Summary: In this blog, John Hughes-D'Aeth considers the changes to the ACE Professional Services Agreement, 2017 edition.
It is hard to believe that the CIC Consultants' Contract was published nearly 10 years ago. Having been involved in its gestation, I am only too keenly aware of the compromises that were needed to create a form that was acceptable to the CIC’s constituent bodies, while also (mainly) meeting the needs of commercial developers and the institutional funding market.
It is clear from Dwight Patten’s blog (published on Practical Law Construction Blog on 17 February 2017) that the ACE faced similar challenges in updating its professional services agreement (PSA). It claims to have produced a form that is “balanced” and one that clients “will be pleased with”. But do these claims stack up? And, more importantly, will it allow ACE to shake off its reputation for producing “consultant friendly” appointments?
There is no doubt that, in some respects at least, the new form is an improvement on its predecessors. Dwight has highlighted the more user-friendly structure and some other aspects (such as early warning, risk management and BIM) where the ACE has sought to embrace modern procurement practices. A number of the more controversial features in previous editions have also been removed or amended.
However, the form still contains a considerable number of provisions that clients and their advisors are likely to find unattractive. These include (this is by no means an exhaustive list):
- The term “to any material extent” in clause 2.6 is highly subjective and leaves wide scope for dispute. Also there is no restriction on the consultant issuing instructions which may delay the project.
- Under clause 6, the consultant may recommend the employment of site staff. They will act under the consultant’s direction, but the client must pay for them on a time basis (see comment below) and must also provide any accommodation and facilities that they need. Many clients will assume that this is “part of the service”. At the very least there is a lack of pricing transparency here.
- For time based fees, the client is expected to pay for every hour worked. Words such as “reasonably” and “properly” are conspicuous by their absence. Note that travelling time is also included.
- Late payments will attract interest at the statutory rate (8% over base), not the lower rate typically seen in commercial contracts (clause 7.9).
- Clause 8.1 allows the client to request a quotation for variations or additional services, but there is no timescale is specified for this to be submitted or agreed. So the consultant can simply stall and then bill on a time basis (see earlier comment).
- The IP Licence (clause 9) remains very limited in scope. Curiously, the right to use documents after completion is “solely in relation to the client”. The client may grant sub-licences for extensions, but (bizarrely) not for other purposes.
- Unsurprisingly, there is an aggregate liability cap (clause 10.1). The default level specified is ten times the fee, which consultants will no doubt pick on as a starting-point, even if they carry a much higher level of PI insurance (and, moreover, on an each and every claim basis). There is also a blanket exclusion of loss of profit and other consequential damage, as well as a net contribution provision (clause 10.2).
- Assignment by the client requires the consultant’s consent (clause 12).
- Under clause 13.2, if the client suspends the services it must pay (among other amounts) a sum for loss and disruption costs. It is not clear how this interacts with the exclusion of liability for consequential loss mentioned above. There is also a right for the consultant to suspend the services in certain circumstances (clause 13.3), which is very oddly worded.
- Clause 13.7 entitles the consultant to terminate if it considers it would be “irresponsible” to continue with the services. If so, it may again claim loss and disruption costs.
- Under clause 13.9, there is no right for the client to reduce the amount payable to the consultant on a termination for breach or insolvency on the consultant’s part.
- Clause 14 grudgingly acknowledges that the consultant may be required to provide collateral warranties, but only if all fees have been paid (potentially creating a ransom situation) and on payment of an additional charge. The form of warranty attached does not meet normal market expectations and in particular clause 5.1 is unlikely to be acceptable to third parties. The use of the Contracts (Rights of Third Parties) Act 1999 is expressly excluded.
Some other omissions
In addition to these points, the form is missing a number of provisions that are commonly included. For example:
- A duty to liaise and collaborate with the client’s other consultants and contractors; indeed, the consultant is positively discouraged from doing so, given the wide scope for claiming additional fees for disruption caused by others.
- An obligation to comply with statutory requirements, including the CDM Regulations.
- A requirement to comply with the “brief”, which is defined only in order to provide a baseline for variation claims.
- A duty to design within, or even to have regard to, any cost limits set by the client.
- Any recognition of obligations owed by the client to third parties.
- An obligation on the consultant to appoint named key personnel and keep them available and a right for the client to require the removal of unsatisfactory staff.
- Usual provisions relating to confidentiality and publicity (the heading to clause 9 is misleading in this respect).
- A novation provision, for use where the consultant is initially appointed by the client and then transferred to the contractor.
As will be seen, the new form is an improvement but still falls some way short of client expectations. I may be biased, but I can’t help wondering why the ACE didn’t simply adopt and update the CIC Consultants’ Contract, to which it is a signatory. Not only would this have offered a more market-credible alternative, but I suspect it would also have saved the ACE a significant amount of work.
This article first appeared on Practical Law Construction Blog on 28 February 2017.