Contract Administration

Question 1

What is nomination?

Answer 1

• This is when the client has chosen a particular sub-contractor to carry out works.
• Provides the client with greater control of material choice and quality.
• In doing so, the main contractor is relieved of liability of design and compliance with the works that have been nominated.

Question 2

What is a named sub-contractor?

Answer 2

• Is when the client provides the main contractor with a list of named sub-contractors for a portion of the works.
• Once appointed, they become a domestic sub-contractor.
• In doing so, this allows the client to have more control over quality and costs.

Question 3

Can the contractor object to a nominated sub-contractor?

Answer 3

• Any objections need to be made during the tender period.
• The MC can reject if they have found out the nominated party is having financial difficulties or is going insolvent.

Question 4

What is novation?

Answer 4

• It is the transfer of rights and obligations of one party to another.
• In doing, there is rescission of one contract for another.
• Novation can’t be done without consent.
• Is popular on D&B projects where the design team or part of the team is novated from the client to the contractor.

Question 5

What is assignment?

Answer 5

• Unlike novation, this transfers the benefits under the contract from one party to another but not the burden.
• In doing so, the original contract still remains.
• Assignment does not require consent unlike novation.

Question 6

What is consultant switch?

Answer 6

• As an alternative to novation, it transfers the consultants from working for the client to the contractor.
• In doing so, the original contract remains in place unaltered.

Question 7

After a valuation, the certificate is issued, the client then advises they have insufficient funds to make payment, what do you do?

Answer 7

• As the certificate has been issued to the contractor, the client is obligated to honour payment and can’t withhold any monies without a valid reason.
• If this is the case, then contact the client and contractor ASAP to arrange a form of payment and if it can be delayed by a few days from the final payment date.
• Failing this, then the client would need to source the funds to honour the certificate.

Question 8

Under a valuation, if a contractor is claiming for monies for materials off-site and there is no provision in the contract for claiming such monies, what would you do?

Answer 8

• Firstly I would inform the contractor there is no contractual provision for them to claim for monies of materials off-site.
• If the contractor is insistent for claiming these monies, I would then contact the client and advise they’re not contractually obligated to pay for these as these had not been set out in the contract originally.
• However, if the client, does wish for these to be paid, then an instruction would be needed for the valuation of materials off-site.
• I would then ensure the necessary provisions are in place for valuing materials off-site e.g. vesting certificate, insurances and etc.

Question 9

What is the defects liability period?

Answer 9

• It is the period at the end of a contract usually 12 months after practical completion has been issued.
• During this period, the contractor rectifies any defects that arise within the structure at their own expense.
• In the event the contractor does not do this, then the client may employ another contractor to do so and recover the costs of doing so from the main contractor.
• The retention monies may be used to cover the costs for making good any defects.

Question 10

What are patent defects?

Answer 10

• Defects that visible upon inspection during the commissioning stage.

Question 11

What are latent defents?

Answer 11

• Defects that are not visible upon inspection and may occur some time after completion.

Question 12

How do contracts deal with latent defects?

Answer 12

Usually claims can only be brought about during the limitation period which is 6 years if the contract is executed under hand or 12 years if executed under a deed.

Question 13

What is a final account and what are the timelines associated with agreeing a final acount?

Answer 13

A final account is usually prepared upon completion of the works and it includes agreeing all financial aspects including any adjustments to the contract sum to determine the value of the project.
Note: A final account may not just be money owed to the contractor but could also entail money owed to the client.
In an unamended JCT SBC contract, usually the contractor submits all documents no later than 6 months after issue of PC Certificate. The CA or QS will prepare a final statement showing all adjustments no later than 3 months of receipt of documents from the contractor.
In an unamended JCT D&B contract, the contractor submits a final statement within 3 months of issue of PC Certificate. The due date for final payment is one months after receipt of the final statement to agree all adjustments.

Question 14

What is the process of issuing a final certificate?

Answer 14

• CA/EA issues a schedule of defects to the contractor no later than 14 days following expiry of the rectification period.
• Contractor has reasonable amount of time to rectify defects.
• Once rectified, CA/EA will issue certificate of making good.
• CA/EA issued final certificate releasing 2nd half of moiety of retention.
• Due date for final payment is 1 month after issuing the latter of rectification period or issue certificate of making good.

Question 15

Once the final certificate is issued, what is triggered?

Answer 15

• Release of the 2nd half of moiety of retention.

Question 16

What is the process of certifying practical completion?

Answer 16

• Substantial completion must be achieved by the contractor which allows the building to be used for its intended purpose.
• CA/EA inspects site and produces a schedule of defects to be rectified by the contractor.
• Contractor is to rectify defects as scheduled.
• EA/CA will then re-inspect and if satisfied will issue practical completion certificate.

Question 17

What events are triggered upon the issue of a practical completion certificate?

Answer 17

• Beginning of the defects liability period.
• Client is no longer able to levy liquidated damages to the contractor.
• Start of the final account process is triggered.
• Release of the 1st half of moiety of retention.
• Contractor is no longer responsible for site and client takes responsibility of insuring building.

Question 18

What documents are issued to the client upon practical completion?

Answer 18

• Draft building owner’s manual.
• Building user’s guide.
• Health and safety file.
• Building log book.
• Construction stage report.

Question 19

What are the main suites of construction contracts?

Answer 19

• JCT - Joints Contract Tribunal.
• NEC - New Engineering Contract.
• ECC - Engineering and Construction Contract.
• FIDIC - Federation internationale des ingenieurs civils (Internal Engineers Federation).
• ICE - Institution of Civil Engineers.

Question 20

What are the main parts of a JCT Contract?

Answer 20

• Recitals.
• Articles.
• Contract particulars.
• Attestation.
• Conditions (9 sections although 7 sections for minor works).
• Schedules.

Question 21

What are the elements of an NEC Contract?

Answer 21

• Form of agreement - statement of intent between two or more parties that sets out their rights and responsibilities.
• Conditions of contract - sets out the legal relationship of the parties and the allocation of risk.
• Contract data:
  
  • Part One - Provided by Employer.
  • Part Two - Provided by Contractor.
• Prices, activities, schedules and bill of quantities.
• Works information - describing what is to be done i.e. the works.
• Site information - describing the condition of the site before works begin.

Question 22

What are the payment mechanisms in a JCT contract?

Answer 22

In an unamended JCT Contract, the payment provisions are:
- Interim valuation date - IVD.
- Due date is 7 days after IVD.
- Employer issues payment notice no later than 5 days after the due date.
- Final date for payment is 14 days from due date.
- Pay less notice must be issued no later than 5 days before final payment date.

Question 23

What are the payment mechanisms in a NEC3 contract?

Answer 23

• Contractor submits their application on or before the assessment date.
• PM certifies amount due and payment to be made by due date which is 7 days after the assessment date.
• Final date for payment is 21 days after the assessment date.
• Pay less notice is issued no later than 14 days after the assessment date or 7 days before the final payment date.

Question 24

What are the differences between a contract administrator (CA) and an employer’s agent (EA)?

Answer 24

• A CA takes a contract administration role on traditional forms of contract and is usually appointed at the time of contract execution or just before. A CA role includes:
  
  • Preparing the contract and executing it.
  • Inspecting and monitoring the works.
  • Issuing instructions for variations.
  • Chairing progress meetings.
  • Issuing certificates including payment certificates, practical completion, certificate of making good defects and final certificate.
• An EA is specific to D&B contracts and is appointed much earlier in the process usually at RIBA stage 2. Once the contract is executed, the EA performs a similar role to that as a CA. Some of the roles of an EA include:
  
  • Preparation of tender documentation such as ER’s.
  • Managing the tender process.
  • Appointing consultants and contractors.
  • Preparation of the contract documents and execution post-contract.

In Summary, the difference is a CA is responsible for administering the terms and conditions of a contract and in doing so, must remain impartial in their decision making.
As for an EA, they’re employed by the client to essentially act on their behalf whilst also remaining impartial but primarily they look out for the interest of the client unlike a CA which plays a more neutral role.

Question 25

On the Ashman Bank project, what other responsibilities did you have as an employer’s agent?

Answer 25

• I was brought onto the project at the time when the contract was executed as another colleague had left the business and I took over his project. Therefore, my role was primarily post-contract.
• My role was also inclusive of reviewing the progress of the works and preparing reports for the client as per monthly cost reports. Towards the end of the works I certified PC, agreed the final account and following the end of the rectification period I also issued the certificate of making good and issuing of the final certificate.

Question 26

You mention that you prepared the relevant valuation documents, what did these consist of?

Answer 26

• Certificate for payment.
• Valuation.
• Statement of retention.