Pre-Construction Services Agreements Explained

Pre-Construction Services Agreements Explained

29th November 2018

Last week we brought our readers some information on contracts in the construction sector and why they are such an important issue.  Today, we’re going to look at a different type of contract –Pre-Construction Services Agreements.

Pre-Construction Services Agreements (PCSAs) are also referred to as Pre-Contract Services Agreements and are designed to enable clients to employ contractors before the main construction contract begins.  PCSAs are usually part of a two-stage tender process and are used in the initial stage to procure contractor collaboration in the design process.  This will allow to contractor to help in the following ways:

  • Contribute to the actual design process
  • Advise on buildability, sequencing, and construction risks
  • Advise on the packaging of the works
  • Advise on the selection of specialist contractors
  • Collaborate on development of the cost plan and construction programme
  • Collaborate to develop the method of construction
  • Obtain quotations for work packages from suppliers and sub-contractors
  • Prepare the site layout plan for the construction stage, including any temporary facilities that are necessary
  • Draft preliminaries for specialist and trade contractor bid documents
  • Help with any planning applications on issues concerning the build phase – such as construction traffic movements, waste disposal proposals, tree preservation and protection, etc.

PCSAs are often used on design and build projects to ensure early collaboration with the contractor.  With the contractor involved at the earlier stage, an integrated project team can be created which will reduce the likelihood of any disputes.  It will also improve the buildability and cost certainty of the design. 

A PCSA should define the services that are required of the contractor during the pre-construction phase, and should clarify whether the contractor is carrying out the design work, whether they will have any design liability, and what will happen to such liability if they are not appointed for the second stage.  The PCSA should also define the method of payment and any provisions for deferred payment. 

A contractor who is appointed under the PCSA will not automatically be appointed for the second-stage construction contract.  However, in such a case, the client may lose leverage in the second stage of the tender process as the contractor has been embedded in the team and potential competitors often lose interested if another contractor has already been awarded the first stage tender.

However, when it comes to continuity, a longer period of familiarity with a project will allow for better relationships to be formed, often resulting in increased programme performance due to the subsequent reduction in learning curves.  Although tender prices for two-stage contracts may initially be higher than for single-stage tenders (which are always subject to full competition), the final account is likely to include fewer variations and fewer claims. 

It’s vital, however, that the client retains some means of securing an alternative bid if second-stage negotiations flounder, though this will inevitably lead to delays and even difficulties related to design liability.  There are standard forms available for PCSAs that can be used and adapted to individual projects.