What is a contract and what is a breach of contract?
Contract: Legally binding promise by one party to fulfil an obligation to another party in return for consideration. Must have key elements: offer, acceptance, consideration and intent to create legal relations.
Breach of contract: When one party in a binding agreement fails to deliver according to the terms of the agreement.
What is the difference between a procurement strategy, contract selection and tendering?
Procurement Strategy: Overall process of obtaining goods and services from a contractor, and strategy on how those goods/services are to be acquired by reviewing the employer’s requirements (time, cost, quality, responsibility for design) and their attitude to risk.
Contract Selection: Choice of appropriate contract flowing from analysis of employer’s requirements and the chosen procurement route.
Tendering: Bidding process and the actual process of appointing a contractor.
What are the key similarities and differences between JCT Minor Works and Intermediate contract types?
Similarities:
- Traditional procurement (client responsible for design)
- Fixed price lump sum, interim monthly payments
- CDP version of contract
- Public/private
- CA to administrate
- Provisions for collaborative working and sustainability
Differences:
- MW for smaller, lower value, basic/simple projects
- Intermediate can use BoQs
- Intermediate provision for named specialists (become domestic but contractor not responsible for sub-contractor design)
- Intermediate can have sectional completion
- Intermediate provision for BIM, advance payment, bonds, third party rights and collateral warranties.
What are the JCT forms suitable for a traditional procurement route?
Three main types:
1) Lump-sum contract: contract sum determined before the work is started
- JCT SBC with Quantities
- JCT SBC without Quantities
- JCT Intermediate / Minor Works, etc.
2) Measurement: contract sum determined after completion, but assessed on remeasurement on an agreed basis
- JCT SBC with approx. Quantities
- JCT Measured Term
3) Cost reimbursement: sum arrived at on the basis of actuals costs plus OH&P
- JCT Prime Cost
What are the main implications for the use of a JCT Intermediate over a JCT D&B contract?
- Client used to using D&B, required advice as to key differences.
Design:
- Intermediate: client control of design, but retains responsibility, design completed to Stage 4, can use CDPs for specialist design (M&E)
- D&B: client issues ER’s and contractor issues CP’s. ER’s based on Stage 3 design. Contract amended to make contractor fully responsible for design.
Programme:
- Intermediate: Longer programme due to sequential design and construction
- D&B: Design and construction can overlap, contractor single source of responsibility
Administration:
- Intermediate: Contract Administrator
- D&B: Employers Agent
Sub-contractors:
- Intermediate: provision for named sub-contractors
Cost Control (both fixed price, lump-sum):
- Intermediate: BoQ or work schedule
- D&B: Contract sum analysis
Changes:
- Intermediate: more leeway for changes, use of BoQ for pricing
- D&B: Contractor can object
Warranty/Insurance/Novation:
- D&B: Collateral warranty, novated design team, PI.
What are the advantages of collateral warranty over third-party rights?
- Client more familiar with collateral warranties
- Sub-contractors unfamiliar with third party rights - requires time / additional negotiation, likely to have limited legal advice
- Contract in its own right
- When lots of sub-contractors it might be difficult to get all to agree to third-party rights clause
- Usually more convenient than putting third-party rights clauses into every sub-contract
- Some lenders still prefer them
However;
- Takes time/cost to develop collateral warranties
What would be the implication of a contractor making design assumptions/decisions in traditional contracting?
- Contractor would assume design liability
- Contractor’s PI might not cover this design liability
- Contractor should refer any inconsistencies or gaps in information to the Contract Administrator for action
- Any delay caused can be subject to time/cost award
What is a back-to-back contract?
- Where the sub-contract terms mirror the main contract terms, so that a chain of responsibility is established through the supply chain
- Sub-contract provided for most forms of JCT contracts
Who shoulders what risk in traditional contracting?
Contractor risk:
- Construction programme
- Cost certainty (jointly)
- Performance of sub-contractors
- Quality of construction
Employer risk:
- Design programme
- Control of design/quality
- Performance of design teams
- Performance of main contractor
Who shoulders what risk in Design & Build?
Contractor risk:
- Programme
- Cost certainty
- Control of design/quality (jointly)
- Performance of design teams (jointly)
- Performance of sub-contractors
- Quality of construction
Employer risk:
- Performance of main contractor
What are the differences between a bond and collateral warranty?
- Bond is a financial commitment backed by a third-party, contained within the contract
- Collateral warranty passes on contractual obligations, a side agreement to the contract
What are the differences between domestic, nominated and named sub-contractors?
Domestic: Chosen by the contractor, not influenced by the employer or employer’s consultants
Nominated: Not used much, no provision in JCT. Employer selects sub-contractor and imposes on contractor to appoint. Allowed for by a prime sum plus OH&P. Contract may not hold contractor entirely responsible for failure, employer might indemnify.
Named: Employer provides a list of pre-approved sub-contractors. Contractor selects one through the tendering process. Become domestic sub-contractors once appointed, i.e. contractor responsible for performance. PS included at tender, and replaced with actual price once agreed.
What are some of the considerations when selecting an appropriate construction contract?
1) Type of works required: Construction/engineering, new build/refurb, major/minor, specialist design, etc.
2) Sector: Familiarity of contract type, unfamiliar might cause contractors to price for risks.
3) Size, value and complexity: appropriate and proportionate in terms of risk balance and administrative burden.
4) Employer and level of sophistication: familiarity with contract type, level of administrative and decision-making capability
5) Balance of risk/risk allocation: risk allocation even within contracts designed for same procurement route
6) Design responsibility: some forms work with wide range of design responsibility (e.g. NEC), whereas others are procurement route specific (e.g. JCT D&B)
7) Control of sub-contractors: certain contracts allow greater control over selection, i.e. domestic vs named
What are the contracts in the JCT suite?
Traditional / lump sum
- Standard Building Contract (with Quantities, without Quantities)
- Intermediate Building Contract (with CDP)
- Minor Works Building Contract (with CDP)
Traditional / measurement
- Standard Building Contract (with approx. Quantities)
- Measured Term Contract
Traditional / re-imbursement
- Prime Cost Contract
D&B:
- Major Project Construction Contract
- Design and Build Contract
Management / re-imbursement
- Management Building Contract
- Construction Management Contract
Partnering / lump sum or target cost
- JCT Constructing Excellence Contract
- Framework Agreement
- Repair & Maintenance Contract
- Homeowner Contract
When would you use a JCT Standard Building Contract?
1) Traditional procurement - design is complete, client retains design control and risk
2) Cost certainty - lump-sum (can also use re-measurement or reimbursement options)
3) Using BoQ (or approx. BoQ) or work schedules
4) Large or complex construction projects where detailed provisions needed
5) Options for:
- CDP
- Sectional completion
- Named specialists
- Bonds
- Advanced payment
- Third-party rights or collateral warranties
- Optional: fluctuations, BIM, collaborative working, sustainability
What are the main features of the JCT Design & Build Contract?
- Contractor will complete a design based on ERs
- Contractor design responsibility for CPs
- Contractor provides Contract Sum Analysis at tender
- Designed to keep changes to a minimum, price based on rates in CSA
- Employer’s Agent
- Sectional completion
- Bonds
- Advanced payment
- Third-party rights or collateral warranties
- Optional: fluctuations
What is a loss and expense claim?
- Any event where the contractor incurs a loss due to the failure of the employer (relevant matter)
- Should be the actual loss incurred by the contractor
- Can be due without an extension of time
Common claims:
- Prolongation (extra prelims)
- Thickening of prelims (extra site supervision)
- Disruption (plant and labour are underutilised)
- Increases in labour and material costs during period of delay
- Finance charges (interest)
What is sectional completion under JCT?
- Provision within the building contract which allows different completion dates to be set for different sections of the works
- Contractor has an obligation to achieve the sectional completion date
- LDs are agreed up front should the section be delivered late
What are the main options for insuring the works under a JCT contract?
Option A: Contractor takes out and maintains joint names all risks insurance of the works for new buildings
Option B: Employer takes out and maintains the joint names all risks insurance of the works for the new buildings
Option C: (Renovations) Employer takes out and maintains the joint names all risks insurance of the works and the policy also insures the existing structure and contents against ‘specific perils’ (fire, explosions, etc.)
What is contractor’s all risk insurance?
Protection against the physical loss or damage to the works being undertaken
Policy will pay for repair or replacement of the insured works following damage caused by an insured event
What are the key differences between JCT and NEC contracts?
- NEC operates an ‘early warning’ process
- JCT splits time and cost after a change (relevant event/matter) whereas NEC deals with the effects of time and cost together
- JCT: variations; NEC: Compensation Events
- JCT: Contract Administrator; NEC: Project Manager
- JCT: separate contracts; NEC: 6 main options
- NEC programme is a contract document
- NEC has timeframes for reply
- JCT has provisional sums, NEC does not
- JCT includes detail on insurance; NEC detail is brief
Are you aware of any other forms of contract aside from JCT/NEC?
- FIDIC (International Federation of Consulting Engineers)
- ACA (Association of Consultant Architects)
- ACE (Association for Consultancy and Engineering)
- Complex Projects Contract 2013’ or ‘CPC 2013’.
What are the relevant events in JCT?
- Changes/Variations
- Employer instruction for opening up/inspection or testing of works
- Client delays giving possession of site
- Impediment, prevention or default whether by act or omission by the Employer/Employer’s Person
- Exceptionally adverse weather
- Strike
- Force majeure
- Delay in receipt of necessary permission/approval from statutory body in which contractor has taken all practicable steps to avoid or reduce
What are the core clauses of an NEC PSC contract?
- General
- Consultant’s main responsibilities
- Time
- Quality Management
- Payment
- Compensation Events
- Rights to material
- Liabilities and Insurance
- Termination
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Ethics, Rules of Conduct and Professionalism72
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Client Care22
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Communication and negotiation7
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Health & Safety48
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Accounting principles and procedures27
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Business Planning16
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Conflict Avoidance, Management And Dispute Resolution22
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Data Management12
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Diversity, inclusion and teamworking16
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Inclusive environments11
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Sustainability34
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Construction technology and environmental services36
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Procurement and Tendering54
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Contract Administration45
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Project Finance44
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Stakeholder Management10
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Development and project briefs26
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Contract Practice31
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Leading projects, people and teams10
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Managing Projects32
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Programming and planning17
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Hot topics / CPD16
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Not used46
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Level 3 questions13
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Level 2 questions35
