Contract Administration

Question 1

1. What are the standard contract forms and when might each be appropriate?

Answer 1

Lump Sum – Building where design is complete
Measured – Infrastructure work or ongoing work where the scope is known but not quantity
Cost Reimbursable – Early start required e.g. emergency works
Design and Build – Partial design where contractor takes over responsibility
Management – Trade packages are managed directly (no MC) – early start

Question 2

2. What obligations does the quantity surveyor have under D&B?

Answer 2

Only EA (no QS role D&B)
Undertake valuations
L&E
Final Account
Value variations

Question 3

3. What obligations does a CA/EA have?

Answer 3

Only EA D&B
Chair meetings
Instructions
EoT
Issue Certificates
Certify Completion

Question 4

4. What is the difference between CA & EA?

Answer 4

CA – SBC EA – D&B
EA typically also undertakes QS duties but this is not assumed contractually i.e. could be different party but no formal QS role under D&B

Question 5

5. Why is it important to take meeting minutes?

Answer 5

Clearly outlines key discussion; agreements or issues, actions by when and by who

Question 6

6. What is the order of a typical progress meeting?

Answer 6

Intro’s
actions from previous
contractor report
progress & issues
change
future meetings

Question 7

7. What certificates might be issued and why?

Answer 7

Completion certificate – ensure time is not at large

Interim valuation certificate – Confirm agreed valuation between EA and MC

Question 8

9. What is the RfP/valuation?

Answer 8

Gross valuation, less retention, less previous payments.

Agreed with the contractor and issued as “RfP” to the client (only “advice”) by EA/CA.

Question 9

10. What are the implications of completion?

Answer 9

Implications; Rectification period begins - Half retention released - Client insures - LDs are not applicable
Employer must accept building early if it is actually complete

Question 10

11. What impact does the Local Development Economic Co Act impose on a contract?

Answer 10

• Payment notice must be issued 5 days after due date
• If no payment notice after 5 days, then contractor can issue their own
• Pay less notice must be issued if employer is to pay less than the the notice
• Entitled to Adjudication

Question 11

12. What were your duties on the EA contract?

Answer 11

Take meeting minutes
Issue Instructions
Issue Certificates
Certify Completion

Question 12

14. Was there not a QS on the project?

Answer 12

I undertook QS duties as well

Question 13

15. What change requests did you receive? Park

Answer 13

Re-fitting of guttering pipes to adjacent delipated building as water was seaping onto the site and not into drain

Question 14

16. What was included in your change request form?

Answer 14

Outline of works inc. rates & quantity#

Any impact on programme . date for instructions

Question 15

17. Give an example of when you priced a variation?

Answer 15

UPS steps

Question 16

18. How long does a contractor have to respond to a variation request?cD&B

Answer 16

D&B 14 days of instruction
Employer has 10 days to instruct
Contractor can object e.g. H&S issue
Employer pays for design work if not instructed

Question 17

19. Does the time change for a contractor to respond to a variation request on SBC differ?

Answer 17

21 days SBC (14 days D&B)

Employer 7 days to instruct (10 D&B)

Question 18

20. What happens if they do not respond or refuse?

Answer 18

The employer can employ someone else to undertake the work:

• Employer must give written notice to comply
• 7 days must elapse after this notice to commence works

Question 19

21. What did you issue when the contractor failed to achieve the completion date and why did you do this?

Answer 19

Non- completion notice – ensure time was not at large to allow the client to issue LD’s if needed

Question 20

22. What was stated in the non completion notice?

Answer 20

States that on the date of the contract completion the works was had not satisfied the completion requirements

Question 21

23. There was a dispute between the client and the contractor as progress was slow and the contract completion date had passed? How did you deal with the issue?

Answer 21

I considered both parties perspectives:
Contractor representative was faced with a difficult situation as it was clear he was not being provided with sufficient resource to complete project

Client – Had not issued LD’s and had aided the MC with the project but was not seeing much improvement

• I suggested that parties work together on a completion countdown programme to completion that could be agreed.
• If works continued to not progress then further action would have to be considered.

Question 22

How does D&B differ to SBC contractually?

Answer 22

Contractor responsible for design 
No listed subcontractors, 
No architect/CA/QS (EA only), 
No clerk of works, 
No payment certification – contractor applies and employer decides how much

Question 23

Roles/Responsibilities of:
Client
COntractor
QS
CA
EA

Answer 23

Client - Pay, Possession, Insure, Not obstruct, Pay Less if does not agree/LDs
Contractors – Complete Work & Design, Comply, Inform EA of discrepancies
QS – Only EA (no QS role D&B), Undertake valuations, Confidential, L&E, Final Account, Value variations
CA – Only EA D&B), Chair meetings, Inspect work, Instructions, EoT, Issue Certificates, Certify Completion
EA – As CA but for D&B, typically QS but contractually is assumed as different party

Question 24

Contractors Estimate - D&B process?

Answer 24

• Contractor must provide a quotation within 14 days of the instruction (SBC 21)
• Employer then has 10 days to accept the quotation or withdraw instruction (7 days SBC)
• Contractor can object on reasonable grounds within 10 days of instruction
• Employer will pay for specific design work required to produce the estimate if rejected

Question 25

Employer Liability;

Answer 25

Required by all firms employing staff, Pays out if employee is injured or ill

Question 26

Public Liability;

Answer 26

Covers injury or death to public, also covers loss or damage to 3rd parties

Question 27

Professional indemnity insurance;

Answer 27

Professional services – Negligence – assurance against bankruptcy in case of claim, run off cover for retirement/ winding down

Question 28

What is Terrorism insurance? Is it higher in certain regions?

Answer 28

Contract requirement Damage or loss by terrorism Pool re-insurance back by UK gov. should losses be too large, premium for high-risk areas e.g. London

Question 29

Non-negligent insurance –

Answer 29

Contractor acquires. | Insurer may not pay if non-negligent, i.e. contractor is not to blame!

Question 30

Contractor’s all risk –

Answer 30

Joint policy with employer, protects against loss or damage to works, machinery, materials

Question 31

Contract Option Insurance: | What is

Answer 31

Option A - New Building - Contractor – Full reinstatement plus Fees, Risk of underinsurance with contractor Option B - New Building – Employer - Full reinstatement plus Fees, Employer must cover any insurance shortfall Option C – Existing structure – Employer – Replacement schedule required (Expert required) (Insurance covered by Landlord not party to contract if tenant is Employer). Employer must cover any insurance shortfall Either party can terminate the contract following extensive damage with a 28-day notice

Question 32

What is a Performance Bond? When does it expire? Which bond is preferable?

Answer 32

Surety to Employer of Contractor non-performance Worth 10% of Contract value (delay & re-tendering) Expires at PC/EoD On Demand as with a Conditional Bond proof of non performance and loss is required – JCT 2016 option to include

Question 33

What is a Parent Company Guarantee? How is it incorporated?

Answer 33

Contractor procures in Employers favour No Cost Parent Company assume responsibility for Contractor obligations should they become insolvent Lasts the limitation period of contract (6/12 years) L2 - Wrexham ECE - Mark Wakefield Demolition

Question 34

What are 3rd Party Rights? How do they differ to CW's?

Answer 34

- Rights of third parties Act 1999 allows the enforcement of terms of a contract that confer a benefit upon them Can only apply if written into contract prior to execution e.g. Sub Contractors’s are identified SC’s must be known early on (typically they are not appointed until post MC appointment) Less favourable than CW’s as not tested in court

Question 35

Collateral Warranties –

Answer 35

Creates contractual link where otherwise would not exist e.g. Funder to MC or Employer to SC Protects against defective work should a party become insolvent e.g. MC ceased trading but Employer has benefit of CW with SC Usually a completion requirement for CW’s to be executed.

Question 36

Change Process D&B

Answer 36

Change from ER’s; Design, Quality or Quantity or Imposition (site access, working hours, reduced working area) Employer makes EA aware – Instruction/EAI (if immediate) or Estimate – Employer Proceed? – Change Proposal to Contractor – Contractor Price – Accepted or Negotiated Instruction by EA – Contractor confirms within 7 days – takes effect from 7 days of confirmation If Contractor does not comply Employer/EA can give notice – 7 days post notice 3rd party can be appointed

Question 37

Practical Completion typical requirements?

Answer 37

``` H&S file, Testing & Commissioning, Work Practically Complete, O&M, CW’s, Building Certificate, Planning Compliance, Structural Warranty, As Built DWGs, Keys. ```

Question 38

Sectional Completion –

Answer 38

Contract provision As Practical COmpletion but Pro Rata Value of Section must be stipulated e.g. 50% of contract value if two sections of same value

Question 39

Partial Possession –

Answer 39

Post contract variation Contractor cannot unreasonably withhold Detail to clarify extent of area, implications as SC L2 - UPS Conveyor contractor

Question 40

Early Use –

Answer 40

Employer may use part of the site early for storage or otherwise with contractors consent contractor responsible notify insurers as likely to attract premium (third party use) L2 - UPS; Considered but dismissed due to potential claims from Main Contractor

Question 41

What are Named Subcontractors? WHat is the process? Which type is no longer used? Would you recommend this?

Answer 41

Client can influence the selection of sub-contractors - MC responsibility for SC performance 1. Client short-list SC’s in the tender documents for the main construction contract. 2. MC has opportunity to reasonably object to any firm on the list. 3. MC leads the tender process for each named SC package. 4. After appointment, the named subcontractor becomes a domestic subcontractor. Nominated no longer included in JCT Good if a component of work is specialist and client has relationship with trade contractor. Takes away from Main Contractor

Question 42

Domestic Subcontractor –

Answer 42

A contractor the MC sub-contracts to carry out part of the works. SC domestic if freely selected by a list of at least three Named sub-contractors become domestic sub-contractors once they are appointed by the MC.

Question 43

Outline what an Extension of Time is and how to review one?

Answer 43

Preserve right to issue LD’s Contractor must give notice: Cause of delay (Relevant Event) & expected delay to completion date. Employer has 12 weeks to assess the EoT (if less time to completion endeavour to assess prior) Must be attributed to a Relevant Event or Matter Employer must establish: 1. Has the delay been caused by the event? 2. Will the delay disrupt the programme? 3. What is the delay likely to be? Contractor should endeavour to prevent delay L2 - Wrexham Material issue - not deemed a RE- Contractor cashflow main cause of delay (resource issues) UPS - act or ommission - HV power delay

Question 44

What is a Concurrent delays?

Answer 44

Usual to grant an EoT for the dominant delay (begins before and finishes after the other delay) Where 1 concurrent event is due to contractor and 1 due to employer, Usual (and backed up in case law) that the contractor may receive an EoT to cover the employer caused delay, despite being partly to blame for its own delay. Example -

Question 45

Is the employer required to pay for Materials off site? How can they be included in a valuation?

Answer 45

Off Site: - Employer not obliged to pay for any materials off site unless ‘listed items’ within the contract - Listed items e.g. bespoke cladding or steelwork, lift In order to to be included in valuation: - Listed (in contract) - Vesting certificate (in the employer) - Insurance (against specified perils until delivery to site then covered under all risk insurance) - Set apart, clearly marked, identified and properly protected L2 - Wrexham

Question 46

Can On Site Materials be included in a valuation? Who's property are the materials? Who takes responsibility for damage>

Answer 46

Can be included in a valuation if: - Not delivered prematurely - Suitably protected from weather (insulation not covered to prevent water ingress) - The materials become property of the employer once they are paid for but the contractor is still responsible for any damage and/or theft.

Question 47

What is Determination?

Answer 47

-Events may occur on site which are so serious that the other party may prefer not to continue with the contract o Provision allowing the termination of the employment of the contractor - Termination is of the contractor’s employment under the contract rather than termination of the contract itself o Parties will remain bound by the contract and can bring losses associated with it. If the contract is terminated, this cannot happen. - Termination can be initiated by the employer or contractor. Example

Question 48

Termination by the Employer: How would you implement?

Answer 48

Notice of default of 14 days Notice of termination 21 days then Employer can employ others Reasonable time for final account

Question 49

Contractor Default

Answer 49

- Suspends work with no cause - Fails to proceed - Refuses to comply

Question 50

What would happen if the Contractor became insolvent?

Answer 50

- If the Contractor becomes insolvent the Employer can terminate the Contract. - The Contractor to notify the Employer of any insolvency matters arising. When the Contractor becomes insolvent (regardless of any notices): - No further sum shall become due to the Contractor (except final date for payment subject to any Pay Less Notices). - Contractor’s obligations to complete the works shall be suspended. - The Employer to protect and secure the site and the site materials.

Question 51

What is Contractor corruption?

Answer 51

- Any person employed by the Contractor (this Contract or others) if they have carried out an act of corruption under the Bribery Act 2010. - If the Employer is a Local Authority and been given a fee or reward of which is an offence under the Local Government Act 1972.

Question 52

If the Contractor becomes insolvent the Employer may appoint a new contractor to complete the works but may require the contractor to:

Answer 52

- Remove temporary site buildings and plant - Provide copies of all contractor’s designs - Assign benefit of subcontractors to employer - A notional final account must be put together by the employer within 3 months of the completion of the works (establish loss) - Contractor becomes liable for the amount required to the employer

Question 53

Process for Termination by the contractor?

Answer 53

``` Notice of default 14 days Notice of termination 21 days Employment terminated Reasonable time for final account 28 day payment ```

Question 54

The contractor can terminate its own employment under the contract due to:

Answer 54

Employer default: - Does not pay - Fails to comply with CDM Employer insolvency - Termination by the contractor is optional - Contractor must issue notice and termination will take effect from receipt of notice

Question 55

Termination by either party

Answer 55

Either party has the right to terminate the contract if the works are suspended for the period noted in the contract particulars ``` 2 months suspension: Warning notice 7 days Termination Reasonable time for final account 28 day payment ``` - Force majeure – Negligence of statutory undertaker – loss/ damage by insurance – terrorism – UK government -Final account; Value loss & damage removal protection/security e.g. Covid (potential but government allowed construction works to continue)

Question 56

What are Liquidated Damages? Can additional claims be made? what are they called? How could you calculate LD's? How are they included in the contract?

Answer 56

- Failure to comple the project by the completion date = Employer make deduction: - Pre-determined estimates of loss to the employer (not penalties which are unenforceable). The loss must flow from the contract breach and not be remote - If losses are significantly different to the estimate in the contract, the employer can claim unliquidated damages (actual loss) through the courts Examples of the calculation of LDs include: - Loss of rent - Loss of income - Fees - Storage costs - Rental costs - Finance costs This amount is inserted into the contract per day or week -Following completion of a Section, the rate for the works will reduce pro-rata unless the amounts per Section are specifically included

Question 57

Process for issuing LDs

Answer 57

- Practical completion not achieved: - Employer fulfilled all duties in awarding any EoTs - Issue a non-completion notice for the works (to ensure that time is not at large) - Employer must notify the contractor before due date for the final payment that they may withhold liquidated damages for the period between the completion date and the date of PC - Employer may withhold amount in LDs section or a lesser amount - Employer must issue a Pay Less Notice including detail of calculation - Further EoT will cancel out any non-completion notice although a new notice can then be issued if necessary

Question 58

What does issuing a Completion notice provide for the contractor?

Answer 58

- Fixed point/date for damages if applicable

Question 59

What is the Defects/rectification period? How does the process work? What is a latent defect vs patent? Example of typical defects

Answer 59

- Contractor is required to make good any defects as notified by the employer for the Rectification Period - Default period for JCT is 6 months but commonly amended to 12 months (allow for a full season of weather) - Employer should provide a schedule of defects within: 14 days of the end of the Rectification Period e.g. 12 months +14 days - If contractor refuses to undertake rectification of the defects and suitable notice is given to the contractor, the employer may use the retention monies to undertake the works and deduct any allowances from any further money due to the contractor - Once complete - 1. Notice of Completion of Making Good is issued (pre-condition of the final payment) 2. Retention released upon issue of Notice of Completion of Making Good. - Latent defect (remember Later) – defects which arise in future that could not be seen (rectification dependent on limitation period – 6 or 12 years) - Patent defect (remember Present) defects discovered upon inspection during rectification period.

Question 60

Final account statements/certificates

Answer 60

- Following practical completion, monthly payment notices must still be issued up to the final payment, whether or not there is any sum due – there may be payments for loss and expense etc. - Final statement (D&B) - Following PC, the contractor must send a final statement with supporting information - Contract sum adjustments, sums already paid and the balance to be paid

Question 61

How have you adjusted a Final account statement?

Answer 61

Provisional sums – Instructions - Loss and expense - Contractor must provide within 3 months of PC - If not, employer must issue a 2-month notice stating intention to complete it - Employer may issue their own statement after that 2 months - Final statement can be positive or negative (e.g. Provisional Sum omission) - Final date for payment is 14 days from the due date: one month after either final statement, end of defects or notice of making good - If the matter of agreement goes to adjudication, arbitration or other, then the time period is frozen until completion of those proceedings, so long as relevant notices are issued

Question 62

Novation and consultant switch

Answer 62

- Normally, the contractor will employ their own design team to take the Employer’s Requirements and develop these into the works on site – during this time, the contractor may look at ways to reduce more expensive details from the original design having quoted a price to build all the works - Under D&B, the client may wish to ensure that the design style undertaken by the architect pre-contract is carried through into post-contract.

Question 63

What is Novation?

Answer 63

- Contract between the employer and architect will be replaced by a contract on identical terms between architect and contractor - Contractor replaces the employer as he accepts all obligations and liabilities formerly as the employer’s e.g. pay for the services - The architect will have no liability to the employer. - A deed of variation to the appointment is required to reflect this change (a novation agreement).

Question 64

Consultant switch

Answer 64

- Original appointment (employer and architect) is brought to an end and new appointment (contractor and architect) is entered into (with agreement between all 3 parties). - Architect is still liable to the employer for breaches made during that time but not after the switch (with the exception of warranties). - This process is not the same as novation as the contractor could claim against the employer for pre-novation design team mistakes. - Employer hopes to retain control over the developing design – however the architect is no longer in contract with the employer - Communication between these parties should now go through the contractor - The quality is heavily dependent on how much the architect stands up to the contractor - Often it is better to retain the architect as an advisor for the employer to comment on the design submission process

Question 65

Typical requirements of completion?

Answer 65

``` Must be confirmed in contract; H&S file, Testing & Commissioning, Work Practically Complete, O&M, CW’s, Building Certificate, Planning Compliance, Structural Warranty, As Built DWGs, Keys. ```