Episode 87 - RIBA Building Contracts (Part 1)

This week is Part 1 of the RIBA Domestic & Concise Building Contracts covering how the contract is formed, the different roles involved in the contracts, project progress and control of the works. This episode content meets PC5 - Building Procurement of the Part 3 Criteria.

Resources from today's episode:

Websites:
https://www.architecture.com/digital-practice-tools/riba-contracts/riba-domestic-building-contract

https://www.architecture.com/digital-practice-tools/riba-contracts/riba-concise-building-contract

Book:
Guide to RIBA Domestic and Concise Building Contracts 2018 by Sarah Lupton

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Transcript

Episode 87:

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 talking about the RIBA Domestic & Concise Building Contracts, this subject will be split into 2 parts. Todays episode meets PC5 of the Part 3 Criteria.

Today we will be covering how the contract is formed, the different roles involved in the contracts, project progress and control of the works. Next week under part 2 we will cover payment and certification, practical completion, insurance, termination and dispute handling.

So lets dive into Part 1, in addition to the building contracts provided by the JCT, the RIBA has also developed its own two forms , Domestic & Concise, aimed at small and medium-scale projects that follow a traditional procurement route. The RIBA’s building contracts aim to be flexible, short, simple and suited to the needs of consultants and clients. 

Just to give you some background on these contracts, the RIBA first launched them in 2014 and they are currently at their second edition. The two building contracts aimed to be fully compatible with the RIBA’s professional services contracts. 

The RIBA Concise Building Contract is intended for use on all types of simple commercial building work and can be used in both private and public sectors as it includes optional provisions dealing with official secrets, transparency, discrimination and bribery as normally required by public sector clients.

The RIBA Domestic Building Contract, is intended for domestic work, including renovations, extensions, maintenance and new buildings limited to work carried out on the clients home.

Key features of the RIBA Building Contracts include:

• collaboration provisions for pre-start meeting, advance warnings, joint resolution of delay, proposals for improvements and costs savings;
• flexible payment options;
• provision for contractor design;
• optional provisions for a contractor programme;
• optional provisions for client-selected suppliers and subcontractors;
• mechanisms for dealing with changes to the project which allow for agreement and include specified timescales;
• option for commencement and completion in stages;
• terms compliant with the Consumer Rights Act 2015 for consumer clients;
• inclusion of guidance notes on use and completion, together with a user checklist;
• client cancellation form included in DBC

As mentioned, the two forms are suitable for use with traditional procurement, therefore, there may be instances where some parts of the design are to be completed by the contractor or by a specialist subcontractor, both RIBA contracts allow for such instances. They are not suitable for design and build or management procurement. Although the RIBA Building Contracts have many useful features, some of the provisions lack the detail to be found in larger contracts. Examples are those relating to design submission and approval procedures and insurance clauses. Other provisions commonly found in larger contracts are not included, such as fluctuations clauses and contractor bonds – if these are required then other standard contracts should be considered.  

Now in terms of the differences between the Domestic and Concise Contracts, these include:

• The Domestic contract has an option for the client to elect themselves to act as Contract Administrator
• Under the domestic contract there is also provision allowing the client to cancel the contract within 14 days and includes a cancellation form within it
• In terms of dispute resolution procedures, within the Domestic Contract adjudication is an optional provision, whereas in the Concise Contract adjudication is stated as contractural right in compliance with the Housing Grants Act
• Advance payment, collateral warranty or third party rights provisions and public sector clauses are optional clauses only allowed for within the Concise Contract 

In terms of forming the contract:

Two tendering methods are considered to be suitable with the RIBA Building Contracts, competitive tendering with a small number of contractors or through negotiations with a single contractor. An alternative method that can be considered is two-stage tendering, whereby there will be a small number of contractors initially to tender on the basis of less than complete information and negotiations will then take place with the one that makes the most attractive submission. It is unlikely that a two-stage tender would be used for a project based on one of the RIBA Building Contracts but, if it is, an agreement will be needed to cover the contractor’s liability to the client for its contribution to the design process.

The key information to be included within the tender documents include:

• If the building contract will be entered into as a deed or a simple contract. 
• The identity of the client must also be stated, whether acting as an individual or a company 
• The nature of the works 
• The location of the site 
• Any restrictions on its use and access 
• And all items that will later be entered in the ‘Contract Details’ located at the front of the two contracts should be set out in the tender documents 
• Whoever is responsible for arranging the contract, usually the Contract Administrator, should discuss and agree all of this information with the client prior to tender

A key task for the CA is to formalise the agreement with the selected contractor upon receipt of the returned tenders, ensuring the contract is in place before construction work starts. If there is a period of negotiation before the formal contract is drawn up, careful records should be kept of all matters agreed in order that they can be accurately incorporated into the formal contract documents.

A contract is then formed when an unconditional offer is unconditionally accepted, meaning the tender is accepted unconditionally and the a contract will have been formed, and the terms of the contract will be those set out or referred to in the tender documents.

For both Building Contracts, the Contract Package will need to be prepared and executed firstly by both parties signing the ‘Agreement’ section at the start of the document and it is good practice to also sign a copy of all other contract documents to avoid any arguments about which contract or revisions are included in the contract. Under the Concise Contract, the client has the options of signing either as an individual or a registered company. So once tender is complete and the contract has been signed, the contract administrator is required to give the contractor ‘up to two copies of the Contract Documents’ and can be in any format agreed by the parties. 

1. Now, lets look at how the contract and the package of contract documents are to be interpreted:

Firstly, the Contract provides a definitions section to assist with interpreting the meaning of clauses, the contract also includes ‘defined terms’ that are set out in the Contract Details. Then there is the priority of the contract documents for all parts of the Contract to be read together as a whole with the Agreement, Contract Details and Contract Conditions to take precedence over other Contract Documents. Now, if any inconsistencies are spotted by the contractor in the Contract Document, they must notify the CA and the CA will then have to issue an instruction resolving the inconsistency. 

2. Now lets move on to the roles within the Contracts:

Starting with the Contract Administrator, they are appointed by the client and their duties and liabilities are owed to the client as set out in their terms of appointment. The CA is not a party to the building contract but is named within it. In some matters they will act as an agent to the client when issue instructions for example and in other instances they will act as an independent decision makers acting fairly at all times. Failure by the contract administrator to comply with any obligation, either express or implied, may result in the contractor suffering losses. Since the CA is not party to the contract, if the contractor wishes to bring a claim, this would have to be against the client and the client may then seek in turn to recover losses from the CA.

So the CA’s duties under the Building Contract include to:

• Attend the pre-start meeting
• Take into account any failure by the contractor
• Administer the contract, issue certificates or statements and instructions
• Give the contractor up to two free copies of the contract documents
• Issue any revisions
• Confirm oral instructions to the contractor in writing
• Issue instruction to deal with inconsistencies in the contract documents
• Aim to agree any revision of time and/or additional payment promptly
• Determine the appropriate adjustment to the contract time and/or price 
• Issue payment certificates 
• Agree the final contract price with the contractor within 30 days of the contractors submission
• Calculate the final contract price 
• Issue a final payment certificate
• Aim to agree on a revision of time
• Make reasonable assessment of a revision of time
• Agree on an additional payment
• Assess any additional payment
• Issue a certificate of making good defects
• Issue the contractor with a notice if they fail to fix a defect
• Notify the parties when satisfied with achieved of a milestone
• Visit site
• Instruct any change to the works
• Postpone the works or section if required
• Resolve inconsistencies in the documents or an instruction
• Reject defective work
• Instruct work is uncovered and inspected or tested
• Issue a 7 day notice to comply with an instruction
• Modify, amend or withdrawn an instruction
• Certify practical completion
• Issue the contractor with a notice of intention to terminate
• Issue the contractor with a notice of termination

Now lets look at the clients role:

The client has of course a significant role in any construction project and they should discuss their duties and rights with the CA and seek their advice before taking any action. 

Some of the clients duties include:

• Providing the contractor and CA with a warning of an event that will affect progress of the works and work together with the contractor to resolve it and taking reasonable steps to minimise its effect
• Maintain insurance in respect of their liabilities to the value specified
• Provide evidence of the insurance and provide it if the contractor fails to
• Pay amount due on any payment certificate or payment notice by the final date for payment
• Pay the contractor VAT when provided with an invoice
• Inform the contractor if force majeure occurs
• Under the Concise contract the client can also pay the contractor advance payment
• And also under the Concise contract the client is expected to provide evidence of their ability to pay the contract price

Now in terms of the clients rights, these include:

• Deferring access to the site or sections of the site
• Employing others if the contractor fails to comply with a 7-day notice
• Issue a pay less notice
• Request to take over part of the works before practical completion
• Deduct liquidated damages
• Employ others if the contractor fails to rectify a notified defect
• Terminate the contractor’s employment with a termination notice if the works are suspended by 60 days
• Cancel the contract within 14 days
• Depending on dispute resolution selected, refer disputes to that method

As mentioned earlier, the client, under the Domestic Contract, has the option of naming themselves as Contract Administrator, but they must make it clear to the contractor at tender stage that this will be the arrangement. The key requirement for the client to determine is whether they are capable of acting impartially as CA and have all the skills and resources required to carry out the role. Any incorrect or biased decisions are liable to be challenged by the contractor and, if a reasonable solution is not agreed, may result in the contractor being successful in subsequent litigation.

Now lets look at the role of the contractor, which has the most extensive list of duties and rights. The contractors main obligation is to complete the works set out in the contract documents. The RIBA Building Contracts also make provision for some design to be carried out by the contractor, this is an optional provision and if required clear design liability will need to be stated and listed as to which works will be under the Contractors Design Portion. Its, therefore, critical that the delineation between the parts to be designed by the contractor and the rest of the project is described accurately. Given the contractor will only be required to design the specified parts, the contract administrator will then remain responsible for any integration. Meaning this could extend to the physical junctions between the contractor-designed parts and other parts, but could also cover the combined performance of several systems or of systems and elements. But it its intended that the contractor is to be responsible for resolving any interface, the interface would have to be identified clearly within the parts to be designed by the contractor and the contractor will retain the copyright in any design they provides, but grants the client a licence to use it for the Works and related purposes. Therefore, the contractor will be subject to design liability in using the skill and care of a competent designer. 

Now in terms of subcontractors work, the contractor will be solely responsible for the subcontractors work. Under the RIBA Building Contracts the contractor can choose any subcontractor they wish and there is no requirements to inform the CA beforehand or obtain their permission or the clients and neither the CA or client have the authority to bar the contractor from using a specific company. But given the entire responsibility of the subcontractors is with the contractor, the client has no risk, the client however can if they wish to take a more proactive stance, through two potential course, the first is to add a clause requiring the client’s or contract administrator’s permission for any subcontracting. The second is to use the ‘Required Specialists’ provisions for critical areas of work, meaning under an optional clause within the contract the client may specify that the contractor uses particular specialists to carry out described parts of the works in the contract. The contractor will still be fully responsible for their performance. It is possible that if the contractor experiences problems with the specialist, it may later refuse to engage the firm, or engage the specialist, but then attempt to claim for additional time and money should the firm later default on its subcontract. If the contractor decides to terminate the Required Specialists employment, they must notify the CA and provide them with a list of suitable alternative specialists and the CA is then required to issue an instruction regarding the replacement. The contract, however, states that the contractor ‘shall be responsible for any delay or additional costs arising from the termination’.

So looking at the contractors duties, these include:

• Carrying out and completing the works in accordance with the contract, in good and workmanlike manner, by the date for completion
• Be responsible for all regulatory and statutory consents, fees and charges 
• Comply with all relevant health and safety legislation
• Comply with all statutory obligations
• Use methods that prevent nuisance, trespass and pollution
• Ensure a suitably qualified representative is available during the works
• Take all reasonable steps and precautions to ensure that security is maintained on the site at all times
• Attend a pre-start meeting
• Provide the client and the contract administrator with a warning of any event that will affect progress of the works, and work together with the client to resolve the event, and take reasonable steps to minimise its effects
• Obtain written consent of the client before assigning rights or benefits
• Comply with instructions promptly
• Cooperate with others engaged by the client following contractor failure to comply with a 7-day notice
• Allow others access to the site as required
• Be responsible for all costs incurred
• Inform the contract administrator immediately of any inconsistencies they find in the contract documents and/or any instruction
• Calculate the effect of a change to works instruction on contract price and completion date
• Aim to agree any revision to time or contract price promptly
• Inform the contract administrator within 7 days if they believe that any instruction is not in accordance with the contract, or would have adverse effects on health and safety or the contractor’s design
• Comply with the contract administrator’s decisions
• Maintain insurance as set out in the Contract Details
• Provide evidence of insurance, or take out insurance if the client fails to provide evidence
• Pay the client any balance shown as due on the interim payment certificate
• Submit their calculation of the final contract price, along with supporting documentation, not later than 90 days after practical completion
• Aim to agree the final contract price with the contract administrator within 30 days of its submission
• Issue the client with a valid VAT invoice
• Inform the client if force majeure occurs
• Inform the contract administrator of any event affecting the progress of the works and apply for a revision of time within a reasonable time
• Aim to agree on a revision of time promptly
• Apply for any adjustment to the contract price within a reasonable time of an event occurring
• Aim to agree on an additional payment promptly
• Notify the contract administrator when it thinks that practical completion of the works or a section has been achieved
• Remedy all defects identified during defects fixing period
• Remove all materials and equipment from site
• Submit a programme to the contract administrator, in the agreed format, no later than the pre-start meeting
• Use reasonable skill, care and diligence in the design
• Ensure the design is in accordance with the client’s specification
• Submit details of their design to the contract administrator
• Notify the contract administrator of any discrepancies they find in the client or architect’s designs
• Ensure there is adequate professional indemnity insurance for their design
• Notify the contract administrator of the termination of the employment of a required specialist
• Employ the required specialists to carry out the described parts of the works
• Provide evidence of an insurance-backed guarantee
• Provide a new building warranty
• Execute a collateral warranty or third-party rights agreement in favour of identified parties
• Under the Concise contract only, the contractor is to adhere to all legislation relating to official secrets
• Also under the Concise contract, the contractor must pass all requests for information under the Freedom of Information Act 2000 to the client
• And also ensure that discrimination in any form is not practised or allowed

In terms of the contractors rights, these include:

• Use, free of charge, any client facilities listed in the contract documents
• Propose changes to the works that may improve their value or lower the contract price
• Send the contract administrator an application for payment
• Send the client a pay less notice
• Issue a final payment notice
• Issue a notice of its intention to suspend some or all of its obligations
• Suspend some or all of their obligations
• Apply for a revision of time
• Apply for an adjustment to the contract price
• Issue a 14-day notice of intention to terminate
• Terminate their employment by issuing a notice of termination
• Attempt to settle disputes by mediation
• Refer disputes to adjudication
• If arbitration is selected, refer disputes to arbitration
• If arbitration is not selected, refer disputes to the appropriate court

So that covers the roles of the key parties, now lets look at the management systems. The RIBA Building Contracts place great emphasis on management and provisions to be made for meetings, coordination and communication. This is to ensure the smooth running of the project by providing an up to date programme, giving early warning of any incidents that may cause a delay, suggest improvements, hold a pre-start meeting and maintain a risk register. 

The Pre-start meeting should be held at least 10 days before the work is due to start on site and both parties including the CA must be in attendance in order to discuss their expectations from each other, agree on the administration and communication procedures and identify potential and actual risks and set out procedure to deal with them and set them out within the Risk Register and these are likely to be adjusted as the project progresses and new risks are identified. 

3. Now lets move on to Project Progress:

As part of the RIBA Building Contracts, the site address, any entry restrictions, if the building is to be occupied, and so on should be outline within the Contract Details and be provided at tender stage. Unlike the JCT Contracts which refer to the contractor of having possession of the site, under the RIBA Building Contracts in light of all the information been made available to the contractor at the time of tender the extent of access will then be allowed to the contractor by the client. Thereafter, the contractor is required to ‘carry out and complete the works in accordance with the contract in a good and workmanlike manner by the date for completion’. In terms of the start date, there is no obligation to start building on the start date under the RIBA Building Contracts as long as the work is finished by completion date, once work starts the contractor will be responsible for security, health and safety and general compliance with local authority requirements. 

The client, however, does have the option to defer access to the whole site or sections of it if needed and no limit on length of the deferment is stated within the building contracts or that the client needs to give any advance warning notice, but it such instances the contractor would be entitled to a revision of time and additional payment to cover costs arising due to the delay. 

The RIBA Building Contracts also include an optional clause allowing for completion in sections by stating the separate start and completion dates and rates of liquidated damages for each section.  

Now when it comes to programme, both building contract versions provide an optional clause requiring the contractor to provide a programme, and the information to be included within it should be set out at tender stage, otherwise there would be no obligation on the contractor to provide it. This clause is recommended to always be selected except on very small projects, although the programme is not identified and being one of the contract documents of the Contract Details it is still advised to ask the contractor to provide it before the contract is entered into and it should set out the contractors activities to be carried out to complete the works, the start and finish dates of each activity and the relationship of each activity to the others. Key item to highlight with the programme is that the dates indicate are not binding.

Now if delays occur which effect the completion date, if the delay is not the fault of the contractor they will be entitled to a ‘Revision of Time’ meaning that the date for completion of the works or a section will be postponed and the contractor will have to meet the revised date. Failure to complete by the completion date, liquidated damages will then be claimable by the client. Then once the works are complete, the CA will certify ‘Practical Completion’ which is then followed by a ‘Defects Fixing Period’ and once defects have been corrected, the CA will issue a final payment certificate. 

So what happens in the case of a Delay:

The aim of the ‘Collaborative working’ section within both RIBA Building Contracts is to prevent or manage delay, so if an event occurred which will likely cause a delay, the parties to the contract should notify each other of the event and the CA as soon as possible, then seek to find a way together to resolve the event and take reasonable steps to minimise the effects of the event to the contract. Similarly to the JCT Contracts, the RIBA Building Contracts also have a list of ‘neutral events’, known as ‘relevant events’ in the JCT contracts. The main reason for including events caused by the client and the contract administrator is to preserve the client’s right to liquidated damages. If no such provisions were included and a delay occurred that was caused by the client, this would in effect be a breach of contract by the client and the contractor would no longer be bound to complete by the completion date and the client would therefore lose the right to liquidated damages, even if some of the blame for the delay rests with the contractor. The phrase ‘time at large’ is often used to describe this situation.

The ‘neutral events’ which give rise for a ‘revision of time’, include:

• the Architect/Contract Administrator issues a Change to Works instruction
• the Client defers or withdraws access to the Site
• the Client or their agent cause delay or disruption to the Works or part of the Works
• the Client or their agent cause the Works or part of the Works to be suspended
• an instruction issued for work to be uncovered and inspected/tested
• the action or omission of a utility company or statutory body, subject to advance warning notification
• Force Majeure

Now when it comes to a contractor applying for a revision of time, they should do so with supporting information submitted within a reasonable time of when the event occurred. Then the CA and contractor are required to agree the Revision of Time promptly and if no agreement can be made, the CA is required to make a reasonable assessment of the Revision of Time taking into consideration all the supporting documentation. Interestingly, the RIBA Building Contractors, even if a revision of time is granted by the CA, there appears to be no obligation on the CA to amend the date for completion, or to inform both parties, although obviously it would be sensible to do both. When assessing the ‘revision of time’, the CA should assess what effect the event will have on the final completion date, and take into account the fact that the contractor should use reasonable endeavours to minimise the effects of any delaying event.

There are two instances which can cause problems when assessing revisions of time: ‘concurrent delay’ and ‘contractor’s float’.

Concurrent Delay, is where two separate events contribute to the same period of delay but only one of these is a neutral event. Typically, the contractor should be given a revision of time for the full extent of the neutral event only and not split the difference for both events. 

Now a ‘Float’ instance, is when the contractor planned early completion and a revision of time is applied for at a relatively early stage in the project, it may be that the delay suffered will not push the planned date beyond the contractual date for completion. So, technically, no revision should be given. However, if the contractor is later delayed through their own errors, they may wish they had the benefit of the earlier revision, as it now appears unlikely that they will complete on time. In such cases it is generally considered that the contractor should be given the benefit of the ‘float’, therefore the contract administrator may need to review earlier decisions and account for the float period.

Following practical completion, the CA is no longer required under the RIBA Building Contracts to review any revisions of time. However, after practical completion, the CA will be able to review all the earlier revisions of time and adjust the date for completion as necessary with the benefit of full information, including the final programme given the period is extended and not reduced.

4. Now lets move on to the Control of the works:

Achieving the contractual standard is entirely the responsibility of the contractor with the CA also having role to play in providing information on the required standard and monitoring whether its achieved. In terms of day to day activities these are entirely the responsibility of the contractor and as such should have a qualified representative on site to be available at all material times to answer queries and received instruction on the contractors behalf.  

In terms of health and safety, the RIBA Building Contractors require that both parties comply with all health and safety regulations of the CDM Regulations 2015, whereby the client is required to appoint a principal designer and a principal contractor. 

Reverting back to the control of the works, in order to keep things running smoothly on site the CA is to ensure that the contractor is supplier with detailed and accurate information either at tender stage or during the project making clear what standards and quality are required. The RIBA Building Contracts also have an optional clause whereby the contractor is required to provide information regarding their developing design if a contractors design portion forms part of the contract. 

Now, in addition to providing information, the CA is also to inspect the works to monitor whether the required standard is being met and if any instructions are required to open up work or tests to be undertaken. The RIBA Building Contracts do not place a duty on the contract administrator to inspect the works, although they do give the CA the power to visit the site and other offsite locations, and inspect the works. It is of course advised the CA visits site as often as required in order to fulfil their duty to the client and ensure the work is progressing as required and to avoid missing defective work that the client can later claim against them for. Although a CA will not necessarily be liable to the client for negligent inspection if a defect in a contractor’s work is not identified, the case will be whether the contract administrator exhibited the degree of skill that an ordinary competent professional would exhibit in the same circumstances. 

Now if the CA does spot defective work, they may issue instructions requiring any work to be uncovered, inspected and/or tested for compliance. If the work proves to be defective, the contractor will bear the cost of complying with the instruction and the correction of the defects but if the work complies with the contract, the client will bear the cost of complying with the instruction. So the CA should only issue such an instruction if there was a serious concern. As already mentioned, the CA has the power to issue a range of instructions including an instruction requiring a change to the works, all instructions are required to be in writing and the contractor is required to comply with them promptly. The contractor is required to notify the contract administrator, within 7 days of receiving an instruction requiring a change to the works, if they believe the instruction is not in accordance with the contract or that implementing it would have adverse health and safety implications or would adversely affect any part of the works designed by the contractor. In both contracts, if the contractor fails to comply with an instruction, the contract administrator may issue the contractor with a 7-day notice to comply, and if the contractor fails to comply with the notice, the client may engage others to undertake the instruction. And then where there is a change to works instruction, the contractor is required to calculate and submit details to the CA of its effect on the contract price and date for completion. The CA and contractor should aim to agree the appropriate revision of time and/or additional payment promptly, otherwise the contract administrator determines the appropriate amount.

So to sum up what I discussed today:

• The RIBA Concise Building Contract is intended for use on all types of simple commercial building work and can be used in both private and public sectors 
• The RIBA Domestic Building Contract, is intended for domestic work, including renovations, extensions, maintenance and new buildings limited to work carried out on the clients home.
• Key features of the RIBA Building Contracts include collaboration, flexible payment options, contractor design, optional provisions for a contractor programme, optional provisions for client-selected suppliers and subcontractors, option for staged works
• Two tendering methods are considered to be suitable with the RIBA Building Contracts including competitive tendering or through negotiations with a single contractor. An alternative method is also the use of two-stage tendering
• A CA forms a key role in both contracts, although it it not a party to the contract and they have the power to issue certificates and instructions
• RIBA Building Contracts also have a list of ‘neutral events’, similar to the ‘relevant events’ in the JCT contracts.
• The RIBA Building Contract also require that both parties comply with all health and safety regulations of the CDM Regulations 2015, whereby the client is required to appoint a principal designer and a principal contractor. 
• The CA, in addition to providing information, they are also to inspect the works although the RIBA Building Contracts do not place a duty on the CA to do so, although they do give the CA the power to visit the site and other offsite locations, and inspect the works.
• If the CA spots defective work, they may issue instructions requiring any work to be uncovered, inspected and/or tested for compliance. And once happy with the works and that all information has been provided, may issue a Practical completion Certificate