Comparison of UK Building Contracts

Comparison of UK Building Contracts Assessment: Terms of Contract; Critical Evaluation; Question standard practise Samuel Perkins Introduction This assignment aims to compare and contrast the various aspects of both the SBC/Q 2011 Standard Building Contract against the NEC 3 Engineering and Construction Contract: priced with Bill of Quantities 2013. Throughout the assignment I will abbreviate these to SBC/Q 2011 and NEC3. I aim to evaluate the documents involved in the making of the contracts (10%/350 words), the roles of those involved in the performance of the contract (20% / 700 words) , the Contractors responsibility towards the design (20% / 700 words) and finally concentrating on the payment aspect of each contract (50%/1750 words). The contracts will be assessed regarding revisions made in September 2011 to the Housing Grants, Construction and Regeneration Act 1996. My word count will be including the above mentioned areas not exceeding the 3500 words as required. Documents Making up the Contracts In the SBC/Q 2011 contract under provisions, the contract documents are defined in clause 1.1. The issue with this is that the contract sum analysis and any schedule of rates are dependent on the respective party and can therefore not be deemed as contract documents under this condition. For the employer this would mean that the main, responsibility for the correct descriptions and quantities would be placed upon them mitigating risks for the contractor. Regarding any discrepancies within the contract documents it is the responsibility of the Contractor to inform the Architect of any differences, however it should be noted that they are under no obligation to freely search for any discrepancies. Yet under condition 2.15 it states that if the contractor becomes aware of any such departure, error, omission or inadequacy as referred to in clause 2.14 that he shall immediately give notice with appropriate details to the Architect/Contract Administrator, who shall issue instructions in th at regard. The discrepancies are related to items found in condition 2.15(1,2,3,4,5) which cover the contract drawings, contract bills, instructions issued by the architect of contract administrator and finally the CDP documents. From the above we can see that SBC/Q 2011 shows a reasonable understanding to identifying contract documents. The main difference between the NEC3 and SBC/Q 2011 is that the NEC3 document doesnt define the term Contract, therefore there is no defining contract documents unlike SBC/Q 2011. It combats this within the guidance notes providing samples concerning a standard form of tender and form of agreement substituting themselves for actual contract documents. In the Core Clauses 12.4 it states that the contract is the entire agreement between the parties therefore combining the previously mentioned procedures involving the project management and contractual duties, liabilities and obligations. As discussed by Eggleston (2006) the term entire agreement has no legally definable definition however the term entire contract which is also known as a sole agreement clause does. Therefore the contract can only be completed to the written terms and conditions, this excluding any implied terms of common law remedies this relating to any legislation created by parliament as noted in (Galbraith, 2014). Like SC/Q 2011, NEC3 makes provisions regarding any discrepancies and contradictions between contract documents in Core Clause 17.1 however is much less distinct and clear cut in its definitions and clarity. The Clause states that The Project Manager or the Contractor notifies the other as soon as either becomes aware of an ambiguity or inconsistency in or between the documents which are part of this contract. The Project Manager gives an instruction resolving the ambiguity or inconsistency. However this does conflict with Core Clauses namely 12.3 and 18.1 which would then suggest that the responsibility to report inconsistencies lies solely with the Project Manager. Roles involved in the performance of the contract The JCT contracts require the Architect to act as the Contract Administrator in regards to performance of the contract on behalf of the employer. Under SBC/Q2011 the role of the architects expressed duties is covered in conditions 2.8 (1.2.3.4), 2.9, 2.11 and 2.12. These range from ensuring documents are supplied to the Contractor in accordance to the release schedule and initial contract documents to discharging the contract. As these are obligations of the architect they are therefore legally accountable for the area of contract administration. Given the Architects professional position and experience it is there duty to ensure the contract is carried out under the implied terms of common law and to the terms and conditions of the contract, it is crucial that the Architect stays unbiased when making decisions. SBC/Q2011 states under condition 2.4 that it is the duty of the Contractor to continue with the work on a regular basis and attentively and have the works finished by the agreed completion date. The work should progress steadily and in accordance to the contract in regards to time as noted in (Chappell 2012). If the Contractor is to make a breach of duty in respect of non-performance (not partial performance) of the contract would result in complete disregard to the contract terms and conditions which would cause total non-performance. Provisions are made to non-performance regarding the employers in conditions 8.4, 8.5 and 8.7 which guarantees the Contractors continual advancement of works in the event of unpredictable circumstances delaying works and the rectification of defect works. Unlike SBC/Q 2011, NEC3 does not mention the Architect under any of its clauses which removes any context of the Architects involvement. Under Core clause 10.1 it stipulates that the legal transitions and agreements and between the Employer and Contractor and subsequently the Project Manager and Supervisor. The provision of NEC3 states that the association of the Employer is to be related regarding their participation within the roles of the contract administration and are therefore a legal entity. The Project Manager exclusively has authority to change the work information, including issues and discharging any works instruction all of which is stated under Core clauses 14.3 and 27.3. Therefore the Project Manager is acting as the Employers Agent , allowing them to have a greater influence in decisions, which contrasts SBCQ/2011 whereby the Architect of Contract Administrator is more independent and acts in sovereignty. It is vital that the appointed Project Manager under NEC3 be it a single person or firm is competent and professional in order to achieve successful completion of the works and the contract due to the wide-ranging duties and obligations they are assigned. The Project manager and Supervisor can delegate works to other staff members in order to carry out their duties. This is noted under Core clause 14.2 however, before this can be done the Contractor must be notified of what actions each member of staff has been assigned. NEC3 also differs variably from SBC/Q2011 in its lack of expressed terms stating the Contractors obligation to continue with the works regularly. Consequently it relies on the provisions of Core clause 20.1 which state the Contractor is to Provide the works as defined in clause 11.2(3) along with disciplinary procedure that corner any delays to key dates, damages and or the payments scheme. It is important to note that NEC3 has no provisions in any of its Clauses that concerns any expressed terms that state the Project Manager should be neutral and equal, as mentioned above they are effectively acting as the Employers Agent. Therefore any concerns regarding the issues of impartial and unbiased contract administration is an implied duty and should therefore be overseen by the implied terms of common law remedies as displayed in Constain Ltd and Others [Corber] v Bechtel Ltd Anor [2005]. The Contractors Responsibility for Design Regarding the responsibility of the design aspect the Contractor should have no involvement, except if it has clearly been requested and defined within the contract documents under the parameter of the Contractors design responsibility Chappell (2012). It is also worth mentioning that the term design should be used broadly and should also encompass not just drawings but also any written documents relating to the Contractors design proportion for example specifications and schedules of work. Lupton and Cornes (2013) The SBC/Q 2011 has previously required an additional supplement which is provided through the Contractors designed proportion part of the contract. With the Contractors design proportion the employer will then prepare their requirements known as the Employers Requirements, which is created from the performance specification that consequently then allows the Contractor to formulate and submit their proposals known as the Contractors Proposals. These are required when creating the contract documents and subsequently the contract sum. Under clause 2.13.2 it states that the Contractor shall not be responsible for the contents of the Employers requirements or for verifying the adequacy of any design contained within them. Furthermore under clause 2.2 titled Contractors Design Proportion, it states what the Contractor should do where the works contain a Contractors Design Proportion. From these clauses it should be made clear the difference between the Contractors Design Proportion and the remainder of the job is to reduce any conflicts or confusion throughout the project. The Contractors liability is noted in clauses 2.1 and 2.19.1 and ensures that they do not exceed the level of works required, due to the Contractors liability being near equal to the Architects the liability is restricted to the Contractors skill and attention to details in their works. The NEC3 differs from SBC/Q 2011 and does not give the Contractor as much flexibility of which the Contractors design can operate. Clause 60.3 of NEC3 states that any inconsistencies with site information are the responsibility of the Employer. It is noted in Eggleston (2006) that due to the fact the Employer should have taken into account the best site conditions as per 60(12) yet logically the Contractor should have allowances and precautionary measures in place, which is contradictive. The Contractors basic obligation is covered in core clauses 20.1 and the obligation for Contractors designed work in clause 21.1 which states what work and designs are required from the Contractor and that the Employer should state the works information, the criteria to which he requires designs to conform. NEC3 is written to take account of common law remedies unlike SBC/Q2011 which uses expressed terms of provisions when discussing the Contractors liability regarding the works being fit for purpose. NEC3 optional clause X15.(1.2) limits the Contractors liability to reasonable skill and care much like SBC/Q2011 clause 2.1. This clause could be interpreted differently regarding fitness for purpose as the Contractor could complete the works with reasonable skill and care however could not be meeting their contractual obligations. Clause 21.2 states that the Contractor is responsible for the design standards, materials and products unless it is stated otherwise in the works information. As common law remedies implied on any warranties unless they are excluded. Payment SBC/Q 2011s provisions states that the parties involved should agree to suitable staged payments or Milestones as they are more commonly known, however if staged payments cannot be agreed upon the contract provisions will default to interim payments as per condition 4.9 (1.2) where a monthly valuation is submitted. It is therefore crucial that all valuations submitted for interim certificates are reasonably accurate and do not need to be perfectly correct, this will allow for any errors from miscalculations created from the difficulty of the matter as revealed in Secretary of State for Transport v Birse-Farr Joint Venture [1993] 62 BLR 36. Interim amounts account for the completed work at Bill of Quantity rates along with a percentage of lump sums, the final amount is due when the whole work has been re-measured in accordance with the Bill of Quantities. Eggleston (2006) Interim valuations should be calculated via gross valuation, which include for the deduction of retention and any previously arranged payments certified as due. Provisions regarding this are found under 4.16 (1.2.3) discussing work executed, site materials and listed items. Yet staged payments should be agreed before the work is commenced and should correlate to relevant milestones and work sections. However this procedure should require periodic re-evaluations due to the administrative nature. Regarding in the event of insolvency as previously mentioned, the site materials in particular any stored off-site can be a difficult to identify whom they belong to, however noted in the provisions of SBC/Q 2011 under Terms of Conditions 4.17 (1-5) these materials become property of the Employer provided they are accounted for in an interim certificate. The Contractor must also provide proof to ensure all offsite materials are insured. Therefore any implied terms of common law remedies regard ing SGA 1979 are in excluded of their respective powers. To act upon the above the retention of title clause must be completed in order to identify the route the transfer of title takes, this is usually done methodically working through the supply chain from the Contractor, Subcontractor and Manufacturer, again checked against interim payments of that Contractor. The principles of payments should be governed by terms of the contract provisions and also by any implied terms of common law remedies like SGA 1979 and SOGSA 1982 as noted in Hughes, Mills, and OBrien (2008). In SOGSA 1982 it establishes that a payment should be made to any provider of work including the provision of any good or services supplied. However if it is expressed in the terms of the contracts provision a right to set off can be put in place to exclude any implied terms of common law remedies as seen in the case of Acsim (Southern) Ltd v Danish Contracting and Development Co Ltd [1992] 47 BLR 59 and Gilbert-Ash Northern v Modern Engineering Bristol) Ltd [1974] AC 689. Any interim certificates under the provisions of the SBC/Q 2011 are to adhere to the dates specified under the contract particulars throughout the contract and its conditions. Condition 4.10 (1.2) under contract provisions the contractor should receive a written notice stating the amount to be paid and the methodology used to calculate the sum, this should be received no less than 5 days after the submission of the interim certificate from the Contractor. It is therefore common practice for a reference to the interim certificate and copy of the valuation to be prepared by the Contract Administer or Quantity Surveyor. It should be noted that in comparison to either the Contract Administrator or Architect they would be held accountable to the parties involved due to the concern of skill and care. Regarding the final payment a few conditions must be mentioned firstly condition 4.12 (1-7) which covers details interim payments final date and amount most importantly that the final date for interim payment shall be no later than 14 days from the original issuing of the interim certificate. It also provides instructions on how to proceed with any pay less notices. Secondly the under the provisions of condition 4.15 (1-9) under title Final certificate and final payment instructs that the final payment will match the final certificate. The final payment should amount to the total of the contract price while taking into account all additional works and omissions, less the staged payments that have been paid throughout the projects work. As discussed by Ramsey (2000)the case of Lubenham V South Pembrokeshire DC [1986] 33 BLR 39 showing how the Contract Administrator should abide to the provisions of expressed terms of the contract while performing their contractual procedure, in which the contractor will have no motive or reason to challenge the certificates issued. NEC3 differs from SBC/Q 2011 in the methods used relating to payment schemes. Firstly it is the Project Managers responsibility to assess the amount of the payments due at the assessment date and consequently they are accountable to ensure the submission of application to confirm payment. The Project Manager is also responsible for determining the first assessment date. This is found under Core Clause 50.1 under title assessing the amount due. Clause 51.1 stating that the latest dates that the Project Manager can certify the payment are fixed throughout the contract relating to each assessment date, this is usually a period of 1 week from the date. NECs secondary option Clause X16 (1.2) is similar to condition 4.20 (1.2.3) of SBCQ/2011 in its replication which defaults the retention percentage to either 3% unless otherwise stipulated under the contract particulars. Regarding the Core clauses that relate to retention there are no expressed terms found in the contract provisions. Core Clause 50.3 is designed to be a powerful motivation to the Contractor and can incur a 25% deduction until the Project Manager confirms a programme submitted by the Contractor, however no provisions are made that make any reference to the final certificate, which consequently means that certificates have no order of precedence and controversially no contractual status. As we are aware it is the Project Managers responsibility under Core Clause 50.1 to access and certify each payment amount at the given assessment dates, along with this under Clause 50.4, it states that the Project Manager should take into account any submissions by the Contractor that however the responsibility remains on the Project Manager the amount due regardless if he has not received a submission from the Contractor. Any assessment that is issued after the defect certificate will be considered as is common practise as the final assessment which will lead to the final certificate, therefore from clause 50.4 it is understood that without the Contractors submission of a final account before the last assessment they will lose any influence they have regarding payment. However this clause may cause disputes between the Contractor and Project Manager regarding the information supplied from the contractors original submitted programme, as this considered to meet the requirements of the contracts agreement. Clause 50.3 is biased in its favouring to the Project Manager, therefore the Contractor may wish to seek adjudication if they believe they have any conflicts throughout the project as the clause provides the opportunity to invoke a penalty clause. NEC Core clause 50.5 is designed to provide motivation to the Contractor to submit a programme which contains information required for the contract, within this clause it is understood that if the amount has been inaccurately assessed is difficult to comprehend. It is implied that the Contractor will not be entitled to any correction of the next payment certificate. Usually it is common practice for inaccurate assessments to be corrected on the later payment certificates without the Project Managers admission. However, if the Project Manager does not correct the assessment in question again the Contractor can seek adjudication by an Adjudicator. If the Project Manager does admit to a mistake following a tribunal or adjudication, under the provisions of core clause 51.3 it is liable to attract interest calculated from the date when the increased amount would have been certified if there had been no dispute. Core Clauses 11.2(21), 11.2(22) and 11.2.(28) relate to Payment in Main Option B Priced Contract with BOQ. The Term bill of quantities is defined in clause 11.2(21) which define its meaning and therefore the how the BOQ relates to other clauses. Clause 11.2(21) is very similar to Core Clause 11.2(20) of the main Option A priced contract with activity schedule. Finally Core Clauses 11.2(28) and 11.2(31) define the completed work ensuring it cannot be misinterpreted regarding payment terms. References Chappell, D. (2012) Understanding JCT standard building contracts. 9th edn. London, United Kingdom: Taylor Francis. Eggleston, B.Ce. (2006) The NEC 3 engineering and construction contract: A commentary. 2nd edn. Oxford, UK: Wiley, John Sons. Galbraith, A., Stockdale, M., Wilson, S., Mitchell, R., Hewitson, R., Spurgeon, S. and Woodley, M. (2014) Galbraiths building and land management law for students. 6th edn. Oxon: Routledge. Hughes, S., Mills, R. and OBrien, P. (2008) Payment in construction: A practical guide. Coventry: RICS Books. Lupton, S. and Cornes, D.L. (2013) Cornes and Luptons design liability in the construction industry. 5th edn. London, United Kingdom: Wiley-Blackwell (an imprint of John Wiley Sons Ltd). Ramsey, Vivian. Construction Law Handbook. 1st ed. London: Thomas Telford, 2000. Print. Cases Acsim (Southern) Ltd v Danish Contracting and Development Co Ltd [1992] 47 BLR 59 and Gilbert-Ash Northern v Modern Engineering Bristol) Ltd [1974] AC 689. Constain Ltd and Others [Corber] v Bechtel Ltd Anor [2005]. Lubenham V South Pembrokeshire DC [1986] 33 BLR 39 Secretary of State for Transport v Birse-Farr Joint Venture [1993] 62 BLR 36.