.7.1
Purpose of the Guide ..................................................................................................................................................................................................... INT 1.3
Qualified Tenders .......................................................................................................................................................................................... CST 5.6, CRS 5.3
Quality Price Mechanism ......................................................................................................................................................................................... CST 3.8.1
Queries by Tenderers ................................................................................................................................................................................................. CST 4.9.1
Racial Discrimination ........................................................................................................................................................................................................... LE 2.3
Re-invitation of Tenders ........................................................................................................................................................................ CST 5.9, CRS 5.8.1
Recommendation for Acceptance ....................................................................................................................................................................... CST 5.10
Record Keeping ...................................................................................................................................................................................................................... PS 3.7
Requests for Debriefing ............................................................................................................................................................................ CST 7.1, CRS 7.1
Requests For Further Information Debriefing Interviews ........................................................................................................................ CRS 7.2
Reservation of Title ........................................................................................................................................................................................................ LE 1.19.1
Risk Management ............................................................................................................................................................................................................... PS 2.3.1
Role of CAU/PACE ...................................................................................................................................................................................................... PS 1.2.2.1
Secure Information .......................................................................................................................................................................................................... CST 4.6
Selected or Approved Sub-Contractors ............................................................................................................................................................. CRS 8.6
Selection of Firms ................................................................................................................................................................................. CST 3.1.1, CRS 3.1.1
Short Lists, Compilation of ............................................................................................................................................................. CST 3.6.1, CRS 3.5.1
Simple Contracts ............................................................................................................................................................................................................... LE 1.2.1
Simple Lump Sum Contracts ..................................................................................................................................................................................... CRS 1.6
Single Tender ..................................................................................................................................................................................................................... CST 3.10
Stamp Duty ............................................................................................................................................................................................................................ LE 1.16
Standard Government Contracts ..................................................................................................................................................................... CRS 1.15.1
GC/Works/1 (1998) - Lump Sum with Quantities .......................................................................................................... CRS 1.15.1.1
GC/Works/1 (1998) - Lump Sum without Quantities .................................................................................................. CRS 1.15.2.1
GC/Works/1 (1998) - Single Stage Design and Build Version ................................................................................... CRS 1.15.3.1
GC/Works/1 (1999) - Two Stage Design and Build Version ....................................................................................... CRS 1.15.4.1
GC/Works/1 (1999) - With Quantities Construction Management Trade Contract
- Without Quantities Construction Management Trade Contract ........................... CRS 1.15.5.1
GC/Works/2 (1998) - Building and Civil Engineering Minor Works ..................................................................... CRS 1.15.6.1
GC/Works/3 (1998) - Mechanical and Electrical Engineering Works ................................................................... CRS 1.15.7.1
GC/Works/4 (1998) - Building, Civil Engineering, Mechanical and Electrical Works ................................... CRS 1.15.8.1
GC/Works/5 (1998) - Works Commission Consultant Documentation ..................................................................... CST 1.5
GC/Works/5 (1999) - Works Commission Consultant Document (Framework/Term) .................................... CST 1.6
GC/Works/6 (1999) - Daywork Term Contract ............................................................................................................... CRS 1.15.9.1
GC/Works/7 (1999) - Measured Term Contract ........................................................................................................... CRS 1.15.10.1
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GC/Works/8 (1999) - Specialist Term Contract for Maintenance of Equipment ....................................... CRS 1.15.11.1
GC/Works/9 (1999) - Operation, Repairs and Maintenance of Equipment for Mechanical and
Electrical Plant, Equipment and Installations etc ............................................................................................................... CRS 1.15.12.1
C1303 - Window Cleaning and C1304 - Chimney Sweeping ................................................................................... CRS 1.15.13
C1306 - Maintenance of Gardens, Grounds, Etc. and
C1312 - Supply and Application of Herbicides, Etc. ......................................................................................................... CRS 1.15.14
C1804 - Repair of Plant ..................................................................................................................................................................... CRS 1.15.15
Structure of the Guide ................................................................................................................................................................................................... INT 1.4
Sub Files .............................................................................................................................................................................................................. CST 2.2, CRS 2.2
Tender Anomalies ............................................................................................................................................................................................................. CST 5.5
Tender Boards ............................................................................................................................................................................................. CST 4.10, CRS 4.4
Tender Boxes ...................................................................................................................................................................................................................... CST 4.5
Tender Documents ...................................................................................................................................................................................................... CST 4.3.1
Tender Periods ................................................................................................................................................................................................................... CST 4.4
Tender Reporting ............................................................................................................................................................................................................. CRS 5.9
Tenderer Selection ...................................................................................................................................................................................................... EPP 1.12.1
Term Commissions .......................................................................................................................................................................................................... CST 1.6
Term Contracts ........................................................................................................................................................................................................... CRS 1.14.1
The Procurement Process ........................................................................................................................................................................................... PS 1.1.1
The Tender Record Book ............................................................................................................................................................. CST 4.13.1, CRS 4.6.1
Thresholds .......................................................................................................................................................................................................................... EPP 1.5.1
Traditional Lump Sum Contracts ........................................................................................................................................................................ CRS 1.7.1
Transactions with Outside Businesses ................................................................................................................................................................ LE 1.13.1
Transfer of Under takings (TUPE) ............................................................................................................................................................................ LE 2.2.1
Use of the Guide ............................................................................................................................................................................................................... INT 1.5
Unfair Contract Terms Act 1977 ............................................................................................................................................................................... LE 1.20
Works Contract Strategies ...................................................................................................................................................................................... PS 2.4.4.1
Writs and Summonses .................................................................................................................................................................................................. CST 9.5
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Guide To The Appointment of Consultants & Contractors: Second Edition

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GUIDE TO THE APPOINTMENT OF

Mr S Dilcock Emplo yment Ser vice

© Crown Copyright 1998

Where there are substantial legal differences or procedural

• LE 1.2 SIMPLE CONTRACTS (English version)

• LE 1.2(SCOT) SIMPLE CONTRACTS (Scottish version)

To facilitate even easier identification the relevant Scottish sections are

The amendments made to enable the guide to be compatible with the

INTRODUCTION INT 1.0

PROCUREMENT STRATEGIES (PS)

GENERAL PRINCIPLES PS 1.0

PROJECT REQUIREMENTS PS 2.0

PROCURING AND MANAGING THE TEAM PS 3.0

PERFORMANCE EVALUATION PS 4.0

OTHER ISSUES PS 5.0

LEGAL ENVIRONMENT (LE)

LEGAL FRAMEWORK LE 1.0

OTHER ISSUES LE 2.0

EC PROCUREMENT PROCEDURES (EPP)

THE SCOPE OF APPLICATION OF THE EC PROCUREMENT

COMMISSIONING STRATEGIES CST 1.0

COMMISSION FILE CST 2.0

CONSULTANT SELECTION CST 3.0

TENDER PROCESS CST 4.0

TENDER EVALUATION CST 5.0

AWARDING COMMISSIONS AND DECLINING TENDERS CST 6.0

DEBRIEFING CST 7.0

MANAGEMENT OF COMMISSIONS CST 8.0

CLAIMS AND DISPUTES CST 9.0

PERFORMANCE REPORTING CST 10.0

CONTRACTING STRATEGIES CRS 1.0

GC/WORKS/1 (1998) - LUMP SUM WITH QUANTITIES CRS 1.15.1

CONTRACTS FILE CRS 2.0

CONTRACTOR SELECTION CRS 3.0

TENDERING PROCESS CRS 4.0

TENDER EVALUATION CRS 5.0

AWARDING CONTRACTS & DECLINING TENDERS CRS 6.0

DEBRIEFING CRS 7.0

NOMINATION OF SUB-CONTRACTORS CRS 8.0

MANAGEMENT OF CONTRACTS CRS 9.0

CLAIMS & DISPUTES CRS 10.0

MATTERS ARISING ON COMPLETION CRS 11.0

PERFORMANCE REPORTING CRS 12.0

INT 1.1 BACKGROUND

On 1 April 1996 Departments took over from Property Holdings

• co-ordinate the Government’s activity on the Civil Estate;

• promote rationalisation of the Estate;

• provide Departments with a body of “off-the-shelf ” advice and

• provide intelligent customer support; and

• provide management of the Government’s vacant properties.

The first edition of the Guide issued in September 1996 provided

The Guide is intended to provide guidance on procurement in the

It is recognised that there is a wide variation in the number, experience

It is divided into five main sections: Procurement Strategies, Legal

EPP EC Procurement Procedures

CST Consultants Section

CRS Contractors Section

This warning triangle indicates where particular care should be taken to