Contract Administration Flashcards
When woud you use JCT Minor works and when wouldnt you?
JCT Minor Works contract selection criteria. We have learnt that the JCT Minor Works contract is commonly used for projects likely to be administered by a building surveyor under the traditional procurement method – and it is under the following criteria: • Where the work involved is simple in character. • Where the work is designed by or on behalf of the client/employer. • Where the client/employer is to provide drawings and/or a specification and/or work schedules to define adequately the quantity and quality of the work; and • Where an architect/contract administrator is to administer the conditions. • Where the approximate maximum value is £500k – but this is flexible depending on the complexity of the project. It is not however suitable: • Under a design and build procurement route as a design and build contract. • Where bills of quantities are required. • Where provisions are required to govern work carried out by named specialists. • Where detailed control procedures are needed. Slide 32
What are the articles of agreement?
Articles of agreement This section identifies the key parties to the contract and other stakeholders. This section identifies the various stakeholders linked to the contract including: • The two parties to the Contract – ie. Client/Employer & Contractor • Architect/Contract Administrator • Quantity Surveyor • CDM Principal Designer • Principal Contractor • Other professionals
What are the contract particulars
Contract Particulars This section contains the all-important contract clauses covering items including: • Carrying out the works • Control of the works • Payment • Injury, damage and insurance • Termination • Disputes
What is section 2 of the JCT MW?
Section 2 – Carrying out the Works - Contractor’s Obligations - Extension of Time It is extremely important that the building surveyor has a firm grasp of the following clauses and concepts as they are most likely to be the source of disputes when administering a contract. Contractors obligations The contractor is basically required to carry out the specified works to the requisite quality within the agreed timescale. It is the Contract administrators responsibility to check the quality of the work completed during regular site progress inspections. Possession of site It is important that the site is made fully available to the contractor by the client on the agreed date in order for him to mobilise his operations and commence work to meet the agreed programme of work. Failure by the client to release part or all the site could constitute a breach of contract and justify an extension of time for the contractor. Errors, Discrepancies and Divergencies Errors within the design documentation are often discovered once the contractor has started on site (eg divergence between the specification and drawings due to a limited design timescale) and this section covers how they are to be dealt with. Extension of time This is often a contentious issue as a contractor will often apply for an extension of time as a result of delays to their original programme for various reasons – and it will be the contract administrator’s decision on whether to approve or decline it. The general rule is that an extension of time should only be issued if the reason is ‘outside of the contractors control’ – otherwise known as ‘A relevant event’ which potentially include: • Weather – If the work or part thereof is external • Force majeure – An Act of God • Additional work instructed by the client – This is most common • Others including the client failing to provide the contractor with reasonable access or information Section 2.1.1 – Contractors obligations: ‘The Contractor shall carry out and complete the works in a proper and workmanlike manner and in compliance with the Contract Documents, the Construction Phase Plan and Statutory Requirements, and shall give all notices required by the Statutory Requirements’.
When would an extension of time be granted to the contractor and what is considered a ‘relevant event’?
WAFA - Weather, Additional, Force, Access The general rule is that an extension of time should only be issued if the reason is ‘outside of the contractors control’ – otherwise known as ‘A relevant event’ which potentially include: • Weather – If the work or part thereof is external • Force majeure – An Act of God • Additional work instructed by the client – This is most common • Others including the client failing to provide the contractor with reasonable access or information
What does practical completion trigger?
The final months payment (known as the Penultimate Payment). • Release of the contractors insurance obligations (which may be expensive). • Exemption of the contractor’s liability to pay Liquidated damages. • Half the retention is released • Start of the ‘Rectification Period’.
What is the rectification period?
The Rectification period is normally a period of 3, 6 or 12 months where the contract remains ‘open’ after practical completion of the work during which the contractor is still liable for rectifying problems (or defects) which have developed following the building work.
What are liquidated damages
LDs are sum of money included within the contract to incentivise the contractor to complete on time … and may be deducted from the contractors final monthly payments and retention (see retention later). LDs are a reasonable estimate of loss as a result of the project not completing on time (for example £250 per week due loss of rent of a residential property).
What are defects?
Defects are the legal term for work which has not been completed to the agreed specification or work that has subsequently failed whilst still under contract.
What is the certificate of making good?
This certificate (and also the certificate on ‘Not making good’) need to be completed by the contract administrator following rectification/failure to rectify defects … and certifies their rectification or otherwise. These will either trigger the ‘Final payment’ to the contractor or result in withholding money until they are rectified.
When should the PC date be decided?
It is important to be aware that the Practical Completion date will be included within the contractors construction programme which should be tabled at the pre contract meeting.
What is on an agenda for a pre-contract meeting?
A standard agenda for a pre contract meeting will cover issues including: Health and safety Access arrangements Storage Programme Valuation and payment arrangements Site progress meetings Project insurance Person in charge AOB
Can you explain clause 2.8.1 damages for non completion?
Section 2.8.1 – Damages for non completion ‘If the works are not completed by the Date for Completion stated within the Contract Particulars, or as later fixed under clause 2.7, the Employer may require the Contractor to pay or allow to the Employer liquidated damages at the rate stated in the Contract Particulars between such Date for Completion and the date of practical completion’ It is critical that LDs within a contract are set at a realistic level – they are an excellent tool for encouraging the contractor to adhere to their programme.
What is an instruction under the contract? Can they be verbal?
These are formal documents issued by the contract administrator to document ANY communication between the CA and the contractor. There are many standard instruction forms available for a CA to use. An instruction can range from a single page of A4 to detailed documentation including drawings and specifications if additional work is being instructed. Also – see the following slide. Section 3.4 – CA instructions ‘The Architect/Contract Administrator may issue instructions and the Contractor shall forthwith comply with them. If instructions are given orally, they shall not have effect until the Architect/Contract Administrator confirms them in writing’. There may be numerous instructions issued – ensure you keep up to date with your records.
What is a provisional sum?
A provisional sum is a figure specified within the tender and contract documents which is included to fund an item which cannot be fully specified prior to work commencing for various reasons. An example would be an inclusion of £10,000 to cover provision of new foundations which cannot be specified due to the uncertainty of the ground conditions. The contractor will then be required to complete the work within that sum – therefore the sum included should be adequate
What is clause 3.2 of JCT MW person in charge inreference to?
Section 3.2 – Person in charge: ‘The Contractor shall ensure that at all reasonable times he has on the site a competent person in charge. Any instructions given to that person by the Architect/Contract Administrator shall be deemed to have been issued to the Contractor’.
What is a contract instruction and what should it contain?
A contract instruction is an important legally binding document and may well be referred to in any disputes or legal action which may arise between the client and the contractor – so it is essential that the CA ensures the format and content of the document is accurate and compliant with legal protocol The format should be as follows (in writing but can be verbal initially): • Names of the parties involved • Include the Project Name • Specify the Date • Provide an issue number • Circulate to all necessary parties • Quantify the financial implication • The content of instructions will include the following: • Only what the contract states e.g. • Variation of the works • Removal of work not in accordance with the contract • Expenditure of Provisional Sums • Opening up of the works for inspection/testing The content of instructions will include the following: • Only what the contract states e.g. • Variation of the works • Removal of work not in accordance with the contract • Expenditure of Provisional Sums • Opening up of the works for inspection/testing
Can you explain what the contract sum means?
Contract Sum The ‘Contract Sum’ is the agreed lump sum the client will pay the contractor for the work. This figure will quite often be subject to change (normally an increase) and this will then become the ‘Final Account’ figure.
What certificates might the contract administrator be required to issue under the contract?
The CA will be required to issue a number of certificates. Why are Certificates issued? • Confirmation of certain events, milestones and occurrences eg. • Practical completion • Making good of defects • Partial possession • Making good to relevant part • Non-completion • Payment certificates.
What are interim payment certificates?
The CA will normally issue interim ‘payment certificates’ to the client on a monthly basis following receipt of the contractors invoice. This is effectively a formal instruction to pay the contractor within a certain period. The CA will first check the validity of the contractors invoice against the contractors programme in conjunction with the design information.
What are the penultimate payment and the final payment?
The Penultimate payment is made at Practical completion stage and the Final payment is made after the Rectification period (see below).
What is the retention?
Retention This is a sum of money the CA deducts from each monthly payment which may be released back to the contractor in various stages. A typical figure is 5% of the agreed sum to be paid therefore the contractor receives only 95% of the value of the completed work. This money is held back from the contractor as an incentive to complete the project on time – and to rectify defects during the rectification period – as 2.5% of the 5% is released at ‘Practical Completion’ and 2.5% is released after the rectification period. The final payment is made at the end of the rectification period once the CA has completed the ‘Making good of defects’ certificate.
What are the payment terms?
Payment terms The payment terms specify the frequency and dates by which the Client must pay the Contractor for the work carried out – and also the penalty for late payment by the client. Cash flow is extremely important for both parties to the contract but in particular the contractor as he is likely to have a supply chain below him to remunerate
Can you explain clause 4.3 interim payments under JCT MW?
- Section 4.3 – Interim payments: Due date for interim payment is 7 days after the interim valuation date.
- CA must issue the interim payment cert within 5 days of the due date.
- Final date for payment is 14 days from the due date.
- If the parties fail to specify a date, the Interim Valuation Date will default to being one month after the Date of Possession.
- The Contractor can make an application for payment (Interim Payment Application) at any time before the IVD.
- The Contractor makes the application based on the amount the Contractor considers due and describes the basis on which that sum has been calculated.
- For both interim and final payments, the Due Date is 7 days after the IVD and the Final Date for Payment is 14 days following the Due Date.
- Five days after the Due Date the Employer must issue a Payment Notice.
- The Payment Notice specifies the sum that the Employer considers to be due to the Contractor on the Due Date and the basis upon which that total has been calculated. Subject to a Pay Less Notice the Employer must pay the amount contained in the Payment Notice on (or before) the Final Date for Payment.
- JCT 2016 The IVD in the JCT 2016 Subcontract is the same date as that contained in the main JCT 2016.
- There is the option to require the subcontractor to submit its payment application at least 4 days prior to the IVD to ensure its application for payment is included in the Contractor’s application, up-stream to the Employer.
- The Final Date for Payment has been shortened in JCT 2016 Subcontract (from 21 days following the Due Date to 14 days) but in overall terms the period has lengthened because the Due Date is later.
- The Contractor then has 5 days after receiving funds from the Employer to make the payment to the Subcontractor. Where the Employer in JCT 2016 (or Contractor in JCT2016 Subcontract) intends to pay less than the sum stated as due in the Interim Payment Application or Payment Notice, he must give notice to the payee of that intention by issuing a Pay Less Notice not later than 5 days before the Final Date for Payment.
- The sum contained in the Pay Less Notice must then be made on or before the Final Date for Payment.
- JCT 2016: What Could Go Wrong? The introduction of the IVD is intended to synchronise the payments throughout the contractual chain.
- The fair payment process is, therefore, only effective if a common IVD is used across all tiers of the project.
- In reality, as you progress down the contractual chain, the use of standard form contracts becomes less common, meaning the potential benefits may be lost or at least diminished.
- In some months the IVD will not be a Business Day and will change to the nearest Business Day in that month.
- In such circumstances, the parties (and their advisors) will need to recalculate all subsequent dates in the payment cycle.
- This is a particularly problematic area for Employers. Such a minor change can have far-reaching consequences.
- Failure on the part of the payer in the contractual chain to issue a Payment Notice by the deadline, subject to a Pay Less Notice (discussed above), means the balance due is the total amount set out in the Interim Payment Application.
- The courts have consistently held that, irrespective of how inaccurate or inflated the amount demanded, it will all, nevertheless, be due and payable to the payee in such circumstances.
- An amount not paid in accordance JCT 2016’s payment terms will constitute a breach of contract and the overdue amounts will accrue interest.
- The payee can recover any unpaid amounts (and associated interest) as a debt and has the right to suspend performance of the works and even terminate the contract for non-payment.
- It is crucial, therefore, that parties take note of the dates which govern the payment mechanisms as the consequences of missing such dates can be severe.
- The courts have in recent times adopted a hard line, against payers, in favour of an overarching objective of securing cash flow down the construction supply chain. ‘During the period up to the due date for the final payment fixed under clause 4.8.1, the due dates for interim payments to the Contractor shall in each case be the date 7 days after the relevant Interim Valuation Date. Not later than 5 days after each due date the Architect/Contract Administrator shall issue an interim certificate for the applicable percentage, as stated in the Contract Particulars, of what he considers to be the total value at the due date of: 1. work properly executed, adjusted where relevant for any amounts ascertained or agreed under clause 3.6, 3.7 or 4.7, and 2. materials and goods reasonably and properly brought on to the site for the purpose of the Works that are adequately protected against weather and causalities …Subject to clause 4.5.3, the final date for payment of each interim payment shall be 14 days from its due date.’
What if the client fails to pay within the interim payment final due date?
NB. Interest runs on late payment Please note that these are the standard payment terms and may be subject to amendment if required. Could be in breach of contract?
What if the CA fails to issue an interim payment certifiate or pay less notice?
In addition, the Housing Grants Construction and Regeneration Act gives the right to suspend performance for failure to make payment that has been notified as due. Where the architect/contract administrator fails to issue an interim certificate the employer should immediately review the amount claimed in the contractor’s application as that is the amount that will be due unless a pay less notice is served. If the employer disagrees that the amount claimed in the contractor’s application is due, it must serve a pay less notice within the prescribed period; a notice served late will be invalid. Once the deadline for service of a pay less notice in that payment cycle has been missed it is too late: the employer has lost the opportunity to withhold money from that payment. Even if the employer has evidence of discussions or correspondence with the contractor disputing the amount applied for this will not obviate the requirement to pay. Serving a valid payless notice is not just a question of issuing it within the prescribed timeframe. The notice must also be in the correct form and contain the requisite details.
What types of insurance should you have under the JCT contract?
Section 5 – Injury, damage and insurance This section outlines the contractor’s liabilities re insurance provision during the contract period. Evidence of insurance will need to be produced at or prior to the pre contract meeting. Section 5.1 – Insurance ‘The contractor shall be liable for, and shall indemnify the Employer against any expense, liability, loss, claim or proceedings whatsoever in respect of personal injury or death of any person arising out of or in the course of or caused by the carrying out of the Works, except to the extent that the same is due to any act or neglect of the Employer, any Employer’s Person or any Statutory Undertaker.’ Ensure you select the appropriate Insurance option from choices A, B or C.
Under what circumstances might you terminate the contract?
- Section 6 –Termination Insolvency client or employer default -non payment
- Repudiatory breach
- Refusal to carry out work.
- Abandoning the site.
- Removing plant from the site.
- Failure to make payments.
- Employing others to carry out the work.
- Failure to allow access to the site.
- Failure to proceed regularly and diligently.
- Failure to remove or rectify defective works.
- Repudiatory breach
- where one of the parties to a contract behaves in such a way that it indicates it no longer intends to accept its obligations under the contract, this is considered to be a repudiatory breach (or fundamental breach) allowing the innocent party to terminate the contract and to sue for damages.
What is the HGRA 1996 act and what does it do?
The Housing Grants, Construction and Regeneration Act 1996 (HGRA - also known as the Construction Act) is intended to ensure that payments are made promptly throughout the supply chain and that disputes are resolved swiftly. Confers rights to the contractor.
Provisions of the act include:
- The right to be paid in interim, periodic or stage payments.
- The right to be informed of the amount due, or any amounts to be withheld.
- The right to suspend performance for non-payment.
- The right to adjudication.
- Disallowing pay when paid clauses.
What does Determination of a contract mean as opposed to termination
Termination ends the contract itself whereas determination ends the contractors employment under the contract but the contract still remains and so do the parties rights.
Can you explain concurrent delay?
Concurrent delay is a situation where several causes of delay are running in parallel and seem to almost cancel eachtoher out.
An example might be where consultants details were issued late, but an industrial dispute delayed progress of critical work at the same time.
In more recent judgments, the courts have disregarded arguments about which was the dominant delay and judgement has been made on the basis that the loss should lie where it falls.
In the above example, the contractor may be entitled to an extension of time and relief from damages but not entitled to loss and expense. To resolve look at the critical path
Can you explain mediation and how is it prescribed within JCT MW?
- An independent third party tries to resolve the dispute between parties by bringing them together to discuss and come up with a mutally agreeable solution
- Their decision is not legally binding so they have to agree to it expressely as a sepearate contact.
- It can be expensive.
- Section 7.1 - Mediation ‘Subject to article 6, if a dispute or difference arises under this Contract which cannot be resolved by direct negotiations, each Party shall give serious consideration to any request by the other to refer the matter to mediation’.
Can you explain Adjudication and how is it prescribed within JCT MW?
- Fast dispute resolution
- Construction adjudication is a statutory right introduced into UK construction contracts by the Housing Grants, Construction and Regeneration Act 1996, applicable to all relevant contracts entered into after 1 May 1998.
- It provides a temporarily binding decision which must be complied with by the parties until overturned or varied by the courts, arbitration or agreement.
- Adjudication is a contractual or statutory procedure for swift interim dispute resolution.
- It is provided by a third party adjudicator selected by the parties in dispute.
- Adjudication is often subject to a strict timetable and may be based purely on documentary submissions (see for example, NEC Engineering and Construction Contract, option W2).
- Adjudicators can adopt an inquisitorial role which may involve taking the initiative in ascertaining facts and law.
- Adjudication decisions are binding unless and until they are revised by arbitration or litigation.
- There is no right of appeal and limited right to resist enforcement.
- Award of legal costs is at the discretion of the adjudicator unless this is excluded by the terms of the contract.
- Based on decision and written information received from both parties, the whole process can take up to 28 days and the decisions are binding.
- If parties to a construction contract do not agree an adjudication procedure, then one is imposed by statute
- Section 7.2 – Adjudication ‘If a dispute or difference arises under this Contract which either Party wishes to refer to adjudication, the Scheme shall apply except that for the purposes of the Scheme the Adjudicator shall be the person (if any) and the nominating body shall be that stated in the Contract Particulars.’
Can you explain arbitration?
- Arbitration is a procedure whereby both sides to a dispute agree to let a third party, the arbitrator, decide.
- In some instances, there may be a panel.
- The arbitrator may be a lawyer, or may be an expert in the field of the dispute.
- They will make a decision according to the law.
- The arbitrator’s decision, known as an award, is legally binding and can be enforced through the courts.
- Arbitration allows for the resolution of disputes outside of court.
- The parties will refer the dispute to an independent person (the arbitrator) who will make a final and binding decision (clause 9.6).
- Arbitration is often slow and as expensive as litigation in court despite the intention that it is to be cheaper and more flexible.
- Selecting arbitration means that the parties may waive their rights to issue court proceedings if the outcome is not as they desired.
- It is not, therefore, usually favoured as the means for resolving disputes.
- Surveyors can become Chartered arbitrator chartered insitute or arbitrators,
12.
How and why might you suspend a costruction contract?
Contracts may also allow suspension of performance. The circumstances allowing suspension are generally similar to those allowing termination. Suspension can be useful, for example, if the client has difficulty in raising funds to pay for the work to proceed at the speed anticipated by the contract. In addition, the Housing Grants Construction and Regeneration Act gives the right to suspend performance for failure to make payment that has been notified as due. Either party may have the right to terminate at the end of a suspension period, or if a suspension becomes prolonged with no prospect of work re-commencing.
When might a loss and expense claim occur?
Loss and expense Construction contracts will generally provide for the contractor to claim direct loss and/or expense as a result of the progress of the works being materially affected by relevant matters for which the client is responsible, such as: Failure to give the contractor possession of the site. Failure to give the contractor access to and from the site. Delays in receiving instructions. Opening up works or testing works that then prove to have been carried out in accordance with the contract. Discrepancies in the contract documents. Disruption caused by works being carried out by the client. Failure by the client to supply goods or materials. Instructions relating to variations and expenditure of provisional sums. Inaccurate forecasting of works described by approximate quantities. Issues relating to CDM. Claims may comprise costs resulting from disruption to the works or from delays to the works (prolongation). The contractor must give written notice of a claim as soon as it becomes reasonably apparent that the regular progress of the works is being materially affected. This need not necessarily result in a delay to the completion date, and so claims for loss and expense and claims for extensions of time do not necessarily always run together. Claims are restricted to ‘direct’ loss and expense and so ‘consequential losses’ (such as lost production) are generally excluded. Direct losses are those that ‘flow naturally’ from the breach of contract. There is disparity between contract types about whether items such as head office overheads can be included in claims for loss and expense, and some court rulings have allowed such claims. If there are specific consequential losses which the parties to the contract wish to exclude, it may be prudent therefore to state these explicitly within the contract.
What is extension of time and why is it important?
Extension of time EOT in construction contracts Construction contracts generally allow the construction period to be extended where there is a delay that is not the contractor’s fault. This is described as an extension of time (EOT). When it becomes reasonably apparent that there is, or that there is likely to be, a delay that could merit an extension of time, the contractor gives written notice to the contract administrator identifying the relevant event that has caused the delay. If the contract administrator accepts that the delay was caused by a relevant event, then they may grant an extension of time and the completion date is adjusted. Relevant events may include: Variations. Exceptionally adverse weather. Civil commotion or terrorism. Failure to provide information. Delay on the part of a nominated sub-contractor. Statutory undertaker’s work. A delay in giving the contractor possession of the site. Force majeure (such as an epidemic or an ‘act of God’). Loss from a specified peril such as flood. The supply of materials and goods by the client. Strikes. Changes in statutory requirements. Delays in receiving permissions that the contractor has taken reasonable steps to avoid. The contractor is required to prevent or mitigate the delay and any resulting loss, even where the fault is not their own. Assessing claims for an extension of time can be complicated and controversial. There may be multiple or concurrent delays, some of which are the contractor’s fault and some not. There are many occasions where contractors contribute to delay themselves by their performance during design periods, when producing drawings, mock ups and samples or in inter-facing with sub-contractors. Crucial in assessing applications for extension of time is the quality of the information provided and records available. For more information, see How to prepare a claim for an extension of time. Claims should be judged against the actual progress of the works, not the programme, and must demonstrate the link between the breach (cause) and the delay. The contract administrator may review extensions of time after practical completion and further adjust the completion date. Mechanisms allowing extensions of time are not simply for the contractor’s benefit. If there was no such mechanism and a delay occurred which was not the contractor’s fault, then the contractor would no longer be required to complete the works by the completion date and would only then have to complete the works in a ‘reasonable’ time. The client would lose any right to liquidated damages. Claims for extension of time can run alongside claims for loss and expense (relevant matters) however, one need not necessarily lead to the other.
what is meant by time is at large in a construction contract?
If ‘time is at large’, ie there is no date for completion, or the date for completion has become invalid (with no mechanism for extension), then the contractor is no longer bound by the obligation to complete the works by a certain date. The client would then not be able to claim liquidated damages from the contractor and the contractor would only have to complete the works in a ‘reasonable’ time. The client would then only be entitled to damages if they could established that the contract was not completed within a reasonable time. Construction contracts will usually include a date by which the works described in the contract should be completed. This is generally the date by which practical completion must be certified. The phrase ‘time at large’ describes the situation where there is no date for completion, or where the date for completion has become invalid. The contractor is then no longer bound by the obligation to complete the works by a certain date. Time can become at large because there is no clear completion date specified in the contract, or can be a situation that arises as a result of events (typically by agreement of the parties or by failure of the contract ‘machinery’), or if the contract does not allow the construction period to be extended. It is not uncommon on construction projects that the works are not completed by the date for completion. If this is because of delays for which the contractor is responsible, then the contract will generally include a provision for them to pay liquidated damages to the client. These are pre-determined damages based on a calculation of the actual loss that the client is likely to incur if the contractor fails to meet the completion date. Some contracts require that a certificate of non-completion is issued as a pre-requisite to deducting liquidated damages. If the works are delayed because of events for which the client is responsible (an act of prevention) or by agreed neutral events, the contracts will generally provide for an extension of time to be granted, changing the completion date (see relevant events). If contracts did not allow the construction period to be extended under such circumstances, then time would be at large. The client would then not be able to claim liquidated damages from the contractor as there would be no date against which they could be calculated and the contractor would then only have to complete the works in a ‘reasonable’ time. The client would only be entitled to damages if they could establish that the contract was not completed within a reasonable time. It is important therefore that clauses describing relevant events cover all necessary eventualities, otherwise if an event occurs that is not covered, time will be at large. NB: Construction contracts generally include a provision requiring that the contractor proceeds ‘regularly and diligently’ irrespective of whether it is apparent that the completion date will be achieved.
What is acceleration?
Acceleration is the process of speeding up the work of a contractor so that a particular activity, or the project as a whole, can be completed before the date required under the contract. Generally, it is the client that requires the acceleration of construction work. A client might require that a building is handed over earlier than is set out in the contract or, where the contractor has been allowed an extension of time, may require completion earlier than the revised completion date. This is referred to as ‘directed acceleration’. Where the contractor incurs additional costs as a result of this sort of acceleration, it can result in a claim against the client. Typically, the contractor does not have to prove the works were actually completed more quickly than originally agreed, just that they made a reasonable attempt to do so and that the attempt resulted in additional costs. Acceleration of the works may also be undertaken by the contractor voluntarily, if, for example, they wish to move on to another project, mitigate inefficiencies and delays that may have been incurred, or to save on costs. They may also be motivated by bonuses awarded for early completion. However, if acceleration is undertaken voluntarily, the contractor will not be able to claim additional costs from the client. There are several techniques available for accelerating work: Working overtime. Adding new shifts. Providing additional labour. Additional supervision. Providing additional resources, such as plant and equipment. Re-sequencing work activities (also known as project crashing or fast tracking). Adopting alternative construction methods, such as off-site manufacturing. Changing the design or specification. Reducing the scope of the works (for example transferring responsibility for some works from the contractor to the client), and Early procurement of key items. These techniques are likely to result in additional costs and may not guarantee early completion. While the same number of tasks need to be performed, they are condensed into a shorter period, and so are likely to require more resources. In addition, purchasing costs may be higher due to time pressures, incomplete information and the complexity of managing the interfaces between elements. A greater number of variations are also likely than on a traditional contract. Options such as working overtime typically result in employees being paid at a higher rate (typically 1.5-2 times the regular rate). Acceleration is also likely to result in additional risks. If resources are focused on critical-path activities, there is the possibility that non-critical-path activities will be affected. Quality, safety and compliance can be affected, and acceleration can result in an overall loss of productivity, perhaps due to tiredness on the part of workers being required to do overtime, or unfamiliarity of the site and the project on the part of additional workers being brought in. It is recommended that acceleration agreements are prepared prior to the implementation of acceleration measures to clarify the position regarding factors such as cost, reward and risk. For more information, see Agreement for the acceleration of construction works.
What are fluctuations?
Fluctuations in construction contracts Fluctuations provisions in construction contracts provide a mechanism for dealing with the effects of inflation, which on large projects lasting several years can be very significant. On smaller projects, the contractor will be expected to take inflation into account when calculating their price (a firm price). On larger projects, the contractor may be asked to tender based on current prices (prices at an agreed base date) and then the contract makes provisions for the contractor to be reimbursed for price changes to specified items over the duration of the project (a fluctuating price). Fluctuation clauses in contracts may allow for: Changes in taxation. Changes in the cost of labour, transport and materials (sometimes referred to as ‘escalation’). Increases in head office or administrative costs.
What is the Joint Fire Code?
The term ‘Joint Fire Code’ refers to a document called Fire Prevention on Construction Sites: The Joint Fire Code published by the Fire Protection Association (FPA) and the RISCAuthority. Construction sites are particularly vulnerable to fire. The losses that follow can be high, in economic terms as well as through delays, injury or loss of life. In the 1980’s, insurers were beginning to question whether it was commercially viable to continue insuring construction sites. In 1992, the Joint Fire Code was first published, providing guidance on fire safety on site as well as the prevention and detection of fire. The Joint Fire Code was widely welcomed and supported across the industry, both by designers, contractors and insurers. It is supported by the Association of British Insurers, the Chief Fire Officer Association and the Contractor’s Legal Group, and is endorsed by institutions such as the RIBA, ICE, and HBF. There is now also close liaison with the Health and Safety Executive to ensure the code is aligned with HSG 168 Fire Safety in Construction Work. The Joint Fire Code covers activities through all stages of design, procurement and construction. Generally it applies to contracts with a value of more than £2.5million, but it can also apply to lower value contracts which are considered to be high risk or which form part of larger projects. The code describes ‘…a series of simple precautions and safe working practices (to) ensure that adequate detection and prevention measures are incorporated during the design and planning stages and that work on a site is undertaken to the highest standard of fire safety.’ The code is accompanied by the Construction Site Fire Prevention Checklist, which is in the form of a series of questions, responses to which can be used to create a record of compliance with the code. Since its first publication in 1992, incidents of fire on site have reduced significantly. On some construction contracts, the parties will be required to indicate whether the code applies (and whether the project is a ‘large project’ with a value of £20 million or more). Compliance with the code may also be a requirement of some insurance policies. Requiring compliance with the code in a construction contract can lead to a reduction in insurance premiums, however, failure to comply with the code could then result in the withdrawal of insurance which might be considered a breach of contract.
What is Force Majeure
An unforseen act of god Very broadly, it relates to exceptional, unforeseen events or circumstances that are beyond the reasonable control of a party to a contract and which prevent or impede performance of their obligations under the contract. Generally it cannot be an event that the party could reasonably have avoided or overcome, or an event attributable to the other party. Clauses referring to force majeure attempt to set out the circumstances to which the term applies to and prescribe how such situations should be treated. Depending on the provisions of the contract, the following may be considered to constitute force majeure: Unforeseen changes to legislation. Wars and other hostilities (such as terrorism). Fires. Exceptionally adverse weather. Civil unrest, such as riots or revolution. Strikes (other than by the contractor or subcontractors). Natural catastrophes such as earthquakes, floods and volcanoes. Epidemics or pandemics. In some contracts, force majuere is considered a ‘relevant event’, that may allow the contractor to claim an extension of time if they have been prevented or impeded from performing their obligations under the contract. Although, if the contractor has continued to perform their duties, despite the occurrence, they may not be able to make a claim.
What is frustration to a contract
Frustration occurs when circumstances that are not the fault of either party mean it is impossible to continue with the contract. The contract will come to an end without any party being considered to be in breach.
What is frustration to a contract
Frustration occurs when circumstances that are not the fault of either party mean it is impossible to continue with the contract. The contract will come to an end without any party being considered to be in breach. it does not cover contracts that were always going to be impossible to perform. For example, it would not apply in the case of a contract to construct a tall building that could not be fulfilled because the ground conditions were completely unsuitable. Some events that may lead to a frustrated contract include: The government imposing unforeseen restrictions on building. Laws being passed that make it illegal to undertake what was promised under the contract The building where works were to be carried out being destroyed. An event that was crucial for the contractual obligations being cancelled.
What types of JCT contracts are there and briefly when would you use them
JCT MW - simple in nature works, under 500K, dont need BOQ, traditional procurement With CD - if not enough info to complete design of part or want contractor to take on the risk for the element. JCT Intermediate - Sectional completion and BOQ JCT Design and build - with DAB procurement JCT Standard Building contract - large/complex projects, traditional procuremet with or without BOQ JCT Major Works
Tell me about the JCT Design and build contract and why it is different from the other JCt contracts?
contract documents which are the agreement, the conditions, the employer’s requirements, the contractor’s proposals including concept drawings, and the contract sum analysis. first recital sets out the work to be undertaken by the contractor (the works). employer’s requirements expand on this in clause 1.1. Second recital -contractors proposal contract sum analysis into the contract. The contractor’s proposals are the contractor’s response to the employer’s requirements outlining how the contractor intends to satisfy the standards and requirements set out by the employer. Professional Indemnity Insurance The obligation to maintain such insurance under clause 6.15 and 16 (2016 version) only applies where a level of indemnity has been inserted into the contract particulars. It is therefore essential that this is completed
What is included in the employers requirements under the JCT design and build contract?
The employer’s requirements are a set of instructions that the employer provides to the contractor setting out the standards that are to be satisfied when designing and constructing the building. The employer’s requirements should be confirmed prior to execution of the contract as although modifications can be made once the contract is in force, such adjustments are construed as a ‘change’ under clause 5.1.1 (clause 2.12). As the contractor is not responsible for either the content of the employer’s requirements or for verifying the adequacy of any design within them (clause 2.11) it is the employer that is liable for the consequences of a ‘change’. Design and build contracts do not therefore inherently relieve the employer from ‘all design’; retaining responsibility for any deficiencies in the underlying design. These consequences may include a claim for an extension of time (clauses 2.24; 2.25; 2.26.1) and for loss and/or expense (clause 4.20) by the contractor. An exception to this occurs where the contractor identifies a divergence from statutory requirements in the employer’s requirements or the contractor’s proposals. If such a divergence arises, the contractor is to give written notice to the employer specifying the divergence and proposing an amendment to remedy it (clause 2.15.1). With the employer’s consent, the contractor is to complete the design and construction of the works in accordance with this amendment at its own cost. f there are any discrepancies or divergences in the contractor’s proposals, the contractor is to notify the employer (clause 2.13), who will recommend how to resolve the situation. The contractor is to implement the employer’s recommendation at its own cost (clause 2.14.1). If the discrepancy lies in the employer’s requirements, it is the contractor’s proposals which prevail. If the discrepancy is not dealt with in the contractor’s proposals or any of the construction information (as defined in clause 2.8), the employer is to modify the employer’s requirements, which will be construed as a change (clause 5.1), potentially giving rise to claims for extensions of time and/or loss and expense.
What can happen if you ammend the client requirements during the design and build contract?
The contractor can ask for an extension of time as it could be considered a client variation.
What is a collateral warranty
A collateral warranty is a binding agreement which gives third parties contractual rights which are collateral to an underlying contract to which it is was not an original party.
How does the Design and Build contract provide for you to deal with any suspected poor workmanship or poor materials?
Should the materials, goods or workmanship not be in accordance with the standards specified in the employer’s requirements (or other documents), clause 3.13 enables the employer to instruct the removal of such materials, goods or work. If as a consequence of the instruction a change is required, no adjustment can be made to the contract sum and no claim can be made for an extension of time. Alternatively, the employer can instruct an inspection or test (under clause 3.12) to check if the materials, goods or work meets the specified standards. In these circumstances there may be no adjustment of the contract sum unless the inspection or testing shows that the standard is met. If the required standards have been met then the contractor may be entitled to claim for an extension of time and/or loss and expense.
