Articles

1. Introduction

1. Collaborative contracting, the new buzzword in the construction industry, is a loosely defined contracting model where the project owner and the project participants enjoy a greater co-operative working relationship in the construction of a project.
2. This varying degree of co-operation is manifested in the different variations of the collaborative contracting model. The contractual form may (but not necessarily) include^[1].

1. 1. express obligations to cooperate;
   2. contractual early warning and risk management procedures or mechanisms for the parties to discuss and collaborate on solutions;
   3. payment arrangements which financially motivate the project participants to collaborate, including but not limited to “pain share” or “gain share” arrangements;
   4. waivers of each party’s right to sue the other for breach of contract and/or negligence;
   5. contractual mechanisms for joint decision making; and
   6. pro-active project management.

3. On one end of the spectrum, there is project alliancing, where the owner and the various project participants enter into a single multi-party agreement which typically features a (a) no-fault clause, and (b) gain share payment mechanism, where parties are collectively incentivised to deliver the project at a costs lower than the expected total cost for completion of the project, also known as the “target outturn cost”[2]
4. On the other end of the spectrum there is a “partnering charter”, where parties agree to work collaboratively within the framework of a traditional procurement contract. The precise ambit of “partnering” can vary between parties, projects and contracts, and these obligations are typically framed in an agreement which can be binding or non-binding. The agreement will outline the collaborative processes, attitudes and behaviours which parties should embrace in light of common goals and desire to move away from confrontational attitudes or behaviour^[3].

2. Collaborative contracting in various parts of the world

5. The concept of collaborative contracting is not new in the construction industry.
6. The UK saw developments in collaborative contracting as early as 1985 when the Legal Affairs Committee of the Institution of Civil Engineers UK (otherwise known as the “ICE”) passed a resolution to lead a fundamental review of alternative contract strategies for civil engineering design and construction^[4]. This review, made with the objective of identifying the needs for good practice, led to the development of the New Engineering Contract (otherwise referred to as the “NEC”) suite of contracts. The latest version, NEC4 published in June 2017^[5] includes an Alliance Contract standard form. This is a single collaborative contract form which appoints a number of partners to create an alliance to achieve the client’s objectives, and share in the risks and benefits of doing so^[6].
7. Across the pond in the United States of America and in the late 1980s, the Army Corps of Engineers initiated a process where the owner and the contractor would meet after completing the tender to define goals and discuss potential issues. This process would take place before parties sign an agreement or charter encapsulating their common goals and principles.^[7]
8. In Singapore, on 31 May 2017, Mr. Lawrence Wong, then Minister for National Development, announced at a joint conference organized by the Board of Architects (“BOA”) and the Association of Consulting Engineers of Singapore (“ACES”), that the government was looking forward to promoting more collaborative contracting models, and would be initiating plans to pilot some of the collaborative contracting models in public sector projects^[8]. Following that, in the launch of the Construction Industry Transformation Map on 24 October 2017, the Building and Construction Authority (“BCA”) announced that the Singapore Government would be reviewing procurement frameworks and contracting practices to explore greater collaboration between firms through collaborative contracting^[9].
9. These initiatives culminated, amongst others, in BCA’s development and introduction of option modules for Public Sector Standard Conditions of Contract (“PSSCOC”)^[10]. These option modules provide for, amongst others^[11]: 

1. 1. a collaborative working relationship whereby the employer and the contractor will use best endeavours to work together and act in a spirit of mutual trust and cooperation^[12];
   2. a set of Key Performance Incentives (“KPIs”), the achievement of which will be monitored. If achieved, the Contractor may be entitled to specified bonus payments pegged to the achievement of that KPI^[13];
   3. an early warning mechanism where the contractor and/or the superintending officer must promptly notify each other of any matter that could cause time or cost overruns and/or have an adverse impact on the performance of the works or KPIs. The objective of this mechanism is to alert parties of any issues early, so that parties can work together to mitigate the adverse effects of such notified matters^[14];
   4. partnership workshops, where key officers of the contractor, their sub-contractors, the employer are required to attend, so as to enable them to work in a collaborative environment^[15]; and
   5. an opt in dispute resolution mechanism in the form of a Dispute Board in accordance with the Singapore Infrastructure Dispute-Management Protocol 2018 (“SIDP”). This is to facilitate dispute avoidance and early resolution of disputes^[16].

10. In October 2018, Option Module E of the PSSCOC for Construction Works was adopted by JTC Corporation in its tender for the Punggol Digital District project^[17]. This is one of the first infrastructure projects in Singapore that embraces a version of collaborative contracting.

3. Challenges in collaborative contracting

11. As Mr J. Robert Oppenheimer monologued in the 2023 biographical drama film: “They won't fear it until they understand it. And they won't understand it until they've used it. Theory will take you only so far.”
12. Indeed, theories on collaborative contracting can only take observers so far. As the Punggol Digital District is set to see completion only at the end of 2026, there are as of now, limited observations which can be made on the state of collaborative contracting in the construction industry in Singapore.
13. Some key points have however emerged from overseas projects adopting various collaborative contracting models, such as the NEC suite of contracts.

1. 1. Selecting the right team members

14. One of the key takeaways in the use of NEC3 Engineering and Construction Contract (“NEC3 ECC”) in the £14.8 billion construction of the Elizabeth line east-west railway across London is that it is crucial that the right people for the job are selected.
15. NEC3 ECC, like its successor NEC4, features elements of collaborative contracting. There are contractual processes for parties to manage risks and agree actions and consequences as early as practicable. Proactive management of the contract is also necessary by both the contractor and the project manager appointed by the employer. In navigating these collaborative elements, Mr David Morrice, the Delivery Contracts Director and Ms Megan Hands, the Project Solicitor, for Crossrail Limited explained^[18] that the “experience and competence of the project manager and the team cannot be underestimated”. Proper collaboration required “competent people, experienced in major project delivery, who can adapt to and manage a variety of complex situations”.
16. Likewise, Mr. Ezani, then Senior Principal Associate of Threesixty Contract Advisory Pte Ltd (a member of the Surbana Jurong Group), forecasted as early as in 2018 that

“[c]ollaborative contracting requires a paradigm shift in the way employers, contractors, subcontractors and consultants collaborate during pre-contract and post-contract stages”. This paradigm shift in turn “requires a change of mind-set in all team members so that the notion of “mutual trust and co-operation” can be upheld at all times”^[19].

17. Similarly, one of experiences thus far in the Punggol Digital District project, as shared by Group Director Mr. Tay Ter Long of JTC Corporation in 21 May 2021^[20] is that “[c]ollaborative mindset alone is insufficient”. To successfully carry out collaborative contracting, the parties involved must be willing to “discuss issues openly” with each other and the Dispute Board to determine “what’s best for the project”.
18. These experiences and attestations underscore the need for the right project participants right from the outset, who embody the proper mindset and attitude. They have to think of the interest of the project as a whole, and not act with their own interests at the forefront of their considerations. They must also have good communication skills, and be willing to participate in discussions early.

1. 2. Selecting the right project

19. Not all projects are suitable for collaborative contracting. Based on the survey results conducted on major international contractors based in France, Germany, Holland, Spain, Sweden, Turkey, the United Kingdom and Japan, there was clear consensus from the survey participants that collaborative contracting in the form of partnering “would establish itself as a superior alternative to traditional approaches for particular projects and employers”^[21]. The same article also observes that “simple construction-only contracts” are not suitable for collaborative contracting, as they do not offer the optimal project environment for maximising the benefits. Potential gains from collaboration also have to be checked against the costs of initiating and administrating the collaborative framework^[22].
20. This echoes the views of Mr. Tay Ter Long, who agrees that turnkey and design and build projects are best placed to reap the maximum benefits from collaborative contracting. Build only projects, which already have detailed design concluded, leave “lesser room / time for collaboration & substantive improvements”^[23].
21. The views have been consolidated by the authors of the Singapore Academy of Law’s Guide on Collaborative Contracting in the Construction Industry, which suggests the following types of projects as ones which would benefit the most from collaborative contracting:

1. 1. projects where the scope of work is subject to significant change after commencement;
   2. projects where the scope of work is complicated by technical and/or stakeholder issues which make it difficult for contracting parties to allocate risk during tender stage;
   3. projects where design and construction is anticipated to progress concurrently;
   4. projects which would benefit significantly from innovation and risk-taking;
   5. projects where the owner’s direct and hands-on involvement would benefit the project; and
   6. projects which are sufficiently large and complex to justify the time, costs and resources that would have to be deployed towards collaboration.

22. Like the project participants, the type of project must, too, be the right one, in order to justify the costs and hassle of implementing a collaborative framework.

3. 3. Selecting the right extent of collaboration

23. As mentioned earlier in this article, there is no single fixed form for collaborative contracting. Even for partnering, which is a form of collaborative contracting, survey results from major international contractor have shown that “[t]here is no consensus understanding of what precisely partnering is and in particular how it can be implemented”^[24].
24. Option Module E for PSSCOC for Construction Works, for instance, represents the more conservative end of collaborative contracting. While it promotes collaboration, it largely preserves the rights-based fault-centric dispute resolution process in traditional contracting. Should things head south, there remains room for participants to blame each other rather than collaborate to solve the problem together.
25. Given the spectrum of collaborative elements, project owners and participants must seriously consider the extent of collaboration before embarking on collaborative contracting model.

4. Conclusion

26. Collaborative contracting, as we mentioned at the start of this article, is a shiny new buzzword in the construction industry, but caution must be taken when considering whether to adopt this form for one’s particular project. Indeed, as with all procurement models, consideration must be given to the selection of the right project, right participants and right extent of collaboration. If not, the more familiar traditional contracting may be better suited to your contract and project needs.

Contributed by:

Joanna Seetoh - Partner, Harry Elias Partnership LLP; Chua MingHao - Of Counsel, Harry Elias Partnership LLP

^[1] Guide on Collaborative Contracting in the Construction Industry, January 2022, Singapore Academy of Law, Law Reform Committee (“Guide on Collaborative Contracting”). Electronic copy may be accessed from the Singapore Academy of Law website at https://www.sal.org.sg/Resources-Tools/Law-Reform/Law-Reform-e-Archive.

^[2] Alliance contracting: Lessons learned globally, 19 January 2022, KPMG Insights. Electronic copy may be assessed at https://kpmg.com/ca/en/home/insights/2022/01/alliance-contracting-lessons-learned-globally.html.

^[3] See the section on “Partnering” in RICS guidance note, UK on Appropriate contract selection (1^st Ed. 2014). Electronic copy may be assessed at https://www.rics.org/content/dam/ricsglobal/documents/standards/Appropriate_contract_selection_1st_edition_PGguidance_2014_archived.pdf

^[4] B. Weddell, Choosing the Right NEC Contract (Thomas Telford Books 2006) p. 1.

^[5] Note that NEC has published several sets of amendments to the NEC4 suites of contract since June 2017, including amendments in January 2019, October 2020 and January 2023.

^[6] Matthew Garatt, NEC4, The next generation, an explanation of changes and benefits. Electronic copy may be assessed at https://www.neccontract.com/getmedia/aa22a130-1e62-4364-b741-fa6bc613747a/NEC4-The-Next-Generation-White-Paper.pdf

^[7] C. Skeggs, Project Partnering in the International Construction Industry (2003) (“Project Partnering in the International Construction Industry “) p. 457. Electronic copy may be assessed at http://alliancecontractingelectroniclawjournal.com/wp-content/uploads/2017/05/Skeggs-C.-2003-‘Project-Partnering-in-the-International-Construction-Industry’.pdf

^[8] Ezani Rais Bin Shaiks Salim, The “I” in Collaborative Contracting (Three Sixty Contract Advisory Pte Ltd, Member of the Surbana Jurong Group, August 2018) (“The “I” in Collaborative Contracting”). Electronic copy may be assessed at https://surbanajurong.com/wp-content/uploads/2018/08/Article-on-Collaborative-Contracting-Final.pdf

^[9] Construction Industry Transformation Map Launch at Singapore Construction Productivity Week (BCA, 24 October 2017). Electronic copy may be assessed at https://www.mti.gov.sg/-/media/MTI/ITM/Built-Environment/Construction/Construction-ITM-Factsheet.pdf

^[10] Option Module E for PSSCOC for Construction Works, and Option Module C for PSSCOC for Design and Build

^[11] See Section 8 of Guide on Collaborative Contracting

^[12] Clause C2.0

^[13] Clause C6.0

^[14] Clause C3.0

^[15] Clause C5.0

^[16] Clause C4.0

^[17] Speech by Zaqy Mohamad at the Singapore Contractors Association Limited (SCAL) Contracts and Practice Seminar on 12 March 2019. Electronic copy may be accessed from the Ministry of National Development website at https://www.mnd.gov.sg/newsroom/speeches/view/speech-by-mos-zaqy-mohamad-at-the-scal-contracts-and-practice-seminar.  

^[18] D. Morrice & M. Hands, Crossrial project commercial aspects of works contracts for London’s Elizabeth line (ICE publishing 2017) which electronic copy may be accessed at https://www.icevirtuallibrary.com/doi/pdf/10.1680/jcien.17.00003.  

^[19] See footnote 8, The “I” in Collaborative Contracting

^[20] Collaborative Contracting, PowerPoint slides by Group Director Tay Ter Long of Contracts & Procurement Division of JTC Corporation (“Collaborative Contracting”). Electronic copy may be accessed at https://www.bcaa.edu.sg/docs/librariesprovider2/lead-events/02-collaborative-contracting-blf-2021-tl.pdf?sfvrsn=4c75e4b2_0

^[21] See footnote 7, Project Partnering in the International Construction Industry (2003) p. 475

^[22] Ibid p. 463

^[23] See footnote 20, Collaborative Contracting

^[24] See footnote 7, Project Partnering in the International Construction Industry (2003) p. 474