Episode 34:

Hello and Welcome to the Part3 with me podcast, 

The show that helps part 3 students jump start into their careers as qualified architects and also to provide refresher episodes for practicing architects. I am your host Maria Skoutari and this week we will be looking more closely at the Building Contracts typically used with design and build procurement route — PC5 - Building Procurement of the Part 3 Criteria.

So last week we looked at the building contracts used with traditional procurement, this week we will be looking at the building contract forms typically used for design and build procurement. 

So I will provide an overall summary and key points on the typical forms that can be used for Design and Build Procurement, which includes: 

• JCT Design and Build which is the most commonly used Contract Form
• JCT Major Project Construction can also be used alongside
• JCT Constructing Excellence and the
• NEC Contract

Starting with the first form, the JCT Design and Build Contract aka DB, similarly to the Standard Building Contract is one of the most known and widely used form of Building Contract. It is a contractor-led contract for a lump sum whereby a contractor designs and constructs the Works to the Employer’s stated requirements. It is appropriate for larger works where the Employer has defined his requirements and the Contractor is expected to develop and complete the designs as well as out the works. Its typical format has 5 Recitals and 9 Articles and may be executed under hand not as a deed or as a deed. And it also includes 7 schedules which cover matters such as the design submission procedure, insurance options, bonds and fluctuations.

This form is often used where scheme design is developed to a detailed level. It typically includes the appointment of an architect and other consultants to prepare the Employer’s Requirements in great detail  and sometimes the Employer may choose to keep the architect as their advisor and the necessary terms of appointment should be drafted appropriately. This form places the same design responsibility on the contractor as that of an architect to use reasonable skill and care. The Contractors proposals should respond to and be consistent with the Employer’s Requirements indicating where amendments or amplifications are relevant. This is a lump sum contract payable in stages or periodically based on the contractors valuation. 

Key items to consider and remember if using a Design and Build Contract, is that it is intended for use where the contractor accepts responsibility for the design of the Works to a greater or lesser extent as the Employer requires and completion of the design is required. The contractor is to use reasonable skill and care in achieving it. The more the contractor is responsible for design, the clearer the boundaries of design responsibility become. While it may seem that this contract has many similarities with SBC11, a fundamental difference is the absence of provision for a contract administrator or quantity surveyor to act on the Employer’s behalf. The Employer’s Requirements and Contractor’s Proposals are the core of this contract and its important that they are in harmony. If acting as Employer’s Agent, any limits to authority should be clarified, and a clear understanding reached on what is empowered by the Employer under the contract. If acting as consultant advising the Employer, care is needed to stay strictly within the limits of the appointment especially once work starts on site. If acting for the contractor under a novation agreement, accountability should be clearly established and respected.

Moving on to the next form, the JCT Major Project Construction Contract aka MP, this contract form was produced for employers who engage regularly in the construction of major projects and have extensive in-house contractual procedures. So under this form type, the employer would provide the definition of his requirements, site access, design document review and payments, the contractor under this form would then proceed with the works without relying on the employer for further instructions or to administer the project. It is a much shorter form and it immediately goes into the 43 Contract Conditions set out under 9 Sections and is to be executed as a deed.

This form has a number of interesting key features which include:

• the contractor is responsible for any additional design work required beyond that shown or described in the Employer’s Requirements;
• the design submission procedure ensures that the Employer is invited to review and comment on all the contractor’s design documents, but the contractor still remains responsible for design despite the review;
• the Employer may name specialists and sub-contractors, and the contractor becomes responsible for their performance;
• the Employer may novate those consultants previously appointed and the contractor then becomes responsible for their services to be performed in line to the Requirements;
• the Employer gives the contractor access to the site, rather than possession; 
• insurance arrangements are for the parties to agree on;
• interim payments to the contractor will usually be made monthly, but this can be stated otherwise in the terms. There is no provision for retention, but bonds or security measures similar to retention could be created if required;
• there are provisions for acceleration, bonus for early completion, and sharing of benefits of savings or value improvements;
• the Employer must appoint a sole representative who has authority to act in all matters under the contract. Other consultants appointed by the Employer can expect cooperation from the Contractor, but will have no authority under the contract to act for the Employer.

The form is published in one version only and can be used in both private and public sector projects. It is a lump sum contract and the Contract Sum is stated in the Contract Particulars. The contractors proposal must also include a Contract Sum Analysis and pricing information. 

Key items to consider and remember if using a Major Projects Contract, is that it is intended for use where both the Employer and the Contractor, together with their respective teams of specialists and sub-contractors, are experienced in substantial commercial projects. The Employer is required to appoint a Representative who will exercise all the powers and functions of the Employer under the contract. Other advisers may be appointed but they will have no authority under the contract to act on behalf of the Employer. There is no prescribed format but it should be remembered that this contract is very reliant on the Requirements stating clearly what is to be delivered, and the manner of delivery. The contract provides for design by the Employer as shown and described in the Requirements, with further design by the Contractor. The Requirements may stipulate that the contractor engages consultants pre-appointed by the Employer under a novation agreement. The JCT Guide lists some of the matters which need to be covered in the novation agreement, which should become part of the Requirements (the parties may wish to consider using the CIC Novation Agreement). Normally design liability is that of reasonable care and skill, but the Requirements could include a fitness for purpose obligation although there might be practical difficulties. Completing the Contract Particulars requires entries on matters such as the Contract Sum, Requirements, Proposals, Pricing Document, names of Planning Supervisor, Funder, adjudicator, entries relating to the application of option clauses such as those for ground conditions, liquidated damages, bonus rates, pre-appointed consultants and named specialists, cost savings, payments, insurances, professional indemnity, and communications. This is a form which is simpler and shorter than either SBC or DB, and can be tailored to the needs of the project. The contractor assumes more risks and responsibilities than under other JCT forms of contract, but provided that the risks can be fully identified and priced for at tender stage, this should not present a problem for experienced operators.

Moving on to the next form, the JCT Constructing Excellence Contract aka CE, this form places emphasis on collaborative working and it is one of the shorter contracts. It has 12 Sections including definitions and interpretation, working together, obligations, risk allocation, performance measurement, payment, insurance, third party rights and warranties, termination, and dispute resolution. It offers the opportunity for a multi-party Project Team agreement. Its greatest benefit is its provision for Risk Allocations encouraging proactive management of risks. 

This form is intended to be used for the engagement of all members of a supply chain including consultants. It’s flexibility offers the opportunity for the same conditions to be used as a main construction contract, sub-contract or as conditions for the appointment of a consultant. It provides two options for managing payment under Target Sum and Contract Sum.  

Key items to consider and remember if using Constructing Excellence, it that it can be used for procurement of construction works and construction-related services. It is drafted to allow for adaptation throughout the supply chain including the provision of professional services. It is particularly aimed at collaborative and integrative working and a suitable contract to be used for partnering. JCT CE can be used for Supplier Design and it is suitable for works that are to be carried out in sections. It also offers the flexibility of using either a Target Costs payment method or a Lump Sum payment method.

And lastly, we have the NEC Contract, has quote few different guides for different uses, but the main contract form is adaptable and suitable for use in lump sum, design and build to management procurement so it can be used for all three different key procurements routes and it can also be used for civil engineering and building works. It offers flexibility in terms the procurement routes and project size, clarity, and good management on the part of all parties to be open and honest in discussion problems as soon as they arise. It is set out in 9 Sections and has the Main Option clauses and the Secondary Option clauses offering the flexibility of tailoring the conditions to meet the requirements of the intended works. 

This form is intended to emphasise on the importance of effective programming, sounds management and the need for early warnings by both the Project Manager and the contractor to enable items that have progress and cost implications to be addressed as earliest as possible.  

Key items to consider and remember if using NEC, is that it is built around the idea of Core clauses to which selected Optional clauses and Secondary Option clauses may be added. The Contract Data and Works Information are essential components of the NEC. The Works Information supplied by the Employer and by the contractor can be presented in a variety of formats, and is information necessary at tender stage. There are no stated restrictions on the use of the NEC, but the law of the contract, the language of the contract, and the currency of the contract should be entered in Part One of the Contract Data. The key persons are the Project Manager, who manages the procurement of the Works for the Employer; and the Supervisor, who exercises certain responsibilities relating to quality assurance on site for the Employer with whom they have a contract for services. Completion of the form requires selecting or assembling the appropriate options, and making relevant entries to the Contract Data. A cooperative and non-adversarial attitude is essential with the NEC, and there is a strong emphasis on best practice management.

So to sum up what I discussed today:

We focussed on the typical standard forms used under the design and build procurement method. Which include JCT Design and Build, JCT Major Project Construction, JCT Constructing Excellence and the NEC Contract.

JCT D&B - Appropriate when detailed contract provisions are required, the contractor is to carry out and complete the design and the works, the employers usually engages an ‘agent’ to administer the contract, the relevant documents for this form are the Employers Requirements, the contractor’s proposals, the contract sum analysis and the contract conditions and schedules. The contractors design responsibility is that of reasonable skill and care and they are not responsible for any design within the Employer’s Requirements. It is a lump sum contract.

JCT MP -  Appropriate for use where both the Employer and the Contractor are experienced in substantial commercial projects. The Employer is required to appoint a Representative who will exercise all the powers and functions of the Employer under the contract. This contract is very reliant on the Requirements stating clearly what is to be delivered, and the manner of delivery. The contract provides for design by the Employer.  Normally design liability is that of reasonable care and skill, but the Requirements could include a fitness for purpose obligation although there might be practical difficulties. Simpler and shorter than either SBC or DB. The contractor assumes more risks and responsibilities than under other JCT forms of contract.

JCT CE - Appropriate for use to procure construction works and professional services either by the contractor or employer. Commonly used for its collaborative and integrated working approach. Can be used for either lump sum or target cost and it includes the provision for a risk register and risk allocation schedule.

JCT NEC -  Promotes good management and collaboration and can be used in a variety of situations and project sizes. It is built around the idea of Core clauses to which selected Optional clauses and Secondary Option clauses may be added. It emphasises on the importance of effective programming, sounds management and the need for early warnings by both the Project Manager and the contractor to enable items that have progress and cost implications to be addressed as earliest as possible.  

The key persons are the Project Manager, who manages the procurement of the Works for the Employer; and the Supervisor, who exercises certain responsibilities relating to quality assurance on site for the Employer with whom they have a contract for services.