Contract Administration Flashcards

Question

What are the advantages of a retention?

Answer 1

Funds for rectifying defects, Incentive for contractors to complete the project on time without defects, Incentive for contractors to return during the rectification period, offers the client protection against contractor insolvency.

Answer 2

- the value of work properly executed - total value of materials delivered to site for incorporation, if not premature - value of listed off-site materials

Answer 3

- in respect of payments or costs due in regard to various insurance costs, statutory fees, patent rights (not IC) , opening up and testing, contractor suspension, loss and or expense - restoration, repair or replacement following certain insured loss or damage - fluctuation payments

Answer 4

Contractor is not paid in full for satisfactory work, 5% can represent a large portion or all of contractor profits, A subcontractor who completes their works may not receive payment for months/ years until the project is complete

Answer 5

A number of alternatives were discussed in the Pye Tait review in 2017 - Project bank accounts, Retention bonds, Performance bonds, Escrow stakeholder accounts, Parent company guarantees, Retentions held in trust funds

Answer 6

The way in which interim valuations and payments are made under construction contracts are influenced by the: - Housing Grants, Construction and Regeneration Act 1996 and - Local Democracy, Economic Development and Construction Act 2009. Under the Housing Grants, Construction and Regeneration (HGCR) Act 1996, a party to a construction contract in excess of 45 days in duration is entitled to interim or stage payments, so every construction contract should include provision for interim payments. Construction contracts of 45 days or less duration are referred to as ‘non-qualifying’ contracts. The LDEDC Act 2009 (The Local Democracy, Economic Development And Construction Act) also amended the HGCR Act 1996 by: - bolstering a payee’s right to suspend for late payment - removing existing barriers to adjudication and - making written and oral contracts subject to the Act.

Answer 7

Contractor can submit an application payment not less than 7 calendar days before the due date. An interim certificate should be issued within 5 calendar days of the due date (time period fixed by statue). The last date for issue of a pay less notice is 5 calendar days before the final date for payment. The final day for payment is 14 calendar days from the due date.

Answer 8

The contract conditions make clear the consequences should the certifier fail to issue an interim certificate within five [calendar] days of the due date. There are two default scenarios: 1. Where the contractor has made an interim application within seven [calendar] days of the due date: the interim application shall become an interim payment notice if an interim certificate has not been issued within five [calendar] days of the due date. 2. Where the contractor has ‘not’ made an interim application by the due date: The contractor may at any time after the five [calendar] day period following the due date issue an interim payment notice to the quantity surveyor. The contractor’s interim payment notice must not only show the ‘gross valuation’, but also show the relevant deductions and the ‘net’ amount considered to be due, together with details showing how the sum applied for has been calculated.

Answer 9

Under SBC, IC and ICD, not later than six months after practical completion or the last section completion certificate, the contractor must send to the architect, or to the quantity surveyor if so directed, all documents necessary for working out the final Contract Sum. Not later than three months thereafter, the architect or, if instructed, the quantity surveyor must ascertain all previously unascertained amounts of loss and/or expense and prepare a statement of all adjustments and send the contractor a copy of the computations of the adjusted Contract Sum. All three contracts provide detailed guidance on the way in which the Contract Sum is to be adjusted in clause 4.3.

Answer 10

For SBC, the final certificate must be issued not later than two months from the latest of the following - - the end of the rectification period - the issue of the certificate of making good For IC/ICD it is 28 days after the last of the above.

Answer 11

- where quality or standards of materials, goods or workmanship are expressly stated to be a matter for the architect’s approval, the architect is reasonably satisfied; - the contract terms requiring adjustment of the Contract Sum have been correctly applied; - all due extensions of time have been given; - reimbursement of loss and/or expense is in final settlement of all matters under clause 4.20 (IC and ICD clause 4.15).

Answer 12

- the adjustment of provisional sums - the adjustment of prime cost (PC) sums - variations to the design and/or the specification of the work - additions or reductions to the scope of the works - loss and expense incurred by the contractor for specified reasons and - increases or decreases in the costs of labour and materials or in taxes, levies or contributions imposed by the government (i.e. fluctuations – albeit many employer’s will seek to remove such provisions through amendment to the contract conditions).

Answer 13

The purpose of preliminaries is to describe the works as a whole, and to specify general conditions and requirements for their execution, including such things as subcontracting, approvals, testing and completion at the tender stage

Answer 14

The CA should be familiar with the relevant contract clauses concerning loss and expense. It is the CAs responsibility to calculate actual loss or instruct a QS to do so and not estimate it. CA ensures that claims for loss have been applied for under the terms of the building contract.

Answer 15

The CA is required, both under the contract and case law, to ensure that the preparation of all valuations are carried out impartially and fair. When undertaking valuations the surveyor must take into consideration; Materials on or off site (if applicable), Retention monies, Delay and prolongation costs and Liquidated damages.

Answer 16

It is solely the CA’s responsibility to issue instructions which should be given in writing and issued promptly, The CA will need to be aware of the cost implications of issuing instructions. If CVIs are being issued then the CA will need to check their contents to make sure they are accurate.

Answer 17

Notes of site inspections: recording the date, time and duration of the visit; the weather, persons on site, progress and status of the works; any defects in workmanship. Office files e.g. collated so that information letters, emails, notices, telephone notes, instructions and drawings. Photographs with date, time and location easily identifiable.

Answer 18

Typically, contingencies refer to costs, and are amounts that are held in reserve to deal with unforeseen circumstances. Most construction projects use a rate of 5%-10% from the total budget to determine contingency.

Answer 19

The bill of quantities is a document prepared by the cost consultant that provides project-specific measured quantities of the items of work identified by the drawings and specifications in the tender documentation.

Answer 20

New Rules of Measurement highlight 2 ways in which a BoQ can be broken down; Elemental, Works Sections, Work Packages.

Answer 21

An approximate bill of quantities (notional bill of quantities or provisional bill of quantities) can be used on projects where it is not possible to prepare a firm bill of quantities at the time of tendering.

Answer 22

New Rules of Measurement volume 2 (NRM2) which was published in April 2012 by the RICS Quantity Surveying and Construction Professional Group and became operative on 1 January 2013.

Answer 23

A claim for loss and expense commonly refers to a claim by the contractor for any monetary loss and expense they suffer as a result of an event that causes delay to the regular progress of the contract works. To be compensated for that loss and expense, the delay has to be as a result of a relevant matter (not a relevant event). An extension of time does not necessarily lead to a claim for loss and expense since there are some subtle differences between the relevant events (relating to time) and the relevant matters (relating to loss and expense).l

Answer 24

They should be a genuine pre-estimate of the loss at the time of entering the sum within the contract documents, rather than a penalty. Costs may include employer time, CA time, alternative accommodation, permit costs.

Answer 25

The employer may deduct liquidated damages if a Non-Completion Certificate has been issued and the employer has given the appropriate notice before the Final Certificate. The notice will state that for the period of delay, the employer wishes the contractor to pay damages at the rate in the contract particulars. An employer can, at their own discretion, deduct a lesser amount but they cannot increase the rate. Alternatively, the employer will deduct this from sums due to the contractor. Under Minor Works, a non-completion certificate is not required and no sectional completion provision within the contract.

Answer 26

1. the contractor must satisfy to claim loss and expense under a JCT contract is to make an application as soon as it has become, or should reasonably have become, apparent that the regular progress of the works has been or is likely to be affected by a relevant matter. It is essential that the application is served promptly. 2. that the contractor is required, on request, to submit such information as is reasonably necessary for the contract administrator or quantity surveyor to ascertain the amount of the loss and expense due to the relevant matter or matters.

Answer 27

Once an amount of loss and expense is ascertained, the payment provisions under the JCT building contracts require those ascertained amounts to be included within interim payments. This requirement emphasises the need for prompt application and ascertainment.

Answer 28

An event that has caused the contractor monetary loss and expense as a result of that event and the delay to the regular progress of the contract works. Relevant matters include: - Variations - Architect / CA instructions - postponement of work - instructions on provisional sums (unless defined work) - relating to named sub contractors (IC clause 3.7 schedule 2) - opening up and inspection and testing of work, unless work is found to not be in accordance with the contract. - in relation to errors, omissions and inconsistencies in or between the contract documents and/or other documents. - the execution of work for which an approximate quantity is not a reasonably accurate forecast of the quantity of work required. - any impediment, prevention of default, whether by act or omission, by the employer, the architect/CA, the QS, or any Employer's person, except to the extent caused or contributed to by any default, whether by act or omission, of the contract or any contractor's person.

Answer 29

In order to recover delay costs and/or to avoid liability for liquidated damages, a contractor will generally have to show that the delay was caused by events that are the employer’s responsibility under the contract. The contractor does this by applying for an extension of time under the contract. Not necessarily entitled to damages (loss and expense) , but will usually receive additional preliminaries.

Answer 30

When the delay was caused by events that are the employer’s responsibility, evidenced by being a "relevant event" under the contract.

Answer 31

A relevant event (IC clause 2.20) is cause for delay / impediment of progress of the works that is the employer's responsibility. These are listed in the contract, and include - - variations - Architect / CA instructions - deferment of giving possession of the site - the execution of work for which an approximate quantity is not a reasonably accurate forecast of the quantity of work required - suspension by the contractor under the contract (non-payment) - any impediment, prevention, or default, whether by act or omission, by the employer, the architect/CA, the QS or any employer's person, except to the extent caused or contributed to any default, act or omission, of the contractor or contractors person. - work of statutory undertakers - exceptionally adverse weather conditions - loss or damage occasioned by any specified peril - civil commotion or terrorism - strike, lock-out - use of statutory powers that directly affect the works - force majeure ('act of god')

Answer 32

The core distinction is that Relevant Events relate to the adjustment of the completion date (extension of time), whereas Relevant Matters relate to the ascertainment of additional costs or losses (loss and expense). An extension of time does not automatically lead to a claim for loss and expense, as there are subtle differences between the two categories.

Answer 33

Schedules of work are ‘without quantities’ instructional lists often produced on smaller projects or for alteration work. They may be prepared as part of the production information alongside drawings, specifications, bills of quantities and preliminaries and are likely to form part of the tender documentation and then contract documents.

Answer 34

The following events are typically identified as Relevant Events that are not Relevant Matters for which the employer is contractually liable for direct loss and/or expense: - Exceptionally adverse weather conditions - Loss or damage occasioned by any Specified Peril (e.g., fire, lightning, explosion, storm, flood, earthquake) are typically insured risks (costs usually dealt with through insurance claims, not directly by the employer as a Relevant Matter). - Civil commotion or the use or threat of terrorism and/or the activities of the relevant authorities in dealing with such event or threat - Strike, lock-out or local combination of workmen affecting any trade employed upon the Works or engaged in the preparation, manufacture or transportation of any of the goods or materials required for them - The exercise after the Base Date by the United Kingdom Government or any Local or Public Authority of any statutory power that is not occasioned by a default of the Contractor or any Contractor's Person but which directly affects the execution of the Works - The carrying out of work or failure to carry out work in pursuance of its statutory obligations, by a statutory undertaker in relation to the Works If it is largely an external or natural occurrence not attributable to the employer's fault, it is more likely to be solely a Relevant Event (for time). Many relevant events are also relevant matters such as variations and CA instructions.

Answer 35

Fire, Explosion, earthquakes, flooring, aircraft crash

Answer 36

The contractor has to prove that the weather had been worse than of a specified number of years previous, typically 10.

Answer 37

There are three insurance options. Options A and B are for new buildings and Option C is for works involving existing structures.

Answer 38

For new builds option A requires the contractor to take out and maintain joint names all risks insurance of the works.

Answer 39

For new builds option B requires the employer to take out and maintain joint names all risks for the insurance of the works.

Answer 40

Options C reqiuires the employer to take out and maintain joint names specified perils insurance in respect of the existing structures and contents and all risks insurance of the works. The contractor is not liable for any damage to the existing structure even if they are negligent.

Answer 41

A provisional sum is an allowance (or best guess), that is inserted into tender documents for a specific element of the works that is not yet defined in enough detail for tenderers to accurately price. The contract usually provides expressly how it is to be dealt with. A common clause in substance provides for the provisional sum to be omitted and an appropriate valuation of the work actually carried out to be substituted for it.

Answer 42

There are two types - The RICS's New Rules of measurement define defined and undefined provisional sums. Undefined provisional sum - A sum provided for work that is not completely designed, but for which the information required for a defined provisional sum cannot be provided. Where provisional sums are given for undefined work, the contractor should be assumed not to have made any allowance in programming, planning and pricing preliminaries. Defined provisional sum - A sum provided for work that is not completely designed but for which the following information is provided: - the nature and construction of the work - a statement of how and where the work is fixed to the building, and what other work should be fixed - a quantity or quantities that indicate the scope and extent of the work, and - any specific limitations, etc. identified. Where provisional sums are given for defined work, the contractor should be assumed to have made due allowance in their programming, planning and pricing preliminaries.

Answer 43

The contract allows for a review of previously awarded extensions. Specifically, clause 2.19.3 of the JCT Intermediate Building Contract states that "At any time up to 12 weeks after the date of practical completion... the Architect/Contract Administrator may give an extension of time... whether on reviewing a previous decision or otherwise... Such an extension of time shall not reduce any extension previously given". This same principle applies to the JCT Standard Building Contract (clause 2.28.5), where any revision to the extension of time decided after review must "either confirm or increase the extension of time period, unless there has been an omission to the works that justifies a reduction". Therefore, an Architect cannot 'take back' time that has already been awarded, even if subsequent events suggest the award was more generous than necessary. The extension must remain "fair and reasonable"

Answer 44

A company is insolvent when it can’t pay its debts. This could mean either: - it can’t pay bills when they become due - it has more liabilities than assets on its balance sheet Here's a breakdown of what constitutes contractor insolvency under JCT contracts: - For a company, it becomes Insolvent when: - It enters administration as defined by Schedule B1 to the Insolvency Act 1986. - An administrative receiver or a receiver or manager of its property is appointed under Chapter I of Part III of the Insolvency Act 1986, or a receiver is appointed under Chapter II of that Part. - A resolution for voluntary winding-up is passed without a declaration of solvency under section 89 of the Insolvency Act 1986. - A winding-up order is made under Part IV or V of the Insolvency Act 1986.

Answer 45

If the contractor becomes Insolvent, the Employer has the right to terminate the contractor's employment by giving notice at any time. The contractor is obligated to immediately notify the Employer if they engage in any of the matters described in the insolvency definition. As soon as the contractor becomes Insolvent, regardless of whether the Employer has issued a termination notice: - The contractor's obligations to carry out and complete the Works are suspended. - The Employer is permitted to take reasonable measures to protect the site, the Works, and Site Materials, and the contractor must not hinder these measures. - No further sums, including retention, become due to the contractor under the contract

Answer 46

A claim for loss and expense commonly includes the following categories of costs, provided they are direct and proven: - Prolongation Costs: Additional preliminaries. - Disruption Costs: Costs due to loss of productivity or uneconomic working, even if the completion date is not delayed. This can include: ◦ Costs associated with loss of a "learning curve" advantage. ◦ Premium rates paid for additional labour recruited at short notice due to unexpected or unplanned tasks. - Increased Overheads - Loss of Profit - Acceleration costs - Finance Charges To substantiate a claim, the contractor must maintain factual and contemporary records. These should be original or "primary documents" produced at or near the time the events occurred.

Answer 47

Under JCT contracts, "exceptionally adverse weather conditions" is recognised as a Relevant Event that may entitle a contractor to an extension of time. However, it does not automatically entitle the contractor to direct loss and/or expense. For the clause to apply, the weather must be exceptional having regard to the time of year or the location of the site. For example, heavy snow in January may not be considered exceptional. To reach a conclusion, it is usual for the architect to require meteorological reports for perhaps ten years prior to the occurrence. The contractor is expected to exercise a reasonable degree of anticipation at the tender stage.

Answer 48

The certificate should be issued when, in the opinion of the Architect/Contract Administrator (or when the Employer deems for DB), practical completion of the Works or a Section is achieved. Although the JCT contracts do not provide a precise definition of "practical completion," several key characteristics and conditions are understood to apply: - Completion for Practical Purposes: Practical completion does not mean that the works are "substantially" or "nearly" complete, nor does it require completion down to the last detail. It means the works are "complete for all practical purposes". - Absence of Apparent Defects: The works must be complete except for minor items where there are no apparent (i.e., visible) defects. A useful working definition is that there are no defects apparent, and any minor items remaining can be completed without inconvenience to the employer's intended use of the building. - Contractual Compliance: The contractor's fundamental obligation is to carry out and complete the Works in accordance with the contract.

Answer 49

Under the Housing Grants, Construction and Regeneration (HGCR) Act 1996, a party to a construction contract in excess of 45 days in duration is entitled to interim or stage payments, so every construction contract should include provision for interim payments. Construction contracts of 45 days or less duration are referred to as ‘non-qualifying’ contracts.

Answer 50

The LDEDC Act 2009 (The Local Democracy, Economic Development And Construction Act) also amended the Housing Grants, Construction and Regeneration Act 1996 by: - bolstering a payee’s right to suspend for late payment - removing existing barriers to adjudication and - making written and oral contracts subject to the Act.

Contract Administration Flashcards

(75 cards)