04 Contract Selection

Question 1

What forms of contracts are you aware of?

Answer 1

JCT (Joint Contracts Tribunal)

Traditional, Design & Build, Intermediate, Minor Works, Measured Term, Management, Construction Management.

NEC (New Engineering Contract) – NEC4

ECC (Engineering & Construction Contract), PSC (Professional Services), ECC Short Form, TSC (Term Service), ECC Option A–F.

FIDIC (International)

Red Book, Yellow Book, Silver Book, Green Book, Gold Book.

Each type has distinct characteristics and is suited for different project requirements and risk levels.

Question 2

What main criteria would you consider when selecting a form of contract?

Answer 2

• Cost
• Complexity
• Risk allocation
• Project duration
• Client requirements

Each criterion influences the suitability of a contract type for specific project needs and stakeholder expectations.

Question 3

How might the type of client affect the choice of contract?

Answer 3

The type of client can influence contract choice by determining the level of risk they are willing to accept, their experience with similar projects, and their specific needs or preferences regarding project delivery methods.

For instance, a public sector client may prioritize compliance and transparency, while a private sector client might focus on cost efficiency and speed of delivery.

Question 4

How might the location of a project affect the choice of contract?

Answer 4

The choice of contract can be influenced by factors such as local laws, regulations, and market conditions, which may dictate specific requirements or limitations. Additionally, geographical considerations like climate, accessibility, and available resources can impact the feasibility and type of contract selected.

Understanding the local context is crucial for ensuring compliance and optimizing project execution.

Question 5

What are the advantages of using a standard form of contract?

Answer 5

Standard forms of contract provide clarity, consistency, and efficiency in project execution. They are widely recognized and understood, which can reduce negotiation time and legal disputes.

Using a standard form can also facilitate smoother communication among parties, as everyone is familiar with the terms and conditions typically included.

Question 6

What are the problems associated with a bespoke contract?

Answer 6

Bespoke contracts can lead to increased complexity, higher costs, and longer negotiation times due to their unique nature. They may also introduce ambiguity in terms and conditions, which can result in disputes between parties.

Unlike standard contracts, bespoke contracts require careful drafting to ensure clarity and mutual understanding, as they are tailored to specific project needs.

Question 7

A client has his lawyers draw up a bespoke construction contract and has asked you to have a look. To make sure it complies with the Construction Act, what clauses would you expect it to contain?

Answer 7

Clauses that ensure compliance with the Construction Act typically include provisions for payment terms, dispute resolution mechanisms, and requirements for health and safety regulations.

These clauses help protect the rights of all parties involved and ensure that the contract adheres to legal standards set forth in the HOUSING GRANTS CONSTRUCTION AND REGENERATION ACT 1996 AS AMENDED 2011

Question 8

What typical non-standard contract amendments have you come across on your projects?

Answer 8

• Amendments for specific project requirements
• Changes to payment terms
• Adjustments to liability clauses

Non-standard amendments can address unique project risks or stakeholder needs, but they may also introduce complexity and ambiguity.

Question 9

What are the main standard forms of contract available for FM works?

Answer 9

The main standard forms of contract available for FM works include:
* JCT (Joint Contracts Tribunal) contracts
* NEC (New Engineering Contract) forms
* FIDIC (Fédération Internationale des Ingénieurs-Conseils) contracts
* IChemE (Institution of Chemical Engineers) contracts

These contracts provide frameworks for various types of facilities management projects, ensuring clarity in roles, responsibilities, and obligations.

Question 10

Describe the different contract pricing mechanisms you have experienced and those you have yet to come across?

Answer 10

Various contract pricing mechanisms include:
* Fixed price
* Cost-plus - NOT EXPERIENCED
* Unit price - NOT EXPERIENCED
* Time and materials - NOT EXPEREINCED

Each mechanism has its advantages and disadvantages, impacting risk allocation and project budgeting.

Question 11

When would you use a lump sum contract and how does it work?

Answer 11

A lump sum contract is a fixed-price agreement where the contractor agrees to complete a project for a specified total price. This type of contract is typically used when the scope of work is well-defined, allowing for clear pricing without adjustments for unforeseen costs.

Lump sum contracts provide budget certainty for clients but can pose risks for contractors if project costs exceed initial estimates.

Question 12

When would you use a measurement contract and how does it work?

Answer 12

A measurement contract is used when the scope of work is not fully defined, allowing for payment based on the actual quantities of work completed. This type of contract is beneficial in projects where the exact requirements may change over time, as it provides flexibility in pricing based on measured work done.

Measurement contracts help manage risks associated with uncertain project scopes, ensuring that contractors are compensated for the actual work performed.

Question 13

Outline the main range of JCT contracts and briefly state when you would use them.

Answer 13

The main range of JCT contracts includes:
* JCT Standard Building Contract - used for larger, complex projects with a defined scope.
* JCT Design and Build Contract - suitable when the contractor is responsible for both design and construction.
* JCT Minor Works Contract - ideal for smaller projects with simpler requirements.
* JCT Intermediate Building Contract - used for projects that are more complex than minor works but less so than standard contracts.

Each contract type is designed to address specific project needs, risk levels, and client requirements, ensuring appropriate management of responsibilities and liabilities.

Question 14

What criteria will determine whether or not to use the main form, the intermediate form or the minor works form of JCT contract?

Answer 14

The choice between the main form, intermediate form, or minor works form of JCT contract depends on the project’s complexity, size, and specific requirements. The main form is suitable for large, complex projects; the intermediate form is for moderately complex projects; and the minor works form is ideal for smaller, simpler projects.

Selecting the appropriate contract form helps manage risks and responsibilities effectively, ensuring that the contract aligns with the project’s needs.

Question 15

When would you use the ‘With Contractor?s Design’ form of contract?

Answer 15

The ‘With Contractor’s Design’ form of contract allows the contractor to take responsibility for the design of certain aspects of the project, while still adhering to the client’s requirements and specifications.

This type of contract is often used in projects where the client desires a faster delivery and is willing to delegate some design responsibilities to the contractor.

Question 16

Explain the difference between the Contractor?s Design Portion and Performance Specified Works?

Answer 16

The Contractor’s Design Portion refers to the part of a project where the contractor is responsible for the design of specific elements, while Performance Specified Works are those elements that must meet defined performance criteria set by the client, without specifying how those criteria should be achieved.

This distinction allows for flexibility in design while ensuring that the final output meets the client’s functional requirements.

Question 17

How would you set up a contractor?s design portion on one of your contracts?

Answer 17

The contractor’s design portion is established by clearly defining the scope of design responsibilities assigned to the contractor within the contract documents. This includes specifying the elements of the project that the contractor will design, ensuring compliance with client requirements, and integrating the design process with the overall project schedule and budget.

This approach allows for flexibility in design while maintaining accountability for meeting performance standards and project specifications.

Question 18

What forms of management type contract are produced by the JCT suite?

Answer 18

• Traditional Management Contract
• Management Contract with Guaranteed Maximum Price (GMP)
• Management Contract with Cost Plus Fee

These contracts are designed to provide flexibility in project management while ensuring that the contractor is accountable for the project’s overall success.

Question 19

Which of the JCT standard forms are lump sum contracts?

Answer 19

• JCT Standard Building Contract
• JCT Design and Build Contract
• JCT Minor Works Building Contract

These contracts typically involve a fixed price for the entire project, providing clarity on costs and responsibilities.

Question 20

What are the main differences between the JCT 2011 suite and the JCT 2005 suite of contracts?

Answer 20

The JCT 2011 suite introduced several key changes compared to the JCT 2005 suite, including updated provisions for risk management, enhanced clarity in contract terms, and improved alignment with current construction practices. Additionally, the 2011 suite emphasizes collaboration and communication between parties, reflecting modern project delivery methods.

These updates aim to address issues that arose in previous contracts and to facilitate smoother project execution.

Question 21

List the items in the appendix of the JCT contract.

Answer 21

• Contract particulars
• General conditions
• Special conditions
• Drawings and specifications
• Pricing documents

These items provide essential details and guidelines for the execution of the contract.

Question 22

Outline the main range of NEC contracts.

Answer 22

1. Option A - Lump Sum priced contract with activity schedule
2. Option B - Priced contract with bill of quantities
3. Option C - Target Cost contract with activity schedule
4. Option D - Target Cost contract with bill of quantities
5. Option E - Cost Reimbursable contract
6. Option F - Management Contract
7. Engineering and Constriction Short Contract
8. Professional Services Contract
9. Framework Contract

Question 23

How does the ECC Option A contract work?

Answer 23

Option A - Lump Sum priced contract with activity schedule

• Contractor offers to provide the works described in the contract for a sum of money
• The lump sum is adjusted if compensation events occur
• The activity schedule is normally written by the Contractor, where he prices each activity as a lump sum and is paid this amount when he has completed the activity

Question 24

How does the ECC Option B contract work?

Answer 24

Option B - Remeasurement priced contract with bill of quantities

• Employer provides a bill of quantities which is priced by the Contractor
• The contract price is the sum of prices for all items in the bill, which may include lump sums for certain items
• When the work is done, if it is found by remeasurement that the estimated quantity is not correct, it is corrected and payment is paid to reflect the actual works carried out
• Therefore, the Employer takes the risk of the correctness of the quantities
• Normally used where the risk of change of quantities is relatively high
• Not appropriate for D&B as the Contractor is responsible for design

Question 25

How does the ECC Option C contract work?

Answer 25

Option C - Target Cost contract with activity schedule * Contractor tenders a target price using an activity schedule * Each activity is priced as a lump sum and a fee is also tendered as a percentage for subcontract work and the Contractor's own direct work * The target price is the sum of the activity prices and the fee * During the course of the contract, the target price is adjusted to cater for compensation events * Payment is made on the basis of actual costs, with an incentive pain/gain mechanism for the Contractor to minimise costs * The sharing of risk in this way is likely to reduce occurrences of disputes

Question 26

Define the concept of 'mutual spirit, trust and cooperation'?

Answer 26

The concept emphasizes collaboration, transparency, and a shared commitment to achieving project goals among all parties involved in a contract. ## Footnote This principle is crucial for fostering a positive working environment and minimizing disputes during contract execution.

Question 27

When and where might the FIDIC Conditions of Contract be used?

Answer 27

The FIDIC Conditions of Contract are typically used in international construction projects, particularly for large-scale infrastructure works such as roads, bridges, and buildings. ## Footnote FIDIC contracts are recognized for their balanced approach to risk allocation and are widely accepted in the global construction industry.

Question 28

For what type of construction work are the ICE contracts generally used?

Answer 28

The ICE contracts are generally used for civil engineering projects, including infrastructure works such as roads, bridges, and tunnels. ## Footnote These contracts are designed to address the specific needs and complexities of engineering projects, promoting clarity and efficiency in contract administration.

Question 29

What are the main differences between the JCT and NEC contracts?

Answer 29

The primary differences include risk allocation, contract structure, and flexibility. JCT contracts are more prescriptive, while NEC contracts emphasize collaboration and proactive management. ## Footnote NEC contracts are designed to encourage a cooperative approach, often resulting in fewer disputes and more efficient project delivery.

Question 30

Why might you choose to use a JCT contract rather than another standard form, such as the NEC?

Answer 30

A JCT contract may be preferred for its clarity, established procedures, and familiarity within the UK construction industry, which can lead to smoother project execution. ## Footnote JCT contracts are widely recognized and often provide a balanced approach to risk allocation between parties.