T3. CONTRACT PRACTICE Flashcards

Question

What are the disadvantages of a retention bond?

Answer 1

* Contractors will price in the cost of providing a bond into the tender. * Bonds can be conditional (although advised against). This means mean that the bond only becomes enforceable if certain conditions are met.

Answer 2

Safeguards the employer in situations where a significant upfront payment is made to the contractor.

Answer 3

Safeguards the employer in situations where payment has been made to the contractor for materials off site payment is made to the contractor.

Answer 4

* A form of security issued by a contractor, guaranteeing that the bidder will undertake the contract if awarded.

Answer 5

Select appropriate form of contract Complete the Articles of Agreement (insert details of the employer and contractor, fill in Recitals, Articles, and contract particulars, and provide execution (signature) pages). Collate all contract documents into a bound pack (including contract drawings, bills, Articles of Agreement, conditions of contract, employer’s requirements, contractor’s proposals, and CDP analysis if applicable).

Answer 6

Complete Contract Data Part 1 (employer's data) and Contract Data Part 2 (contractor's data). Prepare the Scope. Prepare the Site Information. If any amendments to terms and conditions have been agreed, select secondary Option Z and note it in Contract Data Part 1, including the document containing the ‘Z clauses’. Collate all documents into a bound contract pack.

Answer 7

* Altering the risk allocation in a contract * Inserting additional obligations * Removing rights * Project-specific requirements

Answer 8

LD's must be a genuine pre-estimate of loss and therefore I would not be in a position to calculate the rate for LD's. This must come from the employer.

Answer 9

No. Amendments to standard form construction contracts should only be drafted by legally qualified professional advisers.

Answer 10

I would ensure there are provisions in the contract for: - Contract works insurance - Must be for the full reinstatement value of the works, including professional fees - Professional indemnity insurance - Public liability insurance - Insurers advocate insuring for a minimum of £2 million for any one occurrence, although a higher amount may be required by some clients. - Employers liability insurance - The statutory requirement is for a cover level of £5 million, although in practice most standard policies provide cover of at least £10 million.

Answer 11

I would not draft a letter of intent as this is a legal document. If asked I would advise the client to seek legal advise.

Answer 12

Valuation of variations must be conducted in accordance with rules set out in 5.3 to 5.6: Additional Works: * Where work is of similar character undertaken under similar conditions, contract rates will apply. * Where work is of similar character but not undertaken under similar conditions, contract rates used as basis with adjustment for conditions. * Where work is not of similar character fair and reasonable rates and prices. Omissions: * Priced document as basis Where the appropriate basis of a fair valuation is daywork (when the additional or substituted work cannot be properly valued by measurement) clause 5.4 sets out the rules to be followed in assessing the amount.

Answer 13

NEC4 Compensation Event Process – **Key Steps & Timeframes** * Identify CE listed in Clause 60.1 (e.g., scope changes, unforeseen conditions, delays by Client/PM). **Notify CE** * By Contractor: Within 8 weeks of becoming aware (Clause 61.3). * By Project Manager (PM): As soon as identified (Clause 61.1). * PM Decision: Within 1 week (accept/reject as CE, Clause 61.4). **Submit Quotation** * By Contractor: Within 3 weeks of PM’s request (Clause 62.3). Includes cost impact, time impact, programme update. *PM Review & Response * Within 2 weeks: Accept, reject, or request revision (Clause 62.3). * If rejected, PM provides reasons. **Revise & Resubmit (if required)** * By Contractor: Within 3 weeks of request (Clause 62.3). * PM Final Decision: Within 2 weeks (Clause 64.4). **Deemed Acceptance** * If PM fails to respond, Contractor’s quotation is deemed accepted (Clause 64.4). (Exceptions for Options C, D & E where PM can assess independently.)

Answer 14

Defined cost is used to assess compensation events in all main options (A-E) and also for interim payments in the cost-reimbursable options (C-E). Example A & B: Defined Cost is the cost of the components listed in the Short Schedule of Cost Components. Example C,D,E: Defined Cost is: * the amount of payments due to Subcontractors * the cost of the components listed in the Schedule of Cost Components

Answer 15

The schedules are a set of rules to define those components of the Contractor’s cost which are included in Defined Cost

Answer 16

Under the conditions of contract

Answer 17

* The Fee includes all costs the Contractor may incur that are not included in Defined Cost (see clause 52.1) * This may include its overheads, profit, insurance premiums, bank charges, and any allowance for its risks (e.g. Disallowed Cost).

Answer 18

Option A: PWDD = the Activity Schedule prices for those activities or groups of activities which have been completed Option B: PWDD = the Bill of Quantities rates and lump sums and the total remeasured quantity of work completed Option C-E: PWDD = the total Defined Cost which the Project Manager forecasts will have been paid by the Contractor before the next assessment date.

Answer 19

Defined terms are capitalised and found in 11.2 of core clauses and main option clauses.

Answer 20

Found in italics in Contract Data Part 1 and Part 2. 'The Completion Date is the completion date unless later changed in accordance with the contract.'

Answer 21

* The Client required phased completion of the works and provisions for incumbent contractors to undertake an element of the works.

Answer 22

* The works were straightforward in nature with basic trades.

Answer 23

* Yes. Larger value projects are often more complex with a variety of trades including specialists. These projects require more detailed provisions to administer effectively.

Answer 24

* Named subcontractors are those proposed by the Client at tender stage and appointed by the contractors a domestic subcontractor

Answer 25

* The main contractor as if they were Domestic Subcontractors

Answer 26

* The scope was well defined at RIBA 3 enabling Contractor to provide lump sum cost. * The works were not particularly complex

Answer 27

* Projects that have a level of uncertainty within the scope or duration. * Encourages collaboration and cost control between parties but more onerous to administrate.

Answer 28

* Option A is a priced contract with an activity schedule. * Each activity is allocated a price and interim payments are made against the completion of those activities. * There is no part-payment for incomplete activities.

Answer 29

* NEC4 Option C is a target cost contract where the contractor is reimbursed for actual costs plus a fee, with a pain/gain share mechanism to incentivise cost savings.

Answer 30

* Partial Possession allows the client to take over part of the works before Practical Completion, unlike Sectional Completion, which is pre-agreed in the contract.

Answer 31

* Sectional Completion, under JCT contracts, allows different parts of the works to be completed and handed over on separate dates, with each section treated like Practical Completion for that portion.

Answer 32

Takeover is similar to Partial Possession in JCT (Sectional Completion is X5). Client takes possession of all or part of the works before the Completion Date. Implications: * Liability for loss or damage, to the works taken over, transfers to the Client. * Liability for Delay Damages (X7) reduces proportionately. * But defects date only commences upon Completion of the whole of the works.

Answer 33

* Sectional Completion is a secondary clause (X5) where's Partial Possession is referred to as 'Takeover'

Answer 34

* Under a JCT the employer can take early use of the site or works, or part of them, for storage or otherwise, with the contractor's consent, but this doesn't trigger practical completion, and the risk of loss or damage remains with the contractor until practical completion

Answer 35

* Contractor designed portion - an agreement for the contractor to design a specific parts of the works.

Answer 36

* Liquidated (or Delay) Damages are a pre-agreed sum the client can deduct from the contractor for each day or week the works remain incomplete beyond the contractual completion date.

Answer 37

* Contractor must have failed to complete the works by PC. * EA must have issued a non-completion notice. * Employer must also notify contractor of intention to deduct LD's. * Employer can then deduct LD's via issuance of a Pay Less Notice.

Answer 38

* The risk is that they would be considered a penalty and become unenforceable by the courts