Contract admin

Question 1

What are the typical roles and responsibilities of the CA?

Answer 1

The contract administrator is the individual responsible for administering the construction contract in an honest and impartial manner.

Generally, the role includes:

• Preparing contract documents for execution
• Administrating changes such as variations and issuing instructions
• Considering claims
• Issuing certificates, practical completion, and interim certificates
• Issuing a certificate of making good defects
• Issuing the final certificate.

Question 2

2. What is traditional procurement?

Answer 2

Also known as design-bid-build. This is where the client appoints consultants to design the development and then a contractor is appointed to construct the works (although JCT contracts provide for design of specific parts of the works to be carried out by the contractor). The contractor is usually selected by competitive tender, but sometimes negotiation.

Question 3

3. When might traditional procurement be used?

Answer 3

• If the employer has had the design prepared and significant changes post-contract are unlikely
• If the design is substantially completed at time of contractor selection
• The client wishes to retain control over the design and specification
• Cost certainty at start on site is important
• The shortest overall programme is not the client’s main priority.

Question 4

4. What form of contract is suitable for traditional procurement?

Answer 4

• Lump Sum contracts such as JCT Minor Works, Standard, and Intermediate.
• Measurement Contracts
• Cost reimbursement Contracts

Question 5

5. What is Design and Build procurement?

Answer 5

This is where the main contractor is appointed to design, plan, organise, and construction the works to the employer’s requirements. The employer gives the tenderers the ‘Employer’s Requirements’ and the contractors respond with the ‘Contractor’s Proposals’, which include the price for the works.

Question 6

6. When might Design and Build procurement be used?

Answer 6

• Where there is a need to make an early start on site – can overlap design and construction
• Where the client wishes to minimise their risk – no responsibility for design
• For technically complex projects which can benefit from the contractor’s expertise
• Where the employer does not want to retain full control over the design development

Question 7

7. What form of contract is suitable for Design and Build procurement?

Answer 7

JCT Design and Build 2024

Question 8

14. When might you advise a client to use the JCT MW 2016?

Answer 8

It is the nature of the works which should dictate contract selection. Suited to small works but no guidance is provided on the value. Basic construction with simple nature.

Question 9

15. When is a JCT minor works contract not suitable?

Answer 9

• The project is more complex.
• The project design includes bills of quantities.
• The project has detailed control procedures.
• The project has multiple phases or sections.
• There are provisions to govern work carried out by named specialists.

Question 10

16. What other forms of Minor Works Contract are available?

Answer 10

Minor Works with contractor’s design (MWD). Used where the contractor is responsible for designing specific parts of the works.

Minor Works Sub-Contract with sub-contractor’s design is for use when the main contract is the Minor Works Building Contract with contractor’s design, and where the sub-contractor is to design all or a part of the sub-contract works.

Question 11

17. When might you use a JCT Intermediate Contract?

Answer 11

more complex projects
suitable for projects requiring sectional completion
advanced payments
nominated contractors

Question 12

18. When might you use a Design and Build Contract?

Answer 12

Only if the works are to be procured under the Design and Build Procurement route.

Question 13

19. What is a Provisional Sum?

Answer 13

A provisional sum is an estimated allowance that is inserted into tender documents for a specific element of the works that is not yet defined in enough detail for tenderers to accurately price.

A provisional sum can be categorised as ‘defined’ or ‘undefined’.

Defined provisional sums are those which have been described in sufficient detail that the contractor is expected to have made allowance for them in their programming, planning and pricing preliminaries. The work may not have been completely designed but the following information may be known:

• The nature and construction of the work.
• How the works may impact on the existing building or surroundings.
• The quantities that indicate the scope and extent of the work.
• Any specific limitations.

Undefined provisional sums are less well described and so the contractor cannot be expected to make allowance for them in their programming, planning, and pricing preliminaries.

Question 14

20. How do you estimate the value of Provisional Sums?

Answer 14

I would review:

• The nature and construction of the work.
• How the works may impact on the existing building or surroundings.
• The quantities that indicate the scope and extent of the work.
• Any specific limitations.
• Refer to the BCIS or previously tendered rates for similar work.

Question 15

21. What is Prime Cost Sum?

Answer 15

An allowance included in the tender documents for the supply of work or materials to be provided by a sub-contractor or supplier that will be nominated by the client.

The main contractor is entitled to add mark up and attendance costs to the allowance. If the actual costs then turn out to be higher, the contract sum is increased, and if the actual cost is lower, the contract sum is reduced.

Question 16

22. What is a nominated subcontractor?

Answer 16

A subcontractor that is selected by the client to carry out an element of the works and one that is imposed on the main contractor following appointment. The mechanism for nominating is an instruction in relation to a prime cost sum to which the main contractor is entitled to add a mark-up and attendance costs

Question 17

23. In what form must an instruction be issued?

Answer 17

Contract instructions can only be issued by the Contract Administrator. They be written or oral, but the instruction has no effect until it has been confirmed in writing.

Question 18

24. What is the time period within which a contractor is required to comply with an instruction?

Answer 18

Contractor must comply ‘forthwith’; that is, immediately and without delay.

Question 19

25. What options does the employer have if a contractor fails to comply with an instruction?

Answer 19

The CA must issue a 7-day notice if the contractor fails to comply with an instruction. If the contractor still fails to comply after the 7-day period, the Employer may employ a third party to do the works and the main contractor will be liable for the costs.

Question 20

26. What is a variation?

Answer 20

A variation is an alteration to the scope of works in a construction contract in the form of an addition, substitution, or omission from the original scope of works.

Question 21

27. How did you agree the value of the variations?

Answer 21

Variations are often valued based on the rates and prices provided by the contractor in their tender, provided the work is of a similar nature and carried out in similar conditions. If similar types of works cannot be found in the contract documents, then fair valuation of the contractor’s direct costs, overheads, and profit is necessary.

Question 22

28. What needs to be shown on a Certificate of Payment?

Answer 22

Payment Certificates must state the sum the CA considers having (i) been due at the payment Due Date and (ii) the basis on which that sum is calculated. You would also expect the contract sum, gross valuation, retention, previous amount certified, and net amount payable in figures and words

Question 23

29. What happens if a payment certificate is not issued by the due date?

Answer 23

The contractor can make an application for payment which will become the payment notice by default if there is no Payment Certificate issued within 5 days of the Due Date.

Question 24

1. Payment timeline under the JCT MW 2016:

Answer 24

1. Interim valuation date: every 30 days from the date of the contract. Contractor to make application before the interim valuation date.
2. Due Date: + 7 days from interim valuation date.
3. Interim Certificates: to be issued no later than 5 days after the Due Date.
4. Payless Notice: may be issued no later than 5 days before the Final Date for Payment.
5. Final Date for Payment: 14 days after the Due Date / 21 days from the interim valuation date.

Question 25

31. What is a payless notice?

Answer 25

A notice whereby the employer alters the certified payment due to the contractor in that payment cycle. The notice must be in writing and include a statement of the sum due and how that sum is calculated.

Question 26

34. How do you assess a claim for an Extension on Time?

Answer 26

Crucial in assessing a claim is the quality of the information provided and records available. Claims should be judged against the actual progress of the works, not the programme, and must demonstrate the link between the breach (cause) and the delay.

On The Garth PPM Works, part of the delay was due to a relevant event, so I was able to issue a 1-week extension of time. This was a neutral event, meaning the contractor was not entitled to claim loss and expense.

Question 27

35. What must have occurred for an EoT to be issued?

Answer 27

Contractor must have notified the CA forthwith in writing, setting out the cause of the delay, which must be due to a Relevant Event. The delay must genuinely impact the completion date (i.e., must be on the Critical Path).

Question 28

36. When must an EoT be issued?

Answer 28

Employers have 8-weeks (JCT 2024) to review and decide on the EOT from the date of receiving the particulars.

Question 29

37. How you assess a claim of Loss and Expense?

Answer 29

Entitlement to loss and expense must be derived from a relevant matter for which the client is responsible and must be assessed by reference to the period of the delay on site rather than the period “dotted on” at the end of the project.

Contractors must set out their heads of claim which may include prolongation costs; finance charges; disruption costs; costs of compiling the claim. The CA must then assess the validity of the claim.

On Unit 153B, the contractor provided a breakdown of their onsite management costs as evidence for the claim. The contractor had demobilised so items such as labourers, site accommodation, plant, etc., were not included.

Question 30

The contractor asks you to issue an extension of time. What do you advise?

Answer 30

• I would ensure the notification was made in writing and in the appropriate format.
• I would confirm that the delay was due to a relevant event and assess it against the actual progress of the works, and not just the programme.
• I would check there was a demonstrated link between the cause and effect of the delay.
• If there was a link, I would issue and EOT.
• Contractor is obliged to prevent and mitigate delay and any resulting loss.

Question 31

38. What does a certificate of Practical Completion trigger?

Answer 31

• Release of 50% retention
• Commencement of the Rectification Period
• Commencement of the Limitation Period
• Employer takes over building and takes over responsibility for insurances

Question 32

39. What is Practical Completion?

Answer 32

Practical Completion is a contractual term used in the Building Contract to signify the date on which a project is handed over to the client. The date triggers a number of contractual mechanisms, in the JCT this includes the partial release of retention and the commencement of the Rectification Period. PC can be granted with de minis works outstanding.

Question 33

40. What is Partial Possession?

Answer 33

Partial possession is an agreement to accept completion for just part of the works. It is usually agreed whilst the works are progressing and is not pre-planned or defined in the contract documents

Question 34

41. What is Sectional Completion?

Answer 34

Sectional completion is an obligation to meet the date for completion for just part of the works. This allow the client to take possession of the completed parts whilst construction continues on others. Sectional completion differs from partial possession in that it is pre-planned and defined in the contract documents.

Question 35

42. What is the Rectification Period?

Answer 35

A period following practical completion (usually six or 12 months) during which a contractor retains liability under a building contract for dealing with any defects which manifest themselves.

Question 36

43. How do you assess a suitable length for the Rectification Period?

Answer 36

The nature and complexity of the works.

Question 37

44. What is Retention?

Answer 37

Retention is a percentage (often 5%) of the amount certified as due to the contractor on an interim certificate, that is deducted from the amount due and retained by the client. This is done to ensure that the contractor properly completes the activities required of them under the contract.

Question 38

45. What is the difference between a patent and latent defect?

Answer 38

Patent defects are those which can be discovered by reasonable inspection. Latent defects are those which cannot be discovered by reasonable inspection, for example problems with foundations which manifest several years after completion when settlement causes cracking. When a latent defect becomes apparent, it becomes patent rather than latent.

Question 39

46. What processes are followed at the end of the Rectification Period?

Answer 39

At the end of the defects liability period, the contract administrator prepares a schedule of defects, listing those defects that have not yet been rectified, and agrees with the contractor the date by which they will be rectified. Defects must be made good within a ‘reasonable time’, and at the contractor’s cost.

When the contract administrator considers that all items on the schedule of defects have been made good, they issue a Certificate of Making Good Defects. This has the effect of releasing the remainder of any retention and brings about issuing of the Final Certificate.

Question 40

49. What are the different insurance clauses under the JCT Minor Works?

Answer 40

• 5.4 – Insurance of the Works by Contractor - for new builds
• 5.5 – Insurance of the Works and existing structures by Employer - existing building
• 5.6 – Insurance of works and existing structures by other means as agreed by the parties

Question 41

50. What is a Joint Names insurance policy?

Answer 41

A policy that is held jointly by the employer and the contractor. A Joint Names insurance policy covers the Existing Structure (ES) and Contract Works (CW) on reinstatement value for the duration of the works. It is in the joint names of the Employer and any named Contractor(s), but always taken out and paid for by the Employer.

Question 42

51. What is PI insurance?

Answer 42

Professional indemnity insurance covers the policyholder for the costs of legal action made against them in respect of financial loss which occurs due to the negligence, error, or omission in professional advice or services provided.

Question 43

52. What is Employer’s Liability insurance?

Answer 43

Employers’ liability insurance is designed to cover the costs if an employee claims compensation for illness or injury that they believe has been caused by their work.

Question 44

53. What is Contractor’s All Risk Insurance?

Answer 44

Contractors’ all-risk insurance is a policy that covers all risks normally associated with a construction project. It covers for subsequent loss or damage to the property and/or materials other than certain specific exclusions, which may include the existing structure, errors or omissions in design, penalties, damage to external structures not part of the contract, and defective property.

Question 45

54. What is a collateral warranty?

Answer 45

A way of forming a direct contractual link between two parties which otherwise wouldn’t have a link, such as between a sub-contractor and a client.

Question 46

55. What are third party rights?

Answer 46

An alternative to Collateral Warranties. They allow a third party to be written into a contract to give the Third Party the benefits of the contract only, not the burdens.

Question 47

56. How do you assess the requried number of tendering contractors?

Answer 47

JCT tendering practice note suggests generally between 3 and 6 should be sufficient. Each project needs to be considered in context.

Question 48

57. What is a contract?

Answer 48

A legally binding agreement (between two parties) to provide goods and/or services within a specified timeframe.

Question 49

58. What is necessary to form a contract?

Answer 49

• Offer
• Acceptance (or counter-offer)
• Consideration
• Intention (to be legally bound)
• Capacity (to make agreement) (e.g. power of attorney on behalf of a company)

Question 50

59. What do you consider when selecting a contract?

Answer 50

• The client requirements in respect of time, cost, quality and risk.
• The procurement method
• The nature of the works
• Time – quick start on site or allowed time for design phase prior to tender?

Question 51

60. How is a contract executed?

Answer 51

Under hand, signed by both parties, 6-year limitation period. Means that a party must bring about any claim for breach of contract within 6 years of the breach taking place. Any later and the claim will be time-barred.

Under Seal (as a deed), signed and witnessed, 12-year limitation period. Valuable consideration not required.

Question 52

61. What are common contract documents?

Answer 52

• The Contract (with any amendments)
• Preliminaries
• Materials and Workmanship Specification
• Contract sum analysis/Pricing Schedule
• Drawings
• Schedule of Works
• Employer’s Requirements
• Contractor’s Proposals

Question 53

63. What is Performance Bond?

Answer 53

A form of financial Security used to cover the client against the contractor failing to fulfil their contractual obligations.

Question 54

64. What is a letter of intent?

Answer 54

A document outlining an agreement between two parties, before a formal contract has been created

Question 55

65. Why use standard forms of contract?

Answer 55

Tried and tested in the courts with a known apportionment of risk between the parties.

Question 56

66. Why wouldn’t you use a bespoke form of contract?

Answer 56

They are not tried and tested like a standard form and may therefore have an unknown apportionment of risk between the parties.

Question 57

67. What are Preliminaries costs?

Answer 57

Prelims are the cost of the site-specific overheads of any given project. They are the costs of administering a project and providing general plant, site staff, facilities, and site based services and other items not accounted for in labour or materials rates.

Question 58

68. What is a ‘specified peril’?

Answer 58

Specified perils tend to be significant events that would cause very significant damage, such as fire, explosions, earthquakes, flooding and so on. All-risks insurance will tend to cover a broader range of risks, albeit it may not cover every possible risk.