Contract Administration Flashcards
What is nomination?
Selection of a particular subcontractor to carry out works, manufacture or supply of materials
Provides the architect and client with greater control of material choice and thereby quality
It is often used where there are long lead-in times with the employer and placing orders prior to the MC award which reduces potential delays on site
The MC is relieved of liability of design and compliance with the performance spec in addition to subcontractor delays in respect of the works that have been nominated
Are nominated subcontractor paid separately?
They are normally paid via the Main Contract with sums identified separately
Can the contractor object to a nominated subcontractor?
Any objections must be made during the tender period
There are specific exclusions and grounds for an objection for example if they have found out the subcontractor is having financial difficulties and may be going insolvent
If there are problems with the design, after Novation of the architect, who would be responsible?
At the point of novation, the client would agree the level of design was satisfactory & would be signed off by all parties
The contractor would then become responsible for the Architect & their design should any problems arise during construction
Disputes may arise where it becomes unclear when problems have arisen, either prior to the transfer of services or afterwards
What is the difference between Novation and Assignment?
Novation = a mechanism whereby one party can transfer all of its obligations under a contract and all benefits arising from that contract to a Third Party
Assignment = where contractual benefits are assigned however contractual burdens cannot be transferred under assignment
What is set-off?
Set off are any monies owed to the employer by the contractor which are deducted against any payments due to the contractor
Describe the differences between Statutory Provisions and Contract Provisions?
Stat. Provs are set out by law and must be complied with
Cont. Provs relate to the contract in question & therefore only apply to a specific project
What are domestic subcontractors?
This is a standard appointment of a Subcontractor by the Main Contractor
What are named subcontractors?
Clients provide the MC with a choice of named subcontractors for a portion of the works
Once appointed they become a domestic subcontractor in terms of the conditions of contract
Additional names may be added if approved by all parties
This allows the client a level of control over the quality of the works packages and in some cases cost.
After valuation and certificate are issued, the client advises that they don’t have sufficient funding to make the payment. What would you do?
Once the certificate is issued to the contractor, the client is contractually obliged to honour payment of the certificate and cannot withhold money without a valid reason
If this were the case, I would contact the client and contractor ASAP to arrange some form of payment. It may be the case that the payment just needs to be delayed 1-2 days to allow the Client to secure the funds
Failing this, or if the contractor is unwilling to delay the payment, the client would need to finance the payment through other funds to honour the certificate
What items do you include for on a valuation?
- Prelims
- Measured works
- Materials on/off site
- Variations
- Claims
- Retention
- Previous payments
If an instruction was issued during the contract which involved the fabrication of a substantial amount of materials off site would you pay for them as off site materials within the valuation?
There is no obligation on the client to pay for materials off site if this was not identified in the contract
However, in the scenario where the client wishes to pay for them, I would ultimately check with the client before paying or rejecting them
How would you deal with the urgent Verbal Instructions?
If the instruction affects the critical path or programme in general, I would review the instruction with the CA, client & contractor
If the instruction is valid under the contract, I would ensure this is converted into a formal written instruction as soon as possible
What documents would be required in incorporating a Contractor Design Portion Supplement into a project?
Within a D&B project, the documentation to be included would be the Employers Requirements including the Scope, Spec, Drawings, Contractors Proposals along with any insurances
Could an email constitute a contract document?
Yes, providing there is offer, acceptance, intention to create legal relations and the responding email does not vary the conditions, a contract will be created
What is your opinion of Oral Contracts?
Whilst they are legally binding the difficulty lies in proving the specific terms and conditions of the agreement
It is for this reason why the HGCRA (Housing Grants Construction Regeneration Act) only applies to written contracts
What is the difference between NEC and JCT?
The main difference between the two forms is its usage;
NEC can be used within building & civil engineering projects whereas JCT is specifically for building projects
NEC can be adopted to a number of bespoke contract strategies due to the various options available whereas JCT has a standard set of clauses
What is the difference between an information requirement schedule & an information release schedule?
The Info Req Schedule asks the Contractor to provide dates when design information is required
The Info Release Schedule informs the Contractor when the design information will be available
What is Frustration?
Frustration occurs when any event or circumstances beyond control of both parties changes the contractual obligations or makes it impossible or illegal to fulfil their contractual obligations.
The happening of such events automatically discharges the contract
How is a contract under hand different from a deed?
A Deed is signed by a witness & traditionally authenticated by a seal
The limitation period of under hand is 6 years whereas a deed is 12 years
What is the defects liability period?
The DLP is the duration at the end of the contract, usually 52 weeks after the PC or Substantial Completion Certificate has been issued whereby the contractor undertakes to rectify any defects that arise within the structure at the contractors expense, providing they were due to materials & workmanship not being in accordance with the contract
In the event that the contractor failed to rectify any defects the employer may employ another contractor to carry out the works & recover the cost of doing so from the MC
The retention money retained may be used to cover the cost of making good
What is your understanding of latent defects and what contractual issues are associated with them?
Latent defects are defects which are not readily identifiable upon inspection & only come to fruition some time after building completion and may take many years to become identifiable
A claim in contract can only be brought about within the limitation period of the contract, 6 or 12 years depending on whether the contract was executed as a deed or underhand
What should the architect do if they are discovered?
The Architect should issue an instruction as necessary to instruct the contractor what to do if they are identified
This can include telling them to comply with a third party who is examining or opening up the works to identify the defect
If the works or materials are not in accordance with the Contract what options does the Architect have available to them?
The architect may:
- Instruct the contractor to remove all defective work, materials and goods at their own expense and time
- They can notify in writing that they can remain with an appropriate deduction being made from the contract sum
- Issue instructions for variations that are necessary as a result of the work. If they are necessary there should be no additional costs or extension of time given
- Instruct the contractor to open up and test further work to determine the extent of any non-compliance
When issuing instructions for further opening up and testing to examine the extent of non-compliance what sort of things should the Architect consider?
- The significance of the non-compliance
- Consequences of further non-compliance on building owners and users
- Consequences of further non-compliance on adjoining properties and the public
- Reason for the non-compliance
- Level of supervision and control employed by the contractor
- Currently recognised testing methods
- Time and consequential costs of further opening up
What is a provisional sum?
A sum of money included in the contract for work that cannot be fully designed and costed at the time of tender or contract sum agreement
What are the two types of prov sum?
Defined and undefined
What is a defined provisional sum?
A sum included in the contract for work that has not been completely designed at the time of the contract sum agreement, but for which certain specified information can be given about the extent of works, its quantity, duration of installation and how it is to be fixed to the building
What is an undefined provisional sum?
A sum included for work for which there is minimal or no information at the time of the contract sum agreement. The location quantity and time associated for the installation of the works is not fully known.
What is the contractor deemed to have allowed on the inclusion of a defined provisional sum?
They are deemed to have made proper allowances for carrying out the work in their programme and preliminaries
This means that they are not entitled to an extension of time or extra prelims for carrying out the work, whatever the delay or cost of doing so to the contractor
What if the actual work does not closely resemble the provisional sum?
If the description is not accurate it has to be amended
This will be treated as a variation
This will entitle the contractor to an extension of time and extra preliminaries if appropriate
What is the contractor deemed to have allowed in an undefined provisional sum?
They are not deemed to have allowed for anything
Expenditure of the undefined provisional sum may carry additional costs for programme or preliminaries as a result of carrying out the works
How can a provisional sum be expended?
The architect has to issue an instruction for its expenditure
How are provisional sums dealt with in the final account?
The provisional sums included in the contract are deducted and the actual amount substituted
What are the risks associated with provisional sums?
The actual cost and time exceeds that allowed for in the provisional sum because the nature of the item changes between tender and instruction
What are the main suites of construction contracts?
- JCT (Joint Contracts Tribunal)
- NEC (New Engineering Contract)
- ECC (Engineering & Construction Contract)
- ICE (Institution of Civil Engineers)
- FIDIC (Federation Internationale des Ingenieurs Civils / International Engineers Federation)
What are the main parts of the JCT Contracts?
Recitals
Articles
Contract Particulars
Attestation
Conditions divided into 9 sections (7 for minor works)
Schedules
Name the 9 sections
Definition and interpretation
Carrying out the works
Control of the works
Payment
Variations
Injury, damage and insurance
Assignment, Third Party Rights, and Collateral Warranties
Termination
Settlement of Disputes
Name the main types of JCT Contracts
Minor Works
Intermediate
Standard Building Contract
Major Projects
Design & Build
Prime Cost Contract
Measured Term Contract
Construction Management Agreement
Management Contract
Framework Agreement
When would you use JCT Minor Works?
Projects that are short in duration on a small scape with a straightforward construction
JCT guidance is for a value up to £200,000 but it has to be simple in nature
It is a lump sum form where design should be completed prior to execution
The Employer or their team is to provide specifications, drawings and schedule of works
When would you use JCT Intermediate Contract?
The Intermediate form is recommended for projects that do not exceed a one year duration
The project should be simple in content and require only basic skills and trades where services are not complex and where the works are already designed
When would you use a JCT Standard Contract with Quantities?
A JCT SBC would be used where the work has already been designed at execution
It is suitable for use with a bill of quantities and is a lump sum form
The contractor’s risk is limited to price only
The employer takes the risk of errors in the bill
When would you use JCT Standard without quantities?
This is suitable where work has been designed prior to contract however there is no bill of quantities.
The contract documents will include drawings, specification and a schedule of rates
It is a lump sum form of contract
The contractor’s risk includes both price and quantity
When would you use JCT standard with approximate quantities?
This is a re measurement form of contract
There is no fixed contract sum
It is used where the design is not completed at the time of execution
An approximate bill of quantities will have been prepared
Construction is aimed to commence prior to the design being completed
When would you use JCT Design & Build?
When the contractor is responsible for design and construction
The project should be similar in complexity to that of standard building contracts
The contractor’s proposals form the basis of the contract
There is no mention of an architect or QS, instead this role is replaced by the title of Employer’s Agent
What are the key differences between JCT minor works, Intermediate and D&B?
Minor works only has 7 sections of conditions, instead of 9. Variations are included within the Control of the Works section and there is no ‘assignment and collateral warranties provision’
No mention of the QS in minor works and D&B but there is in the intermediate form
Minor works has no provision for sectional completion or partial possession
Standard rectification period is 3 months for minor works and 6 months for intermediate and D&B
Standard retention is 5% for Minor Works and Intermediateand 3% for D&B
D&B is administered by an Employer’s Agent rather than a Contract Administrator
There is no fluctuation mechanism for labour and materials costs in Minor Works and Intermediate Forms
There is no provision for third party rights in Minor Works or Intermediate Forms
What is a bespoke contract?
Contract conditions that are drafted for a particular project
What are the advantages of standard forms over bespoke contracts?
They are written by legal experts
Rights and obligations of each party are clearly set out to the required level of detail
Risks should have been allocated appropriately between parties
Parties should be familiar with the provisions in the form providing greater consistency in application and fewer unseen anomalies
The time and expense of preparing a fresh document for each occasion is avoided
Case law is built up over time and provides a good source of knowledge and clarity on the terms
What are the disadvantages of standard forms over bespoke contracts?
Apportionment of risks is rarely questioned and therefore becomes implicit meaning it is not reviewed on whether it is appropriate
They may not be appropriate to the needs of a particular project or client
Using an inappropriate standard form for the project will cancel out any advantages
When would you use a bespoke contract rather than a standard form?
They should generally be used for major projects with novel obligations
When specialist advisors can undertake the amendments as this requires great skill and knowledge
Drafting from first principles is too daunting for most in the industry
Can you have an EoT without an L&E claim?
Yes an EoT does not automatically mean entitlement to L&E
When pricing an EoT what would you include for and what rates?
When pricing an EOT you should include costs for prolongation of site cabins, site utilities, welfare facilities, management staff, security, cleaners, inefficient use of labour & plant resources, subcontractor mobilisation costs, head office, finance charges and loss of profit
Would you get involved in helping the Architect assess the EoT?
Yes, the QS would become involved in assessing the financial implications of the EoT if applicable
Advantages of JCT
Considered by many as the ‘industry standard’ and offer familiarity
Cover most forms of procurement and building types with ancillary documents to support the main forms
Comprehensive in detail and considered by many to be fair and reasonable - not biased towards any party
Disadvantages of JCT
Sometimes thought to “compromise conditions” in which they try to satisfy the interests of all parties
Can be considered as unnecessarily long and complex
Advantages of NEC
Applicable to a variety of procurement strategies
Offer clarity and simplicity by using ordinary language (minimal legal jargon) and include flow charts to support their users
They act as a stimulus to good management through maintaining:
- up to date programmes which have to be clear and precise
- Provision of early warning procedures and risk registers
- The embody key features of project partnering
- assessment of compensation events by applying a ‘rolling Final Account’
Disadvantages of NEC
Often only considered for civil engineering projects and partnerships
They have limited exposure to the market so they are therefore not fully tried and tested with supporting case law
Key differences between JCT and NEC
NEC is concise and written in plain English - JCT uses legal jargon
NEC is more flexible than JCT with a number of optional clauses
NEC is more proactive whereas JCT is more reactive when dealing with early warnings and risks
No QS or EA mentioned in NEC, only a PM who takes on both roles
Programme is a contract document under NEC
NEC may be considered as more admin heavy compared to JCT as it adopts short periods of reply.
If there is a discrepancy between the Employer’s Requirements and Contractor’s Proposals which prevail?
The Contractor’s Proposals
What is the contractor’s design liability under JCT Contracts?
The same as an independently employed architect with the duty to reasonable skill and care.
