Contract Administration Flashcards
Why is adjudication always included in a JCT contract, while arbitration is optional?
Statutory adjudication is a mandatory right in disputes arising under ‘construction contracts’, as defined in the Construction Act 1996 (section104 of the Housing Grants, Construction and Regeneration Act of 1996)
What is a “lump sum” contract?
Fixed total price for entire project (like JCT)
For straightforward projects with clear scope of works
What is a “Time and materials” contract?
Contractors are reimbursed for cost and materials, and labour time at established rate.
For rojects without well-defined works scope
What is a “Cost plus” contract?
Contractor paid for costs (materials, labour, OH’s) and pre-set profit.
For projects that have design changes throughout
What is a “Unit price” contract?
Divides works into units, contractor paid for each unit.
For Repetitive construction tasks
What is a “Target cost” contract?
If the target is exceeded, the client and contractor share that additional cost – as they also do with any saving made on the target
What is a “Guaranteed maximum price” contract?
Upper cost limit, contractor absorbs costs above this.
For projects with very few unknowns
What is a “relevant event”?
delay that is NOT fault of contractor, eg. “client in control” or “neutral event (noones fault).
Does not necessarily allow contractor to claim for Loss and Expense (neutral events do not allow this - exceptional weather, civil commotion)
What is a “relevant matter”?
Client’s fault. Contractor could claim for Loss and Expense.
Give examples of when a contractor may be entitled to loss and expense claim.
“Client in control” - failure to provide access, information, decisions, delay of named subcontractor.
What are the limitations of the JCT MW16 contract?
Its brevity – can be silent on some matters.
Doesn’t allow for named subcontractors.
No Bills of Quantities.
Suitable for relatively simple works only.
Simplicity means amendments sometimes required.
Roles can become a bit blurred.
What is a “traditional” procurement route?
Linear path - employer engages designers first, then contractor to build works
What is a “design and build” procurement route?
Contractor designs and builds the works. “one stop shop”
No CA, only “employers agent” (more aligned to the client)
What is a “management forms” procurement route?
Client employs different subcontractors directly, there is a main contractor but no contractual relationship between them and client (management contractor).
Most risk lies with employer
What are pros and cons of “standard contracts”?
Pros:
Recognised in industry
Familiarity with all
Clarity of content
Written by experts
Complies with laws
Cons:
Not always “robust” enough for employer
Not necessarily easy to understand for first-time employers
Require amendments for bespoke additions
What are pros and cons of “bespoke contracts”?
Heavily weighted in favour of employer
Contractor prices higher due to risks
May contain onerous T&Cs
What is a “letter of intent”?
“partial contract” effectively - simple statement of intent, not binding on either party
When is a PC certificate issued?
When “‘the client is physically able to take occupation of the
works and use them for their intended purpose” (RICS Black Book definition)
What happens at PC?
Employer must insure building, takes possession
Half retention release
Defect rectification period begins
LDs cannot be taken
What is the “critical path”?
Path of the project from start to completion, assuming no delays
Give examples of what is typically included in “preliminaries” costs.
Site huts, welfare, hire
Cranes, scaffold
Power and water
Temp electrics
Site management
What are “dayworks”?
Contractor paid for specifically instructed work on the basis of the cost of labour, materials and plant plus OHP.
Generally used when work cannot be priced in the normal way.
What are “preambles” in a contract?
An explanation of the document/contract
What is a collateral warranty?
A “warranty” of sorts provided by one party to another, whom it has no contractual relationship, that it has carried out its works correctly.
What are the main forms of JCT contract you know?
- JCT Intermediate Building Contract, 2016 (+with contractor’s design portion).
- JCT Minor Works Building Contract 2016 (+with contractor’s design portion).
- JCT Design and Build.
- Management Building Contract 2016.
- Measured Term Contract 2016.
What kinds of works would be included within the contractor’s design portion of a contract and why?
- It is used when the contactor has agreed to design specific parts of the works. They will usually sub-contract the works
whereby a specialist installer or manufacturer is required. Ensures buildability and other factors are taken into account. The
contractor is responsible for the procurement and must adhere to the programme. - Specialist works can include; installation of services, roof replacement etc.
- Takes the liability of the design off the client and design team.
What are the responsibilities of a contract administrator
- They are not a party to the contract and therefore must remain impartial at all times. Simply there to administer the contract.
- Chair pre contract meeting.
- Issue contract instructions.
- Deal with payment provisions.
- Manage change procedures – design changes etc.
- Involve with dispute avoidance.
- Issue certificates.
- Deal with completion / possession issues.
Explain the valuation process and the responsibilities of a contract administrator for a JC intermediate Contract / JCT Minor works contract?
- Contractor must issue application for payment no later than the valuation date.
- Valuation date occurs (stated in contract particulars – will change to closest business day).
- Due date (date at which the CA values the works) is 7 days after the valuation date.
- Contract administrator must issue a certificate for payment (interim cert) within 5 days after the due date – the cert = the
amount they deem should be paid at the due date. - Final date for payment in standard contract is 14 days from the due date.
- If the employer intends to withhold any amount from the sum certified, the they must provide written notice of their intention no later than 5 days before the final date for payment.
Note: The contract gives the contractor the right to submit its own payment application - they are not required to and the CA can undertake the valuation without it.
Note: If the CA doesn’t issue a payment certificate within 5 days after the due date, if the contractor issued an application for payment this becomes a payment notice and acts as the cert, otherwise a contractor can send a payment notice to the CA.
Did you have the correct insurances to act as contract administrator on your project?
Yes
What happens at PC?
Employer must insure building, takes possession
Half retention release
Defect rectification period begins
LDs cannot be taken
When is a PC certificate issued?
When “‘the client is physically able to take occupation of the
works and use them for their intended purpose” (RICS Black Book definition)
Give examples of when a contractor may be entitled to loss and expense claim.
“Client in control” - failure to provide access, information, decisions, delay of named subcontractor.
What is a “relevant matter”?
Client’s fault. Contractor could claim for Loss and Expense.
What is a “relevant event”?
delay that is NOT fault of contractor, eg. “client in control” or “neutral event (noones fault).
Does not necessarily allow contractor to claim for Loss and Expense (neutral events do not allow this - exceptional weather, civil commotion)
Give an example of a situation where a contractor might be entitled to an extension of time?
Where delay is caused by:
- Relevant matter / “client in control” (failure to provide information, site access problems,
- Is a contractor always entitled to loss and expense when they are granted an extension of time?
No, only if there are actual additional costs incurred.
Neutral events do not typically result in L&E.
- JCT contracts – which form(s) of contract are you most familiar with? I encourage assessors to ask this as a standard opening question to ensure that the questions that follow are based on your declared experience
JCT contracts – which form(s) of contract are you most familiar with? I encourage assessors to ask this as a standard opening question to ensure that the questions that follow are based on your declared experience
- What are the limitations of this form of contract? (i.e. one of the contracts you give in response to the opening question above)
Its brevity – can be silent on some matters.
Roles can become a bit blurred.
Doesn’t allow for named subcontractors.
No Bills of Quantities.
Suitable for relatively simple works only.
No collateral warranties
- Give me some examples when the JCT Minor Works contract is most suitable.
works are simple in nature
no named subcontractors needed
No Contractor’s Design Portion needed
When a lump-sum contract and traditional single-stage tender is desired and appropriate
- What information is included in the RICS Guidance Note on Contract Administration?
- Details the CA role and responsibilities
- good practice guidance on carrying out that role
- Explains contractual terminology
- Focuses on JCT suite
- Tell us about the “Property and Building Law” CPD you did.
Was uni module, not CPD.
- Introduced me to law basics
- particularly contract law (what does a contract need to be formed)
- legal issues around property
ownership structure – freehold, leasehold, underlease, licences
- What are preliminaries in a contract?
Items that are necessary for the contractor to complete the works, but not actually part of the works (electricity, water, scaffold, site overheads)
What are preambles in a contract?
“Preambles” = explanation of a document, such as description of parties to the contract, background, project objectives.
What are they key roles of a CA?
Defined in the contract and detailed in the RICS Guidance Note. They are:
- Make impartial decisions relating to the works, such as issuing instructions, reviewing extensions of time, contractor valuation claims
- Check works progress against specification
- Chair meetings
- Issue certificates (payment, valuation, practical completion, non-completion)
- Advise client if they are unfamiliar with contract terminology
- Record and store information such as meeting minutes, decisions made, facilitate flow of information
What are the different stages of the design process?
(From that godawfully boring RICS Guidance Note on Design and Spec I can guess the stages are)
(a) Establish client/project brief
(b) Explore feasibility and project options
(c) Outline design/spec
(d) Detailed design (works schedule, drawings)
(e) Construction and commissioning
Broadly follows RIBA Plan of Work.
MTC contract - What is the Common Valuation date?
The date 7 days before each due date, as specified in the Contract Particulars.
MTC - staged payments:
CA shall not later than 5 days after the due date issue a certificate, stating the sum that he considers to be due to the Contractor in respect of the progress payment.
In summary
- The Contractor prepares a claim via an invoice on a monthly basis.
- Contract Administrator certifies a payment within one week of the assessment date and produces a pay-ment certificate.
- Each payment is made within a defined period from the assessment date @ peabody it is 28 days.
MTC PAYMENT DATES: :
The due date for progress payment shall in each case be the date 7 days after the relevant Valuation date. The CA not later than 5 days after the due date issue a certificate – stating sum he considers to be due, stating basis for calculation.
Valuation date – 7 days after is due date – 5 days after issues certificate: Payment 51 days or
FINAL PAYMENT where CA measures and values orders: - due date shall be 28 days after the Order Completion Date, or for when progress payments are to be made, - 51 days after the Order completion date:
MTC contract - Payments
MTC Section 4 – payment:
Progress payments if over time specified in the contract particulars or duration of works estimated to be over 45 days.
4.4 – Final Payment: due date 28 days after order completion date. Or if progress payments – 51 days after due date.
What is the process of payment on the Peabody MTC
The Contractor will be required, on a monthly basis, to submit, through the interface to Northgate, fully detailed payment applications to the Employer. The payment applications shall provide full details of all works carried out, the value calculated in accordance with the Schedule of Rates, the site address and the Employer’s Unique Property Reference Number. Subject to the agreement of the Employer, payment will be made by the Employer within 28 days of the issue of the Payment Certificate. All completed Orders must be included in the Contractor’s monthly payment application. Retrospective payment for completed Orders will not be made.
MTC - how do you control poor workmanship on Measured term -
Section 8: termination for Default:
8.4 - Default by contractor:
If the contractor fails to comply with CDM regs, or without reasonable cause fails to comply with his obligations under contract, that the carrying out of the work is materially disrupted, suspended or delayed, the CA can give notice specifying the default. – after 14 days from receipt of notice – within 21 days of receipt of the notice, terminate the contractors employment.
OR:
SECTION 2: CARRYING OUT THE WORKS: 2:1 The Contractor shall carry out and complete the works in a proper and workmanlike manner and in compliance with the Contract Documents, the Construction Phase Plan and Statutory Requirements, and shall give all notices required by the Statutory Requirements.
This clause reinforces the requirement to complete the work as per the specification and drawings, safely and in line with other legislation (to be covered within the Legal and Regulatory compliance module).
What are the sections of an MTC Contract?
Section 1. Definitions and Interpretation.
Section 2. Carrying out works.
Section 3. Control of Works.
Section 4. Payment.
Section 5. Measurement and Valuation
Section 6. Injury, Damage and insurance
Section 7. Break Provision - Rights of Each Party
Section 8. Termination for Default.
Section 9. Settlement of Disputes.
What are the measured term contract payment dates?
MTC PAYMENT DATES:
The due date for progress payment shall in each case be the date 7 days after the relevant Valuation date. The CA not later than 5 days after the due date issue a certificate – stating sum he considers to be due, stating basis for calculation.
Valuation date – 7 days – due date – 5 days – certificate: Payment 51 days or
FINAL PAYMENT where CA measures and values orders: - due date shall be 28 days after the Order Completion Date, or for when progress payments are to be made, - 51 days after the Order completion date:
What are the MTC payment provisions?
MTC Section 4 – payment:
Progress payments if over time specified in the contract particulars or duration of works estimated to be over 45 days or over 25k
4.4 – Final Payment: due date 28 days after order completion date. Or if progress payments – 51 days after due date.
What are the MTC provisions for control of work?
MTC – Section 3 Control of Works
3.8 Non – compliance with instructions. If within 7 days after receipt of a notice from the CA requiring compliance with a CA’s instruction, the contractor does not comply, the employer may employ and pay other persons to execute the work whatsoever which may be necessary to give effect to that instruction. The contractor shall be liable for the additional costs incurred by the employer in connection with such employment and such costs may be withheld or deducted by the employer from any monies due or to become due to the contractor under this contract or shall be recoverable from the contractor as a debt.
What does an MTC say about LAD’s?
There is no mention of LAD’s or EOT’s in the MTC at Peabody.
What does the MTC state about staged payments
Staged payment: Where an application is made, the Contract Administrator shall not later than 5 days after the due date issue a certificate, stating the sum that he considers to be due to the Contractor in respect of the progress payment, after taking into account any amounts previously certified and paid in respect of any application made after the issue of the latest certificate. The certificate shall state the basis on which that sum has been calculated.
What insurances does the MTC contract state you hold?
The contract states: Employer’s Liability Insurance: £5,000,000 (Five million pounds) Professional Indemnity Insurance: £5,000,000 (Five million pounds)
Why is there no provision in a measured term contract for liquidated damages?
JCT – MTC liquidated damages: JCT measured term contracts are a type of construction contract that is typically used for smaller projects or ongoing maintenance works, where the scope of the work is not fully defined at the outset. These contracts are based on a measurement of the actual work carried out, rather than a fixed price, and the payment is based on the quantity of work done.
One reason why JCT measured term contracts may not include a provision for liquidated damages is that it can be difficult to accurately estimate the potential losses or damages that may arise if the contractor fails to complete the work on time. In a measured term contract, the completion date is not fixed at the outset, as the scope of work may change over time. Therefore, it may be difficult to determine a specific deadline for completion and to calculate liquidated damages based on that deadline.
Furthermore, in a measured term contract, the risk of delay and potential losses may be shared between the employer and the contractor. This is because the scope of work may change over time, and delays may be caused by factors outside the contractor’s control, such as design changes or unforeseen site conditions. As a result, it may be more appropriate to deal with any delays or extensions of time through the standard provisions for dealing with delays and extensions of time, rather than through liquidated damages.
At St John’s why did you advise on an MTC contract.
Remember, you considered other contracts, but because scaffolding was up, with a tin hat, you felt that a continuation of an MTC would be the preferred option.
What does an employer provide a contractor under a JCT intermediate?
the Employer is to provide the Contractor with drawings and bills of quantities, a specification or work schedules to define adequately the quantity and quality of the work; and ● where an Archi-tect/Contract Administrator and Quantity Surveyor are to administer the conditions.
What do you know about the Shedule of Rates within an MTC?
Contract is based on a priced Schedule of Rates to be followed by a series of Orders for each separate item of
work which might include a written description and drawings where relevant. Price is based on measurement
and valuation for each separate Order, using the figures in the priced Schedule of Rates as adjusted by the
contractor and accepted by the Employer.
The Measured Term Contract requires the Employer to:
● list the properties to be covered by the contract and state the period and the type of work which may be
required from time to time during that period (the period is envisaged as being not less than 12 months and it
is seldom safe or practical for it to exceed 36 months);
● estimate the total annual value of the work for the whole contract period, and indicate the minimum and
maximum value of any one Order given;
● appoint a Contract Administrator who will issue the Orders from time to time describing the work to be
completed under each Order and the completion date;
● pay for each item of work covered by an Order, as certified by the Contract Administrator, following
measurement and valuation according to the relevant rates and prices in the priced Schedule of Rates, which
are to be adjusted by applying the contractor’s quoted percentage addition or deduction
Tell me about default and failure notices at Peabody?
The Employer may issue to the Contractor a Failure or Default Notice specifying any failure by the Contractor to comply with any obligation or requirements contained in any Contract Document, together with any actions required to remedy such non-compliance, If the Contractor fails to remedy any failure to comply with any obligation or requirements specified in the Failure Notice, the Employer may issue a Default Notice immediately cancelling the Order(s) or any part thereof be immediately cancelled.
The Employer may issue a Default Notice, without first issuing a Failure Notice, cancelling any Order(s) or part thereof to the extent that the Contractor is in persistent and/or material breach of the Contract Documents. Further, the Employer may issue a Default Notice without first issuing a Failure Notice if, in the opinion of the Employer, the issue of a Failure Notice to the Contractor will not result in the commencement and/or completion of the Order or any part thereof in accordance with the time period required by the Employer. Where a Default Notice is issued the Contractor will be responsible for any costs, loss or expense incurred by the Employer including any additional costs in completing works or compensation payments to the Resident. The Contractor is referred to the Employer’s Compensation Policy included in Appendix 8 and the Conditions of Contract.
Tell me about how payments are paid at Peabody.
Payments:
The Contractor will be required, on a monthly basis, to submit, through the interface to Northgate, fully detailed payment applications to the Employer. The payment applications shall provide full details of all works carried out, the value calculated in accordance with the Schedule of Rates, the site address and the Employer’s Unique Property Reference Number. Subject to the agreement of the Employer, payment will be made by the Employer within 28 days of the issue of the Payment Certificate. All completed Orders must be included in the Contractor’s monthly payment application. Retrospective payment for completed Orders will not be made.
What happens on practical completion?
Practical Completion is a much misunderstood and debated term. Contract administrators will have different perceptions of what comprises a Practically Complete project and will often come under pressure from a contrac-tor to agree Practical Completion as it triggers:
The final months payment (known as the Penultimate Payment).
Release of the contractors insurance obligations (which may be expensive).
Exemption of the contractor’s liability to pay Liquidated damages.
Start of the ‘Rectification Period’
The Rectification period is normally a period of 3, 6 or 12 months where the contract remains ‘open’ after com-pletion of the work during which the contractor is still liable for rectifying problems (or defects) which have de-veloped following the building work.
What are the three types of JCT contract?
Types of contract:
Traditional
a. Lump sum
b. Measurement
c. Cost reimbursement contracts
Design & Build:
* Package deal or turnkey contract
* Design and build contracts – contractors design for whole of project.
* Contractor’s design for specific elements only.
Management
* Management contracts
* Construction Management
* Design – manage – construct.
Tell me about S8 of MTC contract - Termination in relation to Highbury Grove.
Section 8: termination for Default: 8.4 - Clause Default by contractor: If the contractor fails to comply with CDM regs, or without reasonable cause fails to comply with his obligations under contract, that the carrying out of the work is materially disrupted, suspended or delayed, the CA can give notice specifying the default. – after 14 days from receipt of notice – within 21 days of receipt of the notice, terminate the contractors employment.
What is Peabody’s MTC payment procedure?
Payments:
The Contractor will be required, on a monthly basis, to submit, through the interface to Northgate, fully detailed payment applications to the Employer. The payment applications shall provide full details of all works carried out, the value calculated in accordance with the Schedule of Rates, the site address and the Employer’s Unique Property Reference Number. Subject to the agreement of the Employer, payment will be made by the Employer within 28 days of the issue of the Payment Certificate. All completed Orders must be included in the Contractor’s monthly payment application. Retrospective payment for completed Orders will not be made.
What are the insurance provisions in an MTC for Peabody - i.e. who insures the building - the contractor or Peabody whilst works start.
Client insures the buildling in joint names.
In an MTC when is the due date?
7 days after the relevant valuation date.
What is final payment on an MTC
Final payment is 28 days after order completion date, or 51 days if progress payments are used. It also states 14 days after due date.
How does an employer pay less under a MWC?
Where an employer intends to pay less in the application, 5 days before final date for payment, give contractor a pay less notice, - stating reasons and basis for calculation.
Order completion date in MTC
Contractor shall notify CA of completed order. If CA doesn’t dissent, within 14 days, the date of contractors notification will be order completion date.
If CA dissents, then when order is complete to CA’s reasonable satisfcation.
MTC - non compliance with instructions;
If within 7 days after receipt of notice from CA requiring compliance with an instruction, the contractor does not comply, - employer may employ other persons to carry out works. Contractor will be liable for costs.
Payment - final date and amount
MTC – where employer intends to pay less than application, he shall not later than 5 days before the final date for payment, igive contractor notice that intention specifying the sum he considers to be due to the contractor and the basis for calculation. Where this notice is not given, payment ahall not be less than amount stated due in notice.
Peabody final payment dates?
Final Payment: due date 28 days after order completion date. Or if progress payments – 51 days after due date.
When are progress payments in invoked on Peabody measured term contract?
Progress payments if over time specified in the contract particulars or duration of works estimated to be over 45 days or over 25k – DUE TO HGCRA
Who is the Principle Designer under the MTC?
Article 4: Principal Designer
The Principal Designer for the purposes of the CDM Regulations is the Contractor or, if he ceases to be the Principal Designer, such person as the Employer shall appoint under
regulation 14(3) of the CDM Regulations and notify to the Contractor from time to time.
Who is the Principle Contractor under the MCT at Peabody?
Article 5: Principal Contractor
The Principal Contractor for the purposes of the CDM Regulations is the Contractor or, if he ceases to be the Principal Contractor, such other contractor as the Employer shall appoint pursuant to regulation 14(3) of those regulations.
