Level 2 - Contract Administration Flashcards
What are the key differences between NEW and JCT contracts?
The following are key differences between the JCT Design & Build 2015 form of building contract (‘the JCT Contract’), and the NEC Engineering and Construction Contract Option C form of Contract (‘the NEC Contract’).
1 Price
The JCT Contract is a fixed price lump sum contract. NEC Option B offers a fixed price lump sum contract but Options C and D are target cost contracts.
2 Provisional sums
The JCT Contract contains provisional sums, whilst the NEC Contract does not.
3 Cost scrutiny
In a JCT contract there may be some cost scrutiny via the contract sum analysis and tender negotiations but the NEC contract has an open book procedure with the key concepts of defined cost and disallowed cost.
4 Ground Risk
In the JCT contract ground risk is with the contractor. However, the NEC contract uses the ICE forseeability test in relation to ground conditions.
5 The programme
The JCT contract does not have a programme as a contractual document. The programme is at the heart of the NEC ethos. It is a contractual document and to be regularly updated. The NEC contract also has key concepts such as float, completion float and time risk allowances.
6 Payment
In relation to payment, the JCT contract payment section is clear, is all in one section (clause 4) and easy to follow. However, in relation to the NEC contract it is located in three different locations – clause 5, Y(UK)2 and Contract Data Part 1.
7 Extension of time/loss and expense
In relation to extensions of time and loss and expense, the JCT contract has relevant matters and relevant events and time and money are dealt with as separate concepts. The NEC contract has the compensation event and it deals with both time and money. The ethos of compensations events is that they are dealt with in real time as much as possible and this is very much process driven. The compensation events also have a condition precedent nature, and failure to notify the compensation event within the 8 week period can have dire consequences.
8 Insurance
The JCT contract contains comprehensive detail in relation to insurances at clause 6 and Schedule 3. In relation to the NEC contract, the insurance detail is very brief and contained at clause 84 of the contract. The NEC contract is silent on some insurances. The missing insurances relate to existing buildings insurance and adjacent property insurance, and need to be included in the additional insurances section of the Contract Data Part 1.
9 Design risk
The JCT contract has a clear interaction between the Employer’s Requirements and Contractor’s Proposals and there is extensive drafting in the JCT. The NEC contract however simply states a contractor is to design the parts of the works which the Works Information states he is to design. The Works Information contains far more than Employer’s Requirements. There is guidance as to what the Works Information should contain and it is dangerous and bad practice to simply re-badge a JCT Employer’s Requirements document as an NEC Works Information document.
10 Employers Requirements/Works Information
The Works Information contains far more information than a JCT Employers Requirements as it is a shorter contract and leaves the some of the detail to the Works Information. Simply re- badging a JCT Employers Requirements as an NEC Works Information is dangerous as the terminology and level of detail required is different.
Can you explain how the valuation process works in a D&B contract? How does it differ in a NEC contract?
Construction contracts will generally provide for the contractor to claim direct loss and/or expense as a result of the progress of the works being materially affected by relevant matters for which the client is responsible, such as:
Failure to give the contractor possession of the site.
Failure to give the contractor access to and from the site.
Delays in receiving instructions.
Opening up works or testing works that then prove to have been carried out in accordance with the contract.
Discrepancies in the contract documents.
Disruption caused by works being carried out by the client.
Failure by the client to supply goods or materials.
Instructions relating to variations and expenditure of provisional sums.
Inaccurate forecasting of works described by approximate quantities.
Issues relating to CDM.
Claims may comprise costs resulting from disruption to the works or from delays to the works (prolongation).
The contractor must give written notice of a claim as soon as it becomes reasonably apparent that the regular progress of the works is being materially affected. This need not necessarily result in a delay to the completion date, and so claims for loss and expense and claims for extensions of time do not necessarily always run together.
What is the RICS black book?
The ‘Black Book’ is a suite of guidance notes that define good technical standards for quantity surveying and construction professionals.
When is a contractor entitled to an extension of time?
When an issue has arisen out of their control which means their original programme may not be achieveable:
1) variation
2) exceptionally adverse weather - depending on the contract wording.
Extension of time EOT in construction contracts
Construction contracts generally allow the construction period to be extended where there is a delay that is not the contractor’s fault. This is described as an extension of time (EOT).
When it becomes reasonably apparent that there is, or that there is likely to be, a delay that could merit an extension of time, the contractor gives written notice to the contract administrator identifying the relevant event that has caused the delay.
If the contract administrator accepts that the delay was caused by a relevant event, then they may grant an extension of time and the completion date is adjusted.
Relevant events may include:
Variations.
Exceptionally adverse weather.
Civil commotion or terrorism.
Failure to provide information.
Delay on the part of a nominated sub-contractor.
Statutory undertaker’s work.
A delay in giving the contractor possession of the site.
Force majeure (such as an epidemic or an ‘act of God’).
Loss from a specified peril such as flood.
The supply of materials and goods by the client.
Strikes.
Changes in statutory requirements.
Delays in receiving permissions that the contractor has taken reasonable steps to avoid.
The contractor is required to prevent or mitigate the delay and any resulting loss, even where the fault is not their own.
Assessing claims for an extension of time can be complicated and controversial. There may be multiple or concurrent delays, some of which are the contractor’s fault and some not. There are many occasions where contractors contribute to delay themselves by their performance during design periods, when producing drawings, mock ups and samples or in inter-facing with sub-contractors.
What is the difference between a Contract Administrator (CA) and Employers Agent (EA)?
The only differences is that an Employers Agent performs the contract administration role within design and build contracts whereas the Contract Administrator performs the same contract administration role in traditional forms of contract.
How would you implement a change control procedure?
Review if a change had been requested. The reasons for this change? If required this would be formally instructed and recorded.
What is beneficial use?
Often on major projects lifts and escalators are handed over into beneficial use to allow these assets to be used whether in operational trials, soft start-up or full in-service hand over.
What would you do if the contractor has not completed by the PC date?
Issue a notice of non completion, unless an EOT has otherwise been agreed.
How does sectional completion differ from partial possession?
Sectional completion is a term used to describe either practical completion of a section or the completion of the whole of the works under the building contract in sections. It differs from partial possession in that it is pre-determined and addressed in the contract documents.
What is partial possession?
The effect of partial possession is that:
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.
The contractor is not obliged to allow partial possession (although permission cannot be unreasonably withheld), and may not wish to if, for example, access routes are difficult to achieve, it would disrupt the works, or it would incur additional costs. There could also be additional difficulties if the occupants of the part that has been possessed disrupt the contractor, which could result in a claim for extension of time and/or loss and expense.
How would you calculate Liquidated damages?
They are often calculated on a daily or weekly rate. Liquidated damages are not penalties, they are pre-determined damages set at the time that a contract is entered into, based on a calculation of the actual loss the client is likely to incur if the contractor fails to meet the completion date.
Such as bank fees, prelim costs etc.
What do you do if you issue a payment notice with the wrong date or cost included?
Advise the recipient of the error and reissue.
Define contract administrator
In the construction industry, the contract administrator is the individual responsible for administering the construction standard contracts. … The contract administrator’s role will generally include: Inviting and processing tenders. Preparing contract documents for execution. Administrating change control procedures.
What is a payless certificate?
The client must issue a pay less notice if they intend to pay less than the amount set out in the payment notice, setting out the basis for its calculation. This has to be issued 5 days prior to payment date.
What is a variation?
A variation (sometimes referred to as a variation instruction, variation order (VO) or change order), is an alteration to the scope of works in a construction contract in the form of an addition, substitution or omission from the original scope of works.
