Understanding JCT Contracts: Which JCT should I use for my project

JCT has a number of standard form contracts within its suite, many of which are commonly used in the UK construction industry. Selecting the appropriate form of contract for your project requires careful thought. Matters which may which influence contract selection include the:

• Nature and scope of the project;
• Contract sum (although there are few guidelines as to which JCT contract should be used for which contract value);
• Design requirements and responsibility; and
• Employer’s appetite for risk.

Employers can often lose sight of a project’s complexity and place sole focus on the contract sum when electing the contract form. They select a JCT Minor Works form of contract for works that are low value and a Standard Building Contract where there is a high-value contract sum. This can lead to the selection of a contract which is unsuitable for the works. A project may be low value, but complex. In which case, the provisions of a Minor Works contract will not be sufficiently detailed to meet the project’s needs. In contrast, a high-value project may not require the detailed provisions of a Standard Building Contract.

Employers should look at the project as a whole when deciding which form of contract to use. This article considers when to use a Design and Build Contract, Standard Building Contract, Intermediate Building Contract and Minor Works Contract.  

When to use a JCT Design and Build Contract

The JCT Design and Build Contract (D&B) is particularly suited to projects where the Contractor is responsible for both the design and construction of the works. It is appropriate for projects where the Contractor’s expertise in design will be beneficial. Such projects might include commercial developments (warehouses, industrial units and such like) and design-intensive residential schemes.

A D&B should be adopted where detailed clauses dealing with design are required. Its contractual provisions go further than those of the ‘Contractor’s Designed Portion’ of the Standard Building Contract.

Given the D&B is more comprehensive and places the entire responsibility for design onto the Contractor, electing this form of contract will lead to an increase in the contract sum. Ultimately, the Contractor will charge more money to account for the increased risk it is taking on.

The D&B contract works well when the Employer can provide a detailed ‘Employer’s Requirements’ document outlining the scope, performance criteria and design intent. It offers a streamlined procurement route that can save time and reduce the Employer’s involvement in the day-to-day project management. The Employer’s need to manage the design team or administer the contract in detail is reduced as the Contractor takes on much of that responsibility. The Employer will then normally instruct an agent (either an external consultant or employee) to administer the contract.

The Employer will be put to the cost of appointing consultants to prepare the documentation which is to form the Employer’s Requirements to ensure that the scope and quality of the intended works is defined in sufficient detail. Often those consultants will then be novated to the Contractor, with collateral warranties being entered into for the benefit of the Employer. The legal and professional fees associated with preparing this documentation will add further expense.

A D&B will therefore lead to increases in the contract sum and the legal fees that the Employer will incur. However, in exchange, the Employer will be reducing their assumption of risk, of which the majority will be passed to the Contractor.

If a dispute was to arise under a D&B, the Employer will only need to look to the Contractor in the first instance. Whereas under the other JCT contract forms, there may be various consultants who an Employer would need to pursue, each of whom might bear an element of responsibility.

The JCT D&B should not be used:

• If the Employer wants full control over the design throughout the project.
•  Where the design is already fully developed and the Employer prefers a traditional procurement route.
• For complex refurbishment projects where detailed design coordination is critical and best retained by the Employer.

When to use a JCT Standard Building Contract

The Standard Building Contract (‘SBC’) is one of the most comprehensive forms of construction contract available in the UK. It is designed for high-value, large or complex construction projects where detailed provisions are needed to manage risk, quality, and time.

The following versions of the SBC are available:

• With Quantities (SBC/Q) - which is to be used where a bill of quantities is provided.
• Without Quantities (SBC/XQ) – to be used where drawings and specifications are used instead.
• With Approximate Quantities (SBC/AQ) – for projects which are less certainty in quantities, where the work is to be quantified and remeasured.

Examples where the SBC may be used include major residential or commercial developments, infrastructure projects, works requiring detailed design coordination and projects involving multiple phases or specialist sub-contractors.

The SBC assumes a traditional procurement route, where the Employer appoints a designer/design team and the Contractor builds to the Employer’s design. If the Contractor is to be responsible for specific elements of the design, then the optional ‘Contractor’s Designed Portion’ provisions of the SBC should be incorporated.

The JCT SBC should not be used:

• For small or simple projects (in which can a Minor Works or Intermediate Building Contract should be adopted).
• Where design and build procurement is preferred (a D&B should be used in this instance).
• If the Employer lacks the resources to manage a large number of consultants as will as the Main Contractor.

When to use a JCT Intermediate Building Contract

The JCT Intermediate Building Contract (‘IBC’) is designed for construction projects that are more complex than those suited to the Minor Works Contract, but not as large or intricate as those requiring the SBC. It strikes a balance between simplicity and detail, making it ideal for medium-sized projects with moderate complexity. Examples of projects suitable for an IBC may include small commercial buildings and residential developments with multiple units.

The IBC includes more detailed provisions concerning interim payments, extensions of time, variations and liquidated damages than the Minor Works form. It also allows for nominated and named sub-contractors, making the IBC suitable where specialist trades are involved but full design-and-build is not necessary.

The IBC is best used when the Employer can provide clear tender documentation including drawings, bills of quantities and a specification/work schedules to specify the quality and quantity of work at the tender stage. It assumes a traditional procurement method has been elected (similar to that of a SBC) and is normally administered by the architect, quantity surveyor, or a contract administrator.

If the Contractor is to take on responsibility for an element of design for the works, then an IBC with Contractor’s Design should be used.

The JCT IBC should not be used:

• For very simple or low-value projects (in which case you should use a JCT Minor Works instead).
• For highly complex or high-value projects (an SBC should be adopted).

• Where the Contractor is to take on full responsibility for the design of the works (in which case a D&B should be used)

When to use a JCT Minor Works Building Contract

The JCT Minor Works (‘MW’) is ideal for projects where the works are simple in nature, and the risks are relatively low. It is best suited to small-scale, straightforward building projects such as minor structural alterations, small residential extensions/refurbishments and basic office/retail fitouts.

The MW assumes a traditional procurement method has been adopted. In the standard form of the MW contract, the Employer is responsible for the design of the works. If the Contractor is to carry out some discrete elements of design, then the MW with Contractor’s Design should be used.

It is a suitable form of contract in instances where the need for detailed contract administration is limited, and the Employer or their representative (typically an architect/contract administrator) can manage the project without the need for complex procedures or extensive documentation.

The JCT MW should not be used:

For complex or high-risk projects It is not suitable if bills of quantities, detailed control procedures, or provisions for named specialists are required.  

• If design and build procurement is required
• Where the project involves multiple contractor’s or phased works.
• Where detailed provisions for delay, extensions of time or liquidated damages are needed.

Practical takeaways on JCT contract selection

There is a balancing exercise to be conducted. Whilst a longer contract form is more complex to administer, its detailed provisions afford greater certainty and protections for both the Contractor and Employer. In the long run, careful drafting will save time and money and ought to provide for a smoother flow of the project.

The contract sum should not be used as the sole indicator of which standard form contract to adopt. Consideration should be given to the project’s requirements and complexity to ensure that the contract contains the necessary provisions, in sufficient detail.

A low value project doesn’t necessary equate to works which are not complex. The example of refurbishment works at a residential dwelling to accommodate disability access and requirements serves as a good example. Whist on the face of it the works may be categorised as straightforward and small in scale such as to warrant a MW form of contract, more comprehensive contractual provisions may be required to, for example, account for the fact that some elements of the works may need to be carried out by named specialists (such as hoist suppliers and lift installers). An SBC may prove more appropriate in those circumstances.

As well as carefully selecting the contract form, the Employer must conduct their due diligence and check the financial strength of a Contractor before a contract is entered into. If there are any concerns regarding the Contractor’s financial position, then consideration should be given as to whether a parent company guarantee, or performance bond should be obtained.

Our advice

Give the form of contract careful thought. Be confident in the form of contract the project requires, having regard to the allocation of risk and responsibility. A decision should be made at the outset so that the intended choice of contract can be included in the tender documentation. If a Contractor has tendered on the basis of entering into a MW, but is later required to sign up to a SBC then this may well lead to delays in the works and an increase in the contract sum.

If in doubt, it is advisable to seek independent legal advice from a specialist construction lawyer at the early stages. For any questions relating to this article or for advice contact our Construction Solicitors.