Contract Administration Flashcards
How did you issue the instructions at Hotham’s Court?
In writing (Contract Instructions).
Can you issue instructions verbally?
Yes, but should be followed up with a written instruction.
Under JCT Minor Works can an employer issue instructions?
No, they must be issued by the CA/Architect.
How did you finalise the final account at Hotham’s Court?
By reviewing the contract sum and any additional costs incurred through variations, provisional sums, loss and expense…
How do you agree final account?
Negotiate the costs incurred throughout the project in addition to the contract sum, whilst considering any variations, provisional sums, prime costs, loss and expense.
What happens if you cannot agree FA?
Refer the matter to ADR.
Can you explain the standard payment terms under JCT?
- The contractor can make an application for payment any time up to IVD (no later than 7 days prior to the Due Date for IC).
- The Due Date is 7 days after the IVD.
- The payment certificate should be issued no later than 5 days after the due date.
- The Final Date for Payment is 14 days following the Due Date (sometimes adjusted to 21 days).
What is the purpose of interim valuations?
The valuation provides advice to the certifier (CA) for issuing of payment certificates and interim notices.
What happens if the CA doesn’t issue their payment cert in 5 days?
The contractor’s payment application becomes a payment notice.
What should you do if a contractor does not submit a payment application?
The CA should carry out their own assessment of the works and issue a payment certificate on that basis.
What is the purpose of a pay less notice?
It is a notification from the Employer of the intention to pay less than the amount previously certified.
Who can issue a pay less notice?
The Employer, or the CA on behalf of the Employer.
Can you talk me through the standard JCT Payment terms.
Interim Payments
- Contractor submits interim payment application 7 days prior to due date.
- CA required to issue payment certificate within 5 days of the due date.
- Final date for payment is 14 days from the due date.
- Employer (or CA on behalf of) to issue pay less notice no less than 5 days prior to final date for payment.
Final Account
- Contractor to issue documentation for computation of the FA within 6 months of PC (3 month default period for MW).
- Final account to be ascertained within 2/3 months from receiving the documentation, depending on the form of contract.
- IC, SBC (3 months)
- DB (2 months)
- 28 days for MW
How do the payment timescales differ between the JCT contracts?
- Minor works – payment application can be made on or before the due date.
- Intermediate & SBC – payment application must be submitted no later than 7 days before the due date.
When are interim payments required?
When the duration of a project is 45 days or more.
Do you know where the 45 day timescale for interim payments is stipulated?
Housing Grants, Construction and Regeneration Act 1996.
What is the purpose of the Housing Grants, Construction and Regeneration Act 1996?
- Intention to ensure payments are made promptly throughout the supply chain and that disputes are resolved quickly.
Provisions of the Act include:
- The right to be paid in interim, periodic or stage payments.
- The right to be informed of the amount due, or any amounts to be withheld.
- The right to suspend performance for non-payment.
- The right to adjudication.
- Disallowing pay when paid clauses (payment of sub-contractors when main/principal contractor has been paid).
What is the significance of the Local Democracy, Economic Development and Construction Act 2009?
- Introduced in 2011 and amends the HGCRA 1996.
- The Act removes the requirement for contracts to be in writing.
- Enables parties to enter adjudication even when a contract has not been formalised in writing.
What other methods of payment may be included within a contract?
Stage payments – these payments will be due at certain stages of the works, for example, completion of the substructure, construction of external walls, construction of the roof, internal fit-out etc.
What is a provisional sum?
A sum provided for work which is not completely designed.
What is the difference between a defined and undefined provisional sum?
Defined Provisional Sum
A defined provisional sum includes information relating to:
- Nature and construction of work.
- How and where the work is to be fixed to a building and what other work is to be fixed thereto.
- A quantity or quantities that indicate the scope and extent of the work.
- Any specific limitations and the like defined.
The contractor is deemed to have made allowance in their tender submissions for pricing/preliminaries, planning and programming.
Undefined Provisional Sum
- A sum provided for work which is not completely designed and less well described than defined provisional sum items.
- The contractor is not deemed to have made any allowance in their tender submissions for pricing/preliminaries, planning and programming.
- The contractor may be entitled to an extension of time and/or the recovery of loss and expense.
Can you provide an example of a defined provisional sum item?
Replacement of roof tiles, however the exact specification of tiles has not yet been decided upon.
Can you provide an example of an undefined provisional sum item?
Works below an existing structure.
What are the contract implications of defined and undefined provisional sums?
- The contract sum is subject to change once a firm cost can be provided by the contactor.
- The contractor may be entitled to an extension of time and/or loss and expense (undefined).
You said you advised on the provision of a Pay Less Notice at Sefton Avenue. Can you explain what is the purpose of a pay less notice?
A pay less notice notifies the contractor that the employer intends to pay less than the amount previously certified within the payment certificate.
Who can issue a pay less notice?
The employer or the contract administrator on behalf of the employer.
Can you issue a pay less notice?
Yes, if asked to do so by the employer.
What should a pay less notice contain?
- The revised amount.
- Reasoning behind the reduced payment.
- Any supporting documentation.
What constitutes a valid pay less notice?
- It must be issued in time (no later than 5 days before the final date for payment).
- It must provide a basis for the calculation and must show the revised amount to be paid.
What constitutes a change under a contract?
Includes any change to the works regarding:
- Quantity
- Quality
- Design
- Working conditions
- Sequencing
- Additions, omissions or substitutions
When assessing a variation, what advice should you give to the client?
- The impact upon cost, time and suitability of the proposed works.
- Possible extensions of time (relevant event).
What is the final account?
- The conclusion of the contract sum (including all necessary adjustments) and signifies the agreed amount that the employer will pay the contractor.
- Typically include any loss and expense associated with EoT’s and any other claims the contractor believes they are due under the contract.
- Will not typically include liquidated damages, VAT or interest on overdue payments.
What should be accounted for when preparing the final account?
- Provisional sums (which can only be expended by issue of a contract instruction)
- Agreeing prime cost sums (where applicable)
- Any loss and expense associated with EoT’s
- Adjustment of provisional/approximate quantities
- Fluctuations
- Any set-off/contra charges (typically a sub-contractor issue)
What is the purpose of the final account and who prepares it?
- To enable the final certificate to be produced.
- Prepared by QS (CA for MW).
When should FA be ascertained?
- Within 2 months (DB) of information being provided by contractor.
- Within 3 months (SBC) of information being provided by contractor.
When must the final certificate be issued?
Should be issued no later than 5 days of the due date.
Two months from the later of:
- End of rectification period.
- Issue of the certificate of making good.
- When the final account is agreed.
What must the final certificate state?
- Total adjusted contract sum.
- Total of all additions / deductions.
- Total of all previous interim payments made to the contractor.
- The difference – expressed as a debt due from one party to the other.