JCT Contracting | C-Link

20 November 2018

JCT Contracting

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What is a JCT Contract?

The Joints Contract Tribunal, often referred to as the JCT, is an independent organisation that publishes standard forms of Building Contracts for use in England and Wales. The JCT suite of Contracts is a standard set of Contract documents, designed to be fair and reasonable for all parties involved.

The JCT is formed of seven industry bodies, representing differing contractual stakeholders, and has been setting the standard for construction contracts since 1931. Their suite of Contracts is a set of standard documents used by the building industry to help deliver your project. Using the appropriate JCT Contract ensures that your project is delivered with a reduction in the risks inherent to any construction project.

If you, as Client (employer), don’t use a standard JCT Building Contract, you could be exposing the project to one-sided terms and conditions imposed by the Contractor or Subcontractor as part of their tender return. Failing that, you may have to revert to common law to control payment, disputes, insurance claims and even what is actually included in the works, which can be ambiguous and open to interpretation. Definition in the contract is important in order to avoid disputes and best manage your project.

JCT Contract Types

There are a variety of different types of JCT Contract that are appropriate for different types of project. Identifying the correct JCT Contract makes sure that your development is delivered, regardless of complexity.

Choosing the right JCT Contract is important for several reasons because:

  • Selecting an overly complex JCT Contract will likely result in additional and unnecessary costs for the parties’ in administering the Contract and potentially getting into contract (legal fees etc.)
  • Delivery of the works may be complicated by an overly complex form of Contract when a simple form will do.

In this article, we’ve tried to identify the different types of JCT Contracts that are applicable to different types of projects. However, we’d always advise getting independent legal advice or that of an Architect:

Type of ContractType of ProjectContract Sum
Minor Works Building ContractLow complexity, minor structural worksUp to £250,000
Intermediate Building ContractMedium complexity, structural worksUp to £1 million
Standard JCT Building ContractHigh complexity with structural worksOver £1 million
Major Works Building ContractHigh complexity with structural worksOver £10 million

Let’s explore the various key forms of JCT Contracts available at your disposal.
Every few years, the JCT will update its standard suite of Contracts to conform with changes in Legislation and/or case law. It’s therefore always important to check you’re working to the latest version of the JCT suite of Contracts.

Building Contract

JCT Building Contract

The JCT Standard Building Contract was drafted and intended for projects being procured via the traditional procurement route. It’s best suited for large or complex construction projects where detailed contract provisions are needed.

Construction’s traditional procurement route, which is sometimes referred to as ‘design bid build’, is the most common means of Clients’ procuring construction works. The scheme for working is simple:

  • The client initially appoints a professional team in the form of construction consultants (Architect, Quantity Surveyor, Structural Engineer etc.) to prepare the design, specification and bills of quantities.
  • These documents then form a tender enquiry and Contractors are invited to submit tenders for the construction works, often on the basis of competitive tendering.
  • Under this procurement route, the Contractor is typically not responsible for the lion-share of the design (except perhaps temporary works or very specialist items) and it is the Architect who holds the responsibility for the design.

This is a complex document and is usually only used on complex contracts in excess of £1 million. The JCT first issued a Standard Building Contract in 1931 and the latest edition is the 2016 version. The contract is one used for general contracting and its provisions are similar to the JCT’s Intermediate Contract which is used for less complex developments but also includes the following:

  • The Contractor can appoint Subcontractors with permission from the Contract Administrator.
  • Provisions are included for collaborative working, sustainability, advanced payments, bonds, third party rights and collateral warranties.
  • This Contract can be used in conjunction with a pre-construction services agreement and is usually part of a framework of wider Contracts used to deliver a major project.

Features of the JCT Standard Building Contract

Traditional Procurement

Using the JCT Standard Building Contract means the client has opted for traditional procurement – a method that became standard practice approximately 150 years ago. The main feature is that the design process is totally separate from the construction, and full documentation is required before the Contractor can be invited to tender for carrying out the work.

The client has total control over the design and specifies the quality and standard of the materials used throughout via appointment of his consultants; typically, the Contractor does no design.

The fragmentation of the design and construction teams means the two elements are separate sequential processes and as a result, the project programme tends to be longer than in other forms of procurement.

Bill of Quantities

The JCT Standard Building Contract is available with or without quantities, but commonly it is provided with Quantities measured by the Employer’s Quantity Surveyor. These quantities are then typically used by the Contractor in order to value and price the works with rates appended to the quantities. On this basis a Contract Sum is calculated, and this is typically fixed price but can be subject to remeasurement in some cases.

Roles and Responsibilities

The JCT Standard Building Contract provides a detailed set of terms and conditions outlining the rights and obligations of both the Employer and Contractor and moreover, the powers and duties of the Architect / Contract Administrator and the Quantity Surveyor.

In this form of Contracting there is not a single point responsibility for the Design and Build, with the Architect responsible for the Design and the Contractor in-charge of the build. This can often lead to disagreements and/or variations to the Contract Sum where there is discrepancies, divergencies and/or errors in the information. It is the Contract Administrators task to manage this and ensure disputes are avoided.

When to use JCT Standard Building Contract

The JCT give simple advice about as and when it is appropriate to use the JCT Design and Build form of Contract and this states that the Standard Building Contract is appropriate:

“…for larger works designed and/or detailed by or on behalf of the Employer, where detailed contract provisions are necessary, and the Employer is to provide the Contractor with drawings; and with bills of quantities to define the quantity and quality of the work; where an Architect/Contract Administrator and Quantity Surveyor are to administer the conditions.”

Conclusion

The JCT Standard Building Contract and traditional procurement has been around for 150 years and has suited the construction industry for some time. In contemporary construction it has been criticised for its lack of flexibility; reliance on construction consultants and the resultant fragmentation you get in project teams which can often lead to delays and disputes. In recent years there’s been a move towards other means of contracting such as Design and Build which we’ll explore below.

Design and Build Contract

JCT Design and Build Contract

Design and Build is a procurement method that has been used in various industries for a long time. The JCT Design and Build Contract was drafted for projects where the Client wants the Contractor to complete both the design and construction. Under this form of JCT Contract, the Contractor is given the same level of Design Responsibility as the Architect and it is defined below:

“Design and Build is a contractual arrangement in which the contractor offers to design and build a project for a value inclusive of both the design and construction costs.”

The intention of the Employer (the end Client) is to transfer design responsibility for delivering the required project. The design input of the Contractor is much greater on Design and Build than a traditional contract with a Contractor’s Designed Portion (CDP).

While the Employer still assembles a Design Team (Architect and Engineer) to get the design to a certain point, the Main Contractor (and their Subcontractors) complete the design. While tendering, the Contractor, together with his Subcontract team, develop a design to ‘complete’ the Architect’s design – this becomes known as the Contractors Proposals.

The Employer often (but not always) retains his professional team to monitor the work and ensure that the specification is adhered to. However, the Design Responsibility is with the Contractor to finalise the design and its compliance with the specification and the performance requirements.

To put it simply on a JCT Design and Build Contract, the Contractor (and their Subcontractors’) has the same professional liability for the design as an Architect. The Contractor(s) are on a level par with the Architect.

Features of Design and Build Contracts

Employers Requirements and Contractor’s Proposals

In JCT Design and Build Contracting, the Employer will approach a Contractor with a detailed set of expectations and requirements and asking for the Contractor to respond with proposals (Contractor’s Proposals). The Employers Requirements will include design work by an Architect but the extent of this will vary project-to-project.

During the tender period there will be some negotiation over the requirements and proposals to enable both parties to achieve an agreeable balance between price, programme and quality ahead of entering into Contract.

The Contractor is totally responsible for undertaking the design work outlined in the Proposals, for fabricating and constructing the building and for co-ordinating the entire process (Design and Build). The Employer may also choose to appoint consultants such as an Architect to monitor the various aspects of the work, but this is not a must as the entire responsibility is that of the Contractor.

Contract Sum Analysis / Price

The price in a JCT Design and Build Contract is provided in the form of the Contract Sum Analysis (CSA) and there is no need for the inclusion of a Bill of Quantities. CSA’s often take a similar format to that of a Bill of Quantities but a CSA can actually appear in any format so long as it allows for variations to be calculated and interim payments to be made.

Roles under JCT Design and Build Contracts

The JCT Design and Build Contract major feature is that under this form of contract there is no independent certification role. Typically, under the Standard Building Contract, this would be played by the Architect or a Contract Administrator who is well placed to settle differences between the parties; however, in Design and Build this role doesn’t exist.

Although this is sometimes seen as a drawback from the traditional methods, it can be a positive opportunity to harness the Contractor’s experience in both Design and Build to the benefit of the project. The integration of ‘designers’ and ‘builders’ typically reaps value engineering and programme benefits as these two stakeholders have a focus to create mutual shared benefit.

When to use JCT Design and Build

The JCT give simple advice about as and when it is appropriate to use the JCT Design and Build form of Contract and it’s always advisable to consider this advice before using any Contract form.

Generally speaking, the JCT Design and Build Contract is better used on lower complexity, lower risk projects and we’ve identified some further project types below:

  • Projects where the Client’s construction experience is lower as in these cases the client can rely on the expertise of the Contractor.
  • Projects where the Client wants cost certainty.
  • Projects where the Client want an early and quick commencement to the work.
  • Projects where the Client wants single point responsibility.
  • Projects where the Requirements are not 100% known and the Client wants increased flexibility to vary the Requirements
Conclusion

The JCT Design and Build Contract has steadily increased in its popularity and usage since its creation and there are few Employers who do not like the Contract format. The Design and Build Contract offers a quality alternative to the Standard Building Contract and its traditional procurement route, particularly given the likelihood of increased cost certainty using this form of Contract.

Intermediate Contracts

Intermediate JCT

The JCT Intermediate Building Contract was drafted for use on projects involving all construction trades where relatively detailed contract provisions are needed, albeit excluding those developments with major complexity in building services for example. Intermediate Building Contracts follow the same procurement route as the Standard Building Contract, in that they are suitable for clients’ procuring using the traditional method.

The Intermediate Contract is less detailed than the Standard Building Contract but more detailed than the Minor Works Building Contract, and therefore, it is suitable for Intermediate complexity level projects.

The simple reality is that the Intermediate Contract is really a cut down version of the JCT Standard Building Contract that is generally used to deliver contracts where the value reaches approximately £1million.

Features of the JCT Intermediate Contract:

  • The features of this form of Contract are more or less the same as the Standard Building Contract in that the Employer first provides drawings, a specification and typically bills of quantities for the Contractor to price.
  • The Contractor provides a price and a payment structure is agreed upon which is usually based on a lump sum price being agreed for the Works with monthly interim payments for cash-flow purposes.
  • With this form of Contract, all Subcontractors are considered domestic and therefore, they’re the absolute responsibility of the Contractor who is required to ensure their performance.

Intermediate Building Contract with Contractor’s design.

Typically, Intermediate Contracts are placed without Contractor’s design. However, in some case it may be appropriate for the Contract to include a small design portion. In this Contract template there is a slight variation on the standard form to enable the Employer to request elements of design to be completed by the Contractor.

For the avoidance of doubt, where the procurement route chosen is Design and Build, the Intermediate Building Contract is not appropriate.

Conclusion

The JCT Intermediate Contract is very useful for medium sized projects with reduced levels of complexity. It’s a good form of Contract where the Employer’s designer (the Architect) is sufficiently experienced to manage and lead the design team and coordinate this process with the management of the builder. One key point to make is that for the Intermediate Contract to work, it’s important that the design is sufficiently complete for it to be a viable solution.

JCT Minor Works Building Contract

Minor Works JCT Contract

The JCT Minor Works Building Contract was drafted for, as it sounds, Minor Works. The term ‘minor works’ is used to define non-complex, relatively straightforward projects without structural alteration works.

The Minor Works Building Contracts are most commonly used for property renovation projects and the general consensus is that they are best used for non-complex works up to a value of £250,000 (or sometimes £500,000).

As with the JCT Standard and Intermediate Contracts, the Minor Works Contract is used when the traditional procurement route is selected. It therefore shares the same characteristics as those two forms of contract, albeit in a simpler, less administratively intensive format.

The Minor Works Building Contract includes the following features:

Features of the JCT Minor Works Building Contract:

  • As with the Intermediate form, the Employer first provides drawings, a specification and typically bills of quantities for the Contractor to price.
  • The Contractor provides a price and a payment structure is thereafter agreed upon which is usually based on a lump sum price being agreed for the Works with monthly interim payments for cash-flow purposes.
  • With this form of Contract, all Subcontractors are considered domestic and therefore, they’re the absolute responsibility of the Contractor who is required to ensure their performance.
  • Administration of this Contract is relatively simple and generally speaking the client’s architect or contract administrator will administer the contract; however it is critical that roles and responsibilities are absolutely clear in this form of Contract.

Conclusion

The JCT Minor Works Building Contract is more straightforward to administer than many other forms of Contract and is therefore a very good Contract for for non-complex, low value projects.

Other standard forms of Minor Works Contract are available from The New Engineering Contract (NEC) suites and also the Federation of Master Builders, but the JCT version remains very popular and more than adequate if administered correctly.

Major Works

JCT Major Works

The JCT Major Project Construction Contract was drafted for bespoke, large-scale construction projects where extensive and complex works are required. This Contract is regularly used by Clients who have a lot of experience in the procurement of major construction works, and likewise, are undertaken by Tier 1 Main Contractors with experience of large, high-risk developments.

The JCT Major Project Construction Contract is actually a Design and Build Contract, under which, as this article already covers, the responsibility for the design and construction works, is that of the Contractor, with the Contractor actually assuming the same level of responsibility as that of the Architect.

As with all Design and Build Contracts, the Major Works Contract includes for the Employer to provide Requirements which are followed by the Contractor’s Proposals. The Contractor can work in several ways:

  • If the Employer has completed minimal design, the Contractor can work on the design from the outset, using its own designers; or,
  • Alternatively, if the Employed has already produced a detailed concept using Architects and Consultants, these Specialists’ may be novated to work for the contractor to develop the detailed design and inspect the construction works as they proceed.

On Major Works, the second scheme is the most commonly used as the Employer often wants to work on concept design in detail with an Architect before the involvement of Contractors for tendering.

As a Design and Build Contract, this standard form contract shares several features with JCT’s existing With Contractor’s Design form: the documentation comprises Contract Conditions; a Pricing Document; Employers Requirements and Contractor’s Proposals.

Once the Contractor is under Contract, the Employer’s design involvement heavily drops and in fact, any design detailed excluded within the Requirements are then to be produced by the Contractor to his proposals. It is for this reason that the Design and Build element of the Major Works contract allows both parties to have cost certainty as the Contractor can build the most economical solution.

Features of the JCT Major Project Construction Contract:

The Major Projects Construction Contract shares many similarities with the JCT Design and Build Contract document; the following are the key features:

  • The Employer will approach a Contractor with a set of requirements defining their expectations and the Contractor will respond with proposals (Contractor’s Proposals).
  • Once under Contract, the Contractor is totally responsible for undertaking the design and fabricating / constructing the building and for co-ordinating the entire process (design and build).
  • Under this form, the Contractor has access to, rather than possession of, the site. This is in the event that the Employer wishes to employ more than one Contractor.
  • The Contractor takes the risk for ground conditions and for the effects of weather on programme.
  • For the reasons noted above there are express provisions that allow the Employer to novate Consultants and Sub-Consultants.
  • Similarly, given the likelihood of detailed up-front design works, the Contract includes express provisions allowing the Employer to name specialist Sub-Contractors and Consultants on the project.
  • An express optional provision obliging the Contractor to take out and maintain

Conclusion

The JCT Major Project Construction Contract was drafted in genuine detail and with the endeavour of removing the need for the standard form to be heavily amended by users. It is believed that it is a comprehensive and well considered document that covers all major risks. Many think it is about as good a standard form document as you can find and therefore, that major amendment is not required.

Final Takeaway Thoughts…

In UK Construction, the JCT is a widely-used form of Building Contract and there’s no doubt, the suite of Contracts used are high quality, well-considered documents that can be used for all types of building project from minor through to major works.

Nonetheless, the JCT suite of Contracts has been criticised for adopting the ‘traditional’ (or ‘master and servant’) form of contracting, wherein money is exchanged in consideration for services rendered.

So, what are the alternatives?

NEC Contracts

NEC Contracts came to the fore in the 1990’s alongside two UK Government Reports being commissioned, first by Sir Michael Latham (Constructing the Team) in 1994, and thereafter by Sir John Egan (Rethinking Construction) in 1998.

Both Reports focused on inefficiencies in construction and sought to find new, progressive and leaner ways of working: one of which being how various contracting stakeholders interact and on which basis.

The NEC suite of Contracts, which rose to prominence following these reports, are therefore philosophically different from the JCT in that they seek to create an ethos around the concept of partnership. The NEC uses a careful choice of terminology and specific collaboration clauses, albeit without being a genuine partnership Contract.

With the JCT suite of documents, less emphasis is placed on the programme than with NEC as there is no obligation to actively update it. With NEC, emphasis is placed on open and honest dialogue through Early Warning Notices and the proactive updating of the project programme to the shared benefit of its parties.

The competing features and approaches of the two suites of Contract often means that their selection is appropriate for a certain type of project. JCT for example is the Contract of choice for the private sector whereas, NEC is all but mandated for public sector projects and is rarely used in the private sector.

The JCT Suite of Contracts were often criticised for being less ‘collaboration’ focused than the NEC but many forget that in 2009 this changed with the JCT introducing collaboration clauses just as the NEC does, obliging the parties to ‘act in a spirit of mutual trust and co­operation’. It also obliges them to ‘act as stated in this contract’.

Regardless of opinion, it is important to remember that The Joint Contracts Tribunal (JCT), is made up of seven members who represent a wide spectrum of interests and experience in UK Construction. The body was and is, in place to produce balanced, standard forms of contract to provide represent a balanced allocation of risk between contracting parties and in its standard form this is exactly what it does.

For Contractors and Subcontractors being asked to sign up to the Standard JCT Terms and Conditions on any project, there should be little to no fear as these Terms and Conditions have long been validated by a representative who understands your position and therefore, are well balanced.

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