Blog Author: PHIL CATON – PARTNER, AARON & PARTNERS
KEY POINTS
- The JCT confirmed its 2016 suite will remain available until the end of 2026.
- Organisations that postpone reviewing contracts, amendment schedules and internal procedures risk a more complex and costly transition later on.
- JCT 2024 introduces changes reflecting major industry developments.
- Many firms are likely to find themselves administering projects under both JCT 2016 and JCT 2024 simultaneously.
- Early planning, staff training and a review of existing contractual documentation will help businesses minimise risk.
When the Joint Contracts Tribunal (JCT) published its 2024 suite of contracts, it marked the first major update to the standard forms in almost a decade. The new suite reflects developments across the construction sector since JCT 2016 was introduced, including building safety reforms, growing emphasis on sustainability, and changes in the way construction projects are delivered.
More recently, JCT confirmed that the 2016 suite will remain available until 31 December 2026. That decision has been broadly welcomed across the industry, providing valuable extra time for organisations to review their contractual arrangements and become familiar with the revised forms.
In my view, the extension is a sensible and practical response to the complex realities of construction procurement. But, crucially, it should not be viewed as a reason to postpone preparations for JCT 2024.
Why the extension was necessary
Construction projects rarely operate to neat timetables. At the point JCT 2024 was launched, a significant number of projects had already been procured using JCT 2016 contracts, or were progressing through procurement processes built around the 2016 suite. Plenty of employers, contractors, consultants and funders will have invested a great deal of time negotiating amendments and allocating risk on the basis of those familiar forms.
For many projects, particularly larger developments, changing contractual frameworks during procurement would have introduced unnecessary complexity.
Where an employer has selected a JCT 2016 form as the basis of a project, that decision often influences contractual arrangements throughout the supply chain. Main contractors will often enter into corresponding sub-contracts, for example. Consultants may find themselves appointed under related forms. Funders and insurers will likely have reviewed contractual arrangements on that basis.
Introducing a different suite midway through the process would not be straightforward.
This issue becomes more pertinent when considering tier two and tier three contractors. Whilst some major employers and contractors may have dedicated legal and commercial teams capable of implementing contractual change relatively quickly, smaller businesses often have fewer resources available to review new documentation and update internal processes.
In practical terms, many organisations are likely to find themselves operating both the 2016 and 2024 suites side by side over the next eighteen months. That is likely to create additional administrative and training requirements, particularly where teams are responsible for projects procured under different editions of the contract.
The confirmed extension acknowledges these realities and provides breathing space for businesses managing the transition. For many organisations, particularly those operating across multiple projects and supply chains, that additional certainty will be welcomed.
Avoiding complacency
I know from the conversations I have with those across the construction sector that the extension has been welcomed by many firms, removing some of the immediate pressure associated with the transition to JCT 2024. However, there is a risk that businesses interpret the additional time as a reason to postpone reviewing their contractual arrangements altogether.
Rather than the withdrawal of JCT 2016 itself, the main risk facing organisations may be underestimating the actual work required to move to JCT 2024. Many of the changes incorporated within JCT 2024 reflect developments that have already occurred within the industry, particularly in relation to aspects such as building safety, sustainability and project administration. Those issues do not disappear just because JCT 2016 remains available for an extended period.
The purpose of the extension is to support an orderly transition and accommodate projects already progressing under the 2016 suite. It should not be viewed as an indication that businesses can simply revisit the issue towards the end of 2026 and I would strongly advise against doing this.
Businesses that continue to treat the transition as a future issue may find themselves revisiting amendment schedules, internal procedures and staff training requirements at the same time as active procurement programmes are already underway.
The extension provides welcome flexibility, but it does not remove the need to prepare for transition. Nor does it change the fact that many businesses will ultimately need to become familiar with the revised suite.
A very different industry from 2016
It is important to consider why JCT considered it necessary to draw up a new set of guidelines in the first place. Just like many other sectors, the construction industry has changed quite drastically since 2016. The Grenfell Tower tragedy and the subsequent introduction of the Building Safety Act 2022 have fundamentally altered expectations around accountability, compliance and information management within construction projects.
Alongside this, the sector has experienced the detrimental effects of the pandemic, labour shortages, significant supply chain disruption and sustained inflationary pressures. Those challenges have affected projects of all sizes and have forced many organisations to reassess established ways of working.
Environmental considerations have also become increasingly prominent. Many clients now expect contractors and consultants to demonstrate a crystal clear understanding of sustainability objectives and environmental performance. In turn, these developments have influenced the way projects are procured, administered and delivered.
Some might conclude that JCT 2024 was overdue. Against that backdrop, the publication of JCT 2024 should not be regarded as a routine update. It is much more than that. In several areas, the revised suite reflects substantive changes in legislation and industry practice rather than simple drafting updates. The changes are not merely cosmetic. Whilst many familiar principles remain intact, the revised suite incorporates changes intended to reflect the legal, commercial and operational environment in which projects are now delivered.
Building Safety Act considerations
The Building Safety Act is the biggest cause of significant changes in JCT 2024.
This legislation meant extensive reforms and new obligations that were hoped to improve standards of accountability and safety throughout the construction process. Many of those obligations already exist independently of the contract itself. However, JCT 2024 seeks to reflect the new legislative framework and support compliance with relevant duties.
The practical implications here are significant. Construction contracts do not operate in isolation. They are one part of a broader framework governing project delivery, compliance and risk management. As a result, contractual provisions need to be considered alongside operational and administrative processes rather than in isolation.
Where contractual obligations are inconsistent with statutory requirements, difficulties can arise.
The revised JCT provisions seek to address this by incorporating requirements relating to information provision, cooperation and compliance with relevant building safety obligations.
For employers, contractors and consultants, reviewing the wording of the contract will only be part of the exercise. The more difficult question may be whether the procedures sitting behind the contract are capable of meeting the obligations now being assumed.
That may include how information is recorded and shared, who is responsible for particular compliance steps, and whether existing document management systems are fit for purpose.
Those points will be project-specific, but they should be considered early – before the new forms are adopted. Doing so is often easier than attempting to resolve them during delivery.
Sustainability and contractual obligations
Another area where JCT 2024 reflects developments within the industry is sustainability.
In a bid to keep pace with industry and wider global developments, many businesses are placing a greater emphasis on environmental performance, carbon reduction and sustainable construction practices.
The revised contracts seek to support that approach – they include provisions intended to spark discussion and cooperation between project participants when it comes to sustainability objectives. They may not radically alter the allocation of risk, but these provisions recognise that environmental considerations now form a key part of mainstream construction procurement.
One of the most valuable tasks organisations can do during the current transition period is a careful review of their standard schedules of amendments. Many firms have developed amendment schedules over a number of years. In some cases, those amendments have evolved incrementally through successive projects.
Certain provisions may have been introduced in response to a particular project requirement. Others may have been adopted from previous contractual arrangements without detailed reconsideration. It is not uncommon to encounter amendment schedules that have grown substantially over time.
The arrival of JCT 2024 gives leaders an opportunity for a careful review of those documents. Organisations that leave this exercise until the latter stages of the transition period may find that the scale of review required is greater than anticipated, particularly where amendment schedules have evolved over many years. Some amendments may duplicate provisions already contained within the revised suite. Others may no longer reflect current legislation or industry practice. Certain amendments may interact differently with the updated contractual wording than they did with JCT 2016.
A wholesale transfer of existing amendments into JCT 2024 without review may therefore create unnecessary risk. The primary objective should be to ensure that they remain effective and consistent with the contractual framework to which they are being applied.
This exercise can also help organisations identify areas where historic approaches to risk allocation may warrant reconsideration.
Practical steps for businesses
For organisations planning their transition strategy, I’d recommend considering several practical steps. First and foremost, identify which projects are likely to remain under JCT 2016 and which may move onto JCT 2024 over the coming months.
Secondly, review standard precedent documents and amendment schedules. This can be a useful opportunity to identify inconsistencies and ensure documentation remains fit for purpose. The transition period provides an opportunity to assess whether existing documentation continues to meet the organisation’s requirements.
Thirdly, consider training. Contract administrators, project managers and commercial teams should understand the key differences between the two suites and be comfortable administering projects under both forms where necessary.
Finally, review internal procedures. Many contractual obligations depend upon effective project administration. Ensuring that internal systems align with contractual requirements can often be as important as understanding the wording of the contract itself.
The extension provides additional time, but it should not be mistaken for an opportunity to defer planning indefinitely. Early preparation is likely to place businesses in a far stronger position than a last-minute review as the transition period draws to a close.
This article was originally published in the July issue of Construction Law.