INTRODUCTION TO CONSTRUCTION CONTRACTS (JCT 2016 & NEC4)
INTRODUCTION TOCONSTRUCTIONCONTRACTS (JCT 2016 &NEC4)January 2019
IntroductionsAndrew LancasterPartnerAnthony Collins SolicitorsPartner in the constructionand public procurementteam operating within thelocal government, care andsocial housing sectors.Andrew is a specialist inhelping clients manageconstruction riskswww.emlawshare.co.ukBeulah AllawayAssociateAnthony Collins SolicitorsSpecialising in advising localgovernment, social housing,health and social care andcharity clients on constructioncontracts and procurementissuesKieran BinnieSolicitorAnthony Collins SolicitorsKieran is a specialist inconstruction law, particularlyin supporting localgovernment, ALMO and socialhousing clients in constructiondisputes
What we’ll look at Choosing the right contractJCT 2016 suite of contractsNEC4 suite of contractsPractical tips on contract managementPost-Grenfell issues to considerwww.emlawshare.co.uk
Types of constructioncontractswww.emlawshare.co.uk
Types of works contractsFit contract to needUnderstand the work, the risks and then the strategyTHENChoose the Contract!www.emlawshare.co.uk
Which contract to use?Things to consider What is needed? For how long/what frequency? A single project/a series oftasks? What is the anticipated spend? What resources are available toadminister the contract?www.emlawshare.co.uk
Consider characteristics of thework Is there a very fixed budget? Is time essential? (For example, Christmascompletions, factory shutdowns, funding demands) Or must it be perfect, regardless of time or cost? Is the scope well known/likely to change? (Does theclient know what it wants?) Can the design be completed before theconstruction starts? Can the client manage a number of differentgroups?www.emlawshare.co.uk
Need a project manager/contractadministrator?The Contract Administrator/Client Representative will be: defined in the contract – exercises all the rights ofEmployer unless Contract Details state otherwise instructs and gives approvals to Provider may not be “the Employer” (can be an employee butthere must be some independence) acts on behalf of Employer, but in decision makingmust also act fairly and independently betweenContractor and Employer.www.emlawshare.co.uk
Types of contract“Term”“Project”Responsive repairsVoidsServicingCyclical decorationPlanned maintenanceMajor improvementsNew buildwww.emlawshare.co.uk
What types of constructioncontract Price Based- Lump Sum- Measured Cost Based- Target cost- Cost reimbursable (Fee contracting) Decision should be based on:- Risk/Certainty of design and construction- Co-operation/Partnering attitude- Attitude towards cost and quality- Experience and resources?www.emlawshare.co.uk
Price – Lump Sum Cost certainty? Fixed price?www.emlawshare.co.uk
Price – Measured Work situation can be described but quality can’t. Can allow for early start on site but unknown costswww.emlawshare.co.uk
Price – Target cost Target cost setSavings/overruns shared by contractual formulaCan link saving share to performanceCan be set for whole contract/partwww.emlawshare.co.uk
Price – Cost Reimbursable or “cost plus” contractPaid actual cost plus set feeKnock down contractor’s profit at tenderingCan link fee to performance but no cost certaintywww.emlawshare.co.uk
Price – Price List/Schedule ofRates List of pricesPrice could be based on any of aboveMost often lump sumCould be industry standard less tenderedpercentagewww.emlawshare.co.uk
Traditional Procurementwww.emlawshare.co.uk
Design and Build Procurementwww.emlawshare.co.uk
JCT Minor Works 2016Contract “Family”Minor WorksBuilding Contract MW 2016Building Contract with Contractor’sDesign (MWD 2016)Sub-Contract (MW/Sub/D 2016)www.emlawshare.co.uk
When to use Minor WorksBuilding Contract Simple works contract (JCT indicative value up to 100k) Design element (if any) completed by party other thancontractor (except CDP) Need sufficiently detailed drawings and specificationsto be incorporated to define the works Architect/Contract Administrator to administer thecontractwww.emlawshare.co.uk
Minor Works – “traditional”contractEmployer separately employs Building Contractor toundertake the Works and Professional Consultants to designand/or manage (eg. Architect).www.emlawshare.co.uk
JCT Intermediate Contract 2016Contract “Family”IntermediateBuilding Contract IC 2016Building Contract With Contractor’sDesign (ICD 2016)Sub-Contract Agreement (ICSub/A2016)Sub-Contract with sub-contractor’sdesign Agreement (ICSub/D/A2016)Sub-Contractor/EmployerAgreement (ICSub/NAM/E 2016)Sub-Contract Conditions (ICSub/C2016)www.emlawshare.co.uk
When to use IntermediateBuilding Contract “Traditional” medium works project (JCT indicative, up to 500k)Works designed by person other thanContractorMust provide Contractor with detaileddrawings, bills of quantities, specificationof work schedules to define the workAllows for Contractor’s Designed PortionArchitect/Contract Administrator andQuantity Surveyor will administer thecontractCan be used where work to be carried outin sectionswww.emlawshare.co.uk Small additionalbuilding onexisting site One-offrefurbishment ofcommon parts ofblocks of flats
Intermediate Contract – a“traditional contract”As with Minor Works, but Sub-Contractors may be usedwho would be employed directly by the Contractor.www.emlawshare.co.uk
JCT Standard BuildingContract 2016Contract “Family”Standard Building ContractWith Quantities (SBC/Q 2016)Without Quantities (SBC/XQ2016)With Approximate Quantities(SBC/AQ 2016)Sub-Contract Agreement(SBCSub/C 2016)Sub-Contract Conditions(SBCSub/C 2016)Sub-Contract with subcontractor’s design Agreement(SBCSub/D/A 2016)www.emlawshare.co.ukSub-Contract with subcontractor’s design Conditions(SBCSub/D/C 2016)
When to use Standard BuildingContract “Traditional” and high value (e.g. above 500k/complex)Works can be delivered in sectionsEmployer has detailed control over design“High maintenance” for Employer (e.g. needs sufficiently detaileddrawings and specifications/bills of quantities to be incorporated todefine the works; or Architect/Contract Administrator and QualitySurveyor to administer project Allows for Contractor’s Designed Portion Can be used where known specialists are to be used (NamedSpecialists)www.emlawshare.co.uk
Standard Building Contract – a“traditional” contractAs with Intermediate, but as the value of the Contracts gets higherthe more funders will want some control of the arrangementsthrough their agreement with the Employer.www.emlawshare.co.uk
JCT Design and Build Contract2016Contract “Family”Contract (DB 2016)Sub-Contract Agreement (DBSub/A2016)Sub-Contract Conditions (DBSub/C2016)www.emlawshare.co.uk
When to use Design and Build Alternative “high value” contract delivery (e.g. above 500k/complex/low management) Project contract Works can be delivered in sections Allows for less expertise resources of Employer (e.g. Contractorto deliver works and complete the design, Employer’sRequirements/Contractor’s Proposals to be incorporated settingout extent of works and to what standards they are to bedesigned/completed) Architect “switches” to being employed by the Contractor Employer’s Agent to administer the Contractwww.emlawshare.co.uk
Design and Build arrangementContract arrangement changes as construction starts, with theemployment of the professional consultants “switching” from theEmployer to the Contractor so that the Contractor is responsible tothe Employer for the “whole package”.www.emlawshare.co.uk
JCT Measured Term Contract2016Contract “Family”Measured Termwww.emlawshare.co.ukBuilding Contract MTC 2016
When to use a Measured TermContract Appropriate for use– by Employers who have a regular flow of maintenance andminor work, including improvements to be carried out by asingle contractor over a specified period of time under asingle contract– where the work is to be instructed from time to time andmeasured and valued on the basis of an agreed schedule ofrates– where a Contract Administrator is to administer the conditionswww.emlawshare.co.uk
Others in the JCT 2016 suite Collateral WarrantiesFramework AgreementPre-Construction Services AgreementMajor Project Construction ContractRepair and Maintenance ContractPrime Cost Building ContractManagement Building ContractConstruction Management Trade ContractConstructing Excellence ContractConsultancy AgreementPartnering CharterAdjudication Agreementwww.emlawshare.co.uk
Contracts and sub-contracts:Differences to 2011 suite. Public sector clientsRegulatory changeBIMPaymentInsuranceThird party rightsOtherwww.emlawshare.co.uk
“Local or Public Authority” Fair Payment Charter principlesFair payment down the supply chainIncorporatesJCT 2011PublicSectorSupplement Transparency and FOIADisclosure of the Contract in theevent of FOIA request Building Information Modelling (BIM) ProtocolIntegration of BIM protocols and harmonisation with designsubmission/information release etc[Applies to MW; IC; SB; DB, MTC and associatedSub-Contracts]www.emlawshare.co.uk
Reflecting Regulatory ChangeCDM Regulations 2015 Incorporating JCT 2011 Amendment 1 Contractor warrants to comply with duties with no entitlement toadditional time/pricePublic Contracts Regulations 2015 30-day payment provisions required by Reg 113 Termination in situations described in Reg 73(1):- Substantial modification leading to need to re-procure- Contractor should have been excluded at tender stage for amandatory exclusion ground- Contract award seriously infringed EU Procurement Law Continuation down the supply chain Contractor to supply names, contact details and legal repsof Sub-Contractors (Reg 71)[Applies to MW; IC; SB; DB, MTC and associated Sub-Contracts]www.emlawshare.co.uk
Payment Provisions – Section 4Simplified and consolidated drafting – interimpayments and final payment: Consolidating clauses on notices for finalpayments and interim payments Final date for payment of final payment now14 days from due date (matching period forfinal date for payment of interim payments) Minor Works brought in line: Contractor canmake application for payment.[Applies to MW; MTC; IC; SB; DB and associatedSub-Contracts]www.emlawshare.co.uk
Payment Provisions – Section 4Fluctuations Wider choice of fluctuations in ContractParticulars Removal of Fluctuations Options B and C(although available from JCT website)[Applies to SB; DB and associated SubContracts]www.emlawshare.co.uk
Payment Provisions – Section 4New prompt procedure for loss and expenseassessment Contractor’s duty to notify is triggered atearlier point than under 2011 New drafting aimed at ensuring: Contractor provides necessaryinformation to Employer to assessloss and expense Employer carries out assessment andascertains amounts promptly[Applies to MW; MTC; IC; SB; DB andassociated Sub-Contracts]www.emlawshare.co.uk
Insurance – Section 5/6 andSchedule 3 Simplifying and consolidating – Section 5/6 (not insuranceSchedule) More flexibility on Existing Structures[Applies to MW; MTC; IC; SB and DB]www.emlawshare.co.uk
Termination Expanded right to terminate followingsuspension. Either party can terminate where loss ordamage arises from any risk covered bythe works insurance policy / an exceptedrisk Termination under PCR 2015 Either party can terminate if materialloss or damage to an Existing Structurewww.emlawshare.co.uk
Third Party Rights/Rights ParticularsCollateral warranties/third party rights What for? When required? In what form?[Applies to IC; MTC; SB; DB and associated SubContracts]www.emlawshare.co.uk
Third Parties and RightsParticulars“Rights Particulars” Replaces Part 2 of Contract Particulars in JCT 2011 Separate document to set out: details of rights the Contractor and/or Sub-Contractors are togrant the Employer; Funders; Purchasers or Tenants (collateralwarranties / 3rd party rights?) Sub-Contractors’ insurance requirements Model Rights Particulars document available s-particulars[Applies to IC; MTC; SB; DB and associated Sub-Contracts]www.emlawshare.co.uk
JCT Collateral Warranties –Key IssuesWhat is needed by way of collateral warranty? Which third parties will / may need one? What are they asking for? Are these requirements detailed in the Rights Particulars?Net contribution clausesContractor Collateral Warranty for a Funder 2016: Clause 1.1“the Contractor’s liability to the Funder for costs under this Agreement shallbe limited to the proportion of the Funder’s losses which it would be just andequitable to require the Contractor to pay having regard to the Contractor’sresponsibility for the same ”www.emlawshare.co.uk
Parent CompanyGuarantee/Performance Bond Can require Contractor to provideParent Company Guarantee /Performance Bond Specify requirements in ContractParticulars[Applies to IC; MTC; SB and DB]www.emlawshare.co.uk
Parent CompanyGuarantee/Performance Bond What for? When required? In what form?www.emlawshare.co.uk
A Schedule of Amendmentswill still be necessaryAmendments to JCT drafting will be neededto: reflect Employer’sobligations/objectives (eg. to Residents/ sector specific) “beef up” JCT terms in certain areas ofweakness shift the balance of risk balance (2016updates have not altered the balance ofthe JCT suite)www.emlawshare.co.uk
Careful re-drafting of“standard” SchedulesIf amending JCT 2011 Schedule of Amendmentsto be used with JCT 2016: don’t just change “2011” to read “2016” remove amendments that are no longerrequired add amendments as required to newclauses update clause cross referencing seek legal advicewww.emlawshare.co.uk
Amendments to reflect Employer’sobligations/objectives Equality and diversity Modern Slavery “Prevent” principles Social value requirements(eg. apprenticeships) Building Warranties CDM 2015 Duties to Residents: Enhanced obligations if Works in occupied properties(DBS; Code of Conduct etc) Contractor to liaise with Resident on access to remedydefects Data Protectionwww.emlawshare.co.uk
“Beef up” terms where JCT hasweaknesses Design liability Discrepancies between documents Programming Annual “final” certificate Site security Health and safety Environmental protection (deleteriousmaterials and hazardous substances) TUPEwww.emlawshare.co.uk
Shift the balance of risk Effect of Employer’s InspectionsChange in law riskConcurrent delayScope of copyright licence fordesigns Definition of practical completion(handover requirements) Effect of Final Statementwww.emlawshare.co.uk
Avoiding the JCT “trap”Clause 1.3 JCT DB“Nothing contained in any other ContractDocument or any Framework Agreement,irrespective of their terms, shall override ormodify the Agreement or these Conditions”www.emlawshare.co.uk
NEC Contracts
NEC approach Project management solutionsEntire life cycleDown whole supply chainSpirit of partneringMain contracts; short form; subcontracts; supplywww.emlawshare.co.uk
Engineering and ConstructioncontractsContract “Family”Engineering and ConstructionNEC4 Engineering and ConstructionContract (ECC)NEC4 Engineering and ConstructionSubcontract (ECS)NEC4 Engineering and ConstructionShort Contract (ECSC)NEC4 Engineering and ConstructionShort Subcontract (ECSS)www.emlawshare.co.uk
When to use EEC Project contractWorks/engineeringIncludes any level of design responsibilitySophisticated management techniquesProject Manager administersLess complex works, use short formPrice Based / Cost Based / Management Contractwww.emlawshare.co.uk
Term Service ContractsContract FamilyTerm ServiceNEC4 Term Service Contract (TSC)NEC4 Term Service Short Contract(TSSC)www.emlawshare.co.uk
Term Service Contracts Term contract Suitable for any manual activity over period (Works;engineering; repairs & maintenance; facilities maintenance;cleaning; decorating; gas servicing etc.) Includes any level of design responsibility Sophisticated management techniques Service Manager administers Less complex works, use short formwww.emlawshare.co.uk
Other NEC4 Contracts The Professional Services Contract (PSC)The Professional Services Short Contract The Supply Contract (SC)The Supply Short Contract The Framework Contract Design, Build and Operate Contract Alliance Contractwww.emlawshare.co.uk
NEC drafting conventionswww.emlawshare.co.uk
Drafting style Simple languageSimple structure and clause numberingPresent tenseNo cross referencingSubjective decisions minimised (avoiding, forexample, “fair” and “reasonable” Defined terms in capitals Terms described in Contract Data in italicswww.emlawshare.co.uk
Contract structure Core ClausesMain Option Clauses (including pricing options)Resolving and Avoiding DisputesSecondary Option ClausesSchedule of Cost ComponentsShort Schedule of Cost ComponentsContract DataIndexwww.emlawshare.co.uk
Main Options A: Priced Contract with Activity ScheduleB: Priced Contract with Bill of QuantitiesC: Target Contract with Activity ScheduleD: Target Contract with Bill of QuantitiesE: Cost Reimbursable ContractF: Management Contract[No more Option G, Term Contract, for PSC]www.emlawshare.co.uk
DIFFERENCES BETWEENNEC3 AND NEC4
New ContractsFour new contracts: TSC SubcontractPSC SubcontractDesign, Build and Operate ContractAlliancing Contractwww.emlawshare.co.uk
General changes to all contracts Gender neutral Terminology changes, including: Client not Employer Scope not Works/Service Information Early Warning Register not Risk Register; earlywarning meeting not risk reduction meeting Ultimate holding company not parent company Undertakings not collateral warrantieswww.emlawshare.co.uk
General changes to all contracts Payment changes application for payment required final account termination payment timetable brought into payment regime single fee percentage, not two Risk management Early Warning Register and early warning meetings, withtimetable “liabilities” not “risks”, and Contractor liability stated Senior representatives as a dispute escalation procedure Programme and/or plan now deemed accepted ifProject/Service Manager delayswww.emlawshare.co.uk
Specific changes to ECC 9 new or amended Options, including X8 undertakings (collateral warranties) X10 information modelling (BIM) X21 whole life costing Changes to Schedule of Cost Componentswww.emlawshare.co.uk
Amendments will still benecessaryAmendments to NEC drafting will be needed through z clausesto: reflect Employer’s obligations/objectives (e.g. to Residents /sector specific) “beef up” NEC terms in certain areas of weakness shift the balance of risk balancewww.emlawshare.co.uk
Z clauses need carefulredraftingIf amending NEC contracts: Follow NEC drafting conventionsDon’t just copy in standard Ts&CsEnsure properly incorporatedConsider seeking specialist legaladvicewww.emlawshare.co.uk
Execution No execution blockOffer and acceptance?Contract or deed?Need incorporating agreementwww.emlawshare.co.uk
Words of advice Do not consider NEC just like any other contract but in differentlanguage Do use correct terminology Do resource NEC contracts adequately Do remember the Scope/Works Information and other documentsneed to be comprehensively written. Documents include ordering process (TSC) dispute process to go with senior representatives Key Performance Indicators in incentive schedulewww.emlawshare.co.uk
TOP TIPS ON CONTRACTMANAGEMENT
Top tips on contract managementScenario 1 A major Decent Homes Contract was let to acontractor to carry out refurbishment works to9,000 properties under a TPC 2005 form ofcontract. Contract length 4 years. Final account value in dispute. Contrac
When to use Minor Works Building Contract Simple works contract (JCT indicative value up to 100k) Design element (if any) completed by party other than contractor (except CDP) Need sufficiently detailed drawings and specifications to be incorporated to define the works Architect/Contract Administrator to administer the contract
A JCT Intermediate Building Contract (IC) A JCT Intermediate Building Contract with contractor’s design (ICD) A JCT Design and Build Contract (DB) A JCT Prime Cost Building Contract (PCC) Contractor Collateral Warranty for a Purchaser or Tenant Revision 2009 (CWa/P&T) ISBN: 978-0-414-04110-3 Price: 13.76
4 The Scottish Building Contract Committee (SBCC), a member of JCT, has in the past prepared and published Scottish Supplements to many JCT forms of contract, for use where Scots law is to apply. SBCC now publishes integrated documents, that is a JCT contract which has been amended formally for use where Scots law is to apply.
JCT Design and Build Contract 2016: All Change? Five years after the issue of the JCT Design and Build Contract 2011 (DB 2011) the JCT have very recently issued the Design and Build Contract 2016 (DB 2016). The purpose of this article is to summarise the main changes between the two forms of contract. 1. Payment
4 The Scottish Building Contract Committee (SBCC), a member of JCT, has in the past prepared and published Scottish Supplements to many JCT forms of contract, for use where Scots law is to apply. SBCC now publishes integrated documents, that is a JCT contract which has been amended formally for use where Scots law is to apply.
Nakhon Chaisi Bang Bamru Hua Takhe Mae Hong Son Lamphun Nakhon Lampang Den Chai Sila At Uttaradit Sawankhalok Ban Dara Jct. Phitsanulok Phichit Taphan Hin Khun Tan Nakhon Sawan Ban Takhli Chaiyaphum Ban Phachi Jct. Ayutthaya Map Ta Phut Chon Buri Si Racha Jct. g Laem Chabang Khao Chi Chan Jct. Aranyaphrathet Sa Kaeo Kabin Buri Prachin Buri .
Minor Works (June) Design and Build (September) Standard Building Contract (October) Intermediate Form of Contract (December) . Note that under the JCT Sub-Contract the due date is 12 days after the IVD ( or receipt of the IPA) and therefore payment to the Sub-Contractor is 5 days later if the JCT Sub-Contract
The Joint Contracts Tribunal, also known as the JCT, produces standard forms of contract for construction, guidance notes and other standard documentation for use in the construction industry. From its establishment in 1931, JCT has expanded the number of contributing organisations.
JCT MWD 2016 Minor Works Preliminaries Minor Works Building Contract with Contractors Design 2016. A10 PROJECT PARTICULARS PRELIMINARIES AND GENERAL CONDITIONS 105 FORM OF CONTRACT JCT MWD 2016 – Minor Works Building Contract with Contractors Design 2016 110A THE PROJECT Project Name: JUNIOR KITCHEN AND DINING ROOM REFURBISHMENT.
