Supply Chain DevelopmentJohn Clement / Ian Widdrington (CFW Consultants)

Iwan Doull (Partner Berry Smith LLP)6th October 2015

Agenda

Overview of Standard Construction Contracts

Types of Construction Contracts

Lump Sum Contract• Contractor agrees to build with

specific scope for a fixed price.

Cost Plus Contract• Purchaser agrees to pay the cost of

the work, including;• Trade contractor work, • Labour;• Materials and equipment;• % of contractor overhead and

profit.

Cost Reimbursable Alternative• Contractors are paid for work with a

mix of reimbursable and fixed or incentive costs.

Design & Build• Main contractor is responsible for

undertaking both the design and construction work on a project, for an agreed lump-sum price.

Turnkey• The employer accepts a proposal

from a standard design from the contractor. Contractor is responsible for the design and construction.

JCT NEC

‘Traditional Contract’ for use in the UK Designed for International use

Contract Administrator acts on behalf of employer

Project Manager acts on behalf of the employer

Focuses on liability and risk More proactive and collaborative approach

Common Contracts:JCT –V- NEC

Time

Similarities

1. Both contracts provide for employer to state a start date, completion date, access dates and any sectional completion.

2. Both allow for damages to be included for late completion by the contractor.

Differences

1. JCT – submit master programme for execution of the works ASAP after contract executed.

2. NEC - detailed set of docs that make up the programme to be submitted on regular basis.

3. NEC ‘early warning’ process. JCT ‘after the event’ process.

Cost

Similarities

1. Both provide for the price payable to the contractor to be based on bills of quantities.

2. Both provide for change control (Variations/claims in JCT, compensation in NEC):

a) JCT splits up time and cost (deals with them separately at various stages after the change arises).

b) NEC deals with the effect of time and cost together (providing for a quotation to be prepared by the contractor and accepted by the project manager shortly after the change occurs).

Differences

1. JCT provides a number of subjective tests to determine is events give grounds for recompense to contractor. NEC generally relies on more objective tests.

2. JCT payment section all in one place (Clause 4). NEC payment section in 3 different places.

3. Differences in cost scrutiny.

Quality

Similarities

1. Both anticipate precise quality requirements to be stated in a separate technical document.

2. Both allow for accepting any of the contractor’s defects;

a) NEC allows for proposal from contractor to reflect time and cost savings;b) JCT only addresses the cost effect of work, materials or goods to remain.

Differences

1. NEC provides for a search for defects, the contractor’s responsibility for correcting defects and failure to correct them.

2. JCT provides for instructions to open up works for inspection. Contractor is responsible to provide workmanship in accordance with the contract. Administrator can issue instructions that are ‘reasonably necessary’ (undefined).

3. NEC – contractor and supervisor obliged to notify each other of defects. No obligation in JCT.