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Insights

22 November 2016

The new JCT Design and Build Contract 2016

An update to one of the most popular forms of construction contract, the JCT Design and Build Contract 2016 Edition. is now available - we highlight some changes to be aware of.

An update to one of the most popular and standard forms of construction contract, the JCT Design and Build Contract 2016 Edition is now available. However, are you aware of the main changes from the 2011 edition of the contract, including amendments to the insurance options, payment provisions, and performance security?

Collateral Warranties and Third Party Rights (Clause 7.4)

Part 2 of the Contract Particulars, documenting the right to call for collateral warranties or third party rights, has been deleted.   Parties are now able to append bespoke documentation detailing the rights to be granted to the relevant beneficiaries as ‘Rights Particulars’. 

Copyright Licence (Clause 2.38)

This is now expressly assignable to any owner of the works.   It may also be sub-licensed to any owner, tenant or any other person engaged in any permitted use of the licenced documents.

The Construction (Design and Management) Regulations 2015 (Clause 3.16)

Amendments covering the latest CDM Regulations are directly incorporated into the contract, whereas previously a separate schedule was required.   

Payment (Section 4)

These provisions have been simplified and now include:

  • Interim valuation dates throughout the construction and rectification periods – payments during the rectification period will now be monthly.
  • A new procedure for a prompt (within 28 days) assessment of loss and expense claims.
  • The consolidation of interim and final payments under the notice requirements of the Construction Act 1996.   A 14 day payment period now applies to both interim payments and the final payment

Insurance (Section 6 and Schedule 3, Insurance Option C)

Historically, there have been issues with using the standard insurance options in the JCT building contracts where tenants are procuring works to existing structures.   This has been addressed by the introduction of a new insurance option, which can be used for alternative insurance arrangements where employers are unable to secure insurance of an existing structure in the joint names of the employer and the contractor.

Performance Bonds and Parent Company Guarantees (Clause 7.3)

The parties can now elect in the Contract Particulars to require the contractor to provide a performance bond and/or a parent company guarantee.  However, the JCT does not prescribe the form of performance bond or parent company guarantee to be used.  There is also no express sanction for any failure to provide the security documents required.  Employers are likely to seek to amend this provision to allow them to withhold a proportion of the money otherwise due to the contractor until these documents are provided.

Other changes

The JCT has incorporated provisions from the JCT Public Sector Supplement 2011 relating to fair payment, transparency and BIM.

In particular, the contractor is obliged to carry out the works in accordance with any BIM Protocol.

Fluctuations (Schedule 7)

Fluctuations Options B and C have been omitted from Schedule 7 but are available for download from the JCT website.  The new form instead allows the use of an alternative bespoke fluctuation or cost adjustment formula.  

Consents and Approvals (Clause 1.10)

This new clause reduces repetition throughout the contract, providing that any consent or approval of either the employer or the contractor shall not be unreasonably delayed or withheld, except in respect of the assignment provisions in clause 7.1, which are at the sole discretion of the relevant party. 

How significant are the changes overall?

In summary, some of the changes may represent ‘style over substance’.   Further, the requirement for parties to provide their own Rights Particulars (setting out the rights to be granted to third party beneficiaries) could be potentially less user-friendly.   However, the need to document an alternative insurance mechanism may be sufficient to alert parties about the potential complications of insuring existing structures at an earlier stage.

Overall, the changes are unlikely to reduce materially the bespoke amendments which employers traditionally make to JCT contracts.   There is no real shift in the allocation of risk between the parties.  

For example, it is common practice for employers and funders to require that the contractor assumes single point responsibility for the design and construction of a project.   This is usually achieved by amending the contract to make the contractor responsible for the contents of the Employer’s Requirements in consideration for the employer novating the appointments of the relevant designers across to the contractor.  This common practice continues to be overlooked by the JCT and will need a bespoke amendment where required.


This article was written by Kate Knox and David Savage. For more information please contact Kate on +44 (0)1483 252 533 or kate.knox@crsblaw.com or David on +44 (0)1483 252 615 or david.savage@crsblaw.com

 

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