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RICS Mac > Contract Admin > Flashcards

Contract Admin Flashcards

1
Q

After valuation and certificate are issued, the client advised that they don’t have sufficient funding to make the payment. What would you do?

A

Once the certificate has been issued to the contractor they are contractually obliged to honour payment of the certificate and I therefore could not withhold the payment

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2
Q

What items do you include for on a valuation?

A

Prelims

Measured works

Materials on and off site

Variations

Claims

Retention

Previous payments

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3
Q

If an instruction was issued during the contract which involved the fabrication of a substantial amount of materials off site would you pay for them as off site materials within the valuation?

A

There is no obligation on the client to pay for materials off site if this is not identified in the contract document

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4
Q

How do you deal with the urgent Verbal Instructions?

A

If the instruction affects the critical path i would ensure it is reviewed with the contract admin. If the instruction is valid under the contract I would as soon as possible follow it up with writing

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5
Q

Could an email constitute a contract document?

A

NEC can be used within the building and civil engineering projects whereas JCT is specifically for building projects

NEC can be adopted to a number of bespoke contract strategies due to the various options available whereas JCT has a standard set of clauses

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6
Q

What is the defects liability period?

A

The defects liability period is the duration at the end of the contract, usually 52 weeks after the
Substantial Completion Certificate has been issued whereby the contractor undertakes to rectify any defects that arise within the structure at the contractors expense, providing they were due to materials & workmanship not being in accordance with the contract

The retention money retained may be used to cover the costs of making good.

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7
Q

What is a provisional sum?

A

A sum of money included in the contract for work that cannot be fully designed and costed at the time of tender or contract sum

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8
Q

What types of provisional sum are there?

A

Defined and undefined

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9
Q

Where are provisional sums defined?

A

New Rules of Measurement

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10
Q

What is a defined provisional sum?

A

A sum included in the contract for work that has not been completely designed at the time of contract sum agreement but for which certain information can be given about the extent of works

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11
Q

What is the contractor deemed to have allowed on the inclusion of a defined provisional sum?

A

They are deemed to have made proper allowances to carring out the work in their programme and preliminaries

This means that they are not entitled to an extension of time or extra prelims for carrying out the work

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12
Q

What if the actual work does not closely resemble the provisional sum?

A

This will be treated as a variation

This will entitle the contractor to an extension of time and extra preliminaries if appropriate

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13
Q

What is an undefined provisional sum?

A

A sum included for work for which there is minimal or no information at the time of contract sum agreements.

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14
Q

What is the contractor deemed to have allowed?

A

They are not deemed to have allowed for anything

Expenditure of the undefined provisional sum may carry addtional costs for programme or prelims

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15
Q

How are provisional sums dealt with in the final account?

A

The provisional sums included in the contract are deducted and the actual amount substituted

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16
Q

What are the risks associated with provisional sums?

A

The actual cost and time exceeds that allowed for in the provisional sum because the nature of the item changes between tender and instruction

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17
Q

What are the main suites of construction contracts?

A

JCT

NEC 4

ECC

ICE

FIDIC

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18
Q

What does ‘JCT’ stand for?

A

Joint Contract Tribunal

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19
Q

What does NEC stand for?

A

New Engineering Contract

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20
Q

What does ECC stand for?

A

Engineering and Construction contract

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21
Q

What does FIDIC stand for?

A

Federation internationale des ingenieurs civils

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22
Q

What does ICE stand for?

A

Institution of Civil Engineers

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23
Q

What is a bespoke contract?

A

Contract conditions that are drafted specifically for a particular project.

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24
Q

What the advantages of standard forms over bespoke contracts?

A
  • They are written by legal experts.
  • Rights and obligations of each party are clearly set out to the required level of detail.
  • The time and expense of preparing a fresh document for each occasion is avoided.
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25
Q

What the disadvantages of standard forms over bespoke contracts?

A

They may not be appropriate to the needs of a particular project or client.
Using an inappropriate standard form for the project will cancel out any advantages.

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26
Q

When would use a bespoke contract rather than a standard form?

A

When specialist advisors can undertake the amendments as this requires great skill and knowledge.

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27
Q

Can you have an EOT without an L&E claim?

A

Yes an EOT does not automatically mean entitlement to L&E.

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28
Q

When pricing an EOT what would you include for and what rates?

A

When pricing an EOT I would include costs for prolongation of site cabins, site utilities, welfare
facilities, management staff, inefficient use of labour & plant resources, subcontractor mobilisation costs, head office, finance charges & loss of profit

29
Q

If a project was due to finish before Christmas, but an extension of time was given which meant the contractor finished after Christmas, is the contractor entitled to costs over the Christmas break, which is normally 2 weeks?

A

The contractor would be entitled to costs over the Christmas period for prelims / site cabins if the
reason for the EOT allows the contractor to claim L&E.

30
Q

Would you get involved in helping the Architect assess the Extension of Time?

A

Yes the QS would become involved in assessing the financial implications of the EOT, if applicable

31
Q

Explain the relative advantages & disadvantages of the NEC and JCT?

A

Advantages of the JCT Suite of Contracts:-

o They are considered by many as the “industry standard,” therefore they offer familiarity.

o They cover most forms of procurement and building types through the various impressive ancillary documents to support the main forms.

o They are comprehensive in detail and considered by many to be fair and reasonable and not loaded in favour of either party.

Advantages of the NEC Contract

  • They are applicable to a variety of procurement strategies,
  • They offer clarity and simplicity by using:-

o Ordinary language (minimal legal jargon).

o They include flow charts to support their users.

  • They act as a stimulus to good management through maintaining:-

o Up-to-date programmes which are required to be clear and precise.

o Provision of early warning procedures and risk registers.

o They Embody key features of project partnering.

o Assessment of Compensation events by applying a “rolling Final Account.”

Disadvantages of the JCT Suite of Contracts

  • They are sometimes though to “compromise conditions,” in which they try to satisfy the interests of all parties.
  • They can be considered as unnecessarily long and unnecessarily complex.

Disadvantages of the NEC Contract

  • They are often only considered to be used for civil engineering projects and partnerships.
  • They have limited exposure to the market so they are therefore not fully tried and tested with supporting case law.
32
Q

What are the key differences between NEC and JCT?

A
  • The NEC is concise and written in plain English
  • There are a number of optional clauses reducing the need to amend contracts compared to the JCT

Provision of early warning procedure and risk register encourage a proactive approach to the
management of the project whereas JCT is more reactive.

There is no QS or Employers Agent mentioned in NEC only a Project Manager who takes on both
roles

The Programme is a contract document under NEC with 25% of money being deducted on interim payments if the contractor does not submit an accepted programme at contract stage

33
Q

What are the role of the parties in the NEC?

A

The Project Manager can be from the employer’s organisation or an external consultant.
* The Project Manager represents the client and has full authority to make decisions, unless the employer
has restricted his authority. The PM has the duty to be impartial and to apply the contract.
* Designers prepare the work information and are not named in the NEC.
* The supervisor is either from the employer’s organisation or an external consultant.
* The supervisors role is to check that the works are carried out as described in the contract.
* They have a similar role to the clerk of works with authority such as instructing searches or issuing
defect certificates

34
Q

What is the role of the quantity surveyor under the NEC?

A

The role of the QS is not mentioned in the contract.
* The QS can adopt a supporting role to contractor and PM to agree cost of compensation events
despite not being formally referenced.
* Options B and D involve quantities and measurement.
* Target costs under options C and D require an audit role in open book accounting in target contracts
which the QS may be responsible for.

35
Q

How is risk management dealt with in the NEC?

A

A risk register should be produced as soon as possible and regularly updated this is defined in clause
11.2(14)

It should include the description of the risk and the mitigation measure, not the value or the owner.
* Employer’s risks are listed in the compensation events (clause 60) and in the contract data (additional employer’s risks). Everything else is deemed to be a contractor’s risk.
* Caution: If ownership is stated in the risk register, it must match the contract conditions or it will create conflict. Compensation events can be added or deleted in Z clauses. Additional employer’s risks are listed in the contract data.
* In case of discrepancy between the risk register and terms of the contract, it will be read in the favour of the party who didn’t prepare the risk register, i.e. the contractor.
* If a sum is stated in the risk register neither party can claim for savings or compensation if the cost of the risk turns out to be less or more.
* Risks can only be transferred against a lump of money by modifying the contract conditions. The risk register is not contractual

36
Q

What is a compensation event?

A

Events which, if they do not arise from the fault of the Contractor’s, entitle the Contractor to be
compensated for effect on the Prices, Key Dates and Completion Date.
*There are 19Nr compensation events listed in clause 60.1

37
Q

What are Early Warning Notices under an NEC contract and what are their purpose?

A

These are notices given by either Party of any matter which could potentially have an impact on cost, completion date, key dates or performance in use

Their purpose is to give the parties sufficient time to consider the options available to prevent or
mitigate the issue and collaboratively find the best solution to meet the employer’s interests

38
Q

How are early warnings dealt with?

A

The PM and contractor have duties to give each other early warnings for inclusion in the risk register as soon as they become aware of an events that may:

Increase the total of the prices

Delay completion

Delay meeting a key date

PM is to record all the early warnings in the risk register

Any party can call for a risk reduction meeting to review the early warning notices and collaboratively
find the best solutions to meet the employer’s interests.
As early warnings are resolved, they are removed from the risk register.

39
Q

What input have you given into EWN’s on the projects you have worked on?

A

Notified EWs as soon as I become aware of them

Attend risk reduction meetings

40
Q

How are ambiguities and inconsistencies dealt with under the NEC?

A

Under clause 17 they are awarded in favour of the party who did not provide the works information

The PM issues an instruction to vary the works information which is a compensation event

41
Q

How is the contractor’s design dealt with?

A

Clause 21 - The contractor must obtain acceptance from the supervisor and PM but remains liable for any failure in the design

There is no provision for novation as the NEC considers it is against good management

42
Q

How does the NEC deal with time and programme?

A

The employer sets the access dates for areas of the works if applicable within the starting date, the key milestones and completion date

The contract duration is not stated, the contractor must complete the works on or before the stated date

If the contractor fails to meet the completion date, delay damages apply if Option X7 was selected

The PM must issue the notice of completion within a week of completion

Programme is a contractual documents

Clause 31.2 details requirements of the programme

The programme has to be regularly updated

43
Q

How is completion defined under the NEC?

A

All the works have been completed as described in the works information

The contractor has done all the works required for the employer to use the works and for others to do their work

All defects have been rectified

44
Q

What is the difference between acceleration (clause 36) and early completion bonus (clause X6)?

A

Acceleration is where the completion date and key dates are advanced for an agreed price

An early completion bonus is where the contractor receives a bonus proportional to the number of days they completed the works in advance with the original completion date unchanged

45
Q

What are the payment mechanisms under the NEC?

A

Option A - Priced contract with activity schedule

Option B - priced contract with bill of quantities

Option C - target cost contract with activity schedule

Option D - Target cost contract with BOQ

Option E - Cost reimbursable contract

Option F - Management Contract

46
Q

What are the difficulties of assessing interim valuations with an activity schedule? (Option A)

A

The activity schedule does not describe the works to be done, this is included in the works information

The contractor re-sequences the works to meet the completion date, he needs to revise the activity schedule so that the works and methods of working included in each activity are compatible with the programme

47
Q

Under which conditions can the activity schedule be adjusted?

A

There are only 3:

Compensation events

Changes in planned method of working

Acceptance of a quotation for acceleration

48
Q

How does the NEC permit payment by milestones / stages?

A

The contractor must group in his tender documents his activities by groups of activities which will form the milestones

At each assessment date the PM assess the level of completion of each group. Payment is only certified when all activities of the group have been fully completed with no scope for partial payments

49
Q

Name some of the compensation events

A

There are 19 of them in clause 60.1:-
o Changing the works information.
o Access to the site.
o PM instructs to stop work.
o PM or supervisor do not respond to a communication within the timescale stated in the
contract.
o Object of value or historical interest.
o PM withholds an acceptance without valid reason.
o Instruction to search.
o Adverse weather (as measured in the contract data).
o Employer’s risks listed in clause 80.1 and contract data.
o PM changes assumptions previously made on compensation events
o Employer’s breach of contract

50
Q

How are compensation events dealt with?

A
  1. PM notifies the CE at the time of giving the instruction OR the contractor notifies the PM of the CE but he must do so within 8 weeks of becoming aware otherwise they are not allowed compensation event
  2. PM has one week to decide whether it is a valid CE
  3. If the PM fails to do so, the contractor notifies the PM that a decision needs to be made. If the PM still doesn’t respond within 2 weeks if this notification, the CE is deemed to be accepted and the contractor can submit a quotation
  4. The contractor has 3 weeks to provide a quotation
  5. Within 2 weeks the project manager can either request a revised quotation or accepr it or inform the contractor the proposed changes are not being made
  6. If the PM failed to respond within the timescales, the contractor notifies him. If the PM fails to respond within further 2 weeks the quotation is accepted
  7. Timescales can be extended
51
Q

What is nomination?

A

Selection of a particular subcontractor to carry out the works

This provides the client with a greater control of material choice and therefore quality

It is often used around long lead times with the employer placing orders prior to the main contract award which potentially delays on site

52
Q

Do nominated subcontractors get paid separately?

A

Nominated Contractors are normally paid via the main contract

53
Q

Can the contractor object to a nominated subcontractor?

A

Any objections must be made during the tender period

54
Q

If there are problems with the design, after Novation of the architect, who would be responsible?

A

At the point of novation, the client would agree the level of design was satisfactory and would be signed off by all parties

The contractor would then become responsible for the Architect and his design should any problems arise during construction

55
Q

What is the difference between Novation and Assignment?

A

Novation is a mechanism whereby one party can transfer all its obligations under a contract and all benefits arising cfrom that contract to a third party

Assignment is where contractual benefits are assigned however contractual burdens cannot be transferred under assignment

56
Q

Deed and underhand

A

Underhand is the more common way and lasts over 6 years

Deed - 12 years 3 directors

57
Q

Why would you use novation

A
58
Q

What is set-off?

A

Set off is any money owed to the employer by the contractor which is deducted against any payments made to the contractor

59
Q

Describe differences between Statutory Provisions and Contract Provisions?

A

Statutory provisions are set out by law & must be compiled with

Contract provisions relate to the contract in question and therefore will only apply to a specific project

60
Q

What are domestic subcontractors?

A

These are contractors who are appointed by the main contractor

61
Q

What are named subcontractors?

A

Where the employer provides the Main Contractor with a choice of named Sub contractors for a portion of the works

Once appointed they became a domestic subcontractor

This allows the client a level of control over the quality of the works packages and in some cases cost

62
Q

What is your opinion of Oral Contracts?

A

Whilst they are legally bindinf the difficulty lies in providing the specific terms and conditions of the agreement

63
Q

What is Frustration?

A

Frustration occurs when any event or circumstances beyond control of both parties changed the contractual obligation or makes it impossible or illegal to fulfil their contractual obligations. The happening of such events automatically discharges the contract

64
Q

How is a contract under hand different from a deed?

A

A deed is signed by a witness and traditionally authenticated by a seal

65
Q

What is your understanding of latent defects and what contractual issues are associated with them? What should the architect do if they are discovered?

A

Latent defects are defects that won’t be identified straight away but they will become more visible some time after building completion and may take many years to become identifiable

66
Q

If the works or materials are not in accordance with the Contract what options does the Architect have available to them?

A

The architect may instruct the contractor to remove all defective work, materials and good at their own expense and time

Can notify in writing that they can remain with an appropriate deduction being made from the contract sum

67
Q

When issuing instructions for further opening up and testing to determine the extent of non-compliance what sort of things should the architect consider?

A

The significance of the non-compliance.
* Consequences of further non-compliance on building owners and users.
* Consequences of further non-compliance on adjoining properties and the public.
* Reason for the non-compliance.
* Level of supervision and control employed by the contractor.
* Currently recognised testing methods.
* Time and consequential costs of further opening up.

68
Q
A

RICS Mac (19 decks)

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