Professional Documents
Culture Documents
JCT Nl3 Final
JCT Nl3 Final
JCT NEWS
THE JCT CONTRACTS UPDATE FOR THE CONSTRUCTION PROFESSIONAL
3 6 8 10 11 12
The Architecture of Ode to the JCT Working North of Can insurance ever Education and JCT News Flash
Austerity Measured Term the Border – Key catch up? Training Initiative
Contract Differences between Bill Gloyn - Partner, announced, as JCT
Richard Saxon CBE JCT and SBCC
Patricia Nathan- Jardine Lloyd Thompson celebrates landmark
Amissah - Charles Contracts European Real Estate; 80th Anniversary
Russell LLP Shona Frame - Immediate Past-President,
MacRoberts City Property Association
Chairman’s
the potential for bridging the gap between knowledge
In 2006 Don McKinnon at the World Teachers’ Day
accumulation and its application. However, it should
Conference said education is the key to everything
Letter and is the key to billions of human beings fulfilling
their unique potential. One would not disagree with
neither be left entirely to academia nor entirely to
business to ensure the conversion takes place; it must
be a joint effort and despite the extent of dialogue that
that but one can always question the form and nature
exists in some areas this must not only be extended but
of education. Education has to do more than fulfil a
more importantly acted upon.
human’s potential, it must also ultimately provide a
benefit to the community through the workplace: no In order to train for the workplace one must be clear
one is an island. This point touches on the education what you want people to accomplish and JCT is making
versus training debate – where education is acquiring the case that wherever you might be placed in the
knowledge, whereas training is acquiring skills by the supply chain a working understanding of construction
application of that knowledge. JCT throughout its long contracts is an essential component in the efficient
existence has always been about education, not just running of a project. JCT’s initiative therefore is,
education but also training and it wants to do more by amongst other things, aimed at not only encouraging
emphasising training throughout the supply chain and the accumulation of knowledge of construction
by further reducing the learning curve. procurement and of construction contracts but
importantly the application of that knowledge through
I have heard it said that today’s younger generation
training.
of employees want to be trained, not educated and I
have also heard it said that many employers are less We believe that this will not only lead to a more efficient
than satisfied with the ability of graduates to perform construction industry but will also stimulate wider
in the workplace. If these are valid observations then interest in the industry and what it has to offer both
it says something about the relationship of universities individuals and the communities in which they live.
and colleges with the workplace or indeed our
Peter Hibberd
understanding of what that should be. Survey data
Chairman of JCT
published by the Centre for Higher Education Research
and Information at The Open University in 2009 indicate
that the UK has one of the lowest rates of participation
in work placements in Europe, at around 30 per cent
as compared with France where it was over 80%. This,
to some extent, may help explain why some employers
hold the view that many people lack the appropriate
skills to operate within the workplace.
The coalition government has recently been blaming So how can we avoid an era of banality and cramped
architects for this situation. The education minister shoddiness in what little building gets done? Are there
castigates architects for extravagant design in BSF ways to reduce cost whilst increasing value and keeping
schools and a free-school champion says that relevant quality?
architects add no value and should be avoided. And
The conventional response to tight budgets has
there have been some very expensive examples as
always been to favour refurbishment over new build,
well as some great outcomes. Even the government’s
to lower the quality of specification and to minimise
Chief Construction Advisor says that we should be
the size of the building. Refurbishment scores well
softening the message that ‘good design’ is vital.
on the low carbon agenda, saving embodied carbon,
‘Good-enough design’ is all we need and can afford,
waste and cost, but the result may underperform.
says former CABE Commissioner Paul Morrell. He also
Lower specification can push up whole-life costs or
calls for a cut in construction costs sufficient to make
it can be a worthwhile simplification. Smaller area
low-carbon buildings cost no more than conventional
can be reasonable with new ways of working, or it
buildings. Thus the link has been made in the public
can be a false economy. The iron triangle, Area times
mind between expressive architecture and avoidable
Specification equals Cost, rules some cost consultants’
cost. ‘Good design’ in the sense that the now-gutted
minds. The Latham/Egan reformers saw however that
CABE has promoted becomes a ‘nice-to-have’ option.
the way we work adds major cost. We have some of the
Austerity architecture is what is wanted.
JCT NEWS
4 • Using Building Information Modelling (BIM) to
reduce risk. BIM is a multi-dimensional CAD model
of the project which all participants share and
which reduces errors enormously by coordinating
designers and rehearsing construction. It can save
more than the cost of design on a job and goes on
helping the owner run the building over its life. It’s a
basic part of IPD.
• Reducing over-specification. We use belt and braces
in the UK, especially for M&E design. Over-regulation
needs to be reviewed as well.
• Using a smaller range of standard products and never
specials. Europe has ten times the range of products
available compared to the USA and many have small
orders but raise whole industry costs. Standard
Fig 1: Opening Space between Value, Price and Cost.
Prof. Hennes de Ridder assemblies and even building elements, like school
toilets and hotel bathrooms, can reduce cost.
most expensive buildings in Europe whilst paying low • Building Offsite. Design for manufacture cuts waste,
wages and salaries to participants. UK productivity and time and risk. Elements can be manufactured directly
profitability in construction is low and many clients pay a from BIM data. Higher air-tightness and insulation is
high price for low risk. Why is our lowest-tender system achievable and the building can start earning sooner.
producing such high prices?
New ways to raise value:
The way ahead surely lies in both taking cost out of
Better client leadership. Most public and many private
the process and creating more value in the product.
clients are inexperienced and risk-averse. Bringing
Professor de Ridder’s graph (Fig 1) suggests a utopia
suitable client advisers on board at the earliest stage
where buyers see value well above the price they pay
reaps rewards by defining the project well and buying
and suppliers keep costs well below price. Both do well.
design and construction intelligently. The RIBA now has
The Toyota system called Lean Thinking suggests that
a cohort of accredited Client Advisers to offer, bringing
concentrating on what customers really value allows
strategic thinking to bear so that the right product is
cost to be taken out, making both margins grow. This
asked for and the right process used.
has to be our roadmap, raking out wasted effort whilst
increasing client satisfaction. • Defining whole-life best value: A building costs more
to run over 20 years than it costs to build. And it
New ways to cut costs include:
houses activity worth many times more. A good
• Using design-build teamwork to reach low-cost value-seeking process optimises the outcomes for
solutions; not ‘here’s my design, what’s your price?’ the owner and occupier, sets acceptable operating
but ‘here’s our goal, what’s your idea to get there?’ cost and then the capital budget to achieve those
Teams formed early and incentivised to collaborate goals.
and to beat a reasonable benchmark showed in the
• Spending more up front to spend less on building.
Building-Down-Barriers (BDB) experiment in 1996-9
Ships, cars and aeroplanes all have more elaborate
that they could cut whole-life costs and get well paid
design stages than they used to do in order to have
for it. The American Integrated Project Delivery (IPD)
lower build and operating costs. Only construction
concept is prospering now, with client-led teams
tries to save on preparation as an aim in itself,
delivering more for less.
condemning it to repeat old errors. A thorough
briefmaking and design process, with BIM and
constructor involvement, redistributes cost but can
cut it overall. As a current US slogan has it: “Pre-
work, not Re-work”.
Fig 2: Nurture Future School: a low-carbon, low-cost system by Tarmac and Cartwright Pickard Architects
• Commission well and operate to learn. Buildings The initial strategy-making for a project can cost less
don’t work as well as designers and constructors than 1% of construction cost or 1/3000 of the value
expect, and they don’t know why because they delivered in the building over 20 years. The chance to
are off the scene. A leap in customer satisfaction leverage high performance is large. We need cost-
and supplier understanding follows if you use effective buildings, not just cheap ones.
‘Soft Landings’, the commissioning and feedback
Perhaps UK architects’ iconic buildings will
convention developed by consultants and
increasingly be in the Gulf and in Asia. Let’s focus here
Cambridge University and now available from BSRIA.
in the UK on understated value.
For low-carbon building it’s an essential step.
Maintenance contracts differ from other forms of more commonly used main forms of JCT contract.
procurement. The contract length can often be for As its title suggests, the JCT MTC is designed for use
periods of between 3 to 5 years which, in these where there is “a regular flow of maintenance and
difficult times, can offer contractors much needed minor works, including improvements, to be carried
continuity of work and income. The form of contract out by a single contractor over a specified period
needs to cater for the ebbs and flows of work type, under a single contract”. Consequently other forms
volume and pricing. Choosing the appropriate may be better suited if the volume of work is not large
JCT contract for maintenance work needs careful enough or where the work can be fully designed and
consideration and often choices can be fettered by completed in less than a year.
the comfort regular users of JCT contracts may have
Patricia Nathan-Amissah The JCT MTC consists of over 40 pages of printed
with traditional lump sum contracts.
conditions, many of which would be familiar to users
Generally, Measured Term Contracts or Framework of other JCT contracts. The JCT MTC refers solely
Agreements are best suited for maintenance, to the Contract Administrator (as opposed to the
improvement and in some cases minor works. Architect). The Contract Administrator is usually a
surveyor engaged by the Employer and is intended
So how do Measured Term Contracts work? Usually
to be someone who is experienced and skilled in
a contractor undertakes to carry out a series of works
construction procurement. The Contract Administrator
orders placed over a period of years within a defined
is responsible for administering the terms of the
geographical area – the work is then measured and
contract in an impartial manner.
valued using rates in a pre-priced Schedule of Rates
or hourly rates which usually include a negotiated The latest JCT MTC Revision 2, as with other JCT
contract percentage, applied to the relevant work. contracts, includes provisions relating to
To encourage economies of scale one contractor • collaborative working
may be appointed, however as the administration
of Connaught PLC shows, there is a benefit to • health and safety
spreading the risk. To reduce the effect of contractor • cost savings and value improvements
insolvency two or more contractors may be appointed
to undertake the work required under a term • sustainable development and environmental
agreement. This also has the benefit of enabling direct considerations
comparisons to be made and facilitating benefit of • performance Indicators and monitoring, and
common supply chains.
• notification and negotiation of disputes.
Many major clients such as registered landlords, local
authorities, churches, universities, care homes and There are other amendments to the text but generally
other large property owners, often use inappropriate the contract remains unchanged from Revision 1.
bespoke contracts or the wrong form of JCT contract. The Articles, Recitals and Contract Particulars set
out the Contract Period (usually at least a year),
Forms of Measured Term Contracts
the Contract Area and the work types in respect
Contracts let on a term basis often use the JCT of which orders may be given. Unless otherwise
Measured Term Contract 2006 (JCT MTC), which was agreed between the Contractor and the Contract
first published in 1989 and is considered “tried and Administrator orders will be of a size consistent
tested”. The latest version of the JCT MTC is Revision with the minimum or maximum orders stated in the
2 2009. There are other forms of term contracts Contract Particulars, as long as they are reasonably
published by the NEC (NEC3 Term Service Contract capable of being carried out within the Contract
published in 2005) and the TPC 2005 ACA Standard Period. The Contract Particulars also include an
Form of Term Contract for Term Partnering – amended anticipated value of work but there is no guarantee of
2008. work nor are there any provisions in the standard form
for exclusivity.
JCT Measured Term Contract Revision 2
The JCT MTC is not written about or reported as often Not only does the contract include termination
as other JCT contracts and its use is dwarfed by the provisions it also contains break notice provisions
Conclusion
The JCT MTC is a stand-alone contract appropriate for
use by Employers who have a regular flow of maintenance
and minor works, whereas the JCT Framework allows
Employers to call off discrete contracts, which may be quite
diverse in nature. Both forms of contract can be used to
foster the collaborative and long term relationships with
suppliers that are now recognised as best practice.
If you require any further information arising from
this article, please contact Patricia Nathan-Amissah
at Charles Russell LLP by email at patricia.nathan-
amissah@charlesrussell.co.uk or by telephone on 01483
252638.
JCT NEWS
WORKING NORTH OF THE BORDER –
8
KEY DIFFERENCES BETWEEN JCT AND
SBCC CONTRACTS
SHONA FRAME - MACROBERTS
The aim of the Scottish Building Contract Committee Contractor’s Council and Scottish Building
(SBCC) in its standard form contracts is to create as Federation. The Arbitrator nominating bodies are
much uniformity across the UK as possible, adopting the the Chairman or Vice Chairman of the board of the
JCT forms wherever possible. However, it remains the Scottish Building Contract Committee Limited and
case that because of the different legal system north of the Chairman or Vice Chairman of the Chartered
the border, there are certain key differences in approach. Institute of Arbitrators (Scottish Branch).
The SBCC standard forms have made the changes • Off site materials and goods – JCT clause 2.25
required to the JCT forms to bring them in line with provides that where a payment is made under the
Scots law and terminology but they do not change the contract of the value of the off-site materials, the
risk profile or make other substantive amendments. They materials will become the property of the client
follow the JCT colour coding, section headings and notwithstanding that delivery has not been made.
clause numbering and, as far as possible, follow the JCT This is not contained in the SBCC contract because
names and dates. in Scotland, under a building or engineering contract,
ownership of property can only pass when there
The SBCC forms are now published in one
is both an intention to transfer ownership and
amalgamated document so that it is no longer necessary
delivery. This can be achieved when the property is
(as was the case with the JCT 80 and 98 forms) to read
incorporated into the works. It may also be achieved
a separate Scottish supplement into the JCT form. The
when the materials are delivered to site and then
consolidated approach is one that users will find easier
paid for by the Employer by inclusion in an interim
to read.
certificate. However, where the contract can be
Key differences are: characterised as a contract of sale, it will be subject
to the Sale of Goods Act 1979 and ownership of the
• Arbitration – Like the JCT form, the default dispute property may pass, by agreement, on payment being
resolution method is Court as opposed to Arbitration. made rather than on delivery. The way this is dealt
Where arbitration applies, the applicable legislation is with is for the client to enter into a separate contract
the Arbitration (Scotland) Act 2010 which came into for the purchase of the materials from the contractor
force on 7 June 2010. The Arbitration Act 1996 does or sub-contractor so that the materials will no longer
not apply in Scotland. The Arbitration (Scotland) Act form part of their contract. This is provided for within
2010 is relatively brief, consisting of 37 sections, but SBCC clause 4.17. It is in quite different terms from
supplemented by 84 Rules contained in Schedule 1, the equivalent JCT clause and provides that the
the Scottish Arbitration Rules. It can apply equally to Employer may enter into a separate contract for the
domestic, inter-UK or international arbitrations. The purchase of materials or goods prior to their delivery
Scottish Arbitration Rules are stated to govern every to site. If such a contract is entered into, the purchase
arbitration seated in Scotland. Some of the Rules of the materials or goods is excluded altogether from
are mandatory meaning they cannot be modified or the building contract.
disapplied and some are non-mandatory (referred to
as the “default rules”). The default rules apply unless • Trust – A trust cannot be effectively created in
the parties have agreed to modify or disapply them. It Scotland unless the parties divest control of the
is possible to disapply a rule in whole or in part. The relevant assets to the trustee. This means that most
appointment of the arbitrator is dealt with by “Arbitral trust mechanisms in English standard form contracts,
Appointments Referees” which are bodies authorised e.g. in respect of retention, will be ineffective under
by the Scottish Ministers to act in this role. Scots law.
• Adjudication – the Rules of the Scottish Scheme are • Signing – In Scotland the law in relation to the
applied. formalities of the execution of contracts is contained
in the Requirements of Writings (Scotland) Act 1995.
• Nominating bodies – the Adjudicator nominating To be validly executed a document requires to be
bodies are the Royal Incorporation of Architects properly subscribed by each of the parties on its last
in Scotland, The Royal Institution of Chartered page. At least part of the written document must
Surveyors in Scotland, National Specialist appear on the page which is signed, and that page
Fortunately, at least for those that can effect Where reinsurers do object to a particular risk
insurance, most serious disasters are covered. one often sees standard exclusions from most
The UK has a very mature market that has policies. One such risk is the legal liability that
seen, and responded to, most of the dangers might arise from working with asbestos. There,
that nature – and fellow humans – can throw of course, the insurance market has suffered
at us. enormously from the industrial disease claims
that started flowing during the 1970’s but
Occasionally something new comes along
which reached a peak some 20 years after. It
and, after a while, insurance usually steps
is not possible to estimate how much insurers
up to the plate and provides protection. A
will have to pay out but a recent estimate of
classic example was terrorism. After two
the total cost in the US alone put the potential
major bombings in London in the early 1990’s,
figure at over $200 billion. The relatively low
individual insurers, and their reinsurers, felt
premiums that these losses related to had
unable to shoulder the burden of another
often been collected decades earlier and
attack under the normal arrangements.
forgotten about, and so the volume of claims
However, with the support of H M Government
There are some changes afoot to the that hit the insurance market posed a severe
acting as re-insurers of last resort, the whole
insurance obligations in clauses 6.11 and threat to its stability. Fortunately, the situation
market got together and formed a mutual
6.12 (and associated Contract Particulars) was managed and now seems under control.
insurance company – the Pool Re – that
of the proposed 2011 version of the Design
enabled insurance to be offered. First this Not surprising that there is now a reluctance to
and Build contract. These relate to the
was against the risk of fire and explosion get involved with asbestos exposures. There is
requirement to include cover for asbestos
only but, after the atrocities of 9/11 – with a similar reluctance to get involved with toxic
and toxic fungal mould within the Professional
the world market removing any cover for mould; not yet a major problem in the UK but
Indemnity insurance that the contractor has
damage and subsequent losses arising out one that has reportedly led to some 30,000
to effect. Having been put there in the 2009
of an act of terrorism – the extent of the claims in the United States – at a cost of over
amendments, it is now planned to remove
protection was extended to an “all risks” basis, $500million. The fear, confirmed by an RICS
them as the required cover has proved difficult
including radioactive, chemical and biological commissioned report which estimated that
to obtain.
contamination. some 3 million homes in the UK are potentially
This change led me to think about the reason affected by it, is that toxic strains of mould are
That makes the cover available in the UK
for insurance being an integral part of the becoming more prevalent in the UK and may
arguably the widest anywhere in the world. We
obligations of both parties in the first place – to eventually lead to the volume of death, illness
are the envy of many other countries, giving
provide a financially secure way of transferring and property damage/valuation claims seen in
comfort to the many overseas investors that
risk. Insurance is a vital ingredient of relation to asbestos.
have put their money into the UK over the past
commerce; without it the risk that a business
decade. So, insurance does respond when No wonder that claims from mould are also
would fail in the event of a disaster would be
needed. becoming a widespread exclusion from
too great for many transactions to go ahead.
many types of policy – including professional
Reinsurers, mentioned earlier, are basically a
Risk is a moving target. As many people and indemnity. Also, understandable is JCT’s view
global group of mega insurance companies
businesses have found out over the past few that insurance against claims arising from
who insure the primary insurer – the one that
years, areas previously unaffected by flooding asbestos and toxic mould should therefore
issues the policy – against catastrophic losses
have experienced devastating damage and not form part of the standard contract
that would otherwise affect their financial
subsequent consequential losses. And that requirements.
stability. Consequently, reinsurers have
ignores the human tragedy often involved.
considerable power in dictating underwriting However, insurers do respond to demand.
Tragically, the catastrophic events in Japan
policy. Sometimes reinsurers take a particular Perversely, just as the requirement is being
seem to have been largely uninsured, due to
dislike to a certain risk and, being a basically removed a fledgling market has emerged
a lack of underwriting capacity for earthquake
unregulated global grouping, they can among specialist underwriters. So, anyone
and tsunami exposures.
therefore take decisions in concert – unlike who wants to retain the requirement for wider
direct insurers who must act so as not to cover may find it, that is if they look hard
offend anti-competitive legislation. enough and are not fobbed off by assertions
that it is not available.
JCT CONTRACTS 2011 START YOUR TRANSITION • Design and Build Contract 2011 Tracked
Change Document
EDITION TO JCT 2011 WITH JCT
• Intermediate Building Contract 2011
NEW ACT, NEW EDITION TRACKED CHANGE Tracked Change Document
The new edition of JCT Contracts – JCT 2011, DOCUMENTS • Intermediate Building Contract with
will cover the new payment legislation and THE CHANGES TRACKED FOR YOU contractor’s design 2011 Tracked Change
other updates. Currently, the Department for Document
Business, Innovation & Skills (BIS) are working To help make the move to the new edition of
JCT Contracts as smooth as possible, the JCT • Minor Works Building Contract 2011
towards an implementation date of October this
have produced the JCT Contracts Tracked Tracked Change Document
year for the new Construction Act.
Change Documents that show the tracked • Minor Works Building Contract with
If implementation is confirmed by mid July changes to the existing JCT 2005 contracts contractor’s design 2011 Tracked Change
for October, JCT 2011 will be published in that will form the JCT 2011 suite of contracts. Document
September, to give you time to make the
transition to the new suite. Especially helpful for professional advisers All other contracts are available through
who have requested advance notice of the Docdel by emailing: sweetandmaxwell.
The JCT 2005 suite will remain available for changes so that they can advise their clients, Docdel@thomson.com.
nine months after the implementation date and the Tracked Change Documents are available
will be labelled to show they no longer comply in hard copy only. When you purchase a Tracked Change
with the current legislation. Document through Docdel, you will receive
HOW TO GET THE TRACKED CHANGE an unbound hardcopy print out of the PDF
If you are a current subscriber to JCT’s Digital DOCUMENT YOU NEED version.
Contracts Service, you will receive your CD in
early September. The following Tracked Change Documents are