Blog Author: Suzanne Reeves – Partner, Wedlake Bell
JCT Design and Build 2016 Contract
JCT has published the new edition of 2016 Design and Build Contract in conjunction with the Design and Build Sub-Contract for use with it. The purpose of this note is to outline the principal changes from the previous 2011 edition and answer some frequently asked questions.
In summary, these are:
- Introduction of common “Interim Valuation Dates” which will apply throughout the contract chain including at sub-contract and sub-sub-contract tiers.
- Introduction of a procedure for prompt assessment of Loss and Expense claims.
- Consolidation in a single sub-section of the payment notice requirements of the Construction Act.
- Amendments to reflect the CDM Regulations 2015.
- Consolidation within the main text of the general provisions of Insurance Options A, B and C and ability to adapt bespoke existing structures requirements.
- Flexibility in relation to adoption of Fluctuations Provisions (if used).
- Inclusion of provisions for the grant of Performance Bonds and Parent Company Guarantees.
- Inclusion as an option of Third Party Rights instead of collateral warranties for subcontractors.
- Updating of the wording of clause 1.8 (Effect of Final Certificate) to bring JCT Design and Build into line with amendments already been made to other JCT contracts in the 2011 editions.
- Inclusion of a new clause 1.10 to eliminate the need for multiple repetitions of the requirements for consents and/or approvals not to be unreasonably delayed or withheld.
- Inclusion of the Public Contract Regulations 2015 for public sector works.
- Minor updating of the intellectual property provisions.
JCT Standard Building (SBC) Contract 2016
In addition to the amendments referred to above:
- The main contract form now incorporates (in Supplemental Provision 9 in Schedule) the provisions of the JCT 2012 Named Specialist Update which previously was published separately. Clause 3.8 of the SBC contract conditions continues to offer the employer some control over the selection of specialists by providing for selection from an (adjustable) list of three or more approved sub-contractors. This is for discrete work packages identified in the Contract Documents. However, where Optional Supplemental Provision 8 is utilised by reference in the Contract Particulars, the employer can name individual specialists for work packages that fall outside the Contractors Designed Portion. This can be either pre-contract or post-contract. In the latter case the work will be identified as the subject of a Provisional Sum.
- The Articles of Agreement remain in their previous format but reference to them has been dropped from the Agreement heading.
- “Measurement Rules” are defined as the RICS New Measurement Rules, unless otherwise stated. These rules supersede the Standard Method of Measurement.
- “Site Manager” now supersedes “Person in Charge”.
Frequently asked Questions on JCT Design and Build (DB) and Standard Building (SBC) Contracts 2016
Has there been a change in the risk profile?
JCT’s stated aim was that the 2016 edition amendments do not materially affect risk allocation. However it is unusual for an unamended JCT contract to be used particularly where JCT Design and Build is the form of procurement. Where there is a Schedule of Amendments agreed between the parties, those amendments will themselves change the risk allocation.
How will Third Party Rights (TPR’s) be granted in the new editions now that this is an option for sub-contractors to grant such rights?
The Contract Particulars in the Articles of Agreement have been simplified by the deletion of part 2 of the Particulars. This used to set out the warranty and TPR requirements but sometimes caused confusion. Instead employers who have developed their own forms of third party rights and collateral warranty requirements can now incorporate these by reference in the Particulars. Alternatively JCT has on its website model forms for the “Rights Particulars” if the Employer does not have bespoke ones. (See below for more detail on TPR’s.)
Are the Contract Particulars entries the same?
The Contract Particulars have been simplified by the deletion of part 2 of the Particulars (as referred to above); the insertion of a new entry against clause 1.1 for the identification of any BIM protocol and to give a wider choice of provision in respect of fluctuations provisions in section 4 (if they start to be adopted again). There is also an additional entry for clause 6.7 and Schedule 3 relating to insurance to reflect the amendments made to insurance option C. This allows a replacement schedule for existing structures insurance (as to which see below).
Are the contracts still executed in the same way?
Yes each contract can still be executed either as a deed thereby attracting a twelve year limitation period or underhand thereby attracting a six year limitation period. The only change is to allow a foreign company Employer, which is not operating through a UK subsidiary, to be able to execute the contract in accordance with its own corporate requirements.
If a BIM protocol is included in the contract what order of precedence does the protocol take?
Some model protocols provide that the provisions of the protocol override the Agreement and other Contract Documents, JCT does not consider that unqualified overriding provisions are appropriate and therefore clause 1.3 which deals with the precedence of documents has been amended slightly to make it clear that the Articles of Agreement and Conditions take precedence over any BIM protocol. However, a new clause 1.4.6 has been added to provide that where there is a BIM protocol or other protocol relating to the supply of documents or information documents should be in a form or medium conforming to that protocol.
If there is a BIM protocol what effect will that have on the Design Submission Procedure?
A. Clause 2.8 provides for the supply of the Contractors Design Documents as specified by the BIM Protocol, if one is applicable. If not the procedure set out in Schedule 1 (the existing Design Submission Procedure) will apply subject to any modifications to it specified in the Contract Documents (the definition of which includes the BIM Protocol, if there is one).
What changes have been made to the intellectual property provisions?
The wording in clauses 2.19 and 2.20 of DB and clause 2.21 to 2.23 of SBC have been amended. There is some minor rewording in clauses 2.19 of DB and clause 2.21 of SBC. New clause 2.20.2 of DB and 2.23.2 of SBC requires the Contractor promptly to notify the Employer if he is or becomes aware that complying with any instructions may infringe any patent rights. Such instructions will not then take effect unless confirmed by the Employer. If so confirmed any royalties damages or other sums payable by the Contractor will be added to the Contract Sum. However the general principles embodied in the clauses remain the same.
What changes have been made to the payment provisions in Section 4?
Generally the section has been rearranged with a view to simplification. There are now eight subsections in a more logical order. A general payments and notices provision has also been included.
However, the main change is the establishment of Interim Valuation Dates which are common valuation dates also intended to apply to sub-contracts and sub-sub-contracts. This has been introduced in order to comply with the Government’s Fair Payment campaign by providing a common assessment date throughout all tiers in the contractual chain. If the payment provisions are unamended, payment will be made from the top to the bottom of the chain within thirty days. The Interim Valuation Dates will be specified in the Contract Particulars and Sub Contract Particulars.
Under clause 4.7.3 of DB the Contractor is required to make an Interim Payment Application in respect of each interim payment before each Interim Valuation Date. Subject to the application being made late, (which is dealt with in clause 4.7.3), the due dates for interim payments are 7 days after the relevant Interim Valuation Date.
Under SBC the Contract Administrator is required to issue an Interim Certificate no later than 5 days after each Interim Valuation Date, being the due date in each case. The Contractor may (but is not required to) make an application for payment by the Interim Valuation Date.
Employers (and in relation to sub-contracts, Contractors) should bear in mind that under the Contract Particulars, Interim Valuation Dates in certain months will be altered to the nearest Business Day in the month. That alteration will directly affect the due date and also the five day period for the issue of the payment notice, the last day for giving a Pay Less Notice and the Final Payment Date. This is particularly noteworthy given the importance of serving the relevant notices in time and the consequences of not doing so as determined by the Court in recent cases when the amount of the Contractor’s application may become payable however inflated.
What are the Public Contract Regulations 2015 (PC Regulations) and when will they apply?
These apply to works procured by a local or public authority employer and not to private sector projects. Where they do apply new Supplemental Provision 12 includes provisions to reflect the sub-contracting requirements of Regulation 71. Under this regulation there is an obligation on a public employer to require the main contractor to provide basic information on his sub-contractors and to keep that information updated.
The inclusion in the contracts of relevant provisions relating to the PC Regulations also means that there are three new termination events set out in Section 8. These would be implied into the contract in any event but JCT has chosen to include (in express provisions) both the basis on which they will be exercised and the consequence of termination. Obviously it remains to be seen if the PC Regulations are repealed or amended in the light of Brexit.
Part two of this article will appear in the April edition of JCT News.
Suzanne sits on the JCT Drafting Subcommittee and JCT Council. She is Head of Construction at Wedlake Bell Solicitors.
Suzanne’s practice covers all issues relating to construction projects including contract drafting and dispute advice and resolution.
Suzanne has over 25 years’ experience in the construction industry dealing with both contract drafting and disputes (domestic and international), acting for most sectors of the industry and involving and wide range of projects large and small, such as house building, office and retail development, manufacturing plant, hospitals, sports stadia and infrastructure.