Contract Admin JB Flashcards
What is a pay less notice ?
Contractoral mechanisms where an empoloyer can reduce the amount of the payment certicafte in refkection to the actual works completed.
Pay less notice NEC – 7 day before due date
Pay less notice JCT = 5days before due date
Issued by the employer - risk of damages if not valued correctly
What is determination ?
E/ C apply for dterminations. In construction contracts, determination is a right that allows a party to end their obligations under the contract, while still allowing the contract to remain in place. Ends C obligations - collateral warrenties &third party rights still in place. Not planned - negative mechanism, when something has gone wrong.
What is a performance bond?
A performance bond is a financial guarantee that a contractor will complete a project satisfactorily. May be required by E after finacial checks, third part insurance. Typically set at 10% of the contract sum. on demand/ conditiona; - requires prood - set out in prelims - bondsman
What are liquidated damages? - Delay Damges in NEC
Pre determined rate by E by C - failure to meet completion . Not a penalty - worked out fairly - Hadley vs Baxendale. Court unlikely to rule LD unfair if both have entered knowing the consquences of delays. - Called
What are unliquidated damages?
Damges not pre- agreed/LD not sufficient - E must prove
What are latent defects?
Defects that are not yet known about or not discovered by reasonable inspection
What are patent defects?
Defects discoverable by reasonable inspection
What is the difference between novation & assignment ?
Novation replaces the original contract with a new one, with the same obligations but different parties. The original contract is extinguished, and the new contract is between the continuing party and the incoming party.
Novation transfers both the rights and obligations of the outgoing party to the incoming party, while assignment only transfers rights
Assignment - transfer of benefits only - does not need to be written in contract -
A collateral warranty can be transferred to a building’s tenant or purchaser during or after construction.
What is a the difference between Collateral Warranties and Third Party Rights?
CW provide a contractural link to a named person not part of the orginal contract.- D&B design team to client
Third part rights allow a specified term in the contract to be enforced by a thrid party, not the whole contract - tenants of block of flats
what is contract works insurance ?
covers builders work underway on site against fire/ flood - will be stated in prelims
What are Retention Bonds?
Avoids retention recovery issues, retention paid into bond - indicated at tender stage - may help contractual relations
What are the main types of tendering? - check this
Single Stage Competitive Tender - invitation to tender issued to multiple Cs, set time to return, analysis, select.
Two-Stage Tendering - used with time constraints / technical input required. First stage, RIBA 2-3, enquiry to Cs, returns, selected on quality of bid / prelim price, selected C joins design team to RIBA 4. Stage 2 - bid for con works, more like quotation.
Negotiated Tendering - single stage tender with single C, returns with cost, negotiated.
Open - anyone apply / Selective - selected list / Single contractor selection.
what happens at completion ?
- release part of retention - amount in contract - start of defects date - end of contractors liability for delay damages - E insurances site. Increases cash flow as the bank pays out the retention so contractor gets paid but E keeps retention. So the employer gets to retain the money in case there’s defects, but the contractor gets paid in full
What is a Project Bank Account?
Account used to recieve payments from E & C to pay C and suppliers. Benefits - security of payment, collaboration, protect against insolvency. Disadvantages - more time heavy, not common use.
What is the difference between a contract and a deed?
A deed is a legal document that transfers, confirms, or validates an interest, right, or property. Deeds are often used in significant transactions, such as transferring property from one person to another.
Contract needs consideration - deed doesnt. Contract can be verbal - deed must be written. Deed must express it is a deed. deed must be witnessed
what benefits might JCT contracts have over NEC?
Familiarity of use. More commonly used than NEC - No EW
What is required to form a contract?
Offer, accpetance, consideration and intent to create legal relations
What are the advantages / disadvantages of D&B?
=adv = early construction, cost certainty
dis = qualty - Contractor cutting corners - changes will have time and cost implications
What are the advantages / disadvantages of traditional procurement?
Ads - cost certainty, quality,
Disads - time
Are collateral warranties covered under the Con Act?
Yes - Parkwood Leisure v Laing O’Rourke - held warranty was meant to be treated as con contract. Therefore seek adjudication
What is a letter of intent & who should write it?
Letter from E to C inforrming their intenstions to enter into a contracr . Should be written by E or solicitor as debatable if binding. Never surveyor.
What is an advanced payment bond
Used when E makes an advanced payment to cover C’s costs for a particular part of the project
What is a tender bond ?
entitles E to payment if substantial tendr costs & C withdraws tender
What is a parent company guarantee?
A Guarantee provided by a holding company if contractor defaults on contract. Up to 12 years latent defect period
What can you use instead of collateral warranties/bonds or third party rights to protect the client against non performance of the contractor ?
KPIS’s - targets set for certain performances or targets
What are step in rights ?
Allows a party of the contract to step-in to the role of another - e.g. client becomes insolvent and funder acts as client
What has been set out in the Government Construction Strategy 2025?
1 People - talented and diverse workforce, smart - advance tech, Sustainable - green construction, Growth - leads growth across the economy, Leadership from Construction Leadership Council . Endorses use of NEC
What are the public contract regs 2015?
Brought in by the EU still remains post brexit. Regulation. Regulation 72 - modifications of contracts during their term. Reg 73 - termination of contracts - if not included in the contract its implied
What was the ruling in Mears v Costplan 2019?
Mears leased flats being constructed - built 3% smaller then specified - costplan were the surveyor - Mears claimed for material breach of contract.That trifling defects cannot prevent PC or are grounds for termination
What happens to the Employers insurance during the works?
Halted or reviewed during construction
What would you do if you noticed you had over certified on an interim payment?
If invoice hadn’t been raised - discussions with the contractor & adjust the PO. if it had issue a pay less notice - avoid carrying payment over to nect month incase of insolvency and losing money.
What are collateral warranties?
agreements that provide a direct contractual link from a party to the original contract to another (USALLY A THIRD PARTY) Required in D&B for anyone undertaking design work (usually the contractor)
A bank funds the construction of an office building. The contractor and subcontractors are engaged to perform the construction work, and the developer (employer) signs contracts with them. The bank, as a funder, may not have direct rights to enforce against the contractor if the work is defective, so a collateral warranty is issued. This gives the bank a direct line to claim against the contractor or subcontractors in the event of defects or non-performance, providing a safety net to ensure the project is properly completed and investment is protected.
What statutes will affect building contracts?
The Sale of Goods Act, the Supply of Goods and Services Act, The defective Premises Act, Unfair Contract Terms Act
What is PFI procurement?
Privately Financed Initiative. Govt Bodies employ private sector consortiums to design, build and operate buildings which are rented back to the Govt body. Prevent large initial expenditure.
The contractor submits a legitimate claim for extension of time, which will incur cost to the client. The client does not have any money to pay the contractor. What is your advice to both parties.
EWN - affecting cost & programme. RRM - Discuss mitigations, potential CE to amend work items and remove items = cost savings - if all that doesn’t work - inform the client they are liable for the costs as the event is CE - Adjudication/ termination/repossession. requirement for contingency. (contingency’s are recommended)
What is acceleration & how can this be achieved?
Increasing the rate of progress to complete a project earlier than forcast. Achieved by: extended working hours, increased resource, sequencing, temporary works - weather protection design changes. Can be costed lump sum, itemised or cost reimbursable
Name common parties to contracts.
Funders, employers, consultants, contractors, sub contractors
How long does a project need to be before the C is entitled to interim payments?
Under the Housing Grants and construction regeneration Act 1999 - 45 days
what are the requirements of the local democracy, economic development and construction act 2009
Requires payment notices containing how they achieved that value issued in 5 days of the due date. PLN - containing how that figure was achieved
When must the payment certificate be issued?
a max 5 days after due date JCT
a max 7 days after due date NEC
Discuss the process of interim payments.
review pricing doc, discuss with the PC - recieve C application for payement - undertake valuation inspection - correct & notify / issue / record - ECC - complete valuation certificate
What is subrogation ?
Substituting one person for another in relation to a claim. Insurer may act as the insured to pursue claims against a third party. Often waived in construction.
What is FIDIC?
French form of contracts not often used within the UK?
What are defined and undefined provisional sums?
Undefined = so little defined that the contractor cannot make allowences for them - may be entited to EoT - e.g. ground conditions beanth existing buildings unknown until demolition
defined - deigned in suffient detail the contractor is expectedto provide a cost and allow time for them - fit x of kitchen units - not decied on what units
What is a contractor’s log book?
Records daiky activity on site such as - project - eather - temp - no of subs - equipement - deliveries - offficaks
What case law do you know surrounding float and what was the ruling?
Ascon vs McAlpine Construction - Each subcontractor is equally liable for delay and benefit of float. Allocation shoundnt be the gift of the main contractor
construction management vs management contracting?
Construction management - seperate works packages direct to the client, construction manager acts as Cli’s agent. Increases speed - may lower prices.
Management contracting - seperate works packages through a management contractor. Increases speed / no cost certainty
Alternatives to novation in D&B
Contractor can employ a new design team or can directly employ the original designer
What is the Scheme for Construction Contracts?
part 1 -Adjudication provsions within the scheme replaces any written in the contract
part 2 - payement provsions
What is Non neg 3rd party liability insurance?
JCT 6.5.1 insurance. insurance for damage to other owners property caused by the works where no negligence has taken place
How would you resolve a latent defect when the defects date had expired?
(NO PATENT)
Determine if the defect was caused by poor workmanship & installed incorrectly - review construction information , design drawings and as builts. If yes invite the contractor to return and remedy the works - if they refuse, sue under breach of contract.
What do you do if you hear on the news your contractor has gone bust? - read more
Discuss with C, Ci &QS . Consider securing site to prevent any items being taken by the contractor.
. Your client wants you to sign PC but the electrical test certs haven’t been completed. What do you do?
Advise, confirming in writing - you will not sign due to H&S concerns. Cli may choose to occupy anyway. Minor items are dine to overlook. decoration of BOH areas if okay with the client - Mears vs CostPlan (trifling defect does not prevent PC)
What are some differences between JCT &NEC ?
NEC - no provisional sums , (have a clause for unexpected ground conditions allowing for them to claim for time and monies- have to prove taht an experienced contractor would not have foeseen), Programme is contract doc. Compensation event and early warning - time and costs together, less detailed info on insurances, PM, adaptive, works information
JCT - provisional sums, contractor bares the risk of ground conditions(slient on the topic), programme is not contract doc but advisable, relevant event and matter, detailed information on insurances, CA, subtractive , employers requirement.
What is the difference between CA vs PM
What is the difference between the Engineering and construction short contract (ECSC) with the Engineering and Construction Contract (ECC)
- There is no PM or Supervisor in ECSC - management roles undertaken by the client
- ECSC does not include provisions for key dates or sectional completion
- the ECSC does not include a requirement for a quality management system
- ECSC ( contractor assess amount due - checked by client ) ECC (PM checks )
- ECSC has a shorter list of compensation events - shorter process
What are defined costs?
NEC - Changes between the options
- Used to assess CE in all options
Options (C, D,E and F) of the NEC ECC:
- A cost reimbursable contract (sometimes called a cost plus contract) is one in which the contractor is reimbursed the actual costs they incur in carrying out the works, plus an additional fee.
- Options (C, D,E ) of the NEC ECC, describe the costs that can be recovered by the contractor as defined cost, where as costs that cannot be revovered are dissallowed cost(cost due to contractors inefficiency)
the defined cost includes payments due to subcontractors and the cost of components for other works (such as plant, equipment, people and so on), minus the disallowed cost.
- defined cost listed in Schedule of cost compents (SCC)
- So these options definied costs are used for Payement due and CE
Option A and B:
- defined costs stated in Short schedule of cost compents (SSCC)
What is a schedule of Cost Components ?
Shorter Schedule of cost components = Options A &B - assess CEs
Schedule of cost components = assess CE’s and Payments for work due to date
- Categories for reimbursement of people working on site - 7 = people, equipment, plant/materials, charges, manufacture away from site, design and insurance
How do you write a NEC Contract ?
Bought conditions of a contract- hand draft conditions of contract. Part 1 and 2
What is Clause 10.1 in NEC contracts?
The E, C, PM, S shall act as stated in this contract and in a spirit of mutual trust and co-operation
What are Disallowed costs?
Cost not recoverable by C - e.g. resources not used
What year was NEC introduced?
1st edition was used in 1993, use recommended in the latham report
3rd edition 2005
4th 2017
What are the 9 core clauses of an NEC ECC Contract?
1 - general
2 - contractors main responsibilities
3 - Time
4 - defects
5 - payment
6 - CE
7- Title
8 - Insurances and liability
9 - termination
What are the main & secondary clauses?
W clause: disputes
W1 - HGCRA 1996 doesnt apply - has to be resfered to adjudication
W2 - hgcra does apply
W3 = NEC4 - Dispute Avoidance board
X clause = 29 of them - secondary optional clause
E.g price adjustment for inflation, change in law, parent company guarentee, sectional completion, delay damages, collateral warranties, performace bonds, retention, low performance damages, limit of liability, KPIs
X29 Climate Change - new NEC4
Yclauses = these are optional clauses enable the contract to be used alongside legislation,
UK specific:
Y1- Allows the client to require a Protect Bank Account
Y2 = HGCR Act 1996 applies - payement provisons apply
Y3- Third part rights - Contracts (Rights of third parties) Act 1999
Z clauses = bespoke Amendments - project specific needs
What forms the main part of an NEC contract
Contract Data Part 1 - by E - description, named Personel, dates, payment details, termination, data protection, CE, Disupte reoslution (adjudication/arbitration ), insurances
Contract Data Part 2 - by contractor
- Contractor details, key staff, fee %, LOCATION OF programme, Location of AS, tender price , details to be included in the risk register , working areas (offices ect ), subcontractor fee %
What is inclueded in the works information ?
Spec, planning info, H&S, Cost breakdown
Discuss the importance of the programme
CLause 31 - contractural requirement, pre and post contract activities, C to produce - if no P is produced then clause 50.3 allows for 25% of work done to date to be retained untill one is procuded and accespted.
-should be revised every 4 weeks
- PM acceptance within 2 weeks of submission
- revised programme to show actual progress
- effects of CE
Why might a PM not accept the PROGRAMME?
- does nt comply with the scope
- plans are not practical
- missing or incorrect information
what are the responsibilities of the contractor
CORE Clause 2 - complete works in accordance with the works information, provide access, obey instructions
What risk management strategies are there for NEC contracts?
Risk registers/ Early warning - are active tools
- Risk allocation (identifiy owneship), - through
List of compensation events
cost and time through choice of contract - payement process and programme.
Optional X clauses - X1 price adjustment for inflation
Risk Reduction Meeting/early warning meeting - condier proposals - NEC4 EWM is a requirement
What are CE?
- Clause 60.1 - 21 - nec4 - 19 - NEC33
1- PM changes work information
2- empliyer prevents access
3 - employers non provsion (missing requirement )
4 - PM instruction to stop/delay work
5 E/others not working to programme
6 - PM/supervisors delay in communication
7 - PM instruction for histoirc value
8 PM/Supervios change of decision
9 - PM witholds acceptance without a reason
10 - supervisor instructs contractor dearch for defect - no defcets
11- unecessary dealys for transport and instalation
12 - physical conditions on site (not weather) , experienced C would not have forseen
13 - weather outiside 10 year norm
14 - event identified as employer risk
15 - PM certify take over of part of works prior to completion
16- E witholds materials for transport and installation
17- PM notifies a corrections of assumptions stated in CE
18 - Employer breach of contract
19 - act preventing C completing works
What is the layout of ECC contracts?
Core Clauses, Main option clauses (w), Secondary Clauses (X,Y,Z) , Cost compenents, Contract Data (Part 1, 2)
What is Take Over in NEC?
Employer takes over part of site before completion - if not employer take over is 2 weeks post completion
What is float?
The concept of float (or ‘slack’) is used to describe the amount of time that an event or activity can be delayed without delaying the overall completion of the works. Float is calculated by subtracting the time necessary to perform a task from the time available to perform it.
Total = can be for indviual task or whole programme - whole programme first come first serve
Time Risk Allowance - allowed for by C used by C,
Terminal - period between planned completion & completion date (contractual )
What are the main differences between NEC 3 & 4?
New contract types:
- Design, Build and operate
- Alliance Contract
Language:
- gender neutral
- Change employer to client
Disupute avoidance
- W3 clause - a dipute avoidance board has been introduced
new x clauses:
- BIM clause (who owns/liable
- X29 - Climate Change
Payment:
- contractor is now required to submit an application for payment before the assessment date
Early contractpr involvement:
- contractor is appointed early stages to contribute to design and tender - can reduce costs
Rention:
Option for a retention bond instead if % value retained
Describe the change process in NEC contract.
- PM issues an instruction requesting a quote - C quote within 2 weeks - PM responds accepting/declining quote within 2 weeks.
- CE issued within 8 weeks, response within 1 week - if PM hasn’t respond contractor notifies them of a failure - PM then has 2 weeks to respond - if no response CE IS accepted
- C supply Quote within 2 weeks - 2 weeks to respond to quote