The Joint Contracts Tribunal (JCT) is releasing a new suite of 2016 edition contracts. The new Design and Build Contract was launched on 23 September 2016. The contract incorporates a number of key changes with which contracting parties should make themselves familiar.
The main changes in the 2016 edition can be summarised as follows:
- The new edition incorporates (with minor changes) the provisions of the JCT Public Sector Supplement 2011 (regarding Fair Payment, Transparency and BIM).
- There are various amendments to update terminology following the introduction of the 2015 CDM Regulations.
- Amendments are made to reflect changes introduced by the Public Contracts Regulations 2015
- Changes have been made to the insurance provisions, in particular an extension of (Works) Insurance Option C and consolidation within the main text of Insurance Options A, B and C regarding evidence of insurance, insurance claims and reinstatement work.
- Widespread amendments to the payment provisions of section 4 – see further below.
- New provisions relating to the grant of Performance Bonds and Parent Company Guarantees.
- Changes to the Collateral Warranties optional provisions for sub-contractors to include Third Party Rights.
- Minor amendments to and clarification of the intellectual property provisions.
- Change to the obligation to have a “person in charge” which is replaced with an obligation to have a site manager.
- Amendment to clause 1.8 relating to the effect of the Final Statement.
- A new clause 1.10 regarding consents and approvals.
The JCT Guide to the new edition notes that “It is not believed that any of the 2016 edition amendments or changes in format will in practice materially affect risk allocation.”
We have set out below a more detailed review of some of the changes. This is not intended to be an exhaustive explanation of all of the amendments but highlights some of the key points of interest.
Main changes to section 1
A number of new defined terms have been introduced into the definitions section. These include “BIM Protocol”.
The Contract Particulars have been amended to allow the parties to make reference to a BIM Protocol which will then be one of the Contract Documents.
A new clause 1.4.6 makes clear that, where there is a BIM Protocol, references to documents shall include information in a form or medium conforming to that protocol. This amendment recognises that, under BIM, designs and information may not be provided in the same format as the hard copy equivalent.
Main changes to section 3
Previously clause 3.2 required the Contractor to ensure he has a competent person in charge on site with the option, if indicated in the Contract Particulars, to require the appointment of a Site Manager.
A new clause 3.2 now requires the Contractor to appoint a full-time Site Manager (a new defined term) prior to the commencement of work on site and for that Site Manager (or a competent deputy) to be on site at all material times.
Main changes to the payment provisions in section 4
The JCT DB guidance flags the need for employers to watch out for the dates for issue of Payment Notices and Pay Less Notices.
Under the Contract Particulars the Interim Valuation Dates in certain months will be moved if they do not fall on a Business Day - they will change instead to “the nearest Business Day in that month”. This will mean that the due date, the 5 day period for issuing the Payment Notice and the last date for serving a Pay Less Notice will all be affected. While in some cases this will mean that the relevant date is pushed back, in others the relevant date will be brought forward. Although the wording in the Contract Particulars in this respect has not been amended, recent cases have highlighted the perils of failing to serve these notices on time. Appropriate processes should therefore be put in place to ensure all relevant dates are diarised.
Previously periodic payments under Alternative B of the payment options were to be made based on monthly interim applications up to practical completion and subsequently at two month intervals. Clause 4.7.2 now provides for monthly due dates up to the due date for final payment.
The wording of clause 4 has been amended, with associated changes to the definitions section to include new definitions of “Final Payment Notice”, “Interim Payment Application” and “Interim Valuation Date”.
There are revised provisions to deal with the ascertainment of loss and expense. A new clause 4.20 deals with notification and assessment. The Contractor must notify the Employer as soon as the likely effect of a Relevant Matter on regular progress, or the likely nature and extent of loss and expense from deferment of possession, becomes (or should have become) reasonably apparent. The notification should include an initial assessment of loss and expense incurred and to be incurred (or this can follow as soon as reasonably practicable) together with such information as is reasonably needed by the Employer to assess the claim. After that the Contractor is obliged to provide monthly updates in such form as the Employer may reasonably require until sufficient information has been provided to ascertain the total amount of loss and expense.
The Employer has to notify the Contractor within 28 days of receipt of the initial assessment and 14 days of each subsequent update of the amount “ascertained”. This needs to include sufficient detail so that the Contractor can identify differences between the Employer’s and the Contractor’s assessment.
Main changes to Third Party Rights and Collateral Warranties in section 7
Part 2 of the Contract Particulars in the 2011 edition sets out the details of the third party rights which were to be granted. This has now been deleted and instead the Contract Particulars require the parties to fill in the description of the document in which the details of the requirements for these rights will be set out. This “Rights Particulars” document is prepared by or on behalf of the Employer setting out the documents required. The Design and Build Guide includes a model form for the Rights Particulars.
Section 7 sets out provisions in relation to third party rights and collateral warranties and there are various amendments made which simplify the process and provisions at each level.
Clause 7.3 requires the Contractor to provide whichever of a performance bond or parent company guarantee as is specified in the Contract Particulars as being required. The contract does not include a form of bond or guarantee for these purposes so the parties are free to agree their own wording.
There have been a number of changes made to the contract. Many of these reflect legislative changes since the 2011 version was issued, such as the changes to the CDM Regulations and Public Contracts Regulations.
The changes to section 4 in relation to payment in particular are widespread and users of the contract should familiarise themselves thoroughly with the new clauses to avoid the potentially adverse consequences of inadvertent non-compliance.
For more information about the issues raised in this article or to find out more about how the Construction team can help you please contact Rowan Turrall on 0118 952 7206 or email [email protected].
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.