Collaborative contracting is a contracting model for construction projects that incorporates elements of shared goal and partnership between parties by having alignment in their commercial interests. This article is Part 2 of an article series examining collaborative contracting from a practical commercial perspective. In Singapore, NEC4 and PSSCOC Option Module E are the two contract forms available for parties seeking to enter into collaborative contracting. This novel contracting model is generally considered to be in diametrically opposite direction to traditional contracting of which parties’ contractual relationship is adversarial in nature. In an ideal world, collaborative contracting could convert parties from ‘competing’ to ‘cooperating’. 

In previous Part 1 of this article series, several unique features of collaborative contracting were examined including the use of Key Performance Incentives (KPI), concept of ‘spirit of mutual trust and cooperation’, implementation of partnering workshops etc. These concepts were examined by understanding the general features of NEC4 and PSSCOC Option Module E. By way of context, PSSCOC refers to Public Sector Standard Conditions of Contract for construction works published in 2020. It is commonly used for traditional design-bid-build projects in Singapore. Parties may switch to collaborative contracting by bolting on Option Module E to the PSSCOC. NEC4 on the other hand is an established international engineering and construction contract with its latest edition published in 2017. NEC4’s formal adoption in Singapore was first announced in 2024 through development of ‘Y Clauses’ for localisation purposes. 

In Part 2 of this article series, various notable contract administration matters will be discussed from a commercial perspective including the adoption of Early Notification Register, provisions on revision of construction programme, dispute resolution mechanism etc. Finally, this article will delve into the question on how sharing of design responsibilities between contracting parties may affect opportunities for them to collaborate.  

Early Notification Register/ Early Warning Register

Under Clause E3.0 of PSSCOC Option Module E, Early Notification Register refers to a list of events that may have adverse impact on the project. It is unique to collaborative contracting in that the events listed in this register is based on early warning mutually notified between the representatives of the contracting parties. The events listed in this register provides both parties the opportunities through ad hoc or scheduled meetings to cooperate, propose solutions and jointly implement remedial actions in a timely manner. Under traditional contracting model, the Employer’s representative is usually under no obligation to give early warning to the contractor of any adverse event. The contractor however is required under traditional contracting to provide advance notice of any adverse event in compliance with certain condition precedent obligations so as to preserve its rights to claim for additional payment and/or extension of time. Therefore traditional contracting in this regard lacks reciprocity. A similar register can be found in Clause 15 of NEC4 whereby it is labelled as Early Warning Register. 

It is customary that as a matter of project management practice, large construction projects typically adopt some form of ‘risk register’ that gets regularly updated. In this regard, certain contingency sum is assigned to various identified risk events. So what exactly is novel or unique about early warning/ notification register under collaborative contracting? Firstly, risk register occasionally adopted in traditional contracting is part of the construction management reporting tool devised and implemented mostly by the main contractor through its own volition. Such discretionary tools are not specified under the contract. On the other hand, Early Notification Register is expressly provided for under the collaborative contracting agreement whereby either party may make a formal request for the other party to attend the relevant early notice meeting. Failure to participate is technically a breach of contract, although the exact ramification is subject to debate. The elevated sense of contractual formality may be of assistance in getting the necessary attention from the appropriate senior management whose decision making authority may be required. 

The effectiveness of Early Notification Register is dependent on the types of event that would qualify to be included in such register. It is a balancing act. An indiscriminate over zealous approach to this register may dilute its significance with overwhelming amount of events whilst an overly conservative approach may have the opposite effect. Under Clause E3.0(2) of the PSSCOC Option Module E, the qualifying events include those that (a) may lead to an increase in the contract sum, (b) may result in delay to time for completion(s), (c) may have an adverse impact on the performance of the works and (d) may have an adverse impact on the achievement of KPI. Under  Clause 15.1 of NEC4, the qualifying events are largely similar except that those that may have adverse impact on KPI are excluded. Further, the NEC4 register has an additional type of event namely those that may increase ‘the contractor’s cost’. This is distinct from a separate ground referred to as ‘increase the total of the Prices’ or contract sum. In other words, the Employer’s representative is not excused from his obligation to warn the contractor even if he believes that the event does not increase sum payable under the contract. The Employer’s obligation to warn is effectively extended to those events that may financially affect only the contractor. In reality, whether certain event may result in additional compensation to the contractor (thus increase in contract sum) may not be entirely clear at the outset. The Employer’s representative under PSSCOC Option Module E may be able argue that it did not issue any warning because he believed that the event in hand could not result in additional payment to the contractor. It is fairly difficult to determine if such argument is an afterthought. Therefore the NEC4’s approach is arguably more all encompassing. 

Early Notification Register is contractually significant beyond a mere discretionary construction management tool because it allows the affected party(s) (contractor and/or the Employer) to mitigate the time or cost implications arising from the notified risk event. As a general rule, early mitigation could reduce any ensuing adverse impact quite significantly. This is the reason why even under traditional contracting, the contractor is usually required to comply with certain condition precedent by way of notification if it wishes to claim for additional payment or extension of time. The idea is similarly to afford the Employer an opportunity to mitigate the effects to the extent possible for any compensation event. In fact the condition precedent under traditional contracting is so stringent that any failure to comply with such notification may extinguish the contractor’s entitlement to compensation. The contractor is generally not at liberty to argue that the failure to notify was inconsequential because the impact of the event could not have been mitigated. 

Such condition precedent remains relevant and in force even under collaborative contracting. Naturally one may ask whether the early warning notified under Early Notification Register could simultaneously amount to fulfilment of condition precedents under the contract. The general answer is no. Under Clause E3.0(4) of PSSCOC Option Module E, the contractor’s duty to comply with condition precedent is without prejudice to the implementation of Early Notification Register. Under Clause 61.3 of NEC4 states amongst others that if the contractor fail to notify the Project Manager within eight weeks of becoming aware of a compensation event, the prices, the completion date or a key date are not changed. Further Clause 61.5 of NEC4 states that if the Project Manager decides that the contractor did not give an early warning of the event which an experienced contractor could have given, the Project Manager states this in the instruction to the contractor to submit quotation. Thereafter Clause 63.7 of NEC4 further states that if the Project Manager has stated in the instruction to submit quotations that the contractor did not give an early warning of the event which an experienced contractor could have given, the compensation event is assessed as if the contractor had given the early warning. In other words, the basis of assessment is as if the Employer had the opportunity to mitigate the risk of the event concerned. If the consequences could have been significantly mitigated or even avoided in its entirety if early warning was in place, the contractor’s compensation could be significantly reduced or even be wholly extinguished. 

In view of the observations above, parties should be mindful of not conflating ‘collaborative’ as a form of ‘concession’ or ‘waiver’ of requirements. Whilst the contractor may be paid incentive amounts in accomplishing KPIs under collaborative contracting, there may not be any financial payment to the contractor for elimination or avoidance of risks within the register. Ironically, the contractor is typically entitled to additional payment or extension of time (which in turn may attract prolongation claims) for materialisation of various risk events where there are express grounds for claim. Therefore one should not be overly surprise if there is a financial dilemma on the part of the contractor as regards its participation in early notification register. Consequently the Employer ought to ensure that the KPI stipulated are in sync financially with its early notification register. If the Employer becomes maniacal with the enforcement of condition precedents, it should not be surprising if that affects the contractor’s sincerity in its participation of early notification register. 

Revision Of Programme

One of the more significant amendments included in Option Module E relates to Clause 9.2 of PSSCOC which deals with the subject of revision of programme. Under Clause E7.0 of Option Module E, the original Clause 9.2 of the PSSCOC is replaced by a relatively elaborate mechanism which governs the ways in which parties should deal with any revision to previously accepted programme. In general there are timelines included in this new mechanism for the contractor to comply with the request for a revised programme from the Superintending Officer as well as for the Superintending Officer to respond accordingly. Timelines are also included for the contractor to issue a further revised programme in case the first draft was unacceptable to the Superintending Officer. This is a departure from the original Clause 9.2 under the traditional contracting model with lesser degree of specificity. In reality most of the new timelines found in Clause 9.2 is fairly similar with those timelines prescribed in Clause 9.1 which relates to the submission and acceptance of the very first baseline programme. Therefore E7.0 of Option Module E effectively replicates the timelines found under Clause 9.1 to Clause 9.2.

A similar provision relating to revision of programme can be found in Clause 32 of NEC4. Whilst NEC4 does not include timelines in the manner set out under PSSCOC Option Module E, there are more explicit substantive requirements stipulated especially on the types of particulars that are expected in the revised programme. By way of example, the revised programme shall indicate the actual progress achieved at the point in time of programme revision including the effects on the timing of the remaining works. Therefore, the revised programme is a factual contemporaneous programme that could provide more options in terms of delay analysis. Assessment of extension of time through delay analysis can often be contentious when there are limited number of mutually agreed contemporaneous programme. Such limitation often curtail the methods available for delay analysis. The revised programme is also inclusive of the contractor’s plans on how to deal with any delays and corrective measures on defects. Therefore the time impacts of any delaying event is evident from the revised programme, which in turn is a reflection of the contractor’s very own delay analysis. The Project Manager is naturally induced to provide his own perspective if he disagrees with the analysis exhibited particularly with the veracity of time impact of excusable delay events. In other words, the revision in programmes actually facilitates the assessment of extension of time, on a prospective basis. These details are noticeably absent under PSSCOC Option Module E, leaving considerable latitude to the Superintending Officer to dictate the level of details required from the contractor. The true opportunity of cooperation can be elusive if flexibility or freedom is only afforded to one party.

One of the essence to effective collaborative contracting is the ability for parties to resolve issues quickly by nipping them in the bud. Apart from the obvious mitigating effect, it provides clarity to both parties on the status of their collective disputes. Contrary to popular belief, collaborative contracting is not exclusively about dispute prevention. It is a model that provides a conducive and efficient avenue for dispute resolution in conjunction with dispute prevention. The terms ‘cooperation’ and ‘mutual respect’ may suggest a collaborative partnership in avoidance of conflict. This perception may not be true and shall be elaborated further in the next section of this article. 

Dispute Resolution Under Collaborative Contracting (with Dispute Board/ Dispute Avoidance Board)

Dispute resolution mechanism under collaborative contracting is significantly more extensive than the ones found under traditional contracting. The mechanism does not merely offer more dispute resolution options but also avenues for dissatisfied party to have certain decisions or determinations reviewed within the contractual framework. These observations affirm that collaborative contracting not only focuses on resolution (as opposed to prevention) of disputes, it is also intended for larger scale projects where contracting parties are sophisticated and well-advised large corporations. 

There are two options as regards Option Module E of the PSSCOC, namely (1) with Dispute Board of SIDP and (2) without Dispute Board of SIDP. SIDP refers to Singapore Infrastructure Dispute Management Protocol 2018 which is a set of rules governing the authorities and functions of a Dispute Board. Such Dispute Board usually comprises one, two or three experts to be appointed by the parties who specialises in construction disputes. There was an earlier two part article series published in this website entitled ‘Dispute Board of SIDP – Contractor’s Perspective’ available for reference for further background and context. This discussion is aimed at Option Module E that is inclusive of Dispute Board of SIDP. The relevant provisions under Option Module E can be found in Clause E4.0. A fairly similar provision can be found in Option W3 of NEC4 which deals with Dispute Avoidance Board. Such board comprises one or three experts and is appointed under NEC Dispute Resolution Service Contract. Whilst the intricacies and nuances of Dispute Board is outside the scope of this article, it is fair to say that its concept and application are fairly commonly practised in other suites of international contract forms including FIDIC and JCT.

Under Clause E4.0 of Option Module E the amendments to the original dispute resolution provision of PSSCOC are two fold. Firstly, it introduces Clause 35A which incorporates SIDP by reference as well as an establishment of a one member Dispute Board within 60 days of the commencement of works. This board shall assist parties in preventing, managing and resolving differences or disputes. In doing so, such board is authorised to act as a mediator, to provide an opinion or to render a determination as it relates to disputes between the parties relating to the contract. Secondly, Clause E4.0 also introduce significant amendments to the original Clause 35 of the PSSCOC which deals with its multi-tiered dispute resolution clause. These amendments are to dovetail the functions of Dispute Board with the existing dispute resolution provisions for avoidance of conflicts or ambiguities. By way of example, the Dispute Board is authorised to review any decisions made by the Superintending Officer in his dispute resolution capacity. Therefore Dispute Board does not merely resolve disputes in the first instance of referral but also discharges its appellate responsibilities. It should be noted that any traditional contracting that utilises PSSCOC with SIDP does not have such explicit hierarchy defined as regards Dispute Board relative to Superintending Officer. Under SIDP, the Dispute Board’s functions are akin to a ‘Swiss Army knife’ i.e. it plays different roles depending on the circumstances and the requests from the parties. Dispute Boards could act as a mediator to assist the parties to arrive at a commercial settlement of their disputes. It could also render an opinion on the referred dispute of which it shall be binding on the parties on an interim basis unless objected to in a timely manner by any dissatisfied party. The board could also render a formal determination of which it shall be binding on the parties. Any dissatisfied party that objects to the determination in a timely manner may have such binding determination to be in force only on an interim basis, and be finally referred to arbitration. 

Dispute Avoidance Board under NEC4 is quite different from Dispute Board under SIDP in that it is generally to assist parties to avoid disputes and where necessary provide non binding recommendations on related matters. It does not have any adjudicative powers to make determinations that is binding (whether interim or final) on the disputes. Therefore the term ‘Avoidance’ is instructive. Despite these differences, it shares certain similar characteristics as SIDP Dispute Board in that it is formed at the early stages of the project and conducts site visits periodically. This is to ensure that it has sufficient understanding of the project in hand to facilitate the discharge of its functions.

Based on the illustrations above, it appears that the dispute resolution mechanism is much more elaborate and comprehensive than in traditional contracting. So what exactly in collaborative contracting that warrants such a comprehensive dispute resolution mechanism? Is this an indication that Early Notification Register and partnering workshops may not be adequate as intended? In theory as collaboration and dispute avoidance become more effective, there ought to be a reduction in crystallisation of disputes that require resolution. Some may argue that perhaps the need for Dispute Board under SIDP is diminished given the implementation of collaborative contracting. Those who take this position may view that having mechanism for decisions to be reviewed under the contractual framework (e.g. Dispute Board to review Superintending Officer’s decision) could be counter productive in that the lack of finality allow animosity to fester. Others may take the opposite position that having the presence of a neutral Dispute Board to provide mediation in the midst of the project goes a long way in preserving parties’ relationship which is at the core of collaborative contracting. Which school of thought would prevail is a matter that remains to be seen. In any case it would be useful for parties to be alive to these contrasting views prior to entering into collaborative contracting. 

Partial Design And Build Under Collaborative Contracting

Whilst this article refers to PSSCOC for construction works which is premised on traditional design-bid-build lump sum contract, it should be noted that it is not uncommon for the contractor to simultaneously share certain degree of design responsibility under this traditional procurement route. How should partial design and build be approached under collaborative contracting? For clarity the PSSCOC Design & Build form which is the standard conditions where the contractor holds a complete single point responsibility for both design and construction of the project does not include Option Module E. This is because the Employer’s involvement is limited to the provision of its requirements (or design brief), whilst the contractor is in almost full control of the entire project. It follows that the contractor assumes most if not all of the risks leaving very limited scope for collaboration and partnering. Collaborative contracting is more suitable in an environment where both parties have a fairly equal level of responsibilities in the execution of the construction works, such as traditional design-bid-build. 

On the other hand under partial design and build, the contractor may from time to time offer design alternatives or value engineering proposals. It is also fairly common for the base scope of works under the contract to stipulate that the contractor shall be responsible for design for certain proprietary systems (e.g. facade system), overall layout coordination of mechanical, electrical and plumbing services or even compliance with certain performance based specification provided by the project consultants. These arrangements are typically pursuant to Clause 6 of the PSSCOC as regards ‘Permanent Works Designed By The Contractor’. There is also an equivalent provision under Clause X15 of NEC4 which deals with ‘The Contractor’s Design’. Under such partial design and build, the opportunities for collaborative contracting may be found in respect of the interfacing between the contractor’s design and the Employer’s design (provided through its engineering and design consultants). Interfacing works are areas where it is notoriously complex and difficult to define with absolute specificity on the delineation of design responsibility. By the nature of its ambiguity, parties are likely to be better off spending their efforts to find common grounds and solve joint problems than to take an adversarial approach.

Conclusion

Based on the issues examined above, it is clear that collaborative contracting is not the panacea to all contractual disputes. Likewise it is extremely challenging to alter parties’ mentality and attitude by way of contract conditions. However, if parties decide to take a chance with ‘collaborative contracting’, there are a whole host of advantages that they could benefit from with the appropriate dosage of sincerity and humility. Sometimes it involves saying ‘no’ to short term profit and to go after longer term relationship. That in itself is also a calculated risk.




Koon Tak Hong Consulting Private Limited