JCT Design and Build Contract 2016:All Change?www.cclaw.co.uk
JCT Design and Build Contract 2016: All Change?Five years after the issue of the JCT Design and BuildContract 2011 (DB 2011) the JCT have very recentlyissued the Design and Build Contract 2016 (DB 2016).The purpose of this article is to summarise the mainchanges between the two forms of contract.1. PaymentIn order to reflect the Fair Payment provisions from theJCT Public Sector Supplement 2011 the DB 2016 nowincludes the establishment of Interim Valuation Datesthat are also to apply at the JCT Sub-Contract and SubSub-Contract levels.The DB 2016 provides that the first Interim ValuationDate must be specified in the entry in the ContractParticulars against clause 4.7.2. As stated in the footnotecorresponding with that entry the JCT recommends thefirst Interim Valuation Date should be not more than onemonth after the Date of Possession. Subsequent InterimValuation Dates are to be the same date in each month.The JCT also provides that the Interim Valuation Datesare to apply for both alternative A (Stage Payments) andalternative B (Periodic Payments).The DB 2016 provides that sums are to be calculated asat the relevant Interim Valuation Date.The Contractor is required to make an Interim PaymentApplication in respect of each Interim Payment in themanner specified in clause 4.7.3. If the application isreceived no later than the relevant Interim Valuation Datethe due date is that date seven days after the relevantInterim Valuation Date. If the application is receivedlater the due date is seven days after the date of receiptof the Interim Payment Application by the Employer.These provisions are followed at clause 4.7.5 by therequirement for the Employer to issue Payment Noticeswithin five days of the due date.As set out in the DB 2011 the final date for payment underthe DB 2016 remains fourteen days from the due date.www.cclaw.co.uk2. FluctuationsFluctuation Option B (labour and materials cost andtax fluctuations) and Fluctuation Option C (formulaadjustment) have both been deleted from the DB 2016leaving only Fluctuation Option A (contribution, levyand tax fluctuations) in Schedule 7. JCT FluctuationsOptions B and C continue to be available on the JCTwebsite (www.jctltd.co.uk) but in our experience it isusually the case that employers seek to disapply all ofthe fluctuation options.3. Loss and ExpenseThe Contractor’s ability to seek reimbursement ofany direct loss and/or expense under clause 4.19.1is subject to compliance with the new procedures inclause 4.20.Under that clause the Contractor is to notify theEmployer as soon as the likely effect of a RelevantMatter on regular progress becomes (or should havebecome) reasonably apparent to him.The Contractor’s notification is to be accompaniedby or as soon as reasonably practical followed bythe Contractor’s initial assessment of the loss and/orexpense incurred and any further amounts likely to beincurred together with such information as is reasonablynecessary to enable the Employer to ascertain the lossand/or expense incurred.The Contractor thereafter is to update that initialassessment and information at monthly intervalsuntil all information reasonably and necessary toallow ascertainment of the total loss and expense hasbeen supplied.Within twenty eight days of receipt of the initialassessment and information and fourteen days ofeach subsequent update the Employer is to notify theContractor of the ascertained amount of the loss and/or expense incurred.
4. InsuranceIn DB 2016 the insurance provisions in Section 6 havebeen amended to consolidate the provisions of thevarious insurance options insofar as they relate to,amongst other things, evidence of insurance and loss ordamage – insurance claims and reinstatement.More substantively the JCT has acknowledged in thefootnotes to Insurance Option C that this option (for usewhere there are Existing Structures) may not be appropriatefor certain projects for example refurbishment projects oralterations by tenant Employers where Existing Structuresinsurance is the landlord’s responsibility.The Contract Particulars for clause 6.7 and Schedule 3therefore expressly allow the Parties in those circumstancesto disapply paragraph C.1 and, by means of a C.1Replacement Schedule, to include in place of thatparagraph provisions that are tailored to their particularrequirements.In the JCT’s view the preparation of such replacementprovisions must be assigned to insurance professionals.These footnotes emphasise the need to consider at anearly stage the insurance provisions and for clients toengage with their insurance brokers/advisers particularlywhere Works are to be carried out to Existing Structures.Protocols so that a conflict should not arise. In any eventit also considers that unqualified overriding provisions ofthis type are not appropriate in such protocols.Notwithstanding the JCT’s stance our view is that it willbe necessary to ensure that conflicts do not arise betweenthe provisions of any protocol (e.g. the CIC BIM Protocol)and the relevant JCT provisions particularly those relatingto the treatment of intellectual property.6. PerformanceGuaranteesBondsandParentCompanyUsefully the DB 2016 now includes obligations on theContractor (at clause 7.3) to provide a performance bondand/or a parent company guarantee subject to the relevantentries in the Contract Particulars being completed.It is worth noting that the DB 2016 assumes that therelevant form of performance bond and/or parentcompany guarantee have been agreed prior to thecontract being entered into.7. CDM 2015Not surprisingly the DB 2016 incorporates the variousprovisions in amendment 1 to DB 2011 relating to theConstruction (Design and Management) Regulations 2015.8. Collateral Warranties and Third Party Rights5. BIM ProtocolsBy completing the relevant entry in the Contract Particularsit is now acknowledged that an agreed BIM Protocol cannow be a Contract Document. The JCT Design and BuildContract Guide acknowledges that some model protocolsclaim in the case of conflict to override the other provisionsof the contract. In that guide the JCT has stated that itconsiders that its contracts give sufficient latitude to BIMDB 2016 now assumes that the Parties will set out ina separate document (defined as the Rights Particulars)details of the requirements for the grant by the Contractorand Sub-Contractors of P&T Rights, Funder Rights and/or (in the case of Sub-Contractors) Employer Rights inrespect of the Works either by way of Third Party Rightsor by Collateral Warranties. In view of this Part 2 of theContract Particulars has now been deleted.
A Model Form for the Rights Particulars is included in theDesign and Build Contract Guide and is also availableon the JCT website.(The Third Party Rights set out in Schedule 5 follow theform of the corresponding standard JCT CollateralWarranties which the JCT assumes will be adopted.)It is also worth noting that DB 2016 now provides forthe possibility of Sub-Contractors conferring Third PartyRights on a Purchaser, Tenant or Funder and/or theEmployer to the extent that the Rights Particulars statethat a Sub-Contractor is to do so.9. Site ManagerDB 2011 included a supplemental provision (at paragraph1 of Part 1 of Schedule 2) whereby the Contractor couldbe obliged to appoint a Site Manager. Clause 3.2 of DB2011 referred to the Contractor ensuring that he has onsite a competent person in charge.In DB 2016 the reference to a “person in charge”has been deleted and clause 3.2 now refers to theappointment of a full time Site Manager and theoptional supplemental provision referred to above hasnow been deleted.10. Relevant EventsThe Relevant Events (which may give rise to an extensionof time) remain largely unaltered save that clause2.26.12 now refers to the exercise after the Base Dateby any local or public authority (as well as such exerciseby the United Kingdom government) of any statutorypower which directly affects the execution of the Works.In addition such Relevant Event will not arise whereit is occasioned by a default of the Contractor or anyContractor’s Person.www.cclaw.co.uk11. TransparencyParagraph 11 of Part 2 of the Supplemental Provisions(see schedule 2) applies where the Employer is a local orpublic authority or other body to whom the provisions ofthe Freedom of Information Act 2000 (FOIA) apply. Inthose circumstances the Parties acknowledge that, exceptfor any information which is exempt from disclosure inaccordance with the provisions of the FOIA, the contentsof the Contract are not confidential.In particular the Contractor consents to the Employerpublishing any amendments to the standard JCT formof contract in their entirety but having first redactedany information which is exempt from disclosure inaccordance with the provisions of FOIA.12. Public Contracts Regulations 2015 (PC Regulations)DB 2016 now includes provisions to ensure that publicsector clients using JCT Contracts are fully compliantwith any relevant Regulations. In relation to DB 2016the JCT have taken this into account not only with theincorporation of provisions from the JCT Public SectorSupplement 2011 but also to amend the Contracts toreflect some of the specific aspects of the PC Regulations.The PC Regulations apply where the Employer is a“contracting authority” and awards a “public contract” inaccordance with the definition set out in the Regulations.In general terms the Regulations apply when the Contractis within the scope of the PC Regulations and exceedsa value threshold. We would recommend that furtheradvice is taken if there is any doubt as to the applicabilityof the Regulations generally or any specific provision.In the DB 2016 the provisions related to the PC Regulationsonly apply where the Employer is a local or public authorityand the Contract is subject to the PC Regulations.
The following specific provisions are includedor otherwise reflected in the DB 2016: Regulation 113 (Prompt Payment)Regulation 113 of the PC Regulations requiresthat Employers pay valid and undisputedinvoices within a thirty day period. There isalso a requirement to ensure that invoicesare considered and verified in a timelyfashion. In addition there is an obligation onpublic sector employers to ensure that SubContractors abide by these conditions andthat they are passed down the supply chain.The payment provisions in the DB 2016, ifunamended, already allow for a thirty dayperiod to apply to the payment process so theJCT have not included any specific provisionsreferring to the PC Regulations.However, at paragraph 12 of Part 2 ofSchedule 2 the Contractor is obliged by virtueof that supplemental provision to includein any sub-contract suitable provisions toimpose the requirements of Regulation 113. Regulation 71 (Sub-Contracting)Under Regulation 71 of the PC Regulationsthere are provisions that require theContractor to provide to the Employer basicinformation on the Contractor’s immediateSub-Contractors which may be extendedto lower tiers of Sub-Contractors. Theserequirements are included in all tiers of JCTContracts. In addition under Regulation 71the Employer has the right to insist on theremoval of a Sub-Contractor where thereare grounds for doing so under Regulation57 (where for example the Sub-Contractorhas been convicted of a bribery offence). Thespecific provisions reflecting these Regulationscan be found at the Supplemental Provisionsin paragraph 12 of Part 2 of Schedule 2. Regulation 73 (Determination)Regulation 73 requires public contractsto contain the right for the Employer toterminate the contract where:- there has been a substantial modificationto the contract which would haverequired a new procurement procedurewithin the meaning of Regulation 72;- at the time of the contract award oneof the mandatory grounds for exclusionfrom the procurement procedureapplied and the Contractor should havebeen excluded from that process;- the contract should not have beenawarded to the Contractor due to a seriousinfringement of the obligations under theTreaties and the Public Contracts Directiveas declared by the ECJ.DB 2016 includes provisions (at clauses8.6 and 8.11.3) giving the Employer theright to terminate the Contract under eachof these circumstances and also includesprovisions that deal with the consequencesof such termination.Further UpdatesA number of the forms of JCT Contract(for example SBC/SBC XQ, IFC, IFC WCDetc.) have not yet been updated but weunderstand that these will be issued shortly.DisclaimerThis Legal Update is published as a generalguide only and it is not intended to containdefinitive legal or professional advice, whichshould be obtained as appropriate in relationto any particular matter. This publication relatesto matters prevailing at the date of its originalpublication and may not have been updated toreflect subsequent developments.For any further information on penalty clauses or other related matters please contactTim Barwick on 020 7003 8104 or email [email protected]
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