PCG drafts model oil and gas contract to put Aberdeen work outside IR35

Following requests from Clients in Aberdeen, a PCG working party was established, headed up by local representative Colin Mitchell. They have been working with clients and local representative bodies to draft a new Contract suited for the Oil and Gas Industry.

This is the text from the introduction to the Contract (available on the PCG members filestore)

The Model Form has as its objective the creation of an IR35 Exempt Agreement for contractors working in the Oil & Gas Industry in those circumstances where its use is genuinely compatible with business practices. The Model Form, and more particularly the Schedules, must reflect the reality of the position if it is to take the relationship out of IR35. The paramount need for any Agreement to reflect the substance of the relationship cannot be over emphasised. PCG will not support, or condone, the inappropriate use of the Model Form.

Do not use the Model Form as the basis for a contract unless you have taken expert legal advice. PCG members should make full use of our Legal Help Line. Details are available on our web site.

The Model Form is based on commercial law in accordance with PCG strategy. It is deliberately a contract between two independent companies.

The Model Form contract is designed to deal with the situation where the Supplier (i.e. the Contractor) is contracting directly with the Purchaser. It is not intended to take account of the involvement of an agent. This has been done for convenience only, a derivative for use where an Agent is present is under development. PCG encourages Agents to review the Model Form and send in comments that address their special needs.

The Model Form contract is cast in the style of a simplified 'call off' contract of a type commonly used by UKOOA and OCA member companies when awarding contracts to firms of consultants where services are required on an ad-hoc basis. It aims to provide flexibility - without undue bureaucracy.

The terms of the Model Form are structured so that they can be relied on over a period of time and over a series of engagements. For each fresh engagement a separate set of Schedules must be drawn up but you do not need to reinvent the wheel by including the terms and conditions – it is sufficient to refer to them in one of the Schedules. Fresh Schedules must be used to avoid any mutuality of obligation being created if the relationship develops and is extended. Each project must be seen as a separate engagement.

The Model Form shadows the Chartered Institute of Purchasing & Supply Terms & Conditions Of Contract - Model Clauses. The work of CIPS has been much influenced by Shell UK Exploration & Production. The content is likely to be familiar to UKOOA & OCA members.

Parties using the Model Form are encouraged to feed back comments that will strengthen it. This will help increase the confidence the O&G Industry demands for day to day application.

PCG thanks the Aberdeen Working Party and legal advisers Bevan Ashford for the commitment they have shown in producing the Model Form against a very tight deadline.

Colin Mitchell

Aberdeen Representative

Professional Contractors Group

E: pcgroup@pobox.com

T: 01224-645534

F: 01224-645534

M: 0850-480118

Editor's note. It is interesting to see how quickly the Oil and Gas industry have reacted to the threat of higher costs as a result of IR35. I spoke at the PCG seminar in Aberdeen and one of the largest Clients in the area came up afterwards and stated they wished to develop a consultancy contract and they wanted to deal with a local PCG rep. I appointed Colin that night, meetings were held the following week and this latest issue of the contract is evidence of the progress being made.

This compares with IT sector Contractor procurement which appears to be run by the Human Resources departments and based on knowledge of both sectors they have not been that good at getting the best deal for their firm. For example the Agent margin in IT is approximately double that of O&G and that is on Contract rates in turn double that of Oil and Gas.

If the O&G sector had some of the cost overruns seen in the IT sector there would not be 'a committee set up', there would be blood on the floor!