This action might not be possible to undo. Are you sure you want to continue?
A NEW APPROACH TO THE
By the same author
A New Approach to the Standard Form of Building Contract (MPT, 1972, The Construction Press Ltd, 1974) A New Approach to the ICE Conditions of Contract, Volume 1 (The Construction Press Ltd, 1975) A New Approach to the ICE Conditions of Contract, Volume 2 (The Construction Press Ltd, 1976) A New Approach to the (FIDIC) International Civil Engineering Contract (The Construction Press Ltd, 1979) A New Approach to the (JCT) 1980 Standard Form of Building Contract (The Construction Press Ltd, A New Approach to the (JCT) 1980 Standard Form of Nominated SubContract (Construction Press, 1982) A New Approach to the (DOM/1) Standard Form of Building Sub-Contract (Construction Press, 1983)
JCT DESIGN AND CONTRACT
Glyn P Jones
MSc ARICS MCIOB
A NEW APPROACH TO THE
LONDON AND NEW YORK
Preface Chapter 1 The design and its life-cycle costs Chapter 2 Choosing the right bid Chapter 3 Chapter 4 Chapter 5 Chapter 6 The risks involved A commentary on the clauses The reason for flowcharts Flowcharts vii 1 7 9 13 33 35
Construction Press an imprint of: Longman Group Limited Longman House, Burnt Mill, Harlow, Essex CM20 2JE, England .
Associated companies throughout the world Published in the United States of America by Longman Inc., New York
©GlynP Jones, 1984 All rights reserved; no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording., or otherwise, without the prior written permission of the Publishers. First published 1984 British Library Cataloguing in Publication Data Jones, Glyn A new approach to the JCT Design and Build Contract. 1. Joint Contracts Tribunal. JCT Design and Buiid Contract 2. Building — Contracts and specifications — Great Britain I. Title 692'.8 TH425 ISBNO-86095-904-X Set in 1MB Press Roman and Univers by Lonsdale Typesetting Services, Lancaster
It was only a matter of time before 'design and build' grew and came of age in the UK. Contractors knew markets existed for the direct selling of their construction wares. They knew packages or bids containing inclusive design services would appeal to many but no 'official' standard form of contract existed for those who wished to offer, or accept, design/build deals. Now, the construction industry has what it wants - a JCT Contract with a pedigree near perfect. Standard in form, rock-anchored into a long lineage of ways and words familiar to the industry's practitioners, it has the flexibility needed to satisfy and protect most kinds of client - from the one-off customer who knows not what he wants (exactly), to the Local Authority that does know, or the commercial client who has his own team of conceptual designers needing their outlines developed into drawings, details and specifications. Fusing design and building technique together into a full parcel of services undoubtedly sharpens attitudes to riks, methods, time, cost, quality and warranties. Furthermore, it forces design/build bidders to compete on three fronts rather than one (price). Design and their design's life-cycle costs now become part of the bid battle. Contractors, to succeed on the second and third front, need to tune in to social trends, the tax world, the land of lease-back, and learn to play the discount tables until they are as adept with present values of future pounds as they are with the future values of present ones; convincing clients their design's package includes not only the most acceptable design/cost choice but also the lowest life-cycle cost commitment.
Of course, the ogre of overall unending liability will hover low over design/build contractors unless the client chooses to utilise the clause 2 facilities to grant certain reliefs where perhaps novel designs are invited. Otherwise the general fear of major mistakes may slow down the emergence of bright new British design/builders until the storm clouds surrounding liability are driven away, This form of contract should hasten the return of people's confidence in buildings. It should encourage the marketing of buildings, offering clients a choice of product, price, quality, longevity, pay-back terms, and life-cycles; enabling the construction industry to take more and more risks with a greater degree of certainty that profits will be gained rather than losses suffered. This book endeavours to clarify this Contract for practitioners, introducing also chapters on matters of design, bidding and risks. The manuscript and charts were all converted into print by Margaret Smith, who managed it all in her usual inimitable way and I extend to her my thanks for such excellence. Glyn P Jones King Faisal University Dammim March 1984
THE DESIGN AND ITS LIFE-CYCLE COSTS
Introduction The traditional procedure for clients wishing to buy new buildings, or rehabilitate old ones, has been to select an independent professional designer and to tell or discuss with him what he wants, what he can afford, and what aesthetic standards he has in mind. The chosen architect in turn arranges for contractors to bid for the construction of his design on the client's property. Tills distinct two part process has disadvantages well known to everyone concerned with the design production and procurement of buildings. The 'design-and-build' process provides differently for a one step way of procuring construction work by those who prefer the designer to be also the builder; they then can speak to one person about design, time, and price in a composite way and invite bids composed of these three unified elements. Construction work increasingly requires closer integration of specialisms whose designs and their execution must interlock into ever tighter fits. This is generally acknowledged to be less easily achieved when a design team acts independently from the construction team. Fusing the designer's and builder's minds together undoubtedly sharpens up attitudes to matters of risk, technique, time, quality, cost and warranties. It forces the designer to listen to the builder for they are one, acting and thinking in unison, in their search for optimum solutions. This frequently topples design choice from its usually dominant and unassailable place. Design matters have to In both the above cases, and in an;/ permutation between the two, the JCT Standard Form of design/build contract accommodates the client's contractual requirements and safeguards to a considerable extent his interests which are to have, for a lump sum price, the kind of building he wants, built well, and completed when he wants i t . The JCT contract does not prevent construction delays. It does, however, reduce the chance of completion being delayed. Damages, prefixed by the client, will in the usual way arise unless certain stipulated events have caused the delay. The contract could quite easily have dispensed with these and other safeguards of the contractor by placing these risks upon his shoulders, but a price would of course be paid by the client whether or not those risks materialised. The JCT reckoned when putting together their conditions that optimised risk-sharing would give the client the safest set of terms for the lowest initial cosl bids by nongambling bidders. These conditions do not therefore offer clients risk-free arrangements. The risk-sharing to be found in all JCT contracts is frequently attacked by contract commentators who have different views on tiie share to be carried by the client. They would prefer io see most risks borne by the contractor. Such a policy ignores its inevitable effect; the higher the risk the higher the bids from non-gambling bidders. Shrewd clients want to take certain risks for they know there lies
This may worry traditionalists who see all delicate designs being bludgeoned into oblivion by brash builders. However, many would argue the relatively free rein enjoyed by designers under the conventional two step rules has produced no appreciable increase in beautiful buildings. In any case there is no reason to prevent designers becoming builders rather than builders becoming designers. The design/build contract In commercial fields the client may. to the designer's relief or dismay, show no interest at all in aesthetic standards. His sole concern may be to own a new factory or warehouse, fit for a certain purpose, built anywhere within a certain area in the fastest possible time at the lowest possible cost and to last for twenty years. Furthermore, he may wish to have little or nothing to do with it until it becomes ready for his occupation. On the other hand, the client may want a memorable and monumental building. He may have very strong views on aesthetics and the social amenities needed to partner his proposed project. He may already own land upon which to build; it may (at his cost) have been surveyed above and below ground; an approved design in outline or even in detail by his own, or a consultant, architect may be available; a budget price fixed; specialists lined up to do ancillary work; a full specification may be to hand; an agent of the client may be engaged and ready to oversee the whole
a chance of gain as well as loss. A client may prefer the opportunity to carry the risk of inflation for in so doing lie will benefit from lower initial bids and in his estimation bear a reasonable chance of low losses in honouring his commitments to pay cost increases. Loading the non-gambling contractor with 'speculative' risks offers him exclusive rights .to the certainty of either a profit or loss. In the former case the client will have paid more for his building than it is worth and in the latter case the contractor may at worst become insolvent or at least become anxious to reduce his losses by cutting every corner he encounters. Competition It is sometimes claimed that because design/build arrangements reduce the numbers competing they thereby reduce competition. However, conventional tendering procedures in the UK call for competition on one front only — namely, price, whereas design/build arrangements generate competition, to the client's advantage, on two if not three fronts: (i) Price (ii) Design (iii) Life-cycle costs (the future user's costs). Contractors will readily accept defeat if their price is too high but will not easily continue to accept rejection on grounds of inferior designs; nor will they be pleased if their lowest bids are ignored in favour of higher initial cost bids which promise lower life-cycle costs. Losing bidders will soon respond by improving their designs, making it harder for inexperienced gambling cut-price contractors to enter the arena or gain any foothold at the expense of unsuspecting clients. The poor designer will tend to stay in the field of 'build' only where his lower-than-cost bids will entice the unwary. The design and its life-cycle costs The contractor's bid is only part of the picture. The advantage of a low initial tender may be offset by a vision of high frequent maintenance and repair costs. A more complex attractive design or layout may generate higher staff running costs or may diminish the efficiency potential of a building.
If the client, or his adviser, adds together the initial building costs, future maintenance costs and running costs, then takes account of interest charges with inflation on the sums concerned, a much clearer picture emerges in which he questions whether to accept a higher initial bid for a design with lower future costs, or to take a lower initial bid with higher future costs to be paid at some time other than the present. In commercial constructions these considerations become even more important since differential taxes may apply or tax concessions may be there for the taking. Grants or low interest loans may beckon the client to consider carefully what he builds and where he builds it. These factors should influence budgets, designs and bids. The design/build contractor must tune in carefully to the tax world, the land of lease-back, and the range of ways to reduce a client's financial commitment in a building he may only wish to have for a fraction of its eventual life-span". The marketing of building has hardly begun unless it can offer clients a choice of product, price, pay-back terms and warranties on quality, longevity and recurring costs. The principles involved in life-cycle costing are tied closely to time, interest payments or receipts, and inflation. Interest and inflation Money must either incur interest charges if it is borrowed or gain interest if it is saved. The sums of clients' monies involved in future maintenance, repairs or running costs must therefore carry this burden of theirs from the moment they are 'born'. From the day the designer conceives their future those various cost sums must begin to accumulate their interest. An account of every future pound to be spent must be drawn up and converted (discounted) hack into its present-day value after allowing for its interest and the effects of inflation.
where it is for a second year the original £100 will have grown to £121 and so on. On the other hand, it can be seen from discount tables that £100 in one year's time is future money whbh at 10% interest has a present-day equivalent of £90.909 because that is the sum needed at 10% interest to amount to £100 in one year's time. Similarly £100 discounted for two years at 10% has a present value of £82.644 and so on. Compounding puts a future value now on a present sum of money. Discounting put a present value now on a future sum of money. Tables are also available to convert a known annual future sum required at the end of every year of a building's life into an equivalent present-day lump sum (Present Value of £ per annum Tables). The above principles are all involved in assessing design/ cost alternatives enabling the future expenditures of differing proposals to be compared upon an equal footing of present values by discounting. For example, if two design/build bids have widely differing design proposals the bids will also differ widely. Without closer examination of the submissions it is impossible to say at a glance which bid is best. The cheaper bid 'A' will lead to heavier maintenance costs sooner and will have only half the life-span of bid 'B'. However, the first cost comparison (below) still shows bid 'A' to be better than bid 'B'.
This first cost comparison has obvious faults in that it assumes present pounds are the same as future ones; it also ignores the points made earlier that any saving in initial cost or the time delay in spending money on maintenance etc should be reflected in the interest saved if that money was borrowed, or the interest earned if that money wis invested elsewhere. Thus, the second cost comparison (Table 1) using a 5% rate of discount shows bid 'A 1 to be by far the There are, as every schoolboy knows, tables available best. (Compound Interest Tables) to show the future worth of This will not surprise entrepeneurs for they have known present money. There are also tables available (Discount for years it pays to delay all sums payable for as long as Tables) to show the present worth of future money. possible when the money is being borrowed (as it often is) It can be seen at a glance from compound interest tables and similarly so when the sums are owned since interest that £100 of present-day money will amount to £110 in would be received or profits would be earned by the money one year's time at 10% interest. If the sum of £110 remains concerned.
The question — which discount rate should be used? — depends upon the client's store of money, source of borrowing and the uses he could otherwise put saved money to; there is also the problem of inflation trends and taxation rates in the future. These pose difficulties for those who may wrongly think discounting presents absolute answers. Discounting in principle and the rate chosen in practice are simply an open declaration of several assumptions — that taking into account everything we know about the client's borrowing power, or profit potential, together with the erosion in value expected — a figure of 5% compositely represents a fair allowance to be made on the capital concerned.
Table 1 Comparisons of proposals 'A' and 'B'
Table 1 shows that design/build bids must be carefully composed and judiciously selected. The design/build philosophy is reputed to give the client greater certainty of receiving what he wants when he wants it but this will not lead to long-term client satisfaction unless the life-cycle costs resulting from the chosen design are also introduced into the equation on a discounted basis. Table 2 illustrates these points, showing also the strong influence of regularly recurring (annual) sums cropping up over a long life-span. It can be seen from Table 2 that bidder 'X' has put himself out of the running mainly because he proffered a
heating/cooling/lighting system 40% Less cost efficient in running terms than bidder 'Y'. If bidder 'X' redesigned his system to produce a per annum running cost of about £22 000 instead of £25 000 he would once again be the lowest all-round bidder. The fact that 'X' had also an inferior roof needing replacement after thirty years was far less cost significant since the sum involved would not arise for thirty years whereas his inferior heating scheme meant annually paying more than the sum under bid 'Y'. The net real interest rates (ie, net after tax, real — allowing for inflation) used in cost comparing is important. Like money values, rates are not static nor are they valid over long-term periods. Where the pace of inflation overtakes the rate of interest payable the client's real rate of interest will become negative, meaning the investment of capital into projects is more than worth while, particularly since the actual recurring amounts of the future running costs are likely (because of the high inflation) to increase sharply. Clients may prefer to use a special rate or 'opportunity cost' rate in bid comparisons, taking the cold view they need not build at all if a comparison shows the proposed project would unprofitably tie up monies that could be put to better use in other activities. Thus the discount rate may well be up to 5% higher than normal risk-free investment rates. The client's life-cycle costs will include not only his operating staff costs but also operating services (cleaning, security, etc) and operating charges (rates, insurances, water, etc). In this respect each bidder's design should be vetted for efficiency in savings achievable by each design. For instance, the client may normally spend l-2!4%of his user costs in the replacement or maintenance of furniture. Now if a bidder can show designs incorporating built-in furniture at costs lower than the client's per annum charges, taking into account a net real rate, ie after tax allowances etc, then the bidder's bid concerned will come to the fore. Bidders who can convince clients their particular designs contain lower per annum recurring costs will score even more. For instance, interior cleaning costs will amount generally to about 25-30% of all the user's future costs, thus any design improvement in this area will show great savings. A carpeted floor design has an initial cost equal to
Proposal 'A ' Initial bid £10 000 Estimated maintenance costs £2000 every 15 years Life-span 30 years Proposal 'B' Initial bid £25 000 Estimated maintenance costs £1 000 every 20 years Life-span 60 years 1st comparison (over 60 years) Initial cost maintenance cost after 15 years after 20 years remove and reconstruct after 30 years maintenance cost after 40 years after 45 years £ Bid 'A'
2nd comparison (over 60 years) discounting monies @ 5%
The present value (PV) of ,. _ , £2000 (15yrs> x 0.481 = ,on , x 0.377 = ,an , OOyrs) ,,ft , <4°yrs> ,._ , x 0.111 = £1000 (20yrs> £12000 x 0.231 = £1000 x 0.142 = £2000 t 4 5 ^ £
Table 2 Comparison of proposals 'X' and 'Y' Tender comparisons (over 60 years) discounting rate = 5% Initial bids Design differences (user costs) (a) Heating/cooling/lighting system — estimated costs per annum : (b) Planned maintenance -estimated costs per annum :
Bid 'X' Bid 'Y'
1 000 000
1 200 000
Bid 'X' 25000 8 000
Bid 'Y' 15 000 5 000
Difference 10000 3 000 13000 246 077
discounted per annum payments over 60 yrs @ 5% 1 8,929 = (c) Remove and reconstruct roof covering after 30 years discounted to present value @ 5% 12000 x 0.231 = nil
2772 1 248 849 1 200 000 1 The most obvious of these lies perhaps in production charges which may affect fuel and power. Climatic changes or trends towards colder winters/hotter summers would influence his designs. Age distribution changes may also require marginally higher or lower heating systems, average temperature calculations, etc. Employment and income levels need to be observed, so too do consumption and expenditure rates; population changes; production and distribution changes; political changes and marketing techniques. Forecasting and 'market research are closely related. There are leading, coincidental, and lag indicators to guide design/build bidders in the right directions. For instance, birth rates and geographical distributions are leading indicators for (design/build) school and home bidders. Coincidental indicators include unemployment rates, retail index rates and crime rates. The 'Bank Rate' is an important lag indicator. These all provide a blurred picture of what is happening. If crime rates against property increase designers must £
only 40% of the total life-cycle cost, the remainder being 40% spent on cleaning it and 20% on replacement. On a broader scale the initial cost of a building may also, as in the case above, amount to only 40% of the total lifecycle cost, the remainder being taken up by fuel costs (10%), maintenance and repairs (10%), insurances, rates, water, etc (10%) and cleaning (30%). Thus the capital cost committed to acquiring an asset, though a smaller proportion of the whole life-cycle cost, commits the client to further unavoidable future payments. The design/build bidder who recognises this and regularly reminds himself to design accordingly and to present his bid in a way that demonstrates this may succeed where others fail. Forecasting trends and life-cycle costs The design/build bidder, to be successful, needs to observe and acknowledge within his designs changes or trends in social and economic fields.
acknowledge these trends in their proposals. If the unemployment rate increases disproportionately in certain areas the design/build bidder may incorporate propositions including special governmental concessions and financial inducements to clients. If the economy moves into higher Bank Rates the bidder's design and life-cycle cost calculations will reflect these monetary trends. If any factor relied upon in the bid changes the contractor and client should react and reappraise the design/ cost picture, making suitable changes bearing in mind total life-cycle costs can amount to many times the initial cost concerned. There is generally an increasing tendency for labour costs to rise faster than material costs. Labour also plays a prominent and often irreducible part in the client's future costs. If such trends continue and we continue to demand higher standards of comfort and cleanliness then the initial capital cost is likely to shrink as a proportion of the total life-cycle cost. The amount of capital needed to be spent to save future more expensive man-hours therefore calls for close correlation but it is not worth spending capital indiscriminately simply in the blind pursuit of saving future running costs. The rate of interest must appear in the picture when optimising designs, initial costs and future costs. Design factors which influence life-cycle costs The design/build bidder is anxious to lower his 'free' design costs and to raise his bid success rate; the client on the other hand is anxious to receive lower bids for better designs having lower life-cycle costs. Both have similar objectives in keeping down initial costs. The bidder, to succeed, must economically propose efficient cheap buildings, aesthetically pleasing, and likely to last 30-60 years. He may also put forward alternatives to the Employer's Requirements within his Proposals, or different designs having different quality standards and different completion dates. Furthermore, he must make certain he avoids design errors and omissions since the ogre of design liability under clause 2 hovers over all his proposals whatever he does or the Employer requires him to do. The consequences of design errors or omissions may amount to enormous sums if, viewed over their long-term future, left unremedied to affect adversely life-cycle costs.
These matters might weigh heavily to influence design and in turn dictate life-cycle costs. The Employer's Requirements may however require bidders to innovatively move away from 'safe' designs, raising the risks of failure. In such cases the increased risks will increase bids unless the increased risks are shared equally or carried altogether by the Employer. Rather than be heavily involved in dictating designs the Employer may prefer to stay at arm's length, stipulating in his 'Requirements' the barest bones of his needs in terms of quantity, quality and economy (see also Practice Note CD/1A). Quantity The statement of quantity would include: (a)Area of accommodation, detailing the purpose/s (b)Any particular heights (factory clearances etc) (c)Floor loadings (d)Particular insulations needed (sound/thermal etc) (e)Air change rates (dust levels, air conditioning re quirements etc) (f)Heating/hot water loads (h) Electrical loads/supplies (slngle/3 phase etc) (i) External needs (car parks, loading facilities etc) (j) 'Green' areas, paved areas. Quality The statement of quality would include:
A statement concerning life-cycle costs may also be - (a) Gross Floor Area made detailing: This factor dictates both initial and recurring costs (cleaning, maintenance, etc). It includes circulation space. Lower (a)maintenance cost limits (annual and intermittent) circulation areas generally signify more economical designs (b)operating cost limits: but an ultimate 'open-plan' may prove unacceptable or (i) cleaning counter-productive. (ii) caretaking/security Commercial clients solely interested in net or usable (iii) gardening floor areas may be heavily influence^ in their choice or (iv) rates, water acceptance of bids if wide variations appear between gross (v) insurances and net areas. For instance, if the gross floor area (GFA) (vi) energy, fuel cost in the bid of bidder 'A1 equals £SOO m2 and contains (c) Repair and renewal cost limits: 25% circulation area the client's profitable space cost rises (i) roof coverings to (£800 x 1/0.75) £1067 m 2. If the bid of bidder 'B' (ii) external walls equalled £850 m2 but contained only 20% circulation space (iii) windows, doors then the client would prefer bid B on the basis (£850 x (iv) interior floor finishes 1/0.80) of £1062 m2 being a lower sam for the rentable (v) interior walls, partitions area. (vi) ceilings (vii) heating/cooling equipment and hot water (viii) light/power equipment (ix) external works The initial cost per m2 wil! tend tc reduce as the GFA increases; wall to floor ratios will reduce; lift/stair area to floor area ratios will reduce and in general bids expressed in terms of net floor area cost per m2 will fall as the floor area increases. In the case of housing bidders' comparative costs for 2, 3 and 4 bedroom units will show ittractive reductions per m2 as the number of bedrooms increases and even better cost savings if expressed per occupier. Clients should therefore interpret figures given in Contractor's Proposals or bids with care, checking the bidder lias not gone too far in cutting down circulation space or in proposing an unbalanced mix of 2, 3 and 4 bedroom units ignoring the social, functional and aesthetic reasons for limiting cost savings. (b) Storey heights This factor mostly affects wall and partition costs with their recurring maintenance costs but it also of course affects energy expenditure. It may marginally influence stair and lift costs, and, by increasing loadings, affect foundation costs. Various storey heights within one building pose annoying problems to designers, who may tend to smooth things out by choosing one all-purpose height less cost efficient
The chosen Contractor could also be required to provide details of anticipated cash flow to correspond with his programme for construction to completion. The above listed parameters though reasonably comprehensive hardly touch upon the building's appearance, shape, colour, character and form; they are virtually all functional remarks collectively communicating the client's needs in terms of size, purpose and general level of quality. However, these initial and earliest remarks or decisions concerning a building's size, purpose and general level of quality have a pronounced effect upon the bid price for they may well account for 80—90% of the total concerned. The most influential statement in setting cost concerns size, ie, Gross Floor Area. Other factors will of course influence the total, such as shape, location, inflation, market conditions and ground conditions, but none will generally move the initial price to be paid quite as much as 'area'. There follows a brief appraisal of the more influential of cost indicators which may be written into an 'Employer's Requirements1 or 'Contractor's Proposals'.
(a)External elevation/roof description and life expec
tancy (b)Internal finishes (c)Windows, doors etc.
Other elements (eg, stairs, lifts etc) may be included. Economy The statement concerning economy may even include a budget sum, ie, a figure establishing the limit of expenditure set by the client. Clearly this will result in bids being judged on the merits of their designs and quality standards offered for the sum suggested or a figure below or close to the budget set.
than a multiplicity of heights. Heights in factories, governed by production needs, clearly command careful consideration to enable the client to flexibly change his production plans without raising the roof yet not spending sums initially upon unnecessary height. (c) Square Index The most efficient plan shape of all lies in a circle but the best practical plan shape begins of course with the square. The Square Index is a number indicating the extent to which the perimeter of a particular building exceeds that of a building of the same area on plan which is a perfect square.
Bidders know the cost of enclosing buildings may equal 25-30% of the bid total. Plans B and C are therefore 49% less cost efficient than Plan A in respect of the external wall element. However, Plans B and C may lend themselves to more economic division wall arrangements, circulation areas and structural cost decreases due to decreased spans but these gains must be weighed against the heavier expenditure in enclosing the space concerned. Bidders may therefore be more inclined to 'square up' buildings unless they can otherwise achieve cost savings elsewhere by use of standard span components, etc. In the case of housing 'squaring up' will however have the opposite effect where terraces are concerned for it will increase the external portion of the wall enclosing the plan. (d) Density of vertical division The amount of enclosing walls, load-bearing walls and partitions within a building is cost significant. The 'density' of such walls can be expressed in the form of an index which takes account of the contribution made to the enclosure of rooms by the perimeter walls: Density of Vertical Division =-------^-----where p - perimeter length at each floor L = length of partition walls A = gross floor area. Certain shapes lend themselves to more economical division of areas:
1 68.75 m
155) + 30
Although Plan B economically achieves the division of four areas by using only 30 metres of division wall the 'poor' Index gained of 0.159 shows it obtained its division at the expense of using more external wall than Plan A. Optimising plan shapes and comparing their vertical division density Indices can profitably lower bids and lower future running costs to the satisfaction of both client and contractor.
Square Index = where P= perimeter a - area on plan (not the GFA).
r = 1.00
67.500B (675 m3)
(2x 67.500) +(2 x 10.000) _ 4XV675 "
o o d .
o p 6
04X103324)+ 51.962 =
CHOOSING THE RIGHT BID
Having earlier emphasised the importance of life-cycle costs and the less important role played by initial costs it is clear the client should not necessarily accept the lowest bid. Nor indeed should he accept any bid at all if the designs proferred commit him to irreducible and unavoidable excess expenditure into the long-term future. A rational way of judging both bidders and their bids is needed. Selecting bidders Only if the client selects the right sort of bidders In the right numbers will he receive the 'right' bid. There is no advantage at all in the client receiving a low bid from a contractor who has insufficient experience, skills, integrity or competence to carry out the project. Clients who regularly place construction contracts will have lists of "approved1 companies and need no information to enable a choice of right bidders to be made. However, 'one-off clients ought to select with great care their bidders by requiring them to provide informative details of: 1, Technical experience 2. Managerial resources 3, Financial resources 4. Safety record and industrial relations 5, Punctuality record 6. Reputation for quality. 1. Technical experience Questions here should seek to discover how well equipped
the contractor concerned is in terms of expertise and previous experience of projects similar to the one proposed. 2. Managerial resources This enquiry will examine staff qualifications, their experience, organisational structure and spans of control. Particular information should be sought on the persons (and their calibre) who would be made directly responsible for the proposed project. 3. Financial resources Balance sheet information and the financial relationships between a parent company and its subsidiaries may be examined together with the rates of equity to loan capital and amount of fixed interest loan capital assessed. Any imposition or managerial restrictions in force by the company's Bank should be investigated in greater detail. Performance bonds appear the answer to any financial unease but the 'premium1 cost would of course be indirectly paid by the client. 4. Safety record and industrial relations These matters may appear of no concern to the client, however he does, in clause 25, take the risk that delays caused by any "local combination of workmen, strike or lock-out" may require an extension of time to be granted by the client to the contractor. In any case no client should accept the bid of any contractor having a known bad safety record resulting from inefficient safety management.
5. Punctuality record
Completion on time may be crucial to the client. In such cases great weight will be rightly given to a past record of punctuality. In this connection details of the companies' planning department, their use of CPM techniques, and their use of time control systems will teach the client much about the bidders' attitude to timely completion. 6. Reputation for quality The right questions here should disclose the sort of reputation the contractor has, the work entrusted to him because of liis high standards and any involvement in arbitration or litigation in respect of alleged defects. The latter must be viewed with great care particularly if the cases concerned involve projects the contractor did not design, since the line between faulty work and faulty design is frequently blurred. Having selected bidders he can rely upon the client must finally choose no more than about six and no less than about four of those to compete against one another. Efficient non-gambling bidders will in normal times decline to participate in a design/build competition if more than six bidders are invited. They know the higher the number of bidders the lower will be the bid and if an 'open" competition is allowed the lowest bid is quite likely to be below cost\ On the other hand, the lower the number of bidders below about 4-6, the higher the winning bid. If a considerable amount of design work is involved in bidding the client may find few bidders prepared to risk the
chance of failure unless the odds are considerably reduced by a reduction in the number of bidders. When a low number is decided upon the client then exposes himself further if one bidder withdraws his bid or fails to submit one. In such cases a Bid Bond may be called for from those few participating to protect the client if a withdrawal occurs. However, the cost of such bonds gets added to each bid, resulting in the client paying a fee for his own protection.
Ranking the bids
outstanding design or potentially low life-cycle costs, in which case he can inform bidders of the particular weightings he proposes to employ in ranking their bids. Thus a bidder such as 'C' in Table 3 knows he can still succeed in landing the job even though his price may be 10% above the lowest. Unless the client stipulates in the Employer's Requirements the relative importance of price, design, punctuality, etc, bidders will simply concentrate upon price, caring less for aesthetic matters and the client's crucial commitment to pay for running the building for the next 30—60 years. Assume the bids received in Table 3 amounted as follows: Bidder A = £1 000000 Bidder B = £1 050 000 (ie, + 5%) Bidder C = £1 100 000 (ie, + 10%) Bidder D = £1 150 000 (ie, + 15%). Bidder 'A' would be ranked at 100 because he has the lowest bid; it follows bid 'B' would arithmetically be ranked at 95,'C'at 90 and 'D'at85. Rating the design cannot similarly be arithmetically set. The client must subjectively select the 'best' design and may rate this at 100, giving the others relative awards.
Rating the life-cycle costs can be done arithmetically as in the case of the initial price, awarding top marks to the design showing the lowest potential user costs, then ranking the others in a similar way. The remaining factors, technical expertise, managerial resources, etc, will be dealt with by awarding ratings out of 100 on each to the bidders concerned. On reviewing the bids in Table 3 it can be seen bidder 'C' has the best all-round bid so far as the client for this particular project is concerned since price was regarded as secondary to future running costs and design (appearance) ranked third. These could of course easily be reversed to bring out a new winner. The client may on reflection wonder why he cannot have the lowest prices of bidder 'A', the best design of bidder 'B', the lower life-cycle costs of bidder 'C' and the management, safety record, punctuality and quality of bidder 'D'. He may even go so far as to suggest bidder 'A' uses the Proposals of bidder 'B'. Apart from breaches of copyright such a move would incur the wrath of all concerned (except perhaps 'A') and might result in a joint action to recover their substantial bid expenses from the client. The client should in any case bear in mind that, once the Contract is entered into, clause 5.6 forbids him divulging information to others and limits the use of the successful bidder's documents to the project concerned. Finally, it should be realised the bidder may have submitted the lowest price by error! A close examination of each bidder's Contract Sum Analysis should therefore be made before any acceptance or rejection of bids is made. Ideally a procedure should be incorporated into the invitations to bid dealing with the question of erroneous bids. These are particularly important under the design/ build arrangements where the structure of the Contract Sum Analysis is left to the parties and the application of a formula to adjust cost fluctuations is based upon those figures to be found in the Analysis.
The many attributes required of the bidder must be combined with the attributes of each bid and ranked in a systematic way before the client can choose the best bid. Bid attributes Bidder's attributes \. Technical experience 1. Price Design 2.Managerial resources 2. Life-cycle costs Speed 3.Financial resources 3. of construction 4.Safety and industrial 4. relations record Payment arrangements 5.Punctuality record 5. Construction techniques 6.Reputation for quality 6. Table 3 shows a way in which these attributes can be put together and weighted by the client according to his needs. The client may wish to encourage, or hope to receive, an
Factors Price Design Life-cycle costs Technical experience Managerial resources Financial resources Safety record Punctuality Industrial relations Quality record
Weigh ting 20 15 25 3 10 5 3 9 3
Bid 'A ' Rating Result 100 90 85 80 95 95 100 85 80 95 20.00 13.50 21.25 2.40 9.50 4.75 3.00 7.65 2.40 6.65 91.10
Bid 'B' Rating Result 95 100 95 90 85 90 75 75 80 85 19.00 15.00 23.75 2.70 8.50 4.50 2.25 6.75 2.40 5.95 . 90.80
Bid 'C' Rating Result 90 85 100 85 90 95 100 95 90 100 18.00 12.75 25.00 2,55 9.00 4.75 3.00 8.55 2.70 7.00 93.30
Bid'D' ' Rating Result 85 95 90 90 100 95 100 100 95 100 17.00 14.25 22.50 2.70 10.00 4.75 3.00 9.00 2.85 7.00 93.05
THE RISKS INVOLVED
Clients may wish to know what sort of risks they run under the JCT design/build Contract and require their advisers to inform them. There are four classes of risk identifiable under the Contract: 1.Fundamental 2.Pure 3.Particular 4.Speculative
1. Fundamental risks
of indemnity the Employer may specify in his Requirements to cover these risks. The client should seek expert advice on these matters. The premiums (and any special survey fees) will form part of the price to be paid by the Employer (client).
4, Speculative risks
statistically stands to benefit from lower bids every time and sometimes to doubly gain if the risk he carries manifests itself only mildly, or not at all. Risks of interest to the parties include: (a)the risk of design faults (b)the risk of bad ground conditions (c)the risk of changes (d)the risk of delay in completion and disruption to regular progress (e)the risk of defective work (f)the risk of inflation. (a) The risk of design faults The JCT have, in clause 2.5, marginally lowered the Contractor's liability from the standard normally to be expected of design/build contractors to a level expected of any architect or professional designer. The Employer may if he wishes go even further and limit the Contractor's liability to a fixed ceiling excepting where dwellings are concerned. Obviously any lowering of liability must not be considered unless the potential risk can be accommodated and the resulting lower bid benefits are substantial! The details of clause 2 liabilities are discussed further in Chapter 4. (b) The risk of bad ground conditions The state of the site and its sub-strata are crucial to the Works and surroundings. The Employer must (clause 7) define the boundaries but need do no more.
These risks are quite unlike the previous three categories which if they occurred would cause loss only, no benefits would accrue. Speculative risks differently offer the certainty of either profit (benefit) or loss. Both parties are (or should be) therefore interested in taking these risks. The Employer takes, for instance, the risk of exceptionally adverse weather delaying completion. His potential benefit lies in lower bids; his potential loss lies in lost liquidated damages. The Contractor takes the risk of ordinary adverse weather delaying him. His potential benefit lies in the lap of the gods who may send down fair weather; his potential loss arises if his allowance within his bid for bad weather is more than consumed by the weather actually encountered. It can be seen the JCT has shared the risks of weather between the parties granting them both the certainty of either profit or loss; the more likely event of ordinary adverse weather being carried by the Contractor. Other examples of risk sharing exist in the Contract. However, commentators sometimes see' the arrangements as one-sided bias against the Employer. Somehow they see only the certainty of loss for the Employer whereas he
These include the risk of war, nuclear fall-out, and other similar unlikely events. No insurances are required; the government stands any reparation costs that might arise. 2. Pure risks Damage to the Works by fire, lightning, storm, etc, is a 'pure risk'. Insurances are required under clause 22. The premiums payable form part of the price to be paid by the Employer (client).
3. Particular risks
These risks may arise from particular construction techniques to be employed in executing the Works, such as piling., demolition or dewatering, which may unavoidably cause damage to property other than the Works. Insurances are to be "maintained" by the Contractor under clause 21 for certain Particular Risks for an amount
The Contractor must have satisfied himself on all aspects of the site, including unforeseeable difficulties that may exist in the sub-surface and hydrological conditions. Bidders will not normally investigate the sub-strata. They expect the Employer to provide them with substrata surveys sufficient to base their bid upon, including the design of foundations, drainage, etc. If no such details are made available they will qualify their bid to exclude underground work or will make assumptions concerning the ground and base their bids accordingly. The Employer should therefore commission the necessary data and maybe a consultant Engineer's interpretation and presentation of that information concerned. Whether or not the data are sufficient and representative of the ground between boreholes for their purposes must be a matter for decision by the bidders. The bidders will also decide the ground's condition and its suitability for construction purposes. They will decide for themselves how to deal with any groundwater, rock or sand, unless the Employer's adviser particularly specifies otherwise. The Employer's adviser will write into the subsoil survey a disclaimer stating the information is not guaranteed to match the conditions encountered nor is the information to be taken as a warranty of the ground's suitability for any particular purpose. The Employer and his adviser or agent should also avoid giving any further or unintended assurances, written or oral, inside or outside the Employer's Requirements in respect of the subsoil's condition or suitability for any particular design. Where factually correct data are provided the bidders carry the risks of the ground's condition. However, if the facts in a subsoil survey given to bidders are found to be incorrect a question of negligence arises. The Contractor misled would seek compensation from the Employer, who would in turn seek recovery of the sum from the consultant who produced the erroneous report. His professional indemnity policy would come into play in such circumstances. (c) The risk of changes Changes and provisional sum instructions tend to disrupt
the regular rhythm and progress of the Contractor's work. Changes also upset his arrangements to carry out his other work not part of the Change Order itself. The JCT recognised the possibility of ordered changes coming at an inopportune time for the Contractor. It arranged its Contract's terms (in clause 12) in such a way as to allow the Contractor to review his rates and prices, to charge the Employer accordingly, and to recover (under clause 26) any loss and/or expense caused by the irregularity arising. Furthermore, the Contract allows the time loss (under clause 25) to be added to the time for completion. The money involved is (under clause 3) to be paid over to the Contractor as soon as it is in whole or in part ascertained. The Employer can avoid the clause 26 payment of loss and/or expense in an 'open-ended' way by negotiating and agreeing in writing a sum in advance for a change to be inclusive of any rate or price change together with the disruption that may be caused. However, if no such agreement is possible then the Contract's terms must be adhered to. Whenever a change or provisional sum instruction requires work not similar in character to, or significantly changes the quantity of, work originally laid down, or if the work must be executed under dissimilar conditions to those prevailing prior to the change order or provisional sum order, then a review of the rates and prices for the changed or provisional sum work is called for. The keywords "similar" and "significantly" in clause 12.5.1 are therefore crucial since they form the benchmarks from whence the Contractor's entitlement to a new rate or price is judged and allowances made whenever a change or provisional order brings about work of dissimilar character to that originally envisaged or substantially changes the conditions under which it is to be carried out or varies the quantity of work to a substantial extent. Clause 12.5.3 also provides for an allowance to be made for any necessary additional sum for "site administration, site facilities and temporary works". On the other hand, to the Employer's advantage, any reduction of such facilities, temporary works or administration, entitles the Employer to an allowance for the savings that may be brought about by certain changes.
None of the keywords, referred to above, have in the Contract been defined. It has been left to the parties to use the plain and literal meaning of the words "similar", "significantly", "site administration" . . . etc to arrive at agreeable rates etc or fair allowances. If they fail to agree amongst themselves the Contract requires them to go to arbitration on the matters. (d) The risks of delay in completion and disruption to regular progress If the Employer wants completion 'at all costs' by a particular date, he will not wish to accept the operation of clause 25 in its standard form. However, striking out the clause, apart from putting up the price, might raise problems for the Employer if subsequently he was in some way the cause of delay to the Contractor. Clauses 25 and 26 recognise that both parties may benefit from their contents and thus an optimum balance of risk and price should ensue. The Employer concedes that certain events ("Relevant Events") will justify an extension of time, also certain matters ("listed matters") are tojustify reimbursement to the Contractor of any loss and/or expense arising due to material disruption to regular progress. Not every reader of contracts sees any fairness towards the Employer in clauses 25 and 26. They appear not to consider fully the implications of the alternatives; that nongarnbling contractors would raise their bids as their risks rise regardless of the possibility that no delay or disruption might ever occur. A claimed loss might in its simplest, form occur directly and clearly from a clause 26 listed matter. But more complicated circumstances may arise involving a chain of events initiated perhaps by an Employer's breach involving events at the Contractor's risk or breaches of the Contractor. Multiples causes and effects of overlapping or concurrent events might generate intertwined liabilities difficult to unravel, or ascertain, for the Employer to verify. Until the losses are "ascertained" the Contractor cannot receive their addition to the Contract Sum (clause 26.3) nor will he be entitled to their inclusion in "the next Interim Payment" unless a divisible part of the claimed loss can be ascertained (clause 3).
The word "ascertain" has the following plain meaning: to make oneself certain to establish as a certainty to find out or learn for a certainty to make sure of, get to know to make certain, or definite; to decide, fix, limit. Clearly, certainty is the keynote of the Contract's attitude to loss and/or expense. The Employer may however be presented with uncertain claims in which case he is under no obligation to pay anything until it is established (at least in part, see clause 3) as a certainty. The onus of convincing the Employer of the claim's validity rests with the Contractor (clause 26.1.1 & .2). An Employer's agent may be capable of vetting such matters but where substantial sums and difficult matters are involved a professional quantity surveyor experienced in such claims may be required to advise on the questions raised, (e) The risks arising from defective work The Employer runs the risk that defects, shrinkages or other faults, which are the Contractor's liability, may entitle the Contractor to the Contract's (clause 16) rights to enter and remain upon the Works to remedy them at a time after Practical Completion when the Employer may have expected to have his buildings to himself. This risk can be curtailed if the Employer uses his rights to have any work or materials not in accordance with the Contract remedied straightaway rather than allow them to accumulate at the project's end. If) The risks of inflation Tlie Employer may well seek the advice of a quantity surveyor before deciding which clause of those available (36, 37 or 38) should be utilised. The kind of project, its time-scale, and future cost trends need to be considered prior to adopting one or other of these clauses.
A COMMENTARY ON THE CLAUSES
This chapter examines the contents of certain clauses and comments upon their function and working in conjunction with other clauses of the Contract.
Clause 2 Contractor's obligations
The heading is misleading. As can be seen from the subheadings the clause deals not only with the "Contractor's obligations" but also with document status (2.2), discrepancies (2.4), and the treatment of errors within or between documents (2.3). Furthermore, an Employer's obligation is also referred to within the clause, ie to give written notice of any discrepancy or divergences he may find. The Employer must also make decisions in respect of discrepancies and issue instructions to correct any divergence concerning site boundaries, However, the clause does principally set down two most important matters: 1. The Contractor's obligation to carry out and complete the Works and 2. The Contractor's obligation in respect of any defect or insufficiency in the design. The Contractor's dual obligation expressed firstly in Article 1 and in more detail in this clause is to carry out and complete the Works referred to in the Employer's Requirements and Contractor's Proposals and for that purpose to complete the design for the Works. The clause recognises the important word "design" used in Article 1 is
on its own not precise and that the parties may for instance have agreed that the Contractor will be responsible for gaining initial planning consents (Development Control Requirements). This may therefore be said to be part of the Contractor's "design" obligation. The Employer's Requirements or Contractor's Proposals may on the other hand state the Contractor is not to do everything or decide everything nor to choose the kind, quality, texture and colour of every conceivable material, nor all of the goods, nor to set standards of the Works in every detail. There may therefore be variable arrangements concerning matters of gaining statutory consents or choosing things. Matters may be further complicated where the Employer intends to partly design in detail a particular element or to put forward his outline design for the whole of the Works or if he provides his own soil reports or has himself gained outline planning consent. The Employer cannot under this Contract nominate sub-contractors or suppliers of his own choosing but he may reserve the right to judge certain standards by way of 'on-the-spot' inspections as and when the particular work is carried out or when certain materials or goods are delivered. It is intended that any such diverse arrangements are written into the Employer's Requirements or the Contractor's Proposals. Whatever then remains to be done, other than described or stated in either of these two documents, by way of design is by this clause 2 made the Contractor's responsibility. The Contractor has a duty therefore to do everything in the way of design necessary for the purpose of carrying out and completing the Works so far as he is not specifically relieved of that obligation by any particular
description or statement to be found in the Employer's Requirements or Contractor's Proposals. Delineating where one party's or the other's design obligations begin and end may however still prove to be blurred in practice. Obviously the simplest arrangement will in this respect prove best, where tie Contractor does absolutely everything, including gaining planning consents, designing everything, deciding the suitability of the site and its sub-strata. Insofar as the design of the Works is the responsibility of the Contractor he carries the same liability to the Employer as would an architect or engineer or other professional designer working in the conventional independent way. This requires the use of reasonable skill anc care by the Contractor in his design work but will not imply the resulting Works will be fit for their intended purposes, In a conventional design-and-build Contract where the Employer does not put forward his own choice of materials or goods or design but just takes what he is offered by the Contractor this would normally inipliedly promise aot only reasonable skill and care in design but also the finished Works would be fit for their purpose, However, whenever the Employer in his Requirements makes his intended purposes known to the Contractor there will be grounds to claim a failure to use reasonable skill and care if the design fails to enable these known purposes to be achieved. The Contractor's liability for any Joss of use of the Works due to his design defects or for loss of the Employer's profits or other consequential losses may in this
Contract be expressly limited by agreement between the parties to a particular amount to be named in the Appendix 1. If such an amount is written into the Appendix, putting a ceiling upon the Contractor's liability (thus indirectly lowering the Contract Sum), the arrangement will not relieve the Contractor of his unavoidable clause 6 obligation to comply with all Acts and statutory rules, nor his separate clause 24.2 liability to pay or allow to the Employer liquidated damages (also to be stated in Appendix 1) for any failure to complete the construction by the Completion Date or any extended Date. Where the Contract involves work for or in connection with the provision of a dwelling or dwellings (new or rehab' including flats) the parties cannot rely on any arrangement at all to restrict or exclude the Contractor's design liabilities. There are unavoidable and more onerous requirements statutorily imposed by law under the Defective Premises Act (section 1(1)) which requires the Contractor additionally to carry an absolute liability to see that any work of his for or in connection with the dwelling/s results in places fit for habitation when completed. Furthermore, the duty is owed not only to the Employer but to every purchaser and subsequent purchasers of such dwellings. If the Employer's Agent imposed Changes (see CD 42) in design which resulted in defects, undetectable beforehand by a reasonably competent Contractor, it may be possible for the Contractor to use part of the Act (section 1(2)) to seek relief from the responsibility imposed in this way upon him. The otherwise unavoidable Defective Premises Act's section 1(1) can alternatively be replaced by an 'approved scheme' of protection for the dweller, such as the NHBC scheme which may be written into Appendix 1 whereby (under section 1(2) of the Act) there is arranged a particular contract (eg, NHBC Agreement HB5) to be made between the Employer or Contractor and each dwelling purchaser providing for a written warranty to build in an efficient and workmanlike manner, of proper materials, so as to be fit for habitation. Where such a scheme is involved the Employer's Requirements should include its application thus bringing clause 2.5.2 into play adding an obligation upon the parties to each do everything necessary for the scheme's documents to be issued.
Although everything written above indicates how important the Employer's Requirements and Contractor's Proposals are in setting out obligations, statement CD 16 clearly stipulates the contents of the Employer's Requirements or Contractor's Proposals or the Contract Sum Analysis cannot override or modify any provisions in the Articles, Conditions or Appendices.
Nothing contained in the Employer's Requirements, Conlraclor's Proposals, or the Contract Sum Analysis must override or modify the application or interpretation of the Articles of Agree ment, Conditions, or the Appendices CD 16 2.2
policy of prompt, and almost full, regular payment to the Contractor by the Employer of absolutely everything stated in the Conditions, on the dot, every month, can be avoided to a limited extent by the use of "Alternative A" in clause 30 wherein predetermined stage payments of stipulated amounts cumulatively recorded in Appendix 2 can be written into the Requirements and/or Proposals after agreement by the parties, prior to entering into the Contract. The objective of clauses 3, 15, 12.6 and 30 remains however to ensure the Contract Sum, together with any amounts to be added (or deducted) as laid down in the Conditions, is to be doled out to the Contractor in a strictly regular way under either Alternative 'A' or 'B' as he proceeds towards practical completion. Many of the amounts to be added (eg, for clause 12 Changes or clause 26 losses) are difficult to ascertain. It is this difficulty that clause 3 recognises. It permits partial ascertainments to be taken into account by the Contractor in his computation of the Interim Payment due to him from the Employer. This partial ascertainment does not encompass guess-work or approximations. It means the ascertainmen; (establishing as a certainty) of parts of the whole concerned. If the Contractor does not properly add or deduct part or whole amounts in the computation of his Interim Payment Applications the Employer is entitled to utilise CD 601, issuing a notice to the Contractor giving his reasons for stating the Contractor's version of the total amount stated as due is not in accordance with the Contract. Simultaneously the Employer must pay the amount he himself reckons is due. If the Employer does not recognise the Contractor's right to take into account ascertained amounts in part or in whole in his Interim Payment Applications the deprived Contractor must wrestle not only with the precise meaning of the word "ascertained" in clause 3 but also with the words "properly due" found in his safety net remedial clause 28.1.1. It is never easy to be absolutely right about anything other than the simplest of issues. Exactitude in making even final valuations is difficult; in Interim valuations their ternporariness and limited life lead practitioners inevitably to approximation. There are good reasons to do so for work is
Thus, although the Employer's Requirements or Contractor's Proposals may be specially drawn up to express the parties' intentions, if these intentions run against the Conditions etc as they stand then statement CD 16 will render the words within the Employer's Requirements or Contractor's Proposals ineffective. If the Requirements and Proposals are united in placing an obligation upon the Contractor, or granting him some special relief, in contradiction to the Conditions, Articles, or Appendices then whatever is contained in the Conditions, Articles or Appendices will prevail. The parties must therefore ensure CD 16 does not negate their real intentions. They must also ensure correct completion of the standard Articles and Appendices takes place. If they wish to enter into non-standard arrangements CD 16 must be suitably altered. For example, the parties may intend to limit the Contractor's liability for the consequences of his design errors and may have written this into the Employer's Requirements and/or Contractor's Proposals with an amount stated as a limit to the liability. However, failure to enter this amount or the correct amount in the proper place in the Appendix will result in CD 16 negating the non-standard arrangement as written in the Requirements or Proposals and in the absence of any sum written into the Appendix will open the Contractor to a no-limit liability.
Clauses 3 and 15 Contract Sum — Interim Payments
Clauses 3 and 15 when combined with clauses 12.6 and 30 are collectively concerned with prompt payment to the Contractor of monies as he progresses. The Contract's
in progress and incomplete, furthermore the words used in the Conditions though superficially clear often raise doubts, as for instance in the words "total value of the materials and goods delivered". Do the words "total value" here include the Contractor's estimated costs of unloading, storage, wastage, breakages, etc? It seems some inexactitude is unavoidable and inevitable in any Interim sums chosen for the purpose of setting a value at a particular moment during the progress of a project. It is the claiming of sums improperly due rather than marginally inexact sums that CD 601 is aimed at. The Contractor must of course comply with any stipulations written into the Requirements concerning any accompanying details to be provided to the Employer (see CD 642 or 683) with each Application for interim payment.
Clause 4 Employer's instructions
Most instructions are likely to arise from the Employer's desire to change his original Requirements or to change something the Contractor would, according to his Proposals, otherwise carry out. Clause 12 empowers the Employer to make such changes and defines (very widely) the term "Change" to include matters concerning imposed obligations or restrictions on access to or use of the parts of the site, working space and hours, and the order of working. However, clause 4 places a brake on the Employer freely and unreasonably making such particular changes if the Contractor makes reasonable objection. If an issued instruction is empowered, is in writing, and is not one the Contractor can object to under CD 63—64 or CD 190-192 then the Contractor must set to immediately and comply. Questions concerning the time (extension) needed and any money (extra) involved if the instruction is a Change are all secondary to the obligation to comply, although the Contractor is obliged to simultaneously give written notice to the Employer under clause 25 if it is immediately apparent his Works' progress will be delayed. No financial deal is necessary before the obligation to comply comes into force. Money matters in respect of Changes are taken care of under clause 12.4 wherein the parties may agree if they wish a 'lump sum' deal on the Change, otherwise they are obliged to settle any differences using the detailed rules of valuation written into clause 12.5. The word "forthwith", meaning immediately and without delay, should be read reasonably of course in each particular circumstance. (Eg, How soon could the required resources be assembled and put to work? What statutory notices would have to be given or permits secured? What reorganisation or reconsideration of the Contractor's original plans, programme, designs and arrangements would be needed?) A minor Change sought by the Employer may have major repercussions on the Contractor's otherwise regular progress. The Employer must make due allowance for these things before turning to CD 65/66. The Employer should also be wary of clauses 25 and 26. The former pushes the completion date onwards and the latter entitles the Contractor to recoup from the Employer any direct loss and/or expense he may incur if his regular progress becomes materially affected. However, clause 12.4
The Employer may emplov and pav other persons to execute any work whatsoever necessary to give effect to an expressly empowered instruction • CD 65 4-, 1.2
if within 7 days aftef receipt of a w notice from the Employer requ compliance, the Contractor doe comply CD 66
ritten ring s not 4.1.2
presents a possible safety net for the Employer if he can persuade the Contractor to freely make an agreement over the desired Change (before the work commences) in which the sum agreed upon will be in full and final settlement, including any sum that may arise under clause 26.1 to .3, also to include the rights under clause 26.4. Prior financial agreements over Change orders are unfortunately a rarity. There is a tradition in the construction industry of getting on with the work first and arguing its value later (sometimes years after). If the Employer wishes to avoid this he should stipulate in the Requirements what action is to follow the issuing of Change orders, bearing in mind of course that CD 16 will not allow any overriding of the standard rules where the Requirements conflict. In any case the Employer may utilise his rights under clause 30.3.4 to refuse payment of anything "not in accordance with this Contract", stating as his'reasons that the words of clause 3 (CD 54—56) require the parties to establish the amount as a certainty before it is to be taken into account in any Interim Payment. It is important to note that although under clause 12.1.1 the Employer may, subject to the four rights of the Contractor to resist (referred to above), make wide-ranging changes in the design, quality or quantity of the Works, there are restrictions under clause 12.L .2 concerning any desired Changes in impositions previously entered in the Requirements in respect of: .1 access to the site or use of any specific parts .2 limitations of working space -.3 limitations of working hours .4 the execution or completion of the work in any specific order.
Practice Note CD/IB gives a list of clauses under which the Employer is empowered to issue instructions (see page 6). This list is not comprehensive. Further rights are contained in the Conditions and these are laid out in the Flowcharts under CD 69. Any instructions given by the Employer to the Contractor's person-in-charge are deemed to have been given to the Contractor. The person-in-charge must therefore ensure he immediately complies with instructions of the Employer (or his Agent) provided the Conditions expressly empower their issue. This strict obligation to respond immediately to all such issued instructions has four safety devices available to the Contractor:
1.A right exists (in CD 69) to query the validity of any
instruction. 2.A fight exists (in CD 73) to treat all unwritten in structions as invalid until they are put into writing. 3.A right exists (in CD 63—64) to reasonably object to a proposed Change in previously imposed obligations or restrictions under clause 12.1.2. 4.A right exists (in CD 190—192) to reasonably refuse an instruction involving an unreasonable Change in the design of the Works.
The Contractor must confirm in writing to the Employer within 7 days if the Employer purports to issue an instruction otherwise than in writing CD 77 4.3.2
Clause 5 Custody and supply of documents The Employer should consider carefully prior to making the Contract whether upon completion the Contractor's drawings, specifications and details used for the purposes of the Works will be sufficient for the Employer's future needs in connection with the maintenance, alterations or repairs of the building concerned. If the Employer considers other drawings and technical information should be produced detailing the Works 'as built' then such requirements should be specifically referred to in the Employer's Requirements and/or Contractor's Proposals. This clause 5 makes no mention of any 'master' plan or programme being supplied to the Employer even though he is expected under clause 25 to operate complex provisions for considering and in appropriate cases granting extensions of time to the Contractor. Furthermore, under clause 26 the Employer is required to make judgements on matters of loss and expense emanating from disruption to the Contractor's regular progress. A 'master' programme would at least outline the intended regular progress.
The Contractor must comply with, and give all notices required by. any Statutory Requirements
Clause 4 endeavours under CD 77 and CD 79 to cope with the difficult questions of purported, unwritten, unnoticeable, or unintended Changes. It does so by giving the Contractor a right to question their validity and requiring both parties to put unwritten matters into writing. It even recognises that despite such rules instructions may still be given and carried out without them having been beforehand put through the proper paper work. In such cases CD 79 grants the Employer a discretionary right to confirm his approval retrospectively. He can do so at any time prior to the Final Account and Statement becoming conclusive.
I f neither Contractor nor Employer con firm such an instruction in the manner and time stipulated bul nevertheless the Contractor complies with an instruction otherwise than in writing then the Em ployer may confirm the same in writing; CD 79 22.214.171.124
with, the Building Regulation requirements, Construction Regulation requirements, planning approvals, and any other relevant statutory requirements. Furthermore, the Contractor must do so without any right to reimbursement of any unforeseen costs arising unless a new or altered statutory regulation comes into force after the Date of Tender or unless certain planning requirements are involved in which case see CD 131 — 136. Clause 8 Materials goods and workmanship etc The Contractor should preconsider his promised standards, or the Employer's Requirements, of workmanship and choices of materials or goods. They must be technically sound, commercially sensible, attainable, and at all times procurable, otherwise the Contractor must gain the Employer's consent in writing before being allowed to make any changes in standards of workmanship or choices of materials or goods. The Contractor must also bear any costlier procurement cost and workmanship costs resulting from such changes. The words "so far as procurable" are not defined. They grant relief to the Contractor from endeavouring to obtain the unobtainable. It is up to the Contractor to show the Employer sound grounds for seeking the relief promised. If satisfactory evidence shows certain materials or goods are unobtainable the Employer may either sit back and await the Contractor's suggested alternative or he may take the initiative by ordering a Change. The first course of action would be risk-free whereas in the latter he must accept that a formal valuation of his order would follow with its possible consequences of design changes and planning permissions with the possibility of delays and disruptions to the Contractor's regular progress.
described in tbe Contractor's Proposals CD described in the specifications referred to in clause 5.3 CD 141 8.1
Failure to respond "forthwith" to an Employer's instruction (which clears the four hurdles listed in the third paragraph under this sub-heading) entitles the Employer to employ others to carry out the particular ignored instruction. If the Contractor more seriously defaults in ways described in clause 27 then the latter rights become operable rather than those in clause 4.
Time, under clause 25, and money matters, under clause 26, are not necessarily unified but they do frequently go together. It is difficult to see how an Employer is to dutifully make his judgements without (from the commencement) having in his hand the Contractor's bona fide master programme. The annotation following CD 84—88 refers Difficulties for the Employer may arise especially further to this problem. towards the end of a project, particularly one which for the Contractor has turned out to be unprofitable. The Clause 6 Statutory obligations, notices, fees and charges more Changes the Employer orders the less inclined the Contractor will be to carry them out. The more work and The importance of the Contractor's overriding obligation, in administration the more loss the Contractor may foresee CD 103 to comply with, and give all notices required by, and the more vigorously therefore he will pursue under any Statutory Requirements is irreducible and cannot be clause 12.5 an allowance for the "lateness" of Changes avoided. No matter what the Employer's Requirements on grounds the conditions under which the work is to specify, including his designs or Change orders, the Conbe carried out have changed. He will under clause 12.5.3 tractor is to-ascertain for himself, and ensure compliance seek an allowance for his extended administrative costs that go with the extra work and under clause 12.5.6 may seek a fair valuation of design work, insurance premiums All workmanship materials and goods - specifically described in the Employer's Requirements and other costs not otherwise included for in the normal must so far as procurable be of the standards: • CD 139 8.1 CD 138 8.1 valuation of the Changes ordered.
If the Employer promptly and reasonably refuses his consent to any suggested substitution by the Contractor the question of lost time will not arise under clause 25. The Contractor, with requests for consent to make a substitution, may however give each time a notice under clause 2S.4.10.1 and/or .2. Any delay by the Employer in giving his consent to a suggested substitution would give rise to a further notice — this time under clause 25.4.6, followed perhaps by a written application under clause 26.2.7 stating the Contractor was likely to incur loss and/or expense due to Ms regular progress being affected materially by the delay in receiving "consent". The Employer may therefore be on a tight-rope. On the one hand he has a clear right to a reasonable time to judge whether a preferred substitution is acceptable. On the other hand he is not obliged to accept or "consent" to an unreasonable substitution. If he promptly and reasonably refuses his consent to a first suggested substitution the clock must then be set to start again, granting the Employer a new reasonable time in which to judge the second suggested substitution and so forth, Obviously the Contractor may persist in putting forth the cheapest substitute he can find until he gains the Employer's consent. However, provided the Employer reacts promptly to each and every substitution preferred the time lost by the Contractor in eventually gaining the Employer's consent will not qualify for an extension to the completion date under the provisions of clause 25 since the clause's words exclude time taken up by reasons within the Contractor's control. This same principle would deny the Contractor's claim for incurred loss under clause 26.2.7 since the "due time" referred to there would be judged not from the first suggested substitution but from the moment when the first reasonably acceptable substitution was preferred. Arbitration is under Article 5.2.1 operable immediately on questions concerning the refusal of "consent" by the Employer. Clause 8 also grants the Employer discretionary rights
open up lor inspection any work covered up CD KB 8,3
to instruct the Contractor to open up work done and/or to carry out tests upon that, or upon other work or any materials or goods awaiting incorporation into the Works or in situ in the Works. This right cannot be interpreted as an obligation upon the Employer to detect any of the Contractor's faults, errors or omissions. However, if the Employer does order work etc to be opened up or tested and the findings show the workmanship, materials and goods to be faultless then the Employer will be required to pay the Contractor his "cost" of opening up and/or testing, together with the "cost" of making good. Difficult questions arise if faults are found which are not as extensive as the degree of or extent of opening up called for; or if the extent or nature of tests subsequently proved. The mere fact that fault was found will of course justify the opening up but whether it can justify all of the opening up or testing demanded is difficult to judge. The line between proper precautionary examinations and the unnecessary baring of construction may be blurred in certain cases but the benefit of removing doubt must be granted to the Employer whenever reasonable doubt exists.
Clause 10 Person-in-charge
tion and know he is the official receiver of "instructions'", not notices. The Contractor may delegate to his "person" additional and wider authority (subject to Head Office supervision and control) than simply to receive instructions. The "person" may be authorised to make agreements on the values of Changes (under clause 12.4) and to agree with the Employer the Final Account and Statement under clause 30.5. However, if the person is not authorised to make agreements but nevertheless does so they may become binding upon the Contractor if it appeared to the Employer the person had authority to make such agreements. If the Employer or his agent gives instructions in the form of sketches or drawings they may well constitute an instruction "in writing" if they clearly show in an instructive manner whatever the Employer wishes the Contractor to do. The Employer's power to instruct does not extend to dictating the Contractor's speed, methods or sequence of working, unless the Contractor's ways and means do not correspond with matters laid 'down in the documents referred to in CD 1, or if the Contractor is not constantly using his best endeavours to prevent delay (see clause 126.96.36.199) in which case the Employer would be entitled to require everything reasonably possible to enable the Works to proceed, under CD 438. Clause 11 Access for Employer's Agent etc to the Works The right for the Agent and others to see the Works in progress, and for the Agent (under clause 5.4) to see the documents, and enter workshops etc where work is being prepared does not reduce in any way the Contractor's obligation to comply with all the requirements and standards of the Contract. The nomination of an Agent or any replacement would make that person an official receiver of any application, notice, request or statement of the Contractor. It would also make the person an official giver of consents, instructions and notices, unless the Employer specifically cut down the person's authority by a written notice to the Contractor. In the absence of any such written notice the Contractor would be entitled to (and must) assume the
The person-in-charge, as the authorised representative of the Contractor, is obliged to receive any instructions of the Employer. When any instruction has been delivered to the "person" it is deemed to have been given to the Contractor. This applies only in the case of an "instruction". A notice, such as one under clause 23.2 formally informing the Contractor of a failure to complete in time, would have to be delivered to the Contractor, not his "person". Similarly, a notice under clause 27 specifying serious defaults or giving notice of determination would, to be valid, have to be served upon the Contractor himself, not his "person". Clause 4 deals with the Employer's empowered notices, the way in which they are to be issued, the Contractor's rights to make reasonable objection, and so forth. The person-in-charge must clearly understand his special posiarrange for any lest of any executed work or of any materials or goods (whether or not already incorporated In the Works! CD U9 8.3 carry out any test of any executed work or of any materials or goods (whether or not already incorporated in the Works) CD 150 8.3
nstructions The Employer may issue re quiring the Contractor to CD 147
Agent has full authority as granted to him under Article 3, to act for the Employer and to bind him. However, the Contractor should realise where the Agent is an architect or quantity surveyor that in their position as Agent they are entitled to openly display their partiality. This may lead the Contractor to wonder just how he is to profitably settle clause 12 valuations! Clause 12 Changes in the Employer's Requirements and provisional sums
The Employer may issue all manner and any number of empowered Change orders up to the Contractor achieving Practical Completion, even if the Contractor has overrun his time. The extra time that may be needed to execute the work, causing the completion date as it then stands to become unattainable, may be granted under clause 188.8.131.52 (CD 414) but any similar time spent merely awaiting any Change instruction should be separately awarded under clause 25.4.6 (CD 419) provided the Contractor has applied in writing for the instruction in question. Whether or not such extensions of time may rightly be awarded or indeed need be accepted once the Contractor is in breach by overrunning time is a debatable matter. A great deal may depend upon whether the Contractor had, in accordance with CD 399, used "constantly his best endeavours" to prevent delay during the progress of the Works. If, for example, there is clear evidence of earlier dilatoriness causing summer work to run into winter-time an extension for exceptionally adverse weather arising in the overrun period may be prejudiced. On the other hand, an earlier lack of best endeavours may later give the Employer the right to set a later Date under clause 25 due to Relevant Events arising later than they might otherwise have done if only the Contractor had earlier done his duty under the Contract (CD 399) to prevent delays. Certain Contractors may refuse proferred extensions on grounds the instructions issued in the overrun period have set time at large and the liquidated damages clause has become inoperable. Resolving such contentions may require expert legal advice. There may have been both necessary and unnecessary Changes ordered. There may have been instructions Issued at the same or different times as Change orders. Provisional sum instructions issued may have been ones which could not have been given earlier and some provisional sum instructions may involve much more or even less work than first envisaged when the sum was set. If no agreement can be reached concerning extensions of time and the deduction or payment of liquidated damages then the Employer should set about proving the loss actually suffered, due to any alleged late completion, rather than rely upon getting predetermined clause 24 liquidated damages from the date alleged by the Employer to be the operative completion date through to Practical Completion.
Further difficulties may be encountered where lateness has been caused by an interwoven set of circumstances involving faults or dilatoriness by the Employer, dilatoriness on the Contractor's part, and factors outside either party's control. In such involved circumstances the validity of deductions made by the Employer for damages due to delay is difficult to judge, particularly if any of the reasons for delay does not fall clearly under any of the clause 25 Relevant Events. When a Change is ordered the Contract Sum Analysis will be referred to in order to reckon up the Change's value. Valuing Changes is (as stated in the commentary to clause 4) rarely swiftly achieved. Clause 3 combined with clause 12.6 (CD 199) anticipates both delay and difficulty. They permit partial payments and provide (in 12.5) a set of rules for making detailed valuations, provided the Contract Sum Analysis is comprehensive enough. However, the simplified alternative clause 12.4 way is open to the parties rather than the slavish rules of clause 12.5. Whichever way is chosen, as soon as any part of the amount involved has been "ascertained" then that sum, when established as a certainty, shall be paid under clause 30.2A.1.2 or30.2E.l.l,less Retention. The greatest difficulty may arise under statement CD 198, where an allowance must be included for the addition or omission of the relevant design work.
The valuation of Changes must be made in accordance with the provisions of clause 12,5; CD 196 I 12.4
There are restrictions upon and limits to Changes the Employer may order. Firstly, the Employer is not allowed to effect a Change which is, or makes necessary, an unreasonable alteration or modification in the design of the Works. For example, an order to a Contractor, who specialises in standardised reinforced concrete buildings, changing the structural frame and cladding to steel may be reasonably refused. Arbitration is in any case available, to start immediately, to decide whether such a refusal should stand. Secondly, reasonable objections may be raised by the Contractor if instructions are issued to change any obligation or restriction previously imposed by the Employer (in the Requirements) in regard to access or use of parts of the site, limitations on space and hours, or changes in the previously specified order of working or completion. Thirdly, the Employer may not by Change order fundamentally alter the character of the Contract to something quite different from that which the Contractor had bargained over in the first place. However, the clause is quite open on the question of when the right to order Changes comes to an end. It is not clear whether the Employer is entitled to issue instructions for extra work or to omit work after the Contractor has passed the Date of Completion or any extension to it. There are no restrictions on late orders; in any case the Contract would become unworkable if necessary orders had to cease once a particular date had passed.
otherwise agreed; and CD 197 1 such valuation must include a for the addition or omission relevant design work CD19B lowance
of the 12.4
The above principles (and problems) apply equally to the expenditure of provisional sums (if any) included in the Employer's Requirements.
Clause 15 Unfixed materials and goods
Building materials, and to a lesser extent goods, are conventionally to be found deposited all around a building whilst under construction. A minority will at any one time have been paid for by the Contractor whilst the majority have not; a minority of suppliers will have retained title to their chattels whilst others have not; some of the chattels may have complicated 'retention of title' clauses attached to them whilst others have the simplest form possible. Most of this commercial 'safety-netting' ceases to matter once the materials or goods have become part of the Works for then the title-holders are generally reckoned to have lost their reserved rights since the chattels have lost their identity (as materials etc) and have become a permanent part of the Works. However, a few sellers may go a stage further by writing into their supply contract clauses granting themselves rights, when unpaid, to enter upon the site and to remove (sever) their goods even if they have become part of the Works. None of this need concern the Employer unless the Contractor becomes insolvent, and having no title or money has unpaid sellers waving retention of title clauses over certain materials or goods. Even then, a retention of title clause would not matter unless the Employer had already paid the Contractor earlier for those materials or goods; or, in the rarer cases of rights to sever, had paid the Contractor for incorporating the particular materials or goods into the Works. The element of risk for the Employer should be put into perspective. Firstly, no risk at all arises where there is no risk of the Contractor becoming insolvent. Any alleged right to title or to repossess applies only to unfixed materials or goods. A slight further risk of claims extending to materials or goods incorporated into the Works may also arise. The degree of risk for the Employer depends therefore upon the financial strength of the Contractor. Under clause 30.2A, where stage payments are arranged, separately identified payment for materials and goods does
not arise. Under the alternative clause 30.2B "the total value of materials and goods delivered to or adjacent the Works" is to be separately summed up and virtually all paid for as the Works progress, excepting for a percentage Retention held back by the Employer. Under clause 30.2B the Employer may in view of the remarks above concerning the risks of 'retention of title' require prior proof of ownership by the Contractor of all or maybe the most important materials and goods, to be provided as part of the "details as may be stated in the Employer's Requirements" (clause 30.3.2) to accompany each Application for Interim Payment. However, the task of scrutinising the variously worded small print clauses of each supplier and deciding whether or not the Contractor has the right to sell on or whether rights have been merely reserved against the proceeds of re-sale without a right to repossess, and so forth, may prove all too difficult, uncertain and time-consuming. The JCT have in any case considered the whole question of title retention and its risks. They appear to have concluded the risks do not warrant the exclusion of the Contractor's conventional rights to interim payments for unfixed materials and goods. The JCT presumably see Employers benefiting from lower bids where bidders are promised a right to payments for on-site materials etc as they proceed. Even 'better' bids may result if the Employer promises interim payments for off-site materials or goods. If this is done the conditions set out in the Appendix must be strictly observed to safeguard the Employer's rights to the paid for materials or goods in case of insolvency.
Clauses 16 and 17 Practical Completion, partial possession and Defects Liability
breach. However, nowhere in the Contract, least of all in the definition clause 1.3, is the Employer given any test to apply in determining whether or not such completion has been achieved. Annotation to assist the Employer is given in the Flowcharts below statements CD 250/1The Employer in judging Practical Completion should disregard the Date actually fixed and stated in the Appendix by the parties for Completion, since the Contractor is entitled to complete before then and the Employer is obliged to extend the Date onwards if any Relevant Event occurs to delay the Works' completion beyond the Date. The Employer should therefore look at the Works with one question in mind. Is everything virtually finished in a satisfactory way (apart from trifling matters) so that full beneficial occupation can take place" If the answer is "Yes", the Employer must promptly write to the Con tractor stating "The Works reached Practical Completion on................................(Date)".
Statement CD 270 indicates the Employer may with the Contractor's consent take earlier possession of any part or parts of the Works. It is also thought possible (see Ref 2 para (2) p 330) a Contractor who is overrunning the Date for completion may be entitled to a proportionate reduction in the damages payable for his delay if any divisible part or parts of the Works could be beneficially occupied by the Employer, thus mitigating the loss from the delay.
The Contractor must make good the defects, shrinkages and other faults specified in the Schedule of Defects, within a reasonable time after recept; CD 270 16.2 & 1M.2
Practical Completion The Employer Is given the task of declaring in writing the Works have reached Practical Completion. If he fails to do so at the right time, or refuses to do so at all, he is in
The Employer must, when the Works have reached Practical Completion,give the Contractor a written statement to that effect; CD 250 16.1
If predetermined sectional completion is desired a special supplemental agreement (similar to the one published in 1975 by the JCT for use with their 1963 Contract) should be used setting out the various amounts of liquidated damages to be paid if the sections concerned are delayed beyond their particular completion dates. If under the standard provisions of clause 17 partial possession of the Works occurs with the Contractor's consent the estimated value of the part taken is to be declared
within 7 days by the Contractor, since the Employer on possession takes sole risk of Clause 22 Perils and the Contractor's insured risk is therefore reduced by the amount concerned for the part possessed. Obviously prior arrangements by the Employer to insure Clause 22 Perils should occur before possession of any "part" goes ahead. Defects Liability From possession onwards each relevant part is then treated as if it was a miniature Works which has reached Practical Completion. Defects (including design faults) arising from the Contractor's failure under the Contract may appear, in which case CD 261 enables the Employer, whenever he considers it timely, to instruct the Contractor to put things right during the period called the "Defects Liability Period". The phrase .„ misleading since it implies the Contractor's liability extends only for the Period stated whereas his liability runs on for years. What the "Period" does do is to set a time-scale during which the Contractor has the duty, right and privilege to remedy any faults or defects appearing during that Period. To formalise this the Employer must issue as an instruction a schedule (list) of all faults and defects etc, not later than 14 days after the Period expires. Thus a list showing all defects etc which appeared in the Period will be drawn up. This list of matters is then reserved for the Contractor to remedy rather than the Employer being allowed to instruct another party to do the work and charge it to the Contractor. However, the Employer may instead of having the faults remedied instruct the Contractor to substitute other work in its place as a better remedy and at the Employer's additional expense, or, in the case of irremediable defects, to leave well alone. The Employer does not have to await the latter stages to gain rectification of unsatisfactory matters. Statement CD 146 enables him to instruct the Contractor at any time (the earlier the better), during the progress of the Works, to remove from the site or to rectify any work, materials or goods not in accordance with the Contract. The procedures outlined above apply equally when the Works as a whole are complete. Statement CD 275 (and CD 277 in the case of a relevant part) is merely a milestone sig-
The Employer must when any defects, shrinkages or other faults which he may have required to be made good have been made good, issue a notice to that effect:
damage which is Employer under applicable)- anc CD 336 at the sole risk of the clause 226 or 22C (if 184.108.40.206
nifying amongst other things the retention money balance remaining with the Employer is to be released to the Contractor. The notices do not put an end to the Contractor's liability for any other defects etc which may subsequently materialise. Clause 20 Injury to persons and property and Employer's indemnity This clause declares the indemnities provided by the Contractor to the Employer to be:
damage arising from a nuclear risk or : war risk or sonic booms;
Obviously from clause 20 it can be seen there are areas of risk to be carried by the Employer. These areas should be covered by insurances arranged for the Employer by ex(i) for personal injuries to or the death of any person (n) perts in these matters in the field of construction insurance damage to property when caused by negligence etc. following an appraisal of the other areas of risk to be carried by the Employer under whichever of the alternatives of clause 22 is to be in operation. Clauses 21 and 22 Insurance against injury to persons and property, also insurance of the Works against Clause 22 Perils
any expense liability loss claim or proceedings are due to any act or neglect of the Employer or any person for whom the Employer isfesponsible CD 309 20,1
The first indemnity does not however (see CD 309) cover injuries etc due to any act or neglect of the Employer or any person for whom the Employer is responsible. These exemptions would include injuries etc arising from activities of the Employer under clauses 29 and 34 as well as injuries etc due to the other persons referred to in clauses 29.3 and 34.2. The Employer's Agent in his activities would also fall into the exempt category. The second indemnity is confined to claims arising out of negligence, omission or default on the part of the Contractor or any sub-contractor or any servant or agent of either, Excluded from the indemnity is any loss or damage as may be at the sole risk of the Employer if either clause 22B or 22C is operative,
Construction insurance is complex. Clause 21.1-2 requires the Contractor to produce for inspection by the Employer evidence of adequate insurances. The evidence produced should therefore be examined by an expert in the field who will predetermine for the Employer the insured minimum cover sum to be stated in the Appendix 1 under statement CD 328, also the most suitable of the alternatives under clause 22, and the suitability of the insurances to be maintained by the Contractor in joint names under clause 21.2.1 (see the detailed annotation on this under CD 331). The liability of the Contractor to indemnify the Employer runs on after Practical Completion for years (subject to the Statute of Limitations Act 1980). Thus there is a necessity to arrange insurance to cover this protracted liability. Clause 23 Date of Possession, completion and postponement The Employer should never lightly commit himself to give in the Contract possession of the site to the Contractor by a particular date. He must be certain possession can be
The Contractor must be given possession of the site on the Date of Possession
Clause 24 Damages for non-completion
The Contractor must pay or allow to the Employer the whole or part of a sum calculated at the rate stated in Appendix 1 as liquidated and ascertained damages;
given in sufficient time for the Contractor to complete the Works by any governing date. He must also ensure possession of the entire site can be given from the date to be set in the Appendix for possession through to the proposed Date for Completion; if not, clause 12.1.2 describes restrictions the Employer may in his Requirements impose upon the Contractor in respect of confined access or restricted use of any specified parts of the site together with any limitations on working space or any obligation flowing from the restrictions requiring execution or completion of the work in any particular order. The importance of being doubly certain of being able to hand over the site upon the Date of Posssession becomes apparent if failure to comply occurs. The Employer may then find: 1-. a claim by the Contractor is made for damages due to the breach of the term for possession
for the period between the Completion Date and the date of Practical Complet io n;
of the liquidated and ascertained sum provided he notifies the Contractor in writing of his intentions before the issue of the Final Account and Statement. If partial possession of the Works has under clause 17 taken place prior to the due Completion Date the Contractor may claim a reduction in liquidated damages must follow. Problems may arise once the Date for Completion has passed if the Employer issues Change or provisional sum instructions involving extra work to the Contractor. These and other difficulties are discussed further on p 18 (clause 12 earlier).
Clause 25 Extension of time
The Employer is by this clause given a convenient procedure to collect a predetermined amount as soon as the Contractor fails to finish the Works by the predetermined Date for Completion or any extension of that Date.
2.a statement by the Contractor that the Date of Com
pletion has become inoperative; that no right to liquidated damages remains for the Employer; that a new obligation arises for the Contractor to com plete in a reasonable time in the circumstances under clause 26 to prepare the ground for the Con tractor to recoup any direct loss and/or expense he may incur due to his progress being materially affected by an order to postpone work.
3.an application by the Contractor to the Employer
There have been doubts expressed over the effectiveness in this situation of any order that may be given by the Employer to the Contractor to suspend work as an antidote to a failure to grant possession. There is however no reason to prevent the Employer in this predicament endeavouring to gain a formal binding agreement with the Contractor to vary the Contract by the substitution of new start and finish dates, keeping the liquidated damages clause effective, and settling any damages arising.
The damages will continue to be collected until Practical Completion actually occurs. The predetermined amount must not be an exorbitant sum plucked from the air. It must be "ascertained" as the amount genuinely reckoned beforehand as the sum likely to be suffered as damages if delayed completion occurs. The Employer should therefore calculate, liquidate, and ascertain his likely damages (preserving his calculations) before entering such sums in the Thus we find the Contractor must be on his toes and Appendix. alert to every cause of delay, including his own faults. He The Employer must in writing give notice to the Con- must tell the Employer exactly what is going on unless he is tractor under CD 391 of any failure to complete by the either on time or ahead of it. Completion Date (or extension to it), otherwise the EmIf the Contractor fails to constantly use his best endeaployer's right to start taking his liquidated damages from vours to prevent delay the granting of an extension of time the Contractor cannot begin. for a later Relevant Event causing delay may be prejudiced. For example, if dilatoriness in getting on with 'summer The Employer must issue a notice in work' causes the Contractor to run into winter-time and writing to the Contractor il the Contractor fails to complete the construction into delay due to adverse weather then his earlier breach of of the Works by the Completion Date CD 399 would deny him the right to be awarded any exten24.1 CD 391 sion of time. Furthermore, under CD 438 the Employer would be entitled to require a dilatory Contractor to do Once the Employer under clause 16 (statement CD 250) something positive about it. The most reasonable thing to issues (promptly) a written statement to say Practical do about it would be to accelerate or "proceed" at a pace Completion has been achieved then the rights to the predetermined damages immediately close down. Statement CD 394 grants the Employer discretion whether to claim payment or to deduct the whole or just part
The Contractor must use constantly his best endeavours to prevent delay in the progress of the Works, howsoever caused
This clause is based upon the premise (CD 399) the Contractor strives constantly to prevent delay and to prevent any overrun of the Completion Date. If despite his best endeavours the Contractor finds the progress of the Works towards completion is being or is likely to be delayed he must write to the Employer giving the cause. If any causal event is one he reckons is a Relevant Event (listed in clause 25.4) he must include this opinion in his written notice to the Employer. All this must be done as soon as it become reasonably apparent to the Contractor that progress is, or is likely to be, delayed.
Tfie Contractor must do all thai may reasonably be required to the satisfaction of the Employer to proceed with the Works CD 438 220.127.116.11
sufficient to eliminate the effects of his lagging 'summer work1, thus avoiding the onset of winter, although the Employer should carefully ensure he clarifies that his requirements are not to be misconstrued as an order under clause 12 or as a promise to pay any of the Contractor's acceleration costs. All this may however prove difficult without a programme of the Contractor having been made available to the Employer under clause 5. The Contractor is required by CD 403/4/5 to give in writing full particulars and estimates of the extent (if any) of delay beyond the due Completion Date, sorting out each and every Relevant Event to give the Employer a clear picture of what is happening, has happened, or is likely to happen. The Contractor must also keep the picture up to date.
The Contractor must, if practicable in such notice, or otherwise as soon as possible after such notice give in writing particulars ol the expected effects of each and every Relevant Event; and CD403 18.104.22.168
The Employer does not have to make his decision there and then upon receipt of the information described above but (dependant upon the sufficiency of the details etc) must do so not later than 12 weeks later, or, if there is less than 12 weeks to go before the Completion Date, the Employer must, if he is of the opinion that both 1 and 2 above are evident, fix a new Date for the Contractor to work to and must do so no later than the Completion Date. If the Employer is not of the opinion that the matters under 1 and 2 above are evident he is not required by the Contract to formally reject the case in any particular way but obviously should inform the Contractor of his views as soon as his opinion is formed. Once one extension of time has been formally made it is open to the Employer to take into account the omission of work later causing savings in time, but only those occurring after the last extension granted. Thus a shortening of the time can occur but not so as to ever be unfair or unreasonable nor to shorten time to a date before the original Date for Completion written into the Appndix 1. A review of the whole question of time and Completion must take place not later than 12 weeks after Practical Completion (see CD 455-461). Summarising, the Contractor is the watchman in charge of time. He bears responsibility for raising the alarm as soon as any time at all will be or has been lost, even if he himself loses it. He must promptly provide the Employer with the latest picture in clear form concerning the cause and effects of the delay. All the Employer has to do is to promptly, carefully and fairly judge whether on the information given to him he is obliged to shift the Date for Completion onwards because of a Relevant Event to allow more time to elapse before the right to recover liquidated and ascertained damages for any overrun comes into play. If the Employer lacks the information or if the information lacks evidence of a Relevant Event being the cause, or if an omission of work reduces time rather than increases it, the Employer may (but is not bound to) inform the Contractor accordingly- Such action will confirm the Employer has not failed to considerthe Contractor's notice and information which, if he did, would be a breach.
Only when causes of delay are classed as Relevant Events is the setting of a new Completion Date valid and only then if delay actually pushes work beyond the otherwise due Date. A Contractor who is well ahead of time may negate the justification for any new Date. Relevant Events are therefore the key to the clause: Force majeure
This expression is terminology of the legal profession here meant to cover delaying events unpredictable by the parties and outside their contemplation when they made their Agreement. It follows that if an extremely unusual event occurs but that event is already contained in the clause it cannot be classed as a "force majeure" sines it was predicted by the parties when they made their Contract. For instance, if an earthquake (ie, a Clause 22 Peril) destroyed part or the whole of the Works it would not be a "force majeure" (as it might well be in other contracts), it would be a Relevant Event (CD 410). If a totally unexpected and extremely unusual delaying event arises outside either party's control which cannot be slotted into clause 25 with its listed Relevant Events then legal advice should be sought if the effects are substantial, particularly if clause 22.214.171.124 becomes applicable, and no decision by the Employer under either clause should be taken until such advice has been received. Exceptionally adverse weather The operative words here are "exceptionally" and "adverse". There is nothing to restrict the extraordinary conditions to the site of the Works. There is no right to grant any extension of time due to ordinary foul weather.
Upon receipt of all this the Employer is obliged to give the Contractor an extension of time which is fair and reasonable if; 1. delay is attributable to a Relevant Event and 2. the delay is likely to cause the completion of the Works to overrun beyond the due Date.
If the Contractor is due to his own dilatoriness or fault already in delay causing an overrun into winter-time, with its greater chance of or incidence of exceptionally adverse weather, the Employer faces a difficult problem. The words of CD 409 do not, as they well could, expressly debar the Contractor from any award in such circumstances. However, it seems wrong to grant an extension of time where earlier misdemeanours or lack of endeavour can be connected directly to the event. It would appear possible to utilise CD 399 to disqualify the Contractor from any award of time for exceptionally adverse weather which could have been avoided but for earlier dilatoriness. More complex circumstances may arise in which differing Relevant Events are intertwined with CD 409 and with delay caused by the Employer himself. In such cases the Employer should insist the Contractor, under CD 403/4/5, openly lays out all the causes and their effects upon each other taking into account the various Events and other causes, their effects, the Contractor's own dilatoriness, his breach of CD 399, the faults of the Employer and their effects upon the matrix of matters. This "picture" to be produced by the Contractor should enable the Employer to form his own opinion in the way required of him under the Contract in matters of delay to the Works. Clause 22 Penis
loss or damage or more of the CD 410 occasioned by a V one Clause 22 Perils 25.4 3
clause 22B or 22C if operable would place the loss/damage risk upon the Employer's shoulders but the question of time would remain open. The words of CD 410 contain no exception or proviso concerning negligence to disqualify the Contractor from an extension. Such words do appear in clause 126.96.36.199 (CD 559) and their omission therefore from CD 410 must be deliberate and aimed at allowing extensions of time where "Perils" cause delay even if negligence on the part of the Contractor (or Ms sub-contractor) is evident. Where loss or damage occurs to the Contractor's (or his sub-contractor's) own or hired temporary buildings or plant there are no words in CD 410 confining loss or damage to the Works (or unfixed materials or goods) in the way clause 22 intended. Thus, if a Contractor's tower crane suffers damage due to a Clause 22 "Peril" and delay ensues, it would appear the Contractor is entitled to an extension of time. However, the separate obligation of the Contractor to "use constantly his best endeavours to prevent delay in the progress of the Works" stands as a limiting device for the Employer faced with applications from a Contractor under clause 25 for more time where delays are basically of his own making. Civil commotion . . . strikes etc Civil commotions are uncommon but strikes are not. A civil
civil commotion, local combination of workmen, strike or lock-out affecting any of the trades employed upon the Works; or CD 411 25.4.4
commotion which causes loss or damage may rank as a CD 410 Relevant Event. If a strike affects one particular maker 'A' of standard goods but not another maker 'B' of the same goods the Employer may under CD 399 and CD 438 be entitled to require the Contractor to go to maker 'B' even if that source is more expensive and not to grant any extension unless the entire supply situation was affected by the strike. However, the position under CD 413 is quite different where a design team go on strike, nevertheless the words of CD 428 are strong ones and difficult to ignore. If a civil commotion affected trades under CD 411/2 or persons engaged under CD 413, causing the whole or substantially the whole construction of the Works to be suspended for a continuous period likely to exceed the length named in the Appendix 1, the Employer would be justified in vigorously employing CD 438, particularly in the light of clause 188.8.131.52. Compliance with Employer's instructions
The "Perils" that rank as Relevant Events are those listed in clause 1.3 that cause any loss or damage. CD 410 des not restrict the loss or damage to work executed or to unfixed materials or goods. If loss or damage is caused to any work, temporary buildings, plant, or unfixed materials etc by any reason unlisted in the definition under clause 1.3 (eg, vandalism, theft) then the cause is not a Relevant Event under CD 410. Certain of the listed reasons which rank as a Relevant Event could occur due to the Contractor's (or his subcontractor's) negligence (eg, fire, flood). In such cases
civil commotion, local combination of workmen, strike or lock-out affecting any of the trades engaged in the prepa ration, manufacture or transportation of any of the goods or materials requited for the Works CD 412 25.4.4
The delays arising from instructions listed in CD 414 are to be segregated by the Contractor from those (if any) arising under CD 415/6 and 417/8. Furthermore, any delay arising from simply awaiting such an instruction is to be segregated and made under CD 419/20/21. Under provisional sum claims care must be taken to make due allowance only for the extra time, ie additional to that already envisaged by the Contractor for the work provisionally included at the bid stage. If instructions cause any serious suspension clause 184.108.40.206 may loom before the Employer to give the Contractor a right to determine his own employment once the period of suspension named in Appendix 1 is equalled. Careful segregation of the causes of delay and tlieir effects is essential in view of the Contractor's rights to recoup loss and/or expense in certain cases, under clause
civil commotion, local combination of workmen, strike or lock-out affecting any persons engaged in the preparation oi the design of the Works CD 413
26, although it must be emphasised that time awards granted under clause 25 do not automatically open the door to clause 26.
The two clauses are quite capable of operating independently of one another but may on occasions be unified in Awaiting matters of time and money. In the case of the discovery necessary of antiquities clause 34 clearly operates quite separately even from clause 26, dealing within its own walls with the loss and/or expense arising from discoveries of objects of interest etc, requiring the Employer to declare what extension he awards so clarifying the questions to be answered in ascertaining the loss. Compliance with instructions to open up or test
compliance with the Employer's instructions under statements CO 147/8 in regard to the opening up for inspection of any work covered up (including making good in consequence of such opening up); CD 415 220.127.116.11 compliance with the Employer's instructions under statements CD 147/9 and 150 in regard to the testing of any woik, materials or goods (including making good in consequence of such testing); CD 417 18.104.22.168
However, the risks for the Contractor in embarking upon such a course are extremely high where technical disagreement exists. The uncertainty generally renders the right ineffectual. instructions, decisions etc from the
to a breach of the Contractor's obligation to distantly use his best endeavours to prevent delay in the progress of the Works. This would also prejudice the Contractor's position under clause 26, although he could pursue loss etc at common law. The Employer should, however, be wary if an application to recover loss etc is made promptly by the Contractor under CD 463 but no formal notification of delay is made under CD 400 quoting CD 419 as a Relevant Event. Any serious breach of the Employer under clause 25.4.6 may bring clause 22.214.171.124 into play. Delayed permissions or approvals of any statutory body
delay in receipt of any necessary permission or approval of any statutory body which the Contractor has taken all practicable steps to avoid or reduce
including a decision unde
statement CD 31;
unless the inspection showed that the materials or goods were not in dance with this Contract CD416 work, accor126.96.36.199 the test showed that the work, materials or goods were not n accordance with this Contract CD 418 188.8.131.52
Statement CD 415 does not apply to work wrongfully covered up by the Contractor (eg, in contravention of the Building Regulations). The provisos in CD 416 and 418 are crucial. The inspection or test may not really and comprehensively show the work etc when exposed to view is clearly to blame or at fault. Expert technical opinions may be needed to determine whether or not, on balance, the work is at fault and whether the extent of opening up and/or testing was entirely necessary or justified. The time taken in such tasks may need to be partly considered as qualifying for an extension of time. Furthermore, under clause 26 the Contractor may qualify for reimbursement of loss and/or expense arising from unjustified exposing or testing. If serious suspension of work occurs due to a 'false alarm', inspection or test the Contractor may, under clause 28.1-2.7, claim entitlement to terminate his own employ.
The proviso in CD 421 is clearly crucial here. If delay is evident, and the requirements of the proviso have been met in full, the Contractor is clearly entitled not only to any due time extension but also (if application is made) to recoup under clause 26.2.7 any suffered loss and/or expense. If on the other hand a dilatory Contractor in delay was further delayed by instructions, decisions, information etc not being promptly issued by the Employer and the proviso CD 421 had not been complied with, the position is not at all clear. If the Contractor inventively refuses an extension of time preferred by the Employer, to cover the Employer's own dilatoriness, the Contractor may (particularly where heavy liquidated damages are payable and high inflation is occurring) claim that time is "at large" due to the Employer's breach. The Contractor may also state clause 25 cannot be operated without the Contractor's CD 421 applications. The words of CD 415 may rescue the Employer in that a failure to apply for necessary instructions could.amount
The words in CD 422, requiring the Contractor to take all practicable steps to avoid or reduce delay, link up with the words of CD 399 and possibly those of CD 438. If the Contractor does not "constantly" pursue the statutory body he may lose his right to an extension of time. In any case the Contractor bears the risk of any loss and/or expense he may incur. Work (not part of this Contract! by the Employer or others employed or engaged by the Employer This provision slots directly into clause 29 where the Employer, in his Requirements, either has reserved rights to have work going on, or, with the Contractor's consent, arranges for work not part of the Contract to go on.
Ihe execution of work, not forming part of this Contract, by the Employer himself as referred to in statement CD 593. or failure to execute such work; or 25.4.S.1 CD 423 the execution of work, not forming part of this Contract, by persons employed or otherwise engaged by the Employer as referred to in statement CD 595, or failure to execute such work CD 424 184.108.40.206
Under CD 400 the Contractor is obliged to notify the Employer of the likelihood of delay to the Works' progress due to failures under clause 29. If the Employer engages others who cause delay he should be able to pass the damages down to the one causing the delay. If a separate application under clause 220.127.116.11 is properly made the Contractor is entitled to recoup his loss etc, and if a serious delaying breach occurs under clause 29 then clause 18.104.22.168 may be brought into play. Failure or delay by the Employer in The supply of materials etc
The important words in this provision are: "labour which is essential" (CD 426) and "materials fuel or energy essential . . ." (CD 427) The provision deals with the industrial difficulties experienced in the recent past of fuel shortage, power cuts and restrictions in the supplies of energy essential to construction work. Any order imposed by the Government to affect the availability of essential labour, materials, fuel or energy, will, if causing delay in progress, be classed as a Relevant Event. Inabilities to secure essential labour materials or goods
the Contractor's inability for reasons beyond his control to secure labour essential to the proper carrying out of the Works, which leasons the Contrac tor could not reasonably Have foreseen at the Date of Tender; or CD 428 25.4,10.1
The Employer may write into his Requirements, or there may be written into the Contractor's Proposals, an arrangement whereby the Employer supplies certain materials or goods for the Works. The Employer should in these circumstances ensure if he purchases special materials etc, unobtainable elsewhere, that the contract of supply covers the risk he runs in this Contract, of an extension of time being required and liquidated damages lost, also loss and/or expense being caused the Contractor due to his regular progress being affected if the materials are awaited, and in serious cases clause 22.214.171.124 might be invoked to raise enormous liabilities. Government imposed restrictions
essentials arising during the progress of the Works. The Contractor is under CD 399 expected to be on his toes and aware of shortages trends, and if necessary should buy in materials etc ahead of time or reschedule tasks involving essential labour to avoid or reduce delay. There is a difficult line between the "best endeavours" of the Contractor which would not cost him any direct increase in expense and those endeavours which would cost more. Neither CD 399 nor CD 438 specifically mentions whether the Contractor is expected to stand any unforeseen costs incurred in preventing delay or in ensuring his progress is maintained. Where the Employer is not to blame the Employer certainly cannot be required to stand any sums arising under CD 399 or 438 unless he expressly agrees to do so. There is a link between this provision and clause 8 under the words "so far as procurable". The Employer should be wary where the Contractor states certain essential materials have become unprocurable rather than difficult to obtain (see commentary on this under clause 8 earlier). Statutory obligations by local authorities or undertakings
The words "beyond his control" are crucial, so too are the words "could not reasonably have foreseen". Both phrases must apply. Not only must the inability to secure essential labour, goods or materials be beyond the Contractor's control but also it must be a state of affairs he could not reasonably have foreseen at the Date of Tender, which Date must be inserted in Appendix 1 by the parties. This Date may be set before the day for handing in the Tender. Any eventualities undeclared or not known of 10 days prior to the date for handing in the Tender may therefore qualify, since from footnote (v) in the Appendix it seems intended an inability foreseeable from 10 days before the Tender Date until the Date of Tender would rank as being unforeseeable. Obviously in such cases the Employer may require the Contractor to negotiate and settle the financial effects with him before their signing of the Agreement. CD 399 and CD 438 may be utilised by the Employer if the Contractor complains of delay due to shortages of Care should be taken in differentiating where a local authority or statutory undertaking is carrying out work "in pursuance of its statutory obligations" or is otherwise carrying out non-statutory activities under contract with the Employer. In the former case their dilatoriness or failure to carry out such obligations is to be considered under CD 430/1. In the latter case their dilatoriness or failure would fall under CD 424 (clause 126.96.36.199) provided they were properly employed under clause 29; if not, the Employer would "have no right to operate clause 25 at all and the
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.