Contract Administration - Level 1 Flashcards

Question

What is the difference between a CA and Employer’s Agent?

Answer 1

The term 'employer's agent' is used to describe an agent acting on behalf of the client for design and build contracts. The employer's agent is likely to be either the lead consultant (often the architect) or the cost consultant, however, the role can be carried out by someone from the client organisation such as an in-house project manager or may be an independent project manager appointed by the client.

Answer 2

Issue of the PC Cert - Release of half of retention - Start of defects liability period - Possession is handed back to employer/client - Ends liability of contractor for LADs - Insurance responsibility passes back to employer/client from contractor

Answer 3

Project becomes at large and liquidated damages are not enforceable.

Answer 4

Contractor to give written notice of EOT to CA and identifies relevant event that has happened. CA makes assessment as to whether the delay was caused by relevant event, if so completion date is adjusted.

Answer 5

Variations, Instructions, Deferment of Site Possession, Adverse weather conditions, force majeure, specified peril, terrorism.

Answer 6

Contractor notifies the CA of the delay, CA agrees EoT and adjusts date for completion, notifies all parties.

Answer 7

Due to the size and complexity of the project, as the works were low in value and relatively minor over a short construction period, this was the most appropriate contract to use.

Answer 8

Advantages: Contractor has most risk More cost certainty in lump sum cost Construction can start earlier One point of contact for the client Disadvantages: Less control over quality of the work as project is price driven Client may not get best value for money as contractor has priced in for risk

Answer 9

Option A – for New Buildings, Contractor takes out and maintains joint names all risk insurance of the works. Option B – for New Buildings, Employer takes out and maintains joint names all risk insurance of the works. Option C – Only option referring to works to an existing structure. Employer takes out and maintains joint names all risk insurance of the works and the policy also covers the existing structure and contents against specified perils.

Answer 10

Typically taken out jointly between contractor and employer.

Answer 11

To prevent one of the parties from cancelling the policy without the other knowing.

Answer 12

Defined provisional sums are those which have been described in sufficient detail that the contractor is expected to have made allowance for them in their programming, planning and pricing preliminaries. An example might be where you know the quantity of bricks required for the works but not the design. Undefined provisional sums are less well described as they refer to work which is not completely designed. As such, the contractor cannot be expected to make allowance for them in their programming, planning and pricing preliminaries. Usually they are unknown such as works below an existing structure where the condition and extent of works is not known until demolition is undertaken.

Answer 13

Latent defects are those that are not discoverable through reasonable inspection and may not come up until a few years after construction. Patent defect are those that can be discovered through reasonable inspection.

Answer 14

The date fixed and stated in the contract particulars

Answer 15

This is the date for completion or any other date that is subsequently fixed (i.e. after an EOT)

Answer 16

When the employer takes back possession of the works

Answer 17

Half of the retention is released , The Rectification Period begins, The contractor’s responsibility for insuring the works (if applicable) ends , Contractor’s liability for liquidated damages ends , The employer is now responsible for any damages to the works.

Answer 18

1 Health and safety file 2 O&M manuals (including as-built drawings, specifications, maintenance details, operating instructions etc.) 3 Warranties and guarantees from suppliers 4 Testing and commissioning documentation 5 Statutory authority approvals and consents

Answer 19

The completion and handover of the works to the employer in agreed stages

Answer 20

Practical completion is a vague concept It is not defined in JCT It is reliant on the architect’s opinion that the works are complete It should not be conditional It is common practice for PC to be granted when the works are substantially complete – i.e. there may be minor defects or omissions BUT nothing that would prevent the employer taking occupation

Answer 21

Where the employer requests and the contractor consents to the employer taking possession of the works / part of the works before the date for practical / sectional completion?

Answer 22

Sectional completion is a contractual obligation to hand over the section at the stated date, partial possession relies on the contractor’s consent

Answer 23

Issue to a written statement to the contractor showing the relevant part and stating relevant date

Answer 24

For the relevant part practical completion is deemed to have occurred on the relevant date Therefore the same consequences follow In addition, the liquidated damages for the works / that section are reduced by the proportion that the value of the relevant part relates to the contract / section sum

Answer 25

The contractor has an obligation to make good any defects, shrinkages or other faults that arise during this period of time

Answer 26

The default position is 6 months BUT it is common to amend this to 12 months – so the building is observed in all seasons

Answer 27

No later than 14 days after the end of the Rectification Period the architect must issue a written statement to the contractor detailed all of the defects that have arisen and need to be made good

Answer 28

Within a reasonable time

Answer 29

Yes, they can issue an CI to get them to fix ‘forthwith’ e.g. if serious defect – leaking pipe etc that cannot be left until the end of the Rectification Period

Answer 30

Issued by the architect to certify that all of the defects that have been required to be made good by the contractor have been so

Answer 31

The remaining retention is released.

Answer 32

Issued by the architect to certify that the works / section have not been completed by the relevant completion date

Answer 33

The employer has the right to seek liquidated damages, as long as a pay less notice and a notice of intention has been issued.

Answer 34

Interim certificate Practical completion / sectional completion certificate Non completion certificate Certification of Making Good Final Certificate

Answer 35

Reimburses the contractor for direct loss and/or expense incurred in carrying out additional work or from an employer’s breach of contract 2.7 & 2.8 4.20 to 4.23

Answer 36

As soon as a the regular progress of the work is affected, or is likely to be affected, or the contractor becomes aware of any other matter that would cause them to incur loss and expense, they should notify the architect in writing He should submit any further information as requested by the CA to enable the amount of loss and expense to be ascertained

Answer 37

The events that entitle the contractor to loss and/or expense, along with deferment of possession of the site. There are 5 relevant matters set out in Clause 4.24 under DB16: 1) Variations 2) Instructions 3) Execution of an approximate quantity that was not a reasonably accurate forecast of quantity 4) Suspension by the contractor for non–payment 5) Any impediment, prevention or default by the employer

Answer 38

It should be the ACTUAL loss incurred by the contractor

Answer 39

Prolongation (extra site overheads i.e. preliminaries) Thickening of preliminaries (e.g. extra supervision required due to variations) Disruption (causing plant / labour to be underemployed – hard to prove) Increases in labour / material costs during the period of delay Head office overheads Loss of profit (commonly combined with head office overheads)

Answer 40

Added to the contract sum immediately and paid in the next interim certificate It is NOT subject to retention

Answer 41

No attempt to separate out all of the difference causes and their effects. Lists a whole load of causes of delay / loss and expense and gives the overall effect Difficult to prove or disprove them, the contractor is likely to end up with at least something, be it an EOT or loss and/or expense

Answer 42

It is a percentage, deducted and retained by the employer from each interim certificate. An incentive for the contractor to complete the works promptly. Financial comeback for the employer in the event of contractor default.

Answer 43

Loss and expense amounts Statutory fees and charges Some additional insurance premiums Opening up and testing costs Fluctuations Options A and B

Answer 44

Place it in a separate bank account Label the account as being held in trust Provide the contractor with statements showing the payments and amount of money in there This should ensure that the money is available to the contractor in event of employer insolvency

Answer 45

The employer

Answer 46

Half released in the interim certificate after PC The remaining retention is released in the Final Certificate – after the Certificate of Making Good

Answer 47

Provided by the contractor in lieu of taking retention from interim payments It should be to the same value as the retention deducted would have been Need should be stated in the contract particulars A standard JCT form in contract schedules

Answer 48

The employer can deduct retention from interim payments If the bond is subsequently taken out, the retention deducted must be repaid to the contractor

Answer 49

Retention can either be deducted from interim payments on the additional amount or the retention bond value is increased

Answer 50

May be used in difficult market conditions to aid the contractor’s cashflow

Answer 51

Employer pays the premium for taking out the bond Reduces the contractor’s incentive to complete to standard and promptly Harms the employer’s cashflow The employer would not get the interest accruing on the amount of the retention bond

Answer 52

A relevant event is an event that causes a delay to the completion date, which is caused by the client, or 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. Relevant events might include: -Variations. -Exceptionally adverse weather. -Civil commotion or terrorism. -Failure to provide information. -Delay on the part of a nominated sub-contractor. -Delay in giving the contractor possession of the site. -Force majeure (such as a war or an epidemic). -The supply of materials and goods by the client.

Answer 53

A relevant matter is a matter for which the client is responsible that materially effects the progress of the works. This enables 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. -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. 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. If delays are not caused by the client and are not neutral events, but are caused by the contractor, and this results in a failure to achieve practical completion by the completion date set out in the contract, the contractor may be liable to pay liquidated damages to the client.

Answer 54

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.

Answer 55

1. Price The JCT Contract is a fixed price lump sum contract. NEC Option B offers a fixed price lump sum contract but Options C and D are target cost contracts. 2. Provisional sums The JCT Contract contains provisional sums, whilst the NEC Contract does not. 3. The programme The JCT contract does not have a programme as a contractual document. NEC is more about collaborative working and the programme is at the heart of the NEC ethos. It is a contractual document and to be regularly updated. 4. Payment In relation to payment, the JCT contract payment section is clear, is all in one section (clause 4) and easy to follow. However, in relation to the NEC contract it is located in three different locations – clause 5, Y(UK)2 and Contract Data Part 1. 5. Extension of time/loss and expense In relation to extensions of time and loss and expense, the JCT contract has relevant matters and relevant events and time and money are dealt with as separate concepts. The NEC contract has the compensation event and it deals with both time and money. The ethos of compensations events is that they are dealt with in real time as much as possible and this is very much process driven. 6. Design risk The JCT contract has a clear interaction between the Employer’s Requirements and Contractor’s Proposals and there is extensive drafting in the JCT. The NEC contract however simply states a contractor is to design the parts of the works which the Works Information states he is to design and therefore The Works Information contains far more detail than Employer’s Requirements. It is bad practice to simply re-badge a JCT Employer’s Requirements document as an NEC Works Information document.

Answer 56

It depends on the complexity of the work required.

Answer 57

These self-explanatory contracts are the most straightforward of all the JCT contracts. The JCT publishes one form for use with a professional consultant (such as an architect) and one without for when the client is “going it alone” with the building contractor.

Answer 58

MW 2016 is for small building works that fall below a recommended threshold of circa £250,000; however, it is not so much the financial threshold that matters but the nature of the works. It is a simple contract and appropriate in the following circumstances: - the work involved is simple in character; - the work is designed by or on behalf of the employer; - the employer is to provide drawings and/or a specification and/or work schedules to define adequately the quantity and quality of the work; and - an architect or contract administrator is to administer the contract. The contract is not suitable where: - bills of quantities are required; - provisions are required to govern work carried out by named specialists; - detailed control procedures are needed; - the contractor is to design discrete parts of the works, even though all the other criteria are met – see Key points for details on the Minor Works Building Contract with contractors' design (MWD).

Answer 59

The intermediate form of the JCT introduces additional complexity to the minor works contract but rather than look similar to that, is really a cut down version of the standard building contract. It is generally used to deliver contracts where there is a higher level of complexity and where the contract value reaches approximately £1million. It provides clauses relating to sectional completion. In the intermediate JCT, the following apply: - The employer must provide drawings, and either bills of quantities, specification or works schedules to specify quantity and quality of work. - Price and payment structure of the contract is based on a lump sum (price for the job) with monthly interim payments. - It can be used where provisions are required to cover named specialists or sub-contractors. - All sub-contractors are domestic and their performance is the responsibility of the main contractor. - Provisions are included for collaborative working, sustainability, advanced payment, bonds and collateral warranties. - It also specifies more detailed liability and insurance issues.

Answer 60

The JCT Standard Building Contract is designed for large or complex construction projects where detailed contract provisions are needed. The works will be described by reference to drawings and bills of quantities prepared by or on behalf of the employer and given to the contractor. Two Types: SBC/Q – the employer provides the contractor with bills of quantities to define the quantity and quality of the work; SBC/XQ – the employer provides the contractor with specification or work schedules to define adequately the scope and quality of the work but with no bills of quantity. Likely to be appropriate where the degree of complexity is not such as to require bills of quantities.

Answer 61

This involves appointing a main contractor to design the project and then to go on and construct it. This is as opposed to the traditional procurement route in which the client appoints consultants to design the project and then a contractor is appointed to construct it. Design and build gives a single point of responsibility for delivering the entire project, and can help ensure good buildability, cost control and speed. The scale and complexity of design and build projects can vary considerably, but the DB contract is generally suitable for projects where a detailed agreement is required, making provision for collaborative working, sustainability, advance payment, collateral warranties and so on. Instead of a specification, there are employers requirements, which detail what the client wants and to what standard.

Answer 62

Articles of Agreement; Contract Particulars: these contain project-specific information; Conditions of Contract; and Schedules.

Answer 63

definitions carrying out the works control of the works; payment; variations; injury, damage and insurance; assignment, third party rights and collateral warranties; termination; settlement of disputes.

Answer 64

The following options are available to choose from in the JCT minor works contract; JCT 5.4A – this requires the Employer to be included as a “Joint Name” with the Contractor on the insurance policy for the new works. New builds. JCT 5.4B – this requires the Employer to provide “Joint Names” insurance policy for the new works and the existing structure. Usually for existing buildings and give control of the insurance policy to the Employer. JCT 5.4C – this requires the works and existing structure to be insured by ‘other means’. Seperate cover for works insurance and structure insurance. For example work on an ancient monument or a building that is structurally unsound or exposed to the elements might make it impossible to insure the existing structure.

Answer 65

The following options are available to choose from in the contract; Option A requires the Contractor to take out and maintain all risks insurance of the works; Option B requires the Employer to take out and maintain all risks insurance of the works; and Option C requires the Employer to take out and maintain (a) insurance in respect of the existing structures and their contents and (b) all risks insurance of the works.

Answer 66

1. Appoint a design team 2. Appoint a contractor 3. Follow the payment terms under the contract 4. Give possession of site as required 5. Follow insurance terms under the contract 6. Comply with CDM duties

Answer 67

1. Obstruct the works 2. Dictate the programme 3. Issue instructions

Answer 68

The contractor is obligated to complete the works according to the Contract Documents / Works Information and statutory requirements (e.g. CDM Regulations)

Answer 69

Administers the terms of the contract in a fair and unbiased manner, including: 1. Chairing meetings 2. Inspecting progress and quality of works 3. Issuing instructions, e.g. variation and change orders 4. Assessing claims, e.g. extensions of time 5. Authorising interim payments 6. Certifying the date of completion 7. Agreeing the final account 8. Administering contract terms during rectification period

Answer 70

1. Contract Instruction 2. Interim Payment Certificate 3. Final Payment Certificate 4. Practical Completion Certificate 5. Certificate of Making Good 6. Pay Less Notice 7. Extension of Time Certificate 8. Non-Completion Certificate

Answer 71

CA has a dual role: • Administrator - represents the employer's interested (e.g. issuing instructions) • Certifier - acts impartially (e.g. certifying payments, assessing claims This can lead to potential conflicts (e.g. employer's interest for CA to certify a narrow valuation, which would not be in the contractor's interest)

Answer 72

• Acts as agent exclusively for the employer under design and build contracts • Responsibilities depend on what has been instructed by the employer, as the employer is ultimately required to issue instructions, certificates etc. • In practice, the EA will usually administer design and build contracts, acting as the employer's 'mouthpiece' • Cannot be considered truly independent, but as they are given authority to bind the employer, to avoid disputes they should act impartially • Important to recognise the contractor's freedom to design

Answer 73

1. Checking and verifying the contractor's design in terms of adequacy and efficiency 2. Checking and verifying the contractor's design in terms of fitness for purpose

Answer 74

Appointed by the employer to act solely as inspector on their behalf and under the CA's direction, including: 1. Witnessing tests 2. Monitoring progress against programme 3. Assessing whether works comply with legal requirements (e.g. health and safety) 4. Assessing whether works are being carried out in accordance with the contract documents 5. Measuring and taking samples 6. Monitoring site conditions to ensure work is undertaken in accordance with manufacturers' recommendations 7. Providing regular reports 8. Attending progress meetings 9. Keeping records (e.g. progress, delays, weather, instructions received, deliveries, significant events etc.) NB: do not supervise works (as this may attach them with responsibility of the works), they merely inspect the works

Answer 75

Administers the NEC forms of contract and has similar responsibilities to a CA under JCT contracts Minor differences to CA: 1. Conclusively of decision-making - CA has power to make certain decisions based on 'reasonableness', whereas PM must collaborate with the employer and contractor, working within the 'spirit of mutual trust and cooperation' 2. Variations/change - PM actively monitors change by means of an early warning mechanism 3. Practical completion - CA's opinion when works are practically complete, whereas completion is defined within NEC, so PM's subjectivity is not required

Contract Administration - Level 1 Flashcards

(103 cards)