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Articles from the Silver Shemmings Ash Team on contractual matters, recent case law changes and items of interest in the construction and property world

The JCT Constructing Excellence Contract 2016 Part 2 – A New Dawn?

January 13, 2020 | Silver Shemmings

So, What Exactly Is In The JCT Constructing Excellence Contract?

The contracts were drafted to underpin collaborative working and are intended to:

    • Encourage collaborative behaviour.
    • Get participants to recognise the importance of risk management at pre-tender stage.
    • Provide flexibility in use.
    • Be used throughout the supply chain.

Objectives

These are achieved through:

  • A series of bi-lateral contracts that adopt a collaborative approach within a common framework
  • A multi-party Project Team Agreement which reinforces a collective approach
  • Use of a Risk Register
  • Flexible allocation of identified risks to the party best able to manage the consequences

Key Features

  • There is a pain / gain share mechanism.
  • The Project Team Agreement is optional – but in my view, essential.
  • The contract is intended for use by all parties including clients, contractors, consultants and sub-contractors of any tier – parties are referred to as ‘Purchaser’ and ‘Supplier’.
  • There is a Risk Register and Risk Allocation Schedule.
  • There is an overriding principle of good faith, mutual trust and respect.
  • Dispute resolution provisions are then to resolve any disagreements before parties proceed
  • Project Protocol – this balances workmanship risk etc.
  • Uniquely, an alternative payment options (target cost requires the separation of empirical costs and the agreed margin)
  • Collateral warranties or TPR still exist.

Key Aspects Of Collaborative Working

  • Identifying and managing risks – there is encouragement to arrange a single policy of insurance, paid for by all parties who would benefit from claim payments.
  • There is proper planning of the construction period – early engagement of key suppliers. 
  • Engagement and integration of supply chain members.
  • Measurement of relevant performance as work proceeds.

So, to make it work there needs to be agreement to the overriding principle.

  • The use of signed documents to engage all the project participants
  • Entry into PTA
  • Preparation of Project Protocol – how we are to behave.
  • Provision of information to all parties.
  • Design obligations – who does what, and the role of the Lead Designer and Lead Supplier is clearly defined.

Robust Contractual Provisions

  • Goods and materials – identified sources.
  • A Risk Register (not a contractual document) is ready and the Risk Allocation Schedule (contractual allocation of risk) is agreed.
  • Payment provisions
    • Target cost
    • Contract sum
  • Insurance is common to all parties.
  • Completion and rectification period is common to all.
  • Dispute Resolution
  • Early notification, direct negotiation in good faith, statutory adjudication and Court
  • H & S and sustainable development

So Will It Prevent….

The Ugly?

Risk Management: The Good, the Bad and the Ugly   

The fund manager for a large commercial project recognised that the project he had invested in was not progressing at it should. The project was being reported as 8 to 10 weeks behind programme and he had not seen any improvement in the situation. He asked for a brief review of the project to be undertaken by a construction consultancy organisation. 

The consultant attended the next project meeting, which was also attended by the contractor and the project professional team. As part of the meeting, the contractor’s monthly report was reviewed, including the contractor’s project risk register. 

The consultant noticed that the register consisted of only two risks, both of which related to planning issues and were assigned to the ownership of the developer. 

The consultant expressed his surprise that a project, which was in 8 to 10 ten weeks delay and was continuing to slip, had only 2 only risks in the register. The contractor’s project manager retorted “am I expected to list everything that might go wrong in the project risk register?” 

The project was eventually delivered 15 weeks late and the contractor made a large penalty payment to the customer. 

The project review that was undertaken by the consultancy organisation concluded that the principal reasons for the late delivery were poor communication by the contractor, lack of resources and late delivery of materials. These incidents were managed on a reactionary basis with no contingency planning having taken place.  

The use of effective risk management on this project would have identified most of the incidents and enabled contingency plans or alternative procurement strategies to be developed, greatly reducing the project overruns. 

Criticisms: and there are many – one commentator saying that it is like:  “Your granny turning up to your next party sporting an eyebrow piercing, dreadlocks and a spliff”

  • It applies to clients, main contractors, sub-contractors and consultants. At a time when the industry is still wondering whether it can cope with a single appointment document for consultants, this is brave
  • Client, contractor, consultant – all these terms have gone. Just Purchasers and Suppliers
  • Primarily intended for the public sector market, Government has told the Public Sector to adopt partnering
  • Is anyone in charge? The Project Team “guide the successful delivery of the project”
  • Fundamental to the contract is its treatment of Risk, it will allow Purchasers and Suppliers to pre-agree the costs and times allowed within the contract price for named Risk Events. More interestingly, it will also allow them to pre-allocate the effect of cost and time overruns for those events. This is a change from the way other contracts work and will take some getting used to
  • It will certainly be worth considering against its competitor contracts (NEC for example) but as it represents such a huge shift away from the traditional JCT approach it remains to be seen whether the JCT name will be sufficient to give it market share. The smart money says it will remain a niche contract.

Read – “Part One”

Author Jon Sharp has practiced in the City for close to 30 years and has a wealth of experience in the insurance industry and has a number of reported cases that demonstrate his abilities as a leader in the areas of dispute resolution, insurance, marine, aviation, general commercial matters and social media. Jonathan regularly presents seminars and lectures to the public insurer’s banks and other lawyers, on a range of topics, including social media.

He has also conducted a number of Arbitrations, before both the LMAA and ICC and dealt with boundary disputes, defended planning applications, and property transfers after matrimonial issues. Jon can be contacted by telephone at 0207 167 6602, or through email via jonsharp@silverllp.com.

At Silver Shemmings Ash, we provide seminars and training alongside our core activities in contentious and non-contentious matters. The purpose of these is to facilitate a greater knowledge and understanding of construction and property law. There remains a considerable lack of training in such areas for companies and this is an issue which we are looking to address.


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