Collaborative Construction: Q&A with Professor David Mosey

A construction sector lawyer since 1980, by the time he became interested in ways to encourage collaboration, Professor Mosey had already spent over a decade in private practice. In the 25 years since, he has designed the first project collaborative contract, PPC2000, the first Framework Alliance Contract, FAC-1, and the first Term Alliance contract.

FAC-1 provides a route to greater, long-term collaboration. It enables clients to group together, to increasing buying power, but it also delivers the ‘rules of the game’ required for a wider conversation between all parties and the early sharing of information and expertise.

FAC-1 has been endorsed by the UK Government and major players from across the industry. Mosey’s subsequent work - on the Government’s Construction Playbook; on Constructing The Gold Standard, his independent look at procurement frameworks; and on his guidance on building safety - have put him ideas at the centre of the debate.

Stephen Matthews caught up with Professor Mosey to hear about the genesis of FAC-1, the importance of early-stage collaboration, and the role of collaborative contracts in his most recent work.

You started working on what became FAC-1 in 2014, but your interest in collaboration and collaborative contracts goes back much further. What did you observe when you first came to work in the sector, in 1980, and what sparked your interest in this area?

“Looking back to the eighties, it was very formulaic and as a young man I thought, “That's fine - we just apply these formulas and everything will be great, but it didn't seem to get us very far.

“Then, in 1994, Sir Michael Latham wrote a report, Constructing the Team.

“That 1994 report has in it every modern concept of construction procurement. Latham was an absolute visionary and he became a great friend of mine. He reviewed my contract forms. He and I spoke a lot and we met regularly.

“And I suppose seeing his report, as I did in the late nineties, and also the (later) Egan report – those were the sources of the inspiration. This idea that there had to be a different way of doing construction procurement.”

One aspect I know you observed early on, and which is relevant also to FAC-1, was the attitude of clients and contractors to risk, and how that approach to risk led to disputes.

“Yes, the problem is where the focus is on transferring the risk - people will keep trying to transfer the risk, without understanding what will be done with it.

“So, the disputes we see don’t come from ‘bad people’ but from incomplete or inaccurate information and design, inaccurate site surveys, poor briefings, unrealistic time expectations, poor communication - and it's a very dispute-ridden industry.”

So how did those two aspects – the need to encourage collaboration, and the approach to risk – feed into your own work?

“If you go back to that first multiparty contract, PPC 2000 (which Mosey designed), that was integrating procurement, contracting and management and it was about joint process, rather than people in bunkers protecting themselves against each other.

“When I joined King's and David Caron said, ‘Hey, why don't you draft a new FIDIC contract?’ I thought, well, I can't do that, but what I can do is examine, at a strategic level, what more we can get out of these engagements if we include multiple projects and multiple clients.

“And that led into the FAC-1 research. We were looking for an intelligent way to motivate behaviours that gets us away from a theoretical look at contractual issues of good faith, and that also gets us away from the parallel universe of just endless workshops and behavioural analysis. Of course, there has to be a behavioural dimension, but if you knit the contract into the landscape of strategy, procurement and management, you can give people things that are much more tangible. They can convert them into profit.”

So how do these contracts - PPC2000 and FAC-1 - help shift the approach to risk?

“So allocating risk is fine if you've been through a process of joint analysis of that risk to understand what it is, where it comes from.

“And there are two types of risk.

“There are risks that are perceived early on, and that you might do something about. Perhaps the site used to be a fuel depot. Is the ground polluted? Is this a risk? And you can do a lot of preparatory work to mitigate that risk and eliminate its cost - maybe share the cost, maybe insure against it. You can undertake that mitigation work at a strategic level or a project level.

“Then you have the second type of risk, the type you don't expect, like COVID-19. These risks are unpredictable, but you can still put in place early warning and response measures, and management systems, to reduce their impact.

“So those conversations are prompted at a strategic level under FAC-1, but also at project level under PPC2000.

“The lesson learned at project level on PPC2000 was to create an early period with a contractor on board to understand how they see risk. They have been appointed under a pre-set budget, a pre-set brief. We're not allowing them to be paid more or to do a different project, but we are testing what they think of design, what they think of risk, what they think of time, and learning.

“And invariably, through that process, we have eliminated disputes. There are, I think, only two court cases involving PPC2000. I'm aware of maybe three, in total, over 22 years. There's no comparison, then, with the rest of the industry, and that’s because people have greater knowledge and they're exploring the sort of things that worry other team members. That's the difference.”

Under a collaborative approach, those conversations are, of course, wider than just risk, so how does the early involvement you have described change behaviours?

“Under the traditional framework, project-level behaviours are stimulated by where you’re going to get the next project. If you've got a decent project, but it's coming to an end and there's nothing else coming in, the temptation is to suck as much money as you can out of the current project and not to compromise your interests for the greater good.

“So, with the ‘Four Is’, strategy is intent; procurement is information - information that goes out and information that comes back; contracts are the integration of all of that, not just the transfer of risk; and management is the incentivisation of good performance, by the way, that you engage with the parties.

“The ‘Four Is’ really helped me to express where the contract fits in to the landscape without rushing to talk about contract detail in a way that would, frankly, confuse people.

“FAC-1 has the means to pick up on people's bright ideas and convert them into reality with varying treatments of intellectual property and varying arrangements for sharing. And it does govern these joint activities and their management.

For many in the industry, I would imagine procurement has been largely about driving down costs – in that sense, is this quite a radical shift?

“Well, you need to leap beyond the confines of an individual project. An individual project isn't enough to align competing commercial interests. If you look at the Companies Act, it says company directors not only have to make a profit, they have to enhance the reputation of their company and they have to look at the environment in which they're working. They have social responsibilities even in statute.

“So, I think what we are saying is, ‘We respect your profitability. The systems will require you to declare your profit margins and protect them, and not make backdoor profits, but in return for that we will reward you with a pipeline of work, and frankly a much easier way of doing that work because you don’t have to bid for it every time, and you don’t have to deal with strangers every time, and you are going to buy into this shared learning from other contractors.’”

“Now, if someone has invested in a manufacturing system, they are not just going to share that with someone else, share their IP. So, some things are unique to one supplier and the framework can accommodate that. They bring their system to every mini-competition and the competitiveness continues on, because there are these differentiators.

You have said that FAC-1 takes the collaborative approach ‘many steps further.’

“Yes, firstly, FAC-1 enables more than one client to participate in this process. One of the issues with establishing a traditional framework is how many projects have you got? If you only got a small programme of work, why would the market be interested? You can imagine how clients coming together to create a multi-client approach can suddenly catch people’s attention in a way that they wouldn't otherwise.

“Hackney and Haringey ran a pilot for FAC-1, combining their entire housing refurb program across the two boroughs. They developed a joint approach, exploring supply chain collaboration, and energy efficiencies. They had big programmes to start with, but they have created an even bigger one, using FAC-1.

“So, the integration operates in terms of – potentially - multidisciplinary teams, thinking strategically. The exact approach depends on who you're putting into your framework alliance - that's a variable and there are many different types of project, but it's the integration that enables the shared information.

"That process is separate from the award of work, but it is playing by the rules in a way that improves everybody's project and delivers the efficiencies that frankly are the reputational benefits that the industry gets and the client needs.

“The learning then comes out of that shared information and the feedback loop. That learning is spread across multiple clients, if you've got multiple clients in there. It’s spread across multiple contractors, multiple consultants, if you've got them in there.

“The second point there is that supply chain collaboration can bring suppliers, manufacturers, subcontractors much closer to that group. It might even bring them into (an alliance) in some circumstances.

“So, you might have a group of clients and contractors who are examining what - between them - would be the best way to deal with a supplier of asphalt, a supplier of cladding, and then make intelligent assessments.

“Engaging with this wider group is not only about due diligence, it is a way of getting them to maybe speculate some design ideas. Because if I was, you know, a cladding specialist trying to prove that my stuff is desirable on a residential property rather than fatal, I would be sharing quite a lot of information at this stage with a substantial group of clients and contractors. I would have to, wouldn't I? I wouldn’t just be saying, ‘I obey the new regulations.’ I would be saying, ‘This is how I work. This is how I will collaborate with you. This is the extended warranty I could offer. This is the support I could provide on-site,’ and then I would be having a dialogue.

“That’s important because we find, of course, that architects don't have 20/20 vision. They do their best, but they don't know every source of supply at the point when they're designing. Nor do the engineers – if you take a mechanical and electrical engineer, they do not know how every air conditioning system works, so unless you start speaking to those specialists the process risks collapse.”

In your work since FAC-1, you have broadened your focus. The contract is still key, but can you explain that broader outlook?

“What we see is that people aren't interested in contracts. The important people are interested in strategy. Procurement specialists are interested in selection. Managers are interested in managing. Nobody really cares about contracts and the four ‘I’s that I created in Constructing the Gold Standard have, I think, been the breakthrough, because to say strategy has to be a candid and open statement of intent is news to some clients. They create speculative frameworks to try to leverage better prices and then wonder why the market hates them.”

Moving away from a ‘lowest price’ approach presents different challenges though, presumably?

“Yes, if your priority is to try and get the best ideas from the marketplace, you have to give people the information with which they can create qualitative submissions. In that situation, the selection process is important, but it also throws up ideas that you want to harvest in varying ways. You can't just accept them all on day one because this is a bid document – the ideas are not fully-informed.”

So how do you harvest those ideas?

“So, you then need a contract which pulls these different parties together - because you hopefully have multiple clients, hopefully have multiple providers, to convert some of their bright ideas into things that are viable, to then share them with the other parties - if they're not subject to intellectual property rights – and also to govern a particular approach to management.