Episode 35:
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 the management procurement route — PC5 - Building Procurement of the Part 3 Criteria.
So far the last few weeks we looked at the building contracts used with traditional and design and build procurement, this week we will be looking at the building contract forms typically used for management procurement.
So I will provide an overall summary and key points on the typical forms that can be used for Management Procurement, which includes:
Starting with the first form, the JCT Management Building Contract aka MC, this form is typically for ‘fast-track’ projects where the employer still wants the overall design, Specification and contract administration. The main contract between the Employer and Management Contractor covers both the pre-construction period and the period of actual construction work. Its typical format has a detailed Content List and the Articles of Agreement. It consists of 9 Sections and 7 Schedules. Followed by 2 appendices relating to information required and specific information relating to pre-construction and during construction. The Contract Document comprise of the Project Drawings, the Project Specification, a Contract Cost Plan and the Articles, Conditions, Appendix and Schedules. This form of contract may be executed either under hand or as a deed.
This form involves the appointment of the management contractor by the employer at pre-construction, at an early enough stage to be able to contribute to the work of the professional team, for which he will need to paid for. Then when the project proceeds to the construction period, the management contractor will appoint Works Contractors to carry out the ‘work packages’. The management contractor will be paid a management fee for this and be reimbursed the Prime Costs for their time spent. The Management Contractor will then start with a Contract Cost Plan and Programme dates. Management Contractors are selected by tender and after interview and they will advise on the choice of the Work Contractors and they are selected through competitive tendering. The Works Contractors will then be appointed by the Management Contractor and will be responsible for their coordination, supervision, and the provision of all site services and facilities. Under this contract form, tight financial control is essential and the management contractor is to manage and monitor the Cost Plan total, even though the employer appoints their own independent surveyor. The contractor is also under contractual obligation to achieve completion on time, but any variations to the design may give the necessary provisions for extension of time.
Key items to consider and remember if using a Management Building Contract, is that it is intended for use where the Employer has appointed a contract administrator, a quantity surveyor and other advisers to make up a professional team, and the team has prepared project drawings and a project Specification, and later detailed drawings, Specifications and bills of quantities for works packages. The Works Contractors enter into contracts direct with the Management Contractor. JCT MC is not a lump sum contract, and the sum paid by the Employer to the Management Contractor is the Prime Cost of the work together with a management fee. The management contract is in one version only, for use in the private or public sectors. The Conditions apply to both the pre-construction period, and construction period. The Conditions include deferment of possession, acceleration, partial possession, performance specified work but not contractor’s design. There is also a Section relating to the Works Contractors and respective obligations. When completing the form decisions are required relating to deferment of possession; insurance of the Project; liquidated damages; acceleration; management fee; Joint Fire Code; and EDI. The Schedules should also be checked for completeness of entries. If acting as contract administrator it means dealing directly with the Management Contractor, who in turn will be involved in the administration of Conditions in the Works Contracts. It is a relatively high risk contract with imprecise cost and time elements initially. It depends on goodwill and a high degree of trust.
And the next form, used for management procurement is the JCT Construction Management Contract aka CM, the documentation consists of an Agreement the CM/A between the employer and the construction manager and a Trade Contract CM/TC between the employer and each of the Trade Contractors. The employer undertakes the appointment of the Consultant Team and would have prepared an Initial Brief and preliminary Project Cost Plan and the work will be carried out under contract directly between the employer and the Trade Contractors. It can be executed under hand or as a deed. The nature of construction management procurement makes it likely to be of interest only for major building works undertaken by experienced clients. Although the Construction Manager is largely responsible for the management and coordination of Trade Contractors, this still leaves the client with considerable executive responsibility on a day-to-day basis for the duration of the pre-construction and construction stages of the Project.
This form involves any role for the architect to be as member of the consultant team which they be appointed by under a Consultancy Agreement and might also be named Consultant Team Leader especially for the design stages at pre-construction. The employer must also identify the ‘Client’s Representative’ and the ‘Cost Consultant’.
Key items to consider and remember if using a Construction Management Contract, is that it is intended for use with large projects where the Client wishes to enter into separate contracts with members of the Consultant Team who will be responsible for design, the Construction Manager who will provide services during both the pre-construction period and the construction period, and each of the Trade Contractors who will carry out and complete the Works. The Client assumes the central role, although a Client’s Representative and a Cost Consultant may also be appointed. This is not a lump sum agreement (although the Trade Contracts may be), and the Client will pay the Construction Manager reimbursable costs and a management fee. The agreement is in one version only, and is the head contract in a standard construction management pack of documents. The Conditions apply to both the pre-construction and construction periods. The Conditions include for completion in phases and partial possession. When completing the form decisions are required relating to preparing the Project Cost Plan; insurance cover including professional indemnity insurance; limitation of liability; any amendments to the standard Trade Contracts; reimbursable costs; and payments to the Construction Manager during the pre-construction period. The Schedules are a particularly important part of the Agreement and should be checked for content and completeness of entries. If acting as design consultant, remember that the Construction Manager may also advise the Client in preparing the Project Brief, make recommendations and review design and other drawings. A close working relationship with the Consultant Team is essential. If acting as Client’s Representative, then remember that this could involve carrying out all the functions ascribed to the Client, acting as agent unless the Agreement specifically states otherwise. Clearly this is an arrangement which will appeal only to an experienced client probably with in-house services. It is relatively low risk for the Construction Manager. The Agreement has the merit of being logically structured, and clearly laid out.
That covers the Management procurement contract forms but I also wanted to cover as a separate contract form so you are aware of it, which is the JCT Repair and Maintenance Contract.
So this Contract Form, the JCT Repair and Maintenance Contract aka RM, it typically used under traditional procurement as a short form. It is intended for use on small projects. It is a form for Employers who have a building which requires small jobs undertaken in the nature of repairs and maintenance and who are experienced in commissioning such work. It is not suitable for use by homeowners and does not provide for the role of a contract administrator. It allows for 3 different basis for pricing as a lump sum contract, a re-measurement contract or as a mixture of the two with defined work being priced as a lump sum and additional work measured using an agreed schedule of rates. Its contents include Invitation to Tender a form of tender, and 7 Sections.
This form is intended to be used by both public and private sector clients who will be experienced in placing orders for such work and in dealing with contractor accounts. All the details regarding the work to be carried out and the information required for the contract must be sent to the contractor at time of tender. And the contractor must be told on which basis it is to price the work as a lump sum or schedule of rates and the start and completion dates for the works. The contract commences once the contractor has completed and returned the Tender form and the Employer has accepted the tender. The completed and signed tender by the Employer and returned to the Contractor is the evidence that agreement has been reached. Key thing to note is that the form doesn’t make any reference to health and safety or to the CDM Regulations.
Key items to consider and remember if using the Repair and Maintenance Contract, is that it is an attractive option for employers who wish to contract direct for small works, and do not require a contract administrator. The form is flexible, allowing for use with its forms of invitation and tender, or by means of a works order. It also allows for a variety of methods of pricing, reflecting the reality of commissioning work of this nature. The form does not contain any provisions for liquidated damages or for retention, and there is nothing to cover the situation where the contractor may be undertaking any design. It is most suited to experienced employers on very short, one off jobs.
So to sum up what I discussed today:
We focussed on the typical standard forms used under the management procurement method. Which include JCT Management Building Contract and JCT Construction Management Trade Contract. And I also discussed the JCT Repair and Maintenance Contract
JCT MC - Suitable for fast-track complex projects where minimal design information is available at the start allowing for early start on site with overlap of design and construction. It allows for early build ability and programming input by the contractor. The Employer is the single point of contractual and payment responsibility and they retain quality control. JCT MC is not a lump sum contract, and the sum paid by the Employer to the Management Contractor is the Prime Cost of the work together with a management fee. It is a relatively high risk contract with imprecise cost and time elements initially. It depends on goodwill and a high degree of trust.
JCT CM - Under this form, the Employer is in control of the process and the construction manager acts on behalf of the Employer. It offers an overall flexible process and the project needs to be large or complex enough to be cost effective. The Employer retains the risk for the works package contractors and the employer also retains the responsibility for performance of the design team. This is not a lump sum agreement and the Client will pay the Construction Manager reimbursable costs and a management fee. This form typically appeals only to an experienced client probably with in-house services. It is relatively low risk for the Construction Manager. The Agreement has the merit of being logically structured, and clearly laid out.
JCT RM - This form is for short one-off small works undertaken from time to time. The employer is typically experienced in commissioning such work. It can be either a lump sim contract, a measured contract or a mixture of the two. The tender form is returned to the employer to sign and return to the contractor to confirm agreement and commencement of the works.