The Joint Contracts Tribunal has released an updated suite of standard form construction contracts for Design & Build as part of an ongoing revamp. Weightmans LLP partner and head of construction John Cleaveley examines the changes
The provisions relating to payments and insurance have seen the most significant change in the Joint Contracts Tribunal (JCT) Design & Build contract 2016. DESIGNED FOR CONSTRUCTION PROJECTS WHERE THE CONTRACTOR PERFORMS BOTH THE DESIGN AND THE CONSTRUCTION WORK, THE AREA OF THE JCT DESIGN & BUILD CONTRACT 2016 THAT HAS SEEN THE MOST SIGNIFICANT CHANGE IS THE PROVISIONS RELATING TO PAYMENTS AND
The payment provisions have been amended to simplify the process and reflect fair payment principles, while the new insurance option is intended to assist tenants in overcoming problems while carrying out work on their landlord’s property. While some of the changes are welcome, the amendments do not go far enough to bring the JCT terms more in line with market standards. As a result, they are unlikely to shorten the time it takes to draught and negotiate customised amendments.
A more straightforward and equitable payment system The Interim Valuation Date has been given a new definition. The default position is now that the first interim valuation date is one month after the date of possession, and subsequent interim valuation dates are at monthly intervals. The contractor submits an Interim Payment Application for each Interim Payment, stating the amount due and how the total was calculated.
Unless the contractor’s Interim Payment Application is received after the stated date, the monthly due date for each Interim Payment will be seven days after the Interim Valuation Date, in which case the due date will be seven days after the date of receipt by the employer.
The due date under the JCT 2011 contracts was the later of the following:
The completion date of the stage (in the case of Alternative A) or the specified date (in the case of Alternative B); or
The date the Interim Application was received by the employer.
The current JCT payment period has been changed as a result of this amendment. Employers and contractors will need to keep this in mind during the negotiation process.
The employer must provide a Payment Notice to the contractor no later than five days after the due date, stating the amount owed. The employer must pay the sum stated in the Payment Notice on or before the final payment date, subject to any Pay Less Notice. Each Interim Payment must be paid within 14 days of its due date.
This period now includes the final payment. There is no longer a distinction between interim payments due before and after practical completion. Previously, the interim certificate period during the Rectification Period was two months rather than one month.
The monthly payment cycle continues after practical completion until the final payment is due. A new procedure for assessing loss and expense claims has also been implemented. Previously, submitting a valid application gave the contractor the right to have loss and expense calculated and added to the Contract Sum.
This has been replaced by a more detailed notification and evaluation process akin to that required for time applications. The employer must assess the loss and/or expense incurred as soon as possible, as new clause 4.20 requires the employer to notify the contractor of the amount determined within 28 days of receipt. However, there are no consequences if the employer fails to notify within the timeframe.
Tenant insurance that is adaptable Along with significant changes to payments, the new contracts address common issues with the insurance provision used when working on existing structures – Option C: Insurance.
Under this option, the employer is required to obtain an all-risks policy for the existing structure in the names of both the employer and the contractor. However, this assumes that the employer owns the building. This creates a problem when the work is done by a tenant, because the tenant has no control over the building’s insurance.
A new insurance option, C1 Replacement Schedule, has been introduced to address this issue. The new provision allows tenants and landlords to disregard standard provisions and tailor provisions to their specific needs.
alterations to the 2011 edition The JCT has taken advantage of this latest iteration to clean up some of the drafting. For example, a new clause 1.10 has been added to confirm that any consent given by either the employer or the contractor shall not be “unreasonably withheld or delayed.” This reduces the number of times this phrase appears throughout the contract.
Other modifications include:
- CDM Regulations – The new contracts incorporate the Construction (Design and Management) Regulations 2015 changes.
- Security documents – now include clauses requiring the contractor to provide performance bonds and/or parent company guarantees.
- Building Information Modelling (BIM) – includes the option to incorporate any BIM protocol, and where applicable, this will be a Contract Document.
Third Party Rights and Collateral Warranties – Part 2 of the contract particulars has been deleted, and the provisions concerning third party rights and collateral warranties have been moved to section 7 of the contract. The contract includes a new definition, the ‘Rights Particulars,’ which will identify the beneficiaries and list the parties who must grant rights, specifying whether rights are to be granted as third-party rights or as collateral warranties in each case.
Importantly, the updates do not address common changes, such as the requirement to establish a single point of contact for both the design and construction of the works, or responsibility for ground conditions – both of which will have to be worked out during contract negotiations.
John Cleaveley, partner and head of construction at Weightmans LLP, contributed to this article.