Contract Practice - NEC & JCT Flashcards
What is delay damages?
- It is a genuine pre-estimate of loss suffered by the employer because of late completion of the works. This is included into the contract.
- They are not a penalty; they need to be a genuine estimation as if the courts decide are unreasonable, they might not be enforceable.
How do you apply delay damages?
• Contractor/subcontractor pays delay damages at the rate stated in the contract data from the completion date until actual completion or the date on which the employer takes over the works
What clause is delay damages in NEC?
• X7
How was the time entitlement assessed in implemented compensation events?
• You assess the compensation event in accordance with the accepted programme
How are delay damages calculated by the client?
- Loss of rent or other income
- Additional professional fees
- Legal costs
What is included in subcontract part 1 and part 2?
• Contains information that is specific to the project
Part 1
• NEC option used
• Works information
• Boundaries of the site
• Starting and access dates
• Risk and insurances
• Defect period
Part 2
• Key people
• Direct fee percentage
• Working fee percentage
• Design overhead fees
What is the difference between part 1 and part 2?
• Part 1 completed by the employers and part 2 completed by the contractor
How did you ensure liabilities documents are up to date?
• For example, employer and public liability was expiring and therefore I requested it from the supply chain
What is disallowed cost?
- On my project the main point of disallowed cost is:
- It’s a cost that is decided by the employer that is not justified by the contractor’s accounts and records
- Was incurred in relation to work on services that are not part of the works information
- Subcontractor have not given an early warning which this subcontract required him to give
- Cost of correcting defects
What is defined cost?
- The amount payment paid a contractor has paid a sub-subcontractor minutes retention correction of defects etc.,
- Cost of subcontractor’s people priced at the agreed subcontract rates.
- Cost of invoices for equipment
- Less Disallowed cost
What is a JCT contract?
• Joint contracts Tribunal
Key characteristics to choose a contract?
- Size, value, complexity
- Need for contractor design
- Certainty on final cost
- Appetite for risk and risk transfer
- Employer experience
What are some of the contracts in the JCT family?
- Design and build contract
- Standard Building contract
- Management Building contract
When would you use a standard building JCT contract?
- Traditional procurement route
- When the design is complete and
- Greatest price certainty
- Might take a bit longer
- Lump sum with interim payments
- Most likely for large or complex construction project
When would you use a design and build contract?
- When the client wants the contractor to design and construct the works
- Contractor completes the design based on concept provided through the employers advisers or will be responsible for producing and completing the design right from the outset
- The employer normally uses an agent to administer the contract
- Client wishes to minimize the risk as the client wil have no responsibility for design
- Where the employer does not want to retain full control over the design development
- Lump sum
- The contractor needs to be experienced as the contractor assumes more risks and responsibilities under other JCT contracts
- In the event between Employer requirements and contractor proposals, the contractor proposal is to prevail.
- Employer is responsible for issuing statements or instructions as required under the contract
- Advantage – single point of contract, early start on-site , early price certainty
- Disadvantages – Reduced quality , client needs to commit to an concept design early
When would you use a management contract?
- A management contractor is appointed by the client for a fee
- Suitable for large complex project
- Employer is responsible for the design and this is usually supplied to the management contractor by the architect or design team working on the employer’s behalf.
- The employer is responsible for the design dn this is usually supplied to the management contractor by the architect or design team working on the employers behalf
- Management contractor appoints works contractors. Contractor has a direct contractual link with all the works contractors and is responsible for all the construction works.
- Advantage – early start on site, design overlap between design and construction , the contractor contributes to the design, work packages are awarded competitively
- Disadvantage – must have a good quality brief to design team , cost certainty is not achieved until all the trade packages are awarded,
- Management contractor should be appointed early so they can cooperate with the architect and contract administrator
- Prime cost (actual cost) plus management fee
- Interim payments are monthly
What is a relevant matter and name an example?
• It is a matter for which the client is responsible for affecting the progress of the works
• The contractor can claim direct loss and expense
• Example
o Failure to give the contractor possession or access of the site
o Delays in receiving instructions
o Disruption caused by works being carried out by the client.
o Failure to provide materials
What is a relevant event and name an example?
- Event that causes a delay to the completion date, which is caused by the client, or a neutral event not caused by either party
- Contractor can claim extension of time which helps shielding you from getting delay damages
- Variations
- Exceptionally adverse weather
- Delay in giving the contractor possession of the site
Example of an event being both a relevant matter and a relevant event?
- Materials not being supplied to the contractor which caused a delay to the programme which caused an expense to the contractor.
What does NEC stand for?
- New engineering contract
Risk profiles of different options?
