Construction Revision Flashcards
Learn (103 cards)
1
Q
What is a compensation event?
A
A single assessment that deals with the entire effect of an event on time and money in NEC contracts
2
Q
What is a Loss and Expense claim?
A
A claim a contractor can make as a result of the progress of the works being materially affected by relevant matters for which the client is responsible. (JCT Contracts)
3
Q
What is an Extension of Time?
A
A delay to the works, caused by a relevant event (Not the contractors fault) JCT Contracts
4
Q
What is a Relevant event? Give an examples
A
Delay on a project affecting completion date. Examples: Variations, Exceptionally Adverse Weather Conditions, Terrorism, Failure to Provide Information, Delay in giving contractor access to site, delay in supply of materials and goods by the client
5
Q
What is a Relevant Matter? Give examples
A
Does not necessarily result in delay to the construction project but could entitle the contractor to a Loss and Expense claim. E.g. Failure to give the contractor possession of site, delay in giving contractor access, delay in receiving instruction, discrepancies in contract documents, disruption caused by client, instructions relating to variations and expenditure of provisional sums
6
Q
What is repudiation?
A
Where one party to a contract has no intention of carrying out their obligations or if a breach is so serious that they clearly had no intention of carrying out their obligations that can lead to immediate termination of contract.
7
Q
Termination by frustration?
A
The termination of a contract without fault of either party but due to unforeseen event
8
Q
Retention Bond
A
A retention bond is a security, usually 5% of the amount certified as due to the contractor on an interim certificate, that is retained by the client.
9
Q
Advance Payment Bond
A
If the client agrees to make an advance payment bond to the contractor (e.g. to cover high up-front costs) a bond may be required to secure the payment against default by the contractor.
10
Q
Performance Bond
A
Commonly used as a means of insuring the client against non-performance or contractor failing to fulfil contractual obligations (Typically set at 10% of the contract value). This compensation can allow the client to appoint another contractor to complete the works.
11
Q
Bond
A
Protection provided by a financial institution to the client. Although the cost of a bond is borne by the contractor, it is usually passed on to the client in the tender price.
12
Q
Conditional Bond
A
Requires the client to provide evidence that the contractor has not performed their obligations under the contract, and that they have suffered loss as a consequence before the bond is paid.
13
Q
Unconditional or On-Demand Bond
A
The Bondsman or Financial Institution pays out an amount set out in a bond immediately without needing for evidence (Rarely used in UK).
14
Q
Parent Company Guarantee
A
Form of security that may be required by clients to protect them against the default of a contractor that is controlled by a Parent Company (or Holding Company). Typically the default would be insolvency by a contractor.
15
Q
What is insolvency?
A
Describes the inability of a debtor to pay its debts
16
Q
What is insurance?
A
Financial backing and protection against losses and liabilities. Legal liability cover.
17
Q
What is an Indemnity?
A
A clause in a contract that allocates risk for claims or for loss and damage between parties to a contract. A contractual obligation of one party to compensate the loss occurred to the other party. E.g. the client may insert an indemnity clause requiring the contractor to indemnify the client against the expense, liability, loss or claim in respect of personal injury or death arising from the works.
18
Q
What is Liability Insurance?
A
Insures a party for their liabilities and will pay out to 3rd party for any loss to 3rd party caused by insured
19
Q
What is Loss Insurance?
A
Provides legal liability cover and covers any losses incurred by the insured.
20
Q
Public Liability Insurance
A
Covers against claims by members of the public visiting the the business of the insured, customers, clients, independent sub-contractors.
21
Q
What is Professional Indemnity Insurance?
A
Provides insurance cover against claims of negligence & cover of cost of defending against a claim. Once a practice has come to an end, the practitioner should maintain run-off cover to cover any historic claims made. Run-off premiums will normally reduce annually to reflect diminishing chances of claim.
22
Q
What are Collateral Warranties?
A
Agreements associated with another ‘primary contract’. They provide for a duty of care to be extended by one of the contracting parties to a third party who is not party to the original contract. E.g. Architect owes duty of care to occupier. May be an obligation of a main contractor to obtain collateral warranties from sub-contractors. Without collateral warranty, economic loss is not recoverable in tort.
23
Q
What is reasonable skill and care?
A
Phrase given to describe minimum standard of work expected from a professional. A performance obligation/duty to perform to the level of skill and care expected of another reasonably competent member of the profession.
24
Q
What is Fitness for Purpose?
A
Works/Services must be good enough to do the job they were intended to do.
25
What is the Base Date?
The date usually set at 10 days before the tender submission used as a date to cross check differences in prices, inflation, changes to the contract sum and changes to regulation/legislation.
26
What are Liquidated and Ascertained Damages? (LADs)
Clause in contract for the contractor to pay liquidated damages to the client in the event that the contract is breached.
In building contracts they usually relate to the contractor failing to achieve the practical completion date. They are often calculated on a daily or weekly basis.
27
What may be included in calculations for Liquidated and Ascertained Damages?
Loss of rent, Loss of Income, Fees, Storage Costs, Rental Costs, Fees and Fines Imposed by Third Parties, Finance Costs.
28
What is Practical Completion?
Contract Administrator certifies Practical Completion when all the works described in the contract have been carried out.
29
When Practical Completion has been certified, what effect does it have?
1) Releasing half of retention
2) Ending contractors liability for Liquidated Damages
3) Signifying the beginning of the Defects Liability Period
30
What are Articles in a Contract?
Articles set out what is agreed between the parties
31
What are Contract Particulars?
Set out the aspects of the contract that are particular to the project to which the contract relates to. It is a schedule for the variables in agreement and conditions. E.g. The contract sum, the retention %, the interim payment period, 3rd party rights for collateral warranties, amount of liquidated damages, length of defects liability period etc.
32
What are some of the contract administrators' duties?
Inviting and processing tenders, preparing contract docs for execution, Administrating change control procedures, Seeking instructions from client in relation to the contract, Issuing instructions such as variations/or relating to prime cost sums/making good defects, Considering claims, chairing construction progress meetings, Issuing practical completion and interim certificates, issuing a certificate of making good defects, issuing the final certificate.
33
How is the Bill of Quantities used under NEC contracts?
Used as a comparison mechanism during tender process
34
How is the Bill of Quantities used under JCT contracts?
To provide detailed measures and quantities needed for the project. Also provides a schedule of rates for work to be carried out and used for valuations and variations.
35
What is contractors' design portion?
This is associated with JCT contracts where there is an agreement for the contractor to design a specific parts of the works. They may in turn sub-contract this work to specialist subcontractors.
36
What is the difference between an Activity Schedule and Bills of Quantities, under NEC4?
An activity schedule is used where each activity is allocated a price and interim payments are made against the completion of each activity. It's advantage is that it simplifies the admin of the interim payment process. Bills of Quants, under NEC4, are used simply as a comparison mechanism in the tender process.
37
The tradition approach to managing change in construction projects is normally dealt within 3 separate elements. How does JCT deal with these?
1) Instruction for Change - variations valued on rates basis
2) Extension of Time
3) Loss/Expense claim
38
NEC4 Option C and D are described as Target Contracts. What are the advantages of such a contract compared to Option E: Cost Reimbursable
Target cost contracts incentivise the contractor to work efficiently and at a low cost, which allows them to keep a % of the pre agreed amount if under budget. Whereas a cost reimbursable contract does not incentivise the contractor to work efficiently and be cost effective, as they know they will be repaid their costs regardless.
39
Describe how 'pain/gain' contracts work, and how this is incorporated into the NEC4 contract.
Parties agree to share ‘pain’ and gain ‘benefits of project. E.g. Sharing profits/losses in a Target cost contract.
40
Explain the difference between a contract under hand and a contract as a Deed
A contract under hand is a normal contract signed by 2 parties and has a limitation period of 6 years
A contract under deed is usually witnessed, does not have to be supported by valuable consideration and has a limitation period of 12 years.
41
What is the difference between a condition and a warranty in a contract? Give an example
A condition is a parties’ obligation in the contract.
Warranty may be used to provide assurance from one party to another that goods and/or services will meet certain expectations e.g. fit for purpose, being free from defects, complying with statutory and other regulations and specifications.
42
What construction risks need to be considered by contracts?
Professional liability, breach of contract, damage/defective work, death or injury, subsidence or damage to property, theft/vandalism
43
Explain the different types of insurance required under JCT 16 relating to people and property. If you were working for a Client what length of cover would you advise and why?
Public Liabilities Insurance, Works insurance, Latent defects insurance, Employers Liabilities Insurance, Collateral Warranty, terrorism insurance, Professional Indemnity insurance
QS would advise that the cover last until end of the rectification period
44
Explain the different types of works insurance required under JCT 16. What is the length of cover required and why?
Works insurance – loss insurance. Clause 6.7.
Option A – New Build, Main Contractor, All risks, Joint Names
Option B – New Build, Employer, All risks, Joint Names
Option C – Existing buildings, Insurable interest, insure works & insure existing building, MC can’t take out Option C has to be client. If ER doesn’t own building then C1 replacement schedule required
45
Why is it important that QS’s advise a client on the insurance provisions required? What should you look for when assessing the cover?
Part of the scope of services a QS is paid to carry out. Should check for the timescale, type of cover, check the exclusions, excess amounts, check insurance is backed up by financial authority
46
Who is responsible if damage to adjacent property occurs but neither the Emp or MC are negligent? What can the Emp do to cover this risk?
Dispute would arise but most likely fall to ER to pay. Clause 6.5.1 As an employer you can state in contract particulars that you want 6.5.1 to apply. This removes the possibility of dispute over negligence as the insured is covered for damage to neighbouring properties should neither party be negligent.
47
If the Employer has paid for materials on site which are subsequently stolen who is liable for their replacement (JCT SBC 16) and why?
If materials on site are stolen then this is covered by the works insurance (and hence both parties liable as the policy will be in joint names). The insurance will be paid for by the party who has taken out the insurance (if Option A or Option B) if in both names – however care must be taken if option C work policy has been taken out as this policy can have the option of removing the sub-contractor.
48
What if the insured goes bankrupt and you have a right to claim against him? What if the insured has missed a payment?
The Employer would receive the rights of the insured through third party rights, and as the insurer pays out to the policy holder rather than the victim, the employer would then be line to receive a financial pay-out. If the MC missed any payments however, the policy would have lapsed and hence there would be no pay-out (as the insured MC has become insolvent it is unlikely they would have kept up to date with payments, and hence the employer would not receive 3rd party rights in reality).
49
If the risk holder does not take out the insurance what can you do? Who is liable for any shortfall and why?
If the risk holder doesn’t take out insurance you as a client can notify the Main Contractor that you have taken out insurance and deduct from interim valuation. MC is liable for the shortfall as they haven’t taken out insurance.
50
Why do standard forms of contracts ask for policies to be taken out in joint names?
Avoids subrogation – the substitution of one person or group by another in respect of a debt or insurance claim, accompanied by the transfer of any associated rights and duties. Client, MC or sub-contractor. By having all names on policy it stops insurance company stopping payout. However joint names is expensive as everyone is under the same policy on site.
51
What is the difference between all risks and specified perils?
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All Risks (More expensive due to larger scope): Wide ranging & covers almost everything but there are certain exceptions (Terrorism – covered by separate cover, design defects, wear and tear, sonic booms)
Specified Perils: Catastrophe’s such as storm, explosions (have to be specified in contract)
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52
What are Excepted Risks?
Excepted risks are anything that is not specifically listed and therefore employer risks. Might include: the use or occupation of the works by the employer/its agents/MC, any fault, defect, error or omission in the design of the works, Riot, War, Invasion, Radiation/Contamination caused by radioactivity, Pressure caused by Aircraft.
53
Explain the reinstatement procedure for works insurance Option A
- Written notice by MC
- Carry out an interim valuation to assess extent, excluding the damage (PQS)
- Inspection carried out by insurers (determine reinstatement value)
- MC authorise insurers to pay reinstatement value directly to the employer
- MC makes good and is then paid in stages up to a maximum of the reinstatement value (any shortfall is for the MC to make up – as a result it is in the MC’s interest to insure for larger than the amount listed in the Contract Particulars.
54
Explain the reinstatement procedure for works insurance Option B
Option B is exactly the same apart from the employer automatically receives the insurance pay out, and all the reinstatement work is treated as a variation. The employer pays the actual value of the reinstatement works to the MC through the variation.
55
What are the 3 key elements a plaintiff needs to show before making a successful claim against a professional for negligence under law of Tort?
1) Sufficient proximity between plaintiff and professional
2) Show there was a Duty of Care/Reliance on advice
3) Show there has been a loss as a result of the advice given/show there was a breach of Duty of Care
56
Assuming you were successful in getting Chartered, how would you deal with a situation such as a friend who asks you to provide them with QS advice for a house extension that they are about to undertake?
You would be held liable over any advice you gave to your friend as you have a duty of care as a professional so you would have to treat this as a job and create a contract etc.
57
Would the employer be able to claim from the Quantity Surveyor for the additional cost of variations made by the contractor?
Depends on the type of contract. If there are errors in the Bill of Quantities then yes employer can claim from QS. However if it is design changes then no.
58
What is a net contribution clause?
A net contribution clause is where two or more parties involved in a construction project are each jointly liable for the same loss or damage, the liability of each party will be limited to the amount which would be apportioned to that party by a court.
59
What is the purpose of PII? How does this differ from other types of insurance?
Professional Indemnity Insurance covers you as a professional if your employer decides to take legal action against you for mistakes made while offering your professional services.
60
Provide reasons why the industry would choose to subcontract?
- Cheaper than maintaining a full workforce
- Competition
- Specialisation
- Regional/Locational flexibility
- Economies of scale & increased efficiency
61
What is Novation?
Novation - is the act of replacing an obligation to perform with another obligation, or adding an obligation to perform or replacing a party to an agreement with a new party.
62
What is Assignment?
Assignment – is the transfer of rights or benefits from the assignor to the assignee.
63
What is subcontracting?
Employ a person outside one’s firm to do work as part of a larger project
64
If the contractor is in financial trouble, can the employer pay the sub-contractor directly?
If you pay a subcontractor directly you could be seen to be giving them preferential treatment/preferred creditor, thus breaching the pari-passu agreement (equal in right of payment’.
65
Why do construction projects have interim valuations carried out?
So that the works completed by contractors and sub-contractors can be valued allowing them for payment for the work they have completed so far which helps the contractors cash flow (Dates are usually stated in contract).
66
What is a net contribution clause?
Is where two or more parties involved in a construction project are each jointly liable for the same loss or damage, the liability of each party would be limited to the amount apportioned to that party by the courts.
67
What are the 5 reasons an employer can terminate the works?
- Assignment without written consent
- Failure to move or repair defective work
- Not complying with CDM regulations
- Failure to work regularly or diligently
- Suspension of work for no reasonable cause
68
What are the 4 reasons a MC can terminate works?
- Failure of Employer to pay full amount due on certificate by the final date of payment
- Interference/Obstruction by the Employer
- Assignment without written consent
- CDM
69
Under what circumstances does NEC4 contract enable the contract to be terminated?
- Insolvency by either party
- Specified defaults by the MC
- Non-payment by the Employer
- Release under the law
- Prolonged suspension
- Prevention/Force Majeure
- A corrupt act
70
Under NEC can an Employer remove a contractor from site if they seem incapable of producing good quality work?
Cannot just remove them. Have to follow process and allow the contractor to make good any defective work. If they are unable to do so then Employer can issue Defect Notification and then Termination Notice. However if there has been a breach so serious such as a health and safety breach then this may be grounds for a breach by repudiation and thus immediate termination.
71
How can you as a QS safeguard your client from the risk of insolvency of the contractor?
Check pre-tender financial information of contractor, Parent Company Guarantee, Retention Bond, Ensure on time payment
72
What are the main issues relating to time within a contract?
Commencement: possession, sectional possession; Progress; Completion: sectional completion, partial possession, delay; EOT
73
What dates in relation to time are inserted to Contract Particulars?
Interim Payment Period, Completion Date, Sectional Completion Date, Contract Base Date, Length of Defects Liability Period, Duration of CDM Planning Period, Max. Period for Permitted Deferment of Possession
74
Explain the JCT Payment Timetable
Contractor submits application for payment 7 days before Interim Valuation Date
7 days after the Interim Valuation Date is the Payment due date
PQS has to issue a payment certificate 5 days after the payment due date (if the PQS does not do this, the MC can issue an interim payment notice, entitling the MC to claim the full amount on the contractor's intervim valuation application.
If the employer is unwilling to pay the full amount, the PQS must issue a 'pay less certificate' following the interim certificate.
The CA/PQS issues payment which should be received by MC within 14 days of the due date, 35 at the most
75
What are the different fluctuation clauses under JCT SBC 16?
(a) contributions, tax and levy fluctuations
(b) Labour and materials cost fluctuations
(c) use of price formula adjustment (requires the use of indices)
76
What is the final account?
The final account is the process of calculating and agreeing any adjustments to the original contract sum, so that the amount of the final payment can be determined. The final payment will be paid at the end of the defects liability period providing all defects have been rectified.
77
Under a single stage tender there are ways of dealing with errors – what are they? Give reasons why you may recommend each option to a Client.
Under Alternative 1 of JCT – inform contractor and ask them to stand by their tender or withdraw (as not able to change under Alternative 1).
Under Alternative 2 of JCT – inform contractor confirm if correct or give option to correct if they are genuine errors
78
What is meant by the term front loading? What should you do if the contractor has front-loaded his rates in a tender?
Front loading is where a tenderer may increase early stage costs for things like prelims in a bid to help their cash flow in the early stages of the project.
If a contractor has front loaded his rates at tender you should inform the client and ask if they wish to proceed with them, highlighting the risk of this in terms of insolvency and future cash flow issues.
79
What is meant by the term "a qualified tender" and give an example?
A qualified tender is when a contractor deviates from an item in the specification. This may be replacing one type of cladding for another. Mainly used to achieve a cheaper price. The client needs to specify whether they will allow these changes.
80
What is Open Tendering?
this is where the tender invitation is open to anyone and anyone is able to bid for the works. On larger projects there may be a pre-qualification process to create a shortlist of tenderers who have the capacity or finance to be able to do the works.
81
What is Selective Tendering?
this is where a shortlist comprising of 4-6 tenderers is compiled, sometimes on the advice of consultants or in the case of experienced clients, a list of contractors they have worked with before, this is usually based on their track record, previous projects, reputation for quality, capacity and finance capabilities.
82
What is Negotiated Tendering?
this is used occasionally where a specialist contractor/sub-contractor may be needed for a specialized area of the works and a tender bid will be negotiated between themselves and the client for the works.
83
What is Serial tendering?
used when projects are large and will need future phases. The new rates based on original price. Serial tendering may be used where the client has a regular programme of works that they would like to be undertaken by a singular contractor, usually minor works such as maintenance.
84
What are the advantages of Open tendering?
i. Get tender bids from wide range of contractors
| ii. Competition forces bids down
85
Disadvantages of Open tendering?
i. Time consuming for both contractors preparing bids and client assessing bids
ii. May invite bids from contractors who are unsuitable or incapable of doing the work
iii. May invite bids from contractors who are desperate for work and on the brink of insolvency and therefore prepared to bid at very low rate to get work
86
Advantages of Selective tendering?
i. Pre-prepared list means contractors will be selected on criteria aligning them to employer requirements
ii. Time-saving
iii. Likelihood they have been worked with previously therefore have a good working relationship
87
Disadvantages of Selective Tendering
i. Discourages innovation amongst tenderers – not faced with same level of competition
ii. This also discourages price competition
88
Advantages of Negotiated Tendering?
i. Deal with one or two contractors means time could be potentially saved on tender process
ii. Allows for early contractor involvement which is key with specialist types of works
89
Disadvantages of Negotiated Tendering ?
i. Anti-competitive & exclusive
90
Advantages of Serial Tendering?
i. Same contractor used throughout – simplifies process
| ii. Costs are reduced
91
Disadvantages of Serial tendering?
i. Higher negotiated rates
| ii. Issues is problems arise with tenderer
92
What are some of the headings/requests of a PQQ?
i. Company details (inc. legal status)
ii. Details of insurance cover
iii. Financial information
iv. Relevant experience
v. Information about technical and professional capacity
vi. Information about capability and capacity
vii. Health and safety policy
viii. Quality assurance policy
ix. Environmental management policy
x. Equal opportunities policy
xi. Relevant references
xii. A BIM assessment to determine BIM capability
93
What are tender rules?
Tender Rules are the rules in which the tender process is managed. Tender rules can be things such as: details of the documents which form the tender package, guidance on how to complete, instructions on information to be returned, key dates.
94
Why must a contractor submit an early warning notice under NEC contracts for a compensation event?
If they fail to do so, this doesn't give the PM the opportunity to mitigate against the event, thus the PM can choose to deduct an amount from the Comp Event
95
What does the MC have to demonstrate within a L&E claim? 4 Elements
Cause, Effect, Entitlement, Substantiation
96
What are Prolongation Costs/Claim in JCT Loss & Expense claims?
Prolongation is where the MC can claim for additional costs incurred as a result of the project being delayed due to an event that is the responsibility of the Employer. (these may include additional cost of materials, labour, machinery as a result of the delay)
97
What are Disruption Costs/Claim in JCT Loss & Expense claims?
Disruption costs are the costs incurred by the Contractor due to the inefficient deployment of labour or plant, loss of productivity and interruption of progress. No physical delay needs to have occurred providing the MC can prove the Employer has caused the above.
98
What is the difference between Date for Completion and Completion Date?
Date for Completion - fixed as programme clauses are non existent under JCT
Completion Date - can change throughout the whole projects
99
What is an Activity Float?
For each activity the contract allows for a buffer
100
What is a Terminal Float?
The Terminal Float is the difference between the Contractors planned completion date and the completion date stipulated in the contract programme
101
What is a Time Risk Allowance?
The TRA is the best case time period considered and the worst case time period considered. The difference between is the Time Risk Allowance.
102
What is meant by Acceleration in JCT & NEC? (Different in each)
JCT - Means speeding up works by increasing the resources available to the contractor
NEC - Under NEC you would shorten the programme time - this allows the ER to take over at or before the completion time.
103
How are delays assessed under NEC contracts?
Option Clause - 'Delay Damages' - if this is not selected then it would be dealt with by Liquidated Damages and it is up to the Employer to prove in court that they have suffered loss or additional cost due to the delay
