Contract Administration Flashcards
1
Q
What is phased completion?
A
Construction works can be planned as a series of stages or phases, rather than as one continuous process.
This can be useful for clients where a complex sequence of events needs to be followed (such as on densely occupied or complex site), or where there are a number of distinct components to the works, particularly for clients who are seeking to maintain some level of business operation during construction and so wish to minimise disruption.
In such cases, the project works can be divided into a series of smaller projects, spaced out over a period of months or even years.
2
Q
What is sectional completion ?
A
Sectional completion refers to a provision within construction contracts allowing different completion dates for different sections of the works. This is common on large projects that are completed in sections, allowing the client to take possession of the completed parts whilst construction continues on others.
3
Q
What are the risk associated with a client paying for items direct and outside of the contract ?
A
They would not be included within the contract, contract administrators inspection and have limited protection.
4
Q
Can you please expand on what the role of a Contract Administrator is ?
A
A contract administrator manages contracts made between building contractors, employers, and clients. Their responsibility is to administer construction contracts, whereby they may act as project managers, engineers, consultants and client representatives
5
Q
Can you expand on your knowledge of the JCT Intermediate contract ?
A
A JCT contract that allows for a number of addition in comparison to JCT MW including, clerk of works, sectional completion, partial possession, sectional completion and use of bonds
6
Q
Can you expand on your knowledge of the JCT Standard Building Contract
A
The JCT SBC allows for, in addition to the intermediate contract such as:
Employers representative, listed sub contractors (for specialist works), retention bonds, variation and acceleration quotations, third party rights.
7
Q
What JCT contracts allow for a clerk of works ?
A
- JCT standard Building contract
- JCT Intermediate Contract
- Not JCT MW
8
Q
What contract allows for sectional completion and named sub contractors?
A
Intermediate and standard building contract
9
Q
Can you talk me through the EOT timeline JCT ?
12
A
Contractor to notify the employer of the delay event (when it becomes reasonably apparent that it will affect the works, but this can be amended) - response to contractor (reasonably practicable/ within 12 weeks)
10
Q
Can you talk me through the EOT timeline NEC ?
8-1-2
A
NEC = Delay that could affect completion date - early warning must be given by either PM or contractor- Risk reduction meeting - 8 weeks from becoming aware of the event the contractor must submit a CE (after 8 weeks EOT is waived) - PM has one week to notify the contractor of their decision - No response contractor can confirm the failure - PM then has 2 weeks to respond - if no response the CE is accepted -Contractor instructed to submit quotation - 3 weeks submits quotation - 2 weeks PM responds
11
Q
Who produces the AS in NEC?
A
PM but the contractor responds with their own broken down into how they would like to get paid
12
Q
Can you explain the interim payment procedure under JCT MW ?
7 - 5 - 14- 5
A
- Pre- contract stage state the interim valuation Date (IVD) (in the contract) - shouldn’t be more then a Month after commencement
- following valuations dates no more then one month after that
- interim payment due date is 7 day after the relevant IVD
Interim certificate is 5 days after due date - Final date for Payment must be made 14 days from the due date
- Pay less notice issued 5 days before final date for payment
7 - 5 - 14- 5
13
Q
When can a employer claim for liquidated damages (JCT MW) ?
A
14
Q
What are liquidated damages?
A
Liquidated damages are a well established method to collect compensation for a specific breach of a contractual obligation. If the breach is considered a relevant
15
Q
What is the ‘Guide to select the appropriate JCT Main Contract ‘?
A
Its a diagram that helps enable you select the correct contract through a series of yes and no questions in a spider diagram.
16
Q
Does JCT MW allow for clerk of works ? What contracts do allow for this ?
A
No it does not however, both intermediate and standard building contracts do allow for this.
17
Q
What are the main types of tendering ?
A
- Open
- Selective
- negotiated
-Serial
-Framework
18
Q
What are the main updates from JCT MW contract ?
A
JCT MW 2016 updates include:
- Amendments to reflect CDM 2015
- Increased Flexibility regarding insurance and ‘insured by other means’
- Simplified payment provision including the interim payment provision under the Housing Grant, Construction and Regeneration Act 1996
19
Q
What is a traditional lump sum contract ?
A
A lump sum contract is the traditional means of procuring construction and involves a single ‘lump sum’ price for all the works being agreed before the works begin. This means that the contractor is able to accurately price the works they are being asked to carry out.
20
Q
What is the role of the contract administrator ?
A
To administer the conditions/works under the terms of the contract. Acting impartially.
21
Q
What is a contract variation ?
A
A change made to the terms or conditions of an existing contract. This could be altering the scope, price or deadlines ect. They can occur for a variety of reasons; unforeseen circumstances, changes in project requirement, or mutual agreement between parties.
22
Q
What is traditional Procurement?
A
The traditional procurement route involves separating design from construction. The client first appoints consultants to design the project in detail and to ensure cost control and inspect the construction works as they proceed. Contractors are then invited to submit tenders for the construction of the project on a single-stage competitive basis.
Included in the contractor’s responsibilities are workmanship, materials and work undertaken by suppliers and subcontractors. The contractor is not responsible for the design (other than temporary works), although some traditional contracts may provide for the contractor to design specific parts of the works (see key criteria below).
Traditional procurement is typically undertaken under a lump sum contract. A single ‘lump sum’ price for all the works is agreed before the works begin, then stage payments are made as the works proceed. This is appropriate where the project is well defined when tenders are sought, and significant changes to requirements are unlikely. This allows the contractor to accurately price the works they are being asked to carry out.
23
Q
What is single stage tender?
A
The most common type of tendering strategy is the
single-stage competitive tender for obtaining a price for
the whole of the construction works. Invitation to
tender documents are issued to a number of
competing contractors who are all given the chance to
bid for the project based on identical tender
documentation
24
Q
What is procurement?
A
The overall act of obtaining goods and services from external sources and, includes deciding the strategy on how those goods are to be acquired by reviewing the clients requirements
25
What is tendering ?
An important phase in the procurement strategy. The bidding process, to obtain a price and how a contractor is appointed.
26
What s two-stage tendering ?
Two-stage tendering has become more common in
recent years and is often used where time is
constrained (as it enables design and tendering to
overlap). It is also used if the design process would
benefit from the technical input of a contractor in the
later design stages. In this sense it is used to obtain
the early appointment of a contractor.
The process involves first-stage tender enquiry
documentation being issued to bidding contractors at
RIBA Stage 2 or 3. Rather than requesting a bid for
constructing the entire project (which is still in the
process of being designed), the preferred contractor is
chosen on the basis of the quality of their bid, the
quality of their team and their preliminaries price and
overhead and profits allowances. The preferred
contractor then joins the design team on a consultancy
basis using a pre-construction services agreement
(PCSA). The preferred contractor then works with the
professional team to complete the design, usually to
RIBA Stage 4, before presenting a bid for the works at
this stage. There are benefits and disadvantages of this
route which are discussed in subsection 3.2
27
What is a Negotiated Tender ?
A negotiated tender is effectively a single-stage tender
with a single contractor who returns with an initial
price. This is then negotiated with the client’s
professional team (usually the professional quantity
surveyor (PQS)).
The benefit of this route is the speed with which a
price can be obtained for the works. However, the
competitive advantage of a formal bidding process is
compromised. Also, many public bodies and
government departments will not allow negotiated
Tendering strategies
tenders except in exceptional circumstances as it is
difficult to prove that value for money in the current
market has been achieved.
28
What are the main types of procurement routes ?
Traditional Procurement
Design and Build
Management Contracting
Construction Management
29
What contracts are typically used for traditional procurement ?
JCT Standard Building Contract, Intermediate Building Contract and Minor Works Building Contract are most typically used.
30
What are the advantages and disadvantages of traditional procurement ?
Advantages:
- Early cost certainty
- Programme certainty at award of the contract
- Design led, quality can be ensured
- established procedure
Disadvantages:
- Contractor's expertise not used in the design/planning process
- Overall procurement time is slower
- Design must be complete before tendering can take place
- Dual point of responsibility, design team and contractor for construction
31
What is Design and build procurement ?
The contractor is responsible for the design, planning, organisation and construction of the works, with reference to the employer’s requirements.
Emphasis on Time and Cost.
JCT Design and Build Contract 2016 will be typically used.
Collateral Warranties are usually put in place to extend duty of care to client.
32
What are the advantages and disadvantages if D&B?
Advantages:
Single point of responsibility for design and construction
Earlier commencement on site
Early cost certainty
Contractor’s expertise is harnessed during design
Disadvantages:
Client relinquishes control over design, and quality may suffer
Variations are often difficult to arrange and can be expensive
Employer’s requirements must be very clear
Client must commit to a concept design early on
33
What's is management contracting procurement route ?
A management contractor is employed to contribute their expertise to the design and to manage the construction. They are paid a fee for doing so.
The management contractor has responsibility for the construction works without actually undertaking them.
Design and construction overlap all the way through the project.
Emphasis on time, typically used when time is critical.
JCT Management Building Contract is typically used.
34
What are some advantages and disadvantages of management contracting ?
Advantages:
Quicker construction process due to overlapping of design and construction
Each sub-contract is tendered separately, ensuring competitiveness
Management contractor’s and sub-contractors experience is used in design
Changes can be accommodated in packages not yet let, if they have no further impact
Disadvantages:
Costs are not fixed at the outset
There is little incentive for the management contractor to reduce costs
Client interaction is high, and they need to be informed and pro active
35
What is construction management procurement route ?
The employer places a direct contract with each of the trade contractors. The construction manager supervises the construction process and coordinates the design team.
The construction manager does not have any contractual links with the trade or design teams.
Design and construction overlap all the way through the project.
Emphasis on time, typically used when time is critical.
JCT Construction Management Appointment (CM/A) and Construction Management Trade Contract (CM/TC) are used.
36
What are some advantages and disadvantages of construction management ?
The employer places a direct contract with each of the trade contractors. The construction manager supervises the construction process and coordinates the design team.
The construction manager does not have any contractual links with the trade or design teams.
Design and construction overlap all the way through the project.
Emphasis on time, typically used when time is critical.
JCT Construction Management Appointment (CM/A) and Construction Management Trade Contract (CM/TC) are used.
Advantages
Management contractors - MC able to advise on subcontractors = client has input and control over the professional team
Construction manager can contribute to design and planning
Prices may be lower due to direct contact with trade contractors
Quicker construction process due to overlapping of designn and construction - piling might commence whilst the detailed design of above ground works continues
Roles, risks and relationships are clear for all parties
Disadvantages
Costs are not fixed at the outset - Price certainty not achieved until last trade package is let
No single point of responsibility
Client interaction is high, and they need to be informed and pro- active
37
What are the main types of tendering ?
Single stage tendering
Two stage tendering
Negotiated tender
38
What is single stage tendering ?
Type of tendering whereby a price is obtained for the entirety of the construction works.
Invitation to tender documents are issued to contractors who are given the opportunity to bid.
Contractors are given a period of time to respond, following this the tenders are analysed in terms of cost and quality.
A contractor is appointed and enters into a building contract with the client.
Typically occurs at RIBA stage 4.
Good fit for Traditional Procurement.
39
What is two stage tendering ?
Often used when time is constrained as it enables design and tendering to overlap. Also used if the design would benefit from the technical input of the contractor.
Rather than pricing for the entire project, the contractor is selected on the quality of their bid
Contractor joins the design team once appointed on a consultancy basis. Pre-construction services agreement (PCSA) will be used.
Typically occurs between RIBA Stages 2-3.
Preferred contractor works with design team until RIBA stage 4 before presenting a bid for the works at this stage.
Good fit for Management Contracting, Construction Management and Design and Build projects.
40
What is negotiated tendering ?
Effectively a single stage tender with a single contractor.
The contractor returns an initial price, and this is negotiated with the client's professional team.
The benefit of this route is the speed at which a price can be obtained for the works.
Many public bodies and government departments will not allow negotiated tenders.
41
What is novation ?
A new contract that transfers the rights and obligations of one contractual party to a new third party ie. the design rights and obligations of architect transferred to the contractor
42
19. If the design team is novated, what should the client put in place?
A collateral warranty to the design team to give them remedies for breach of contract
43
32. What is the difference between management contracting and construction management?
Under construction management the client is in direct contractual relationships with each of the trade contractors and the construction manager isnt
- Under the management contracting, the MC is in direct contractual relationships with the trade contractors and the client is in contract with the MC only
44
What are the main methods of choosing a contractor?
- Open tendering
- Selective tendering - single or two stage
- Nomination/negotiation
- Serial
- Joint Ventures
45
What is open tendering ?
- Indiscriminate request for tenders
- Advert placed in local paper/technical press inviting contractors to apply for tender docs
- Gives characteristics of the work
- Deposit usually required to discourage frivolous applications
46
What are the advantages of open tendering?
a) No charge of favouritism
b) Gives opportunities for capable firms you might not have put on a list
c) Should secure max benefit from competition
47
What are the disadvantages?
a) Danger lowest tender is inexperienced or has made lots of errors
b) No guarantee the lowest is capable or financially stable
c) Total cost of tendering is increased
48
What is selective tendering?
-Restricts the number of tenderers by pre-selecting a limited number of contractors to tender for the work
49
What are the two types of selective tendering?
- Single stage
- Two stage
50
What is single stage tendering?
- A structured process of receiving competitive tenders from a number of pre selected capable contractors, who provide a lump sum for the works
- Contractors pre-selected on say NJCC basis:
1. Established skill
2. Integrity
3. Responsibility
4. Proven competence and character
5. Size of work
- No more than 6 on list. If pre-selection is done beforehand then tenders can be selected on price alone.
- Good contractors have the following: Recent experience, necessary skills, good management and organisational structure, spare capacity, good financial standing.
51
What are the advantages of single stage tendering?
- Ensures only capable and approved firms submit tenders
- Tends to reduce the aggregate cost of tendering
- Client gets a lump sum for the whole works
52
What is two stage tendering?
- Separates the processes involved with selecting a contractor from the processes for determining the price for the works
- Used when it is desired to obtain the benefits of competition and have the advantage of bringing a contractor into the planning of the project and gain an earlier commencement
53
What is the purpose of the first stage of a two stage tender?
-To select a suitable contractor by means of limited competition
54
What is the purpose of the Second stage of a two stage tender?
A negotiation process with the selected contractor on the basis of the first stage/ Or the tender of the first stage design
55
How do you identify the client requirements before recommending a procurement route?
Through detailed discussions with the client and design team to identify their priorities in terms of cost, time, quality, risk, control requirements and experience
56
If the client wishes to start on site ASAP what procurement route would you recommend?
- Depends on their other requirements – such as cost and quality
- If time was their overriding priority then CM or MC as they offer the fastest start on site
- This is because start on site is not dependent upon a long tender period
- BUT has consequential disadvantages in terms of cost certainty
57
What procurement route would you recommend if the client wanted an early start but also cost certainty
- Then design and build might be the most appropriate
- Allows design and construction to be overlapped rather than being sequential
- Tenders are based on the provision of all services so the client gets a lump sum price
58
What is GMP?
Guaranteed maximum price
59
What would you suggest if the client wants guaranteed maximum price?
- A lump sum contract under which there is no adjustment of tender price unless the SCOPE required by the client changes
- The contractor includes the additional risks involved in the design development process in his tender price
What are the advantages?
- Greater price certainty – contractor takes risk of design development and unforeseen occurrences
- Greater control of overspending – contractor’s interests to alert the team to expensive items of design development
- Quicker settlement of final account
What are the disadvantages?
- The client may pay too much – contractor’s risk allowance may be higher than in reality
- Scope changes are likely to be very expensive
- Can be adversarial – trying to decide whether changes are design development or scope changes
60
What is PFI?
- Private Finance Initiative;
- A government programme launched in 1992 to bring private sector project management and expertise into the public sector;
- The private sector is granted a concession to finance, design & build and operate major public projects such as schools and hospitals.
61
What are the three types of PFI projects?
- Financially free standing Project undertaken and costs recovered by charging users e.g. toll roads and bridges;
- Joint Venture Public and private sectors contribute but the private sector has overall control. Contributions and allocation of risk are clearly defined; and
- Services Sold A significant part of the project is capital expenditure by the private sector and then sold back to the public sector. The public sector requires clear demonstration that this provides better value for money than option 1) and 2).
62
1. What is tendering?
- Tendering is a method of obtaining the resources necessary to carry out the required work
63
What are the main methods of choosing a contractor?
a) Open tendering
b) Selective tendering – single or two stage
c) Nomination / negotiation
d) Serial
e) Joint ventures
64
What is open tendering?
- Indiscriminate request for tenders
- Advert placed in local paper/technical press inviting contractors to apply for tender docs
- Gives characteristics of the work
- Deposit usually required to discourage frivolous applications
65
What are the advantages of open tendering?
a) No charge of favouritism
b) Gives opportunities for capable firms you might not have put on a list
c) Should secure max benefit from competition
66
What are the disadvantages open tendering?
a) Danger lowest tender is inexperienced or has made lots of errors
b) No guarantee the lowest is capable or financially stable
c) Total cost of tendering is increased
67
What do tenderers return as part of the first stage of a two stage tender?
a) Detailed build up of prices for the preliminaries items
b) Percentage additions for profit and overheads
c) A construction programme
d) Proposed sub letting of the works
68
Are there any precautions you should take before entering the 2nd stage process of a two stage tender?
Define procedure for either party to withdraw should 2nd stage negotiations prove abortive, what payments become due.
69
What are the advantages of two stage tendering?
a) Early involvement of the contractor
b) Encourages collaborative working
c) Potential for earlier start on site
d) Greater client involvement in selecting the supply chain
e) Contractor can help identify and manage risk
70
What are the disadvantages of two stage tendering?
a) Cost certainty may not be achieved before construction starts
b) Additional pre-construction fees for the contractor
c) Contractor could take advantage of second stage negotiation – increase costs
d) Potential for parties to not agree contract sum – risk – cost of retendering
71
Why should you use 2 stage tendering?
- Building is complex
- Magnitude of work is unknown at time of contractor selection
- Early completion is required
- Design team would like to make use of contractor’s expertise on buildability issues.
72
What is negotiation / nomination?
-Where the client has a preference for a particular firm
73
When might negotiation / nomination be used?
- Possibly when the contractor has done satisfactory work for him before
- when it’s specialist work
74
How does negotiation / nomination work?
- There is no competition – likely to lead to a higher price
- BUT client may think it is worth it for a quicker or better quality job
- The contract sum is arrived at by a process of negotiation
- One party usually prices a schedule of rates / bill which is used as a basis
75
What is serial tendering?
- Effectively strategic partnering
- Contractors are asked to bid for a project on the basis that if they build this one satisfactorily, others of a similar type will follow and the same bill rates will be used
76
What is a framework agreement?
- A list of contractors selected by the client after a formal tendering procedure to work over a long period of time
- The contractor may have to wait his turn for a contract or tender repeatedly with the same group of contractors
77
What is a joint venture?
- Used on large complex projects when 2 or more companies take on a joint and several liability for design and execution of the project.
- Would normally be backed up with PCG, Performance Bonds.
78
24. What is OJEU?
-Official Journal of the European Union
79
What is Official Journal of the European Union used for?
- Public sector tendering
- All contracts from the public sector above a certain financial threshold have to be advertised across the EU
- Also contracts that are say 49% private funded and 51% public must be published.
- Use Open, Restricted and Negotiated, (Open, Selective and Nomination)
What are the thresholds?
- Works - £3.497m
- Services - £90, 319 or £139,893 (depending on gov body)
80
What could selecting the wrong contractor lead to?
a) A bad client / contractor relationship
b) A dissatisfied client
c) An insolvent contractor
81
What is NJCC?
- National Joint Consultative Council for Building
- They published highly regarded codes of procedures relating to tendering practices
- Disbanded and taken over by the Construction Industry Board (CIB)
- BUT many clients still adhere to the original codes and JCT’s practice note includes a substantial amount of their material
82
How would you put together a set of tender documents?
i. ITT (Invitation to tender letter)
ii. Instruction to tenderers: Date and time for return, to whom, site visits, programme, visit to architect to see drawings, errors, discrepancies, NJCC alternative 1,2. Scoring matrix (quality/ price), confirmation of receipt
iii. Conditions of proposed contract
iv. Prelims, Pricing doc (SOR, BOQ)
v. Specification
vi. Drawings
vii. ERs
viii. CPs
ix. Pre-construction H&S information
x. Form of tender
xi. Submission of bona fide tender
xii. Return envelope
83
What information would the instructions to tenders contain?
a) Date for return
b) Address to return to
c) Site visit details
d) Programme length
e) Confirmation of receipt of documents
f) How tender should be submitted
84
What is the form of tender?
- A pre printed formal statement in which the tenderer fills in the blank spaces
- He provides his name, address and the sum of money for which he offers to carry out the works
85
What are the employer’s requirements?
- Sets out the client’s requirements e.g. function, size, accommodation, quality
- Level of detail depends on how much design has been done prior to tender
- Normally includes current state of planning permission
- Should detail the level of design, structure and spec info to be provided by the tenderers
86
What are the contractor’s proposals?
- The contractor’s response to the ERs
- They are the key document for the client to consider at the tender review
- Often includes plans, elevations, sections and typical details
- Layout drawings and specification for materials and workmanship
87
How did you decide which contractors to go out to?
- Preliminary inquiries based on design team recommendations.
- Issue a pre-qualification questionnaire to interested and suitable contractors.
- Based on responses, a decision can be made to go out to a reasonable number of tenderers, taking into account financial situation, relevant experience, health and safety records.
88
What is a preliminary enquiry letter and what would you include?
- 1 month before tendering, send out tender enquiry letter to ascertain whether firms are willing to submit a bona fida tender. (avoids contractor submitting cover price)
- Sufficient info given to contractor should allow them to make a decision.
- Inform of any other requirements: CWs, Bonds, PCG.
89
What would you include in the pre-qualification questionnaire?
a) Details of contract particulars, in accordance with practice note 6
b) Turnover
c) Previous relevant experience and references
d) Company accounts
e) Personnel
f) Management and organizational structure
g) Health and safety records
h) Quality systems and environmental policy
i) Provision of bonds / warranties / PCG
- This is done through questionnaire and interview process with scoring matrix.
90
What is electronic tendering?
- All the forms, documents and drawings are uploaded onto a server
- Tenderers are provided with all the info necessary to access and download
- Safeguards have to be built in to prevent unauthorised amendment of the data
- There must be a clear system of notifying parties of changes
91
62. How do you carry out a tender evaluation?
- Need a breakdown of the tenders, check them to ensure they have been priced in accordance, that there are no errors, qualifications or exclusions
- Follow NJCC procedure if errors are found
- Compare against the pre-tender estimate to check rates are not unusually high/low
- Ensure all amendments made during the tender period have been incorporated
- Prepare the tender report giving a summary of the actions, costs and recommendation
92
What is included within a tender report?
a) List of tenders received
b) Initial tender return totals
c) Any qualifications identified
d) Post-tender adjustments
e) Revised tender sum
f) Issues to be resolved
g) Comparison of tender returns
h) Comparison with pre-tender estimate
i) Recommendation
93
What are the others available JCT Contracts ?
Standard Building Contract;
Design & Build;
Intermediate Contract;
Intermediate Contract with Design;
Minor Works;
Minor Works with Design;
Major Projects (MP)
Framework, non-binding and binding;
94
Add in types of payments
95
What is a letter of intent ?
A letter of intent is a document outlining the understanding between two or more parties which they intend to formalise in a legally binding contract. The concept is similar to a heads of agreement, term sheet or memorandum of understanding
96
What does the Housing, Grants Construction and Regeneration Act 1996 allow for within the contract ?
The right to stage payments
The right to notice of the amount to be paid
The right to suspend work for non payment
The right to take any dispute arising out of the contract to adjudication
97
Does the HGRCA apply to residential occupier ?
No, the HGCRA does not apply to residential occupiers. This is a ‘Section 106 - Residential Occupier’
98
What are the types of specifications ?
specifications describe the products, materials, and work required by a construction contract. They do not include cost, quantity, or drawn information, and so need to be read alongside other information such as quantities, schedules, and drawings.
Specifications vary considerably depending on the stage to which the design has been developed, ranging from performance specifications (open specifications) that require further design work to be carried out, to prescriptive specifications (closed specifications) where the design is already complete.
Prescriptive specifications give the client much more certainty about the end product when making investment decisions (such as when they appoint the contractor), and place a greater burden on the designer to ensure proper installation rather than the contractor.
Typically, performance specifications are written on projects that are straight-forward, standard building types, whereas prescriptive specifications are written for more complex buildings, or buildings where the client has requirements that might not be familiar to contractors and where certainty regarding the exact nature of the completed development is more important to the client.”
99
What are the types of procurement ?
Traditional contract 86%
Single-stage design and build 41%
Two-stage design and build 39%
Management contract 18%
PFI 10%
Contract management
100
Under JCT MW does the programme form part of the contract ?
No however the contract promotes the use of one for reference generally
101
Under JCT what are included within the contract documents ?
- Drawings
- Specification
- Work schedules
102
What is the base date ?
The base date in construction contracts is generally used as a mechanism for the allocation of risk between the client and contractor for changes that might occur in the period between the contractor pricing the tender and the signing of the contract. This period can be very long and changes that occur may have a significant impact on the costs of the works.
the base date is usually set at around the time of return of tenders
The base date sets the reference date from which the conditions under which the tender was prepared are considered to have been known by the contractor and so are properly reflected in their price. If specified conditions change before the contract is implemented, then the contract may be adjusted to reflect this.
103
Who normally retains the contract ?
The contract administrator
104
Does JCT MW make reference to a possession date ?
MW16 does not refer to the contractor being given ‘possession’ of the site, but states simply that ‘The Works may be commenced’ on the date stated in the contract
105
What are the ground for termination from the client under JCT?
Insolvency
CDM breaches
Corruption of the contractor
Contractor failing to proceed regally and diligently
Employer failing to pay amounts
Either party can terminate is the works are suspended for a period of more than one month due to neutral events
106
What are the grounds for termination from the contractor under JCT?
Insolvency
CDM breaches
Corruption of the contractor
Contractor failing to proceed regally and diligently
Employer failing to pay amounts
Either party can terminate is the works are suspended for a period of more than one month due to neutral events
107
Does JCT MW require a contract programme ?
MW16 does not require the contractor to produce a programme, although there would be nothing to prevent such a requirement being included in the specification; a programme might be very useful to the contract administrator, particularly when monitoring progress and assessing extensions of time.
108
Why is it important to define a completion date ?
The significance of having a completion date is that it provides a fixed point from which damages may be payable in the event of non-completion. Generally in construction contracts the damages are ‘liquidated’, and usually expressed as a rate per week of overrun.
109
What is the reason for an extension of time ?
One important reason for an extension of time clause is to preserve the employers right to LD in the event that the contractor fails to complete on time due wholly or in part to some action for which the employer is responsible
110
What is ‘time at large’ ?
The phrase ‘time at large’ describes the situation where there is no date for completion, or where the date for completion has become invalid. The contractor is then no longer bound by the obligation to complete the works by a certain date.
When the contractor has not fulfilled the obligations of the contract to meet practical completion but a certificate of non completion has not been issued.
Therefore there is no set completion date and the contractor must complete works only in a ‘reasonable time’.
Liquidated damages cannot be claimed
111
When must a contractor give written notice regarding an extension of time ?
Under MW16 the contractor must give written notice to the contract administrator ‘If it becomes apparent that the Works will not be completed by the Date for Completion’ (cl 2.7, or 2.8 in MWD16). The notice must be given regardless of the reason for the delay, i.e. whether it is caused by the employer, by a neutral event (such as bad weather) or by the contractor itself.
112
When would you issue a certificate of non completion ?
If the completion date is not achieved, under JCT MW the certificate is not required but this failure should be recorded and circulated to all.
113
Does JCT MW state a list of relevant events ?
For guidance on what might be considered to be beyond the contractor’s control, the contract administrator might have regard to those matters listed as ‘Relevant Events’ under SBC16, for example exceptionally adverse weather, the ‘Specified Perils’, strikes, failure to supply information, site access and indeed any difficulty in movement on or around site.
114
When should the CA respond to a contractor EOT claim ?
There are no time limits on when the contract administrator must respond to the contractor’s notice, but it is suggested that this should be done as soon as possible, in order to preserve the employer’s right to liquidated damages. The contract administrator should either fix a new completion date or notify the contractor that no extension of time is due. The contract administrator might call for information if this is necessary to make a fair and reasonable assessment, but this must never be considered as a delaying tactic.
115
Can an EOT be reduced following initial confirmation ?
The second limitation is that there appear to be no provisions whereby the contract administrator may reduce a previous extension of time by fixing an earlier completion date where work has been omitted. Nevertheless, it is suggested that if work has been omitted, the contract administrator could take this into account when deciding what might be a reasonable extension in response to some further notice by the contractor.
116
Does MW allow for occupation of the site prior to completion ?
MW16 makes no provision for the employer to use or occupy the site or the works or any
part prior to practical completion. If arrangements for phased occupation have not been agreed in the contract documents, a situation may arise where the contractor has not completed by the date for completion but part of the works are complete or sufficiently complete to allow the employer to have beneficial use of those parts and the employer is anxious to occupy them. There is nothing in the contract that allows for this; therefore, a separate ad hoc agreement would have to be made.
117
What triggers practical completion ?
Under clause 2.9 (2.10 in MWD16) the contract administrator is obliged to certify the date at which, in the contract administrator’s opinion, works have reached practical completion and the contractor has complied sufficiently with clause 3.9 (its CDM obligations, for example the supply of information required for the health and safety file) and, in the case of MWD16, clause 2.1.3 (supply of CDP drawings). The date certified is the date when the last condition is fulfilled.
it is implied that it will be a fair and reasonable exercise of professional judgment.
However, it has been held that the contract administrator has a discretion to certify practical completion where there are very minor items of work left incomplete, on de minimis principles
118
What does practical completion trigger ?
- Start of the rectification period
- Release of half of the retention
- Employer takes responsibility of the site
- Liability for liquidated damages
119
How and where would you process liquidated damages ?
May deduct damages from the amount due under the next certificate or reclaim the sum as a debt Under MW16 the contract administrator is not required to certify non-completion, but it may be prudent to record the failure in a letter to both the employer and the contractor. Once the date for completion has passed, the contractor is said to be in ‘culpable delay’.
The liquidated damages may either be recovered from the contractor as a debt or deducted from monies due (cl 2.8.2, or 2.9.2 in MW16). In both cases the following preconditions must have been met:
* the contractor must have failed to complete the works by the completion date (cl 2.8.1,or 2.9.1 in MWD16);
* the contract administrator must have fulfilled all duties with respect to the award of extensions of time.
120
What is culpable delay ?
Culpable delay (sometimes referred to as ‘contractor delay’) on the other hand is a delay that is entirely the fault of the contractor. Where the contractor is culpable for a delay, they have no entitlement to an extension of time or loss and expense.
121
Do liquidated damages need to be proven or estimated for a claim ?
t is no longer considered essential that the amount is calculated on the basis of a genuine pre-estimate of the loss likely to be suffered. Provided that the amount is not ‘out of all proportion’ to the likely losses, the damages will be recoverable without the need to prove the actual loss suffered, irrespective of whether the actual loss is significantly less or more than the recoverable sum. In other words, once the rate has been agreed, both parties are bound by it. Of course, for practical reasons, the rate should always be discussed with the employer before inclusion in the tender documents, and an amount that will provide adequate compensation included to cover, among other things, any additional professional fees that may be charged during this period. If ‘nil’ is inserted then this may preclude the employer from claiming any damages at all , whereas if the clause is left blank then the employer may still be able to claim general damages.
Liquidated damages can be beneficial for the client, as they remove their obligation to prove actual losses in the event of delay occurring. They can also be beneficial to the contractor as they limit their liability to a known amount in the event of delay.
122
What notice would you need to submit if you are planning to recoup liquidated damages form a payment ?
a pay less notice
123
What is the process for issuing an extension of time if liquidated damages have been claimed ?
If an extension of time is given following the date for completion, the employer must
immediately repay any liquidated damages recovered for the period up to the new
completion date.
124
What are the key powers of the contract administrator JCT MW
- Agree variations
- Issue a pay less notice in behalf of the client
- issue certificates
- Certify practical completion making good defects
125
How should a main contractor appoint sub contractors ?
MW16 stipulates that ‘Where considered appropriate, the Contractor shall engage the sub-contractor using the JCT Short Form of Sub-Contract'
126
At what point can you no longer issue variations under the contract ?
following practical completion/ final account
127
Does the contractor have a right to access the site during the rectification period ?
Yes, but cannot force access. Although the right to return to site ceases at the end of the three-month period, the contractor’s liability for defective materials or workmanship continues throughout the statutory limitation period.
128
How long does the contract administrator have to notify the contractor of the existence defects ?
MW16 requires the contract administrator to notify the contractor of the existence of defects within 14 days of the end of the rectification period.
Unlike SBC16, the form does not state that the contract administrator must issue a schedule of defects. It is suggested that it would be sufficient for the contract administrator to write to the contractor to inform it that defects had appeared, and of their general nature.
The onus would then be on the contractor to identify and make good all defective work. If
the contract administrator prefers to issue a schedule, it might be wise to state that it is
not intended to be a comprehensive list, and that the contractor should make its own
inspection. It would also be sensible to make the employer aware that the contractor must
be allowed access, as to prevent this might result in the employer being unable to claim
for the costs of remedying the defective work
129
Can the employer accept the defect’s and suggest deduction from the retention fund ?
If the employer would prefer to accept the defects rather than require them to be corrected,
then an appropriate deduction is made from the contract sum (cl 2.11). As noted above
(see paragraph 5.31), care should be taken to establish the full extent of the problem and
negotiate a deduction before such a course of action is taken as it is unlikely that the
employer would thereafter be able to claim for consequential problems or further remedial
work
130
What are prolongation costs ?
Prolongation costs are the additional costs that a contractor has incurred as a result of the completion of the works begin delayed by an event that is the responsibility of the other party (usually the employer). Such events might include; failing to give the contractor possession of the site on the date specified in the contract; delays in giving instruction, and so on.
131
Does JCT MW allow for advanced payments ?
No the contract would have to be amended to suite
132
What does a valuation include ?
The value of the work properly executed and the value of materials and goods properly brought onto site.
133
Can you allow for defective work to remain ?
The contract administrator should obtain both parties’ agreement, and ensure that its proposed adjustment to the contract price is agreed and confirmed in writing. The rates and prices for that work as set out in the contract can be used as a starting point for negotiation, but are not the only matters to be taken into consideration (see Mul v Hutton Construction Limited ). The contractor may prefer to correct the work, especially if the proposed reduction in the contract price is significant, and in general it cannot be denied the opportunity to do so.
134
What risks are attached with including materials on site within interim payments ?
The employer may be at risk. Where materials have not been built in. Even where the materials have been certified and paid for, as the contractor might not actually own them because of a retention of title clause in the sale of materials contract
135
What is a payment notice ?
When the CA has not produced a payment certificate the contractor can produce a payment notice
136
What happens if the employer fails to pay the contractor under JCT?
- interest of 5% above the official bank rate of the bank of England
- Right of suspension of work and obligation
JCT
Clause 4.6.1 makes provision for simple interest on late
payment of interim and final certificates. This is set at 5 per cent above the official bank rate of the Bank of England (cl 1.1), and the interest accrues from the final date for payment until the amount is paid.
The contractor is also given a ‘right of suspension’ under clause 4.7. This right is required by the HGCRA 1996 (as amended). If the employer fails to pay the contractor by the final date for payment, the contractor has a right to suspend performance of all its obligations under the contract, which would not only include the carrying out of the work, but could also, for example, extend to any insurance obligations
137
What are the insurance options under JCT MW ?
Clause 5.4A is for use with new buildings, and is taken out by the contractor
5.4B is for use with existing buildings where the policy will cover the
new works and existing structure, and is taken out by the employer, 5.4C is used where neither of these options is appropriate and the parties agree their own insurance arrangements (these are to be set out in the contract particulars).
138
How long should does each party have to provide evidence of there insurance in place ?
Both parties must be able to provide reasonable evidence within seven days of a request
139
If a contractor submitted an obvious error in there submission what would you do with a JCT contract ?
Alternative 1 = Details provided and the contractor has the choice to confirm or withdraw submission with no amendments
Alternative 2 - Details provided and opportunity to confirm or amend to correct the error.
Source - JCT Practice note - Tendering”
140
Give me some examples of the requirements of the Housing Grants and Construction Regeneration Act 1996 .
The right to be paid in interim, periodic or stage payments
The right to be informed of the amount due, or any amounts to be withheld
The right to suspend performance for non-payment
The right to adjudication
141
What 8 Conditions need to be met for a contract to be in place ?
- offer by one party (tender)
- Acceptance by the other party (tender return)
- Consideration (price of the promise)
Intention to form a contract
Legality of contract
Capacity to make agreements
Consent
Possibility of Performance
142
What are the advantages of standard forms over bespoke contracts?
Written by legal experts
Rights and obligations of each party are clearly set out to the required level of detail
Risks should have been allocated equitably between parties
Parties should be familiar with the provisions in the form
Fewer unforeseen anomalies
The time and expense of preparing a fresh document for each occasion is avoided
Case law is built up over time – provides a good source of knowledge and clarity.
143
When pricing an Extension of Time, what would you include for and what rates?
Include for costs of prolongation of site preliminaries - welfare facilities, utilities ect
Facilities management staff, security, cleaners
Sub contractor mobilisation cost
144
How would you assess an adverse weather claim for EOT ?
Need to be supported by historical weather data taking into account the time of year and region the project in question is located in.
The contractors claim should be based on data from a recognised independent source and the data would be compared to previous years to assess if the prolonged period is equivalent to the EOT
145
Is the construction phase programme part of the contract document for JCT MW ?
The CPP is not a contract document under MW16
But the contractor must ensure that a CPP is prepared before setting up the construction site (regulation 12)
The construction phase plan is not a contract document under MW16, and the recitals make no mention of it. However, the employer and the principal designer must provide the contractor with pre-construction information (regulations 4(4) and 12(3)), which should be sent out with the tender documents. Where the contractor is the principal contractor, the contractor must ensure that the construction phase plan is prepared before setting up the construction site (regulation 12); compliance with this is required under clause 3.9.2.
To avoid uncertainty, it is advisable to require that this document be submitted by the contractor well in advance of start of work on site. Following commencement, the contractor must ensure that the plan is reviewed and updated on a regular basis (regulation 12(4)).
146
What option have you got if a contractor makes a mistake in their tender submission (JCT) ?
Alternative 1 - Inform the contractor who can choose to either confirm or withdraw
Alternative 2- Inform the contractor who can choose to confirm or amend
147
Can you name some legislation in relation to contract administration ?
Contracts (Rights of Third parties) Act 1999
House Grants Construction and Regeneration Act 1996
CDM 2015
148
Why would a final certificate not be issued?
If there is an ongoing dispute resolution process then a final certificate should not be issued, potential for a certificate of non completion dependent on contract.
149
What is a Rectification Period, and what is the process involved
If any defects are found within the rectification period, the CA will issue an instruction that notes a schedule of defects, which should be issued no later than 14 days after the expiry of the rectification period. The contractor should then return to rectify those identified defects at no cost to the employer. Once these works have been carried out the CA will issue a certificate of making good to document these works
150
What clause within the Minor Works contract deals with Defects and Rectification Period?
Clause 2.11 deals with defects found within the Rectification Period, and clause 2.12 notes the requirement for a Certificate of Making Good Defects. The Rectification should be defined within the contract particulars
151
In what situation would acceleration of a programme be considered?
If a contractor wanted to avoid liquidated damages due to delay, or perhaps to free up staff. A client may wish to accelerate a programme to avoid the works being completed late.
152
What is the difference between Sectional Completion and Partial Possession?
Sectional completion of is a pre-arranged situation, whereas partial possession occurs within the course of the project, and the needs to be consented to by the contractor.
153
What is a Pay Less Notice, in what situation would it be issued and what are the timescales involved?
A pay less notice is a notice issued either to the employer or the contractor noting the intention to pay less monies than noted due in the valuation. Where a valuation is considered to be wrong, or where example the client wishes to claim liquidated damages, then a pay less notice should be issued to detail the amount to be paid. A pay less notice must be issued no later than 5 days before the final date for payment.
154
Why would you use JCT or a NEC contract
JCT has been around longer so its more established and people are more familiar with it
NEC is more collaborative and has less ambiguous language, better risk management
155
Why is conflict avoidance important in construction contracts ?
The Latham report 1994suggested that construction contracts are confrontational. Therefore the NEC was introduced which has collaboration and better risk management
156
How can a change be undertaken with a contract scope during works.
A formal request is submitted by the party wishing to change the works. This is the evaluated by the other part for impact of time, cost and quality. A competition event (NEC) or relevant events and relevant matters (JCT) is submitted for a approval. In NEC the contractor has 8 weeks to notify for payment after becoming aware of the event in JCT its 2 weeks. NEC = project manager, JCT = Contract administrator
157
What is the difference between contractual completion and planned completion ?
Planned completion comes at the end of the contractors critical path and therefore moves if critical delay occurs. The completion date is the date by which the contractor is contractually obliged to complete the works , this can only be changed in accordance with the contract (clause 11.2). If a delay in the works occurs for any any other reason that would allow the contractual completion date to change then the planned completion is pushed out. Once the contractual completion date is surpassed then liquidated damages can be claimed by the client (in the contract). An Extension of time may be submitted by the contractor if delays were outside of there control. Delay damages can be claimed by either party for additional costs or losses (i.e. increased financing costs, increased project management costs). Once the date of contractual completion has been passed in JCT a certificate of non completion must be issued before any monies are claimed. In NEC you can issue non-completion certificate but it is not required.
158
Is a programme required by the contract ?
In JCT (depending on the specific contract), it is a provision that programme or schedule of works be used, whereas in NEC is is advised and used as a KPI.
159
How do you claim for Liquidated damage?
Notify the other party, Submit a compensation event, assess impact, agree LDs, formalise claim, receive payment.
160
When would a non-completion certificate be issued?
A non-completion certificate would be issued when works are not complete at the relevant completion date, and no extension of time has been issued. LDs cannot be claimed unless a Non-Completion certificate has been issued.
161
What clause in the minor works contract deals with Non-completion certificates?
None. Non-Completion Certificates are not required under the minor works contract but are advised to be defined in writing the practical completion has not been met.
162
How is the amount of liquidated damages applied in a contract calculated ?
Liquidated damages should be a genuine pre-estimate of loss due to delay. They may include loss of rent, extended professional fees, the requirement to rent additional spaces etc.
163
What is the difference between liquidated and un-liquidated damages?
- Liquidated damages are a genuine pre-estimate of loss. When used actual loss is irrelevant, and once set they can only be revised down.
- Unliquidated damages are when the section in the contract particulars is left blank, and the loss must be calculated at the time and need to be proven
164
What clause within the JCT Minor Works contract deals with Liquidated Damages?
Clause 2.9 deals with liquidated damages. Amount of liquidated damages should be defined in the contract particulars
165
What clause within a Minor Works contract deals with Loss and Expense?
Loss and Expense is dealt with in clause 5.10, where details of when a contractor is entitled to loss and/or expense is detailed
166
What counts as exceptionally adverse weather conditions?
- 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.
167
What is a Specified Peril ?
a specified peril is a relevant event which can justify an application for an extension of time, but not an application of loss and expense:
Defined in MW and IBC :
* Fire
* Lightening
* Explosion
* Storm
* Escape of water from tank or pipe
* Earthquake
* Riot/Civil commotion
Specified risk are usually covered by the works insurance policy, and may give rise to a claim
168
what is an Extension of time ?
If a contractor fails to complete the works within the allotted time for reasons beyond their control, the CA can consider an application for the contractor for an Extension of Time - which is a certificate that alters the completion date.
169
What is Retention ?
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.
170
What clause within JCT Minor Works contract deals with Retention ?
The amount of retention is defined in the contract particulars, and then Clause 4.3 deals with interim Payments
171
What does Practical Completion trigger ?
-End of contractor liability (termination of liquidated damages)
- Insurance handover
- Handover of the premises
-Beginning of the defects liability period
- Retention releases, generally from 5% to 2.5%
172
What does Practical Completion mean ?
There is no legal basis for the term Practical completion. It is when the works are completed to the satisfaction of the Contract Administrator. The CA cannot certify PC if there are outstanding works or patent defects (Identified during works or defects liability period), but they also cannot withhold PC for minor defects outstanding
173
What is a collateral warranty ?
A collateral warranty is a binding agreement which gives third parties contractual rights which are collateral to an underlying contract to which it is was not an original party. It allows the employer to enforce the obligations of a sub-contractor in the event that the main contractor went bust, or were unwilling to take action themselves.
A contractual right is also more effective than tort.
174
What types of JCT contracts are there and briefly when would you use them.
JCT MW - simple in nature works, under 500K, don’t need BOQ, traditional procurement With CD - if not enough info to complete design of part or want contractor to take on the risk for the element.
JCT Intermediate - Sectional completion and BOQJCT Design and build - with DAB procurement
JCT Standard Building contract - large/complex projects, traditional procurement with or without BOQ
JCT Major Works
175
What is frustration to a contract?
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.
Notes: 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
176
What is Force Majeure ?
An unforeseen act of god Very broadly, it relates to exceptional, unforeseen events or circumstances that are beyond the reasonable control of a party to a contract and which prevent or impede performance of their obligations under the contract. Generally it cannot be an event that the party could reasonably have avoided or overcome, or an event attributable to the other party. Clauses referring to force majeure attempt to set out the circumstances to which the term applies to and prescribe how such situations should be treated. Depending on the provisions of the contract, the following may be considered to constitute force majeure: Unforeseen changes to legislation. Wars and other hostilities (such as terrorism).Fires. Exceptionally adverse weather. Civil unrest, such as riots or revolution. Strikes (other than by the contractor or subcontractors).Natural catastrophes such as earthquakes, floods and volcanoes. Epidemics or pandemics. In some contracts, force majeure is considered a ‘relevant event’, that may allow the contractor to claim an extension of time if they have been prevented or impeded from performing their obligations under the contract. Although, if the contractor has continued to perform their duties, despite the occurrence, they may not be able to make a claim.
177
What certificates might the contract administrator be required to issue under the contract?
The CA will be required to issue a number of certificates. Confirmation of certain events, milestones and occurrences e.g.
- Practical completion
- Making good of defects
- Partial possession
- Making good to relevant part
- Non-completion
- Payment certificates
178
Can you explain what the contract sum means ?
The Contract Sum is the agreed lump sum the client will pay the contractor for the work. This figure will quite often be subject to change (normally an increase) and this will then become the Final Account figure
179
What is a contract instruction and what should it contain ?
1) A contract instruction is an important legally binding document and may well be referred to in any disputes or legal action which may arise between the client and the contractor so it is essential that the CA ensures the format and content of the document is accurate and compliant with legal protocol.
The Format should be (in writing but can be verbal initially) :
- Names of the parties involved
-Include the project name
- Specify the date
- provide an issue number
Circulate to all necessary parties Quantify the financial implication The content of instructions will include the following: a Only what the contract states e.g. A Variation of the works Removal of work not in accordance with the contract Expenditure of Provisional Sums Opening up of the works for inspection/testing The content of instructions will include the following: a Only what the contract states e.g. Variation of the works Removal of work not in accordance with the contract Expenditure of Provisional Sums Opening up of the works for inspection/testing
180
What is a provisional sum?
A provisional sum is a figure specified within the tender and contract documents which is included to fund an item which cannot be fully specified prior to work commencing for various reasons. An example would be an inclusion of £10,000 to cover provision of new foundations which cannot be specified due to the uncertainty of the ground conditions. The contractor will then be required to complete the work within that sum therefore the sum included should be adequate
181
What is an instruction under the contract? Can they be verbal ?
These are formal documents issued by the contract administrator to document ANY communication between the CA and the contractor. There are many standard instruction forms available for a CA to use. An instruction can range from a single page of A4 to detailed documentation including drawings and specifications if additional work is being instructed. The Architect/Contract Administrator may issue instructions and the Contractor shall forthwith comply with them. If instructions are given orally, they shall not have effect until the Architect/Contract Administrator confirms them in writing. There may be numerous instructions issued ensure you keep up to date with your records.
182
What is on an agenda for a pre-contract meeting ?
A standard agenda for a pre contract meeting will cover issues including:
* Health and safety
* Access arrangements
* Storage
* Programme
* Valuation and payment arrangements
* Site progress meetings
* Project insurance
* Person in chargeable
183
When would an extension of time be granted to the contractor and what is considered a ‘relevant event’ ?
The general rule is that an extension of time should only be issued if the reason is outside of the contractors control - a relevant event
184
What does practical completion trigger ?
- the final months payment (known as the the penultimate payment)
- The release of the contractors insurance obligations (which may be expensive)
- Exemption of the contractors liability to pay liquidated damages
- Half the retention is released
- start of the rectification period
185
What is the rectification period / defects date ?
The rectification period is where the contractor remains open after completion of the work during which the contractor is still liable for rectifying problems (or defects) which have developed following the building work.
186
What are liquidated damages?
LDs are sum of money included within the contract to incentivise the contractor to complete on time and may be deducted from the contractors final monthly payments and retention (see retention later). LDs are a reasonable estimate of loss as a result of the project not completing on time (for example £250 per week due loss of rent of a residential property).
187
What are defects ?
Defects are the legal term for work which has not been completed to the agreed specification or work that has subsequently failed whilst still under contract.
188
What is the certificate of making good defects ?
This certificate (and also the certificate on not making good)need to be completed by the contract administrator following rectification/failure to rectify defects and certifies their rectification. These will either trigger final payment to the contractor or result in withholding money until they are rectified.
189
When would you use JCT Minor works and when wouldn’t you ?
The JCT Minor Works contract is commonly used for projects likely to be administered by a building surveyor under the traditional procurement method and it is under the following criteria:
Where the work involved is simple in character.
Where the work is designed by or on behalf of the client/employer.
Where the client/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.
Where the approximate maximum value is £500k but this is flexible depending on the complexity of the project.
It is not however suitable:
* Under a design and build procurement route as a design and build contract
* Where bills of quantities are required
* Where provisions are required to govern work carried out by named specialists
* Where detailed control procedures are needed
190
What are the contract particulars ?
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
191
What is required to issue practical completion ?
The majority of the works must be completed bar de-minis work. The building must be functional and safe to use. There must not be substantial defects, if there are, you should not submit PC.
192
What are the consequences of issuing PC ?
The health and safety file and operations manual needs to be given to the client, the client takes possession of the site and the client takes on insurance liability of the building. Half the retention is released and the contractors liability for liquidated damages ends and the defects liability period starts.
193
How do you assess liquidated damages ?
Liquidated damages are a pre-determined estimate for the likely costs that will be incurred by the client if the project over runs such as rent payments or income lost etc. They cannot be a penalty.
194
How do you assess unliquidated damages ?
These have to be proven losses incurred by breaching the contract and the amount is not pre-agreed. The amount is determined by the courts.
195
How do you assess Extension of Time?
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.
196
How would you calculate loss and expense incurred ?
I would review the contractors claim and review the preliminaries to determine what costs are genuine as a result of the extension, for example, it is unreasonable for the contractor to give a blanket average cost of the preliminaries as items such as scaffolding costs or skips or washroom facilities etc may not have been required at the end when the delay was added. These costs are then combined to create my own idea of what the costs should be and usually, I will discuss this with the contractor so that a fair settlement can be made for the genuine costs incurred by the delay.
197
What type of procurement routes do you know about ?
- Traditional - design is separate from construction
- Design and Build - Contractor performs both design and construction
- Management - The client is responsible for the design but the contractor defines the works packages and arranges for these to be carried out.
198
What is a relevant event ?
It is something that causes a project to overrun that is outside of the contractors control such as the client not providing access, acts of god, variations, slow instructions, civil commotion. It allows the contractor to apply for an extension of time.
199
What is a relevant matter ?
Where the client is responsible that materially affects the progress of work and cause the contractor to incur a direct loss and expense such as failure to give contractor possession, delays in instruction, opening up works, failure for the client to supply goods, expenditure of Provisional sums.
200
What is a provisional sum ?
An unspecified amount as an estimate for the likely cost that something will be or cost to install where you do not have enough information to provide any details.
201
What is a prime cost ?
Where you have a specified cost for the purchase of materials but does not include the cost of installation
202
How do you decide on what contract to use ?
Look at the value of the works, the complexity and nature of the works, procurement route.
203
What are the duties of a CA ?
In short, to administer the obligations of the contract. This includes inviting contractors to tender, preparing contract documents, preparing progress reports preparing interim payment applications, valuing works, acting impartially, preparing the final certificate, collating the schedule of defects.
204
How is CA different to a clerk of works ?
The clerk of works has no authority to make appointments or prepare and issue certificates. They can value the works though and will oversee the quality of the work on site making sure that plans are being followed.
205
What are preliminaries ?
They are a list of project details that prepared in order to allow the contractor to fully price the project including items which may not be in the specification but important as part of the job such as safety precautions to price up, site facilities, utilities usage, access etc
206
What are the key elements of a contract executed under deed ?
The contracts are executed under seal, signed by the parties, witnessed and stipulated that it is under deed.
207
What are the key requirements for a contract to be made binding ?
Offer
Consideration
Acceptance
Competence
Legal intention
208
What is included in tender documents ?
The relevant drawings
Schedule of works
Preliminaries
Preambles
Specific design detail
Bills of quantity
209
What is included in a traditional contract?
The contract document itself, prelims, preambles, schedule of work, bills of quantity, drawings, design details, specifications, dispute resolution
210
What are the different tender processes ?
- open
- selective
-negotiated
- serial
- Framework
-Single stage
- two stage
- Public procurement
211
What is a PCSA ?
Pre Contract service agreement - designed for appointing a contractor to carry out pre-construction services under two stage tender process. It allows the contractor to collaborate with the employer and their team to develop a deisgn
212
What RIBA stage would you go out to tender ?
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
213
What forms of contract are you aware of ?
JCT
NEC
214
What is the difference between NEC and JCT ?
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.
NEC requires and enables a more proactive and collaborative approach whereas JCT is aimed at focussing on liabilities and risk.
215
What is novation ?
The transfer of contractual rights and obligations from one part to another
216
What is assignment ?
The assignor transfers rights, property or other benefits to the assignee.
217
What is a performance bond ?
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 usally 10% of the contract value.
218
What is a concurrent delay ?
Where there are multiple delays all occurring at the same time but for different reasons.
219
What is the difference between a CA and an EA ?
The key difference is that the Employers Agent will perform the contract administration on D&B contracts whereas the CA will perform the role on traditional contracts.
220
What types of contracts are there ?
- Lump sum
-Measurement
- Cost reimbursement
-D&B
- Management
221
What is a letter of intent ?
A document that states the intent of one party to enter into a contract usually subject to certain conditions being met
222
What is a contract ?
It is a written or verbal agreement between parties to carry out a service in exchange for some form of repayment.
223
What is the difference between CA and EA ?
CA does it impartially on behalf of the contractor and client, EA only administers it on behalf of the employer to protect their requirements.
224
What is procurement ?
The act of obtaining goods or services from external services usually via tendering
225
What are the limitations with a letter of intent ?
They can become legally binding under certain circumstances when this was not the intention of the organisations. By agreeing to a letter of intent at an early stage in the process you may hinder your ability to negotiate a better deal late in the process.
226
What are the different tender processes ?
Single stage - Tender is issued to several contractors , the pack includes all the detail required to provide a cost. The preferred tender is selected and discussions can start.
Two stage - First stage is the same as single stage. The contractor will be chosen to provide input into the design or specific part of the design to help build a specification. This package then goes out to tender again and include that original contractor. The downside is that it often reduces competition and some contractors will refuse as you already have a relationship with the original contractor
Negotiated - similar to single stage but you only go to one contractor and aim to negotiate the cost down to a fair amount but there is no competition.
227
What is the extension of time timescales in a minor works?
There isn't one. The minor works is not really efficient for dealing with EOT's and thus another form would have been more suited.
228
What happens at PC?
- Client becomes responsible for the building
- Half the retention is released
- Rectification period commences
- H&S file agreed depending in contract
- PC cert issued
229
What are the main contract suites ?
- JCT - Joint contracts tribunal
- NEC - New Engineering Contract
- FIDIC- International Federation of Consulting Engineers
- ICE - Institution of Civil Engineers
230
How do you try to mitigate delay in a project ?
- Detailed site investigations.
- Careful monitoring and regular meetings.
- Effective site management.
- Collaborative working and effective coordination.
- Careful scheduling.
- Full commitment to the project by all parties
231
What are the key tasks of the CA ?
Chair meetings
Periodically inspect works
Give instructions/variations or changes
Determine application for EOT
Authorise interim payments
Certify completion date
Setting the adjusted contract sum
232
What standard forms of contract do you know that are offered by JCT?
- SBC - 2011/2016
- Intermediate building contract - 2011/2016
- Minor woks building contract - 2011/2016
-Major projects building contract - 2011/2016
- Management building contract - 2011/2016
- Construction management contract - 2011/2016
- Prime cost building contract - 2011/2016
233
You’ve mentioned that you work with JCT MW, what sort of works would have led you to choosing intermediate ?
Minor Works Building Contract
* This contract is by far the most commonly used in property renovation
* It is generally agreed that non-complex contracts up to £250,000 can be adequately administered by a minor works JCT and includes the following provisions:
* the employer must provide drawings, a specification or schedule of works to define the quantity and quality of work.
* the price and payment structure for the contract, which is usually based on a lump sum (the price for the job) with monthly interim payments.
* provisions are included for collaborative working and sustainability but also cover liability and insurance
The Intermediate Building Contract
* 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.
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.
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What is the role of the CA?
- Inviting and processing tenders
- Preparing contract documents for execution
- Administrating change control procedures
- seeking instructions from the client in relation to the contract
- issuing instructions such as variations, or relating to prime cost sums or making good defects
- Considering claims
- chairing construction progress meetings
- Preparing and issuing construction progress reports
- Co-ordinating and instructing site inspectors
- Agreeing commissioning and testing procedures.
- Agreeing defects reporting procedures
- Ensuring that project documentation is issued to the client
- issuing certificates of practical completion and interim certificates.
* Collating and issuing schedules of defects.
* Issuing the certificate of making good defects.
* Issuing the final certificate
235
What is the usual payment terms under JCT contract ?
Every 4 weeks unless stated differently in the contract documents.
236
What time is the payment timeline under JCT MW ?
The Interim Valuation Date determines the due date for each interim payment which is the date 7 days after the relevant Interim Valuation Date (clause 4.3).
Payment of each interim payment must be made within 14 days from the due date of the interim payment (i.e. 21 days from the Interim Valuation Date).
That simple structure sets out the time framework but in order for a payment to be made it is necessary to certify the amount of each payment. The Architect/Contract Administrator shall within 5 days of the due date for each interim payment (i.e. 12 days from the Interim Valuation Date) do this by issuing an interim certificate.
237
RICS practice statement - ‘Contract-administration-1st-edition-RICS’ - 2011. What are the contents ?
Introduction
Context
Appointment of contract administrator
Roles and responsibilities
238
Can you name some section of this document (RICS practice statement - ‘Contract-administration-1st-edition-RICS’ - 2011) ?
Appointment of the CA
Roles and responsibilities
Records
Site inspection
Meeting
Valuation of works
Contract instruction variations
Final sum
H&S
239
What did you learn this document (Contract-administration-1st-edition-RICS’ - 2011) ?
That a CA although normally engaged by the clients should remain unbais and impartial throughout the role of CA
The process of terms of appointment – in line with RICS for firms
General administration split into information :
Ensure the provision of information
Supply document, drawings etc
Provide or give additional information
Financial
Certify – interim payment
Consider – interim valuation
Send -0 adjust contract sum or payment certificate
Supervision
Approve – quality of work and materials etc
Instruct – the contractor
Obtain – the contractor or clients consent
Issue – variations etc
Make a fair and reasonable review of any additional claim”
240
Can you expand on the RICS practice statement – Retention – 1st edition 2012 ?
Reason for inclusion
Amount of retention
Principle of release
Alternative such as bonds and collateral warranties
Issue with release
Guidance Note – Recommended good practice to be followed by competent and conscientious practitioners
241
What is included within a payment certificate ?
- Date
- Certificate no
- contract sum
- details for parties
- Gross valuation
- net amount
- issued by
242
What would you do if a contractor has submitted an over estimated valuation ?
Issue a pay less notice and record the reasons and evidence why
243
How do you normally select a contract ?
Based on the complexity and contract value of the works.
244
What edition is the Practice Statements in relation to contract administration ?
o Contract admind– 1st - 2011
o Retention – 1st - 2012
245
You mention using JCT minor works contract and having read the retention RICS document. Is there any option for any bonds or similar to be used within this contract ?
There is no option for retention bond this is available within JCT standard building contract. However there could be some protection under the Third part rights Act 1999
246
Within your JCT MW projects what have you set as your levels for the following :
Retention
Liquidated damages
Adjudication measures
Payment intervals
Arbitration measures
Contractors public liability insurance
Retention - 5% total - 2.5% releases following the issue of practical completion and 2.5% is released following the completion of the rectification period and the certificate of making good defects.
Liquidated damages - £100 a week. This figure should be calculated on teh actual additional expenditure of the business as a result of not meeting the prescribed date for completion - Clause 2.2 JCT Minor works contract.
Adjudication measures - RICS
Payment intervals - every 4 weeks
Arbitration measures - RICS
Contractors public liability insurance - based on size, complexity and value of the works. Dependant on size and no of workforce
247
What is a relevant event ?
Delays on a project will have different contractual consequences depending on the cause of 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 damage (LAD's) 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 us 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 CA 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 mechanisms and delay occurred which was not the contractors 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’
248
What is a relevant matter?
Relevant matters in construction contracts
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’
249
What is sectional completion ?
Sectional completion in construction contracts
Sectional completion refers to a provision within construction contracts allowing different completion dates for different sections of the works. This is common on large projects that are completed in sections, allowing the client to take possession of the completed parts whilst construction continues on others.
Sectional completion differs from partial possession in that it is pre-planned and defined in the contract documents.
If sectional completion is required, it must be an express term of the contract, and reflected by the fact that there are multiple completion dates rather than just one. The extent of each section must be clearly defined and liquidated damages, and the amount of retention that will be released must be specified for each section. There may also need to be clarification of how extension of time provisions will be applied if, for example, delays to one section of the works have a knock-on effect on other sections (the cascade effect).
In procedural terms, sectional completion is similar to normal completion and follows the usual handover procedures (see handover to client). However, some work within the section may remain outstanding, such as the completion of commissioning, operation and maintenance manuals and as built drawings, which will cross all sections.
It may exclude mechanical and electrical service systems which are reliant on total completion before they can be properly tested and commissioned. This means that their needs to be an agreed protocol for re-entry into completed sections for the contractors to complete outstanding work.
Sectional completion requires particular care to be taken regarding:
Difficulties with logistics on site when different sections are in the possession of different parties.
The protection of completed sections from ongoing work.
The provision of appropriate insurance at all times for all sections.
The adoption of appropriate health and safety measures to deal with risks resulting from occupation of areas adjacent to, or only accessible through ongoing construction works.
The provision of appropriate security measures.
The consequences of sectional completion are that
Half of the retention is released for that section.
The Rectification Period begins for that section,
The contractor’s responsibility for insuring the works (if applicable) ends for that section.
The contractor’s liability for liquidated damages ends for that section.
The employer is now responsible for any damages to the works for that section.
250
What is Force Majeure ?
Force majeure is used to describe an event that occurs which is beyond the control of the parties, and which prevents them from fulfilling their contractual obligations. The courts have previously held that force majeure is an event which goes beyond what the courts understand by the terms ‘act of God’ or ‘vis major’.
251
How long would you stipulate for a defect liability period ?
Depending on the nature of works and the size of works this could be 6-12 months that would be specified within the contract.
252
When might you consider having a 6 month defect liability period ?
If the works were of simple nature and small size then 6 months would suffice.
253
What is a patent defect ?
A patent defect is identified during the rectification period as a result of reasonable inspection.
254
What is a latent defect ?
A latent defect exists before its discovery. It cannot be identified from reasonable inspections; hidden or concealed flaw.
255
Take me through the process of undertaking a valuation from a contractor ?
Once received I would carry out a site inspection and ensure the works that are valued are completed on site.
Cross reference this with the contractor’s programme. I would query any suspicious items. Once a settlement is reached I would request an invoice from the contractor’s QS.
Once received I would fill out a certificate of payment, ask my senior to QA and sign and I would issue both (invoice and certificate of payment) to the client to pay the contractor within 14 days.
256
On a commercial project were an end-user has agreed to move into the property. How would you assess a suitable rate for liquidated damages prior to a project ?
Loss of income from rent
Cost of alternative accommodation incurred during the delay
Loss of profit to the business at the property where the works are being carried out.
257
How do you provide protection to your client against damages to surrounding buildings ?
England - Party Wall Act – make neighbour aware of the proposed work and adequate time to object.
Northern Ireland - Schedule of Condition – is used to record the condition which is agreed in writing with the neighbour’s surveyor. In accordance with Common L
258
What is a certificate of practical completion ?
The contract administrator certifies practical completion when all the works described in the contract have been carried out. Certifying practical completion has the effect of:
- Releasing half the retention ( an amount retained from payments due to the contractor to ensure they complete the works)
-Ending the contractors liability for liquidated damaged (damages that become payable to the client in the event that there is a breach of contract by the contractor - generally by failing to complete the works by the completion date)
-Signifying the beginning of the defects liability period.
Documentation that should be issued to the client on certification of practical completion might include:
- A draft building owners manual
- A building user's guide
-The health and safety file
- The Building log book
- A construction stage report
- Once the certificate of PC has been issued, the client takes possession of the works for occupation
259
What is a certificate of partial completion ?
The client may wish to take possession of part of a building or site, even if works are ongoing. This can be programmed within the original contract documents it the need can be foreseen through a requirement for sectional completion, but in the absence of such a provision many contracts offer the more open-ended option of partial possession.
The effect of partial possession is that:
Any part for which partial possession is given is deemed to have achieved practical completion.
Half of the retention for that part must be released.
The defects liability period begins for that part.
Liquidated damages reduce proportionally.
The client is responsible for that part and should insure it.
The contractor is not obliged to allow partial possession (although permission cannot be unreasonably withheld), and may not wish to if, for example, access routes are difficult to achieve, it would disrupt the works, or it would incur additional costs. There could also be additional difficulties if the occupants of the part that has been possessed disrupt the contractor, which could result in a claim for extension of time and/or loss and expense.
260
What is practical completion ?
Practical Completion is a contractual term used in the Building Contract to signify the date on which a project is handed over to the client. The date triggers a number of contractual mechanisms including:
Releasing half of the retention
Ending the contractor liability for liquidated damages
Starting the rectification period
Transfer of insurance liability
261
What is an O and M file ?
The building owner’s manual, or operation and maintenance manual (O&M manual), contains the information required for the operation, maintenance, decommissioning and demolition of a building. The building owner’s manual is prepared by the contractor or the sub-contractor with additional information from the designers (in particular, the services engineer) and suppliers. It is a requirement that is generally defined in the preliminaries section of the tender documentation where its contents will be described, although there may be additional requirements regarding mechanical and electrical services in the mechanical and electrical specification. A draft version of the document should be provided for the client as part of the handover procedure prior to certifying practical completion. The final document is not usually available in full form until several months after practical completion, as commissioning information often needs to include summer and winter readings taken in the fully occupied building. The preliminaries may require several copies of the building owner’s manual and might require an electronic version.
The building owner’s manual might include: A description of the main design principles. Details of the building’s construction (such as finishes, cladding, doors and windows, roof construction, and so on).As-built drawings and specifications. Instructions for its operation and maintenance (including health and safety information and manufacturers’ instructions for efficient and proper operation).An asset register of plant and equipment. Commissioning and testing results. Guarantees, warranties and certificates. Particular requirements for demolition, decommissioning and disposal.
262
Which is more common in the construction industry ? Collateral warranties v Third party rights ?
The construction industry is more used to using CW, and they are seen as more effective as they mirror the existing responsibilities. However TPR are becoming more popular when included in contracts as they don’t require the preparation of a detailed agreement.
263
What are Liquidated damages ?
Contracts generally include a clause making provision for the contractor to pay liquidated damages (LD, sometimes referred to as liquidated and ascertained damages - LADs) to the client in the event that the contract is breached. In building contracts, liquidated damages usually relate to the contractor failing to achieve practical completion (i.e. completing the works so they can handover the site to the client) by the completion date set out in the contract. They are often calculated on a daily or weekly rate.
Liquidated damages are not penalties, they are pre-determined damages set at the time that a contract is entered into, based on a calculation of the actual loss the client is likely to incur if the contractor fails to meet the completion date. They might include; rent on temporary accommodation, removal costs, extra running costs, and so on. They are generally set as a fixed daily or weekly sum, although there may be a more complicated formulae where the works are phased, where may be partial possession and so on. It is important that the method of calculation is precisely and formally documented.
If the contract prevents the client claiming liquidated damages, or if actual losses are significantly different to those that were estimated at the time the contract was entered into, then the client may pursue a claim for unliquidated (i.e. actual) damages through the courts. Unliquidated damages are damages, the exact amount of which has not been pre-agreed, and are typically determined by the courts.
As liquidated damages are not a penalty, they must have been based on a genuine calculation of damages when they were set. If they are not genuine, they may be considered a penalty by the courts and so will be unenforceable (see Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd), although this is unlikely as the courts are very reluctant to interfere in contractual agreements negotiated freely by two commercial parties of similar standing.
Calculations might include, amongst other things:
Loss of rent
Loss of income
Fees
Storage costs.
Rental costs.
Fees and fines imposed by third parties.
Finance costs.
There be a causal link between all the losses the contract foresees are likely to be suffered, and the breach of contract, i.e. the damages flow naturally from the delay and must not be ‘remote’. The principle of ‘remoteness’ is established in the case of Hadley v Baxendale in 1854.
Liquidated damages can be beneficial for the client, as the remove their obligation to prove actual losses in the event of delay occurring. They can also be beneficial to the contractor as they limit their liability to a known amount in the event of delay.
However, in some circumstances, the parties to the contract will wish to exclude liquidated damages. In this case, they should not simply insert ‘nil’ as the rate of liquidated damages, as this can imply that the loss for unliquidated damages is also nil. Instead, they should make clear that unliquidated damages apply, or delete the clause for liquidated damages.
264
Can you name some types of Procurement ?
- Traditional contract - 86%
- Single-stage design and build - 41%
- Two-stage design and build - 39%
- Management contract - 18%
- PFI 10 % - Public Funding incentive -fund public infrastructure project
- Construction management contract - sub contractors directly contracted
265
What is Loss and Expense ?
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.
266
Extension of time ?
Construction contracts generally allow the construction period to be extended where there is a delay that is not the contractor’s fault. This is described as an extension of time (EOT).
When it becomes reasonably apparent that there is, 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.
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.
A delay in giving the contractor possession of the site.
Force majeure (such as an epidemic or an ‘act of God’).
Loss from a specified peril such as flood.
The supply of materials and goods by the client.
Strikes.
Changes in statutory requirements.
Delays in receiving permissions that the contractor has taken reasonable steps to avoid.
The contractor is required to prevent or mitigate the delay and any resulting loss, even where the fault is not their own.
Assessing claims for an extension of time can be complicated and controversial. There may be multiple or concurrent delays, some of which are the contractor’s fault and some not. There are many occasions where contractors contribute to delay themselves by their performance during design periods, when producing drawings, mock ups and samples or in inter-facing with sub-contractors.
Crucial in assessing applications for extension of time is the quality of the information provided and records available.
For more information, see How to prepare a claim for an extension of time.
Claims should be judged against the actual progress of the works, not the programme, and must demonstrate the link between the breach (cause) and the delay.
The contract administrator may review extensions of time after practical completion and further adjust the completion date.
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.
Claims for extension of time can run alongside claims for loss and expense (relevant matters) however, one need not necessarily lead to the other.
It is very important when deducting liquidated damages to ensure that the correct contractual procedures are adhered to. In the case of Octoesse LLP v Trak Special Projects Ltd [2016], Justice Jeffords held that Octoesse was not entitled to deduct liquidated damages as they had agreed to an extension of time after a certificate of non completion had been issued. The JCT Intermediate Building Contract is constructed such that:
‘If the Contractor fails to complete the Works or a Section by the relevant Completion Date, the Architect/Contract administrator shall issue a certificate to that effect. If an extension of time is made after the issue of such certificate, the extension shall cancel that certificate and the Architect/Contract Administrator shall where necessary issue a further certificate.
267
What is a pay less notice ?
The Housing Grants, Construction and Regeneration Act 1996 (also known as the Construction Act) include provisions to ensure that payments are made promptly throughout the supply chain.
These provisions include:
The right to be paid in interim, periodic or stage payments.
The right to suspend (or part suspend) performance for non-payment and to claim costs and expenses incurred and extension of time resulting from the suspension.
Pay when certified clauses are not allowed, and the release of retention cannot be prevented by conditions within another contract.
In addition, there are specific provisions in relation to the procedures for making payments.
The client must issue a payment notice within five days of the date for payment, even if no amount is due. Alternatively, if the contract allows, the contractor may make an application for payment, which is treated as if it is the payment notice.
The client must issue a pay less notice if they intend to pay less than the amount set out in the payment notice, setting out the basis for its calculation.
The notified sum is payable by the final date for payment.
If the client (or specified person) fails to issue a payment notice, the contractor may issue a default payment notice. The final date for payment is extended by the period between when the client should have issued a payment notice and when the contractor issued the default payment notice. If the client does not issue a pay less notice, they must pay the amount in the default payment notice.
268
What is a relevant event ?
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. The contract should set out what constitutes a relevant event
269
When might an early warning notice be issued ?
When the contractor starts to experience a delay which might affect the project. Before they submit their EOT claim. Must be issued to the Employer including details of potential impact and cost.
270
What is a target cost contract ?
Examples include NEC Option C (with activity schedule) and Option D (with bill of quantities) Allows team collaboration to benefit from cost savings But also bear some of the clients costs when it overruns
271
What is a compensation event ?
The NEC equivalent of JCT LAD’s
272
Give an example of a situation where a contractor might be entitled to an extension of time ?
Unforeseen works discovered that did not form part of the tender documentation. Relevant Matter/Relevant Event
273
Is a contractor always entitled to loss and expense when they are granted an extension of time ?
No, only if the delay is deemed a Relevant Matter and only if the contract includes a relevant matter provision.
274
What alternative forms of contract would you consider and what factors would make the alternative more suitable ?
Intermediate form of contract. This contract type is more detailed and has more extensive control procedures than the Minor Works Building Contract, but it is less detailed than the Standard Building Contract. It can be appropriate for projects that are procured via both the ‘traditional procurement route’ (or ‘conventional method’) and can be used by both private and public employers.
275
What document(s) would you refer to assist in advising on the most suitable form of contract ?
JCT Deciding on the appropriate JCT Contract 2016.
276
What information is included in the RICS Guidance Note on Contract Administration ?
Records
Site inspections
Meetings
Interim valuations
Works
Variations
277
When might you use an NEC form ?
NEC is a family of contracts that help apply good project management principles and practices, and define legal relationships. The contracts are suitable for procuring a diverse range of works, services and supply, ranging from major framework projects through to minor works and the purchase of supplies and goods.
278
Explain how you would assess contractors valuations.
I inspected site weekly monitor progress / programme. I inspected monthly along with my M&E consultant and the contracts manager and requewed each item of the valuation against the actual progress of works.
279
What timescales did you issue payment certificates following the valuation date ?
Payment Cert 7 days after Interim Valuation Date
280
What are the standard retention rates in a JCT MW Contract ?
5% with 2.5% released at practical completion.
On Standard Building Contract, these can be altered to 3% and 1.5% respectively.
281
What are the consequences of issuing the PC certificate ?
Practical completion cert means that the rectification period can begin.
The retention reduces and the responsibility for insuring the premises passes back to the client.
282
How/when would you certify PC ?
When works are substantially completed and free of patent defects other than those that can be ignored as minor. There is not set definition of practical completion. The client should be able to make beneficial use of the building to issue PC.
283
What happens after the rectification period ends ?
A joint snagging inspection will be carried out with the contractor and agent to identify what defects need to be repaired. Once the repairs are carried out, the CA will release the retention in the final payment application and then issue a certificate of making good defects. Contractor issues their final account.
284
What happens after issuing final certificate ?
Provides conclusive evidence that the quality and standard of work is to the satisfaction of the agent and all adjustments have been taken to the sum and all loses/expenses are settled.
285
What is the difference between partial possession and sectional completion ?
sectional completion is written into the contract and can have LD associated. Partial possession is when the client takes over part of the site that has been substantially completed with the contractors consent. Certificate is issued and defects liability period begins for that area.
286
What insurance would a contractor require before commencing works on site ?
Professional indemnity
Public liability
Employers liability
All risks insurance
287
Under JCT IC, what collateral warranties may a principal contractor provide ?
Principal Contract provides collateral warranties for sub contractors they use that will have design responsibility. Under IC/SBC, the contract requests for collateral warranties to be provided by the contractor to the purchaser, tenants, funders and employer.
288
How would you identify risks in a project? How are risks rated? How did you deal with them ?
Carry out a risk assessment and log it in a register. Maintain said register throughout the project. The risk is scored on likelihood and severity and outlines the mitigating actions.
289
What is your role as a contract administrator ?
Employed by the client to administer the contract on their behalf. Must always act impartially and with integrity. Duties include formulating the contract, issuing instructions, raising certs, carry out inspections, assess damages and EOT.
290
What helps manage meetings ?
Agendas
Taking minutes
Understanding of the purpose
Allow everyone to discuss their points
291
What is the difference between named and nominated subcontractors ?
Client may wish to nominate their own subcontractor for specific works rather than allow the contractor to choose. This usually occurs where the client already involved the subcontractor in the design process and wants a very specific outcome. The nominated contractor is still appointed by the main contractor.
Named sub contractors are where the client will provide a list of acceptable sub contractors. The tender will allow a provisional sum for the subcontractor package. When the contractor is appointed, they will go to the named contractors to tender for the sections. (they can reasonably rejected the names)
292
Why were nominated sub-contractor provisions changed ?
It was unfair for clients to assume risk of insolvency/performance with the nominations. Nominated was replaced with named subcontractor option where a selection is given to the contractor to choose. This then becomes the domestic sub contractor for the main contractor and assigns risk to them.
293
What is a performance bond ?
Provides the employer with financial security payable by the bank for the contractors failure to perform under the contract.
294
What does delay mean in JCT ?
Caused by contractor, employer or factors outside of either of their control. Something that prolongs the completion date stated in the contract.
295
Provide examples where the contractor would not be liable if they are delayed .
Client cause:
* Instructions to open up and or test of any work materials.
* Instructions in regard to expenditure of undefined provisional sums.
* Delays to possession.
* Instructions which increase the level of work required.
Neutral Event:
* Statutory undertaker executing or failing to execute in pursuance of its obligations
* Adverse weather
* Loss or damage caused by fire, flooring, explosion, earthquake etc.
* Force Majeure
296
What is the procedure for an extension of time ?
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.
297
Are you aware of any recent case law relating to extensions of time ?
Walter Lilly & Co V Mackay and DMW Developments. Judge held that where there have been concurrent delays under a JCT or similarly drafted contract, the contractor is entitled to an EOT for the period caused by relevant events
298
What remedies would be available for the contractor should an employer or their agent cause a delay by their action or inaction ?
Delays caused by employer or their agent may lead to a claim for loss and expense relating to the delay. Contractor must make written application to the CA as soon as they are aware of a likely incurred loss. Provide info to the CA to determine the loss.
299
What are relevant matters ?
- Variations
- Instructions
- Approximate quantities in the tender do not reflect the amount actually required.
- Any prevention or impediment or default by act or omission by the employer or their agent
300
What remedies would be available for the client if the contractor is delayed ?
Contractors should use their best endeavours to prevent delays. If the contractor fails to, the client can claim compensation for liquidated damages. This process is sped up by allowing a set sum allowed for in the contract.
301
What is the procedure of claiming liquidated damages ?
CA must issue a certificate of non completion. Employer may inform contractor in writing that they will withhold, deduct or requirement payment of LDs
302
What are LADs ?
Liquidated and Ascertained Damages is a monetary payment the employer is entitled to if a project is not completed by the completion date without prior agreement.
303
How are LADs calculated ?
Loss of rent/revenue, costs imposed by other parties, additional fees, fines from statutory bodies. Normally calculated on a weekly basis.
304
Can an employer claim LADs if they do not actually incur the loss identified in the initial calculation ?
Technically, yes, providing the calculation is not deemed a penalty and is a genuine pre estimate.
305
What are un-liquidated damages ?
Not quantifiable by loss in the contract. Must be ascertained by the courts and must demonstrate an actual loss
306
What is the implication of writing nil in the liquidated damages clause ?
Means there are no damages and the client is not entitled to deduct anything if the contract over runs
307
What is the difference between sectional completion and partial possession ?
In an NEC3 contract, Sectional Completion dates are stated within the contract and known from the outset. Partial possession is where the employer take possession of part of the site before the end of the project. When either occur, insurance liabilities transfer to the employer and rectification period commences.
308
If there was no contract would be HGRCA apply ?
yes
309
What is the final account inclusive of ? WEAL
- All works
-Claims for extension of time
- All variation
- claims for loss and expenses
310
What is the benefit to JCT MW insurance options being in joint names ?
employer and contractor cannot make claims against each other
311
What information is included in Pre Construction Information ?
Project info/arrangements
Health hazards
Design hazards
Site layout, access etc
The regulations define pre-construction information as ‘information in the client’s possession or which is reasonably obtainable by or on behalf of the client, which is relevant to the construction work and is of an appropriate level of detail and proportionate to the risks involved
312
Are materials off site automatically included in an interim valuation?
no . Not unless stipulated in the contract
313
Client calls and says he is short of money and doesn’t want to pay. What to do?
Explain to client that they are in breach of contract and client is liable. Recommend talks between contractor and client.
314
What is PCSA?
Pre-Construction Services Agreement
Used in two-stage D&B tendering. Procure contractor involvement in the design process. Having the contractor on at an early stage, they can advise on the design, improving buildability and cost-certainty.
315
What is the purpose of Joint Names Insurance policies?
The key feature of this type of policy is that the insured parties are unable to claim against one another in respect of an insured loss, as they are considered to be one-and-the-same for the purposes of the insurance.
316
Can you name some JCT intermediate contracts facts ?
JCT intermediate Building contract 2016 (+ ICD with contractors design)
Used for reasonably complex nature works
Allow for names subcontractors which must be engaged using jct intermediate named sub contract document
Similar to mw the works are designed by or on behalf of the employer
Allows for sectional completion
Details list of relevant extensions of time and loss and expenses, both matter and time
Collateral warranties allowed for
317
What is a O&M manual ?
O&M manual), contains the information required for the operation, maintenance, decommissioning and demolition of a building.
The building owner’s manual might include:
A description of the main design principles.
Details of the building’s construction (such as finishes, cladding, doors and windows, roof construction, and so on).
As-built drawings and specifications.
Instructions for its operation and maintenance (including health and safety information and manufacturers’ instructions for efficient and proper operation).
An asset register of plant and equipment.
Commissioning and testing results.
Guarantees, warranties and certificates.
Particular requirements for demolition, decommissioning and disposal.
318
What is the Health and Safety file ?
A file that is prepared pre construction including information such as :
Description of the works carried out
Any outstanding hazards
hazardous materials
nature and location of services
information and as built drawings
319
What is procurement ?
The process of acquiring goods and services
320
What is tendering ?
The sourcing of the selected labor/contractor to carry out the works.
321
What is culpable delay ?
When the PC has not been met.
322
What is the term culpable delay ?
When the completion date has not been met by the contractor and the fault of the contractor
323
What is the Local Democracy, Economic Development and Construction Act 2009 ?
The Local Democracy Economic Development Act (LDEDA) 2009 was introduced in 2011 and amended the Housing Grants Construction and Regeneration Act 1996 (the Construction Act).
* Removes the requirements for contracts to be in writing
* Added the slip rule to allow for the correction of clerical or typographical error
* Removes pay when certified clauses
* Amendments to the payment notice requirements
324
Who bears the cost of a bond ?
Normally the contractor
325
What is traditional procurement ?
The design proportion is carried out by or on behalf of the client/employer prior to tender. Allowing for design control from the client.
326
What is D&B procurement ?
- Employer agent appointed
- Normally 2 stage
- Contract appoint a contractor to create the design and construction
- quicker
- contractor liable for design
327
What is management contracting ?
One main management contractor manages several packages of sub contracted packagers of specialist works
328
What is construction management ?
Client directly appoints several sub contractors. A contractor is then appointed to manage the works as an agent.
329
What are the options available for errors in submitted tenders ?
Alternative 1: Tenderer should be informed of errors & Discrepancies, and afforded the opportunity to confirm or withdraw his tender.
Alternative 2: The tenderer should be given opportunity to confirm his offer or amend it to correct genuine errors.
330
What is a health and safety file ? What is included in one ?
Principal Designer to create during the pre construction phase but it is then updates during the course of the works, which is passed to the client following completion.
Contents include :
Description of the works
Outstanding hazards that have not been eliminated through the design and construction
As built plans showing services
331
Can you list some examples of relevant events ?
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 (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.
332
What is a relevant event ?
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. The contract should set out what constitutes a relevant event. Relevant events entitle the contractor to claim an extension of time; that is for the completion date to be moved.
333
What is a relevant matter ?
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.
334
Can you give me some example of relevant matters ?
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.
335
What are preliminaries and what information would be included as part of this?
NBS suggest that ‘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.’ Preliminaries and work sections together describe what is required to complete the works required by the contract.
The costs attached to preliminaries may also be referred to as ‘preliminaries’ or ‘prelims’, or as ‘site overheads’, or general cost items or expenses. The Code of Estimating Practice published by the Chartered Institute of Building (CIOB) describes preliminaries as:
‘…the cost of administering a project and providing general plant, site staff, facilities, and site based services and other items not included in the rates.’
Preliminaries in tender documents may include:
A general summary.
Method statements.
Pre-construction information.
A description of any planning conditions or other conditions that may affect the work to be carried out by the contractor.
A description of any outstanding statutory approvals that may fall to the contractor to satisfy.
Party wall requirements or other agreements with, or rights of, neighbours (such as rights to light).
Any emergency services obligations.
A description of the reporting information that the contractor will be required to submit (often on a monthly basis) describing construction progress (including a detailed critical path programme, key performance indicators and earned value analysis). See Construction progress reports for more information.
A description of the commissioning strategy, separating setting to work and balancing tasks from independent verification by the consultant team.
Relevant reports (such as soil reports).
An information release schedule.
Quality management procedures.
Labour relations.
Schedules of mock-ups, testing and samples required from the contractor.
The method of sub-contracting.
Requirements for insurance, performance bonds, warranties and product guarantees (for the contractor and sub-contractors).
Requirements for the operating and maintenance manual (the client’s facilities management team may wish to comment on this).
Requirement for progress photos to be taken on site during construction and off-site during fabrication.
Dates for partial possession.
Collaborative practices.
Building information modelling (BIM) requirement and protocols (including requirement for BIM in sub-contracts).
Site waste management plan.
Contractor’s site preliminaries, such as; staff, welfare provisions, site offices, plant, site waste clearance, water, electricity, furniture, ICT and consumables, rates, protection of work, protective clothing, site transport, setting out, building control fees, and so on.
336
What are the Sections of JCT MW ?
Recitals
Articles
Contract Particulars
Attestation
Conditions
Schedules
337
Why and when would you advise the use of a JCT MW contract ? Where could you seek guidance prior to advising a client ?
- simple in nature
- no requirement for a sub-contractor design
- no requirement for sectional completion
- no requirement for collateral warranties
- Reference JCT deciding on the most appropriate contract
338
What are the other generic suites of contracts are available ?
JCT Intermediate
JCT standard building contract
JCT Major project
JCT Design and Build
JCT + Contractors Design
NEC3 / 4
FIDIC - International federation of consulting engineers
339
What is the main difference between JCT AND NEC contracts ?
- JCT is adverbial whereas NEC is collaborative
- NEC uses the contract programme as a contract document
- Contract administrator v Project manager
- Relevant events and matters v compensation event (both time and money)
- NEC does not allow for provisional sums
340
What is an employers agent ?
The contract administrator under JCT design and build contracts
341
If there was an error with a submission from a contractor what are your options to move forward under a JCT contract ?
Alternative 1 = Details provided and the contractor has the choice to confirm or withdraw submission with no amendments
Alternative 2 = Details provided and opportunity to confirm or amend to correct the error.
Source - JCT Practice Note - Tendering 2017
342
What is the difference between liquidated and unliquidated damages ?
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.
343
Was does the JCT MW not allow for ?
- Sub-contractor design
- Sectional completion
- Named sub- contractors
- Clerk of works
- QS
- Programme as contract documents
- Relevant events/ matters
- Novation (replacing an existing contract with a new one ) /assignment (transferring rights under a contract from one party to another)
344
What is a domestic subcontractor ?
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.
345
What is required for a under hand contract ?
signed by the director and secretary
346
What is required for a under deed contract ?
Signed by director and company seal affixed
347
What are the insurance provisions in the JCT MW contract ?
5.4A (Work insurance by Contractor in joint names) - New building
5.4B (Works and existing structures insurance by employer in joint names)
5.4C (Works and existing structure insured by other means)
348
What are the other insurance relevant to a project ?
PII insurance,
All risk insurance
Contents insurance
Public liability insurance
349
What is all risk insurance ?
All risks” refers to a type of insurance coverage that automatically covers any risk that the contract does not explicitly omit. For example, if an “all risk” homeowner’s policy does not expressly exclude flood coverage, then the house will be covered in the event of flood damage.
350
What is a pay less notice ?
The purpose of a pay less notice is to give the paying party the right to pay less than/withhold all or part of the notified sum. The notice must specify the sum that the paying party considers they require to pay and the basis on which the sum has been calculated, even if that is zero
351
What is the due date for payments (JCT MW) ?
14 days after the interim due date or the final due date
352
What is a defined and undefined provisional sum ?
- Defined provisional sums are those that are sufficiently well defined and/or detailed to allow the contractor to make allowances for them in their programming, planning and pricing preliminaries.
- 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. This means the contractor may be entitled to an extension of time and/or additional payments when the actual works are undertaken.
- An example of an undefined provisional sum might be work required below an existing structure, where the ground conditions, and so the extent of work required, cannot be determined until the structure is demolished and the ground opened up.
353
What is a prime cost ?
Prime costs are a firm's expenses directly related to the materials and labour used in production.
354
What considerations should be made with regards to novation?
Whether the new part has the right to take action against the novated team for an issue that occurred prior to the novation
355
What is assignment ?
Assignment is the transfer of a right or an interest vested in one party (the ‘assignor’) to another party (the ‘assignee’). A valid assignment will entitle the assignee to demand performance of a contractual obligation
356
What is a bond ?
A construction bond is a written agreement in which one party (the surety) guarantees that a second party (the principal) will fulfil its obligations to a third party (the oblige). If the principal defaults on its obligations, the surety must complete them or pay the completion costs to the oblige.
Bonds are a means of protection against the non-performance of the contractor. They are an undertaking by a bondsman or surety to make a payment to the client in the event of non-performance of the contractor. The cost of the bond is usually borne by the contractor, although this is likely to be reflected in the contractor’s tender price.
Bonds can be ‘on demand’ or ‘conditional’, with conditional bonds requiring that the client provides evidence that the contractor has not performed their obligations under the contract and that they have suffered a loss as a consequence.
See also Bonds v guarantees.
Performance bond
A performance bond is commonly used as a means of insuring a client against the risk of a contractor failing to fulfil contractual obligations to the client, although they can also be required from other parties. Performance bonds are typically set at 10% of the contract value. This compensation can enable the client to overcome difficulties that have been caused by non-performance of the contractor, such as, finding a new contractor to complete the works.
Advance payment bond
If the client agrees to make an advance payment to the contractor, (for example where the contractor incurs significant start-up and procurement costs before construction begins), a bond may be required to secure the payment against default by the contractor. This will normally be an on-demand bond.
Off-site materials bond
It can sometimes be appropriate for the client to pay for items even though they remain ‘off-site’. For example, where a contractor has made a large payment for plant or materials that have yet to be delivered to site, or if the client wishes to ‘reserve’ key items in order to protect the programme. This is similar to the situation where an advanced payment is made in that a bond secures the payment against default by the contractor and is likely to be an on-demand bond. The bond might be up to the value of the off-site items, with the value of the bond reducing as deliveries to site are made.
Retention bond
Retention is a percentage (often 5%) of the amount certified as due to the contractor on an interim certificate that is retained by the client. The purpose of retention is to ensure the contractor properly completes the activities required of them under the contract. Half of the amount retained is released on certification of practical completion and the remainder is released upon certification of making good defects. An alternative to retention is a retention bond, where the client agrees to pay the amounts which would otherwise have been held as retention, but instead a bond is provided to secure the amount that would have been retained. As with retention, the value of the bond will usually reduce after practical completion has been certified.
Defects liability bond (or defects liability demand guarantee)
The defects liability period (now called the ‘rectification period’ in Joint Contracts Tribunal (JCT) contracts) begins upon certification of practical completion and typically lasts six to twelve months. During this time, it is the contractor’s responsibility to rectify any defects that become apparent in the works. A defects liability bond can be used to ensure that the contractor continues to provide services, rectifying defects that become apparent after practical completion has been certified. This is generally an on-demand bond that may be required on projects where there are no remaining payments to be made, or other security such as retention, after practical completion.
357
What is a letter of intent ?
a letter of intent is a document expressing an intention to enter into a contract at a future date but creates no contractual relationship until that future contract has been entered into. A letter of intent is not an 'agreement to agree'.
It is important to bear in mind that ‘letter of intent’ is a term of commercial convenience and not a term having a substantive legal meaning, as for example ‘subject to contract’. Each letter of intent must be construed on its own particular meaning.
358
What is traditional lump sum procurement route ?
Traditional procurement remains the most commonly-used method of procuring building works. The traditional procurement route involves separating design from construction. The client first appoints consultants to design the project in detail and to ensure cost control and inspect the construction works as they proceed.
359
What may you use instead of a letter of intent ?
“JCT’s Pre-Construction Services Agreement (General Contractor) is designed for appointing a contractor to carry out pre-construction services under a two-stage tender process.
The Pre-Construction Services Agreement enables the contractor to collaborate with the employer or their team of consultants to develop detailed designs, to develop the main contract works, or to compile specialist tender documents.
The contractor’s involvement at the pre-construction stage is valuable and often essential in the final design process of a project, as well as making preparations for the construction phase, such as the programme, cost plans, buildability and any specialist procurement.
The agreement covers the period from the submission of first stage tenders up to the submission of a definitive second stage tender and entry into a main contract for the construction phase.
The agreement can be used when the main contract is one of the following:
Standard Building Contract
Design and Build Contract
Major Project Construction Contract
Intermediate Building Contract (with or without contractor’s design) “
360
Does JCT MW allow for relevant events and relevant matters ?
No there is no specific reference to this, however I could seek guidance of examples from the SBC.
361
What is a vesting clause or a vesting certificate?
vesting clause is a contractual term which deals with the transfer of ownership of goods and materials and a vesting certificate is document evidencing that transfer of ownership of those goods or materials.
Under such circumstances, a ‘vesting certificate’ or ‘certificate of vesting’ may be required from the contractor (or sub-contractors or suppliers), certifying that ownership of the goods, plant or materials listed in a schedule will transfer from one party to the other upon payment and confirming that they will be will be properly identified, separately stored, insured and are free from encumbrances (such as retention of title).
362
What a material off site bond ?
It can sometimes be appropriate for the client to pay for items even though they remain ‘off-site’. For example, where a contractor has made a large payment for plant or materials that have yet to be delivered to site, or if the client wishes to ‘reserve’ key items in order to protect the programme. This is similar to the situation where an advanced payment is made in that a bond secures the payment against default by the contractor and is likely to be an on-demand bond. The bond might be up to the value of the off-site items, with the value of the bond reducing as deliveries to site are made.
363
What is the JCT MW final account timeline ?
- 28 days before the due date contractor can submit valuation
- Due date
- 5 days after the due date CA should issue payment notice - 14 days to the due date for payment
- 5 days before the due date for payment the client has the ability to issue a pay less notice
- If the CA does not issue a payment certificate within the first 5 days what contractor can submit an equivalent direct to the client.
364
Does JCT MW allow for a certificate of non completion ?
No but it does reference a letter to confirm the non completion.
365
How did you prepare costs for review ?
From BCIS, spons and in house data
366
How would you review and extension of time ?
- consider is it a relevant event
- process and review the contractors claim
- Formally issue confirmation and the revised completion date
367
What are the difference between JCT and NEC ?
- JCT is adversarial (competitive) where as NEC is collaborative
- NEC uses the contract programme as a contract document
- Contract administrator v Project manager
- Relevant events / matter v compensation event (both time and money)
- NEC does not allow for provisional sums
368
What other suites of contracts are available ?
NEC - NEC was first published in 1993 as the New Engineering Contract. It is a suite of construction contracts intended to promote partnering and collaboration between the contractor and client. It was developed as a reaction to other more traditional forms of construction contract which have been portrayed by some as adversarial.
FIDIC - International Federation of Consulting Engineers - FIDIC stands for ‘Fédération Internationale des Ingénieurs - Conseils’, which is best translated from French as The International Federation of Consulting Engineers.
369
What is the role of a contract administer ?
A contract administrator manages contracts made between building contractors, employers, and clients. Their responsibility is to administer construction contracts, whereby they may act as project managers, engineers, consultants and client representative
370
You mention the RICS Guidance note on contract administration, can you expand on its contents please ?
Contract Administration
Guidance Note
1st Edition
2011
Appointment of the contract administrator
Roles and responsibilities
Notice
Variations
Instructions
Site inspections
Meetings
371
You mention the RICS Guidance note on retention, can you expand on its contents please ?
Guidance Note
1st Edition
2012
Reasons for inclusions
General principals of release of retention
Alternatives - Bonds etc
Contract specific clauses
372
You mention the JCT practice note deciding on the appropriate jct contract, can you expand on its contents please ?
JCT Practice Note - 2016
This is a document detailing the difference between the contracts. This document also includes a flow chart to help guide the decision.
373
What does practical completion trigger ?
Practical completion is a contractual term used in the building contact to signify the date on which a project is handed over to the client. The date triggers a number of contractual mechanisms including, releasing half of the retention, ending the contractor liability for LD's, starting the rectification period.
374
What is a Employer’s agent ?
The CA equivalent on a design and build contract.
375
What are the contents/what are included in typical contract documents ?
drawings, schedule of work, preliminaries, pre ambles, construction programme, the contracts, photo report, asbestos and H&S information.
376
What is required for a contract under hand ?
Signed by a director and the company secretary, liability for 6 years.
377
What is the final account ? What are the timelines attached to this ?
The final account is the conclusion of the contract sum (including all necessary adjustments) and signifies the agreed amount that the employer will pay the contractor. It includes any works that are paid to the contractor through the main contract. The timeline is as follows:
- Contractor submit a valuation up to 28 days before the due date
- CA asses a issues a payment certificate within 5 days of the due date
- Employer can issue a pay less notice up to 5 days before final date for payment
- Final date for payment is 14 days from due date.
378
What is required for a contract under deed ?
Signed by two directors and attached the common seal of company
379
What is partial completion ? What contract did you run this under ?
The client may wish to take possession of part of a building or site, even if works are ongoing. This can be programmed within the original contract documents if the need can be foreseen through a requirement for sectional completion which is not allowed under JCT MW, but in the absence of such a provision many contracts offer the more open-ended option of partial possession.
The effect of partial possession is that:
- Any part for which partial possession is given is deemed to have achieved practical completion
- Half of the retention for that part must be released
- The defects liability period begins for that part
- LD's reduce proportionately
- the client is responsible for that part and should insure it.
- The contractor is not obliged to allow partial possession (although permission cannot be unreasonably withheld), and may not wish to if, for example, access routes are difficult to achieve, it would disrupt the works, or it would incur additional costs. There could also be additional difficulties if the occupants of the part that has been possessed disrupt the contractor, which could result in a claim for extension of time and/or loss and expense.
380
How would you review and extension of time ?
-Assess the contractors claim -should be notified when reasonably apparent
- Consider was this a relevant event
- Asses the claim
- Formally confirm the outcome
381
How would you formal define at extension of time ?
Via a formal letter to contractor and employer
382
What would you look at when assessing contractors and sub consultants ?
Credit rating
Reference
Size
Experience
Availability
Willingness
H&S
383
Is there a provision for partial completion under JCT MW ?
Not within the contract but an adhoc agreement can be made
384
What might you do as a contract administrator prior to the contract being signed ?
The role of contract administrator does not technically commence until a building contract is in place between the employer and the contractor; however, in practice the responsibilities of the CA will have commenced before the building contract exists. However, the contract administrator would normally draft the contract prior to a pre start meeting.
385
What are payment timescales under JCT MW ?
Interim
* Interim Valuation date is 7 days before the due date. contractor can submit valuation application for payment prior to this.
* CA has 5 days from due date to create payment certificate
* Final date for payment is 14 days from due date
* Employer has up to 5 days before due date to issue a pay less notice
Final
* Contractor has 28 before due date to submit valuation
* CA as 5 days from due date to create payment certificate
* Final date for payment is 14 days from due date
* Employer has up to 5 days before due date to issue a pay less notice
386
What happens if your contractor does not get paid ?
The contractor has the ability to terminate the contract, however I would ensure to consider negotiations in the interim.
387
What are the differences between minor works and intermediate JCT contract ?
JCT Intermediate allows for Named sub contractors and Sectional completion
388
What are the other types of JCT Contracts ?
Homeowner - not CA
MW / with CD
Intermediate BC / with CD
Standard BC / with CD
Design and Build
Major Projects
389
Have you ever used any other types of contract ?
I have not but i do have an awareness of the other contracts within JCT and NEC contracts generally, variation in inclusions and terminology, aimed towards civil construction works in some cases.
NEC
* Compensation event
* Project Manager
* Programme forms part of the contract
* No Allowance for provisional sum
390
Why did you choose a jct minor works contract ?
- Works simple in nature
- No requirement for sectional completion
- No requirement for sub contractors design
391
What are the other suites of contracts available ?
NEC
FIDIC
JCT
392
What happens if a tendering contractor included an obvious error ? What are the options ? Where would find this information ?
Alternative 1 = Details provided and the contractor has the choice to confirm or withdraw submission with no amendments
Alternative 2 - Details provided and opportunity to confirm or amend to correct the error.
Source - JCT Practice note - Tendering 2017
This information would be contained within the Preliminaries of the document.
393
What are the CA duties ?
A contract administrator manages contracts made between building contractors, employers, and clients. Their responsibility is to administer construction contracts, whereby they may act as project managers, engineers, consultants and client representatives.
394
What certificates can you issue under JCT MW contract ?
- contract variation
- payment cert
- cert of making good defects
- cert of practical completion
- letter of non-completion
- contract instructions
395
What option do you have regarding a fixed completion date ?
Acceleration
RICS Guidance Note
1st Edition
2011
Falls within the Black Book Suits of RICS Guidance Notes
Provision for this within JCT SBC with timelines and process defined
396
Tell me about your tender analysis process and the recommendations you made to your client.
I reviewed the tender and created a spreadsheet to compare all of the tender prices per item to highlight any provisional sums, calculation errors, high or low prices in comparison to the other submissions. I advised the client of the best price and consideration regarding start date, previous experience and highlighted prudent information.
397
What process did you follow when opening the tenders ?
They were all opened in the presence of a colleague after the tender deadline.
398
When can a JCT MW contract be terminated ?
Default by contractor
Default by employer
Insolvency
Non performance
Non payment
Agreement from both parties
399
What are the types of procurement ?
- General contracting
- Design and build
- Construction management
- Management contracting
400
What are the types of tendering ?
- Open tendering
-selective tendering
- serial tendering
- Framework tendering
- single- stage and two stage tendering
- public procurement
401
How would you calculate a contingency ?
I would refer to the number of provisional or unknown sums and any investigates items and calculate a suitable % to be added. This would not be visible to the contractor but between the CA and employer.
402
What insurance would you seek from a contractor prior to construction ?
- All risks
- Public Liability
-Employers liability
403
What is all risk insurance ?
“All risks” refers to a type of insurance coverage that automatically covers any risk that the contract does not explicitly omit. For example, if an “all risk” homeowner’s policy does not expressly exclude flood coverage, then the house will be covered in the event of flood damage.
404
What is a Extension of Time if refused ?
Time at large
405
What is time at large ?
An example includes when EOT has been declined by the client the completion date is not defined. 'Time is at large'
406
What are the procurement options available ?
- Traditional contract 86% (single stage)
- Single-stage design and build 41%
- Two-stage design and build 39%
- Management contract 18%
- PFI 10% - The private finance initiative (PFI) is a procurement method which uses private sector investment in order to deliver public sector infrastructure and/or services according to a specification defined by the public sector.
- Construction management
407
What are the JCT MW insurance options ?
5.4A - Works insurance by Contractor in Joint names - Intended new building with no existing structure - contractor would take out all risk insurance
5.4B - Works and existing structure insurance by Employer in Joint names. Works to existing buildings - The existing structure together with its contents are insured in joint names against specified perils. Employer amend current insurance to cover the contractor
5.4C - Works and existing structure insurance by other means. Employer keeps there insurance and the contractors take out insurance for the works and damage to the structure
408
What is traditional procurement ?
Traditional procurement remains the most commonly-used method of procuring building works. It comprises a tripartite arrangement involving a client, consultants and contractor.
The traditional procurement route involves separating design from construction. The client first appoints consultants to design the project in detail and to ensure cost control and inspect the construction works as they proceed. Contractors are then invited to submit tenders for the construction of the project on a single-stage competitive basis.
409
What is design and build procurement ?
Design and build is a term describing a procurement route in which the main contractor is appointed to design and construct the works, as opposed to a traditional contract, where the client appoints consultants to design the development and then a contractor is appointed to construct the works.
The contractor is responsible for the design, planning, organisation, control and construction of the works to the employer’s requirements. The employer gives the tenderers the ‘Employer’s Requirements’ and the contractors respond with the ‘Contractor’s Proposals’, which include the price for the works.
Design and build can be seen as giving a single point of responsibility for delivering the entire project. Some clients, however, consider it is only appropriate for simple projects, where design quality is not the main consideration.
410
Who calculated the figure for liquidated damages ?
The client.
Contracts generally include a clause making provision for the contractor to pay liquidated damages (LD, sometimes referred to as liquidated and ascertained damages - LADs) to the client in the event that the contract is breached. In building contracts, liquidated damages usually relate to the contractor failing to achieve practical completion (i.e. completing the works so they can handover the site to the client) by the completion date set out in the contract. They are often calculated on a daily or weekly rate.
Liquidated damages are not penalties, they are pre-determined damages set at the time that a contract is entered into, based on a calculation of the actual loss the client is likely to incur if the contractor fails to meet the completion date. They might include; rent on temporary accommodation, removal costs, extra running costs, and so on. They are generally set as a fixed daily or weekly sum, although there may be a more complicated formulae where the works are phased, where may be partial possession and so on. It is important that the method of calculation is precisely and formally documented.
If the contract prevents the client claiming liquidated damages, or if actual losses are significantly different to those that were estimated at the time the contract was entered into, then the client may pursue a claim for unliquidated (i.e. actual) damages through the courts. Unliquidated damages are damages, the exact amount of which has not been pre-agreed, and are typically determined by the courts.
411
What is an insurance backed guarantee ?
An Insurance Backed Guarantee (IBG) is a guarantee given by a contractor to provide peace of mind in case the contractor has ceased trading. Contractors can offer guarantees for up to 25 years, but if the contractor was to close down then their guarantee would be worthless, hence the requirement for it to be backed by a third party insurer.
412
What is required to form a contract ?
- Offer
- Acceptance
- Consideration
- Legality
- Capacity
- Intent
413
What is a relevant matter ?
Relevant matters in construction contracts
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’.
414
What is a relevant event ?
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’.
415
What items would normally be included in contractors design ?
Mechanical and Electrical
416
If the liquidated damages section is left blank what does this mean ?
They have not been agreed but can be claimed for in court
417
Is there any provision in JCT MW for the inclusion of any negotiations ?
Yes, within the JCT MW contract both the client and the contractor have a represented nomination with regards to negotiation of disputes
418
Can you give me an example of items contained within a snagging list / rectification period ?
Broken tiles on the roof.
Patchy paintwork, anywhere in or on the property.
Insufficient loft insulation.
Incomplete grouting in the bathroom.
Poorly fitted skirting boards.
No acid wash on outside brickwork.
419
Does the contractor have a right to access during the rectification period ?
Yes but should be pre agreed access etc
420
What is subcontractor design ?
When sub contractor carries out and takes responsibility for part of the design, normally specialist items.
421
Why would you allow a 12 month rectification period ?
to allow for full seasonal changes
422
Did you undertake any pre-qual checks on the contractors?
PQQ - prequalification questionaire?
Insurance
References
Credit checks
423
What is the main aim of an extension of time ?
To protect the employers rights to LD's in the event the contractor fails to complete on time.
424
What does the term ‘ time at large ‘ relate to ?
Time at large usually means that there is no enforceable date for completion, and the contractor then only has an implied obligation to complete the works within a 'reasonable time'.
425
Does JCT MW allow for phased completion or occupation ?
No but an adhoc arrangement can be agreed by the parties.
426
What is a pay less notice ?
A Pay Less Notice is a written notification from the Payer to the Payee of the Payer’s intention to pay less than the value stated in either their previous Payment Notice and/or the Payee’s application.
427
What is the final certificate conclusive of? (WEAL)
- Work, goods or materials that are expressly described within the contract are to the architect's satisfaction
- All extensions of time have been given and dealt with
- All adjustments of the contract sum have been dealt with and agreed
- All loss/and or expense claims have been settled
428
If you had made an error and approved the additional costs, what could the client do so they don’t make the over payment ?
Issue a pay less notice
429
What must liquidated damages be ?
A true calculation of the costs and or loss, not a penalty.
430
Which form(s) of contract are you most familiar with ?
431
What are the limitations of this form of contract (JCT MW) ?
does not allow for sectional completion or sub contractor design.
432
What alternative forms of contract would you consider and what factors would make the alternative more suitable?
JCT Intermediate Contract
* Simple constriction works
* Works carried out in parts
* Requirements for for clerk of works or QS
* Names sub contractors
JCT Standard Contract
* Large or complex works
433
What document(s) would you refer to assist in advising on the most suitable form of contract ?
RICS Contract Administration - 1st Edition - Guidance Note - 2011
JCT Deciding on the appropriate JCT contract 2016
434
What information is included in the RICS Guidance Note on Contract Administration?
Roles and responsibilities of a contract administrator
Records
Site meetings
Meetings
Interim Valuations
Health and Safety
435
Give me some examples when the JCT Minor Works contract is most suitable ?
- simple in nature
- no sectional completion
-no sub contractor design
- No requirement for names sub contractor, QS or COW
436
What is a relevant event?
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’.
437
How do NEC contracts differ from JCT contracts in the terminology used?
JCT is adversial where as NEC is collaborative
NEC uses the contract programme as a contract document
Contract Administrator v Project manager
Relevant events / matter v compensation event (both time and money)
NEC does not allow for provisional sums
438
When might an early warning notice be issued on an NEC contract?
The contract makes provision for early warning procedures. Both parties must give early warning of anything that may delay the works, or increase costs as soon as they become aware of them. They should then hold an early warning meeting to discuss how to avoid or mitigate impacts on the project.
If the contractor fails to give early warning of a possible delay to the works, or increase in costs, they will only be compensated for effects that would have remained anyway even if they had given early warning.
If the contractor fails to give early warning of an event that may give rise to a possible delay to the works, or increase in costs, within 8 weeks of becoming aware of the event, they will not be entitled to a change in price, completion date or key date, unless the project manager should have notified the event to the contractor but did not.
439
How would you calculate Liquidated Damages for inclusion within a contract?
The contractor would calculate the actual costs incurred per week for the potential delay.
440
Give an example of a situation where a contractor might be entitled to an extension of time?
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.
A delay in giving the contractor possession of the site.
Force majeure (such as an epidemic or an ‘act of God’).
Loss from a specified peril such as flood.
The supply of materials and goods by the client.
Strikes.
Changes in statutory requirements.
Delays in receiving permissions that the contractor has taken reasonable steps to avoid.
441
Is a contractor always entitled to loss and expense when they are granted an extension of time ?
No, a claim for loss and expenses would lint to a relevant matter.
442
What does the end of the rectification mean re access to the site ?
Ends the right of the contractors to return to site for access and put right snagging times
443
What if the client does not want the contractor to complete the snagging items within the rectification period / does not want to give access ?
They have to allow the contractor to make good these unless an agreement is made
444
Talk me through the process you followed when assessing the contractor’s request for payment.
I reviewed the progress, programme, valuation in reference to the tender breakdown. (The items being claimed has not previously been raised and were not suitable claims.)
445
How did you determine when practical completion had been achieved ?
Following a site inspection and in reference to the schedule of work items.
446
If you did not agree with the amount claimed by the contractor, what action would you take ?
Discuss initially and then create my own valuation of the works to be followed by a payment certificate.
447
How did you determine the length of the defect liability period for this contract ?
Under JCT MW this is by default 3 months however I would consider if this should be extended to allow for seasonal changes.
448
Do you always specify for a retention amount to be retained – discuss the implications of not keeping retention.
Yes this helps to safeguard the client and in reality helps to get the contractor back to site to complete the remaining works. If this was retained then remedial works could be completed by a third party but would likely relate to additional costs. By not keeping retention it risks the contractor not coming back to complete any snags.
449
How would you deal with a request for payment for materials on site ?
Check to ensure they are on site, delivered and for the project, this would then be included within my following payment certificate if accurate.
450
Explain why you felt it necessary to check the tender submission was not “front loaded” ?
This is something that I consider will all tender to ensure and check the weighting of the figures in comparison to other during the tender analysis.
451
Explain the process you followed when the contractor over-valued his application for payment.
I reviewed the progress and material on site to confirm my valuation of the works, I communicated this to the contractor who agree, I then created and issued a payment certificate (interim).
452
What information was included on the penultimate (one before the final) certificate issued at practical completion.
Penultimate Valuation
Valuation No
Date
File / Project Ref
Date
Retention at 2.5%
Less previously certified
453
Explain what action you took before issuing the final certificate.
Inspection of site to confirm completion of snagging items and agreement of final account.
454
What information do you include on a contract instruction?
- Variation No
- Date
- Project/ File reference
- Add/Omit
- Value of variation
- Contract Sum
455
Explain how you dealt with any defects arising during the defects period.
I created a snagging list which was issued to the employer and the contractor, I then re inspected to confirm the items had been completed within the rectification period
456
When getting the defects made good at the end of the defects liability period how do you ensure everything is complete before issuing the final certificate
Via an inspection, I allow for early issue of snagging last and various inspections to confirm this, Regular communication also helps with this regard.
457
Explain the advice given to the client in respect of the delays caused by COVID 19.
At this time it was classed as a relevant event, to which the contractor submitted an EOT to delay the completion date due to the unforeseen events.
458
Explain the advice given in respect of the cost of the proposed conversion and the sources of information used to prepare the cost estimate.
Costs were sough from BCIS ( Building cost information Service) regarding the area and the rate. This was ratified in part by recent tenders to confirm the rates.
459
Why do you have predominate experience with JCT MW ?
As I deal with similar sized projects, however I do have knowledge of the other forms of contract such as intermediate and standard building contract.
460
What affect did COVID have on your JCT contract ?
Potential delay - consideration of if relevant event or relevant matter
461
How would the tender evaluation differ when using a performance specification to ensure you chose the best solution offered by the tenderers, rather than simply selecting the cheapest ?
The request for further information regarding how the contractor proposes to complete this.
462
What factors did you consider when offering design and construction advice?
Cost, time, quality
463
What else could you use apart from BCIS for cost estimates?
Previous tender submission relative to the work and Spons data
464
How do you manage cost and cost variance on a project?
A cost tracking spreadsheet to defined cost per items including add and omit variations to the the SOW
465
How do you keep track of the current cost of an on-going contract ?
I have a cost tracker spreadsheet, % or value of work is entered per item as the works progress on site.
466
What is a feasibility survey. ?
Feasibility studies are preliminary studies undertaken in the very early stage of a project. They tend to be carried out when a project is large or complex, or where there is some doubt or controversy regarding the proposed development. If an environmental impact assessment (EIA) is required, this may involve assessments best undertaken as part of feasibility studies.
The purpose of feasibility studies is to:
- Establish whether the project is viable
- Help identify feasible options
- Assist in the development of other project documentation such as the business case, project execution plan and strategic brief.
467
What are liquidated damages?
Liquidated damages are a well established method to collect compensation for a specific breach of a contractual obligation
468
How does a compensation event differ from a relevant matter or relevant event?
Compensation are an allocation of risk, not blame under NEC CE. Any risk that is not specifically identified as being attributed to the client is borne by the contractor.
Compensation Event vs. Relevant Matter:
Compensation Event (NEC): Covers both time and cost implications. It is assessed collaboratively, and the impacts are agreed upon proactively.
Relevant Matter (JCT): Primarily addresses financial compensation due to employer actions or omissions. It does not inherently cover time extensions.
Relevant Matter vs. Relevant Event (JCT):
Relevant Matter: Leads to financial compensation for additional costs incurred due to employer actions or failures.
Relevant Event: Entitles the contractor to an extension of time but does not directly provide financial compensation.
469
What are some of the responsibilities of the PM under NEC
Managing risk, utilising NEC change management procedures, reviewing progress of works
470
What is the difference between programme in NEC and JCT
n NEC, it is a contractual document. In JCT, it is an indication.
471
What are the timescales for a Compensation Event?
The contractor must notify the project manager within 8 weeks of becoming aware of the event.
The PM has one week to agree. - Check
The contractor has three weeks to provide a quotation.
The PM has two weeks to accept.
472
What is important to consider when engaging with sub-consultants?
The agreement is back to back with our head agreement.
473
When were NEC contracts introduced?
1993
474
When was the Latham Report released?
1994
475
When were JCT contracts introduced?
19931
476
When would you expect to see Employer’s Requirements?
On a D&B contract.
477
Name some types of compensation events?
Instructions to change the service (unless this results from accepting a defect, or from a change requested by the contractor).
Failure to provide access.
Failure of the client to provide equipment, plant or materials.
An instruction to halt, or delay the works.
Work done by others.
Conditions that could not reasonably have been foreseen.
Exceptionally adverse weather (beyond one in ten year frequency).
Force majeure (such as an epidemic or an ‘act of God’).
478
How are provisional sums dealt with in NEC?
The NEC3 also does not cater for provisional sums.
If an element of the works is incapable of being accurately specified at the outset then it should be described in as much detail as possible in the technical documentation (ie the Works Information) together with appropriate assumptions - any amendments can be made through a CE.
479
What are the main differences between NEC3 and NEC4
- Works information becomes scope
- Gender inclusive language
- x29 climate change clause included
- Working from home becomes a defined cost
480
What are defined costs?
They are used to calculate compensation events. They are actual costs incurred by the contractor on the works minus retention and any costs which would fall within the overheads covered in the Fee.
481
What are the categories of defined costs?
People: Those directly employed or paid by the contractor to carry out the works.
Equipment: Items provided by the contractor and used to provide the works.
Plant and materials: Items intended to be used and included in the works.
Charges: Cancellation charges arising from a compensation event, payment to public authorities, specialist services, and so on.
Manufacture and design: Only apply if they are outside the working areas and wholly or partly designed specifically for the works.
Design: Costs for the works and equipment only.
Insurance: Does not actually facilitate cost recovery for the contractor. Costs that would otherwise be recoverable that have been paid by the insurer to the contractor are set off against the recoverable cost.
482
How would you choose between the NEC options?
The differences are how the contractor gets paid, and the allocation of risk.
483
How is design and build reflected in the NEC suite of contracts?
A Client can include the requirement for the Contractor to be doing elements or all of the design by including such requirements within the Scope. This avoids the need for a separate “design and build” option within the NEC family of contracts. Excludes Design, Build, Operate (DBO).
484
How would you sub-contract NEC ECC?
Subcontract (ECS) - Similar to/complex as ECC, head contract passes down most of the terms from contractor to subcontractor.
Short-contract (ECSC) - For client-contractor. Abbreviated ECC, less administration. For low risk work.
Short-subcontract (ECSS) - Contractor-subcontractor, low risk work. Mainly for under ECSC.
485
What type of contracts would professional’s use under NEC?
Professional services Contract (PSC ) - not physical construction works. Most of the clauses within this contract are the same as that in the main ECC contract, so that all Contractors, Designers and Subcontractors have pretty much the same obligations and processes to follow as each other.
Framework Contract (FC) - Work packages will then be let during the life of that framework. Parties follow the headline clauses within the framework contract (which is a fairly slim contract) and then the individual clauses within the chosen contract for that package. Different work packages can be let using different contracts during the life of the framework.
Term Service Contract (TSC) - Project that is operational or maintenance based - usually minimal construction works/betterment
486
What are the X Clauses under NEC?
Optional clauses that develop the T&Cs of the contract - examples include Sectional completion / delay damages
487
What are the Y Clauses under NEC?
Y clauses are optional clauses in NEC3/NEC4 contracts that allow contracts to be used alongside legislation.
488
What are the Z Clauses under NEC?
Bespoke amendments
489
What are defined vs undefined provisional sums under JCT?
Undefined PS is where the extent of works is unknown, e.g. as further information is required such as ground conditions. With undefined provisional sums, the client typically bears the price and scheduling risks.
Defined provisional sums are those which have been described in sufficient detail - the contractor is expected to have made allowance for them in their programming, planning and pricing preliminaries.
490
When would you use Bill of Quantities?
It is about where risk sits and when and how the contractor gets paid.
Option B or Option D - A QS prepares a BoQ, which is a more fair and accurate way of pricing for tendering contractor as they are working off the same scheme.
Additionally, the works are re-measured, so the Contractor gets paid for the amount they do (as has to be 100%) so works can be broken down/itemised to assist, and given the Employer produces the BofQ any errors/omissions in the B of Q will be a compensation event.
491
What is Price for Work Done to Date?
Core Clause 50.2 of NEC3 and 50.3 of NEC4, the amount due to the Contractor is the total of: Price for Work Done to Date; plus other amounts to be paid to the Contractor (such as compensation events); less any amounts to be paid or retained from the Contractor.
492
What are the insurance options under JCT?
*Option A, which is where the Contractor takes out and maintains joint names all risks insurance of the works
*Option B, which is where the Employer takes out and maintains the joint names all risks insurance of the works
*Option C, which is the only option referring to renovations and involving existing structures.
493
What are the W clauses under NEC?
Disputes
494
What are the Payment Terms under NEC?
Pre-defined assessment date
Due date is 7 days after assessment date
Final payment date for main contract is 14 days after due date
495
What considerations must you give when reviewing a CE if outside the 8 week timescales?
If the project manager should have given notification.
If an EWN was raised which eliminates the 8 week limit.
How to prove that the contractor was aware of the CE if outside of the 8 week timescale.
496
What would have been considered adverse weather in NEC?
When number of days where temperature stays below 0 deg C exceeds the one-in-10-year average
497
What are the types of float in NEC?
Project float (total float)
Time-risk allowance (free float)
Period between planned completion and the completion date (terminal float)
498
How would you know if the weather exceeded the one in ten year average?
Down-time report from the Met office
499
How would you know if the contractor could claim for a relevant event for weather disruption?
Long term averages in the contract
500
How would you select an NEC contract?
Depending on the employer’s preference for risk and reward. Options A and B are higher contractor risk, Option E and F are higher employer risk, and C and D are in between and more equally shared
501
What is the difference between works information and scope?
Works information is NEC 3, Scope is NEC 4.
502
What is the difference between scope and activity schedule in NEC?
The scope is prepared by the client, the activity schedule is prepared by the contractor.
503
What is the difference between the schedule of works and the activity schedule?
The contractor prepares the activity schedule in NEC, the client/designer prepares the schedule of works in JCT, usually a building surveyor.
504
What measurement considerations would you make when preparing a bill of quantities?
I would refer to the new rules of measurement - NRM2. Refers to
- number
- length
- volume
- weight
- time
505
Does design and build allow for any kind of financial benefits?
It permits the designer and contractor to innovate.
506
What are preliminaries?
Describes the works as a whole, and to specify general conditions and requirements for their execution, including such things as subcontracting, approvals, testing and completion. The PCI will be included in this bundle of information.
507
What are preambles?
An explanation of a document to help with its interpretation - usually a contract, specification or BoQ. May include a description of the parties, their competence, any existing negotiations or tendering requirements.
It should not repeat rights or obligations included elsewhere in the document.
508
How long is the defects/rectification period?
There is no strict requirement, often contracts may auto-populate 6 months but on larger projects it is generally accepted it will be 52 weeks to ensure all the seasons are cycled for impact.
509
What happens if the client fails to pay the contractor under NEC?
Dealt with through the payment provisions set out in the contract.
The Contractor may issue a notice of non-payment to the client, which triggers the dispute resolution process under the contract.
If a payment is not made in accordance with the payment provisions, the contractor is entitled to receive interest on the amount outstanding. The interest rate is set out in the contract and is calculated from the date the payment became due until the date is paid.
510
What can the contractor do if they are not paid?
Suspend works (and insurances) under the housing Grants and Construction Regeneration Act 1996
511
What are the grounds for termination by the client under NEC
Clause 80.1
The contractor fails to remedy a serious breach of the contract within a specified period of time after receiving a notice from the employer; or
The contractor becomes insolvent or goes into liquidation.
512
What are the grounds for termination by the contractor under NEC?
Clause 81.1
The employer fails to pay an amount due to the contractor within a specified period of time after receiving a notice of non-payment; or
The employer fails to provide access to the site or to give possession of the site or works to the contractor within a specified period of time after the date stated in the contract.
513
Can you name some X clauses from NEC?
Price adjustment for inflation
Sectional completion
Delay damages
Retention
514
Can you name some Y clauses from NEC?
UK specific, refers to 3rd party rights, contract's payment provisions comply with the Housing Grants, Construction and Regeneration Act 1996
515
Can you name some Z clauses from NEC?
Z clauses are completely customisable prior to contractual agreement.
516
What are the clause types in NEC?
Core clauses
Main Option Clauses (A-F)
Secondary Option Clauses
517
Can a contractor get a bonus for early completion?
If stipulted so in X6
518
What is the contractor liable for under NEC ECC
81.1
Claims from third parties
Loss or damage to works, plant, materials and equipment
Loss or damage to client property
Death or injury of employees
519
What are the clients liabilities under NEC ECC?
80.1
Activities on site of the contractor after takeover
Loss of or damage to the works, plant and materials due to; war, strikes and civil commotion
520
When is the contractor required to insure their liabilities from?
It is required to be in place from the starting date until the defects certificate is issued. This means the contractor must have a policy in place beyond the date of completion.
521
If the client wanted to know what insurance deductibles the contractor had, when would they be required to request this information?
Tender stage
522
What insurance is the contractor required to have past the issuing of the defects certificate?
Professional Indemnity insurance
523
What are the project manager’s responsibilities when it comes to insurance?
To review the contractors insurance certificates and decide to accept or reject them - the project manager is required to ascertain if the insurance complies with the contract and assess the commercial position of the insurer
524
How would you check if insurance documentation is suitable?
- Name of the contractor is stated in the certificate
- The certificate is current and that the amount of cover is equal to or greater than that specified in the contract data
Beyond this project managers should seek competent advice - the client's insurance broker
525
How is design liability approached in NEC?
The contractor is not required to have insurance for design negligence claims.
If secondary option X15 regarding reasonable skill and care is not referred to, the client should increase their professional indemnity insurance requirements in the contract data (part 1).
526
What is subgroation and why might it be waived?
A right held by most insurance carriers to legally pursue a third party that caused an insurance loss to the insured. It is generally waived on joint-names insurances to stop the parties from persuing eachother for payouts they recieve.
527
What are the benefits of using NEC?
- Flexible, pushes good management
- Simple, methodical
- avoids subjective writing for ambiguity
-Proactive
528
What are the negatives to using NEC?
- Admin heavy; PM's charge more
- Time intensive
- Personal resistance
- Spirit of mutual trust not always respected
529
What is the government construction strategy?
Recommended use of NEC for public sector works
530
What are the benefits of JCT?
- Simplicity less admin
- Familiar
- Traditional approach to risk allocation - seen more favourable to contractors - employers bear more risk
-Standardization - understanding of roles and responsibilities
- flexible payements
531
What are the negatives of using JCT?
- less flexbile
- less collaborative
- reactive with issues not proactive
- adversial nature = more disputes
- less programme managment
-less suitable for complex projects
532
What are disallowed costs?
Costs that cannot be recovered by the contractor as 'defined cost' - cannot be claimed under the contract - usually specified in the contract
e.g. negligence, unapproved variations, correction of defects.
533
What are defined costs?
costs that are identified as reimbursable under the contract i.e. labour, materials, equipment ect.
534
What are the advantages of using an activity schedule?
Option A - It is the contractor’s responsibility to fill out the Activity Schedule, taking dims/quants off the drawings themselves. If the client provides an indicative schedule, must caveat that the contractor can add their own detail. Cost may be higher as a result.
535
What are the disadvantages of using an activity schedule?
Cost may be higher as a result as contractor takes more risk for design
Under Option A there is no automatic right for contractors to claim the value of unfixed materials on site whether or not they are delivered in a timely manner; increases cost
Provisional sums are not allowed for and therefore must be described in as much detail as possible
536
What are the advantages of using a BoQ?
More accurate and fair way of tendering
Tender comparison is apples to apples
Contractor is taking onboard less risk so costs may be reduced compared to AS
537
What is the difference between an activity schedule and BoQ
BoQ: Detailed, itemized, used for pricing and fixed-price contracts, based on standard measurement methods, less flexible.
Activity Schedule: High-level, focused on scheduling and progress tracking, used in design and build contracts, costs assigned to activities, more flexible.
538
What are the disadvantages of using a BoQ?
Requires a complete design
Client errors in measuring will be compensated through a CE
539
What were the main changes between NEC3 and NEC4
- New contracts, such as DBO and Facilities management
- Dispute avoidance clarity, including new option W3
- Scope ( was Works information)
- Client (was employer)
- Early Warning Register (was Risk Register)
- Inclusive language
540
What are the key differences between NEC and JCT?
- Terminology (CoW v Supervisor, CA vs PM)
- Programme
- Change control (RM/RE vs CE)
541
What is included within the works information /scope?
Technical information, specifications and drawings.
Constraints for how the contractor provides the works, such as safety requirements.
Work to be designed by the contractor.
542
What would you expect to find in an NEC tender?
Works Information
Site Information
If it is AS - the client may provide an indicative schedule that the contractor then will add to and take responsibility for.
If it is a BoQ - the client will provide the BoQ for the contractor to fill in and return
543
What would you expect to find in a JCT tender?
- Premables
- Preliminaries
- SoW/Drawings
544
Where would you have an Employer’s Agent?
To act as the contract administrator in a design and build contract (JCT) they are the 'client' for all matters.
545
What are the responsibilities of the employers agent?
In addition to their role as contract administrator.
- co-ordinating the tender process
-co-ordinating the novation of consultants
- collating contract documents for execution
- implementing change control procedures
-
546
What are the advantages of Employer’s Requirements?
The more detailed, the fairer the tender and likely the more cost certain
547
Can you give an example of time-risk allowance?
Allowing extra time to pour concrete in winter.
548
Who is responsible for the design under JCT (MW or I)
Client - usually supplied by a design team in the form of drawings, specifications and then either a schedule of work or bill of quants.
549
What should the client consider when naming a specific supplier?
The supply contract is with the main contractor, not with the client, the client should ensure that they have a direct warranty with the nominated supplier to guarantee performance and indemnify the client if any default allows a claim for loss and expense or extension of time by the main contractor.
550
What is the difference between a management contractor and a construction project manager?
The management contractor is acting as a principal whereas the construction manager is acting as an agent.
Management contractors contract works contractors direct, whereas construction managers only manage trade contracts, the contracts themselves are placed by the client.
551
What are the advantages and disadvantages of a management contract?
Adv - the client only has one contract to administer.
Adv - appointed early to assist with cost/buildability and packaging of works.
Disadv - the client will require warranties against each contractor incase the management contractor becomes insolvent.
Disadv - if operating on cost plus fee, the management contractor will struggle to prove loss of non performance for the works contractors as the loss is usually passed onto/experienced by the client. Warranties required to combat this.
552
Should other professional services be appointed separately, eg PM, CM?
Judgement has to be made on the competence and experience of the management contractor’s proposed project team - if a client has already engaged a CM/PM at concept stage they may be retained for confidence.
553
How does a term service contract work?
The contract is
PPM - monthly rates
Reactive maintenance - item rates
This^ information may change acutely e.g. short term increase or same service in a new area - compensation event under 60.1 (1) changes to prices
Where something extra is required, it will be a task order which is a mini project with its own programme under optional clause X19 - items not covered in the price list above are assessed as a new compensation event (the forecast defined cost plus the tendered fee percentages). Delay damages are applicable here but not above.
554
How are the task orders different in NEC3 and NEC4?
They are a core clause under NEC4 based on experience of NEC3. The contractor must submit a quotation for the proposed work and have this accepted. It is no longer just after consultation with the contractor but after agreement of a quotation. A decision that a quotation is not accepted or a ‘Task’ order will not be instructed is a compensation event. This highlights the intention that the ‘Task’ order process is intended for significant pieces of work, to be developed and priced co-operatively.
555
When would a task order not be appropriate?
The term service contract (TSC) and therefore 'Tasks' have;
- no compensation events for physical conditions or weather
- no provisions for design of permanent works
- no provisions for contractor design of plant and materials to be installed at the affected property
So are not suitable for major or complex works
556
When is a contractor entitled to interim payments?
Under Construction Act, if the contract period is in excess of 45 days
557
Can you explain the differences between NEC and JCT contracts, and when it would be appropriate to use each one?
NEC: Use for complex, large projects needing flexibility, collaboration, and proactive management.
JCT: Use for traditional, straightforward projects with clear divisions of responsibility and established practices.
558
How do preambles and preliminaries facilitate contract execution, and what are some common clauses that are included in these sections of a contract?
559
Is there any case law behind frustration?
Davis Contractors vs Fareham UDC
Frustrating event is not caused by the default of either party
The contract has become something entirely different and is now impossible to fulfil.
There is no provision in the contract that covers the frustrating even
560
If there is a discrepancy between the employers requirements and contractor’s proposals which will prevail?
the contractor’s proposals
561
What are the advantages of using a standard contract over a bespoke contract?
Written by legal experts
Risk allocated to parties equally and to those best placed to receive them.
Rights and obligations set out in the required level of detail
562
When would you use a bespoke contract?
Novel obligations
When specialist advisors can undertake the amendments
563
What is retention of title?
When the sub-contractor retains the ownership of materials until they are paid for by the contractor - issues can be avoided through vesting certificates
564
Who might want a collateral warranty?
Any party with financial interests in the project but not party to the main contract.
565
What is fitness for purpose?
The provision of a service that is suitable for the employer’s intended purpose.
566
What is the main difference between practical completion and completion in NEC/JCT?
PC is not defined in JCT and is on the CA’s opinion. In NEC, completion ins defined as ‘when all works have been completed in accordance with the works information and are free from any defects which would prevent the employer from using the works and others from doing their work’
567
Can Practical Completion certificate be conditional under JCT?
No
568
Does Takeover also require a PC certificate?
No - just a Takeover cert
569
What is the difference between planned completion and completion date?
Planned completion imitates reality, completion date denotes liability
570
What would the effect on the completion be if you accelerated working and the contractor knew that that might be a possibility?
No change to completion date only planned completion, and the contractor regains some terminal float.
571
What is terminal float?
In construction contracts, "terminal float" refers to the amount of time between the scheduled completion of the project and the contractually required completion date. It
572
Does the contractor have to accelerate programme?
No, they only have a duty to mitigate delay.
573
Are you competent to prepare/assess a valuation?
Yes, the duty falls to the CA but they may delegate to the cost consultant on larger jobs/where one has been employed to undertake those responsibilities
574
What is the point of interim payments?
Eases contractor cash flow, which facilitates programme being adhered to
575
What are the three types of payment notice?
Payment Notice
Payless Notice
Default Payment Notice
576
What should the payment notice contain?
State the Sum Due
Provide the Basis for Calculation of the Sum Due
Date, Addresses, refer to works
577
What is the difference between a payment notice and a payment certificate?
payment notice is an initial notice requesting payment by whoever took the valuation, while a payment certificate is a final certification that the payment amount is correct and should be paid and is issued by the CA
578
What are the different types of certificate?
Payment certificate
Progress certificate (EoT, MGD)
579
If you were having work done on your house, what building contract might you use?
RIBA domestic building contract
580
What happens at project handover?
Contractor releqased from delay damages liability
Half of the retention is released back to the contractor
The defect liability period commences
581
How long does the contractor have to accept the programme under Nec 4
2 weeks
582
What are the types of NEC contract?
Option A = Priced with AS
Option B - Priced with BoQ
Option C =Target with AS
Option D= Target with BoQ
Option E = Cost reimbursable
Option F = Management contract
583
How long does the PM have to accept the programme under NEC3
Not a core clause - the last accepted programme is the programme.
584
Who accepts the programme?
The project manager
585
What is included in a collateral warrenty?
Similar to a contract:
The obligation to use reasonable skill and care in the performance of services being performed in the underlying contract.
‘Equivalent rights of defence’ wording (which gives the granter the protection of any limitations built into their appointment carrying through to the collateral warranty).
A grant of an unconditional copyright licence.
Clear limitation period.
Step-in clauses.
Obligation to maintain professional indemnity (PI) insurance
586
What rights/responsibilities are transferred at partial possession?
Responsibility for the area taken over: Once partial possession is granted, the employer becomes responsible for the area taken over, including its maintenance, security, and any risks associated with that specific section of the works.
Health and Safety: The employer assumes responsibility for ensuring health and safety within the area taken over. They must maintain a safe working environment and comply with relevant health and safety regulations and requirements for that specific portion of the project.
Insurance: The employer typically assumes the responsibility for insuring the area taken over. This includes arranging appropriate insurance coverage to protect the works, materials, and personnel within the specific section of the project.
Defects and Completion: The employer becomes responsible for any defects that arise within the area taken over after partial possession. The contractor’s obligation to rectify defects within the taken-over area is generally reduced or removed, and the employer assumes responsibility for addressing any defects or completion works required within that specific section.
Liabilities and Risks: Once partial possession is granted, the employer generally becomes liable for any damage, loss, or risks associated with the area taken over. The contractor’s liability for those specific sections of the works is typically reduced, and the employer assumes responsibility for any risks, such as damage or loss of the works or materials within the taken-over area.
587
How do you typically assess percentage completion?
Review the Contract Documents: Familiarize yourself with the specific terms and conditions outlined in the JCT contract, including the payment provisions and procedures for measuring progress. Pay attention to any specific guidance or definitions related to assessing the percentage of completion.
Identify Measurable Units: Determine the measurable units or milestones specified in the contract for the particular item in question. These units could be based on quantities, stages of work, or other criteria defined in the contract. For example, if the item is a building component, the measurable units could be the number of installed units or the completion of specific stages of installation.
Establish a Baseline: Determine the baseline for the item in question, which is typically defined at the start of the project or at a specific milestone. The baseline represents the initial agreed-upon percentage of completion for the item.
Measure Actual Progress: Regularly monitor and measure the actual progress of the item. This can involve on-site inspections, tracking work completed, reviewing documentation, and consulting with relevant parties involved in the project.
Document and Record Progress: Maintain detailed records and documentation of the work completed for the item. This can include progress reports, site diaries, photographs, and any other relevant evidence to support the assessment of completion.
Calculate Percentage of Completion: Apply the agreed-upon method specified in the contract to calculate the percentage of completion. This could involve comparing the actual progress against the baseline and determining the ratio or percentage achieved.
Interim Payment Application: Prepare an interim payment application, indicating the assessed percentage of completion for the item. Provide supporting documentation and evidence to justify the assessment and align with the requirements outlined in the contract.
588
What could you do to avoid disputes surrounding percentage completion?
Use a BoQ
589
What is float?
Affordable delay in a task chain that does not affect the sequencing of task chain
590
Who owns float?
Terminal and time-risk = contractor
Total = shared
591
What is a takeover certificate?
It certified that the works are complete in the area described and the client takes over responsibility for htat space
592
What are the clients liabilities at Takeover?
Loss of or damage to the parts of the works taken over by the Client, except
- A defect which existed at take over
- An event occurring before take over which was not itself a Client’s liability or
– the activities of the Contractor on the Site after take over.
593
Can you name some optional clauses under NEC?
Retention
Delay damages
594
What type of clause is retention?
X clause - optional
595
What is the dividing date?
Used in NEC 4- The dividing date is the switch point between using actual Defined Cost and forecast Defined Cost of a compensation event.
596
What information must the accepted programme contain?
The starting date, access dates, Key Dates and Completion Date;
Planned Completion;
The order and timing of the operations which the Contractor plans to do in order to Provide the Works;
The dates when the Contractor plans to meet each Condition stated for the Key Dates and to complete other work needed to allow the Client and Others to do their work;
Provision for float, time risk allowances, health and safety requirements, and the procedures set out in the Contract;
Other information which the Scope requires.
597
Under NEC how long does the PM have to accept the programme?
2 weeks
598
How often should a programme be revised under NEC?
In accorance with the minimum submission intervals in accordance with the contract.
The PM can also instruct the CContractor to provide a new programme at any time
599
How long does the CA/employer have to accept a delay and allow a EOT?
12 weeks (reasonabl time) or before the end of the contract if it is less than 12 weeks.
600
What is ‘Time is of the essence’.
Where the party will suffer damages as a result of non-completion of an activity by a certain date. Either express or implied (via emails). Allows the party to both terminate the contract, and claim damages.
Time is not generally assumed to be of the essence in construction contracts, as there are mechanisms already in place to mitigate e.g. delay damages
601
Example of relevant matters?
Failure to give C possession
Delay in instruction
Discrepancies in contract docs
Variations
CDM issues
Client failing to supply goods
602
Example of relevant events?
Variations
Exceptionally adverse weather
Force Majeure
Delay on the part of a nominated sub-contractor
Changes to statutory requirements
Loss from a specified peril
603
how many compensation events are there and name some examples?
There are 19.
- Change to works information
- C can’t get access to the site
- PM does not respond to communication within the required timeframe
- Supervisor inspection causes unneccesary delay
- Adverse weather conditions
- Takeover
604
What is the purpose of the accepted programme?
Transparency for parties knowing what theyre doing and when
As a basis for the calculation for compensaion events
605
What do you know about the public contract regulations 2015?
Public procurement should be based on value for money
Encourages free and open competition
Amended following Brexit
Threshold for works contracts is £5.3m
606
How do JCT and NEC each deal with trust?
NEC - not optional: Spirit of mutual trust and cooperation
JCT - optional: Good faith and trust. Box ticking as contradicted elsewhere, e.g. ‘notice of termination should not be given vexatiously’
607
If delay damages are paid but then the completion date is extended, what happens to those monies?
Client returns overpayment of damages with interest.
608
What would you do if a contractor went into administration?
RICS GN Termination of Contract
- Secure the site and materials
- Call on any bonds, collateral warranties or third party rights
- Liaise with the administrators
- Prepare a notional final account
- Prepare an outstanding schedule of works and prepare to relet the works
609
When would you use a shortform contract?
Short-contract (ECSC) - For client-contractor. Abbreviated ECC, less administration. For low risk work.
Short-subcontract (ECSS) - Contractor-subcontractor, low risk work. Mainly for under ECSC.
610
When would you refer to the defining completion guidance note ?
certifying completion of works
certifying payment after completion of works
analysing delay
advising on the deduction of delay damages
advising on insurance provisions
advising clients of their occupancy options if works are delayed
advising main contractors, or specialist contractors on issues, such as release of retention, rectification of defects etc.
advising purchasers, tenants, bondsmen and other third parties of their rights and obligations
resolving or adjudicating disputes related to any of the above activities
drafting or reviewing contract documents.
611
How is a cost reimbursable contract priced?
Lump sum for profits
Pro-rata for rates
Good for emergency or un-defined work
612
what is the difference between partial possession and sectional completion
Sectional is written into the contract, PP client can take possession of a part of the project with the contractor's consent, without necessarily having pre-defined sections laid out in the contract
613
What is net contribution ?
limits a party's liability to the portion of a loss directly attributable to their actions, meaning they are only responsible for the part of the damage they caused, not the entire loss even if multiple parties contributed to it; this is often seen in construction projects where multiple parties might be involved in a defect, and the clause ensures each party is only liable for their specific fault.
614
what is maximum aggregate liability
maximum aggregate liability" refers to the total, combined maximum amount a contractor or party can be held liable for across all claims arising from a construction project, essentially capping the total financial responsibility regardless of how many individual claims are made against them; it represents the highest possible financial exposure under a contract, summing up all potential damages from various claims. Need to ensure sub contractors have the same
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what is the difference between third party rights and collateral warranties
Collateral warranties and third party rights both allow third parties (like funders or tenants) to enforce contract terms they aren't directly part of in construction projects. Collateral warranties are separate agreements linked to the main contract, extending a duty of care from one party to another, and are commonly used in the industry. They provide detailed rights but require negotiation and additional documentation. In contrast, third party rights are simpler, created through a notice in the contract under the Contracts (Rights of Third Parties) Act 1999, allowing third parties to enforce specific terms, but not the entire contract. While third party rights are gaining popularity due to their ease of use and lower administrative costs, collateral warranties are still more widely used for broader legal protections in construction projects
