Introducing the new NEC4 Facilities Management Contract (FMC) Suite

The contracts are modular, with a range of secondary options available for selection which allows the client to tailor the contract to suit its specific needs and allocate risk appropriately without the need to amend the standard contract. Secondary options include multiparty collaboration, BIM and extending the service period, as well as dealing with a change in control of the service provider and client termination.

The FMC suite adopts the NEC4 ‘early warning’ process - if either party becomes aware of any matter which could affect time cost or quality, it is required to notify the other party immediately, for prompt discussion at an early warning meeting to decide how best to mitigate the risk.

The FMC suite provides a clear process for evaluating cost and, where appropriate, time implications of compensation events including arising from client scope changes, with a view to agreement within a short period. Costs are continually updated and agreed as changes and events happen, so that there are no surprises at the end of the contract.

The service providers may propose a change to the scope which reduces cost, which the client can accept or reject, or request a quotation prior to making a decision. The service provider shares in cost savings opportunities it initiates, either through the target share or by recovering a percentage of the saving. A secondary option allows the service provider to identify opportunities to change the scope which, while it may increase the price of the service, would reduce the cost of an asset over its whole life. Again, through the procedures in this option, both parties can share in the saving created.

The client can use Service Orders to call off work identified in the scope as and when required, e.g. for reactive maintenance. Work called off under a Service Order is identified at tender stage, and rates and prices for the work included in the price list, making it a simple process to order and price the work required.

There is also a secondary option for Project Orders, allowing the client to instruct additional work which has a level of complexity, coordination and risk which requires a programme for its execution and which may include changes or additions to the scope and the price list, such as the refurbishment of a lift, the re-wiring of a laboratory or classroom, the work involved in bringing a void property back into use, or the creation of a new exhibition area. Additional incentives, both positive and negative, can be included in Project Orders to encourage the service provider to complete the work on time.

The service provider is required to provide a detailed plan of how it will provide the service. The plan is a key management tool which has to be kept updated, so that the parties know when and how the service provider will provide the service. In addition to the plan, the client can also require mobilisation and demobilisation plans to be produced and for the service provider to provide details of how they will provide business continuity in the event of disruption to their normal business operations.

A service provider is required to provide the service in accordance with the scope, part of which operates as a service level agreement, providing a clear, robust and flexible method of driving achievement of the agreed service levels, with clear consequences and corrective measures.

A Performance Table is used to incentivise the service provider financially, both positively and negatively to achieve or better the service levels. There is complete flexibility how the Performance Table is filled out, allowing the client to identify performance targets, levels, values and timing of assessment, in order to drive key aspects of service delivery.

The FMC Suite includes a secondary option to be used where the service provider undertakes design as part of the service – it deals with the issue and acceptance of any such design, liability which is set at a standard of reasonable skill and care, ownership and use and the requirement for professional indemnity.

This option allows for a combination of lump sum and remeasurement of rated items. There is complete flexibility in how the price list is created allowing the parties to determine the level of detail and manner in which activities are paid for.

This option provides a target cost for the services on a lump sum and remeasurement basis. The service provider is paid for the services on a cost reimbursable basis (Defined Cost plus Fee), with review dates to compare the costs incurred to the target cost to assess the service provider’s financial performance. Savings made or overspend incurred is shared between the parties on a pre-agreed percentage split, which is intended to incentivise performance and encourage collaboration.

Under this option, the service provider is paid on a cost reimbursable basis. This provides complete flexibility for the client to develop and change the service required throughout the contract period.