Contract Administration Flashcards

Question

What are the advantages of single stage tendering?

Answer 1

Ensures only capable and approved contractors submit tenders. Tends to reduce the overall cost for the tendering process. Client get a lump sum for the entirety of the works.

Answer 2

The design portion of the works is completed by the client’s design team before competitive tenders are invited and a principal contract employed to construct what has been specified. The contractor takes responsibility and financial risk for the construction of the works and completes the works for a contract sum within a contract period which is confirmed at pre contract stage

Answer 3

If the design is substantially completed at time of contractor selection. The client wishes to retain control over the design and specification. When the client needs cost certainty - to get board approval. When total programme length isn’t the clients’ main priority.

Answer 4

JCT Minor Works, 2016. JCT Intermediate

Answer 5

Competitive fairness and transparent process – increase value for money Design led – can ensure quality Price certainty before commencement Well known procedures Changes are reasonably easy to arrange and value

Answer 6

Increases overall project duration - it is a sequential process with design produced before construction can commence. Reduced buildability within the design as contractor has had no input. Dual point of responsibility for client for design and construction. If the design is not completed at time of tender then cost / time certainty are reduced.

Answer 7

List of tenders received. Initial tender return totals. Any qualifications identified. Post-tender adjustments. Revised tender sum. Comparison of tender sums. Recommendation.

Answer 8

The contractor must have not completed the works or section of works by the contractual completion date. The contract administrator must have issued a certificate of non-completion. The employer must have notified the contractor in writing that they intend to claim liquidated damages. This may be by ordering the contractor to pay them or deducting them from the sums owed to the contractor. If the employer wants the deduct the liquidated damages from sums owed to the contractor then a pay less notice is required to ensure compliance with the Housing Grants, Construction and Regeneration Act 1996.

Answer 9

The overall act of obtaining goods and services from external sources (for example a building contractor) and includes decision making with regards to how the goods are to be acquired by reviewing a client’s requirements (i.e time, quality and cost). and their attitude to risk.

Answer 10

Tendering forms part of the procurement strategy and involves: The bidding process to obtain a cost for the works; and How a contractor is appointed.

Answer 11

Procurement is the overall act of obtaining goods and services from external sources (for example a building contractor) and includes decision making with regards to how the goods are to be acquired by reviewing a client’s requirements (i.e time, quality and cost). and their attitude to risk. Tendering forms part of the procurement strategy and involves the bidding process to obtain a cost for the works and how a contractor is appointed.

Answer 12

The first stage of the process involves first-stage tender enquiry documentation being issued to preselected bidding contractors at RIBA stage 2 / 3. At this stage the works are still being designed. The contractors then submit their bids which do not give a lump cost for the entirety of the works but confirm their preliminaries costs, proposed sub letting of the works (sub contractors) and their overhead and profit allowances. The preferred contractor then joins the design team on a consultant basis using a pre-construction services agreement. The preferred contractor then works with the design team to complete the design before presenting a bid for the works.

Answer 13

A single contractor is provided with the tender documentation by the client and then submits their initial cost to carry out the entirety of the works. The client’s professional team then negotiates the cost of the works with the contractor to achieve a final cost.

Answer 14

Advantages: Ensures that only capable and approved firms submit tenders (as they are preselected from an approved list). Client gets cost certainty as they are provided with a lump sum for the works. Disadvantages: - The full design has to be prepared before the works can be tendered which is not suitable whereby total programme length is important.

Answer 15

Advantages: Allows the contractor to contribute to the design and early planning of the work (so increases buildability). Allow the contractor to commence works on sections before the entirety of the design is complete. Disadvantages: Hard to replace the contractor is second stage negotiations break down. Risk of increased cost for retendering works if second stage negotiations have broken down. The second stage is not a competitive process so the contractors cost may not be competitive. Two-stage tendering is suitable for: Projects that are complex (require contractor’s input on design). When programme length is important. Projects whereby the magnitude of the works are yet unknown.

Answer 16

Advantages: The contractor is usually approached because they have carried out similar works and to the required standard before so there is greater certainty of cost and quality. Time and cost savings by reducing input into the tendering process because only a single tender needs to be analysed. Time saving on tender process allows earlier commencement of the works. Disadvantages: Lack of competitive tendering may increase the cost for the works. Negotiation process needs to be structured and controlled otherwise there could be adversity between the parties before works have even commenced. You would usually utilise negotiated tendering when overall programme length is a priority over cost and whereby the client wants to replicate the quality of a project that the contractor has delivered before.

Answer 17

Traditional. Design and build (single and two stage). Management Contracting. Construction Management. Framework agreements. Partnering.

Answer 18

Design and build is whereby the contractor is responsible for the design, planning organisation, control and construction of the works to the employer’s requirements. I would utilise design and build when… The client has a need to make an early start on site as the design can be developed during the construction phase. The client wishes to minimise their risk in relation to the design of the works, this may be due to risky nature of the works for example replacement of combustible cladding. The design is complex and contractor input is needed to ensure buildability. The client does not want to or is not bothered about retaining control over the development of the design. The JCT Design and Build, 2016 contract would be used.

Answer 19

A procurement option whereby a client employs a management contractor to contribute to design and manage the works. The management contractor has direct contractual links with all of the works contractors and has the responsibility for the works without carrying them out. The management contractor breaks down the project into suitable works packages and selects works contractors through competitive open book tenders. The client then then reimburses the cost of the works packages to the management contractor in addition to their fee. I would utilise this procurement route when: 1. The client values an early start and overall project length over cost. 2. The works are extensive. 3. The works are complicated. I would use the JCT Management Contract, 2016.

Answer 20

Advantages: There is a single point of responsibility for the design and construction of the works. Works can commence earlier on site as the design and construction process can overlap. Contractor involvement with the design ensures buildability and expertise are incorporated into the design. It also promotes innovation in design (contractor’s not constrained by detailed design) which leads to cheaper and faster construction. Disadvantages: It may be hard for a client to prepare a sufficiently comprehensive brief. Harder to compare tenders as the contractors each have their own designs rather than pricing for fully defined and designed works. Designs submitted may also be uninspiring as contractors may emphasise quickness of construction over quality.

Answer 21

A procurement strategy whereby the client engages directly with specialists for the design of the works via individual contracts. A construction manager is then employed on a consultant basis to plan, coordinate and monitor the works. The construction manager coordinates the design team and has no contractual links with the specialist contractors or the design team. They prepare the programme, determine prelims and then break down the project into suitable works packages and obtain and evaluate tenders. I would utilise construction management when: 1. The client is uncertain of the extent of works to be carried out. 2. Those clients that want to commence works on site quickly and is less concerned about cost certainty. 3. The client is an ‘expert’ and would benefit from the simple and direct legal relationships as they allow for effective redress of latent defects should they arise. JCT Management Contract, 2016.

Answer 22

Advantages: The construction manager can be appointed early on and can contribute to the design and planning process. Project duration is shortened as there is an overlap between the design and planning. Offers flexibility in design and the works as specialist contractors are let in stages. The simple and direct contractual link between the client and expert contractors allow easy redress regarding latent defects. Cost for the works packages may be lower due to direct contracts between the client and expert contractors. Disadvantages: Client needs to be an ‘expert’ to manage the various contracts between them and specialist contractors and consultants. Can be difficult to select a suitable construction manager as selection is based on skill and not cost of a tender submission. Puts risks of the performance of specialist contractors largely on the employer as the construction manager has little responsibility. There is little incentive for the construction manager to reduce costs associated with the works as their payment is fee based. The price of the works is not confirmed until the last package of works has been let.

Answer 23

Advantages: Overall project duration is shorter due to overlapping design and construction There is contractor contribution to the design and planning process Changes can be accommodated in packages not yet let if they have no further impact The works are let competitively at current market prices on a firm price basis Disadvantages: Can be difficult to select a suitable construction manager as selection is based on skill and not cost of a tender submission. Puts risks of the performance of specialist contractors largely on the employer as the construction manager has little responsibility. There is little incentive for the construction manager to reduce costs associated with the works as their payment is fee based. The price of the works is not confirmed until the last package of works has been let.

Answer 24

Framework agreements allow client’s that are consistently instructing construction work to invite tenders from contractors to be carried out over a prolonged period of time on a call off basis as and when required. Could use JCT FA, 2016.

Answer 25

Advantages Reduces costs related to tendering works. Allows quick start on site. Integration of supply chain. Continuity of finishes end product. Allows development of long term and strong relationships. Disadvantages Reduced competition resulting in higher overall project cost. Contractors must be able to undertake all types of work - this may not be the case if not considered before creation of framework agreement.

Answer 26

Will depend on the client or sector but the public sector is governed by EU procurement rules which limit a FA to 4 years.

Answer 27

Suppliers are appointed on the basis of their capability & capacity to carry out the works. I would first discuss the scope of work & size of packages likely to be involved throughout the FA & would then draw up a list of potential capable contractors either from an internal list of approved contractors which the Client may have (Network Rail) or from my own knowledge & experience & discussions with colleagues. I would invite the contractors to pre-qualify for the Framework, requesting information such as the financial standing, work load, number & quality of staff, previous experience in the potential projects under the FA, H&S & QA procedures in place. Appointment would be assessed based on quality & capability rather than price.

Answer 28

Carry out random audits & benchmark with the industry data (BCIS or internally against other projects recently tendered). Bid some of the work competitively outside the framework & invite framework contractors to tender.”

Answer 29

Documents that evidence the details of the building contract.

Answer 30

Employer’s requirements: Can be a brief written performance statement, sketch drawings, planning permission drawings or detailed drawings and bill of quantities. Contractors proposals: These can be equally as brief or extensive as the employer’s requirements. Contract sum analysis: The CSA could be a full bills of quantities produced in accordance with NRM2 schedule of rates, or a simple elemental cost breakdown. The building contract: JCT Design and Build, 2016. A BIM protocol (if applicable): This creates the requirement for the contractor to provide specified BIM at defined levels of detail and incorporates provisions which supports the production of deliverables for ‘data drops’ at defined project stages.

Answer 31

Drawings. Specification. Schedule of works. Contract sum analysis. Employer’s requirements for any contractor designed portions. The building contract.

Answer 32

The contractor must be given written notice that the employer intends to pay them less than the sum certified no less than 5 days before the final date for payment in the form of a Pay Less Notice.

Answer 33

A letter of intent or a pre-construction services agreement is a document that is used when two parties wish to commence construction works immediately prior to negotiation and formation of the final building contract. There are two main types of letter of intent, these are: 1. Non-binding letters of intent: - Intended to give rise to a contract but confirms the parties intention to enter a contract at some point in the future. - It does not create liability for either party to enter into a contract afterwards if they not wish to. - The contractor is under no obligation to complete the works in a certain timeframe / complete them at all. - There are limited remedies under this form of letter of intent - the employer has no counterclaim for damages for where there isn’t a contract in place, but they can deduct the cost from the value of the works. 2. Contractual letters of intent: It creates some limited reciprocal rights rights and liabilities between the parties - e.g carrying out works within a timeframe etc. It is usually limited in scope - for example the amount of time the contractor or money the contractor can take / expend. Whether this form of letter of intent is contractually binding will depend on whether: + Offer and acceptance + Consideration + An intention to create legal relations and + Certainty as to the essential terms.

Answer 34

Limit the scope of the letter - limiting the scope by time or money encourages the contractor to agree to a full contract within a certain period of time / once a certain value has been reached. This also protects the employer should a contract not be agreed or signed. State whether or not the contactor should stop works once the limit has been reached and if not then on what terms and confirm the payment provisions. Identify the works to be carried out. Insurance: state the level of public and employer’s liability in addition to all risks insurance. If the contractor is carrying out design works then level of professional indemnity insurance should be stated. CDM Regulations requirements: state that the contractor is to act in accordance with the regulations. Payment provisions: clearly state payment provisions. If not then Scheme of Construction Contracts default payment provisions apply. Warranties: depending on the type of works, third parties may require collateral warranties from the contractor / sub contractors. Copyright: if contractor carrying out design work, the letter should provide for a licence to be given to the employer allowing it to use any design documents following termination of the contractor’s involvement with the works. Termination: letter must provide for the employer to terminate the contractor’s engagement and confirm that the employer has no obligation to enter into a full contract come the end of the letter of intent.

Answer 35

Both parties can have numerous commercial issues to be resolved before the contract is fully negotiated which leads to parties neglecting these issues meaning that full execution of the contract is never undertaken meaning a contract may never be fully negotiated / executed. This can lead to future disputes and exposure of the parties as the letter of intent does not contain detailed provisions.

Answer 36

Stated by Judge in Cunninghame V Collet [2006]: Where contract work scope and price are agreed or there is a clear mechanism in place to reach an agreement. Where terms and conditions are (or are very likely) to be agreed. Where start and finish dates and the outline programme are broadly agreed. Where there are good reasons for the works to be commenced in advance of contract documents being finalised.

Answer 37

A scheme that that applies when construction contracts do not comply with the Housing Grants, Construction and Regeneration Act. The scheme either supplements or replaces provisions of a contract where it has deficiencies relevant to the Housing Grants, Construction and Regeneration Act. Ensures that construction contracts remain capable of performance whilst allowing regulatory control over their provisions.

Answer 38

A contract provision that allows adjustment of the contractual completion date. It reserves the right of the employer to claim liquidated damages in the event that the contractor is unable to complete the works by the completion date for a reason that is partly due to the employers if the completion date could not be adjusted then the contractor would only have the complete the works with a ‘reasonable time’ (time at large). It also protects the contractor as if granted it relieves the contractor of their liability to pay liquidated damages.

Answer 39

1. Contractor must notify the CA as soon as it becomes apparent to them that a delay has occurred or will likely occur: - Notification required even if contractor is not seeking an EoT. - Notice doesn’t need to confirm whether the delay is a relevant event. 2.Contractor must provide CA with any further information reasonably required by the CA to assess the delay. 3. CA then assesses if there is a delay and notifies the contractor if an EoT has been granted. - No defined timeframe for the notification but the CA must notify “as soon as he is able”.

Answer 40

1. Contractor notifies the Employers Agent / the Employer as soon as it is apparent that a delay has or will occur. - Notification required even if EoT is not being pursued. - Notice needs to confirm the cause of the delay AND confirm whether the delay is the result of a ‘relevant event’ and confirm the anticipated delay caused to the works / works section. 2. Employer’s Agent / Employer must assess the delay. - Notice must confirm whether an EoT has been granted or not. - Contractor must be notified within 12 weeks from receipt of the contractor’s notice / contractor must be notified before the completion date if there are less than 12 weeks until the completion date.

Answer 41

A concurrent delay is caused two or more delays occurring at the same time. It is not to say that the delays occur simultaneously but their effects are apparent at the same time. For example exceptionally inclement weather occurs alongside a contractor’s inability to source site labour.

Answer 42

Customary to grant an extension of time for the ‘dominant reason’ but only where it begins and ends after the other reasons. Even if the dominant reason is not a ground for a loss/expense claim this may still be awarded over other concurrent delays that could lead to a claim. H Fairweather and Co Ltd V London Borough of Wandsworth [1987].

Answer 43

The contractor would be granted an extension of time for the full length of delay caused by the relevant event. Henry Boot Construction (UK) Ltd V Malmaison Hotel (Manchester) Ltd [1999]: + Malmaison appointed Henry Boot to construct hotel in Piccadilly, Manchester. + Judge cited example of exceptionally inclement weather occurred concurrently with a contractor’s inability to source labour during the same week. + Judge stated that Architect would not be allow to deny the contractor an extension of time on the grounds that the works would have been delayed by the labour shortage - contractor entitled to an EoT by 1 week.

Answer 44

The contractor would be granted an extension of time for the full length of delay caused by the relevant event. Henry Boot Construction (UK) Ltd V Malmaison Hotel (Manchester) Ltd [1999].

Answer 45

Contractor must ‘constantly use his best endeavours to prevent delay and must take steps to minimise the effect of the delay on the completion date.

Answer 46

Liquidated damages are a predetermined sum agreed between both parties of a building contract which are to be paid by the contractor to the employer whereby the contractor has failed to complete the works by the contractual completion date. The rate for liquidated damages is stated in the contract particulars and is usually expressed as per week or part there of. If the works are to be carried out in sections, the rate for liquidated damages can differ for different sections.

Answer 47

Usually comprise of cost for anticipated rental income - usually informed by the client’s surveyor, professional fees (CA etc), any other costs incurred as a result of the delay e.g finding alternative accommodation for storage of a an incoming tenant’s property etc. It is no longer essential for the rate to be calculated on the basis of a genuine pre-estimate of the loss likely to be suffered by the employer - reference ParkingEye Limited V Beavis. Provided the amount is not ‘out of all proportion’ to the likely loss, damages will be recoverable and the employer will not have to prove their loss, even if it is much less than the amount of damages being claimed (BFI Group of Companies v DCB Integration Systems).

Answer 48

If ‘nill’ is inserted as the rate of liquidated damages into the contract, this will likely prevent the contractor claiming liquidated damages or general damages (Temloc V Errill). If nothing is inserted as the rate of liquidated damages then the employer may be able to claim general damages.

Answer 49

1. Contractor must have failed to complete the works by the contractual completion date. 2. Employer / CA must have fulfilled any duties with respect to the award for an EoT (if EoT should have been granted then liquidated damages will not be claimable). 3. Employer / CA must have issued a certificate of non-completion (JCT Intermediate) / non-completion notice (Design and Build) to the contractor. 4. Employer must have notified the the contractor before the due date of the final payment (D&B) / before the date of the final certificate that it intends to withhold payment or requires payment for liquidated damages. 5. A second notice is then required to state how the liquidated damages will be claimed.

Answer 50

Advise the client that they must provide formal instruction if they wish for the late tender to be included.

Answer 51

Analyse all tenders methodically and logically to ensure the tenders have been analysed on a like-for-like basis

Answer 52

Arithmetical errors. Obvious errors in the programme dates / lead in and contract period. Conflicts of interest - review proposed sub-contractors.

Answer 53

According to the JCT tendering guidance note, the employer has agent / the CA has two options: 1. Notify the tenderer of the errors and give them chance to confirm or withdraw their tender. If withdrawn the next most financially advantageous tender is analysed. If they confirm their tender then a letter of endorsement should be included within the priced documents prior to acceptance. The endorsement should confirm that all rates / costs in the documents (excluding contingencies, PS and prelims) are to be considered as reduced or increased - endorsement should be signed by both parties. 2. Notify the tenderer and give them opportunity of confirming or correcting it. If the tendered elects not to amend then an endorsement will be required to confirm this. If the tenderer elects to amend their tender then they should be either given access to the original tender to make adjustments or confirm their adjustments in a letter. The letter is then appended to any tender acceptance letter.

Answer 54

List of tenders received. Initial tender return totals. Any qualifications identified. Any post tender adjustments following queries / analysis. The revised tender sum. Comparison of the tender returns - in a tender analysis document. Comparison with the pre-tender estimate. Recommendations.

Answer 55

Option A (new buildings) - requires the contractor to take out and maintain all risks insurance of the works. Option B (new buildings) - requires the employer to take out and maintain all risks insurance of the works. Option C (existing structures) - requires the employer to take out and maintain (a) insurance in respect of the existing structure and their contents and (b) all risks insurance of the works.

Answer 56

Appropriate: When works are simple in nature - works themselves are simple and involve recognised basic trades and skills without very complex building services installations. When works are designed by or on behalf of the employer and fairly detailed contract provisions are necessary. When employer provides contractor with drawings, bills of quantities, a specification or work schedule to define the works. Where an Architect of Contract Administrator will administer the contract. Can be used: When works are to be carried out in sections. by both private and local authority employers. Where provisions are required to cover named specialists (where the work is of a specialist nature and allows the employer the opportunity to select a sub-contractor with the relevant expertise). Where additional provisions not found in minor works contract needed - partial possession, bonds and collateral warranties needed. Using traditional procurement method. Not suitable: where contractor is to design discrete parts - need ICD. for D&B procurement route.

Answer 57

Appropriate: When work involved is simple in character. Where work designed by or on behalf of the employer. Where the Employer is to provide drawings and/or a specification and/or work schedules to define adequately the quantity and quality of the work. Where an Architect/Contract Administrator is to administer the conditions. Can be used: By private and local authority employers. Not suitable: Where bills of quantities are required. Where provisions are required to govern work carried out by named specialists. Where detailed control provisions are needed D&B procurement route. When sectional completion partial possession required. When performance bonds required.

Answer 58

It is used when the contactor has agreed to design specific parts of the works. They will usually sub-contract the works whereby a specialist installer or manufacturer is required. Ensures buildability and other factors are taken into account. The contractor is responsible for the procurement and must adhere to the programme. Specialist works can include; installation of services, roof replacement etc. Takes the liability of the design off the client and design team.

Answer 59

Introductions – if parties haven’t met before then good to define everyone’s roles in person. Health and safety – F10, Construction Phase Plan, COSHH and CDM regs, site cleanliness, temporary works, contractor’s compound. Contractor / site management – Site manager, office support and progress reports. Communication – Instructions and methods of communication. Contract details: Date of possession, contract sum, programme, completion date, contractor and employers insurances. Site – Access, neighbours, accommodations, working hours, security and any other restrictions. Statutory approvals – Building control. Progress meets and valuations – Agree progress meetings (informal every 2 weeks and formal once a month close to valuation date as possible). Info required. Any other business.

Answer 60

Procurement is the purchasing of goods and services. Construction management: works constructed by numerous trade contractors who are employed by the client but managed by a construction manager (employer’s agent). Allows early appointment of construction manager who can improve buildability and package works. Way of client being able to keep tabs on quality of works. Design and build: Main contractor employed to design and construct the works. Can have single or two stage tendering process – used when specialist design needed / put responsibility of works on contractor (roof / cladding). Framework agreement: Used when client is regularly instructing works and uses a contractor regularly – cuts down lead ins and costs. Contractors submit tender and are instructed on a call off basis. Lump sum: The most traditional form of procurement – a lump sum price for all the works is agreed before they commence. Usually used when a project is well defined and major changes are unlikely.

Answer 61

A tender is a submission made by a prospective supplier in response to an invitation to tender and makes an offer for the supply of goods or services. Single stage: All information is made available to the contractor to allow them to price when tendering commences. Invitation to tender is issued to prospective contractors, tenders are returned, and a preferred tender is selected and the contractor appointed. Two-stage: First stage involves a limited appointment to allow works to commence (maybe enabling works), in the second stage a fixed price is negotiated for the contract. Allow early appointment and commencement of the works. Negotiated: Single contractor is invited to tender; they submit their tender which the CA will then review and negotiate costs before appointment. Utilised where works are highly specialised, or where the contractor has completed a very similar job for the employer before + allows for reduced time and costs tendering (can commence works quicker). Drawback is that competitive pricing might be reduced. Selective tendering: Contractors can submit tenders only by invitation. Pre-selected list of contractors (usually ‘approved’ contractors) based on their suitability for an instruction. Their performance is regularly monitored to allow them to remain on the approved list.

Answer 62

They are not a party to the contract and therefore must repair impartial at all times. Simply there to administer the contract. Chair pre contract meeting. Issue contract instructions. Deal with payment provisions. Manage change procedures – design changes etc. Involve with dispute avoidance. Issue certificates. Deal with completion / possession issues.

Answer 63

Is used for the design and build procurement route (employer appoints main contractor and then gets them to design and then undertake the works, as opposed to using consultants to design works then appoint contractor). Can ensure good buildability (designed by contractor). Some consider only effective for smaller projects where they don’t need as much control / are not as concerned with the design. Client may just like using the contract – has amendments for it. Client doesn’t want liability for the works – cladding replacement etc. Employer will issue ‘employers’ requirements’: gives the minimum standards that the contractor needs to achieve with the works, the scope of services required and allocation of risk for unknown items. Payment notices given instead of payment certs. Retention is 3% rather than 5% - contractor is taking on greater portion of the responsibility.

Answer 64

Intermediate Building Contract 2016 + with contractor’s design portion. Minor Works Building Contract 2016 + with contractor’s design portion. Design and Build Contract 2016. Management Building Contract 2016. Measured Term Contract 2016.

Answer 65

Appropriate: Where detailed contract provisions are necessary and Employer’s Requirements have been prepared and provided to the Contractor. Where the Contractor is not only to carry out and complete the works, but also to complete the design. Where the Employer employs an agent (who may be an external consultant or employee) to administer the conditions. Can be used: Where the works are to be carried out in sections. Not suitable Where the Contractor’s design responsibility is restricted to discrete parts of the works and he is not responsible for completing the design for the whole works, consideration should be given to using one of the JCT contracts that provide for the employment of an Architect/Contract Administrator and limited design input by the Contractor.

Answer 66

Appropriate: Where detailed contract provisions are necessary and Employer’s Requirements have been prepared and provided to the Contractor. Where the Contractor is not only to carry out and complete the works, but also to complete the design. Where the Employer employs an agent (who may be an external consultant or employee) to administer the conditions. Can be used: Where the works are to be carried out in sections. Not suitable Where the Contractor’s design responsibility is restricted to discrete parts of the works and he is not responsible for completing the design for the whole works, consideration should be given to using one of the JCT contracts that provide for the employment of an Architect/Contract Administrator and limited design input by the Contractor.What document would you refer to if unsure what contract to utilise?

Answer 67

JCT guidance document - Deciding on the appropriate JCT contracts

Answer 68

The contract administrator under JCT design and build contracts

Answer 69

A domestic sub-contractor is any sub-contractor, other than a nominated-sub contractor, that the main contractor sub-contracts to carry out part of the works. The work of the sub-contractor is the responsibility of the main contractor as far as the contract between the main contractor and the client is concerned

Answer 70

Sub-contractor design Section completion Named sub-contractors Clerk of works QS Programme as contract documents Relevant events / matters Novation / Assignment

Answer 71

Liquidated damages are a pre-determined sum of money payable in respect of a specific breach of contract. Most commonly we associate liquidated damages with delay. In this context the parties usually agree in the contract that in the event the contractor is late in reaching completion of the works for handover then the contractor shall pay to the client the sum of [x] per day or per week that the works are delayed. See B is for Breach for more information. Unliquidated damages by contrast are the damages claimed when the loss has not been pre-determined by the parties. I.e. unliquidated damages are claimed for any breach of contract which is not subject to a liquidated damages clause.

Answer 72

Recitals Articles Contract Particulars Attestation Conditions Schedules

Answer 73

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 * Dispute

Answer 74

This is determined by the amount a project critical path is delayed by a relevant event such as the client failing to provide access or providing delayed instructions or constant variations. The EoT claim is reviewed to determine how the contractor has justified it and I then review this and site notes/emails to determine if the contractor made reasonable efforts to avoid the delay or if the delay was down to their own performances. Where they have cited adverse weather, I will take an average of the last 10 years from met office to determine if the weather at the time of the event was to be unexpected or not.

Answer 75

Single stage – go out to tender at Stage 4 which is technical design. Two stage – go out to tender at stage 2 or 3 which is concept design or spatial coordination.

Answer 76

JCT NEC FIDIC

Answer 77

They are both standard forms of contract. JCT is designed for domestic projects whereas NEC is suitable for domestic and international. NEC came after the Latham report and aims to offer better clarity, flexibility and better management processes. In NEC, the contract is administered by a PM and in JCT, it is a CA. NEC requires and enables a more proactive and collaborative approach whereas JCT is aimed at focussing on liabilities and risk. NEC has early warning notices and compensation events rather than relevant events/matters

Answer 78

A contract document that allows an employer to create direct contractual links with a party who isn’t party to the main construction contract. This protects the employer in the event that the contractor becomes insolvent as the employer would have no direct link with any subcontractor and therefore no form of redress if defects arise. JCT provide standard forms of collateral warranties which can be utilised.

Answer 79

A contractual bond that guarantees the completion of a project. If the contractor does not complete the project, the bond guarantees against financial loss to the client for a specified amount which is usually 10% of the contract value. It is obtained via a bondsman and protects the employer if the contractor becomes involvement - the pay out is there to essentially pay the cost of finding and appointing another contractor to complete the works. Performance bonds will need to run to the end of the rectification period to ensure they are covered for any defects that arise.

Answer 80

It is a written or verbal agreement between parties to carry out a service in exchange for some form of repayment.

Answer 81

A patent defect is identified during the rectification period as a result of reasonable inspection.

Answer 82

A latent defect exists before its discovery. It cannot be identified from reasonable inspections; hidden or concealed flaw.

Answer 83

Professional indemnity Public liability Employers liability All risks insurance

Answer 84

Drawings, schedule of work, preliminaries, pre ambles, construction programme, the contracts, photo report, asbestos and H&S information

Answer 85

Offer Acceptance Consideration Intention to have Legal relations Ability / Performance

Answer 86

Relevant matters are referred to in some construction contracts, such as JCT contracts. A relevant matter is a matter for which the client is responsible that materially affects the progress of the works. This may enable the contractor to claim direct loss and / or expense that has been incurred. Relevant matters might include: 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. Relevant matters should not be confused with relevant events. A relevant event is an event that causes a delay to the completion date, which is caused by the client, or is a neutral event not caused by either party. Relevant events entitle the contractor to claim an extension of time; that is for the completion date to be moved. A relevant event does not necessarily entitle the contractor to claim loss and expense. Similarly, a relevant matter need not necessarily result in a delay to the completion date, and so may not always entitle the contractor to an extension of time. NEC contracts deal with these issues under the single heading ‘compensation events’. They do not treat compensation events as an allocation of blame, but rather an allocation of risk. Any risk that is not specifically identified as being attributed to the client is borne by the contractor. The Society of Construction Law Delay and Disruption Protocol, 2nd edition, refers to an event or cause of delay or disruption which under the contract is at the risk and responsibility of the employer, as an ‘employer risk event’.

Answer 87

Delays on a project will have different contractual consequences depending on the cause of the delay: Where a delay which impacts on the completion date is caused by the contractor (culpable delay), the contractor will be liable to pay liquidated and ascertained damages (LADs) to the client. Where a delay which impacts the completion date is not caused by the contractor, it may be a ‘relevant event’, for which the contractor may be entitled to an extension of time and to claim loss and expense incurred as a direct result of the delay. A relevant event may be caused by the client, or may be a neutral event such as exceptionally adverse weather. The contract should set out what constitutes a relevant event. 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. Delay in giving the contractor possession of the site. Force majeure (events that are beyond the reasonable control of a party, such as a war or an epidemic). Loss from a specified peril such as flood. The supply of materials and goods by the client. National strikes. Changes in statutory requirements. Delays in receiving permissions that the contractor has taken reasonable steps to avoid. When it becomes reasonably apparent that there is a delay, 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. Claims for extension of time can run alongside claims for loss and expense however, one need not necessarily lead to the other. The contractor is required to prevent or mitigate the delay and any resulting loss, even where the fault is not their own. 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. NB: On NEC contracts, delays are dealt with slightly differently and are referred to as ‘compensation events’.

Answer 88

Under JCT MW this is by default 3 months however I would consider if this should be extended to allow for seasonal changes.

Answer 89

Cost, time, quality

Answer 90

Retention is a sum deduced at each valuation (generally 5%) to provide the client with security that the contractor will return to correct any defects.

Answer 91

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.

Answer 92

There is no legal basis for the term Practical Completion. It is when the works are complete to the satisfaction of the Contract Administrator. The CA cannot certify PC of there are outstanding works or patent defects, but they also cannot withhold PC for minor defects outstanding.

Answer 93

End of contractor liability (termination of any liquidated damages) Insurance handover Handover of the premises Beginning of the defects liability period Retention releases, generally from 5% to 2.5%

Answer 94

JCT does not define exceptionally adverse weather condition, meaning it is left to discretion. This means that it can be a potential cause for dispute. NEC defines it as a 1 in 10 year event, otherwise the contractor should have allowed for the effects of weather within their price

Answer 95

Loss of income from rent / hiring out of facilites affected by the project Costs associated with additional surveyor fees above that already agreed with the client.

Answer 96

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. NB: The New Engineering Contract (NEC3) contains provision for the contractor to claim payment for ‘compensation events’ rather than loss and expense.

Answer 97

The contractor must provide written notice as soon as it becomes apparent that the work will not complete on time. Notice must include the conditions causing the delay. CA must then decide if the condition is relevant event and whether an extension of time is granted. Must notify the contractor as soon as decision is made and within 12 weeks of receipt of notice. If the EOT is warranted, the CA has to fix a later completion date and notify the contractor.

Answer 98

The contractor must have failed to complete the works by the date for completion or any extended date (if an EoT has altered the completion date). The contract administrator must have issued a certificate of non-completion (cl.2.22). The contract administrator must have fulfilled all duties with respect to the award for an extension of time (cl.19.2). The employer must have given the contractor written notice of its intention before the date for the final certificate.

Answer 99

The contractor must have failed to complete the works by the completion date. The employer (or employer’s agent) must have fulfilled all duties with respect to the award for an EoT. The employer (or employer’s agent) must have issued a non-completion notice to the contractor. The employer (or employer’s agent) must have notified the contractor before the due date for the final payment that it may require payment of, or withold, liquidated damages.

Answer 100

- A document expressing an intention to enter in a contract at a future date. - Used as a last resort where the time taken to finalise a formal contract would delay the works

Answer 101

- They may be used to enable a supplier or contractor to pre-order materials or create a site establishment.

Answer 102

- Whilst the contract isn’t signed the employer is liable to the contractor on a Quantum Meruit basis. - Puts the client in a weak negotiating position going forward - If a dispute arises it will be in the interest of one of the parties that the terms of the proposed contract do not apply. - Limitation period for a letter of intent will only be six years

Answer 103

- Depends on the drafting - Can be an expression of an intention to enter into a contract at a future date, which does not give any rise to a legal obligation or liability for costs. - Can be an expression of an intention to enter into a contract at a future date, which does not exclude the right to recover cost on a quantum meruit basis - The creation of a conditional or ancillary contractual obligation, which may be subsumed upon the exchange of formal contracts - A legally binding executory contract, the letter is an offer capable of being accepted or is an acceptance of an offer.

Answer 104

- Avoid where possible, they are an interim measure only - Recommend the use of a lawyer to draft the letter of intent.

Answer 105

- A term used to refer to a reasonable recompense for work done, and is often based on the amount of money expended, in addition to a reasonable allowance for profit.

Answer 106

- Ampleforth Abbey Trust v Turner and Townsend Project Management Ltd - The contractor was appointed on a letter of intent to allow an early start on site. - Over the course of the works 8 letters of intent were written. - The contractor was four months late in completing the works, the employer was unable to claim liquidated damages - The case stated that TTPM was negligent and ordered costs of 2/3 the LD damages amount (£226k)

Answer 107

- Should follow the terms of the JCT contract - Confirm to contractor they have been appointed - Confirm to contractor they can mobilise, and order materials to the value stated in the letter - Helps to mitigate delay between contract issue and start of works - Allows contractor to keep on programme

Answer 108

- Work executed as per the specification. - Materials property bought to site.

Answer 109

- Gross valuation - Less previously certified - Retention reduction - Net amount for payment - VAT amount - All figures in numbers and letters.

Answer 110

- The contract conditions specify the due date for the first interim payment following issue of PC occurs 7 days after the date completion has been specified. - The certifier is to issue an interim certificate within 5 calendar days of the due date. - Thereafter, unless agreed otherwise, interim payments are to be made at two monthly intervals up to the expiry of the rectification period.

Answer 111

- Undertake an interim valuation and to ascertain the amount due in the interim certificate before the expiry of the five day period after the due date.

Answer 112

- The contractor may at any time after the five day period issue an interim payment notice to the CA, stating the sums considered to be due. - Unless a pay less notice is issued stated the employer wishes to pay a less than the amount stated on the notice.

Answer 113

Includes consideration of the following  Work executed  Variations  Expenditure of provisional sums  Adjustment of provisional quantities  Retention  Materials and goods on and off site  Amounts previously paid  Loss and expense.

Answer 114

- A means by which a contractor is paid for specifically instructed work on the basis of the cost of labour, materials, plant and OH+P, used when work cannot be priced in the usual way. - I.e. unforeseen obstructions are encountered during ground works.

Answer 115

- Option A – A percentage addition for OH+P and incidental cost to a prime cost - Option B – All-inclusive rates

Answer 116

- An allowance for the supply of labour, plant and materials to be provided by a contractor that will be nominated by the client - Exclusive of any OH+P, attendance etc.

Answer 117

- Must be delivered to or adjacent to the works, delivery to site storage is not sufficient. Adjacent means lying near or contiguous to the works. - Not prematurely bought to site (reference to current programme) - Must be adequately protected against weather

Answer 118

- No provision under MW - Must not be certified where there is a retention of title clause in the supply contract.

Answer 119

- Any unpaid amount is recoverable as a debt - Simple interest must be paid on that amount at 8% above the bank of England base rate - The Late Payment of Commercial Debts (Interest) Act 1998

Answer 120

- Employer does not pay, by the final date for payment the amount due to the contractor. - Interferes or obstructs the issue of any certificate due under the contract - Fails to comply with their duties under the CDM Regulations - Suspension of more than 1 month by the employer due to any impediment or default by the employer. - Insolvency of the employer

Answer 121

- Insolvency - Without reasonable cause wholly or substantially suspends carrying out the works - Fails to proceed regularly and diligently with the works - Fails to comply with their duties under the CDM regulations - Corruption

Answer 122

- The Employer may employ and pay other persons to carry out and undertake the works - The employer and new contractor can enter and take possession of the site and the works, and (subject to third part consents) may use all temporary buildings, plant, tools, equipment and site materials for those purposes. - No further sums become due to the contractor under the contract

Answer 123

- Section 6.7.3.1 – JCT MW16 - Following completion of the works, the CA should prepare an account and a certification should be issued setting out the following:  The expenses and loss to the employer  The amounts of payments made to the contractor  The total amount which would have been payable for the works  If the payments to the contractor and the employer’s loss exceed the amount payable for the works (contract sum) then the difference will be recovered as a debt.

Answer 124

- CA Issue a default notice, setting out the default(s) of the contractor. - If the contractor continues a specified default for 7 days after receipt of the default notice the employer may, within a period of 10 days from the expiry of the 7 day period terminate the contractors employment in a second notice.

Answer 125

- Terminate the contractors employment - Protect and secure the site - All payments to the contractor stop - Choose a third party to complete the works, start liaising with subcontractors in order to conclude the works - After completion, prepare a final account within 3 months including direct loss caused by insolvency.

Answer 126

- Bonds are undertakings given by one party, a bondsman, to another to pay money if a third party defaults. - Regularly procured by contractor in favour of employers, as security for losses caused by insolvency or other default. - Typically equate to 10% of the contract value.

Answer 127

- Retention bond - Advance payment bond - Performance bond - Goods off site bond

Answer 128

- Requires the bondsman to pay a sum equivalent to the retention monies, which would otherwise be retained from payments under the contractor.

Answer 129

- Used when the employer makes an advance payment to cover the contractors setting up cost, or for a particular part of the project. - Protects the client when procuring large expensive items if the contractor becomes insolvent.

Answer 130

- Issued by a bondsman on behalf of the contractor - Conditional on the proper performance of the contractor. - If the contractor does not perform their obligations the bondsman agrees to pay the employer their losses up to a stated maximum sum.

Answer 131

- The bondsman pays the amount of money set out in the bond immediately, without preconditions having to be met.

Answer 132

- Evidence has to be provided of a loss suffered

Answer 133

- The end of the rectification period and final certificate

Answer 134

- A contract between a parent company and a third party beneficiary by which the parent (as guarantor) guarantees the performance of a subsidiary. - I.e. the parent company of the contractor guaranteeing the employer the performance of the contractor under the contract.

Answer 135

- used as a holding account for construction project funds - provides security to the contractors - the contractor can only access the cash when the employer fails to pay a certified sum - Negatively affects the employers cash flow, if the escrow account is not topped up the contractor has the right to suspend works.

Answer 136

- A party to a construction contract in excess of 45 days is entitled to interim payments (Section 109) - Every contract must have a mechanism for when payments become due, and provide a final date for payment (Section 110) - Parties must not withhold payment after the final date unless an effective notice has been given (Section 111) - Where the written contract does not provide the above, the payment mechanism in the Scheme for Construction Contracts (England and Wales) 2011 comes into effect.

Answer 137

- Came into force in October 2011 - Each and every pay period will require a notice to be issued within 5 days of the due date, specifying the sum due - Payment notices are required to contain the basis upon which the sums are calculated. - Impossible for the payer to avoid making a payment by failing to value to the works, as the payee is entitled to serve a payment notice. - A notice must value the work at the date the notice is served. - Removes barriers to adjudication - Bolsters the payees right to suspension for late payment - Makes written and oral contracts subject to the act.

Answer 138

- Sets out payment provisions that are used in cases where the parties have entered into a written contract, but the contract does not contain adequate mechanisms for payment.

Answer 139

- Good management - Clear contract documentation - Good project, client and design team management. - Good contractor management - Record keeping - Good payment practice - Regular cost reporting and a proactive approach

Answer 140

- Negotiation – problem solving by the parties themselves - Mediation or conciliation – third party intervention does not lead to a binding decision being imposed - An adjudicative process – the final outcome is determined by a third party who imposes a binding decision

Answer 141

- Negotiation - Mediation/conciliation - Adjudication - Arbitration - Expert determination - Litigation

Answer 142

- Mediation - Adjudication - Arbitration

Answer 143

- The process where the parties work out how to resolve issues, power to settle rests with the parties.

Answer 144

- The parties agree to a neutral third party to facilitate discussions, the power to settle remains with the parties

Answer 145

- A TCC judge may provide ENE, will set out conclusions and brief reasoning on the full case or particular issues. - Only becomes binding on the express agreement of the parties

Answer 146

- The parties agree for a third party to make a binding decision, the terms are governed by the contract. In most cases the decision will be final.

Answer 147

- Carried out under section 108 of the Housing Grants, Regeneration and Construction Act 1996 - Either party may request the appointment of an adjudicator within seven days of serving a Notice of Dispute, the adjudicator has 28 days to then issue a decision.

Answer 148

- Section 108 of the Housing Grants, Regeneration and Construction Act 1996.

Answer 149

- It provides a determination of disputes by a third party arbitrator or arbitration panel

Answer 150

- 1. One party requests the dispute is referred to arbitration - 2. The Arbitrator is appointed - 3. Preliminary Meeting - 4. Statement of Claim and response - 5. Discovery Period - 6. Interchange of Evidence - 7. Hearing - 8. Award

Answer 151

- The Arbitration Act 1996

Answer 152

- When written into the contract

Answer 153

- Construction Industry Model Arbitration Rules (CIMAR) 2016

Answer 154

- Yes, can only be overturned in court on a point of law.

Answer 155

- Private and quick - The parties can agree on the arbitrator with relevant expertise - The award can be enforced as a judgement in a court

Answer 156

- The parties must bear the cost of the Arbitrator and the Venue - Limited powers of compulsion or sanction, which, if one party fails to comply will significantly slow the process - Limited appeal rights

Answer 157

- Arbitration – both sides agree to let an arbitrator decide the case, the decision, known as an award is legally binding. Arbitrators have the power to ascertain facts and to order costs - Adjudication is a right within the contract, an adjudicator is selected and decisions are binding unless revised by subsequent arbitration or litigation, has no power to award costs and takes 28 days.

Answer 158

- Proceedings to determine a dispute in a court of law

Answer 159

- The technology and construction court (TCC)

Answer 160

- The CPR is a procedural code governing civil litigation, includes a small claims track, fast track and multi-track. - The pre-action protocols are annexed to the CPR and set out the steps the parties should take before commencing proceedings of civil claims, this includes:  An understanding of each other’s position  Decision made about how to proceed  Attempts made to settle without proceedings  Consideration of a form of ADR  Reduce the costs of resolving the dispute

Contract Administration Flashcards

(185 cards)