15. Contract Administration

Question 1

What is the role of a contract administrator?

Answer 1

The role of a contract administrator is generally to oversee the entire project, analyse, prevent or mitigate errors, risks or disputes. Some of the roles include:

• Ensuring the works are carried out and progressing in accordance with the contract terms
• Managing the timescales and milestones of the project
• Managing the costs of the project
• Liaising with and instructing the main contractor of the project
• Ascertaining variations
• Issuing the relevant certificates (payment, non-completion, practical)
• Record keeping such as site visits, site inspections, correspondences, invoices etc.
• Inspecting and managing the defects and ensuring these are remedied in the stipulated timeframe.

Question 2

What are the different forms of contract?

Answer 2

I have used the JCT suite of contracts including:
1) JCT Minor Works Building Contract 2016
2) JCT Intermediate Building Contract 2016

There are also other forms of contract within the JCT suite of contracts including:
1) Standard Building Contract 2016
2) JCT Design and Build Contract 2016
3) Pre-Construction Services Agreement

Question 3

Explain the JCT Minor Works Building Contract

Answer 3

The JCT Minor Works Building Contract is designed for smaller, basic construction projects where the work is relatively straightforward.
- The work is designed by or on behalf of the client
- The client provides drawings and a specification
- The architect or contract administrator is to administer the conditions.

Minor Works can be with or without contractor design portions.

Question 4

Explain the JCT Intermediate Building Contract

Answer 4

The JCT Intermediate Building Contract is designed for building works that are simple context involving normal, recognised basic trades and skills of the industry, without building service installations of a complex nature or other complex specialist work.
- The work is designed by or on behalf of the client
- The client provides drawings and a specification
- The architect or contract administrator is to administer the conditions.

Intermediate Building Contracts can be with or without contractor design portions.

Question 5

Explain the JCT Standard Building Contract

Answer 5

The JCT Standard Building Contract is designed for larger works, or works of a complex nature that involve a high degree of building services or specialist works.
- The work is designed by or on behalf of the client.
- The client provides a specification and drawings.
- An architect or contract administrator administers the conditions.

Question 6

Explain the difference between Minor Works and Intermediate Building Contracts

Answer 6

Intermediate Building Contract offers the client more protection through detailed provisions.

1) Intermediate has the option for sectional completion. Minor works does not.
2) Intermediate has the option for named subcontractors. Minor works does not.
3) Intermediate has collateral warranties. Minor works does not.
4) Intermediate has the option for advanced payments. Minor works does not.
5) Minor works has a restricted extension of time provision.
6) Minor works has a restricted loss and expense provision.

Question 7

What is an interim payment certificate?

Answer 7

These provide a mechanism for the client to make payments to the contractor during the construction process, before the works are complete.

Question 8

What is a non-completion certificate?

Answer 8

This is a notice issued by the contract administrator for failing to complete the relevant sections by the contractual date.

Question 9

What is a practical completion certificate?

Answer 9

The point in the process when the construction work is certified as practically complete.

Question 10

What happens at practical completion?

Answer 10

• Rectification period commences
• Retention is reduced to 2.5%
• Liquidated damages can no longer be claimed
• Client will take occupation of the site
• Client is responsible for insuring the site
• Final account procedure is triggered
• Contract administrator has 12-weeks after practical completion to issue an extension of time

Question 11

What is a letter of intent?

Answer 11

This is used in the interim until a formal contract is in place.

It is often used to allow enabling works to be mobilised if there isn’t time for the formal contract.

It is based on the terms of the contract you intend to use and preliminaries.

Time and financial cap to the letter of intent.

Question 12

What is procurement?

Answer 12

Procurement is the process of acquiring the necessary goods and services to successfully accomplish a construction project.

Question 13

What are the three main procurement routes?

Answer 13

1) Traditional
2) Design and Build
3) Management

Question 14

How do you pick a procurement route?

Answer 14

This is very much dependent on several factors. Including:

1) When design certainty is achieved
2) When cost certainty is achieved
3) Input on quality
4) Programme and speed
5) Design input by the client

Question 15

Explain the traditional procurement route

Answer 15

Traditional design is separate to the construction process.

Full design documentation is required before the contractor is invited to tender or carry out the works.

A lump sum tender requires a fully detailed design prior to tender.

All client decisions must be made prior to award of any contract. Although provisional sums can be used.

Question 16

Explain the advantages and disadvantages of traditional procurement

Answer 16

Advantages
- All tenders are based off using the same information
- More certainty on cost before works commence
- More programme certainty
- Easy change control process when onsite

Disadvantages
- Requires a fully designed tender pack
- May need to include CDP items or provisional sums
- Will incur additional costs if changes are made onsite

Question 17

Explain the design and build procurement route

Answer 17

Contractor is responsible for undertaking both the design and construction work in return for a lump sum price.

Tender documents outlining the employers requirements are prepared by the consultants employed by the client.

The contractor is responsible for delivering to time, cost and stated quality. They have little flexibility for making changes which can both be costly and have programme implications.

Once the parameters have been set, there is little opportunity to make material changes.

Question 18

Explain the advantages and disadvantages of design and build procurement

Answer 18

Advantages
- Cost certainty is established unless the client makes changes
- Programme certainty
- Responsibility of the design stays with the contractor

Disadvantages
- Client has less involvement in design
- Employers requirements often need to be detailed
- May require a longer tender period
- Variations can be expensive
- May be more expensive as the contractor costs risks

Question 19

Can you use any documentation to assist with deciding on an appropriate JCT Contract?

Answer 19

JCT ‘Deciding on the appropriate JCT contract 2016’

This is a practice note which provides further guidance.

Question 20

Explain the standard terms for payment

Answer 20

• Valuations are monthly
• Interim Valuation Date is typically a month after commencement
• Due Date is 7 dates after the Interim Valuation Date
• The contract administrator has 5 days from the Due Date to issue a payment certificate
• Client has 14 days to make payment from the Due Date
• A ‘pay less notice’ must be issued 5 days before the payment is due.

Question 21

What are the types of JCT insurance?

Answer 21

Three types:

A) Contractor to take out an all risk policy in joint names
- This is used for all risk insurance for the works
- Often used in the erection of a new building

B) Employer to take out an all risk policy in joint names
- This is used for all risk insurance for the works
- Often used in the erection of a new building

C) Employer to ensure the existing structures and all risk policy in joint names
- For refurbishment or remediation projects to an existing building

Question 22

What are variations?

Answer 22

Variations are changes to proposed scope of works. These are issued three ways:

1) Contract Instruction - This is a written instruction by the contract administrator to vary the scope. In order for it to be valid, it must be given as a written instruction.

2) Request for Information (RFI) - This is usually to clarify information in the contract documents. It is important to record the date of the RFI, when a response is required and the dates the responses are received in the event of a dispute.

3) Confirmation of Verbal Instruction (CVI) - This is an instruction that is given verbally (could be during a site inspection) either the contractor or contract administrator should confirm in writing.

Question 23

What is the difference between a patent and latent defect?

Answer 23

Faults and defects caused by the works that are known and apparent are patent defects.

Latent defects are unknown.

Question 24

What is the process of a relevant event?

Answer 24

This is an extension of time.

1) When it becomes apparent that there is, or is likely to be a delay that could merit an extension of time, the contractor will give the contract administrator written notice identifying the relevant event that has caused the delay.

2) If the contract administrator accepts the delay was caused by a relevant event, an extension of time will be granted and the completion date adjusted.

3) When assessing a claim, these should be judged against the actual progress of the works. Not the programme and the contractor must be able to demonstrate the link between breach (cause) and the delay.

Question 25

What is the process of a relevant matter?

Answer 25

This is loss and expense claim.

1) The contractor must give written notice as soon as a claim becomes reasonable apparent that the regular process of works is being materially affected.

2) A loss and expense claim can be assessed by comparing a period where the would be no disruption (i.e. project ran fine) against the period which suffered from disruption. A contractor can only claim against actual loss and expense.

3) The contract administrator is required to notify the contractor of their initial assessment within 28 days of receiving the required information from the contractor.

4) They must then provide further updates within 14 days of each subsequent update.

Question 26

What is the defects liability period?

Answer 26

This is the period after the practical completion certificate has been issued.

1) This is typically 12-months
2) The client reports any defects that may arise and the contract administrator determines whether these are defects (works in accordance with the contract) or whether these are maintenance issues
3) If the contract administrator agrees these are defects, they may issue the contractor instructions to rectify and make good in a reasonable time.
4) Defects need to be notified 14-days after the rectification period expires.
5) If the contractor fails to rectify the defects or within a reasonable timeframe, they are in breach of contract. In this situation, others can be employed to rectify the defects and the cost of such works deducted from the contractors retention.

Question 27

Beccles School - What happened after you told the client the decision to pause the works could lead to extension of time and claim a loss and expense?

Answer 27

I had a meeting with the client and stakeholders to discuss in further detail. Fortunately, I was able to have a meeting on the day of disruption. The client agreed to continue the works and accept there would be a level of disruption for the last week of school. The noise levels were mitigated by moving students further away from the works.

Ultimately, this did not impact the overall completion date.

Question 28

Beccles School - What if the outcome of the meeting was different and the client would not agree to the level of disruption?

Answer 28

This would be classed as a relevant event and relevant matter as the client would be responsible for delaying the project.

RE: The contractor would issue a written notice identifying the relevant event that has been caused. In this case, client failing to allow works to commence. This would then be reviewed against actual works progress and extension of time granted and completion date extended.

RM: The contractor would issue a written notice as soon as it becomes apparent that the works would be materially affected. A loss and expense claim would be assessed by reviewing where there would be no disruption against the period that suffered disruption. I would notify the contractor within 28 days of the claim with an initial assessment and provide further updates in 14-day intervals if required.

Question 29

Beccles School - When does the relevant matter and costs agreed need to be completed by?

Answer 29

• The contractor should provide the relevant information no later than 6 months after practical completion.
• If they haven’t the contract administrator can give the contractor one further months notice
• If the information has still not been provided after this, they can make their own assessment and adjust the figure accordingly. They must issue the contractor with their assessment.

Question 30

Plume Academy - Why did you choose the Intermediate Building Contract over the Standard form?

Answer 30

The works were considered relatively simple in context involving normal, recognised basic trades and skills of the industry, without building service installations of a complex nature.

Using the Intermediate Building Contract meant that I could include sectional completion and other provisions to protect the client.

Question 31

Why did you choose sectional completion?

Answer 31

• As the project involved using most areas of the school, the works could be split up into sections. This would allow progress to be monitored on each section.

Question 32

What was the benefits of using sectional completion?

Answer 32

Progress could be easily monitored by the sections.
The school would be handed back in stages.

Question 33

What happens at sectional completion?

Answer 33

1) Sectional Completion Certificate is issued (on that section)
2)Defects Liability Period starts (on that section)
3) Client takes ownership (on that section)
4) Client is responsible for insuring (that section)
5) Retention is reduced from 5% to 2.5% (on that section)
6) Liquidated damages are reduced (pro-rata)

Question 34

What are the negatives of using sectional completion?

Answer 34

Sectional completion can increase the risk of disputes if sections are not completed by the contractual dates.

Question 35

How did you determine liquidated damages?

Answer 35

These are pre-estimated losses the client would incur if the works finish late. When determining loss there are three considerations:

1) Loss of return
2) Direct loss
3) Extended financial costs

In terms of the school, considerations were made for moving classrooms, furniture and time associated with doing so.

It would be wholly unreasonable to pre-estimate potential losses in the form of delivery, erection, dismantling and removal of temporary classrooms given the funding stream was through public money. Contractors would not sign up to the potential cost in doing so.