15 - Contract Administration Flashcards
Contract Administration - Extract from Candidate Guide - Aug 2018 (updated Feb 2022)
What is phased completion ?
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.
What is sectional completion ?
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.
What are the risk associated with a client paying for items direct and outside of the contract ?
They would not be included within the contract, contract administrators inspection and have limited protection.
Can you please expand on what the role of a Contract Administrator is ?
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
Can you expand on your knowledge of the JCT Intermediate contract ?
A JCT contract that allows for a number of addition in comparison to JCT MW including, clerk or works, sectional completion, partial possession, sectional completion, the use of bonds.
Can you expand on your knowledge of the JCT Standard Building Contract
The JCT SBC allows for additional to the intermediate contract such as:
Employers representative, listed sub contractors, retention bonds, variation and acceleration quotations, third party rights.
What JCT contracts allow for a clerk of works ?
- JCT Standard building contract
- JCT Intermediate Contract
- Not JCT MW
What contract allow for sectional completion and named sub contractors ?
Intermediate and standard building contract
Can you talk me through the EOT timeline ?
Can you explain the interim payment procedure under JCT MW ?
Can you explain the final payment procedure under JCT MW ?
When can a employer claim for liquidated damages (JCT MW) ?
What is the ‘Guide to select the appropriate JCT Main Contract ‘?
What is contract between the main contractor and the sub contractor ?
In this scenario is was a bespoke contract, the sub contractors were dealt with as domestic subcontractors and the responsibility of the main contractor.
Does JCT MW allow for clerk of works ? What contracts do allow for this ?
No it does not however, both intermediate and standard building contracts do allow for this.
What are the main types of tendering ?
- Open
- Selective
- Negotiated
- Serial
- Framework
What are the main updates from the previous version (JCT MW updates) ?
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
What is a traditional lump sum contract ?
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.
What is the role of the contract administrator ?
To administer the conditions/works under the terms of the contract. Acting impartially.
What is a contract instruction and how would you deal with it ?
In simple terms, a contract variation occurs when the parties agree to do something differently from the way they originally agreed, whilst the remainder of the contract otherwise operates unchanged. Such an agreement, if valid, would amount to a variation of the existing contract.
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.
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.
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;
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 formalize in a legally binding agreement. The concept is similar to a heads of agreement, term sheet or memorandum of understanding
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
Does the HGRCA apply to residential occupier ?
No, the HGCRA does not apply to residential occupiers. This is a ‘Section 106 - Residential Occupier’
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.”
What are the types of tendering ?
- Open
- Selective
- Negotiated
- Serial
- Framework
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%
Under JCT MW does the programme form part of the contract ?
No however the contract promotes the use of one for reference generally.
Under JCT what are included within the contract documents ?
- drawings;
- specification;
- work schedules;
What is the base date ?
Base date: the base date is usually set at around the time of return of tenders. base date’ is a reference date from which changes in conditions can be assessed. “
Who normally retains the contract ?
The contract administrator
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
What are the ground for termination from the client ?
- 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
What are the grounds for termination from the contractor ?
- 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
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.
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.
What is the reason for an extension of time ?
One important reason for an extension of time clause is to preserve the employer’s right to liquidated damages 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
What is the reason for an extension of time ?
One important reason for an extension of time clause is to preserve the employer’s right to liquidated damages 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
What is ‘time at large’ ?
Construction contracts will usually include a date by which the works described in the contract should be completed. This is generally the date by which practical completion must be certified.
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.
Time can become at large because there is no clear completion date specified in the contract, or can be a situation that arises as a result of events (typically by agreement of the parties or by failure of the contract ‘machinery’), or if the contract does not allow the construction period to be extended.
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.
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.
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.
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.
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.
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.
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
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 ceas
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.
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.
Do liquidated damages need to be proven or estimated for a claim ?
It 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.
What notice would you need to submit if you are planning to recoup liquidated damages form a payment ?
Within a pay less notice
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.
What are the key powers of the contract administrator JCT MW ?
- Agree variations
- Issue a pay less notice on behalf of the client
- issue certificates
- certify practical completion making good defects
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
At what point can you no longer issue variations under the contract ?
Following practical completion/Final account.
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.
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
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
What are prolongation costs ?
Prolongation costs are the additional costs that a contractor has incurred as a result of the completion of the works being 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 instructions, and so on.
Does JCT MW allow for advanced payments ?
No, the contract would have to be amended to suite.
What does a valuation include ?
The value of the work properly executed and the value of materials and goods properly brought onto site
What does a valuation include ?
The value of the work properly executed and the value of materials and goods properly brought onto site
What does a valuation include ?
The value of the work properly executed and the value of materials and goods properly brought onto site
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.
What risks are attached with including materials on site within interim payments ?
The employer could be at risk, however, where materials have not yet been built in, even where the materials have been certified and paid for. The contractor might not actually own the materials paid for because of a retention of title clause in the sale of materials contract.
What is a payment notice ?
When the CA has not produced a payment certificate the contractor can produce a payment notice.
What happens if the employer fails to pay the contractor ?
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
What are the insurance options under JCT MW ?
5.4A, 5.4B and 5.4C. 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, and 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).
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
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”
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
Give me some examples of the requirements of the Housing Grants and Construction Regeneration Act.
• Intended to ensure that payments are made promptly throughout the supply chain and that disputes are resolved swiftly. Provisions of the act include:
o The right to be paid in interim, periodic or stage payments.
o The right to be informed of the amount due, or any amounts to be withheld.
o The right to suspend performance for non-payment.
o The right to adjudication. Disallowing pay when paid clauses.
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
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.”
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 etc.
- Facilities management staff, security, cleaners
- Subcontractor mobilisation costs
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.”
Is the construction phase programme part of the contract document for JCT MW ?
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)).
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
What are the payment timescales attached to interim payment applications for JCT MW ?
Can you name some legislation in relation to contract administration ?
- Contracts (Rights of Third Parties) Act 1999
- Housing Grants Construction and Regeneration Act 1996
- CDM 2015
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.
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.
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
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.
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 needs to be consented to by the Contractor.
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 as due in a valuation. Where a valuation is considered to be wrong, or where for 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 not later than 5 days before the final date for payment
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. Liquidated damages cannot be claimed unless a Non-Completion Certificate has been issued
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.
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.
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
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
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.
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
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
What is a Relevant Matter ?
A Relevant Matter is a matter for which the client is responsible that materially effects to progress of the works. May give rise to an contractor’s claim for Loss and/or Expense. Might include:
• Failure to give site possession
• Failure to provide access to/from site
• Delays in providing instructions
• Discrepancy within contract documents
• Disruption caused by works carried out by the client
• Instructions relating to variations and expenditure of provisional sums
• Issues relating to CDM
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.
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.
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
What does Practical Completion trigger ?
- End of contractor liability (termination of any liquidated damages)
- Insurance handover
- Handover of the premises
- Beginning of the defects liability period
- Retention releases, generally from 5% to 2.5%
What does Practical Completion mean ?
There is no legal basis for the term Practical Completion. It is when the works are complete to the satisfaction of the Contract Administrator. The CA cannot certify PC of there are outstanding works or patent defects, but they also cannot withhold PC for minor defects outstanding.
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.
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
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. 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
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.
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
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
What is a contract instruction and what should it contain ?
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 as follows (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
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
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.
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
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 otherwise known as ‘A relevant event’ which potentially include:
• Weather If the work or part thereof is external
• Force majeure An Act of God
• Additional work instructed by the client
• Others including the client failing to provide the contractor with reasonable access or information
What does practical completion trigger ?
- The final months payment (known as the Penultimate Payment).
- Release of the contractors insurance obligations (which may be expensive).
- Exemption of the contractors liability to pay Liquidated damages.
- Half the retention is release
- Start of the Rectification Period
What is the rectification period ?
The Rectification period is normally a period of 3, 6 or 12 months where the contract remains ˜open™ after practical completion of the work during which the contractor is still liable for rectifying problems (or defects) which have developed following the building work.
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).
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.
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 or otherwise. These will either trigger the Final payment to the contractor or result in withholding money until they are rectified.
When would you use JCT Minor works and when wouldn’t you ?
JCT Minor Works contract selection criteria. 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
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
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.
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.
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.
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.
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.
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.
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
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
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.
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.
What is a prime cost ?
Where you have a specific cost for the purchase of materials but does not include the cost of installation.
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.
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.
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.
What are preliminaries ?
They are a list of project details that are 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.
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.
What are the key requirements for a contract to be made binding ?
- Offer
- Consideration
- Acceptance
- Competence
- Legal intention
What is included in tender documents ?
- The relevant drawings
- Schedule of works
- Preliminaries
- Preambles
- Specific design detail
- Bills of quantity
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
What are the different tender processes ?
- Open
- Selective
- Negotiated
- Serial
- Framework
- Single Stage
- Two Stages
- Public Procurement
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 detailed design.
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.
What forms of contract are you aware of ?
- JCT
- NEC
- FIDIC
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. In NEC, the contract is administered by a PM and in JCT, it is a CA. NEC requires and enables a more proactive and collaborative approach whereas JCT is aimed at focussing on liabilities and risk. NEC has early warning notices and compensation events rather than relevant events/matters
What is novation ?
The transfer of contractual rights and obligations from one party to another
What is assignment ?
The assignor transfers rights, property or other benefits to the assignee.
What is a collateral warranty ?
Agreements associated with one primary contact which can be transferred or extended to a third party who is not part of the original contract.
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 usually 10% of the contract value.
What is a concurrent delay ?
Where there are multiple delays all occurring at the same time but for different reasons.
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.
What types of contracts are there ?
- Lump Sum
- Measurement
- Cost Reimbursement
- D&B
- Management
What is a letter of intent ?
It is a document that states the intent of one party to enter into a contract usually subject to certain conditions being met.
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.
What is the difference between CA and EA ?
CA does it impartially on behalf of contractor and client, EA only administers it on behalf of the employer to protect their requirements.
What is procurement ?
The act of obtaining goods or services from external services usually via tendering.
What are the limitations with a letter of intent ?
The main disadvantages of letters of intent are as follows: They can become legally binding under certain circumstances when this was not the intention of the organizations. 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.
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 a specific part of the design to help build a specification. This package then goes out to tender again and may 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.
What is the EOT 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.
What happens at PC ?
- Client becomes responsible for building
- Half of retention released
- Rectification period commences
- H&S file agreed Depending on contract
- PC cert issued
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
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
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.
What timescales did you issue payment certificates following the valuation date ?
Payment Cert 7 days after Interim Valuation Date
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.
