Results and discussion - Mauna Loa Observatory, Hawaii

Mauna Loa Observatory, Hawaii

C.5. Results and discussion

The UK is fortunate to have the benefit of a wide variety of published institutional standard forms of contract available for use in the building and civil engineering industries.

However, a number of government-sponsored reports have also highlighted that this has major disadvantages, identifying duplication of effort and a wasteful use of resources at almost every level of activity. It has been suggested that many of these forms also probably help to fuel the adversarial nature of the construction industry in which they are applied.

It can also be argued that to write and interpret the clauses of the various forms alone represents an industry in itself.

The widespread use of standard forms within the construction industry is also partly accounted for by the practical impossibility of writing a set of new contract conditions for every project, even if this were in any way desirable.

The construction of building and civil engineering projects represents a major investment for any client. In some cases this will represent the single highest purchase ever made in an organisation. For clients who undertake construction projects as a regular part of their activities, the correct choice of a form of contract is more important, since the application of the principles involved may be seen as precedents in the administration of their contracts.

Since large sums of money are likely to be involved in these activities, it is important that the contractual arrangements should always be formal and legal from the outset of the project. Where a client allows consultants or contractors to begin their work on an informal basis, then the client’s bargaining position is thereafter weakened or even eliminated. Under these circumstances, a worst-case scenario for clients is that they may expect to spend years, often at substantial legal expense, in arguing over the precise nature of the contractual arrangements which should have been clarified from the start of the project.

THE STANDARD FORM OF CONTRACT FOR BUILDING WORKS

A standard form of contract for building projects in the UK was introduced in the latter part of the nineteenth century. It consisted of nineteen clauses compared with the 42 clauses plus supplemental provisions, in the current edition of JCT98. The form was commonly described as the RIBA form until 1977, when the term JCT contract was adopted.

60 Forms of Contract

The RIBA form, as it was known, was originally written by the RIBA, the National Federation of Building Trades Employers (NFBTE) and the then Institute of Building (IOB).

In 1931, the IOB withdrew and much later the NFBTE became known as the Construction Confederation (CC) after a number of different name changes. The RICS became involved in the preparation of the form in 1952, and by 1963 the JCT consisted of ten bodies from the construction industry. Subcontracting bodies eventually became members of JCT.

The Joint Contracts Tribunal (JCT) has existed since 1931 and has produced forms of contract, guidance notes and other standard documentation for use in the construction industry. The standard form was substantially rewritten in 1939, 1963 and 1980. The latter of these was described as JCT80.

The present body responsible for drafting the current form includes public and private sector employers, architects, quantity surveyors, contractors and subcontractors.

TYPES OF CONTRACT ENVISAGED

The building or civil engineering contract typically refers to the contractual arrangement between the client (employer in building forms of contract and promoter in civil engineering) and contractor. The large part of this book has been written with this in mind. However, it should be remembered that with the construction of most building and civil engineering projects, contracts also need to be formed between other individuals or firms. Besides the main contract, these include:

■ Engagement of the different consultants

■ Nominated subcontractors and suppliers

■ Trade or domestic subcontractors

In addition, the different contractual arrangements also require collateral warranties and performance bonds and in some cases personal and parent company guarantees.

EMPLOYER AND CONTRACTOR

As long ago as 1964, the Banwell Report recommended the use of a single form of contract for the whole of the construction industry, this being both desirable and practicable. More recently the Latham Report (1994) has reiterated these comments. Rethinking construction, the Egan Report (1998), makes further comments. Chapter 12 considers some of the issues raised from these reports in more detail. Unfortunately, since 1964 this apparently good suggestion has been thwarted with just the opposite taking place. Since that time there has been a plethora of different forms of contract designed to suit the individual interests of particular clients and changes in the way that construction work is now often procured.

The different forms of contract also have the vested interest of different parties and institutions, who for a variety of reasons whilst incorporating good practices will at the same time wish to retain their separate identity. The better (fairer) forms of contract have incorporated the views of the different interested groups within the construction industry, such as employers and contractors. Such forms have then been prepared as a joint effort

Main Contract Forms 61 between the various different parties involved. The JCT forms (see below) include wide representation from different organisations in the construction industry.

The widespread use of different forms of contract is of course exacerbated where international projects are concerned. Not only are further additional forms required, but the procurement methods used can also be considerably different from those used in the UK and different laws may exist. Note that aspects of the laws of England and Scotland themselves continue to remain at variance. There are common threads that run throughout all of the forms of contract regarding payments, variations, quality, time, etc. However, whilst the general layout and content of the various forms may appear somewhat similar, the details may vary considerably. The interpretation of the individual clauses will also differ. In some cases these have been clarified through the application of case law resulting from differences of opinion being settled in a court of law. The principles of the case law may also only apply to the form of contract in question and thus may not be applied universally across all of the different forms.

The selection of a particular form of contract depends upon several different circumstances, such as the following:

■ Type of work to be performed: building, civil engineering, process plant engineering.

■ Size of project: forms are available for major and minor works and those of an in-between nature.

■ Status of designer: architects are more likely to prefer JCT or ACA, whereas civil engineers will opt for an ICE or ECC form.

■ Public or private sector: different forms are available for use by private clients and local and central government. Large industrial corporations may in addition have their own forms of contract.

■ Procurement method to be used

A major advantage of using a standard document is that those who use it regularly become familiar with its contents and can apply them more easily and more consistently in practice.

Individuals become aware of the strengths and weaknesses of a form and are able to identify the potential areas where disputes may arise, and take corrective action where possible. They are also able to identify the form’s suitability for projects with which they are concerned. The range of forms adopted by consultants is often more restricted than those faced by contractors.

MAIN CONTRACT FORMS

According to Contracts in use surveys (Chapter 7), the Joint Contracts Tribunal form of contract, referred to as JCT 98, remains the most popular form of contract for building contracts in the UK. This has commonly been referred to as the Standard Form of Building Contract (SFBC). The Institution of Civil Engineers (ICE) form remains the most popular form for civil engineering contracts. Whilst JCT 98 is in common use, its original introduction in 1980 ( JCT 80) in the industry faced considerable opposition. It resulted in the reprinting of the older 1963 form of contract due to its more popular demand by those in practice. Whilst this form is still preferred by some practitioners, its general use has now all but disappeared. It could also be argued that the introduction of JCT 80 also encouraged

62 Forms of Contract

the Association of Consultant Architects (ACA) to prepare their own form of contract. This had great similarities to the former 1963 RIBA (Royal Institute of British Architects) form.

Due to the overt complexity of administering aspects of JCT 80, particularly in respect of nominated subcontractors, the Joint Contracts Tribunal introduced a new intermediate form of contract (IFC) in 1984. This has since been revised to bring it in line with JCT 98 and this form is referred to as IFC 98. The reason for introducing this form was to provide contract conditions that were more appropriate for use on ‘medium-sized’ building projects.

In practice this form has received a more widespread use, often on the sort and size of projects that should have adopted JCT 98 as the preferred form of contract.

JOINT CONTRACTS TRIBUNAL (JCT) FORMS

The JCT is widely represented from within the construction industry. Its constituent bodies are:

■ Royal Institute of British Architects

■ Construction Confederation

■ Royal Institution of Chartered Surveyors

■ Association of County Councils

■ Association of Metropolitan Authorities

■ Association of District Councils

■ Confederation of Associations of Specialist Engineering Contractors

■ Federation of Associations of Specialists and Subcontractors

■ Association of Consulting Engineers

■ British Property Federation

■ Scottish Building Contract Committee

Here are the different forms of contract available from JCT.

Standard Form of Building Contract (JCT 98)

There are separate editions for use with either local authorities or the private sector (Figure 6.1). There are also different versions available for each, to allow for with quantities, without quantities or with approximate quantities. However, the six different versions are very similar in their content throughout. Since its introduction in 1980, a number of amendments have been introduced. The incorporation of such amendments is cumbersome to use. It was therefore decided to publish a revised JCT 80 incorporating the various amendments as JCT 98. No doubt future amendments will be issued from time to time until a new edition is published in 2005.

Five amendments to JCT 98 are applicable:

■ Construction industry scheme (CIS) ( June 1999)

■ Sundry amendments ( January 2000)

■ Terrorism cover/Joint Fire Code/CIS/SMM ( January 2001)

■ Extension of time/Loss and expense/Advance payment ( January 2002)

■ Construction Skills Certification Scheme ( July 2003)

Joint Contracts Tribunal (JCT) Forms 63

Joint Contracts Tribunal (JCT) forms of contract

With Contractor’s

Electronic Data Exchange in the Construction Industry Formula Rules

Form of Agreement for Collateral Warranty Guide to Terrorism Cover

The Use of Standard Forms of Building Contracts Adjudication Agreement

Practice Notes

Fig. 6.1 JCT forms of contract (Adapted from Joint Contracts Tribunal, 1998, The standard form of building contract)

In addition there are also a number of additional supplements to cover:

■ Fluctuations, two alternatives for private versions and local authority versions

■ Sectional completion, relevant to with quantities, without quantities and with approximate quantities

■ Optional clause 30.4A for contractor’s bond in lieu of retention, for use with the private edition of the forms

■ Contractor’s designed portion; this should not be confused with design and build, which is an entirely different concept, with its own particular JCT form (CD 98)

■ JCT Adjudication Agreement

64 Forms of Contract

■ JCT 1998 Edition of the Construction Industry Model Arbitration Rules

■ Formula Rules

■ Form of Agreement for Collateral Warranty

■ Government Department Supplement

Intermediate Form of Building Contract (IFC 98)

This form was first introduced in the mid 1980s in response to the overcomplexity of some of the provisions and procedures of the then JCT 80. This form has received similar revisions to JCT 80 and there are the same amendments that are applicable to JCT 98.

The form is considered in further detail in Chapter 34.

Agreement for Minor Building Works (MW 98)

The original minor works form was introduced at the same time as JCT 80. It now contains similar provisions to those of JCT 98, but in a much more simplified format. It is intended for use on minor building works schemes and small projects to be carried out on a lump sum basis and where an architect or supervising officer has been appointed on behalf of the employer (Chapter 33). The form cannot be used where bills of quantities have been prepared or where the employer wishes to nominate subcontractors or suppliers separately. The form includes the two amendments Construction Industry Scheme and Sundry Amendments.

Standard Form of Building Contract with Contractor’s Design (WCD 98)

The use of this form is on projects of a design and build nature. It includes many of the clauses found in the ‘parent’ JCT 98. It also includes clauses especially designed to deal with this type of contractual procurement arrangement. It includes the same three amendments as JCT 98. (Chapter 11).

Standard Form of Management Contract (MC 98)

The head contract to provide for contracts in which the contractor manages the works. It provides for the works to be subcontracted using the works contract documents, which correspond approximately to the NC series under JCT 98. It includes the two amendments Construction Industry Scheme and Sundry Amendments. The form is used on

management contracts. It includes the following:

■ Works Contract/1: Section 1: Invitation to Tender

■ Works Contract/1: Section 2: Works Contractor’s Tender

■ Works Contract/1: Section 3: Articles of Agreement

■ Works Contract/2: Works Contract Conditions Construction Management Documentation (CM 02)

JCT have provided documentation for use between the client and the construction manager.

Joint Contracts Tribunal (JCT) Forms 65

1 Sectional completion supplement

2 Clauses 21, 22, and 30.1: insurance provisions withdrawn 3 Clause 21.2: insurance – liability, etc., of employer withdrawn 4 Clauses 5.2.2 and 5.4: drawings – additional copies

5 Clauses 30.3 and 16.2: payment for off-site materials

6 Value added tax withdrawn

7 Standard form of building contract for use with bills of approximate

quantities withdrawn

8 Statutory tax deduction scheme out of print

9 Domestic subcontractors out of print

10 Nomination of subcontractors out of print

11 Employer/nominated subcontractor agreements out of print 12 Direct and final payment to nominated subcontractors out of print

13 Renomination of a subcontractor out of print

14 Variations and provisional sum work out of print

15 Nominated suppliers out of print

16 Extensions and liquidated damages out of print

17 Fluctuations out of print

18 Payment and retention out of print

19 Application and practice notes to contracts in Scotland out of print 20 Deciding on the appropriate form of JCT main contract

21 The employer’s position under the 1980 edition of the standard form of building contract compared to the 1963 edition

22 Amendments to the insurance and related liability provision: 1986 out of print

23 Contract sum analysis out of print

24 Insolvency of contractor 25 Performance-specified work

26 Valuations and certification for interim payments including variations 27 Application of construction (design and management) regulations 28 Mediation on building contracts or NSC disputes

Box 6.1 Practice notes issued under JCT 98

Some of the practice notes originated with the 1963 form and have thus been adapted to suit this particular form. The practice notes are not finally authoritative; they often deal with a practical application of the form, and contain material which will be included in future revisions to the form. Such notes, although they express only an opinion in legal terms, are nevertheless considered to be based upon expert legal advice. However, they do not have the same binding effect as the decisions from courts of law.

Box 6.1 contains the full list of practice notes that have been issued under JCT 98, together with their status. There are also a series of JCT rules, warranties, etc.

■ Guide to Terrorism Cover

■ Electronic Data Interchange in the Construction Industry

■ The Use Standard Forms of Building Contract

66 Forms of Contract

JCT 98 Standard Form of Building Contract: Practice Notes

The Joint Contracts Tribunal have issued the following practice notes in respect of JCT 98:

■ Practice Note 1 (Series 2): Construction Industry Scheme

■ Practice Note 2 (Series 2): Adjudication in JCT Forms

In addition some of the JCT practice notes (series 1) on the previous JCT 80 form are still available. Where relevant to current practices they will be updated and reissued as practice notes (series 2). The rest will be withdrawn.

It is likely that additional practice notes will continue to be issued as the need arises in order to clarify matters arising from the use of the contract in practice.

Standard Form of Prime Cost Contracting (PCC 98)

This form replaces the old fixed-fee contract. The main contract form consists of recitals, articles of agreement, attestation clause, conditions of contract and eight schedules. It includes the two amendments Construction Industry Scheme and Sundry Amendments.

Standard Form of Measured Term Contract (MTC 98)

This form is designed for use by employers in the public and private sectors who need to undertake regular maintenance, building improvements and minor works programmes. The buildings concerned are likely to be within a defined geographical area. The appointment of a contractor to carry out these works is likely to be for a specified period of time. The contract is widely used with the National Schedule of Rates. It includes the two

amendments Construction Industry Scheme and Sundry Amendments.

Jobbing Agreement (JA 90)

This contract is designed for use by local authorities and other employers who place a number of small jobbing contracts with various contractors and who are experienced in ordering jobbing work and dealing with contractors’ accounts. A new edition is currently in preparation. There are two alternatives:

■ JA/T Jobbing Agreement Tender for use by local authorities and other employers who place a small number of jobbing contracts with various contractors. It is used for work of small value where MW 98 is too detailed.

■ JA/C Jobbing Agreement Conditions for use with the above or by employers who do not wish to use JA/T but place a number of small jobbing contracts with various contractors by means of works orders.

Agreement for Housing Grant Works (HG (A) 02)

There are two versions of this form for use where a grant is receivable under the Housing Act 1989. One is used where an architect is appointed and the other where no architect is engaged. A new edition is in preparation.

Designer of the Works is the Contractor or it is done on his behalf

Use JCT Standard Form of Contract With Contractor’s Design Use JCT Standard Form of Contract With Quantities modified by Contractor’s Designed Portion Supplement Use JCT Standard Form of Contract Without Quantities modified by the Contractor’s Designed Portion Supplement

Works are of a nature that require a Bill of Quantities

Management Procurement Employer wants contractor to be accountable for ‘Works’ Contractors Use JCT Measured Term Contract Works are of a nature that can best be described to the tendering Contractor by use of Bills of Quantities Use JCT Standard Form of Contract Without Quantities

Use JCT Management Contract Use JCT Standard Form of Contract With Approximate Quantities Use JCT Prime Cost. Contract Works contain an element of Design by the Contractor

Use JCT Standard Form for Construction Management Works have been fully designed and detailed contract documents provided Works are of a nature that require Bills of Quantities or the Architect wishes to designate sub-contractors A consultant will administer the contract Use JCT Agreement for Minor Building Works

In document TESIS DOCTORAL (página 96-104)