Level 1 Flashcards
What was the Latham report about?
Sir Michael Latham, 1994. Government commissioned report.
Latham identified industry inefficiencies,
‘adversarial’, ‘ineffective’, ‘fragmented’, ‘incapable of delivering for its clients’ and ‘lacking respect for its employees’.
What were the recommendations of the Lathem Report?
1) The government should commit itself to being a best practice client.
2) A checklist of design responsibilities should be prepared.
3) A target should be set for 33% of government funded projects starting over the next four years to use the New Engineering Contract.
4) Adjudication should be the normal form of dispute resolution.
What is the Egan report about?
Rethinking Construction - Sir John Egan’s Construction Task Force (1998). The report identified a number of key drivers for change: committed leadership, a focus on the customer, integrated processes and teams, a quality driven agenda, and commitment to people.
What were the affects of the Latham Report and subsequent reports?
The NEC contracts produced.
What is a construction contract?
A formal agreement which sets out who does what for how much, how it should be done, and allocates the risk
What are the key principles of a construction contract?
“The obligations of parties and others:
• The works, supplies (goods), services, material, matters or things to be carried out or supplied.
• The payment – how much is to be paid, how and when it is to be paid.
• The time within which the contract is to be performed
• Quality requirements and/or standards which must be met
• Requirements on the contractor/employer to hold and maintain appropriate insurance
Provides procedures to vary the contract – instructions, variations extensions.
Provides procedures to manage dispute and disagreement.
Details what happens in the event that the contractor fails to comply with its contractual obligations (in whole or in part). (Delay, defective work, non completion)”
Name three factors that are necessary for a contract to be formed?
Offer, Acceptance and Consideration
List the typical documents that make up a building contract?
1) The Building Contract
2) The Specification
3) Priced Schedule of Work/Bill of Quantities
4) Pre Construction Information Pack
Can you expand on the building contract?
Legal document, usually in standard form. It sets out the roles, rights and responsibilities of the employer and the contractor.
Would would typically be expecerted in the specification section of a contract?
1) Prelims
2) Preambles
3) Works
4) The drawings/plans
What are Prelims?
Preliminaries are activities or costs that are not necessarily linked to the building work. They are costs associated with administration, setting up and Statutory Authorities regulations and fees
What are Preambles?
Quality of materials and workmanship.
What is the difference between preambles and preliminaries?
Prelims detail non-construction related works that the contractor needs to cost and preambles detail the quality requirements for materials and workmanship.
What is the priced schedule of work/bill of quantities?
Breakdown of all items being incorporated in the construction project. This is usually the base of the application for payment.
What is typically included in the Pre Construction Information Pack
Details of all the health and safety, security, welfare, access considerations that need to be taken into account. The response to which should be the contractors construction phase health and safety plan.
What certificates are issued under JCT Contracts (List 5)
interim payment certificates practical completion certificate certificate of making good defects final certificate extension of time certificate
What figures would you expect to be detailed on a payment certificate?
- The contract sum
- The gross valuation
- Less the retention
- Less the total amount previously certified
- Net amount for payment (in figures and words).
List the JCT Suite of Contracts?
Standard building contract Intermediate building contract Minor works building contract Design and build contract Management building contract Construction management contract Major Project construction contract
What are the forms of subcontract?
Short form of sub contract
Contractors design
Sub-sub contract
What must the CA do if you wish to withhold payment to a contractor?
Fun Fact= AKA Payless Notice.
Section 111 of the Housing Grant Construction and Regeneration Act 1996- give an effective notice of their intention to do withold payment. The notice needs to clearly state the amount withheld and the grounds for doing so
Did you or someone else in the firm sign the interim certificate?
All certificates were drafted by me, checked by a senior surveyor and then checked and signed by a Director.
What is a retention?
A percentage of the amount certified as due to the contractor on an interim certificate that is deducted from the amount due and retained by the client
What is the standard retention on your projects?
5% with 2.5% released at practical completion
What are the advantages of a retention?
1) funds rectifying defects,
2) Incentive for contractors to complete the project on time without defects,
3) Incentive for contractors to return for Rectification Period &
offers the client protection against contractor insolvency.
What are the disadvantages of a retention?
1) Contractor is not paid in full for satisfactory work,
2) 5% can represent a large portion or all of contractor profits,
3) A subcontractor who completes their works may not receive payment for months/ years until the project is complete
What is the Pye Tait Review?
The review sought to assess the costs and benefits of retentions and alternative mechanisms. It found that the average retention was 4.8%.
What were the key findings of the Pye Tait review?
Non payment or late payment of retentions included:
1) Disputes over defects.
2) Contractors becoming insolvent.
3) Non-payment in a higher tier of the supply chain.
4) Contractors not asking for their retention money, with some Tier 3 companies pricing work to offset the retention costs, and others keen to maintain good relationships with their main contractor.
What alternatives to a retention were recomended in the pye tait review?
Project bank accounts, Retention bonds, Performance bonds, Escrow stakeholdedr accounts, Parent company gaurentees, Retentions held in trust funds
What actions have been taken to improve retentions?
2017 - pye tait review,
2018 - bill passed so retentions are held in third party scheme
2019 - persimmon homes let buys hold back a retention until snagging issues are dealt with
2019, build uk published a set of minimum standards for retentions
2020- Debate in House of Commons- seen as a backward step?
What is a bond?
Bonds are means of protection against the non-performance of the contractor.
Can you list the different types of bonds?
Performance bond, Advance payment bond, Bid bond, Retention bond, Adjudication bond,
What is a performance bond?
Provides the Employer with some financial security payable by the Bank for the Contractor’s failure to perform under the contract. (10% of the contract value.)
What is a advance payment bond?
If the client decides to make an advance payment to the contractor a bond will be required to protect the client in the event of default by the contractor. This as an on demand bond.
What are bid bonds?
Rare in the Uk, typically used on international projects submitted with a tender to secure commitment to the project. This as an on demand bond.
What are adjudication bonds?
Emerged from PFI/PPP projects, a payable amount due upon the adjudicators decision.
What are retention bonds?
The client agrees to pay amounts that would otherwise be held as a retention. The value of the bond decreases after PC.
What is a bondsman?
A professional agent, agency or corporation who takes responsibility for another persons obligations by signing a bond to that effect.
What is a surety?
Takes responsibility for another persons obligations and may have to undertake payment to the client in the event of non-performance
What is an on demand and conditional bond?
On-demand bond - the bondsman pays an amount of money set out in the bond immediately.
Conditional bond - requires the client to provide evidence that the contractor has not performed before the amount stated in the bond is payed
What is a pay less notice?
The purpose of a pay less notice is to provide the employer with a method of notifying the contractor that he or she intends to pay less than the sum stated on a payment notice.
When must a payless notice be issued?
A pay less notice must be issued by the employer not more than 5 days (JCT) or 7 days (NEC) after the interim payment certificate was issued.
Failure to issue a pay less notice within the given times the value stated on the interim certificate will stand.
Can a contractor apply for a pay less notice?
Yes, The contractor must specify both the sum that they consider to be due to the employer at the date the pay less notice is given and the basis on which that sum has been calculated.
When is a payless notice required
A defect is found after the payment notice was issued
If the payer has made a fundamental error in their previous payment notice.
When the payer or specified third person has failed to serve a payment notice in time, or at all.
What are the types of payment described in the Construction Act 1996
Installments - pre-agreed payment dates not subject to payment after the completion date
Stage payments - payments made at pre-agreed milestones
Periodic payments - payments assessed monthly by a valuation
Why is can creating a bespoke definition of Practical completion be an issue
It adds complexity if a dispute were to arise.
It can conflict with other contractual provisions such as payment.
How did you decide whether PC had been achieved?/ When can you certify practical completion?
1) Works are substantially completed/free of patent defects
2) Complete health and safety file has been issued in draft.
3) The client ability to take possession and make beneficial use of the building.
What are the consequences of issuing the PC certificate?
1) rectification period begins, the retention often reduces as detailed in the contract and responsibility for insuring the premises passes back to the client. Final account is then prepared.
What happens after the rectification period ends?
Joint snagging inspection should be undertaken by the CA and Contractor.
The contractor should rectify any defects
Second inspection should be undertaken to confirm this.
Certificate of making good defects and a final payment certificate should be issued (for the retention).
The contractor will then issue this to the client with his final invoice.
What is Sectional Completion?
Written into the contract = liquidated damages associated with it.
What is Partial Possession?
Client takes over part of the site that has been substantially completed with the contractor’s consent (which cannot be unreasonably withheld).
What is the effect of partial possession?
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. Liquidated damages reduce proportionally.
The client is responsible for that part and should insure it.
Does the Contractor have to accept Partial Possession?
The contractor is not obliged to allow partial possession but cannot be unreasonably withheld, reasons for no allowing partial possession include, disruption to works or extra costs?
What is Partial Possession referred to under NEC?
New Engineering Contract (NEC) offers a different description of partial possession as ‘taking over’ the works.
What is the difference between Sectional Completion and Partial Possession?
Both involve the client taking exclusive possession of that area of the site. The CA will either issue a sectional completion certificate or a notice to confirm the partial possession. This will mean that the defects liability period begins for that area and responsibility for insuring the area passes to the client. With partial possession the liquidated damages is reduced on a pro rata a basis.
What do you know about collateral warranties?
A collateral warranty is an agreement which gives a third party rights collateral to rights in an existing contract entered into by two separate parties. It forms a contract between one of the parties to the underlying contract and a third party with an interest in the performance of that contract.
Under JCT IC, what collateral warranties may a principal contractor provide?
It is usual for a principal contractor to provide collateral warranties for subcontractors they intend to use that will have an element of design responsibility. Also under IC / SBC, the contract requests for collateral warranties to be provided by the contractor to the purchasers, tenants, funders as well as the employer.
What are some challenges with Collateral warranties?
JCT does not issue a Consultant Collateral Warranties. However, they do have a range of collateral warranties for contractors/Subcontractors/Employers/Tenants/Purchasers. It has been noted that clients often claim that industry-standard warranties favor contractors and designers.
Onerous terms that designers or contractors are unable to agree to as their insurers will not provide cover. As a consequence many collateral warranties are bespoke.
On large projects with many consultants and sub-contractors and multiple occupants, there can be a great number of warranties. The Contracts (Rights of Third Parties) Act can offer a way around this difficulty by allowing the primary contracts to confer benefits upon third parties even though they are not a party to that contract.
What is the JCT suite of Collateral Warranties?
JCT does not issue a Consultant Collateral Warranties. However, their suite of collateral warrenties include; Contractors/Subcontractos/Employers/Tenants/Purchase
How do you identify risks of a project?
1) risk workshop in the feasibility stage and produced a risk register.
2) Maintain that risk register throughout the project.
2A) The register identified the risk, scored it based on likelihood and severity, described the mitigating actions to be taken and apportioned ownership for that risk.
What is your role of contract administrator / project manager?
The CA is employed by the client to administer the contract on his behalf as an agent, however he must always act with impartiality and integrity. Duties include formulating the contract, issuing instructions, raising certificates, carrying out site inspections, assessing EOT claims.
A project manager is the person who has the overall responsibility for the successful initiation, planning, execution and closure of a project. This includes resource planning, risk management, quality control, managing teams and providing appropriate documentation.
What might you do if a contractor makes an error in his tender?
There are two alternative – the tenderer must stick by their price or withdraw, or they are given the opportunity to amend the price.
What helps managing meetings?
Issuing an agenda, allow each member of the member an opportunity to express their point of view, controlling when and how long people can speak, ensuring all points are covered thoroughly and resolutions are confirmed, ensure minutes are taken and reflected upon.
What does JCT stand for and what is the most recent edition?
Joint Contracts Tribunal and 2016.
What is a Design and Build Contract?
Designed for construction projects where the contractor carries out both the design and the construction work. Design and build projects can vary in scale, but the Design and Build Contract is generally suitable where detailed provisions are needed.
What is a JCT Construction Management Contract?
Designed for construction projects where the employer appoints seperate trades to carry out the works, and a construction manager to oversee the works for a fee.
What is an Intermediate form of Building Contract?
Designed for construction projects involving all of the trades and skills of the industry but without specialist or complex building services installations
What is a Minor Works Building Contract?
Designed for smaller, basic construction where the works are simple in nature. For traditionally procured projects
What is a Standard Building Contract
The JCT Standard Building Contract is designed for large or complex construction projects where detailed contract provisions are needed. Standard Building Contracts are suitable for projects procured via the traditional or conventional method.
In the JCT Suite of contracts, what are recitals, articles and contract particulars?
Recitals – Introduce the nature / background of the contractual relationships and includes work to be carried out, details of the drawings and specifications.
Articles – Details the contract sum, persons involved in the contact (Architect, QS, CDM-C) and methods of dispute resolution
Contract Particulars – Sections to be completed by the parties. It sets out a number of different provisions such as date for completion, dates of possession, LADs, rectification period, insurance options, etc.
Name some difference of the JCT MW and the JCT IC/SBC?
The following is not available under MW, but is available under IC and SBC: • Sectional completion • Early possession • No relevant events • Named subcontractors • Advance payment • Bonus for early completion.
What does FIDIC stand for?
International federation of Consulting Engineers
What are the FIDIC contracts?
Green Book - Short form, less value that 500,000
Red Book - Conditions of contract for buiding and engineering
Yellow book - Conditions of contract for plant design and build
Silver book - Conditions for EPC / Turnkey projects
What does NEC stand for?
New Engineering Contract
Can you give me some examples of NEC Contracts?
NEC4 Engineering & Construction NEC4 Design Build & Operate Contract NEC4 Engineering & Construction Subcontract NEC4 Framework Contract NEC4 Professional Servies Contract NEC4 Supply Contract
What were some recent changes to NEC4?
Amendments to the NEC4 suites were published in October 2020. Some of which include;
1) Delay damages - amended to clarify that any delay damages cease at termination.
2) Plant and materials - amended to confirm that the Contractor is liable for loss of or damage to any equipment provided by the Client to the Contractor.
3) Banking - updated to reflect user feedback, electronic banking methods and best practice.
4) Gender-neutral wording.
These updates do not apply to users of NEC3 contracts.
What are some differences between JCT and NEC
JCT
- No Programme
- Lump sum with Provisional Sums
- Monthly interim valuations
NEC
- Programme is the heart of the contract docs
- No provisional sums
- Can be based on targets
- Easier to understand
What is the difference between JCT/NEC?
*JCT designed for use in England and Wales, whereas NEC are for international use with a choice of governing law and language;
- JCT uses legal terms, whereas NEC attemps to eliminate legal terms and provide a simple language;
- JCT seperate contracts for employer-design or contractor-design, whereas NEC allows for this or part and part. it is simply express in the works information;
- JCT subjective judgement of practical completion, whereas NEC defines a state of completion.
When are NEC contracts used?
To date NEC has most often been used for infrastructure and building contracts. The contracts are designed for worldwide application. Known for helping to improve project management, they can be used in any sector.
When would you use a FIDIC Contract?
International construction contracts.
What are the different pricing mechanisms used in nec?
A) Fixed Price or Lump Sum B) Re-measurement C) Target Cost D) Guarenteed Maximum Price E) Cost re-imbursement
Who formed the Joint Contracts Tribunal?
Royal Institute of British Architects (RIBA)
