THE PRINCIPLES AND POLICIES

OF THE JCT MAJOR PROJECT FORM

A paper based on a talk given to a meeting

of the Society of Construction Law
in London on 1st July 2003

Geoff Brewer

August 2003

www.scl.org.uk
 THE PRINCIPLES AND POLICIES
OF THE JCT MAJOR PROJECT FORM

Geoff Brewer

Introduction
In June 2003 the Joint Contracts Tribunal (JCT) launched the Major Project
Form (MPF), being the latest in their family of construction contracts. It is
published in response to a demand from the users of contracts on major
projects to address the problems caused by either the use of bespoke contracts
or the making of extensive amendments to the existing JCT standard forms of
building contract. As a consequence, the drafting group was willing to start
with a clean sheet of paper in order to prepare a document that reflects the
requirements of large commercial projects, without necessarily following
either the format or approach of existing JCT contracts. In another departure
from their usual practice, a small steering group and external draftsmen were
used to speed up the production of the form.

The MPF is intended for experienced users who require a contract that
contains only limited procedural matters, to enable clients to adopt their own
in-house procedures. As a consequence, it has been possible to reduce the
amount of detail in the Contract Conditions so that they are both shorter and
simpler than in the existing JCT contracts. By way of indication, the JCT
1998 With Contractor’s Design form of contract contains approximately
85,000 words, excluding guidance notes. The MPF is in the order of 14,500
words. Although prepared with major projects in mind, there is little doubt
that the straightforward approach of the MPF will appeal to experienced users
undertaking a wide range of projects.

The intention of the Contract is that, having defined its requirements (and
bound these into the contract in a document simply called the ‘Requirements’),
the Employer should then permit the Contractor to undertake the Project
without the Contractor being reliant on the Employer for anything more than
access to the Site, the review of the design as it progresses, and payment. In
particular, there is no requirement for the Employer to issue any further
information to the Contractor, as all design information beyond that contained
in the Requirements will be produced by the Contractor.

Under the MPF, the Contractor assumes more risks and responsibilities than
under existing JCT contracts. To allow this approach to work it is essential
that the demands of the Project are fully identified at tender stage in order that
they can be appreciated properly by the Contractor. The identification and
transfer of risk at this stage permits the Contractor both to allow for these
matters within its pricing and, equally importantly, to manage its
responsibilities in the most efficient manner.

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This Contract will therefore be most effective where both the Employer and
the Contractor, together with their respective teams of advisors and
subcontractors, are experienced in undertaking large commercial projects.

The contract documentation

JCT publish two documents, the contract form itself and a guidance note.
Within the contract form are:

The Contract Conditions: These are required to be executed as a deed by the

Employer and the Contractor and comprise 39 clauses in eight main sections.
Clause 39 contains definitions that are used throughout the Contract
Conditions, the Appendix and the Third Party Rights Schedule. The same
definitions are used in this paper and defined terms can be identified by the
use of capital initial letters.

The Appendix: This contains all the project specific information relevant to
the Conditions, the Third Party Rights Schedule and the Pricing Document.
As there are no articles of agreement, the Appendix also contains or identifies
much of the information they would normally contain such as, for example,
the Contract Sum. Where it is possible to do so, a default option has been
identified for each of the matters addressed by the Appendix.

The Third Party Rights Schedule: This is an optional provision (operated by

an entry in the Appendix) by means of which the Funders (if any), together
with Purchasers and/or Tenants are given the right to enforce certain of the
provisions of the Contract against the Contractor. The intention of the Third
Party Rights Schedule is that it should render the provision of collateral
warranties unnecessary.

The Pricing Document: This requires careful preparation by the parties and
their advisors. It contains information concerning the calculation of the
Contract Sum, the evaluation of Changes and the manner in which the
Contract Sum is to be paid to the Contractor.

In addition to the contract form itself, the Contract also comprises:

The Requirements: These set out what the Employer requires the Contractor
to provide. They will initially be prepared by or on behalf of the Employer,
but could well be revised in order to reflect pre-contract negotiations and any
alternatives that the Contractor has offered.

The Proposals: These set out the manner in which the Contractor intends to
meet the Requirements.

The Contract Conditions

General obligations and administration

The definitions and meanings used can be found in clause 39.

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The MPF is always executed as a deed. Having regard to the nature of the
projects for which the Contract is intended, and the additional limitation
period gained by executing as a deed, no provision is made for its execution
under hand.

The Contractor’s obligation is to execute and complete the Project in

accordance with the Contract (clause 1.1). The intent is that the Contractor be
obliged to ‘take it from here’, meaning that it is solely responsible for the
completion of any necessary design, undertaking any necessary dealings with
the statutory authorities and the preparation of any necessary production
information.

To make the Contract workable, the Employer is required to appoint a

representative to act on its behalf (clause 15.1), who may be replaced upon
notice to the Contractor. Depending upon the nature of the Employer’s
organisation, the representative may be a designated member of the
Employer’s staff, or an external consultant. Where the Employer appoints
other advisors (for example, inspectors or letting agents), the Contractor is
obliged to co-operate with them, although they have no authority to act on
behalf of the Employer (clause 15.2).

Where the Contract requires a communication to be made (for example, the

giving of a notice, the provision of a valuation or the giving of an instruction),
these must be in writing unless either the Appendix identifies that electronic
communications may be used or the parties have agreed some other protocol
for communications (clause 38.1). The only exceptions to this rule are
notifications in connection with termination or third party rights, which must
be given by hard copy (clause 38.2).

The Contractor is obliged to comply with any instruction that the Employer
issues in connection with the Project (clause 2.1), save only where the
Contract restricts the right to issue particular instructions (for example, in
relation to acceleration (clause 13.3) or cost savings and value improvements
(clause 19.5)). As instructions have to be in connection with the Project, there
will be a practical limit to what the Employer may require of the Contractor.

Where the Contractor does not comply with an instruction, there is provision
for the Employer to give effect to the instruction itself; the Contractor will be
liable to pay the Employer any additional costs it incurs as a consequence
(clause 2.3).

Some instructions (for example, those issued under clause 16.2 regarding the
consequences of defective work) are expressly identified as not giving rise to a
Change. Whether or not any other instruction gives rise to a Change will fall
to be determined by reference to the definition of a Change.

In preparing tenders it will be necessary for the Contractor to determine what,

if any, consents have been obtained by the Employer as the Contractor is
responsible for complying with all Statutory Requirements (clause 3.1). This
includes the giving of any necessary notices or the obtaining of consents, and
there is an obligation to keep the Employer informed throughout this process.

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Unless stated otherwise in the Requirements, the Contractor is also responsible
for the payment of any fees etc in connection with the Statutory Requirements
(clause 3.2).

There are procedures in the MPF for dealing with conflict within and between
the various documents that comprise the contract, summarised as follows:
• where there is a conflict within the Requirements, the Contractor may
choose which of the discrepant provisions it intends to follow; where the
Employer does not accept this choice it may instruct the Contractor to do
otherwise, and that instruction is treated as giving rise to a Change
(clause 4.2);
• where there is conflict within the Proposals or between the
Requirements and the Proposals, the choice of which is to be followed
rests with the Employer; that choice is not treated as giving rise to a
Change (clauses 4.3 and 4.4).

By these procedures, each party accepts responsibility for errors within the
documents they produce. Where the Contractor knows that its Proposals do
not comply with the Requirements (for example, where an alternative tender
has been submitted), it is essential to amend the Requirements to reflect any
alternatives accepted by the Employer. Otherwise the original Requirements
will take precedence, unamended by the Proposals.

Where the Statutory Requirements change after the Base Date, this will not be
treated as giving rise to a Change unless the alteration was not announced at
the Base Date (clause 4.5). Thus, when regulations are published at the Base
Date but it is not known when they will take effect, if they come into force and
affect the Project, this will not give rise to a Change.

The risk of adverse ground conditions rests with the Contractor, unless an
alternative provision is operated by means of an entry in the Appendix (clause
8.1). When the alternative provision applies, if the ground conditions
encountered are such that they could not have been reasonably foreseen by an
experienced and competent contractor at the Base Date, then to that extent
they are treated as giving rise to a Change (clause 8.2).

Design

The Contractor is not responsible for the Requirements, or the adequacy of the
design contained in the Requirements (clause 5.1); this responsibility rests
with the Employer.

With that sole exception, and in line with its ‘take it from here’
responsibilities, the Contractor is responsible for the completion of the design
and the preparation of any necessary production information. This will be
achieved by a combination of the use of:
• Pre-Appointed Consultants, whose appointments have been novated to
the Contractor;

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• consultants or subcontractors who have been identified in the
Requirements as Named Specialists;
• consultants selected by the Contractor;
• in-house design resources;
• subcontractors selected by the Contractor.

Because of its key role in the completion of the design, the Contractor is
always appointed as Planning Supervisor, in addition to its role as Principal
Contractor (clause 1.2).

However it is achieved, the Contractor is required to complete the design

utilising the skill and care of an appropriately qualified professional designer
(clause 5.3) and also (clause 5.2) to ensure that the design of the Project:
• complies with the Statutory Requirements;
• satisfies any performance specification within the Requirements, and
• uses materials selected in accordance with the guide Good practice in
the selection of construction materials, prepared by Ove Arup &
Partners (this is intended to replace the commonly found lists of
deleterious materials).

Subject to the above, there is no requirement that the Project, when

constructed in accordance with the designs, will be fit for purpose, and this
reflects the normal practice in the industry. The guidance note recognises that
sometimes it will be appropriate to impose a fit for purpose obligation on the
Contractor and includes a suggested amendment for such circumstances.

Although the Contractor is not reliant on the Employer for the provision of
further information to allow it to complete the design, the Contractor is
required to submit all Design Documents that it prepares to the Employer for
review and comment (clause 6.2). The purpose of the review is solely to
permit the Employer to see the Contractor’s designs at an early stage and
satisfy itself that they appear to be in accordance with the Contract. This
reduces the risk (for both parties) of a non-compliance being identified after
something has been built.

Although the Employer gains the opportunity of this early review of the
Design Documents, neither making a comment nor failing to do so affects the
Contractor’s obligation to comply with the Contract (clause 6.10).

Upon receipt of a Design Document, the Employer has 14 days in which to

return it marked for ‘A Action’, ‘B Action’ or ‘C Action’. If the Design
Document is not returned within 14 days, it is deemed to have been marked
‘A Action’. The significance of the various markings is as follows:
• ‘A Action’ means that the Contractor may proceed in accordance with
the Design Document;

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• ‘B Action’ means that the Contractor may proceed in accordance with
the Design Document provided it has regard to the comments that have
been made and also submits a revised Design Document;
• ‘C Action’ means that the Contractor may not proceed in accordance
with the Design Document, but must resubmit it, having regard to the
comments that have been made.

The making of comments on submittals is a frequent cause of dispute when

contractors feel that, in fact, the comment is a requirement for them to do
something additional, not required by the contract. To prevent such disputes
arising, the MPF:
• provides that the Employer may only comment upon a Design
Document when it is not in accordance with the Contract, and must also
identify why it is considered not to be in accordance with the Contract
(clause 6.5);
• requires that where the Contractor considers that compliance with a
comment would give rise to a Change, this must be identified within
seven days of the comment being made (clause 6.8), failing which
compliance with the comment will not be treated as giving rise to a
Change (clause 6.9). Where, in the manner required by this provision,
the Contractor considers compliance with a comment would give rise to
a Change, the question of whether or not a Change exists falls to be
determined by reference to the definition of a Change (clause 6.8).

The purpose of these provisions is to permit such issues to be dealt with at the
time, a theme that is common throughout the MPF.

Where the Contractor executes work for which no Design Documents have
been prepared or for which the relevant Design Documents have been given a
‘C Action’ status, the Employer is not liable to pay the Contractor for such
work (clause 6.7).

Although the copyright in any Design Documents it prepares vests in the

Contractor, the Employer is granted an extensive licence to use the Design
Documents and to grant sub-licences (clause 7). Where the Third Party Rights
Schedule applies, the Funder (if any), together with Purchasers and/or Tenants
are granted similar licences (clauses F12 and PT7).

Time

The Contractor is never given possession of the Site, but is permitted access
on the date stated in the Appendix, to the extent reasonably necessary to
complete the Project in accordance with the Contract (clause 9.1). As a
consequence of not being given possession:
• if set out in the Requirements, the Contractor’s access to the Site may be
subject to restrictions; and
• the Employer is able to arrange for Others to undertake work on the Site
at the same time as the Contractor. These Others may include, for

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 example, fit-out contractors engaged by either the Employer or its
tenants.

Because of the need for the Contractor to progress with design activities,
access to the Site may not be given immediately after the Contract has been
entered into.

Once access to the Site has been given, the Contractor is obliged to proceed
regularly and diligently so as to achieve Practical Completion on or before the
Date for Completion (clause 9.2). Additionally, the Contractor is required to
use its reasonable endeavours to prevent or reduce delay to the progress of the
Project and to its completion (clause 9.3).

The MPF permits the Project to be divided into Sections (as defined in the
Requirements), with each Section having a different Date for Completion.
Where there are Sections, the Contractor is required to achieve Practical
Completion of each Section on or before the Date for Completion of that
Section. The various contractual rules in relation to adjustments to the
Completion Date and the payment of liquidated damages or bonuses apply to
individual Sections. When all Sections have reached Practical Completion,
Practical Completion of the Project is said to have occurred.

In addition to the possibility that the Project will be divided into Sections, the
MPF also envisages that the Employer may wish to take possession of parts of
the Project prior to Practical Completion in a way that was not anticipated
when the Contract was entered into. Where this is the case, the Employer may
do so with the consent of the Contractor, which must not be unreasonably
withheld (clause 11.1).

Practical Completion is recorded through a process of notification (by the

Contractor, when it considers that Practical Completion has occurred) and
either acceptance by the Employer (by means of a statement) or rejection by
the Employer (by means of a notification setting out the work it requires to be
completed before Practical Completion will occur) (clause 9.4). To aid this
process, the MPF contains a definition of Practical Completion, which requires
that:
• all relevant Statutory Requirements have been complied with and any
necessary consents or approvals obtained;
• neither the existence nor the execution of any minor outstanding works
would affect the use of the Project;
• any stipulations identified by the Requirements as being essential for
Practical Completion to take place have been satisfied; and
• the health and safety file and all ‘as built’ information and operating and
maintenance information required by the Contract to be delivered at
Practical Completion have been delivered.

The Contractor is entitled to an adjustment to the Completion Date (clause

12.1) in circumstances where delay is caused by one of a restricted list of
matters comprising:

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• force majeure;
• Specified Perils;
• the exercise of statutory powers after the Base Date by the UK
Government, except where this relates to alterations in the Statutory
Requirements that were known of at the Base Date (ie those dealt with
by clause 4.5);
• terrorism;
• Changes;
• interference by Others (ie other persons, contractors and the like on the
Site with the permission of the Employer);
• the Contractor’s suspension due to non payment (ie in accordance with
section 112 of the Housing Grants, Construction and Regeneration Act
1999);
• any other breach or act of prevention by the Employer.

Under the MPF, the familiar grounds of weather, statutory undertakers and
strikes are all at the Contractor’s risk.

The Contractor is required to notify all delays from whatever cause (clause
12.2). Additionally, where it believes it is entitled to an adjustment to the
Completion Date, it is required to provide and update supporting
documentation to demonstrate the effect of the matter complained of upon the
Completion Date (clause 12.3). Upon receipt of this information, the
Employer has 42 days to either notify the Contractor of a fair and reasonable
adjustment to the Completion Date or notify the Contractor why it considers
an adjustment to the Completion Date is not required.

Having made an initial adjustment to the Completion Date the Employer is

obliged to keep this under review, and have regard to any further
documentation that might be provided by the Contractor.

The MPF requires the following principles to be adopted in making any

adjustment to the Completion Date:
• the Employer is obliged to implement any agreements reached regarding
Changes, acceleration or costs savings and value improvements
(clause 12.7.1);
• regard is to be had to the extent that the Contractor has failed to comply
with its obligation to use reasonable endeavours to prevent or reduce
delay to the progress of the Project or completion of the Project
(clause 12.7.2);
• in a case where there is concurrent culpable delay (ie completion of the
Project is also being delayed by a cause that does not entitle the
Contractor to an adjustment to the Completion Date), that should be
ignored in determining any adjustment to the Completion Date
(clause 12.7.3).

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• other than by agreement, no Completion Date should be set that is earlier
than one that has already been determined (clause 12.8).

Once Practical Completion has occurred, the Contractor has 42 days in which
to put forward further information in support of an adjustment to the
Completion Date. Any information put forward must be considered and
responded to by the Employer within a further 42 days.

One of the ways in which an earlier Completion Date could be established, is

by the parties agreeing that there should be acceleration. Where the Employer
wishes to investigate acceleration (ie the achievement of Practical Completion
before the Date for Completion), it may call for the Contractor to make
proposals which can either be accepted or form the basis of negotiation (clause
13.1). Matters to be addressed by any proposal or agreement would include
the earlier date to be achieved, the additional payment to be made (either a
fixed amount or calculated on an agreed basis) and the consequences should
the earlier date not be achieved. If an agreement is reached, an instruction is
to be issued confirming the agreement (clause 13.2).

The Employer is not empowered to instruct acceleration in the absence of

agreement, although it may instruct the Contractor to take specific additional
measures (for example, the working of overtime or the use of additional
resources). Such an instruction would be treated as a Change, and
responsibility for the effectiveness of the measures instructed would rest with
the Employer.

Where Practical Completion is achieved prior to the Completion Date, an

entry in the Appendix may provide for the payment of a daily bonus to the
Contractor (clause 14.1). The default value of the bonus is nil.

Where Practical Completion is not achieved until after the Date for
Completion, the MPF provides that the Contractor will be liable to pay
liquidated damages to the Employer at the daily rate stated in the Appendix
(clause 10.1).

Quality

One of the instructions that the Employer is able to issue is to require that
work be opened up for examination or testing. Where the examination or test
is not called for by the Requirements, the Contractor is entitled to have its
compliance with the instruction treated as a Change, provided that the
inspection or test establishes that the work is in accordance with the Contract.
Where the work is shown not to be in accordance with the Contract, then
compliance with the instruction is not treated as a Change, and any delay or
additional expense incurred by the Contractor will be its own responsibility
(clause 16.1).

Where works are not in accordance with the Contract (however that non-
compliance has been established) the Employer has a number of options open
to it. Thus:

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• it may require the non-conforming works to be removed from the Site
(clause 16.2.1);
• it may, after consultation with the Contractor, accept the non-
conforming works in part or in whole, subject to receiving an
appropriate discount from the Contractor (clause 16.2.2);
• it may, after consultation with the Contractor, instruct such further
works as are necessary as a consequence of the removal or retention of
the non-conforming works (clause 16.2.3);
• it may instruct further reasonable opening up and testing to establish that
other similar work is in accordance with the Contract (clause 16.2.4).

None of the above options give rise to a Change (clause 16.3).

After Practical Completion, the Employer has the power to instruct the
Contractor to remedy Defects that arise during a 12 month Rectification
Period that commences upon Practical Completion (clause 17.1). Once
instructed, the Contractor is obliged to comply with the instruction within a
reasonable period and, should it not do so, the Employer may utilise the
provisions of the MPF concerning non-compliance with instructions (clause
2.3). When all Defects have been rectified, the Employer is required to issue a
statement to that effect (clause 17.2).

If the Contractor has not remedied all notified Defects within a reasonable
period after the expiry of the Rectification Period, and the Employer is not
willing to allow matters to be prolonged further, it may:
• notify the Contractor of its intention to engage others to rectify the
Defect (clause 17.3.1), or
• notify the Contractor that it does not intend to rectify the Defect, but will
make an appropriate deduction from amounts otherwise due to the
Contractor (clause 17.3.2).

The purpose of these provisions is to allow the final payment advice to be

issued and all financial matters concluded in connection with the Contract,
notwithstanding the fact that the Contractor has not completed its obligations
to rectify Defects.

Pre-appointed consultants and named specialists

Clause 18 contains an optional provision (operated by an entry in the

Appendix) whereby the Contractor can be required to accept the novation of
one or more Pre-Appointed Consultants. In such circumstances the Contractor
accepts, under the Contract, full responsibility for all the services provided by
the Pre-Appointed Consultant (whether before or after the novation), other
than those provided in connection with the preparation of the Requirements
(clause 18.4).

Where this provision is to be used it is essential that the consultant’s initial

appointment (by the Employer) anticipates novation and that full details of the

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appointment and services to be provided are contained within the
Requirements. Additionally the Requirements must contain the Model Form
of Novation Agreement that is to be used to achieve the novation. The
guidance note sets out some of the issues that will have to addressed by the
Novation Agreement, and this is definitely an area where specialist advice will
be required.

Once the novation has taken place (immediately after the execution of the
Contract), the Contractor is responsible for the performance of the Pre-
Appointed Consultant, such that if its appointment is terminated (for any
reason) the Contractor is responsible for the selection and appointment of a
replacement (clause 18.10).

The Requirements may identify that certain works are to be executed by a

Named Specialist. This may be either a consultant or a subcontractor, and in
either case the Named Specialist may be identified within the Requirements or
a list of options may be provided. The performance of any Named Specialist
appointed in accordance with this provision becomes the sole responsibility of
the Contractor, who will have to accept the consequences of any failure to
perform, including the insolvency of the Named Specialist (clause 18.4).

For this reason the Contractor should carefully consider at tender stage any
Named Specialists identified by the Requirements and their ability to perform
to the quality and programme requirements of the Contract. Similarly, the
Contractor should consider whether it will be able to contract with any Named
Specialists on acceptable commercial terms. If the Contractor has any
reservations concerning the Named Specialists, these should be raised with the
Employer prior to entering into the Contract.

If the Contractor attempts to reduce the scope of the services provided by a

Pre-Appointed Consultant or Named Specialist then it is not entitled to any
payment in respect of works that are no longer being executed by the Pre-
Appointed Consultant or Named Specialist (clause 18.6).

Value engineering

The Contractor is encouraged to identify matters which, if instructed as

Changes, would give rise to a benefit to the Employer in terms of decreased
construction costs, decreased costs in use or in some other way (clause 19.1).
Where the Contractor makes proposals that are accepted by the Employer, the
immediate financial consequences of the Change are treated in the normal
manner (ie the agreed value of the Change is reflected within interim
payments). Once Practical Completion has been achieved the Contractor is
entitled to receive the proportion specified in the Appendix of the agreed
benefit to the Employer (clause 19.4): the default proportion is 50%.

In order to protect the Contractor’s interest in the proposals it makes, the MPF
provides that once a potential Change has been identified by the Contractor in
accordance with the provisions of clause 19, it may only be instructed in
accordance with that clause (clause 19.5). This prevents the Employer from
either instructing the necessary works as a ‘normal’ Change or engaging

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Others to undertake the necessary works on the Site at the same time,
alongside the Contractor. This restriction on the Employer’s implementation
of proposed Changes ceases upon Practical Completion.

Valuation

It is intended that, by dealing clearly with issues such as discrepancies and not
making the Contractor reliant upon the provision of further information by the
Employer, many of the matters that would normally give rise to claims for
variations and loss and/or expense will not arise.

That having been said, the main reason that the amount paid to the Contractor
may increase or decrease is as a consequence of Changes. These may be:
• alterations to what the Contractor is required to provide, as established
by the Requirements and Proposals;
• alterations by the Employer to the manner in which the Contractor is to
undertake the Project, as established by reference to the Requirements
and the Proposals;
• any other matter that the Contract requires be treated as a Change (for
example the effect of changes in Statutory Requirements that were not
known of at the Base Date).

Where possible, the effects of Changes (financial and time) should be agreed
before instructions are issued, and the MPF contains a procedure whereby the
Contractor can be asked to provide a detailed quotation for acceptance by the
Employer (clause 20.3).

Where the consequences of a Change have not been agreed prior to it being
instructed, as soon as a Change is identified by either party (as not all
instructions will necessarily give rise to a Change and not all Changes are
necessarily initiated by an instruction,) there is a requirement to notify it to the
other party (clause 20.1). Within 14 days of a Change being identified in this
manner, the Contractor is required to put forward details of its proposed
valuation of the Change, together with such information as is reasonably
necessarily to permit a fair valuation to be made by the Employer
(clause 20.7).

The fair valuation is then notified by the Employer within 14 days of receipt of
the information from the Contractor (clause 20.8). In making a fair valuation
(clause 20.6) the Employer is obliged to have regard to:
• the nature and timing of the Change;
• the effect of the Change upon other parts of the Project;
• the principles set out in the Pricing Document, so far as applicable; the
contents of the Pricing Document will need to be determined by the
parties prior to entering into the Contract, but could well include a
detailed contract sum analysis and/or schedule of rates and/or details of
the manner in which the rates are to be calculated for the valuation of

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 Changes (for example prime costs and various additions) and/or
daywork rates;
• any loss and/or expense incurred as a consequence of the Change
(subject to an important proviso that is considered below in relation to
loss and/or expense).

Where the Employer’s valuation is different from that proposed by the

Contractor, the Employer is required to provide sufficient detail backing up its
valuation to permit the Contractor to identify any differences (clause 20.8).

Once Practical Completion has occurred, the Contractor has 42 days in which
to put forward further information in support of any further valuation it
considers should be made in respect of any Change. Any information put
forward must be considered and responded to by the Employer within a further
42 days (clause 20.9).

The Contractor also has a separate entitlement to be reimbursed any loss

and/or expense it may incur as a consequence of:
• any breach or act of prevention on the part of the Employer (clause
21.2.1);
• interference with progress by Others on the Site (clause 21.2.2);
• a valid suspension by the Contractor in accordance with section 112 of
the Housing Grants Construction and Regeneration Act 1996 (ie as a
consequence of non-payment by the Employer) (clause 21.2.3).

The entitlement to be reimbursed loss and/or expense is subject to the

Contractor having:
• provided a timely notification (clause 21.3);
• taken all practicable steps to reduce the loss and/or expense to be
incurred (clause 21.3); and
• provided the information necessary for the Employer to make an
ascertainment (clause 21.4).

Upon receipt of the necessary information in respect of loss and/or expense

that has been incurred, the Employer is required to make and notify an
ascertainment within 14 days. The ascertainment is required to be in sufficient
detail to permit the Contractor to identify any differences between it and the
Contractor’s own assessment (clause 21.5). Where loss and/or expense is
being incurred over a prolonged period the provision of information, the
making of the ascertainment and the making of payment takes place
progressively.

The Contractor’s entitlement to be paid loss and/or expense, whether as a part

of the fair valuation of a Change (clause 20) or under clause 21, is subject to
an important proviso: the Contractor is not entitled to be reimbursed any
element of its loss and/or expense if that element has been contributed to by

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some matter that is either not a Change or does not give rise to an entitlement
under clause 21 (clauses 20.6.4 and 21.8).

Thus, for example, a Change may be instructed that would have caused delay
to the Project, were it not for the fact that the Project was already being
delayed because the Contractor had failed to submit Design Documents in
accordance with the design programme. In such circumstances, although the
Contractor would be entitled to an extension of time (clause 12.7.3), loss
and/or expense would only be included in the valuation of the Change to the
extent that any of its elements had not been contributed to by the Contractor’s
own default. The valuation would therefore not include any allowance for the
prolongation to the site establishment costs (as those costs would have been
incurred in any event, having regard to the failure to comply with the design
programme), but it could include the cost of disruption to other trades as a
consequence of the Change.

Once Practical Completion of the Project has occurred, the Contractor has 42
days in which to put forward further information in support of any further
ascertainment of loss and/or expense it considers should be made. Any
information put forward must be considered and responded to by the
Employer within a further 42 days (clause 21.6).

Payment

The MPF provides for interim payments to be made monthly, subject to the
proviso that once Practical Completion has occurred there is no requirement
for an interim payment to be made unless it would exceed an amount specified
in the Appendix (clause 22.2). The default amount is £10,000.

The trigger for each interim payment is an interim payment advice, to be

issued by the Employer on a specific day of each month, as identified in the
Appendix. The default date is the 28th of each month. The Contractor is
required to provide the Employer with a detailed application for payment
seven days prior to this date.

The manner in which the Contract Sum is included in an interim payment

advice is determined by the Pricing Document, which offers various rules,
selected by an entry in the Appendix. Thus:
• Rule A provides for the Contract Sum to be paid by a ‘conventional’
process of interim valuation. This is the default rule to be applied if the
entry in the Appendix is not completed. If this approach is adopted the
parties will need to ensure that the Pricing Document contains sufficient
information to permit a reasonably accurate valuation to be made each
month.
• Rule B provides for the Contract Sum to be paid by a process of stage
payments, as various tasks or elements of the Project are completed.
Details of the definition of the various stages and their values will need
to be agreed by the parties and included in the Pricing Document.

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• Rule C provides for periodic payments, where the Contractor receives a
predetermined amount (recorded in the Pricing Document) each month.
The Pricing Document contains provision for these payments to be
adjusted if the Project falls behind programme.
• Rule D is the opportunity for the parties to apply any other rules that
they agree.

There are no retentions (although a similar effect could be obtained by virtue

of the stage payments agreed in accordance with Rule B, or the agreement of a
procedure incorporating retention as part of Rule D). Neither does the MPF
provide for payment for on site materials or fluctuations.

The payment advice itself represents a departure from the procedures

commonly found in construction contacts, in that its purpose is to set out all
the sums that either party is liable to pay the other in accordance with the
provisions of the Contract, in order to determine the sum due from one party
to the other. Thus, for example, in addition to the relevant proportion of the
Contract Sum and the value of any Changes that may have been executed, it
will also have regard to:
• costs incurred by the Employer where the Contractor has failed to
comply with instructions (clause 2.3);
• costs incurred by either party in taking out insurance where there has
been a failure by the other party to maintain insurance that the Contract
obliges it to maintain (clause 27.3);
• loss and/or expense (clause 21.7);
• liquidated damages, or the repayment of liquidated damages after an
adjustment to the Completion Date (clauses 10.1 and 10.2);
• bonus for early completion (clause 14.1);
• the Contractor’s portion of any shared benefits (clause 19.4).

As a consequence, many of the matters that under other contracts fall to be

addressed by a withholding from the amount otherwise due, are addressed in
the actual determination of the amount due.

A payment advice may therefore identify that a balance is payable by either

party to the other. Where a sum is payable by the Employer to the Contractor
(as will normally be the case) it becomes due upon the receipt by the
Employer of the Contractor’s VAT invoice and has a final date for payment of
14 days later. Where (exceptionally) the payment advice shows a sum payable
by the Contractor to the Employer, it will become due on issue of the payment
advice and have a final date for payment 14 days later (clause 22.4).

Once the Employer has either issued the statement confirming that all Defects
have been rectified (clause 17.2), or notified the Contractor in accordance with
clause 17.3 concerning unrectified Defects, the Employer may issue the final
payment advice. Payment of the final payment advice becomes due in the
same manner as an interim payment advice. The final payment advice has the

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effect of a binding statement of the Contractor’s entitlements under or in
connection with the Contract, unless challenged in adjudication or litigation
within 28 days of its issue (clause 22.7).

The MPF contains no detailed procedures in relation to either VAT or the CIS,
save to provide that both parties are to comply with the relevant legislation
(clauses 25.1 and 22.8). Where the Employer is also a ‘contractor’ for the
purposes of the CIS, it is not obliged to make any payment to the Contractor in
circumstances where the Contractor has failed to provide the vouchers
required by the CIS in respect of a prior payment.

Although it is intended that the payment advice will be able to take account of
most matters that would otherwise fall to be addressed by a withholding, the
MPF does contain a withholding provision that complies with the
requirements of the Housing Grants, Construction and Regeneration Act 1996.
Where the Employer wishes to withhold monies it must give notice of its
intention to do so at least seven days before the final date for payment of the
payment from which money is to be withheld (clause 23.2).

Should either party fail to make payment in accordance with the Contract then
the other party is entitled to simple interest on the outstanding amount,
calculated at 5% over the Base Rate (clause 24.1).

Indemnities and insurance

The MPF contains an indemnity provision in respect of claims for death or

personal injury and loss or damage to property whereby:
• the Contractor indemnifies the Employer against any claims arising out
of the execution of the Project, to the extent that they do not arise as a
consequence of some act or neglect on the part of the Employer or those
for whom the Employer is responsible (clause 26.1); and
• the Employer indemnifies the Contractor against any claims arising as a
consequence any act or neglect on the part of the Employer or those for
whom the Employer is responsible (clause 26.2).

Excluded from the above indemnities are matters that are the subject of any
insurance policy required by the Contract.

So far as insurance is concerned, the MPF has no mandatory insurance

requirements and recognises that, for major projects, insurances will be the
subject of specific, project based, arrangements. Thus the MPF simply:
• requires the Appendix to identify what policies are to be provided, what
they are to cover and which party is to be responsible for their provision
(clause 27.1); this can be achieved by either attaching a copy of the
policy document or annexing a summary of the cover.
• establishes a mechanism by which either party can satisfy themselves
that the policies have actually been taken out and are being maintained
(clause 27.2);

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• establishes a right for either party to make arrangements to protect their
own position in the event that the other party has failed to take out or
maintain a policy that the Contract requires them to provide (clause
27.3); additionally, a failure to take out or maintain a policy of insurance
required by the Contract would be a Material Breach, entitling the other
party to terminate the Contractor’s employment under the Contract.

The policies referred to by the Contract may address issues such as public
liability, damage to the Project, damage to adjacent structures, loss of
contractor’s plant, environmental pollution, project based design liability,
consequential losses due to delay etc. The policies may be taken out by either
party, depending upon what is considered to be the most efficient
arrangement, and it is strongly recommended that these matters are discussed
between the parties’ insurance advisors at an early stage.

The MPF makes clear that any excess on a policy of insurance required by the
Contract falls to be paid by the party making the claim (clause 27.6).

To the extent that either party considers that the policies required by the
Contract are insufficient to protect it against any risk to which it may be
exposed (for example, the scope or limit of indemnity may be considered to be
insufficient or the excess may be considered to be too high), then the onus will
be upon that party to make such additional insurance arrangements as they
consider appropriate to protect their position. For example, the policies
required by the MPF will, almost inevitably, not address matters such as
employer’s liability and motor vehicle insurance, and so these will be matters
that each party will need to arrange for themselves. Similarly the Contractor
may consider that the policies do not give sufficient cover in respect of its own
site plant, and this would then be separately insured.

There is an optional provision (clause 28), operated by an entry in the

Appendix, whereby the Contractor can be required to take out and maintain
professional indemnity insurance for a specified limit of indemnity. Provided
that the cover remains generally available at commercially reasonable rates,
the Contractor is required to maintain this cover for 12 years from Practical
Completion of the Project.

Assignment

To reflect the requirements of the commercial property market the MPF

permits the Employer to:
• assign the benefit of the Contract at any time, without the consent of the
Contractor Clause 29.2);
• assign both the benefit and the burden of the Contract at any time to the
Funder (if any), its consent being given by clause 29.3; there need not
necessarily be a Funder but, if there is, it must be identified in the
Appendix.

By contrast, the Contractor may not assign either the benefit or the burden of
the Contract without the consent of the Employer (clause 29.1).

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Termination

By clause 38.2, any notices given by either party in connection with the
termination provisions of the Contract must be given by actual delivery,
registered post or recorded delivery and take effect upon delivery.

Either party may terminate the Contractor’s employment under the Contract in
the event of a Material Breach by the other party. The party wishing to
terminate must first serve a notice giving the other party 14 days to remedy the
Material Breach (clauses 32.1 and 33.1) and then, if the Material Breach is not
remedied during that period, terminate the Contractor’s employment under the
Contract by means of a further notice served during the subsequent 14 day
period (clauses 32.2 and 33.2).

The Material Breaches recognised by the MPF are (see the Definitions):
• by the Contractor – failure to proceed regularly and diligently; failure to
comply with an instruction; suspension of the Project (save in certain
circumstances); breach of the CDM Regulations; breach of the
requirements of the CIS; breach of any of the provisions of the Contract
relating to Named Specialists or Pre-Appointed Consultants;
• by the Employer – failure to issue a payment advice in the manner
required by the Contract;
• by either party – failure to make payment in accordance with a payment
advice; failure to insure in accordance with the Contract; any
repudiatory breach of the Contract.

Additionally, either party may terminate the Contractor’s employment under

the Contract without notice if:
• the other party becomes Insolvent (clauses 32.3 and 33.3); or
• the carrying out of the Project is suspended for more than the period
specified in the Appendix (the default period for which is 13 weeks) as a
consequence of specific events outside the control of either party (clause
34.1).

Finally, where one of the policies of insurance required by the Contract cover
terrorism and that cover ceases to be available, the Employer may by notice
terminate the Contractor’s employment under the Contract (clause 34.3).

The MPF contains rules for the determination of the financial consequences of
each of the above circumstances. These rules vary depending upon whether it
is the Contractor or the Employer that is in default, or neither party. It is to be
noted that it is only the Contractor’s employment under the Contract that is
terminated, not the Contract itself.

Disputes

Throughout the MPF there is an emphasis upon matters that might give rise to
disputes being dealt with in a timely manner and in a way that aids the
understanding of the other parties’ position. For example, in relation to the

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valuation of Changes, the Contractor has to provide its proposed valuation
within 14 days of a Change being identified; the Employer then has 14 days to
respond with its valuation of the Change in a format that allows the
differences from the Contractor’s proposed valuation to be identified. By
these means it is intended that disputes will either be avoided or, alternatively,
isolated to discrete issues that are identified at an early stage and dealt with
accordingly.

If the parties are not able to resolve their differences, the MPF offers three
options:
• Mediation – either party can suggest to the other that a dispute is
appropriate for mediation and, if the other party agrees, an attempt at
mediation can be made (clause 36.1). It is left to the parties to agree
upon the appointment of a mediator and the manner in which the
mediation is to be conducted. This approach is taken on the basis that if
the parties are unable to agree these basic matters a mediation is unlikely
to be successful.
• Adjudication – this is provided for and is to be conducted in accordance
with the Scheme for Construction Contracts (clause 37.1). The
Appendix allows for the naming of either an adjudicator or an
adjudicator nominating body, with the RICS being the default
nominating body.
• Litigation – either party may of course refer a dispute to litigation at any
time, and without necessarily having attempted either mediation or
adjudication.

The MPF contains no provision for arbitration, although the parties would be
free to agree to arbitrate a dispute and enter into an ad hoc arbitration
agreement accordingly.

The Appendix
The Appendix contains or identifies all the project specific information
referred to in the Contract Conditions and the Third Party Rights Schedule. In
addition to the matters conventionally found in the appendix to a construction
contract, it also contains (or identifies) much of the information normally
found in the articles of agreement. Thus, for example, it defines the Contract
Sum and identifies the documents that comprise both the Requirements and
the Proposals.

Where it is possible to do so, a default option has been identified for each of
the matters addressed by the Appendix.

The Third Party Rights Schedule

The MPF contains an optional provision (clause 30, operated by an entry in
the Appendix) whereby the Contracts (Rights of Third Parties) Act 1999 is
used to give the Funder (if any) and any first Purchasers or first Tenants of the

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whole or any part of the Project rights equivalent to those they have
conventionally gained by means of direct warranties from the Contractor.

This is achieved by means of a Third Party Rights Schedule that contains a

warranty from the Contractor that it has and/or will comply with the Contract
(clauses F1 and PT1). Thus the Funder and/or Purchasers and/or Tenants gain
a remedy against the Contractor should it, for example, fail to comply with the
Requirements and/or Proposals (clause 1.1), fail to exercise reasonable skill
and care in undertaking design (clause 5.3), fail to design in accordance with
the Statutory Requirements (clause 5.2.1), fail to select material in accordance
with the guide Good practice in the selection of construction materials (clause
5.2.3) etc.

Additionally the Funder, Purchasers and Tenants are granted a licence (clauses
F12 and PT7) to use the Design Documents in similar terms to that given to
the Employer (clause 7) and the right to satisfy themselves of the existence of
any professional indemnity insurance that the Contractor is required to provide
by clause 28 (clauses F13 and PT8).

The Contractor’s liability to a Funder is unlimited, but its liability to a

Purchaser or Tenant is:
• either, limited to the reasonable costs of repair and renewal (PT1);
• or, also includes other losses, subject to a financial limit of liability to
each Tenant or Purchaser in respect of such other losses being identified
in the Appendix (PT2).

Having acquired rights in accordance with clause 30, the Funder and each
Purchaser or Tenant may assign those rights twice without the Contractor’s
consent (clauses F14 and PT9), provided that the Contractor is notified of the
assignment.

A Funder also acquires step-in rights whereby it may take over the Employer’s
responsibilities under the Contract in the event of the termination of the
Finance Agreement (clause F6) or where the Contractor has grounds to
terminate its employment under the Contract or treat the Contract as having
been repudiated (clause F10). In taking over the Employer’s responsibilities,
the Funder must also accept a responsibility to pay the Contractor all sums due
to it in accordance with the Contract, irrespective of whether those sums arose
before or after the step-in (clause F11). To make this provision effective the
Contractor is required to notify the Funder prior to either terminating its
employment under the Contract or repudiating the Contract (clauses F7, F8
and F9).

The MPF contains no provision for the Employer, the Funder, Purchasers or
Tenants to gain rights against subcontractors or consultants engaged by the
Contractor, whether by means of warranties or the use of the Contracts (Rights
of Third Parties) Act 1999. This reflects an intention that the Contractor will
present a single point of responsibility is respect of such matters, and that the
Employer should satisfy itself of the Contractor’s ability to discharge this

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responsibility prior to entering into the Contract. This may involve
consideration of bonds and/or parent company guarantees.

The Requirements
The Requirements set out what the Employer requires of the Contractor, both
in terms of what is to be delivered and the manner in which it is to be
delivered. Although the Contract allows substantial flexibility as to the form
and content of the Requirements, their proper preparation is essential for a
successful Project. The Employer must ensure that, as a minimum, they
contain information concerning all the criteria it considers important. Other
matters (ie those it considers to be less important or unimportant) may then be
left for the Contractor to address, either within its Proposals or within the
Design Documents.

In preparing the Requirements it will be necessary to strike a balance between

prescription (whereby the Employer sets out in detail the works that are to be
undertaken) and opportunity (whereby the Employer looks to the Contractor to
provide innovative and best value solutions to its needs). In striking this
balance it will be necessary to consider:
• how to make tender opportunities requiring a substantial design input for
the preparation of the Proposals attractive to Contractors;
• how tenders will be evaluated where the Proposals offer different design
solutions;
• the degree of design responsibility that is retained by the Employer as a
consequence of any design within the Requirements.

Specific points to be addressed within the Requirements include:

• the proposed entries in the Appendix;
• the boundaries of the Site;
• any performance specifications that are applicable to the Project or parts
of the Project (clause 5.2.2);
• whether any specific standards are applicable to materials and
workmanship (clause 5.4);
• any requirements for the production of Design Documents, including the
design programme (clause 6);
• the definition of any Sections into which the Project is divided;
• any restrictions there may be on access to the Site (clause 9.1);
• details of any other persons who the Employer will be authorising to
work on the Site at the same time as the Contractor;
• the Health and Safety plan, if one has been produced;
• details of any tests and inspections required by the Employer;

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• any stipulations made by the Employer concerning the achievement of
Practical Completion;
• where applicable, details of any Pre-Appointed Consultants that are to be
novated to the Contractor, including full details of their original
appointment by the Employer and the Model Form of Novation
Agreement that is to utilised;
• the identification of any designs to be prepared by, or works to be
undertaken by, Named Specialists, together with either a name or list of
names for each category of work;
• any requirements as to the format to be adopted by the contract sum
analysis;
• any requirements as to the pricing information to be provided by the
Contractor;
• information concerning the Employer’s VAT procedures;
• confirmation of whether or not the Employer is a ‘contractor’ for the
purposes of the CIS;
• preliminary details as to the manner in which it is intended the Project
should be insured;
• details of any bonding and/or guarantees that will be required by the
Employer, including any that relate to advance payments (where
applicable).

The Proposals
The Proposals should respond to the Requirements and set out the manner in
which the Contractor intends to satisfy the Requirements. Sometimes the
Requirements will specify the level of detail to be contained within the
Proposals and in other cases it will be left to the Contractor to ensure that the
Proposals contain sufficient detail for the Employer to fully appreciate what it
intends to provide.

Where the Proposals make a suggestion that is at variance with the

Requirements, then it is important that this is clearly identified by the
Contractor in order that, if acceptable to the Employer, the Requirements are
altered to reflect the suggestion. If the Requirements are not altered in this
manner then, in accordance with clause 4.4, the Employer may instruct which
is to take precedence, and that instruction will not be treated as giving rise to a
Change.

The pricing documents

The Pricing Document is an important part of the MPF. It sets out the manner
in which the Contract Sum is to be paid to the Contractor, and also contains
pricing information that can be used in the evaluation of Changes. The
Contract is not prescriptive as to its content, the intention being to allow the
parties the opportunity to consider and record the pricing information

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necessary to make the financial provisions of the MPF work in the way that
they intend. Thus:
• although various alternative rules are put forward as to how the Contract
Sum might be paid to the Contractor, all apart from Rule A include an
opportunity for the parties to record agreements specific to the Project,
and Rule D allows the parties to agree their own payment arrangements;
• the level of detail to be contained within the contract sum analysis will
be determined by the parties, and will reflect the option selected for the
payment of the Contact Sum;
• the Pricing Document can also contain pricing information to be used in
the valuation of Changes; the level of detail to be provided will be
determined by the parties but might include, for example, schedules of
rates, labour rates, details of preliminaries costs, overheads and the like.

Geoff Brewer MSc, FRICS, FCIArb is a director of Brewer Consulting.

© Geoff Brewer and the Society of Construction Law 2003.

The views expressed by the author in this paper are his alone, and do not
necessarily represent the views of the Society of Construction Law or the
editor, neither of whom can accept any liability in respect of any use to which
this paper or the information in it may be put.

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 ‘The object of the Society
is to promote the study and understanding of
construction law amongst all those involved
in the construction industry’

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