Benefits of a Master Services Agreement for Multiple Construction Projects
A Master Services Agreements (MSA), also known as Framework Agreements, establishes what terms and conditions will govern all current and future activities and responsibilities between two parties. Having an MSA for a programme of works is rare in NZ, which is surprising as they can significantly improve the efficiency and effectiveness of construction by combining multiple projects under one contract.
An example of this is a nationwide project NZ Construction Alliance have been running for the last three years. We had one contract under which we completed 29 significant refurbishment projects on time and on budget – despite significant disruptions with the covid restrictions, supply chain disruption, and capacity constraints in the industry. Had the client attempted to procure these separately, they would have completed less than 5, and would have needed significantly more internal resource to manage these.
A good MSA will set out the terms and conditions for a long-term business relationship between a client and a contractor – and having one contract spanning multiple projects gives the opportunity to provide continuous feedback and improvement in both directions – which ultimately creates better outcomes for all stakeholders.
So to summarise, the main advantages of an MSA for multiple construction projects are:
Efficiency: An MSA can save time and resources by streamlining the contracting process for multiple projects. Once the terms and conditions have been agreed, the parties can simply create works orders referencing the MSA, which can reduce the need for negotiations, revisions, and legal review.
Consistency: An MSA can help to ensure consistency across multiple projects. By setting out standard terms and conditions, the parties can avoid confusion and disputes that can arise when contracts vary from project to project.
Cost Savings: An MSA can help to reduce costs by establishing pricing and payment terms that apply across multiple projects. Contractors have more certainty over the future pipeline, so can price for economies of scale, and can eliminate the cost of contracting every individual project. .
Better Relationship Management: An MSA can help to foster a long-term relationship between the parties. By setting out the terms and conditions for multiple projects, the parties can build trust and confidence in each other, and can learn and provide feedback throughout the contract, which can lead to better communication, collaboration, and project outcomes.
Better service: when a contractor knows that they have multiple projects ahead of them, they will work towards meeting & exceeding the clients expectation, so as to not put future projects in jeopardy. The example above of 29 projects completed on-time in 2022, is testament to that.
Overall, an MSA ensures better efficiency, consistency, cost savings, relationship management, and better service. It is an effective tool for building long-term partnerships and ensuring successful project outcomes, so why don’t more NZ organisations structure their contracts like this?