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JCT Design and Build Contract 2016: All Change?

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JCT Design and Build Contract 2016: All Change?

Five years after the issue of the JCT Design and Build Contract 2011 (DB 2011) the JCT have very recently issued the Design and Build Contract 2016 (DB 2016).

The purpose of this article is to summarise the main changes between the two forms of contract.

1. Payment

In order to reflect the Fair Payment provisions from the JCT Public Sector Supplement 2011 the DB 2016 now includes the establishment of Interim Valuation Dates that are also to apply at the JCT Sub-Contract and Sub-Sub-Contract levels.

The DB 2016 provides that the first Interim Valuation Date must be specified in the entry in the Contract Particulars against clause 4.7.2. As stated in the footnote corresponding with that entry the JCT recommends the first Interim Valuation Date should be not more than one month after the Date of Possession. Subsequent Interim Valuation Dates are to be the same date in each month. The JCT also provides that the Interim Valuation Dates are to apply for both alternative A (Stage Payments) and alternative B (Periodic Payments).

The DB 2016 provides that sums are to be calculated as at the relevant Interim Valuation Date.

The Contractor is required to make an Interim Payment Application in respect of each Interim Payment in the manner specified in clause 4.7.3. If the application is received no later than the relevant Interim Valuation Date the due date is that date seven days after the relevant Interim Valuation Date. If the application is received later the due date is seven days after the date of receipt of the Interim Payment Application by the Employer. These provisions are followed at clause 4.7.5 by the requirement for the Employer to issue Payment Notices within five days of the due date.

As set out in the DB 2011 the final date for payment under the DB 2016 remains fourteen days from the due date.

2. Fluctuations

Fluctuation Option B (labour and materials cost and tax fluctuations) and Fluctuation Option C (formula adjustment) have both been deleted from the DB 2016 leaving only Fluctuation Option A (contribution, levy and tax fluctuations) in Schedule 7. JCT Fluctuations Options B and C continue to be available on the JCT website (www.jctltd.co.uk) but in our experience it is usually the case that employers seek to disapply all of the fluctuation options.

3. Loss and Expense

The Contractor’s ability to seek reimbursement of any direct loss and/or expense under clause 4.19.1 is subject to compliance with the new procedures in clause 4.20.

Under that clause the Contractor is to notify the Employer as soon as the likely effect of a Relevant Matter on regular progress becomes (or should have become) reasonably apparent to him.

The Contractor’s notification is to be accompanied by or as soon as reasonably practical followed by the Contractor’s initial assessment of the loss and/or expense incurred and any further amounts likely to be incurred together with such information as is reasonably necessary to enable the Employer to ascertain the loss and/or expense incurred.

The Contractor thereafter is to update that initial assessment and information at monthly intervals until all information reasonably and necessary to allow ascertainment of the total loss and expense has been supplied.

Within twenty eight days of receipt of the initial assessment and information and fourteen days of each subsequent update the Employer is to notify the Contractor of the ascertained amount of the loss and/or expense incurred.

4. Insurance

In DB 2016 the insurance provisions in Section 6 have been amended to consolidate the provisions of the various insurance options insofar as they relate to, amongst other things, evidence of insurance and loss or damage – insurance claims and reinstatement.

More substantively the JCT has acknowledged in the footnotes to Insurance Option C that this option (for use where there are Existing Structures) may not be appropriate for certain projects for example refurbishment projects or alterations by tenant Employers where Existing Structures insurance is the landlord’s responsibility.

The Contract Particulars for clause 6.7 and Schedule 3 therefore expressly allow the Parties in those circumstances to disapply paragraph C.1 and, by means of a C.1 Replacement Schedule, to include in place of that paragraph provisions that are tailored to their particular requirements.

In the JCT’s view the preparation of such replacement provisions must be assigned to insurance professionals.

These footnotes emphasise the need to consider at an early stage the insurance provisions and for clients to engage with their insurance brokers/advisers particularly where Works are to be carried out to Existing Structures.

5. BIM Protocols

By completing the relevant entry in the Contract Particulars it is now acknowledged that an agreed BIM Protocol can now be a Contract Document. The JCT Design and Build Contract Guide acknowledges that some model protocols claim in the case of conflict to override the other provisions of the contract. In that guide the JCT has stated that it considers that its contracts give sufficient latitude to BIM

Protocols so that a conflict should not arise. In any event it also considers that unqualified overriding provisions of this type are not appropriate in such protocols.

Notwithstanding the JCT’s stance our view is that it will be necessary to ensure that conflicts do not arise between the provisions of any protocol (e.g. the CIC BIM Protocol) and the relevant JCT provisions particularly those relating to the treatment of intellectual property.

6. Performance Bonds and Parent Company Guarantees

Usefully the DB 2016 now includes obligations on the Contractor (at clause 7.3) to provide a performance bond and/or a parent company guarantee subject to the relevant entries in the Contract Particulars being completed.

It is worth noting that the DB 2016 assumes that the relevant form of performance bond and/or parent company guarantee have been agreed prior to the contract being entered into.

7. CDM 2015

Not surprisingly the DB 2016 incorporates the various provisions in amendment 1 to DB 2011 relating to the Construction (Design and Management) Regulations 2015.

8. Collateral Warranties and Third Party Rights

DB 2016 now assumes that the Parties will set out in a separate document (defined as the Rights Particulars) details of the requirements for the grant by the Contractor and Sub-Contractors of P&T Rights, Funder Rights and/or (in the case of Sub-Contractors) Employer Rights in respect of the Works either by way of Third Party Rights or by Collateral Warranties. In view of this Part 2 of the Contract Particulars has now been deleted.

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A Model Form for the Rights Particulars is included in the Design and Build Contract Guide and is also available on the JCT website.

(The Third Party Rights set out in Schedule 5 follow the form of the corresponding standard JCT Collateral Warranties which the JCT assumes will be adopted.)

It is also worth noting that DB 2016 now provides for the possibility of Sub-Contractors conferring Third Party Rights on a Purchaser, Tenant or Funder and/or the Employer to the extent that the Rights Particulars state that a Sub-Contractor is to do so.

9. Site Manager

DB 2011 included a supplemental provision (at paragraph 1 of Part 1 of Schedule 2) whereby the Contractor could be obliged to appoint a Site Manager. Clause 3.2 of DB 2011 referred to the Contractor ensuring that he has on site a competent person in charge.

In DB 2016 the reference to a “person in charge” has been deleted and clause 3.2 now refers to the appointment of a full time Site Manager and the optional supplemental provision referred to above has now been deleted.

10. Relevant Events

The Relevant Events (which may give rise to an extension of time) remain largely unaltered save that clause 2.26.12 now refers to the exercise after the Base Date by any local or public authority (as well as such exercise by the United Kingdom government) of any statutory power which directly affects the execution of the Works. In addition such Relevant Event will not arise where it is occasioned by a default of the Contractor or any Contractor’s Person.

11. Transparency

Paragraph 11 of Part 2 of the Supplemental Provisions (see schedule 2) applies where the Employer is a local or public authority or other body to whom the provisions of the Freedom of Information Act 2000 (FOIA) apply. In those circumstances the Parties acknowledge that, except for any information which is exempt from disclosure in accordance with the provisions of the FOIA, the contents of the Contract are not confidential.

In particular the Contractor consents to the Employer publishing any amendments to the standard JCT form of contract in their entirety but having first redacted any information which is exempt from disclosure in accordance with the provisions of FOIA.

12. Public Contracts Regulations 2015 (PC Regulations)

DB 2016 now includes provisions to ensure that public sector clients using JCT Contracts are fully compliant with any relevant Regulations. In relation to DB 2016 the JCT have taken this into account not only with the incorporation of provisions from the JCT Public Sector Supplement 2011 but also to amend the Contracts to reflect some of the specific aspects of the PC Regulations.

The PC Regulations apply where the Employer is a “contracting authority” and awards a “public contract” in accordance with the definition set out in the Regulations. In general terms the Regulations apply when the Contract is within the scope of the PC Regulations and exceeds a value threshold. We would recommend that further advice is taken if there is any doubt as to the applicability of the Regulations generally or any specific provision.

In the DB 2016 the provisions related to the PC Regulations only apply where the Employer is a local or public authority and the Contract is subject to the PC Regulations.

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The following specific provisions are included or otherwise reflected in the DB 2016:

• Regulation113(PromptPayment)

Regulation 113 of the PC Regulations requires that Employers pay valid and undisputed invoices within a thirty day period. There is also a requirement to ensure that invoices are considered and verified in a timely fashion. In addition there is an obligation on public sector employers to ensure that Sub-Contractors abide by these conditions and that they are passed down the supply chain. The payment provisions in the DB 2016, if unamended, already allow for a thirty day period to apply to the payment process so the JCT have not included any specific provisions referring to the PC Regulations.

However, at paragraph 12 of Part 2 of Schedule 2 the Contractor is obliged by virtue of that supplemental provision to include in any sub-contract suitable provisions to impose the requirements of Regulation 113.

• Regulation71(Sub-Contracting)

Under Regulation 71 of the PC Regulations there are provisions that require the Contractor to provide to the Employer basic information on the Contractor’s immediate Sub-Contractors which may be extended to lower tiers of Sub-Contractors. These requirements are included in all tiers of JCT Contracts. In addition under Regulation 71 the Employer has the right to insist on the removal of a Sub-Contractor where there are grounds for doing so under Regulation 57 (where for example the Sub-Contractor has been convicted of a bribery offence). The specific provisions reflecting these Regulations can be found at the Supplemental Provisions in paragraph 12 of Part 2 of Schedule 2.

• Regulation73(Determination)

Regulation 73 requires public contracts to contain the right for the Employer to terminate the contract where:

- there has been a substantial modification to the contract which would have required a new procurement procedure within the meaning of Regulation 72;

- at the time of the contract award one of the mandatory grounds for exclusion from the procurement procedure applied and the Contractor should have been excluded from that process;

- the contract should not have been awarded to the Contractor due to a serious infringement of the obligations under the Treaties and the Public Contracts Directive as declared by the ECJ.

DB 2016 includes provisions (at clauses 8.6 and 8.11.3) giving the Employer the right to terminate the Contract under each of these circumstances and also includes provisions that deal with the consequences of such termination.

Further Updates

A number of the forms of JCT Contract (for example SBC/SBC XQ, IFC, IFC WCD etc.) have not yet been updated but we understand that these will be issued shortly.

DisclaimerThis Legal Update is published as a general guide only and it is not intended to contain definitive legal or professional advice, which should be obtained as appropriate in relation to any particular matter. This publication relates to matters prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

For any further information on penalty clauses or other related matters please contact Tim Barwick on 020 7003 8104 or email tbarwick@cclaw.co.uk