Download - CONSTRUCTION CONTRACTS
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2014
CONSTRUCTION CONTRACTS
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CONTRACTS
“It is not the beauty of a building you should look at;
its the construction of the foundation that will stand the
test of time.”
- Unknown
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CONSTRUCTION CONTRACTS
Provides, based on what is known at the time of contract, for what is ultimately Deliverable, by
When and at what Price;
Deals with a relationship (not necessarily founded on good faith, mutual cooperation and trust)
just as much as it deals with the Deliverable.
Defines or restricts the extent to which the common law would otherwise govern the
relationship.
Defines the relationship - it is not a mere formality in the process.
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CONSTRUCTION CONTRACTS
The Deliverable: To define the Deliverable, with the degree of accuracy possible at the time,
and to allow the Deliverable to evolve in a controlled manner;
The Price: To define the Price of the Deliverable based on what is known and what ought to be
reasonably foreseeable to an experienced contractor at the time, and to provide for the Price to
change in a controlled manner;
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CONSTRUCTION CONTRACTS
The When: To define the Time for Completion of the Deliverable based on what is known and
what ought to be reasonably foreseeable to an experienced contractor at the time, and to allow
the Time for Completion to change in a controlled manner;
The Risks: To respectively allocate the foreseeable and unforeseeable / likely and unlikely risks
to each of the Parties; and
Possible Disputes: To provide a mechanism to principally avoid, but to otherwise effectively
deal with disputes.
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THOUGHT FOR THE DAY
- The type of contract form to be used will depend on the Employer’s preference as well as the Works to be executed
- Many employers use standard form contracts developed and published by industry-based organisations
- The idea of standard form contracts is to include provisions which are beneficial to both parties to the contract in accordance with good practice
- Some contracts are, however, not based on the approach of good practice
- Therefore it is important to know the three R’s:
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THOUGHT FOR THE DAY
- The type of contract form to be used will depend on the Employer’s preference as well as the Works to be executed
- Many employers use standard form contracts developed and published by industry-based organisations
- The idea of standard form contracts is to include provisions which are beneficial to both parties to the contract in accordance with good practice
- Some contracts are, however, not based on the approach of good practice
- Therefore it is important to know the three R’s:- Rights
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THOUGHT FOR THE DAY
- The type of contract form to be used will depend on the Employer’s preference as well as the Works to be executed
- Many employers use standard form contracts developed and published by industry-based organisations
- The idea of standard form contracts is to include provisions which are beneficial to both parties to the contract in accordance with good practice
- Some contracts are, however, not based on the approach of good practice
- Therefore it is important to know the three R’s:- Rights- Responsibilities
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THOUGHT FOR THE DAY
- The type of contract form to be used will depend on the Employer’s preference as well as the Works to be executed
- Many employers use standard form contracts developed and published by industry-based organisations
- The idea of standard form contracts is to include provisions which are beneficial to both parties to the contract in accordance with good practice
- Some contracts are, however, not based on the approach of good practice
- Therefore it is important to know the three R’s:- Rights- Responsibilities - Risks
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THOUGHT FOR THE DAY
- The type of contract form to be used will depend on the Employer’s preference as well as the Works to be executed
- Many employers use standard form contracts developed and published by industry-based organisations
- The idea of standard form contracts is to include provisions which are beneficial to both parties to the contract in accordance with good practice
- Some contracts are, however, not based on the approach of good practice
- Therefore it is important to know the three R’s:- Rights- Responsibilities - Risks
- Within standard form contracts you will find your three R’s within the General Conditions of Contract read together with the amendments thereto as set out in the Contract Data and Special / Particular Conditions
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THOUGHT FOR THE DAY
- The type of contract form to be used will depend on the Employer’s preference as well as the Works to be executed
- Many employers use standard form contracts developed and published by industry-based organisations
- The idea of standard form contracts is to include provisions which are beneficial to both parties to the contract in accordance with good practice
- Some contracts are, however, not based on the approach of good practice
- Therefore it is important to know the three R’s:- Rights- Responsibilities - Risks
- Within standard form contracts you will find your three R’s within the General Conditions of Contract read together with the amendments thereto as set out in the Contract Data and Special / Particular Conditions
- The obvious benefit of the standard form is common understanding and the resultant efficiency in Tender and Execution Phases.
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THOUGHT FOR THE DAY
• The role players are:
• Employer
• Main Contractor
• Sub-contractor
• (Designer / Supplier / Manufacturer etc)
• Importantly:
• Familiarise yourself with the contract
• Be aware of all changes to standard form contracts
• Strict compliance
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Integrity,quality,consistency.
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Standard Forms
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AVAILABLE STANDARD FORMS
What Standard Forms are available for use (and required to be used by State Owned Entities):
Construction
FIDIC
NEC
JBCC
GCC
CIDB standard forms
Professional Services
NEC PSA
CIDB Standard Forms
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AVAILABLE STANDARD FORMS
The FIDIC Suite (latest is 1999)
• Silver Book – EPC;• Yellow Book – Design & Build;• Red Book – Construction Work; and• Green Book – Minor Work.
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AVAILABLE STANDARD FORMS
• New Engineering Contract:
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AVAILABLE STANDARD FORMS
• New Engineering Contract • Engineering and Construction Contract
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AVAILABLE STANDARD FORMS
• New Engineering Contract • Engineering and Construction Contract• Construction Short Contract
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AVAILABLE STANDARD FORMS
• New Engineering Contract • Engineering and Construction Contract• Construction Short Contract
• Joint Building Contracts Committee Series 2000 (5th Edition 2007):
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AVAILABLE STANDARD FORMS
• New Engineering Contract • Engineering and Construction Contract• Construction Short Contract
• Joint Building Contracts Committee Series 2000 (5th Edition 2007):• Principal Building Agreement;
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AVAILABLE STANDARD FORMS
• New Engineering Contract • Engineering and Construction Contract• Construction Short Contract
• Joint Building Contracts Committee Series 2000 (5th Edition 2007):• Principal Building Agreement;• N/S Subcontract
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AVAILABLE STANDARD FORMS
• New Engineering Contract • Engineering and Construction Contract• Construction Short Contract
• Joint Building Contracts Committee Series 2000 (5th Edition 2007):• Principal Building Agreement;• N/S Subcontract
• General Conditions of Contract for Construction (2004)
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AVAILABLE STANDARD FORMS
• The standard forms of contracts can, and usually will, be changed to fit the different requirements for different projects or to suit the requirements of a particular employer
• These conditions may change the rights and responsibilities of the employer and contractor
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Global reach;local specialistknowledge.
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Before Signing
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BEFORE SIGNING
• Completion Date
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BEFORE SIGNING
• Completion Date
• Contract Price:
• Lump Sum / Re-measurable
• CPA?
• Cost Plus
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BEFORE SIGNING
• Completion Date
• Contract Price:
• Lump Sum / Re-measurable
• CPA?
• Cost Plus
• Payment Structures: Progress / milestone based
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BEFORE SIGNING
• Completion Date
• Contract Price:
• Lump Sum / Re-measurable
• CPA?
• Cost Plus
• Payment Structures: Progress / milestone based
• Bond Requirements
• Performance
• Retention
• Advanced Payments
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BEFORE SIGNING
• Completion Date
• Contract Price:
• Lump Sum / Re-measurable
• CPA?
• Cost Plus
• Payment Structures: Progress / milestone based
• Bond Requirements
• Performance
• Retention
• Advanced Payments
• Penalties
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BEFORE SIGNING
• Completion Date
• Contract Price:
• Lump Sum / Re-measurable
• CPA?
• Cost Plus
• Payment Structures: Progress / milestone based
• Bond Requirements
• Performance
• Retention
• Advanced Payments
• Penalties
• Material Terms
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BEFORE SIGNING
• Completion Date
• Contract Price:
• Lump Sum / Re-measurable
• CPA?
• Cost Plus
• Payment Structures: Progress / milestone based
• Bond Requirements
• Performance
• Retention
• Advanced Payments
• Penalties
• Material Terms
• Programming Requirements
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BEFORE SIGNING
• Completion Date
• Contract Price:
• Lump Sum / Re-measurable
• CPA?
• Cost Plus
• Payment Structures: Progress / milestone based
• Bond Requirements
• Performance
• Retention
• Advanced Payments
• Penalties
• Material Terms
• Programming Requirements
• Entitlements to Extension of Time and Additional Costs
• Variation Orders
• Omissions
• Delays
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BEFORE SIGNING• Completion Date
• Contract Price:
• Lump Sum / Re-measurable
• CPA?
• Cost Plus
• Payment Structures: Progress / milestone based
• Bond Requirements
• Performance
• Retention
• Advanced Payments
• Penalties
• Material Terms
• Programming Requirements
• Entitlements to Extension of Time and Additional Costs
• Variation Orders
• Omissions
• Delays
• Limitation of Liability
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BEFORE SIGNING• Completion Date
• Contract Price:
• Lump Sum / Re-measurable
• CPA?
• Cost Plus
• Payment Structures: Progress / milestone based
• Bond Requirements
• Performance
• Retention
• Advanced Payments
• Penalties
• Material Terms
• Programming Requirements
• Entitlements to Extension of Time and Additional Costs
• Variation Orders
• Omissions
• Delays
• Limitation of Liability
• Resolution of Anticipated Disputes
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Integrity,quality,consistency.
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Contract Phases
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CONTRACT PHASES
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CONTRACT PHASES
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CONTRACT PHASES
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CONTRACT PHASES
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CONTRACT PHASES
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Global reach;local specialistknowledge.
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It’s not just a contract
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT”
An evolving “merx” against a backdrop (very often over an extended period of time) of
evolving circumstances (both unforeseeable and foreseeable, albeit not always predictable).
Reasonable programming.
Breach (albeit not material) is expected. A degreed of breach is the rule rather than the
exception and events or circumstances giving rise to disputes are common place; not because
of the nature of the industry players but rather the nature of activity.
Risk is considered (not avoided at all costs), understood and allocated.
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT”
Principal Drivers: Traditional: Time, Cost and Quality – modern approach includes Health
&Safety.
Quality: Workmanship and Performance (as appropriate).
Time and Cost are moving targets - One of the Parties has to accept the risk. The extent / lack of
planning and the proper allocation of risk are a key factors in Time and Cost optimisation.
Health & Safety: statutory requirements and corporate policy considerations. The concept of
best practice and zero harm is most often required and/or adopted in mature jurisdictions and
by responsible corporations.
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT”
Main Contractor Rights:
Timeous Payments
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT”
Main Contractor Rights:
Timeous Payments
Variations or alterations
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT”
Main Contractor Rights:
Timeous Payments
Variations or alterations
Extensions of Time
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT”
Main Contractor Rights:
Timeous Payments
Variations or alterations
Extensions of Time
Access to the Employer
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT”
Main Contractor Rights:
Timeous Payments
Variations or alterations
Extensions of Time
Access to the Employer
Dispute Resolution Mechanisms
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT”
Main Contractor Rights:
Timeous Payments
Variations or alterations
Extensions of Time
Access to the Employer
Dispute Resolution Mechanisms
Termination of the Contract
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT”
Main Contractor Rights:
Timeous Payments
Variations or alterations
Extensions of Time
Access to the Employer
Dispute Resolution Mechanisms
Termination of the Contract
Appointment of sub-contractors
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT”
Main Contractor Responsibilities:
Completing and Maintaining Works
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT”
Main Contractor Responsibilities:
Completing and Maintaining Works
Guarantees and insurances
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT”
Main Contractor Responsibilities:
Completing and Maintaining Works
Guarantees and insurances
Administrative procedures
Reporting on progress
Updated programmes
Substantiation of claims
Contemporaneous documents
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT”
Main Contractor Responsibilities:
Completing and Maintaining Works
Guarantees and insurances
Administrative procedures
Reporting on progress
Updated programmes
Substantiation of claims
Contemporaneous documents
Notifications
Early Warning
Notice of Claim – Time periods
Fully detailed claim
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT”
Main Contractor Responsibilities:
Completing and Maintaining Works
Guarantees and insurances
Administrative procedures
Reporting on progress
Updated programmes
Substantiation of claims
Contemporaneous documents
Notifications
Early Warning
Notice of Claim – Time periods
Fully detailed claim
Security
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT”
Main Contractor Responsibilities:
Completing and Maintaining Works
Guarantees and insurances
Administrative procedures
Reporting on progress
Updated programmes
Substantiation of claims
Contemporaneous documents
Notifications
Early Warning
Notice of Claim – Time periods
Fully detailed claim
Security
Instructions
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT” Main Contractor Responsibilities:
Completing and Maintaining Works
Guarantees and insurances
Administrative procedures
Reporting on progress
Updated programmes
Substantiation of claims
Contemporaneous documents
Notifications
Early Warning
Notice of Claim – Time periods
Fully detailed claim
Security
Instructions
Subcontracts
Claims
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT” Main Contractor Responsibilities:
Completing and Maintaining Works
Guarantees and insurances
Administrative procedures
Reporting on progress
Updated programmes
Substantiation of claims
Contemporaneous documents
Notifications
Early Warning
Notice of Claim – Time periods
Fully detailed claim
Security
Instructions
Subcontracts
Claims
Compliance
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT” Main Contractor Risks:
Financial Loss
Errors in calculations
Poor management
Delays
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT” Main Contractor Risks:
Financial Loss
Errors in calculations
Poor management
Delays
Penalties
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT” Main Contractor Risks:
Financial Loss
Errors in calculations
Poor management
Delays
Penalties
Insolvency of Employer
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT” Main Contractor Risks:
Financial Loss
Errors in calculations
Poor management
Delays
Penalties
Insolvency of Employer
Termination of the contract
Recovery of damages
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT” Sub-Contractor:
Three R’s will mainly depend of Scope of Works
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT” Sub-Contractor:
Three R’s will mainly depend of Scope of Works
Responsibility is towards Main Contractor
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT” Sub-Contractor:
Three R’s will mainly depend of Scope of Works
Responsibility is towards Main Contractor
Weaker position
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT” Sub-Contractor:
Three R’s will mainly depend of Scope of Works
Responsibility is towards Main Contractor
Weaker position
Similar rights to those in Main Contract
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT” Sub-Contractor:
Three R’s will mainly depend of Scope of Works
Responsibility is towards Main Contractor
Weaker position
Similar rights to those in Main Contract
Warning lights in contract:
Reduction of / set-off from certified payments
Pay when paid
No DAB / Arbitration Procedure
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT” Sub-Contractor:
Three R’s will mainly depend of Scope of Works
Responsibility is towards Main Contractor
Weaker position
Similar rights to those in Main Contract
Warning lights in contract:
Reduction of / set-off from certified payments
Pay when paid
No DAB / Arbitration Procedure
Retention percentages
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT” Sub-Contractor:
Three R’s will mainly depend of Scope of Works
Responsibility is towards Main Contractor
Weaker position
Similar rights to those in Main Contract
Warning lights in contract:
Reduction of / set-off from certified payments
Pay when paid
No DAB / Arbitration Procedure
Retention percentages
Defects liability periods
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT” Sub-Contractor:
Three R’s will mainly depend of Scope of Works
Responsibility is towards Main Contractor
Weaker position
Similar rights to those in Main Contract
Warning lights in contract:
Reduction of / set-off from certified payments
Pay when paid
No DAB / Arbitration Procedure
Retention percentages
Defects liability periods
Changes to notification periods
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT” Sub-Contractor:
Three R’s will mainly depend of Scope of Works
Responsibility is towards Main Contractor
Weaker position
Similar rights to those in Main Contract
Warning lights in contract:
Reduction of / set-off from certified payments
Pay when paid
No DAB / Arbitration Procedure
Retention percentages
Defects liability periods
Changes to notification periods
Time barring
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CONSTRUCTION CONTRACTS – IT’S NOT “JUST A CONTRACT”
Important:
Notification Procedure Time barring
Strict Compliance
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Integrity,quality,consistency.
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DISPUTE: NOW WHAT?
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DISPUTE: NOW WHAT?
• Claims procedure
• Determination
• Dispute
• DAB / Arbitration
• Court
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DIFFERENCE IN APPROACHPRACTICAL EXAMPLE
Contractor 1
Realistic Tender
Guarantees and finance
Signed Contract
Took possession
Timeous notice: delays
Contemporaneous documents
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DIFFERENCE IN APPROACHPRACTICAL EXAMPLE
Contractor 1
Kept to progress chart
Reported regularly
Completed snag list
Completed work
Received final payment
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QUESTIONS?
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Thank you