The JCT has published its new JCT 2016 suite of contracts, the first major re-publication since the 2011 editions were published. The first new forms published were the Minor Works form, followed by the Design and Build, the Standard Building Contract, and most recently the Intermediate Form of Contract. The rest of the suite of contracts will be published over the next few months.
We consider below the main changes introduced in the JCT 2016 contacts by reference to the JCT Design and Build Contract 2016 (JCT DB 2016).
The general format and clause numbering of the contract remains unchanged, although there are some structural changes. Part 2 of the Contract Particulars which includes provisions requiring third party rights and warranties to be given to particular beneficiaries has been moved to a separate “Rights Particulars” document on the basis that these provisions were often amended by the parties. Fluctuations options B and C are also deleted.
In the accompanying Guide to the JCT DB 2016, the JCT state that it does not believe that any of the 2016 edition amendments or changes in format will, in practice, materially affect risk allocation.
We set out the main changes below.
The payment provisions have been updated to comply with fair payment principles and to consolidate the payment notice for both interim and final payment into one section.
There is a new Interim Valuation Date which is set at the beginning of the contract and subsequent Interim Valuation Dates will fall on the same date each month. The due date for payment of Interim payments is 7 days after the Interim Valuation Date, or 7 days after receipt of the Interim Payment Application if the application is not received by the Interim Valuation Date. The cycle of interim payment due dates continues up the date for final payment.
The final payment due date for both Interim payments and the final payment is now the same, being 14 days from the relevant due date.
One practical point for employers (and contractors in the case of sub-contracts) is that in certain months the Interim Valuation Date will be adjusted to the “nearest Business Date in that month”. A careful diary note of the Interim Valuation Date will need to be made, since the Interim Valuation Date affects the due date for payment, and consequently the dates for issuing the relevant payment notices and any pay less notice.
Procedure for assessing Loss and Expense
The procedure for assessing loss and expense has also been updated.
As before, the contractor is to provide notification of loss and expense but the contractor now needs to provide an initial assessment of the loss and expense with the notification, or as soon as reasonably practicable, and has to provide monthly updates of information.
Employers are now required to assess claims for loss and expense within 28 days of receipt of the contractor’s initial assessment or within 14 days of any subsequent update to the initial assessment. Failure to do so is not taken to mean that the contractor’s assessment is accepted (in contrast to the procedure under the NEC forms of contract) and the consequences of failing to comply with the required timescales are not set out. Nevertheless, employers will need to be more proactively involved with managing loss and expense assessments.
Performance Bonds and Guarantees
The JCT DB 2016 now makes provision for the contractor to give security in relation to the contractor’s performance, either by way of performance bond or parent company guarantee, the relevant selection being made in the Contract Particulars. The parties are free to agree the actual forms to be used.
Collateral warranties and third party rights
JCT DB 2016 provides an option for a sub-contractor to grant third party rights in place of collateral warranties to funders, purchasers or tenants. This change reflects the increased use of third party rights in recent years, although care needs to be taken when using third party rights to protect the funder’s position on step-in.
As mentioned above, the JCT DB 2016 retains provisions requiring the use of third party rights or collateral warranties but these particulars are found in “Rights Particulars” set out in a separate document. A model form of the Rights Particulars can be found in the Design and Build Contract Guide 2016 or from the JCT website. We anticipate that for most employers will still seek to amend these provisions.
It is likely on large projects that employers will continue to use their own forms of collateral warranty and third party rights. For those parties using the JCT forms these now include a net contribution clause.
In the past, the JCT has taken the view that net contribution clauses were not appropriate for use with the Design and Build contract because the contractor had overall responsibility for the design under the contract. The JCT state in the Design and Build Guide that the introduction of the net contribution clause is necessary as there may be circumstances where the employer’s consultants could be held jointly liable with the contractor in respect of a design defect, particularly where the Employer retains responsibility for the Employer’s Requirements under clause 2.11 (subject to certain limited exceptions).
In practice, clause 2.11 is typically amended by employers to provide that the contractor takes full responsibility for the design set out in the Employer’s Requirements, and in such circumstances, net contribution provisions in a third party rights schedule or collateral warranty would be generally inappropriate.
The insurance provisions have been simplified by stripping out some of the repetition in the schedules and putting that into the body of section 6. For example, the provisions relating to evidence of insurance are contained in clause 6.12 and provisions dealing with insurance claims and reinstatement are found in clause 6.13.
In addition, the JCT has recognised that there is sometimes a difficulty with securing insurance for Existing Structures, for example, to cover a tenant employer’s fit-out works or refurbishment works, where there is also an insuring landlord. The Contract Particulars and Insurance option C.1 allows alternative bespoke solutions to insuring the Existing Structures to be entered into and details of such insurance would be added as Option C1, Replacement Schedule. The parties will need to take specific insurance advice on this issue.
Other changes in the JCT DB 2016 include:
Construction (Design and Management) Regulations 2015
As expected the JCT DB 2016 has been updated to reflect the role of the Principal Designer in place of the CDM Co-ordinator introduced under the CDM Regulations 2015. These provisions were previously dealt with by Amendment 1 to the JCT 2011.
Site Waste Management Plans Regulations 2008
Reference to the Site Waste Management Plans Regulations has similarly been deleted to reflect the fact that these regulations have been repealed.
The JCT Public Sector Supplement 2011 provisions relating to fair payment, transparency and building information modelling are introduced into the body of the document.
The JCT DB 2016 has been updated to include reference to the Public Contracts Regulations 2015 and includes provisions which enable the contract to be used on public sector projects. These provisions include express rights to terminate for breach of the procurement regulations, and revised obligations to comply with the Freedom of Information Act 2000.
The JCT DB 2016 includes provisions allowing for use of the BIM Protocol where the parties agree. These provisions are an acknowledgment that BIM is to be used on all centrally procured government projects at BIM Level 2 as from April 2016.
Where use of the BIM Protocol is selected, the BIM Protocol will form one of the contract documents and employers should be aware that the BIM Protocol may require the employer to provide the contractor with certain information (clause 2.7.2); and the contractor may be required to provide information from the BIM to the employer, together with the as-built drawings, prior to Practical Completion (clause 2.37).
Priority of documents
If the BIM protocol is included as a contract document, clause 1.3 makes it clear that the Agreement and the Conditions will take priority over the other contract documents. This is a clause that is often amended in practice to make clear the order of precedence of the documents when construing the contract as a whole, for example by making the Employer’s Requirements take precedence. The difficulties of interpreting conflicting provisions can be seen in the case of Fenice Investments v Jerram Falkus Construction (2009) where the court had to resolve conflicting provisions which the parties had introduced in the Contract Conditions and the Employer’s Requirements.
Consents and approvals
There is now included at clause 1.10 a catch-all provision that where consent or approval of either party is required then that consent or approval should not be unreasonably withheld or delayed. The giving of consent by either party to an assignment of the contract remains at the sole discretion of the person whose consent is required.
The contractor is required to appoint a full-time site manager, approved by the employer, and this provision takes the place of the previous obligation to appoint a competent person in charge of the site (clause 3.2). The site manger provisions in the Part 1 of the Supplemental Provisions have therefore been deleted.
Whilst the JCT DB 2016 retains the look and feel of the previous version of the JCT form, parties will need to familiarise themselves, in particular, with the changes to the payment procedures, the assessment of loss and expense claims, and the insurance arrangements. In our view it is likely that employers will still seek amendments to the JCT DB 2016 to address such issues as design responsibility, and novation of the design consultants, which have not been changed in the new JCT DB 2016.