Why are standard forms of contract (SFC’s) generally preferable than bespoke contracts?
Three main reasons: cost, certainty and familiarity.
Explain how using a SFC can have benefits over using a bespoke contract?
Cost - Using a SFC avoids the cost of preparation and production of a bespoke contract, which typically would be written by solicitors.
Certainty - SFCs are tested and enable complex contractual arrangements between parties to ensure projects can be managed through known processes.
Familiarity - Widespread use of SFC’s have made them familiar with professionals in the industry. This benefits as parties often already understand their roles, responsibilities and rights under the contract before they start.
Can SFC’s be amended?
Yes, it’s unusual to find an SFC without some form of amendment. However, there is risk that too many amendments can negate the benefits of using an SFC.
When selecting a SFC for a project what must you ensure?
The SFC is best suited to meet the needs of the project, not solely the SFC you are most familiar with.
What are the selection factors to consider when choosing a SFC?
- Identity of the client / employer
- method of procurement
- source of design
- size of the project
- allocation of risk
- type of project
What are the main procurement options?
- Traditional
- Design and build
- Management procurement
Explain traditional procurement.
The design is separate from construction and full documentation is required before the contractor is invited to tender for carrying out the works.
Explain design and build procurement.
The contractor is responsible for undertaking both the design and construction of the work in return for a lump sum price. There are variants to this depending on the degree to which initial design is included in the clients requirements.
Explain management procurement
Overall design is the responsibility of the clients consultants. The contractor is responsible for defining packages of work and managing works through separate trades.
What are some of the most common SFC suites?
- JCT (joint contracts tribunal)
- NEC (new engineering contract)
- FIDIC
- PPC200
Name some of the contracts within the JCT suite
- Standard Building Contract
- Intermediate Building Contract
- Minor Works Building Contract
- Design and Build Contract
- Major Project Construction
- Management Building Contract
- Measured Term Contract
When is a JCT Standard Building Contract (SBC) appropriate?
- Appropriate for larger works designed on behalf of the employer, where detailed contract provisions are necessary.
- Where an architect/CA and QS administer the conditions.
The SBC has the following variations:
- with quantities
- without quantities
- with approximate quantities
When is a JCT Intermediate Building Contract (IC) appropriate?
- Appropriate where proposed building works are simple, involving basic trades without complex, specialist work.
- Works designed on behalf of the employer and detailed contract provisions are necessary.
- The employer provides the contractor with drawings, bills of quantities, a specification or works schedule to define the quantity and quality of the work.
This form of contract is more detailed and contains more extensive control procedures than the Minor Works Building Contract (MW) but less detailed than the Standard Building Contract (SBC).
The Intermediate Building Contract has the following variations:
- Intermediate Building Contract (IC)
- Intermediate Building Contract with Contractors Design (ICD)
When is a JCT Minor Works Building Contract (MW) appropriate?
- Appropriate where the proposed building works are simple in character.
- Works designed on behalf of the employer.
- Where an architect/CA is to administer the contract conditions.
- The employer provides drawings, specification and/or schedule of works to define the quantity and quality of the work.
This form of contract is not suitable when bills of quantities and/or detailed control procedures are needed.
The Minor Works Building Contract has the following variations:
- Minor Works Building Contract (MW)
- Minor Works Building Contract with Contractors Design (MWD)
When is a JCT Design and Build Contract (DB) appropriate?
- Appropriate where detailed contract provisions are necessary.
- Where the contractor is to not only carry out the works, but also complete the design.
- Where the employer employs an agent to administer the contract conditions.
When is a JCT Management Building Contract (MC) appropriate?
- Appropriate for large scale projects requiring an early start on site.
- Where works are designed by or on behalf of the employer but where it is not possible to prepare full design information before commencement.
- The employer provides the management contractor with drawings and a specification.
- The management contractor administrators the contract.
The management contractor does not carry out any construction works themselves, but manages the project. They employ separate contractors to carry out the works.
When is a JCT Measured Term Contract (MTC) appropriate?
- Appropriate where the employer has a regular flow of similar maintenance and minor works, including improvements.
- Carried out by a single contractor over a specified period of time, under a single contract.
- Where work are instructed from time to time, measured and valued on the basis of an agreed schedule of rates.
- Where a contract administrator is employed to administer the contract conditions.
How can you ensure you are selecting the correct form of JCT contract?
I would review the current JCT “Deciding on the appropriate JCT contract” practice note against the project requirements.
What is The JCT?
The JCT stands for The Joints Contract Tribunal, and provide a suite of standard forms of contract (SFCs). JCT is generally regarded as the industry standard against which all others are judged. The latest edition published in 2016.
What is the NEC?
The NEC standard for “New Engineering Contract” and was produced by The Institution of Civil Engineers (ICE). The objective of the NEC was to publish a flexible contract “written in plain English”.
The contract works by having main options allowing the employer different ways of pricing the project and different ways of paying the contractor.
The main options do not change the rest of the contract.
What are the various contract options in NEC?
Option A - Priced lump sum contract with activity schedule
Option B - Priced lump sum contract with BoQ
Option C - Target Cost Contract with activity schedule
Option D - Target price contract with BoQ
Option E - Cost reimbursable Contract
Option F - Construction Management option
Option G - Term contract
Explain the NEC Option A Contract
- Priced contract giving lump sum price for works described in the activity schedule.
- The lump sum contract is linked to a contract programme with an activity schedule. Each activity is allocated a price.
- Interim payment is made upon completion of completed activities.
Explain some of the pros and cons of using an NEC Option A Contract.
Pros:
- Simplified payment process. It’s easier to measure when an activity is complete rather than output of work complete on a BoQ.
- For clients, greater cost certainty than with a target cost option.
Cons:
- for contractors, there is no provision for part payment. If there is an issue completing an activity, no payment is made until the activity is complete.
