contract administration Flashcards
What standard forms of contract are you aware of?
Joint Contracts Tribunal (JCT) Suite:
New Engineering Contract (NEC) Suite:
Institution of Civil Engineers (ICE) Forms:
What are the timescales involved with an extension of time request on a standard JCT contract?
And minor works
Does an instruction need to have an agreed value contained within it?
Yes
The contractor fails to complete the project by the completion date, what
measures do the CA/EA take and what are the consequences of this?
If a non-completion certificate is not issued, what is the contractual
effect?
The C/A can issue a non completion certificate which will entitle the employer to LADs
What is your understanding of bespoke contract?
Bespoke Contracts, as the name suggests, are tailor-made agreements created for specific projects Typically drafted in a manner that suits the specific needs of a project
What do you understand as the difference between a bespoke contract
and standard form of contract?
English law does not require a particular form to contracts, and so the terms and ultimately the risk allocation is the choice of the parties involved. However, the Housing Grants, Construction and Regeneration Act applies to all contracts for ‘construction operations’ setting out requirements relating to payment and adjudication. The Scheme for Construction Contracts (England and Wales) Regulations applies when construction contracts do not comply with the Act
What are your views on the advantages/disadvantages of using a bespoke
contract?
and standard form
Standard Forms of Contracts provide a level of certainty and predictability for all parties involved. The standardized language and clauses help in setting clear expectations regarding rights, obligations, and potential risks. This predictability contributes to better risk management and dispute avoidance, fostering a more collaborative and productive contractual relationship.
Standard Forms of Contracts offer efficiency in contract administration and management. Since these contracts are widely recognized and understood, parties can save considerable time and resources that would otherwise be spent on negotiating bespoke terms for each new contract. The standardized nature of these contracts allows for quicker decision-making and reduces the administrative burden associated with drafting unique agreements for each project
Bespoke Contracts, as the name suggests, are tailor-made agreements created for specific projects Typically drafted in a manner that suits the specific needs of a project, Bespoke Contracts are often criticized for not being inherently fair in risk allocation among contracting parties.
Risks in Bespoke Contracts and Impact on Bidding
One of the central drawbacks of Bespoke Contracts lies in their untested nature and limited applicability. As risks are not evenly allocated among the contracting parties in a standardized manner, contractors often face higher levels of uncertainty. This uncertainty, in turn, leads to a hesitancy among bidders, who may quote comparatively higher rates for projects governed by Bespoke Contracts. This increase in bidding rates is an attempt by contractors to mitigate the potential risks and uncertainties inherent in these customized agreements
When was the JCT contract suite last updated?
Tell me about some of the key changes that were made.
Electronic Signatures: Parties can agree to use email for all correspondence and notices, simplifying communication.
New Relevant Events: The 2024 edition includes new grounds for claiming time and money for epidemic and changes in law.
Expanded Site Conditions Clauses: The site conditions clauses have been expanded to cover asbestos, contaminated land, unexploded ordnance, and antiquities.
Amendments to Reflect the Building Safety Act 2022 (BSA): The contracts have been updated to reflect the Building Safety Act 2022.
Mandatory Good Faith Negotiations: A new requirement for parties to notify potential disputes to senior executives to seek a negotiated settlement.
How was the JCT contract suite modernised through the last update?
The JCT has also focused on modernizing and streamlining the contracts, including provisions for electronic execution and email communication, further enhancing efficiency and accessibility
How does JCT facilitate electronic working?
Parties can agree to use email for all correspondence and notices, simplifying communication.
How does the JCT work alongside the Construction Playbook?
How has the JCT contract suite incorporated diversity and inclusion?
The JCT 2024 suite uses gender-neutral pronouns, ensuring that the contracts are inclusive and respectful of all individuals, regardless of gender
The JCT has also focused on modernizing and streamlining the contracts, including provisions for electronic execution and email communication, further enhancing efficiency and accessibility
What is the JCT Fluctuations Hub used for?
Explain the JCT Target Cost Contract to me.
What form of NEC contract might the Target Cost Contract be a good
alternative for?
What is the difference between a Relevant Event and Relevant Matter?
What guidance is there on contract administration?
What are the duties of a CA under JCT contracts?
Do these include design?
When authorising payment for goods or materials stored off site what
must you obtain to protect your client in the event of the contractor
going bankrupt?
If you are concerned that a contractor is in financial difficulties, name 3
things as CA you should do?
Can you name three standard forms of contracts that can be used on a
construction project?
What insurance provisions are in the JCT and NEC standard forms of
contract?
What is loss insurance?
What is all risks insurance?
What is a contractor’s all risk insurance or contract works insurance?
Where is the minimum financial cover for the contractor’s liability for
injury, death and damages to property other than the works contained?
What do you understand by insurance in joint names?
What is a collateral warranty?
Who might want a collateral warranty?
What are the common clauses / terms in collateral warranties?
What is the difference between a bond and a collateral warranty?
What is your understanding of what a letter of intent is?
What are the advantages of a letter of intent?
What are the disadvantages?
In what circumstances might they be used?
What is their purpose?
Who issues it?
Who signs it?
What would you say if the client asked you to draft a letter of intent?
What is the final account (FA)?
What must the FA state?
Who prepares the final account in a JCT form of contract?
Who prepares the final account in the NEC4 form of contract?
What is the purpose of a final account?
On the issue of the final account, what are the relevant time periods in a
JCT form of contract?
When must the final certificate be issued?
Tell me two of the information or statements that must be contained in
the final certificate.
What are the usual constituents of a final account?
What additions may there be to the FA?
What is the procedure for getting the FA agreed?
What is released to the contractor in the final certificate?
What are the usual constituents of a FA?
What are the four elements of a valid contract?
What is common law?
What do you understand by consideration in contract?
What do you understand by invitation to treat in contract?
How is the JCT form of contract structured?
What are liquidated damages?
What is your understanding of retention, bonds
What is your understanding of early possession?
Tell me about some of the insurances a subcontractor would need if they
were responsible for a part of the design work.
What contractual weight does a practical completion certificate carry in a
JCT contract?
What do you understand by parent company guarantee?
When might it be used?
Define sectional completion, partial completion and beneficial use.
How do they differ?
- Sectional Completion:
Definition:
A contractual mechanism where a project is divided into distinct sections, each with its own completion date, scope, and associated contractual terms.
Purpose:
Allows the client to take possession and use parts of the project as they are completed, while construction continues on other sections.
Contractual:
Sectional completion is a pre-planned, explicitly stated provision within the contract documents.
Example:
A developer can hand over a completed building block to tenants while construction continues on other blocks in a multi-block development.
Key Features:
Defined sections with specific completion dates.
Separate liquidated damages for each section.
Clear definition of each section’s scope.
May require clarification of how extension of time provisions will be applied if, for example, delays to one section of the works have a knock-on effect on other sections. - Partial Possession (or Partial Completion):
Definition:
A situation where the client takes possession of a part of the project before the entire project is completed, even if the contract doesn’t explicitly provide for sectional completion.
Purpose:
Enables the client to use parts of the project earlier than if they had to wait for the entire project to be completed.
Contractual:
Partial possession is a more consensual process, as the sections are not defined in the contract.
Example:
A client may be allowed to store materials or use a part of the building for temporary purposes before the final completion.
Key Features:
The client takes possession of a part of the project before the entire project is completed.
Any part for which partial possession is given is deemed to have achieved practical completion.
Half of the retention for that part must be released.
The defects liability period (or rectification period) begins for that part. - Beneficial Use:
Definition:
The ability of the client to use parts of the project for its intended purpose, even if there are minor defects or ongoing works.
Purpose:
Allows the client to derive benefit from the project, even if it is not fully completed.
Contractual:
Beneficial use is not a formal contractual term, but rather a concept that can arise in various contexts.
Example:
A client may be able to use a completed building section for storage or testing purposes, even if there are some minor defects that need to be rectified.
Key Features:
The client can use the project for its intended purpose.
Minor defects or ongoing works do not prevent beneficial use.
The client is responsible for any damage caused by their use of the project.
What is your understanding of performance bond?
When might it be used?
Performance bond for construction
A performance bond (or performance security) is commonly used in the construction industry as a means of insuring a client against the risk of a contractor failing to fulfil contractual obligations to the client. Performance bonds can also be required from other parties to a construction contract.
Whether or not a performance bond is required will depend, in the main, on the perceived financial strength of the party bidding to win a contract, as the most common concern relates to a contractor becoming insolvent before completing the contract. Where this occurs the bond provides compensation guaranteed by a third party up to the amount of the performance bond.
Bonds are typically set at 10% of the contract value. This compensation can enable the client to overcome difficulties that have been caused by non-performance of the contractor such as, for example, finding a new contractor to complete the works.
Bonds can be ‘on demand’ or ‘conditional’, with conditional bonds requiring that the client provides evidence that the contractor has not performed their obligations under the contract and that they have suffered a loss as a consequence.
The obligation for the contractor to provide the client with a bond is set out in the tender documents. The choice of bondsman and terms with regard to cost falls entirely to the contractor who secures it prior to the start of work. From a client viewpoint it is wise to stipulate that the bond stays in place until the end of the defects liability period when the final certificate is issued.
Bonds can be issued either by an insurance company or by a bank, and the cost of the bond is usually borne by the contractor (albeit, this is likely to be reflected in the contractor’s tender price). The cost of the bond gives the client a good guide as to the credit worthiness and reputation of the contractor in the bond market, which will view each contractor differently in respect of its history, management and financial health.
Strictly speaking, the bond is a guarantee and as such is a contingent liability in regard to the contractor’s balance sheet. A smaller contractor might face a limit on how many bonds it can take out.
The contractor sends the bond document to the beneficiary, i.e. the client who holds it until the end of the defects liability period.
The bond is related to the contract conditions and the courts take a view that the bondsman has little protection against adverse risk. So it is wise to seek the bondsman’s consent before acting outside the contract conditions, for example by paying the contractors in advance of work undertaken to ease its cash flow difficulties. Such conduct could jeopardise a subsequent claim on the bond.
What is you understanding of limitation of liability?
What do you understand by relevant event in a JCT form of contract?
What do you understand by compensation event in a NEC form of
contract?
In JCT contracts, a “relevant event” is an event that entitles the contractor to an extension of time, while in NEC contracts, a “compensation event” is an event that entitles the contractor to additional time and/or money.
JCT (Relevant Event):
A “relevant event” under JCT contracts is an event that causes a delay to the completion date, which is not the fault of the contractor.
These events are typically specified in the contract and can include things like:
Employer’s instructions
Variations
Unforeseen site conditions
Delays caused by statutory undertakers
Exceptional weather conditions
Specified perils such as fire, lightning, explosion, storm, flood, escape of water, earthquake, riot, civil commotion
The contractor can apply for an extension of time (EOT) based on a relevant event.
JCT deals with time and price variations separately, so an EOT does not automatically guarantee a price adjustment.
NEC (Compensation Event):
A “compensation event” under NEC contracts is an event that can affect the cost of the work, the time needed to complete it, or both.
These events are usually not the fault of the contractor.
Examples of compensation events include:
Changes in scope
Unforeseen ground conditions
Other specified occurrences
As a result of a compensation event, the prices, key dates, or the completion date may be reassessed, and the contractor may be entitled to more time or money.
NEC groups both time and cost adjustments together under the compensation even
In the NEC form of contract, talk me through five things that can lead to a compensation event.
In the NEC form of contract when can the completion date be adjusted?
In the NEC form of contract what is a defined cost?
In the NEC form of contract what is a disallowable cost?
When were changes to NEC4 last made?
What changes were made?
NEC compensation events are a mechanism for clients to pay contractors extra time and/or money for dealing with unexpected changes.
Instructions to change the service (unless this results from accepting a defect, or from a change requested by the contractor).
Failure to provide access.
Failure of the client to provide equipment, plant or materials.
An instruction to halt, or delay the works.
Work done by others.
Conditions that could not reasonably have been foreseen.
Exceptionally adverse weather (beyond one in ten year frequency).
Force majeure (such as an epidemic or an ‘act of God’).
What is a PCSA?
How does a PCSA differ to a LOI?
When are pre-construction services usually used?
What should be taken into account in the wording of a PCSA?
What might the pitfalls be?
A pre-construction services agreement (PCSA) is used to appoint a contractor to carry out services before entering into a formal building contract. This is often used on design and build contracts and two stage tendering.
The Pre-Construction Services Agreement will define the services that are required of the contractor during the pre-construction phase and will generally be similar to a consultancy agreement. It should make clear whether the contractor is undertaking design work, whether they will have any design liability, and what will happen to this liability if they are not appointed for the second stage (the construction works). It should also set out the method of payment, and any provisions for deferred payment.
The contractor appointed under the Pre-Construction Services Agreement will not necessarily be appointed for the second-stage construction contract. However, the client inevitably loses leverage in the second-stage of the tender negotiation process, as the contractor is already embedded in the project team and potential competitors lose interest once they find out that another contractor has been awarded the first-stage tender.
However, a longer period of familiarity with the project creates better relationships as well as a reduction in learning curves and programme performance, and so, whilst tender prices for two-stage contracts may initially be higher than single-stage tenders, which are subject to full competition throughout, the final account tends to include fewer variations and fewer claims. Competition can be introduced into the second stage by an open-book approach to the tendering of sub-contracts.
It is important that the client ensures they have some means of securing an alternative bid if second-stage negotiations fail, albeit this is likely to result in delays and difficulties regarding design liability.
What is the role of an Employer’s Agent?
What contract might include this role?
How do the roles of CA and EA differ?
Can you act as both?
What typical documents make up a Building Contract?
Give examples of other JCT Contracts and when they are appropriate to
use
What insurance provisions are you aware of in JCT contracts?
List some methods of ADR you may find in a JCT contract
Talk me through when you’ve administered a contract.
Talk me through how you’ve dealt with and managed change in a
contract.
Talk me through your involvement with dispute avoidance
Talk me through how you’ve dealt with completion and possession issues.
Talk me through your experience of issuing final account certificates
Tell me about how you’ve contractually managed the emergence of
unforeseen issues during a construction project.
Talk me through how you have issued instructions / dealt with payment
provisions / managed variation procedures.
Tell me about your involvement with issuing certificates.
Tell me about your administrative procedures carried out to ensure
smooth running of a construction contract.
I create an excel spread sheet for all projects which records instructions and valuations and effects on the contract sum. The document is distributed to the client when issuing the certificate of payment.
What is the need for your excel spreadsheet?
How do you utilise this when discussing projects with clients?
L2 Greek House - Refurbishment
The client requested to alter the kitchen layout which included the
removal of a load bearing wall. I informed the client that the change needed additional design and identified the disruptions to the critical path. The contractor would be entitled an extension of time, as well as loss and expense. I advised that we should proceed with the structural engineer calculations prior to instructing and the contractor provided budget costings for the works along with potential figures for a three week extension and break down of their potential loss and expense claim. This managed the clients’ expectations. Once the costs were confirmed I issued an instruction.
At which stage of the project did the client request the alterations?
How did you deem the war loadbearing?
Why was the contractor entitled to extend of time and loss and expense?
What form of contract did you use and why?
How did you go about reviewing the additional cost?
Clifton House – Roof repair
I attended site with the client and contractor to confirm if practical
completion had been achieved. The contractor had completed the
majority of the works, however, the site had not been cleared or
cleaned. I identified that the external fire escape could not be used, and the temporary fire escape plan would need to remain meaning the client would still require additional night staff. I concluded that practical completion had not been achieved and issued a non-completion certificate
Why did you deem practical completion had not been issued?
What is the implication of a non-completion certificate?
How did you go about documenting this with the contractor?
How have you advised all parties of their contractual rights and
obligations?
When have you agreed a completion of certification and a final account?
How have you outlined and recommended to a client the proposed
contract preliminaries?
How have you assessed the quantum of a contractor’s claim?
Tell me about when you’ve been involved in advising on contract
modifications with a client.
Tell me about when you have provided reasoned advice any specific
matters of a contract.
Talk me through when you’ve led the selection of a form of contract for a project.
At Clifton House the client had obtained a specification from Bailey for the roofing system as they had used them before. The tender returns were very close with only 78 pounds between the lowest quotes.
Within the tender documents the contractors were also invited to provide costs for alternate cost effective solution which also achieved a cost saving.
I advised that the JCT minor works would
L3 - The Gregg School – Redecoration
The contractor requested an extension of time stating that the client’s variations had held them up. I reviewed the project records and site inspection reports (SIRs). I concluded that work had not progressed in a timely manner due to a lack of labour. I advised the client that an extension of time was not valid and therefore the contractor risked incurring LADs if the completion date was missed. I advised the contractor to ensure sufficient labour was allocated to the project and negotiated with both parties to allow weekend working to achieve practical completion. I agreed the final account and also attended site at the end of the defects liability period to assess the making good. I advised the client that the retention could be released.
How did the contractor request an extension of time?
What did the contract outline the next steps to be?
How did you deem lack of labour?
What is the process of applying LAD’s?
During your discussions with the contractor how is documented?
What was the protocol for end of defect period?
Newlands – Refurbishment
During the site visit I assessed the contractor’s valuation against works completed on site. The contractor was claiming for works not fully completed including the removal of loft insulation and completion of the sash window and door refurbishments. I also observed that the stair parts and internal doors had been delivered to site but had not been claimed. I requested the delivery receipt for the materials, amended the valuation and issued a payment certificate which reflected the works completed and the materials delivered to site. I advised the contractor and the client of their contractual rights regarding the materials and reiterated that all valuations must be correct so that that no dispute
over work completed could arise with the client.
How did you go about assessing works completed?
Why did you request for the delivery receipt?
Given the additional items, what impact did this have on your certificate?
What is the contractual rights regarding materials?
I received the valuation from the contractor and arranged a site meeting to assess the percentage completed were correct.
The contractor had claimed that the window and door refurbishment was 100% complete however during my inspection the ironmongery had not been changed and 9 windows were not balanced and functioning correctly as required in the schedule of works. The loft insulation had been removed but new insulation had not been installed.
I reduced the window and door items to 75% and the loft insulation to 50%
under MW16 the contract administrator is obliged to include the
unfixed materials when certifying interim payments. Clause 4.3.2, however, states that the obligation only extends to materials that are ‘reasonably and properly’ delivered and are adequately stored and protected. Contract administrators should pay careful attention to
the exact wording of this qualification.
I requested the delivery receipt to be included in the file for records along with photographs which confirmed they were suitably stored, in this instance they were stored within the building.
I requested the contractor provide me with a revised application which correctly reflected these items and issued a certificate for payment.
The client was concerned paying for materials with out them being fixed.
