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So what exactly is a PCSA?

At its simplest, a PCSA is a Pre-Construction Services Agreement.

In many ways, it does exactly what it says on the tin: it’s a contract entered into before a formal building contract to provide specified services prior to the full build. They are often used in two-stage tendering for design input and to get advice and costs information from a contractor, usually while full building contract negotiations are ongoing with the same contractor.

But isn’t that a letter of intent?

PCSAs and Letters of Intent (LOIs) are similar, but they serve different purposes. PCSAs can take longer to negotiate than LOIs as they essentially carry a ‘stand-alone’ set of services that can be pared away from the main contract, and sometimes aren’t subsumed into the main contract, particularly if a different contractor is then selected for the main build. PCSAs are often used where the employer wants advice on buildability, programming and management, all of which are needed before the build, or even some design works, can go ahead. The terms and conditions of these pre-services are fully negotiated and recorded as a contract, giving both parties the comfort of a sturdy contract and a clear scope of what is required of the contractor.

A LOI, however, is a ‘stand-in’ for a building contract in the event the full scope of services and/or a building contract is still being negotiated but the employer wants work to be starting on-site as they have their plans, designs and management all ready to go. A good LOI will cover the same liabilities of a building contract before being subsumed into the final contract where all of the services and terms have been fully hashed out. Carolyn wrote about LOIs in the last edition of Aggregate, if you missed it.

This sounds like what I need…what are the benefits?

Well, if you want to get going on the project a little earlier and had been considering an LOI, PCSAs can be useful for commencing a project in advance of a full scope of works or design packages. For example, you might want some groundworks or demolition carried out, but you get the safety of a full contract instead of a risk-riddled LOI. You’re also engaging your contractor a lot earlier, which can help build up a working relationship ready for your main phase; although, equally, if you realise that this contractor is not the right fit for you, you can get another one for the main works instead. 

There might also be greater cost certainty and a lower risk of delay since your contractor is involved from the start of the project, and has a greater opportunity to have input on pricing on programming. Contractors also find PCSAs attractive as there might not be such a competitive pricing streak in two-staged tendering that single-stage tendering might have, plus they know exactly what they are getting themselves into (and have some input on that) from the outset.

Speaking of being riddled with risk, what do I need to be careful of with PCSAs?

Let’s face it, legal fees are usually a big chunk of cost, and, unfortunately, a PCSA adds to this as it often involves more negotiation than an LOI given that it’s more akin to a mini-building contract. They usually take more time to negotiate than a standard LOI as well, but you are getting more legal certainty and a surer footing than you could have with an LOI.

Similarly, a contractor engaged under a PCSA may feel as if it will 100% get that main contract as well, due to all the time, money and effort spent on a PCSA, and not price as competitively. The risk allocation under a PCSA often falls solely onto the contractor as well, rather than across a consultant team, so sub-contract inflation may occur as the Contractor tries to alleviate some of its risk by passing it down its supply or work chains.

Great. Have you got a draft PCSA I can use?

The JCT has two forms of PCSA that you can use, and the NEC suites have optional clauses that can act as PCSAs (see NEC3 ‘early contractor involvement’ clauses published in 2015, or option X22 for the NEC4 suite). A lot of law firms will also have bespoke PCSAs, or schedules of amendments to the JCT/NEC forms to tweak them perfectly for their clients’ needs – we’re no exception. Ultimately what’s right for your specific project will depend on the circumstances, and it’s worth spending a bit of time getting it right – so the standard forms might be right, but shouldn’t be used an automatic solution.  

Is that it?

Well, yes and no. It’s the end of this article, but this is only a very brief overview of PCSAs. If you’re an old hand at PCSAs, we’ve likely taught you nothing new – but if you’ve never heard of them, or heard of them only to move topic quickly, hopefully we’ve covered the basics. As ever, we’re experts in this kind of thing – so if this has made you think a PCSA might be useful for you, please get in touch to discuss.

About the author

Sophie is a Trainee Solicitor, specialising in non-contentious construction matters. Read more about her here.

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