FAC-1 is a standard form multi-party contract designed to reach the parts that two-party contracts cannot reach. It connects and enhances the procurement and management of:
- a programme of multiple projects
- the components of a complex project
- the members of a supply chain
- the contributors to digital information management.
FAC-1 integrates the teams engaged on any type and range of works, services and supplies, and it has been used on UK and international procurements totalling over £100 billion:
- to align the objectives, success measures, targets and incentives of clients, managers, suppliers and supply chain members
- to apply transparent performance measurement and work allocation procedures
- to plan and integrate how clients, managers, suppliers and supply chain members will improve value and reduce risks
- to translate framework objectives into actions with clear timescales and outcomes
- to implement proven systems of joint decision-making, risk management and supply chain collaboration.
But why should FAC-1 be of interest to NEC in addition to their other contract products? FAC-1 is strongly endorsed by the UK Government’s ‘Construction Playbook’ and, together with the ‘TAC-1 Term Alliance Contract’ (also acquired by NEC) , it has supported construction procurements and projects worth over £100 billion. The Playbook states that the ‘FAC-1 framework is a good example of a standard form framework contract that can achieve many of the ambitions set out in this Playbook’. Contributors to ‘Constructing the Gold Standard’, my independent review of construction frameworks, also recommended the wider adoption of FAC-1.
For example, Crown Commercial Service as the largest framework provider in Europe stated that FAC-1 ‘enables the government to align its strategies in construction with the key objective policies outlined in the Construction Playbook. The benefits of this drive improvements across the construction industry including:
- Ability to influence design through earlier contractor engagement
- Connecting whole life considerations through an integrated supply chain
- Focus on newer and safer working practices in construction
- Options for innovative construction methods and technologies
- More opportunities for SMEs, specialists and local providers
- Sustainable solutions and environmental benefits
- Collaborative risk management and dispute avoidance’.
FAC-1 is not a standalone contract. It connects different project contract forms which can adopt not only the NEC4 suite but also the FIDIC, JCT and PPC2000 construction contracts and any other consultant appointments and supply forms. However, there are many examples of FAC-1 working particularly successfully with NEC contracts and this led NEC and ACA to share relevant case studies in their 2024 ‘Guidance on using NEC4 contracts with the FAC-1.’
An example of how FAC-1 operates effectively with NEC4 is the £1.2 billion New Prisons Programme where the Ministry of Justice (MoJ) created an FAC-1 alliance with ISG, Kier, Laing O’Rourke and Wates and with Mace as alliance manager, preceding and integrating the NEC4 contracts that govern the construction of each prison project. The alliance members collaborated through digital information management to prioritise standardised components, platform design for manufacture and assembly, and the digitisation of the construction process. They selected and appointed an integrated supply chain, using FAC-1 systems to agree strategic commitments with each key supply chain member for each key package across all four prisons, and to drive innovation, maximise social value and deliver shared net zero targets.
This FAC-1 alliance model was based on a Crown Commercial Service template and is replicated on other MoJ programmes and also on Defence Infrastructure Organisation programmes. MoJ used these FAC-1 alliances to deal with the ISG insolvency by transferring ISG work to other contractors within the alliance and minimising the money lost by pre-appointed supply chain members.
If FAC-1 supports alliances as well as frameworks, will it also advance the objectives of ‘Project 13’, the collaborative approach to major infrastructure that also operates under the auspices of the ICE? The aim of Project 13 is ‘to develop a new business model -based on an enterprise, not on traditional transactional arrangements’, and FAC-1 provides the contractual integrator that is needed for an enterprise approach. For example, the Construction Playbook notes that the Crown Commercial Service framework alliances are ‘integrating FAC-1 and Project 13 principles.’
So can FAC-1 help NEC to enter new markets? Both FAC-1 and NEC have attracted interest in Latin America, where their combined use should gain new users. In addition, FAC-1 has been used in Italy and Spain on windfarms, metro projects and a university public private partnership. FAC-1 is also endorsed by the European Bank for Reconstruction and Development who have published detailed guidance on its use in complex project procurement and for achieving sustainable project outcomes. Hence, there are many opportunities for the combination of NEC and FAC-1 contracts to support coherent commercial alternatives that add value to UK and international project delivery and that improve on the serious shortcomings of fragmented procurement and contracting.