Opinion

Standardisation of
commercial agreements

Standardisation of commercial agreements

Published: 18th February 2020
Area: Education
Author(s): Ian Griffiths ,

The benefits of using standard terms and conditions across the institution’s contractual arrangements.

In 2019 the Department for Education published a generic design brief which included useful common sense points on standardising an approach to construction procurement.  This publication followed on from the release by the DfE of their standard terms and conditions in contracting for services.  Whilst the DfE were happy to disclose the type of provisions that would apply when bidding for a particular contract from them, they were also keen to point out that each contract would be drafted on a bespoke basis but that the released document reflected the core provisions likely to apply in many situations.

This welcome approach to standardisation serves as a model for individual institutions.  In understanding the benefits of standardisation of terms relevant to commercial agreements, confidentiality agreements, research and development agreements, agreements for services and construction and engineering services and works, it may be helpful firstly to understand what this approach is not.

One size does not fit all

Standardisation is not simply using the last approach for each new contract.  I’m sure we’ve all seen examples of draft contracts bloated with irrelevant provisions which may or may not have been relevant in some past project that have simply been pasted into the document.  Such practice creates ambiguity, wastes negotiation time and can result in terms which adversely impacts the institution’s position.

Flexibility

A core standard set of terms should be able to allow for flexibility of differing procurement strategies for pricing facilitating lump sum, target cost and cost reimbursable methods of procurement, and potentially also differing levels of service input and engagement of the management role to be undertaken by the institution.  Possibly the best example of a published suite of standard form set of contracts which adopts this approach is the New Engineering Contract.  The NEC offers differing pricing options and forms for term services, short form and long form service and works contracts, facilities management and alliancing contracts among others, all based around core clauses and principles which apply throughout the suite of contracts.

Benefits of standardisation

A good set of core provisions should assist the institution in:

  • Specification: Setting out the nature of the services required, the parameters of the service areas, the potential interface with other consultants and contractors and the information to be provided to assist the consultant to undertake the services is the key priority for institutions, and the key determinant for project success.  This is where the bespoke focus of the institution should be directed. Specification and programme management is where the institution can best ensure project success.  Avoiding reinventing the wheel on the bulk of terms and conditions is one way to ensure more time is given to institutional critical involvement.
  • Management: Where the institution is familiar with the structure, administration and management requirements of the project this can only improve the quality of institutional input and management.
  • Flow down: Where there is an understanding of what are the core terms for a contract it is easier for these to be flowed down the supply chain which assists in management and project integration.
  • Contract integration: Where there is familiarity with the core provisions and definitions it should be easier for the institution to create specification documents which work with the terms and conditions. It is surprising how often the specification or bills of quantities or cost analysis documents are simply annexed to the terms and conditions without any effort to integrate them into the terms.  The definitions, timescales, deliverables, programme sequencing and completion mechanisms all need to be aligned to avoid confusion or ambiguity.
  • “Play Book” approach: Where the institution is familiar with its core terms of engagement it is easier for it to assess risk, mitigation tactics and work out compromise positions during negotiations. Clearly this will apply the more often the core provisions are used.  A good understanding of an institution’s usual position, for example, in the type of position it usually seeks to achieve in obtaining a copyright licence or in safeguarding its own intellectual property can only help in working out how it will approach the position when it needs to contract on the basis of the counterparty’s standard terms.

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