A pre-construction service contract is a contract of use in a two-stage tendering process. Two-step tendering is more common in larger or more complex projects and includes the employer`s tendering for the project on the basis of an incomplete project, price and program developed by the employer`s professional team. A contractor is then selected on the basis of his proposal for the second phase of the tender for cooperation with the employer. The PCSA defines the benefits that the contractor needs at the construction stage and is generally similar to a consulting agreement. It should be specified whether the contractor is carrying out design work, whether he has a design responsibility and what happens to that responsibility if he is not designated for the second stage. It should also define payment terms and possible provisions for deferral of payment. Work under PCSAs is not always possible and the decision is made by the customer. However, for the subcontractor, it makes sense that at an early stage of the tendering process, if valuable engineering opportunities and/or risk options could be clearly identified, it makes sense for the client to lean towards this type of agreement. A well-developed letter of intent gives the employer and the contractor a legal framework in which the contractor can start (and be paid). In addition, the employer generally only agrees to pay for this work until a certain amount is reached until the final agreement of the construction contract is reached. In recent years, pre-construction service agreements (“PCSAs”) have been commonplace in construction projects. Until recently, all of these agreements were custom documents, but the JCT has now published two standard PCSAs.
This article examines what many describe as the obvious benefits of a PCSA, it is possible to think that the use of a Memorandum of Understanding is always a negative step. It is certainly not a good practice to seek a statement of intent as a reflex reaction. However, the parties to a Memorandum of Understanding may have good reason to choose, for example: while a Memorandum of Understanding may be most used when the parties know what needs to be built, it can be used in other situations. For example, to demolish an existing building while the contractor completes his project for the proposed new project. For more information on pre-construction service contracts in the construction industry, please see the practical terms: pre-construction service contracts. The agreement covers the period of submission of the first tender for the filing of a second final phase of the tender and the opening of a main contract for the construction phase. Despite these positive results, what are the main thoughts and risks to consider when signing a PCSA? This is where a pre-construction contract is concluded.