Contractor Contracts

An email in from a buddy who has managed quite a few commercial and larger (multi dwelling) building projects:

The only other things to be aware of and concerned by is the type of building contract to be used. The standard form JCT contracts, I believe, are biased towards the contactor, the ACA standard form was written by Architects and is more balanced.

You also need to think about the level of damages for overrun on the contract. This is slightly more complicated than it might appear. One of the most crucial decisions made by the contract administrator is the issue of the Practical Completion Certificate as this signals the contract has been satisfied.

If there is an overrun, as invariably there is, he has to decide who is at fault and you are in the territory of the famed “critical path”, ie if the delay prevents progress on the rest of the build its on the critical path and who ever caused that delay in culpable. The reason these decisions are important, even for one week is there is a swing for every week by approximately twice the level of damages assuming damages are set at a level similar to the “preliminaries” figure. Prelims are the costs to the contractor of being on site, ie his admin costs. So if damages are say £2000 pw and prelims say £1500pw and there is just one week delay caused by the contractor he is £3500 down. You get the picture it can get very prickly.

Good luck, I am sure it will go well, new builds tend to be easier, provided they are well planned, because there are less unknowns. Keep an eye on any unusual materials and/or bespoke items that have long delivery lead in times and/or are coming from none standard sources as these can be the source of serious delays.

Project Management

A nice article by Charlie Laing on Project Management at:

http://charlielaing.wordpress.com/2012/08/18/controlling-your-building-costs-through-robust-contracting-techniques/

They talk about a  Joint Contracts Tribunal (JCT) contract between builder(s) and client. Going through it and both signing it, so that there is a pre established way to control the work and exchange of money that is fair to all.

For changes during the project, their advice is that:

  • contract changes can only be made by the project manager / contract administrator (which should not be the client).
  • the builder should quote for the changes
  • the contract manager uses this to get client approval. If given, passes this on to the builder.

As I’ve read elsewhere, informal approval changes from the client is the most common area for problems when the consequent bill for this arrives.

A Joint Contracts Tribunal (JCT) contract, brings with it an agreed adjudication / arbitration route, but in most cases, a common sense, sit down and come to an agreement solution is best. Here the contract manager can mediate.

For this, Charlie Laing have some suggested questions to cover the conversation over what is being claimed. Is / was it:

  • described within the contract?
  • described as a revision to the contract and the contract sum?
    – if yes, was it requested, quoted for and approved?
  • related to completed work? Is there any evidence that it has been done?
  • related to work that the contractor had to redo through no fault of his own?
  • requested directly by the client?
  • raised by the contractor to the client directly as an option that they may choose?
  • clearly confirmed by the contractor to the client as being at extra cost?
  • carried out with an element of risk by the contractor through not following procedure?
  • in line with market rates for materials and labour time used
  • related to the actual labour time used

In light of the answers to the above, is full payment of the claim considered fair and reasonable?

This all re-enforces the idea I’ve read elsewhere abut keeping a site / project diary. ie keeping your own notes and other records.