5626 BESG Construction Contracts

1. Faculty of Engineering and Technology Department of Built Environment 5626 BESG Construction Contracts

2. Lecture Two FUNCTION AND FORMATION OF CONSTRUCTION CONTRACTS

3. In this session… • The function of the Construction Contracts • Content of the construction contract • Formation of construction contracts

4. Learning outcomes • At the end of this session you should be able to: • Understand how the construction contract if formed • Identify and understand the content of the construction contracts • Understand the basic principles of the construction contract.

5. Dr. Y. Upadhyay. Function of a construction contract: • Specifying the work to be done by the contractor (or subcontractor) including the required quality and time for completion of various parts of the work.

6. Dr. Y. Upadhyay. Payment • Defining what amount is to be paid, how any additional or reduced payments are to be computed and when payments are to be made.

7. Dr. Y. Upadhyay. Force Majore Clause • Defining which party is responsible for events occurring outside the parties direct control which affect the work; such events may include bad weather, access difficulties, local authority restrictions, changes in the law, etc. http://www.rollonfriday.com/Default.aspx?TabId=318&Id=3245&fromTab=318&currentIndex=47

8. Dr. Y. Upadhyay Construction contracts and ‘Constructing the Team • Sir Michael Latham asserts that a modern contract should be chosen by the client in direct relation to the procurement route most appropriate to the project and the client’s objective.

9. Dr. Y. Upadhyay He further states that a contract should: • Encourage collaborative relationships between Design Teams and Contractors. • Provide means for a totally impartial Adjudicator between Client and Contractor. • Create a general duty to trade fairly with specific requirements relating to payment, work stages and pre-pricing of variations.

10. Dr. Y. Upadhyay Latham’s 13 contract principles: • A specific duty for all parties to deal fairly with each other and with their subcontractors, specialists and suppliers in a atmosphere of mutual cooperation. • Firm duties of teamwork, with shared financial motivation to pursue those objectives including a presumption to achieve a ‘win-win’ solutions to problems which may arise during the course of the project.

11. Dr. Y. Upadhyay Interdisciplinary • A wholly interrelated package of documents which clearly define the roles and duties of all involved and which is suitable for all types of project and for any procurement route. • Easily comprehensible language and with guidance notes attached.

12. Dr. Y. Upadhyay Allocation of risk • Separation of the roles of contract administrator, project or lead manager and adjudicator. • A choice of allocation of risks to be decided as appropriate to each project but then allocated to the party best able to manage, estimate and carry the risk.

13. Dr. Y. Upadhyay Pre-planning. • Taking all reasonable steps to avoid changes to pre-planned works information. • But, where variations do occur, they should be priced in advance, with provision for independent adjudication if agreement cannot be reached.

14. Dr. Y. Upadhyay Schedules of activities • Express provision for assessing interim payments by methods other than monthly valuations, e.g., milestones, activity schedules or payment schedules. • Clearly setting out the period within which interim payments must be made to all participants in the process.

15. Dr. Y. Upadhyay Dispute Resolution • Provide for secure trust fund routes of payment. • While taking all possible steps to avoid conflict on site, providing for speedy dispute resolution if conflict arises, by a predetermined impartial adjudicator/referee/expert.

16. Dr. Y. Upadhyay Performance incentives • Providing for incentives for exceptional performance. • Making provision where appropriate for advance mobilisation payments (if necessary bonded) to contractors and subcontractors including in respect of off site prefabricated materials provided by part of the construction team.

17. Dr. Y. Upadhyay. Main Forms of Standard Contracts:

18. Dr. Y. Upadhyay. JCT 2011 suite of Contracts The Joint Contracts Tribunal have produced a revised and restyled suite of contracts. There are 57 main contracts, subcontracts, warranties and guides.

19. Dr. Y. Upadhyay. 1. Standard Building Contract (with quantities) • Appropriate: • For larger works designed and/or detailed by or on behalf of the Employer, where detailed contract provisions are necessary and the Employer is to provide the Contractor with drawings and bills of quantities to define the quantity and quality of the work. • Where a Contract Administrator and QS are to administer the conditions.

20. Dr. Y. Upadhyay. Standard Building Contract (with quantities) • Can be used: • Where the Contractor is to design discrete part(s) of the works. (contractor’s designed portion). • Where the works are to be carried out in sections. • By both private and local authority employers

21. Dr. Y. Upadhyay. 2. Standard Building Contract (with approximate quantities) • Appropriate: • For larger works designed and/or detailed by or on behalf of the Employer, where detailed contract provisions are necessary and the Employer is to provide the Contractor with drawings and with approximate bills of quantities to define the quantity and quality of the work, which are to be the subject of remeasurement.

22. Dr. Y. Upadhyay. Standard Building Contract (with approximate quantities) • Where a Contract Administrator and QS are to administer the conditions.

23. Dr. Y. Upadhyay. Standard Building Contract (with approximate quantities) • Can be used: • Where the Contractor is to design discrete part(s) of the works. (contractor’s designed portion). • Where the works are to be carried out in sections. • By both private and local authority employers

24. Dr. Y. Upadhyay. 3. Standard Building Contract (without quantities) • Appropriate: • For larger works designed and/or detailed by or on behalf of the Employer, where detailed contract provisions are necessary and the Employer is to provide the Contractor with drawings and with either a specification or work schedules to define adequately the scope and quality of the work and where the degree of complexity is not such as to require bills of quantities. • Where a Contract Administrator and QS are to administer the conditions.

25. Dr. Y. Upadhyay. 4. Intermediate Building Contract (IC) • This contract provides more detailed provisions and more extensive control procedures than the Minor Works Building Contract (MW) but less detailed than the SBC.

26. Dr. Y. Upadhyay. Intermediate Building Contract (IC) • Appropriate: • Where the proposed building works are of simple content involving the normal, recognised basic trades and skills of the industry, without building services installations of a complex nature or other complex specialist work.

27. Dr. Y. Upadhyay. Intermediate Building Contract (IC) • Where the works are designed by or on behalf of the Employer, where fairly detailed contract provisions are necessary and the Employer is to provide the Contractor with drawings and a specification, work schedules or bills of quantities to define adequately the quantity and quality of the work. • Where a Contract Administrator and Quantity Surveyor are to administer the conditions.

28. Dr. Y. Upadhyay. Intermediate Building Contract (IC) • Can be used: • Where the works are to be carried out in sections. • By both private and local authority employers. • Where provisions are required to cover named specialists.

29. Dr. Y. Upadhyay. Intermediate Building Contract (IC) • Not suitable: • Where the Contractor is to design discrete part(s) of the works, even though all the other criteria are met (more appropriate to use ICD).

30. Dr. Y. Upadhyay. 5. Intermediate Building Contract with contractor’s design (ICD) • Appropriate: • Where the proposed building works are of simple content involving the normal, recognised basic trades and skills of the industry, without building services installations of a complex nature or other complex specialist work.

31. Dr. Y. Upadhyay. Intermediate Building Contract with contractor’s design (ICD) • Where fairly detailed contract provisions are necessary and the Employer is to provide drawings and a specification, work schedules or bills of quantities to define adequately the quantity and quality of the work.

32. Dr. Y. Upadhyay. Intermediate Building Contract with contractor’s design (ICD) Where the works are designed and the requirements for the contractor’s design of discrete part(s) are detailed by or on behalf of the Employer, and where the Contractor is required to design those part(s) of the work (contractor’s designed portion). Note: only to be used where there is PARTIAL Contractor design.

33. Dr. Y. Upadhyay. Intermediate Building Contract with contractor’s design (ICD) • Where a Contract Administrator and Quantity Surveyor are to administer the conditions.

34. Dr. Y. Upadhyay. Intermediate Building Contract with contractor’s design (ICD) • Can be used: • Where the works are to be carried out in sections. • By both private and local authority employers. • Where provisions are required to cover named specialists.

35. Dr. Y. Upadhyay. Intermediate Building Contract with contractor’s design (ICD) • Not suitable: • As a Design and Build contract.

36. Dr. Y. Upadhyay. 6. Design and Build Contract (DB) • Appropriate: • Where detailed contract provisions are necessary and Employer’s Requirements have been prepared and provided to the Contractor. • Where the Contractor is not only to carry out and complete the works but also to complete the design • Where the Employer employs an agent to administer the conditions

37. Dr. Y. Upadhyay. Design and Build Contract (DB) • Can be used: • Where the works are to be carried out in sections. • By both private and local authority employers. • Where the Contractor is restricted to design small discrete parts of the works and not made responsible for completing the design for the whole works consideration should be made to use one of the JCT contracts that provide for such limited design input.

38. Dr. Y. Upadhyay. 7. Major Project Construction Contract (MP) • Appropriate: • For major works where the Employer regularly procures large-scale construction work and where the Contractor to be appointed is experienced and able to take greater risk than would arise under other JCT contracts. • Where the parties have their own detailed procedures and where limited procedures only need to be set out in the contract conditions. • Where the Employer has prepared his requirements and provided these to the Contractor

39. Dr. Y. Upadhyay. Major Project Construction Contract (MP) • Where the Contractor is not only to carry out and complete the works but also to complete the design. • The Employer employs a representative to exercise the powers and functions of the Employer under the Contract.

40. Dr. Y. Upadhyay. Major Project Construction Contract (MP) • Can be used: • Where the works are to be carried out in sections.

41. Dr. Y. Upadhyay. 8. Construction Management Trade Contract (CM/TC) This Contract is to be entered into between the Client and the Trade Contractor in conjunction with the Construction Management Agreement (CM/A)

42. Dr. Y. Upadhyay. 9. Major Project Construction Contract (MP) • Appropriate: • Where the Client is to enter into direct separate trade contracts. • Where a Construction Manager appointed under the Client and Construction Management Agreement is to administer the conditions on behalf of the Client.

43. Dr. Y. Upadhyay. Major Project Construction Contract (MP) • Can be used: • Where the works are to be carried out in sections.

44. Dr. Y. Upadhyay. 10. Management Building Contract (MC) The Management Contractor does not carry out any construction work but manages the Contract for a fee. The Management Contractor employs Works Contractors to carry out the construction works.

45. Dr. Y. Upadhyay. Management Building Contract (MC) • Appropriate: • For large-scale projects requiring an early start on site, where the works are designed by or on behalf of the Employer but where it is not possible to prepare full design information before the works commence and where much of the detail design may be of a sophisticated or innovated nature requiring proprietary systems or components designed by specialists.

46. Dr. Y. Upadhyay. Management Building Contract (MC) • Where the Employer is to provide the Contractor with drawings and a specification. • Where a Management Contractor is to administer the conditions.

47. Dr. Y. Upadhyay. Management Building Contract (MC) • Can be used: • Where the works are to be carried out in sections. • By both private and local authority employers.

48. Dr. Y. Upadhyay. 11. Prime Cost Building Contract (PCC) The work proceeds on the basis of a brief specification and an estimate of its cost. The Contractor is paid his reasonable costs plus either a percentage of the cost or a lump sum as a fee.

49. Dr. Y. Upadhyay. 12. Prime Cost Building Contract (PCC) • Appropriate: • For projects requiring an early start on site, where the works are designed by or on behalf of the Employer but where it is not possible to prepare full design information before the works start. • Where detailed contract provisions are necessary and the Employer is to provide a specification describing and showing the items of work. Drawings may also be provided. • Where a Contract Administrator and QS are to administer the conditions.

50. Dr. Y. Upadhyay. Prime Cost Building Contract (PCC) • Can be used: • Where the works are to be carried out in sections. • By both private and local authority employers.