Blogs
During the winter of 2016, the Joint Contracts Tribunal (JCT) launched its new suite of building contracts with the publication of its revised Minor Works family. This included building contracts with and without contractor design responsibility and a form of sub-contract (with provision for sub-contractor design). This constituted the first three agreements in the JCT’s new 2016 edition. The remaining JCT contracts were updated during the first half of 2017 (though still labelled 2016). It is, therefore, nearly a year since the full suite of JCT 2016 contracts were rolled out.
It has been common for updated JCT forms to take a little time to filter through into every-day use. The traditional trigger for widespread uptake is the removal from publication of the old forms, which happened to the old 2011 versions at the end of April this year. For those involved in the construction industry who have been clinging on to the 2011 forms, unless you are hoarding a stock of the old versions, it is time to update your standard schedules of amendments for contracts and sub-contracts and move on to the new forms.
This first note in a series is a quick reminder of some of the key changes to the forms. We will publish further blogs in the coming weeks covering the changes to the payment and insurance provisions in more detail.
The main features of the 2016 editions were to simplify the payment processes, to incorporate the JCT Public Sector Supplement 2011 that relates to Fair Payment, transparency and BIM, to include the CDM Regulations amendments and to generally improve functionality and user-friendliness.
Remember, the 2016 updates are further reforms to the 2005 versions rather than large scale re-drafts, so they do not include changes to the overall allocation of risks and obligations but there are a number of key changes that users should be aware of.
The Key Changes
Payment Provisions
Arguably, the most significant changes have been made to the payment terms and these are likely to have the biggest impact. The intention is to reflect the government’s fair payment charter, to simplify and consolidate some of the drafting. The changes are also intended to speed up the payment process throughout the contractual chain so that all levels of the chain from the main contractor down to sub-contractors and sub-sub-contractors are paid within the same 30-day period.
To reflect the fair payment principles, changes have been made to the interim payment due dates. This includes the introduction of a common interim valuation date that applies throughout the contract chain with the intent that all valuations are assessed and processed against the same period. Also, the payment period is now co-ordinated in the head contract and sub-contracts so that there is sufficient time to process the applications and payments downstream to sub and sub-sub-contractors.
A new procedure has been added for the prompt assessment of claims for loss and expense. This differs from the previous contract because it includes prescriptive time periods for submitting and reviewing information for both parties. For example, notification of the event is “to be accompanied, or as soon as reasonably practicable followed, by the Contractors initial assessment of the loss and expense incurred and…. likely to be incurred”. The Contractor is also to provide monthly updates. From the Employer’s perspective, its initial ascertainment is to be notified within 28 days, with further notifications issued within 14 days from any updates.
We will cover the payment provision changes in more detail in a future blog.
CDM Regulations
JCT 2016 now fully integrates JCT Amendment No. 1 which was issued in 2015 into the contract, to take account of the update to the CDM Regulations in 2015.
Building Information Modelling
One of the changes has been the incorporation of the JCT Public Sector Supplement 2011 that relates to fair payment, transparency and Building Information Modelling.
The parties can now specify a BIM Protocol to be adopted in the Employer’s Requirements. That protocol is a Contract Document and so the Contractor is obliged to comply with it but the protocol will not override the conditions of the contract.
Security
For the first time the JCT contracts include provisions allowing for the Contractor to provide a performance bond and /or a parent company guarantee although there are no forms provided and there are no sanctions for a failure to comply.
Collateral Warranties/Third Party Rights
The old form dealt with collateral warranties and/or third party rights from the Contractor, but only collateral warranties from sub-contractors. This has now been extended so that sub-contractors may be required to provide third party rights.
These were previously dealt with in Part 2 of the Contract Particulars but they are now in clause 7.4 of the Rights Particulars, which is a separate document. The Rights Particulars document details the rights required from the Contractor and sub-contractors and the beneficiaries of those rights. If the Rights Particulars fail to specify the method of the rights i.e. whether it is by a collateral warranty or third party rights, the party giving them can elect what it provides.
The JCT already publishes model forms of warranty and the third party rights provisions have now been amended to include a net contribution clause and the same clause is no longer optional in the collateral warranty. Where the JCT documents are to be used, special care needs to be taken because of the specific wording of these clauses.
Insurance
There are widespread amendments to the insurance provisions but they are generally not substantive. A key change is to include a further Option C relating to insurance for existing structures where the parties can put in place bespoke arrangements in circumstances where the standard Option C is not appropriate through the use of a replacement schedule. This saves the parties from having to make extensive amendments to the terms.
The insurance changes will also be covered in more detail in a future blog.
So far, the construction industry has seemed disinclined to use the 2016 forms because the 2011 forms are regarded as sufficient. Another reason for the slow take up may have been the lack of guidance on the key changes. However, now that the publication of the 2011 forms has ceased and the JCT has issued the full suite of contracts along with guidance notes, it is time to adopt the 2016 forms and to take advantage of some of the new provisions. For those looking to do so, care will need to be taken when updating any schedules of amendments and drafting any sub-contracts to ensure that they sit back to back with the new forms.
We are supportive of the introduction of the fair payment provisions throughout the supply chain but, there have been many changes to the payment provisions in construction contracts in recent times. As can be seen from the recent rise of ‘smash and grab’ adjudications, many are still not fully up to speed on the current provisions. The JCT have introduced further changes to the payment provisions which will apply to all levels of the supply chain and this may prove difficult to keep on top of. Anyone that is moving to the new forms needs to ensure that they, and their project teams, are fully aware of their obligations set out in the revised payment provisions. The risks from a failure to comply are well known across the industry.
Our solicitors at Myerson are well versed in drafting schedules of amendments, JCT contracts and sub-contracts and can provide in depth training to your teams on the new payment regime should you require any assistance. If you would like to speak to one of our expert construction solicitors, please contact us on 0161 941 4000 or email lawyers@myerson.co.uk