Subproject II: Procurement and contracting with deferred pricing for the construction phase

Cause

Over the past decades, a development can be observed in construction in which the executive contractor is increasingly involved in the design process. Early involvement of the contractor in the design phase offers advantages, since the contractor’s expertise with regard to the execution is available at an early stage. In an early stage the contractor can provide design advice or identify risks that may affect the execution phase. Also, the contractor may perform design tasks entirely independently (this happens in integrated structures of construction processes).
When using a structure of the construction process in which the client involves the contractor in the design process, parties sign a contract at an early stage on the basis of a fixed price. They do so when much is still uncertain: the design is often still a functional schedule of requirements or a preliminary design at that stage. The parties thus run the risk that the uncertainties will manifest themselves as (unpleasant and costly) surprises during the execution of the contract, with all the adverse consequences this entails. It makes sense to think about possibilities to control (the consequences of) the risks outlined above in advance. After all, this would prevent parties from having to fall back on the (conflicting) retrospective application of contractual risk regulations in, for example, the UAV 2012 or the UAV-GC 2005. One of these possibilities is postponing the pricing for the execution phase until the design or parts thereof have been worked out in such detail that the price can be determined with a sufficient degree of certainty. This process of deferred pricing can be set up in various ways so that it can be applied to structures of construction processes in which the client involves the contractor in the design process. However, those different ways must, at the same time, fit within the limits of procurement law.

Purpose

The purpose of this project is to investigate the possibility of using deferred pricing for the execution phase and whether or not it can be operationalized in order to better manage the uncertainties inherent to early contracting and the associated risks. The purpose of this research is to contribute to the development of a single uniform legal-administrative framework that can facilitate deferred pricing and the postponement of pricing for construction process for a number of structures of construction processes. The framework to be developed and the solutions formulated should be efficient, legitimate, independent of the chosen structure of the construction process, practical to apply and moreover they should be broadly supported by the construction sector.

Research method

First of all, the practical needs regarding the use of deferred pricing are being researched. Following on, this research will also be identifying the ways in which the possibility of deferred pricing is already being tested in practice and which methods are being applied (all with the effectiveness of the adopted solutions in mind). At the same time, on the basis of European and national procurement regulations, case law and policy documents of the European and national legislators, it will be examined whether and to what extent procurement regulations allow the use of deferred pricing. In this phase an important advisory role is reserved for an advisory board, consisting of people working for important stakeholders in the field. On the basis of the results of the aforementioned study, provisional statements can be made about the possibilities desired by practitioners for the use of deferred pricing, the structural and legal design thereof and the incorporation of procurement law. These preliminary results will then be widely shared and discussed with practitioners during an expert meeting to achieve further demarcation, clarification and a clearer vision on the rest of the research.

The Advisory Board

The advisory board consists of the following members participating in a personal capacity:

• B.C.L. (Bas) van den Berg (ProRail)
• J. (Hans) Boes (TU Twente)
• M. (Merel) Bruis (RVB)
• A. (Arno) Duijverman (Koninklijke Bouwend Nederland)
• J. (Joost) Fijneman (CROW)
• C. (Caroline) Govaert (RWS)
• J. (Jorrit) Kalt (Ingenieursbureau Gemeente Amsterdam)
• J.G. (Jaap) de Koning (Witteveen+Bos)
• M.A.Th. (Meriam) de Koning (MKB Infra)
• J.S. (Jacobien) Muntz-Beekhuis (PIANOo)
• M. (Maarten) Rauws (Provincie Utrecht)
• M. (Marit) Ruigrok (Bouwbedrijf M.J. de Nijs en Zonen)
• E. (Erik) Segers (Dura Vermeer)
• T. (Ton) Swanenberg (Meanderende Maas)
• M. (Marlous) Vogels (programma Beter Aanbesteden)
• A.M.J. (Aslan) Vos (VolkerWessels)
• M.C. (Marissa) Willemse (Techniek Nederland)
• B. (Brigitta) van der Woerdt (TenneT)

Two meetings with the advisory board will take place during the research project. Prior to the meeting, participants will receive a document with a number of questions and/or interim results that the researchers would like to present. Participants will be asked to answer these questions briefly. The questions and their answers will be the focus of the meeting that follows. During that meeting, participants are given the opportunity to explain their answers in more detail and to respond to each other’s input. After each meeting, a memo is written containing a summary of the input from the advisory board.

The first meeting focused on the methods being used to operationalize the possibility of deferred pricing and the experiences with those methods. Questions were asked about practical needs, bottlenecks, suggestions, points of attention and examples from practice. The first meeting took place on June 23rd 2022.

The second meeting has yet to take place. The focus will be on the preliminary structures of a construction process that the researchers created and developed during the subproject. The participants will be asked to comment on these structures. This will involve questions such as: which structure meets practical needs? Is there anything missing in the structures? What are potential pitfalls? Is there a lack of knowledge and/or experience? And are there any legal obstacles?

Final product

The research results will be worked out and brought together into a practically applicable and extensively tested manual. This manual will be provided with example texts that can be implemented in the existing legal-administrative frameworks that practitioners are accustomed to using when setting up the tendering and contracting phase. Finally, the research results underlying the practical manual will be published separately in book form.

Partner: programma Beter Aanbesteden

The subproject is partly supported by ‘Programma Beter Aanbesteden’ or the ‘Better Procurement program’ in English. This program is a collaboration between the Ministry of Economic Affairs and Climate, VNG, VNO-NCW/MKB-Nederland and PIANOo. The program focuses on improving the procurement process and the cooperation between governments and entrepreneurs. More information about the Better Procurement program can be found on the PIANOo website.

Activities

The IBR has organized an expert meeting on Deferred Pricing on Friday, July 1, 2022. This meeting provided valuable input that will be incorporated in upcoming publications.