Procurement Models and Contracts
Procurement Models and Contracts
The design and installation of most biomass systems is in effect a construction contract often involving civil and architectural works, alongside mechanical and electrical works. They should be procured under contracts that cater for this.
The most common model for procuring a commercial scale biomass installations in the UK is the where the installer is responsible ‘design and build’, but in some circumstances a ‘design, build and operate’ model may be more appropriate or ‘heat supply’ contract. Find out more about the different models.
Contracts – Key Considerations
There are several key considerations when preparing contracts:
- Performance Based Specifications
When preparing contracts, it is usually recommended that they be based on precise performance based specifications and using clearly stated output requirements. These determine general requirements and restrictions about the design, location and operation of an installation project, but leave the detailed design choices to the installation companies. For example:
The customer specifies: Physical location, general appearance of the scheme and the amount of heat it is required to provide. It can include: system efficiency, % downtime and full service costing. This is why it is essential that customers (and/or their technical advisors) develop a detailed understanding of their heating needs and define these in schematic drawings and specifications in order to define performance standards.
The installer determines: make and output of the boiler and the type and size of accumulator tanks. In the UK biomass installers do not usually manufacture boilers or any other equipment, but many have developed close commercial relationships with the specialist equipment suppliers especially the boiler factories located in continental Europe, but also with suppliers of heating pipes, buffer tanks and the flue manufactures. This means they can secure the installation warranties and have a detailed knowledge of how the equipment works and what can be specified in different circumstances and are based placed to specify this equipment.
There is clear evidence that when the customer provides highly detailed designs and product and equipment selections, this blurs the lines of responsibilities and creates contractual disputes. The use of performance standards and output requirements allows the installer to provide technical solutions that don’t transfer risk back to the client.
The decision about basing the design on wood chips or wood pellets is often a collaborative process: but this needs to be determined early on.
- Standard Design and Build Contracts
In some circumstances, it will be appropriate to use a standard design and build contract, using a set of formal contract terms and conditions, such as JCT.
Particular attention should be paid to payment terms, as biomass installers will tend to seek deposit and off-site payments for the ordering of the biomass boiler and other large items of equipment. Click here for further advice on Terms and Conditions for a biomass installation, including payment terms.
Example standard design and build contracts available for purchase, such as:
- JCT Design and Build Contract (2016): JCT Ltd – Design and Build Contract
- SBBC Design and Build Contract for use in Scotland (2011): Scottish Building Contracts – Design and Build Contract
In some circumstances customers may have the skills to provide aspects of the works like civils, (with biomass installers offering only aspects of their full service), and that is fine, so long as limits and extents of responsibilities are agreed.