London: for a visual representation of JCTs

contribution to the UK construction industry, no

other city houses the range of iconic projects
built on JCT contracts like the capital. In recent
years it seems the London skyline has been
expanding to the tune of a JCT contract at its
foundation. Both the Gherkin and more recently
Heron Tower are examp|es of the O|ty fex|ng |ts
muscles with JCT at the core.
Now, a new glass giant casts a long, sharp
shadow over its City neighbours: with the
completion of The Shard, it is not just
London, but Europe that sees the most
iconic building constructed on a JCT
contract to date.
In a climate where stories are currently centred
on constructions decreasing output, the loss
of jobs and bus|nesses, The Shard |s a defant
splinter. The Shard is a story of bombast,
of innovation, of going against the current
economic grain to make a cultural statement.
Those who saw the recent Channel 4
documentary The Tallest Tower, documenting
the construction process, know that many of
the approaches taken to deliver this landmark
were unprecedented for a UK project.
Building a 1016ft (310m) tower comprising
900,000sq ft of space between Guys Hospital
and London Bridge station is a daunting,
costly and logistically sophisticated task,
yet main contractors Mace employed some
exceptional techniques to complete this
complex build in just four years. One example
is the UKs largest ever continuous concrete
pour 32 hours in total, during which 5,500
cubic meters (about 750 lorry loads) of
concrete was poured to allow the top-down
JULY 2012
JCTNEWS
THE JCT CONTRACTS UPDATE FOR THE CONSTRUCTION PROFESSIONAL
SWEET & MAXWELL
3 4 5 6 8 10
JCTs Essay
Competition provides
boost to industry
with support and
opportunities for
construction students
JCT Contracts
Discovery the new
education module
from JCT improves
the understanding of
contracts for future
professionals
Using the Standard
Building Contract to
manage performance
Shona Frame, Partner
MacRoberts LLP
Ground conditions and
JCT contracts
Jane Fender-Allison -
Dundas & Wilson
The Bribery Act and
Contractual Anti-
Corruption Provisions
Neil McInnes, Senior
Associate, Barrister -
Pinsent Masons LLP
Chairmans Letter
Government trials the
JCT - Constructing
Excellence Contract
THE SHARD EUROPES TALLEST
BUILDING COMBINES INNOVATION,
DARING AND JCT CONTRACT EXPERTISE
>> Continues on page 2
The Shard
JULY 2012
JCTNEWS
construction method (whereby work on
the foundations and core can progress in
parallel) to continue. A big pour on most
projects would be around 150-200 cubic
meters. Mace did this every hour.
As development of the core progressed,
a hydraulic jump lift was used to transport
mater|a|s to the |ncreas|ng|y d|ffcu|t h|gh
working points. The lifts were capable
of moving three metres per second as
opposed to the half-a-metre per second
speed of using traditional hoists, meaning
a lot of time could be saved.
Perhaps most remarkably, the decision to
set a 'foat|ng` crane on top of the core
rather than inside it allowed structural
work to continue no matter the rate of
growth. This was only the second time
that such a technique had been employed
on a project anywhere.
Topping Europes tallest building has to
be done in style. The Shards striking
feature, its broken glass spire comprises
1300 pieces of glass and 500 tonnes of
steel, which had to be prefabricated and
winched into place piece-by-piece using
Europes largest tower crane, often during
challenging weather conditions.
The success of The Shard in terms of the
level of innovation, design and work by the
parties involved can now be clearly seen.
However, it seems incredible to think how
close this project came to not getting off
the ground at all.
Originally let on a bespoke construction
management contract, works packages
for The Shard were a|most fna||sed
and let, when the recession caused the
funding for the project to be pulled. With
orders already placed, the outlook was
bleak for the client, with the contractor on
the verge of backing away. Private funding
from Qatar ultimately saved The Shard
project but the operation would have to
be rethought, under a fxed-pr|ce scheme
with a new contract.
The contract that the parties chose was a
JCT Standard Building Contract Without
Quantities, with Contractors Designed
Port|on (spec|fca||y SBO 2005 rev|s|on 1
2007). With enough uncertainty around
the project already, and with a lengthy
renegotiation having to take place, JCT
seemed the natural choice. JCT contracts
are well known, familiar and risks can be
apportioned fairly.
Given the experience of the contractor on
projects of this size and the experience of
the client, the comprehensiveness of SBC
was a key requirement. From Maces point
of view, it was the best choice because
the contract required needed to have
a strong background, a proven history
and one that could provide key default
positions. It was also the most appropriate
form for allocating the risks outlined in the
project between the parties.
An added beneft was a|so the fex|b|||ty of
SBC. The client had already gone a long
way with the design team, and using the
contract with a Contractors Designed
Portion meant that certain elements
could be handed over to the contractor
for completion, with the client still able to
retain overall control of the design.
It is perhaps testament to the position
of JCTs contracts within the industry
that even for a project so contemporary,
innovative and complex, JCT, and in
particular the Standard Building Contract,
remains the go-to form. It adapts with
the changing needs of the industry, yet
its balance, background and proven
history make it an excellent choice for
when daring and innovation needs a solid
foundation.
2
SWEET & MAXWELL
>>
The JCT Sustainability Lifecycle Consultation closed in April. Responses are currently being
considered by the JCT Sustainability Working Group. We would like to thank those who
participated in the consultation.
JCT SUSTAINABILITY LIFECYCLE CONSULTATION
The Shard, London Bridge
Chairmans
Letter
3
In the April 2012 edition of JCT News an article by Peter
Barnes and Nigel Davies looked at partnering as a means
to procure construction work more effectively. They also
outlined the use of the JCT - Constructing Excellence
Contract (JCT-CE), its key features and why they believe
it achieves the greatest success of the various forms of
partnering contracts that are available. It is, they suggest,
more effective in respect of integration and alignment of
partnering team members.
What constitutes a partnering contract has always been
subject of debate and many years ago JCT went to
some lengths to clarify what was being sought by the
construction industry and its clients. The traditional
approach to contracts was seen by some, especially
some w|th|n centra| government, as fawed and a|though
the concept of partnering had not been wholly embraced
it was right to explore the use of a different model. This
resulted in the 2001 publication of Practice Note No. 4
(series 2) on partnering. Following further consultation,
in 2006 JCT in conjunction with Constructing Excellence
introduced JCT-CE to meet a developing desire,
especially in the public sector, for an alternative means
of procuring construction work. The public sector sought
a relationship that was fair, dealt with risk in a more
overt way and reduced costs: these objectives were, it
believed, achievable through a partnering relationship.
The frst pub||cat|on of JOT-OE was, and the recent|y
pub||shed 2011 ed|t|on rema|ns, a refned contract that
offers great potential to those who seek to collaborate
in achieving the common objective of a successful
project outcome. It was subsequently shown to satisfy
all the requirements of the OGCs Achieving Excellence
in Construction
[1]
. An increasing number of public sector
clients have recognised the potential of partnering but
government continues its search for more effective
procurement and the means to increase savings beyond
those already claimed.
ln February th|s year, the Oab|net Offce |ssued a paper
Government Construction Construction Trial Projects
which sets out three new procurement models
[2]
,
namely Cost-Led, Integrated Project Insurance and
Two Stage Open Book which it wanted to trial using
what |t cons|dered the best ft standard contract form.
JCT is pleased that government has chosen JCT-CE
for use on a number of the trial projects. JCT-CE is
being trialed on the Two Stage Open Book procurement
approach, notwithstanding that the Contract Form
Working Party appointed by the Procurement/Lean Client
Task Group (PLCTG) recommended that it should be
used on the Cost-Led approach
[3]
. Such deliberation is
understandab|e as JOT-OE has an |n-bu||t fex|b|||ty to
enable its use in either situation. It can be used with a
|ump sum or cost re|mbursement approach. The fex|b|||ty
that JCT-CE offers is important as users views on each
of these approaches are not constant. Although JCT-CE
offers such fex|b|||ty the P|OTG was aga|nst mandat|ng a
single form of contract for all of its projects.
The outcome of any project trial is dependent upon a
range of factors, not least the experience of the process
adopted and the skill of those involved. Nevertheless, it
is right to carry out trials to investigate the operation of
var|ous procurement approaches. l am confdent that
JCT-CE through its promotion of early and extensive
engagement with the supply chain either in conjunction
with a framework agreement or stand-alone can drive
innovation, identify waste, deal appropriately with risk and
|mportant|y de||ver |ncreas|ng cost benefts. The veh|c|e
Operator and Serv|ces Agency (vOSA} found th|s to be
case and won the integration and collaborative working
award at the National Constructing Excellence Awards
when using JCT-CE under a framework contract for
its new build and refurbishment work on its operating
centres
[4]
. The contract is also used by the Historic Royal
Palaces for its building conservation and improvement
programme
[5]
and provides further proof of the contracts
great fex|b|||ty |n terms of accommodat|ng d|fferent types
of project.
The JCT-CE contract and the JCTs Pre-Construction
Services Agreements for use in conjunction with JCTs
ma|n contract forms prov|de s|gn|fcant opportun|t|es to
explore non-traditional approaches to procurement. Used
as intended either of these approaches can provide a
better end product on time and deliver major savings.
Peter Hibberd
Chairman of JCT
Peter Hibberd
GOVERNMENT TRIALS THE JCT - CONSTRUCTING
EXCELLENCE CONTRACT
[1]
Partner|ng Oontract Rev|ew, September 2008 by Arup Project Management for the Offce of Government Oommerce
[2]
The Interim Report of the Procurement/Lean Client Task Group January 2012 report acknowledges the procurement models
are an evolution of existing practice rather than a radical departure page 2
[3]
Interim Report of the Procurement/Lean Client Task Group January 2012 page 45
[4]
Reported in JCT News April 2009 (www.jctltd.co.uk/vosa-bristol.aspx)
[5]
Reported in JCT News April 2009 (www.jctltd.co.uk/Hampton-court-surrey.aspx)
JULY 2012
JCTNEWS
4
SWEET & MAXWELL
JCTS ESSAY COMPETITION PROVIDES BOOST TO
INDUSTRY WITH SUPPORT AND OPPORTUNITIES
FOR CONSTRUCTION STUDENTS
Education remains a major focus for JCT
this year. Having launched our Education
and Training Initiative formally last year
with the JCT Academic Box set, we have
continued to provide education resources
and opportunities throughout 2012.
In addition to the announcement of JCT
Contracts Discovery, our new education
module, another key activity was the JCT
Student Essay Competition, which ran
from January to the beginning of June.
The competition was set up to provide
opportunities for students studying on
construction courses, as well as increase
the level of understanding of construction
contracts throughout the education
system.
An important overall objective of JCTs
Education and Training Initiative is
to improve the understanding of the
contract process throughout the supply
chain, therefore it was important to
encourage entries from as diverse a
range of backgrounds as possible.
The competition was open to any
student studying a degree, professional
qua||fcat|on, vocat|ona| course, trade
apprenticeship or any other construction-
related study programme.
Peter Hibberd, JCT chair and chair of the
competition judging panel, explained the
background to the competition:
We wanted to do something to help
improve awareness of procurement and
contracts in the industry, and appreciation
of the impact that actions, or inaction,
can have upon the supply chain.
If we can begin to increase
understanding through our education and
training initiative, perhaps we can help
reduce the number of future problems
and disputes, and assist in making the
||d0s||, wo|| mo|e e//c|e|||,.
The task for the competition was to
produce an essay of no more than
2500 words on one of the following
topics: A vision of the future for
construction or The future of
construction management in the
digital age`. The frst top|c was set up to
be deliberately broad, although students
could choose to comment on the whole
industry, or one particular element (e.g.
training or sustainability) within the
context of the overall question. The
second topic is more contract focused,
|ook|ng spec|fca||y at the management
of construction contracts and their
administration in the digital age.
With the wide implication of the
competition beyond its primary
education remit, JCT has assembled a
representative judging panel of experts
from the education, law, training and skills
and media sectors. The panel includes:
Dr Ann Heywood, Principal of the
College of Estate Management
Mark Farrar, Chief Executive of CITB-
Construction Skills
Tony Bingham, Barrister and Arbitrator
at 3 Paper Buildings, Temple and legal
columnist for Building magazine
Rebecca Evans, Editor of
Construction News
Peter Hibberd, JCT Chair
Tony Bingham further emphasised
the importance of the competition in
promoting contracts throughout the
supply chain:
Encouraging better understanding
of contracts down the supply chain is
commendable. Many disputes arise at
trade level, and a better understanding,
especially of the consequences of
actions, could help reduce the number
of problems and disputes on projects,
which cumulatively, could help make the
industry run more smoothly, and do me
o0| o/ a |oo.
The judging process has involved some
careful consideration of the entries with
judges particularly looking for originality,
imagination, creative writing skills, clarity
of thought. Other factors that the judges
considered in the essays are their shape
and structure, the ability of the author to
keep to the point and demonstration of
care and effort.
It is JCTs aim that the competition
prov|des a s|gn|fcant boost for
construction students, and accordingly
the prizes available for winners provide
both further development opportunities as
we|| as fnanc|a| support. JOT |s prov|d|ng
1,000 prizes for winning entries, with
prizes of 250 available for runners-up. In
addition, in collaboration with the College
of Estate Management, a special overall
winner prize will be on offer. The entry
that the judges believe to be the best will
be awarded a 1,000 a year scholarship
by the College of Estate Management to
study one of their construction courses.
The value of this prize would be 4,000
for one of their full Bachelors degree
programmes. This one-off overall award
complements the existing prizes on offer,
meaning the overall winner could be
taking home a prize worth 5,000.
Ann Heywood, competition judge
and CEM Principal explained CEMs
involvement in the prize fund:
As a key supporter of JCTs Student
Essay Competition, we felt that CEM
was uniquely placed to provide an
additional opportunity for a student in
the form of this scholarship prize. It is in
the interest of the whole construction
industry to improve the knowledge and
skills of its students. By working with JCT
on a number of projects we are taking
proactive steps to ensure that in future
our industry continues to maintain the
|||es| s|a|da|ds.
A special prize-giving ceremony will be
taking place as part of JCTs annual
Construction Industry Parliamentary
Reception on 12th July. The winners
and an extract of the winning essay will
be published in the October edition of
JCT News.
5
JCT has launched JCT Contracts
Discovery, an education and learning
modu|e a|med spec|fca||y at educat|on and
training providers, independent tutors and
in-house training teams to help students
gain a comprehensive understanding of
JCT contracts and contractual procedures.
Th|s |s the frst t|me that JOT has created
a product spec|fca||y for the educat|on
market, but as part of JCTs wider
Education and Training Initiative we
recognise the importance of ensuring that
students coming through construction-
related higher education courses have
the best possible grounding in the role
contracts play across the construction
industry.
Delivered in hard copy and as an online
distance learning package, the module
|s des|gned to be as fex|b|e as poss|b|e,
meeting a variety of teaching and learning
requirements. It can be used as a stand-
alone module on JCT contracts or it can
be incorporated into the existing structure
of a construction contracts and contractual
procedures course.
JCT Contracts Discovery supplements a
students knowledge of JCT contracts and
helps to explain their use in context. It can
be used a|ongs|de the study of spec|fc
contract documents offering a richer
understanding of a particular document.
The module is organised so that
each section covers a key area of the
construction contract process impacted by
JCTs range of documents.
JCT Contracts Discovery:
Explains the major elements of the JCT
suite of contracts
Goes through how JCT contracts are
set up and implemented
Looks at the various roles of individuals
including contractors, employers, sub-
contractors and contract administrators
within the contract process
Discusses how JCT provisions deal
with administrative matters, such as
payment, control of the works, and
control of time
JCT Contracts Discovery is now
available to purchase for incorporation
into course materials for September.
The module is available through JCTs
publishers Sweet and Maxwell. For more
information, please contact
suzanna.wong@thomsonreuters.com
Dr Ann Heywood is principal of the College of Estate Management, the leading distance learning provider for the property
and construction sector, with 4000 students in 100 countries, worldwide. She was previously in private practice and was
elected Green Surveyor of the Year by the RICS in 1998 for her work in balancing the competing environmental, land use
and fnanc|a| needs of |and portfo||os.
Rebecca Evans joined Construction News in 2010, becoming editor in September 2011. Prior to joining CN, Rebecca had
been a journalist for a series of public sector-focused trade magazines, including positions as deputy editor of Health Service
Journal and Nursing Times, and news editor of Local Government Chronicle and Inside Housing.
Mark Farrar took over as chief executive of CITB-ConstructionSkills, the Sector Skills Council and Industry Training Board
responsible for the UK construction industry, in 2008. Mark is a trustee of the Buildings Research Establishment (BRE), a
member of the Skills Funding Agency (SFA) advisory board and sits on the board of the Alliance of Sector Skills Councils. He
is also a member of the Skills Sub Group to the Green Construction Board and has previously held positions on the board
of Women into Science, Engineering and Construction (WISE) and the Institute of Chartered Accountants Public Sector
Advisory Panel.
Tony Bingham is a barrister and arbitrator at 3 Paper Buildings Temple, and is best-known as the legal columnist for
Building magazine, which he has done for the last 25 years, and for his role in the Channel 4 series Dont blame the builder.
He was called to the Bar in 1992, completing his pupillage at 3 Paper Buildings, Temple, London, subsequently becoming
a full member of chambers, where he has been ever since. He is a visiting lecturer at Reading University, College of Estate
Management, and since 1996, he has been training new adjudicators for the CIoA and the Chartered Institute of Building.
Peter Hibberd is chairman of JCT. He is a fellow of the Royal Institution of Chartered Surveyors (RICS) and has a masters
degree from UMIST (now University of Manchester) on building contract. He has extensive experience of the construction
industry having worked both as a partner in private practice and as a director of a development/construction company. He
became professor of construction procurement at the Polytechnic of Wales (now University of Glamorgan) in 1989 and later
secretary general of JCT. He is currently a visiting professor at the University of Salford.
Judging Panel
JCT CONTRACTS DISCOVERY THE NEW EDUCATION MODULE
FROM JCT IMPROVES THE UNDERSTANDING OF CONTRACTS FOR
FUTURE PROFESSIONALS
JULY 2012
JCTNEWS
6
SWEET & MAXWELL
Management of performance is a crucial
element in the success of a building
project. For the purposes of this article,
performance |s be|ng defned as hav|ng
four elements namely quality, budget,
programme and dispute management.
Quality
In relation to quality, the starting point
is clause 2.1 of the Standard Building
Contract which requires the Contractor
to carry out the works in a proper and
workmanlike manner and in compliance
with the Contract Documents.
The Contract Documents are the key
p|ace for the qua||ty and spec|fcat|on
of the works to be defned. Any |ater
alterations to quality requirements are likely
to trigger variations and the cost and time
consequences of these.
Subcontractors, particularly specialists,
can be an important element in delivery
of a project. Clause 3.7 provides that
the Contractor shall not, without the
Architects consent, subcontract any part
of the works or the design. Where the
Employer wishes to retain more control
over the supply chain, the JCT Named
Specialist Update (February 2012) allows
the Employer to name individual specialists
as domest|c subcontractors for |dent|fed
parts of the work.
A further important aspect of quality is
the materials used. Clause 2.3 contains
provisions linking the quality of materials
back to the kinds and standards
described in the Contract Documents.
The Contractor can be obliged to provide
reasonable proof that materials and goods
are in compliance (clause 2.3.4).
The contract allows for the Architects
inspections of the works to include not
just on site but also off site works, for
example where off site fabrication is being
carried out. Clause 3.1 contains provisions
requiring the Architect to be given access
for such inspections.
The Employer also has the option of
appointing an Employers Representative
(clause 3.3) and a Clerk of Works (clause
3.4) whose duty is to act as an inspector
on behalf of the Employer.
Where there is a Contractors Designed
Portion, the Design Submission Procedure
within Schedule 1 applies. The Architect
has an important role in commenting on
any design documents submitted. The
timescales for doing so are strict and need
to be adhered to otherwise documents
are deemed to have A status. A status
means they are in accordance with the
contract and the Contractor is to carry
out the works in accordance with the
documents.
Budget
In relation to budget, one key aspect in
obtaining certainty is to ensure that the
quality and quantity of work required
is accurately described in the Contract
Documents to give bidding contractors the
opportunity to put forward accurate prices.
Clause 4.1 makes clear that it is the
quality and quantity of work set out in the
Contract Bills and any CDP documents
which is included in the Contract Sum. If
these do not |n fact refect the Emp|oyer`s
intentions or wishes then it is likely that
variations will result which is where control
can start to be lost in terms of managing
the budget.
As the work proceeds, the key
management objective in monitoring
spend is to ensure that interim payments
are at the correct level. Clause 4.16 sets
out details of how to calculate the gross
valuation which includes work properly
executed by the Contractor and payment
for site materials as long as they are
adequately protected against weather
and are not on the works prematurely.
Clearly some monitoring is required to
ensure that work be|ng cert|fed has |n
fact been properly executed and also that
the provisions relating to site materials
have been followed. This is particularly
important in challenging economic times
where there is a higher than normal
insolvency risk. This risk increases if there
are any overpayments or where materials
are on s|te premature|y and not fxed to the
works so that retention of title claims may
be mounted by unpaid suppliers.
var|at|ons are somet|mes |nev|tab|e but,
again the Standard Building Contract
provides mechanisms to create certainty
as to their effect. Clause 5.3 allows the
Architect to require the Contractor to
prov|de a var|at|on Ouotat|on. Schedu|e
2 sets out details of what the quotation is
to include: the adjustment to the contract
sum including any loss and expense,
any adjustment to the time required for
completion, the cost of preparing the
quote and additional resources. In other
words |t seeks to fush out a|| |mpacts of
the variation on the works. This allows
the Architect and Employer to make an
informed decision as to whether or not to
proceed with the varied works.
Where the Supplemental Provisions
in Schedule 8 apply, paragraph 3
encourages the Contractor to propose
changes to des|gns and spec|fcat|ons
wh|ch may beneft the Emp|oyer e|ther
in the form of a reduction in cost of
the works or life cycle cost. Where the
Employer wishes to proceed with any
such proposals, the parties negotiate to
agree a va|ue of fnanc|a| beneft and any
adjustment to the contract Completion
Date. Again the mechanism, if operated,
allows certainty as to cost savings which
may be achieved.
A clear area to avoid in attempting to
achieve cost certainty is the occurrence of
Relevant Matters, where this is possible.
The Relevant Matters listed in clause 4.24
do include matters within the control of
the Emp|oyer/Arch|tect. var|at|ons are an
obvious one. Others include instructions
postponing work, opening up to inspect
work (could it have been inspected prior
to being hidden?), instructions to deal
with discrepancies in information and
any impediment, prevention or default by
the Employer or those responsible to the
Employer. These trigger loss and expense
which, again, can lead to a loss of control
in the cost of the project.
Where necessary, the contract allows
deduction mechanisms including pay
less notices and liquidated damages in
the event of delay. Again, key tools in
management of cost.
USING THE STANDARD BUILDING CONTRACT TO
MANAGE PERFORMANCE
SHONA FRAME, PARTNER MACROBERTS LLP
7
Programme
Moving onto programme, the starting
point is likely to be the decision on
whether to have one Completion Date
or whether Sectional Completion of
the works is desirable. The Contract
Particulars require an election to be
made where there is to be Sectional
Completion and the appropriate
|nformat|on to be f||ed |n.
Following on from that is the
Contractors master programme. Clause
2.9.1.2 provides that the Contractor is
to provide a master programme. The
contract particulars allow the Employer
to insist on this showing the critical
paths through the project. This could be
important information in considering in
advance the impact of any variations to
the works, particularly if these are made
to critical activities. It should also allow
for pre-planning of information supply.
On that point, clause 2.11 requires the
Architect to ensure that the information
referred to in the Information Release
Schedule (IRS) is released at the time
stated in that schedule. Late information
is a frequent complaint by Contractors
and can clearly adversely affect
progress. Use of the IRS along with the
master programme should allow key
pieces of information to be provided on
time and to prevent delay occurring.
As the works proceed, it may be that
further |nformat|on |s |dent|fed as be|ng
required and this is provided for within
clause 2.12. This obliges the Architect
to provide the Contractor with further
drawings or details as necessary to
allow the works to be completed in
accordance with the contract and for this
information to be provided at the time
reasonably required by the Contractor
with regard to progress of the works.
Again, variations can sometimes be
inevitable but the clause 5.3 provision
for a var|at|on Ouotat|on as referred to
above should prevent surprises relating
to the time implications of any proposed
variation. In addition to this, there is an
option contained within Schedule 2 for an
Acceleration Quotation to be requested
if the Employer wishes to investigate
the possibility of early completion. There
are clear cost implications but in certain
circumstances it may be an appropriate
way to proceed. In general, the quotation
procedure is a route to greater certainty.
Where there are delays, an important
feature of management of performance
is to be aware of these so as to enable
appropriate steps to be taken where
possible. Clause 2.27 requires the
Contractor to give notice as soon as
it becomes reasonably apparent that
progress of the works or any section is
being delayed or is likely to be delayed.
This notice is required whether or not
the delaying event is a Relevant Event.
The Contractor is then required to give
particulars of the effects of the event on
completion and to update the Architect
with any material change in this estimate.
Again this is an important management
tool, not just to trigger entitlement to
extension of time but to act as an early
warning system and allow consideration
to be given of omission of work,
acceleration or other measures where
completion on programme is critical.
The Contractors role in this is not to
be underestimated and clause 2.28.6
provides that the Contractor is to
constantly use best endeavours to
prevent delay, however caused. Further,
the Contractor is to do all that may
reasonably be required to the satisfaction
of the Architect to proceed with the
works. This may require a dialogue to
agree actions.
As with budget, a key consideration in
attempting to keep to programme is to
avoid, where possible, Relevant Events
(as defned |n c|ause 2.29} from occurr|ng
where this is within the control of the
Employer and/or Architect.
Dispute Management
Some projects inevitably do end up with
disputes arising. However a key part of
performance is in how these disputes are
managed and, if possible, prevented from
escalating.
The ground rules in terms of
expectations of approach of the parties
is the Supplemental Provisions in
Schedule 8 which provide for parties
to work together in a cooperative and
collaborative manner. Where there is
such collaborative working, dispute
avoidance can be achieved. That is all
very well in theory but sometimes is not
suffc|ent.
The Supplemental Provisions also
contain an escalating dispute resolution
procedure within paragraph 6 where, with
a view to avoidance or early resolution
of disputes or differences, parties are to
notify each other of these promptly.
This applies not just to items in dispute
but also to items likely to give rise to a
dispute. Thereafter, senior executives
are to meet as soon as practicable to
negotiate to resolve the matter.
Where that does not achieve a
resolution, a further step, in appropriate
circumstances, would be the provision
in clause 9.1 for parties to give serious
consideration to any request to refer a
matter to Mediation, a form of negotiated
resolution where the control of the
outcome is retained within the hands of
the parties as opposed to being put in
the hands of a third party.
Where third party resolution is
necessary, the contract of course
contains provisions for Adjudication in
clause 9.2 and then an option between
Arbitration in clauses 9.3 9.5 and
Court in clause 9.6.
Parties are often reluctant to consider
resolution of disputes at the stage of
entering into contracts but it should be
borne in mind that the default position
in the Standard Building Contract is
that disputes will be referred to Court. If
parties wish Arbitration to be the method
of dispute resolution then they require
to opt in to this option at the time of
entering into the contract. There are pros
and cons to both Arbitration and Court
but the key is to give this some thought
and choose the one considered to be
most appropriate to the case and which
will provide the most effective forum for
the disputes which are likely to arise from
the spec|fc project.
It is clear from the above that the
standard form contains numerous
provisions allowing management of the
many aspects of performance at pre-
contract stage, as the works proceed
and beyond. It could be that proactive
management early on in a project by
implementing some of these measures
could help prevent disputes arising at the
latter stages.
Shona Frame is a Partner at MacRoberts
LLP. She has dual accreditation by the
Law Society of Scotland as a Specialist in
Construction Law and in Arbitration Law.
She can be contacted on shona.frame@
macroberts.com
JULY 2012
JCTNEWS
8
SWEET & MAXWELL
No one needs to be reminded of the
potentially enormous consequences of
unforeseen ground conditions. Time,
money and health and safety implications
make this a serious issue which needs
careful consideration. This article looks
frst|y at the |ega| pos|t|on as to a||ocat|on
of risk for ground conditions and secondly
at JCTs approach.
Starting Principles
Most contracts expressly require the
contractor to carry out and complete
the works, or will have an implied term
to that effect. Some contracts provide a
get out such as under ICC 2011 where
the contractor is obliged to complete
the works save in so far as it is legally
or physically impossible. But failing a
similar clause the contractor is signing up
to carrying out works, to his own design
or the employers design depending on
the contract, and he is under a duty to
complete those works regardless of the
d|ffcu|t|es |n do|ng so un|ess frustrated.
What happens when unexpected ground
conditions are encountered along the
way? The starting point is that in the
absence of contractual provisions
the common law position is that the
contractor bears the risk of unforeseen
ground conditions i.e. the contractor will
be responsible for the time and money
consequences wh|ch fow from those
ground conditions. Long established
case |aw confrms that the ob||gat|on
to complete includes anything which is
indispensably necessary to complete
the works e.g. dealing with unforeseen
ground conditions. This will not, where the
contract is silent, constitute a ground for
extra payment, unless dealing with such
ground conditions inevitably requires a
change or variation to the works.
What about where the employer provides
ground investigation reports and site data
as part of the tender process? Has the
employer assumed the risk of accuracy
of this information and is the contractor
off the hook? The starting point as
always is to look at the contract. This will
determine if the relevant information is part
of the contract. Unless the information is
expressly stated to be part of the contract,
it will not be. One example of this was a
case where there were references to a
site survey report in contract drawings
and an item in the Bill of Quantities, but
the report was not listed as a contract
document itself. It was held the report
was not incorporated into the contract
[1]
.
If information is not part of the contract
the contractor is effectively using it at its
own risk, unless it can make out a case
for some sort of misrepresentation, which
genera||y speak|ng |s d|ffcu|t.
If on the other hand the information in
question is expressly included as part
of the contract, this may amount to a
warranty from the employer, entitling the
contractor to rely on that information. One
example is a case where a contractor
used borehole data provided in a tender
about the soil conditions on site, to design
building foundations. Another type of
ground material was later found to be
present which necessitated additional
excavation works and re-designing of the
foundations. The court found there was an
implied term or warranty that the ground
conditions would be in accordance with
what was shown or could be deduced
from the borehole information. So the
employer bore the cost of the design
changes
[2]
.
There are often spec|fc contract
provisions as to how such site information
offered by the employer will be treated.
Clauses such as the contractor is
deemed to have examined the site
and |s sat|sfed as to the content and
completeness of such information and
has obtained all other relevant information
which may affect the works and takes
full responsibility for the accuracy of such
information are common. This is often
accompan|ed by a spec|fc statement that
the employer is not giving any warranty
or representat|on as to the suffc|ency
GROUND CONDITIONS AND JCT CONTRACTS
JANE FENDER-ALLISON, DUNDAS & WILSON
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of the information it provides. In these
circumstances close examination of the
contract terms is essential in case there
are some get outs, but typically the risk
here lies with the contractor.
JCTs Approach
What is the approach in the JCT
contracts? The Standard Building
Contract Without Quantities 2011
does not deal expressly with ground
conditions, so the common law
position applies. The Design and Build
Oontract 2011 does not have spec|fc
ground conditions provisions either.
However information contained in the
Employers Requirements relative to
ground conditions may amount to
representations giving rise to implied
terms or warranties as discussed earlier.
Plus, if it becomes necessary to make any
changes to ground condition information
in the Employers Requirements, these
are subject to the Change procedure
(section 5) which values changes to
the Employers Requirements which
necessitate alteration of the design,
quality or quantity of the works.
Of course the contractor and the
employer are at liberty to amend these
forms; the employer might be content
for the contractor to rely on some of
its information or it might adopt the
reasonably foreseeable and deemed
knowledge approach used in the JCT
Major Project Construction Contract
2011 (MP) and some other non-JCT
forms. In MP, where the contractor
encounters ground conditions or man-
made obstructions which necessitate
an amendment to the Employers
Requirements/Contractors Proposals he
shall notify the Employer. Where clause
14.2 is selected in the contract particulars
as applying the amendments will be
treated as a Change (which may give rise
to time/money entitlement) to the extent
that the conditions could not reasonably
have been foreseen by an experienced
and competent contractor at the Base
Date (as |dent|fed |n the Oontract
Particulars), having regard to
any information that the contractor had or
ought reasonably to have obtained.
Points to bear in mind with this approach
are; frst|y |t w||| a|ways be a matter of
interpretation as to what reasonably
foreseeable means. Court guidance
will often turn on the particular facts of
a case. Secondly, the use of the Base
Date, or the date of tender, has been
suggested as unrealistic given that
in reality most contractors may not
have had the opportunity to conduct
in-depth surveys and investigations at
this point. Contractors could end up
pricing for the risk of unforeseen ground
conditions much as they would under the
unamended Standard Building Contract.
Alternatively the JCT-Constructing
Excellence Contract 2011 (CE), in line
with its collaborative ethos, provides
for a Risk Register and Risk Allocation
Schedule (schedules A and B of part 5
of the Contract Particulars and section
5 CE). Where the Contract Particulars
state that the Supplier is responsible for
preparing the Risk Register, the Supplier
has to carry out a risk assessment which
is set out in the Risk Register. Even
where not responsible, the Supplier has
to provide all reasonable assistance in
the preparation of the Risk Register.
The Supplier may also be responsible
for updating and amending the Risk
Register, again where stated in the
Contract Particulars. The Risk Allocation
Schedule then sets out the agreed time
and cost consequences of the risk items;
both the amount provided for by the
Supplier and the percentage allocation
between Supplier and Purchaser over and
above that. For example, in the case of
unforeseen ground conditions the Supplier
(as contractor) may include in its Target
Cost Contract Sum for 50,000 and agree
to be responsible for 4 weeks should they
arise, and time and money consequences
in excess of that may be split 50%/50%
with the Purchaser (as employer).
This offers an opportunity to deal with
the risk of unforeseen ground conditions
upfront. To do this the Risk Register
and Risk Allocation Schedule should be
completed very carefully. For example, will
pollution or contamination be included?
The more spec|fc the |dent|fed r|sk |s, the
less likely there are to be arguments about
whether that risk has arisen. If ground
cond|t|ons are not |dent|fed/apport|oned |n
the Risk Allocation Schedule they may still
be Relief Events for which the Supplier is
entitled to additional time/money. However
at this point the Suppliers entitlement will
fall back to the question of whether the
risk was reasonably foreseeable and
beyond the control of the Supplier. So
there is an incentive for the Supplier to
identify and allocate the risk of unforeseen
ground conditions, where and to the
extent that agreement can be reached
with the Purchaser.
The Standard Building Contracts With
Quantities and With Approximate
Quantities 2011 have a different approach.
These contracts require the Bills of
Quantities to be prepared in accordance
with SMM 7 (clause 2.13). SMM 7 at
section D provides standard rules as to
measurement, defn|t|on and coverage
of ground work items. Does this negate
the need for spec|fc a||ocat|on of r|sk
for ground conditions? Partly; insofar
as the ground works are measured in
accordance with the SMM an allocation of
the risk has been made. However, using
spec|fc contract c|auses as to who bears
the risk for what, including unforeseen
conditions and which data can be relied
upon or taken at the contractors risk
remains the clearest way to deal with
these issues.
Keating on Construction Contracts
(9th Edition) suggests one solution of
using reference conditions which the
employer produces and against which
the contractors prices are deemed to
apply. The Bill of Quantities is then used
to price adverse conditions beyond this.
As Keating notes this would mean the
Employer has an incentive to make the
reference conditions as accurate as
possible whilst the contractor is paid for
what is actually encountered.
[1]
Cooperative Insurance Society Ltd v Henry Boot (Scotland) Ltd [2002] EWHC 1270.
[2]
Bacal Construction (Midlands) Ltd v Northampton Development Corporation [1976] 1 EGLR 127.
JULY 2012
JCTNEWS
10
SWEET & MAXWELL
Introduction
Many contractors and others within the
construction and infrastructure sectors
have reviewed their compliance systems
since the introduction of the Bribery
Act. This article considers how contract
wordings in construction contracts can
help secure anti-corruption protections
and highlights some common pitfalls. With
the emphasis in the Government Guidance
on taking a risk-based approach, how
might organisations use boilerplate clauses
effectively in their contracts with their
supply chain and sub-contractors? And
what level of protection is provided by
such clauses? Where are the potential
pitfalls?
The new law
The Bribery Act 2010 introduced four
new corruption offences: paying bribes,
receiving bribes, bribery of a Foreign
Pub||c Offc|a|, and fa||ure by a commerc|a|
organisation to prevent bribery. The law
can cover corruption outside of the UK
and private as well as public sector bribery.
Sanctions for non-compliance include
|mpr|sonment, un||m|ted fnes, confscat|on
of assets and the possibility of being
debarred from tendering for public sector
contracts under EU procurement rules.
The key development is the new corporate
criminal liability for failure to prevent
bribery. This is a major reason why many
organisations have chosen to take another
look at their anti-corruption contract
wordings (a number of types of clause
having been in common use previously, in
reference to the old law).
Under the new offence, a commercial
organisation is now criminally liable where
someone associated with the organisation
(an associated person being anyone
performing services for or on its behalf,
such as a contracting party) bribes
someone else, intending some form of
business advantage for the company.
The only defence for the organisation is to
demonstrate it had adequate procedures
to prevent bribery.
Adequate procedures and the
Government Guidance on contractual
provisions
The starting point to understand the
meaning of Adequate procedures is the
Government Guidance of March 2011,
which sets out 6 principles for a company
to consider: proportionate procedures,
top level commitment, risk assessment,
due diligence, communication (including
training) and monitoring and review.
In relation to anti-corruption contractual
provisions, the Guidance includes the
following remarks:
The principal way in which commercial
organisations may decide to approach
bribery risks which arise as a result of the
supply chain is by employing the types
of anti-bribery procedures referred to
elsewhere in this guidance (e.g. risk based
due diligence and the use of anti-bribery
terms and conditions) in the relationship
with their contractual counterparty, and
by requesting that counterparty adopt a
similar approach with the next party in the
c|a||.
However, the Guidance does not go in
to exhaustive details about the content
of anti-bribery terms and conditions to
consider in a supply chain relationship
which is consistent with the mantra of
the Gu|dance that |t |s not a set of fn|te
rules and parties are encouraged to take
a risk-based and proportionate approach.
In any event, it is clear from the Guidance
that contractual protections alone will not
be suffc|ent to have adequate procedures
under the Act (and similarly, where an
organisation has simply introduced a new
anti-bribery policy, it will almost certainly
not have met the compliance bar with a
paper policy alone).
The Gu|dance does po|nt to w|der benefts
of securing some level of contractual
protection with immediate counter parties.
As can be seen from the extracted
passage above, where a contractor
puts in place anti-corruption wording
in an agreement and seeks equivalent
measures for its sub-contractor to agree
with others down the supply chain, the
Guidance suggests this can help ring
fence part of a contractors liabilities under
the new corporate offence, so that it may
not be held liable if bribes are paid by
others further down the supply chain.
Notwithstanding these words of comfort
in the Guidance, caution should be
exercised and it remains to be seen how
the Courts will determine the liability
for associated persons, several steps
removed from a contractor, but whose
corrupt acts may have been intended to
g|ve an |nd|rect or d|rect beneft to a|| those
in the supply chain. Where a principal
contractor is aware of higher risks involving
parties two or more steps removed from
it contractually, it will be well-advised
to consider additional anti-corruption
measures based around those risks. Here
it is important to keep in mind the broad
defn|t|on g|ven |n the Act for the mean|ng
of associated persons. Section 8(4) of the
Act states:
Whether or not [an associated person]
is a person who performs services for or
on behalf of [a commercial organisation]
is to be determined by reference to all the
relevant circumstances and not merely by
reference to the nature of the relationship
oe|wee| ||ese |wo oa|||esj
The contractual relationship can never
therefore be more than part of the
picture.
These principles aside, there is no
comprehensive assistance in the
Government Guidance about what types
of contractual clauses may be suitable for
a normal supply chain relationship. Some
steer can be derived from a number of the
example case studies at the end of the
Guidance which include suggestions
for anti-corruption contractual controls
in higher risk relationships, such as joint
ventures and the engagement of overseas
agents.
THE BRIBERY ACT AND CONTRACTUAL
ANTI-CORRUPTION PROVISIONS
NEIL MCINNES, SENIOR ASSOCIATE, BARRISTER - PINSENT MASONS LLP
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A possible approach
A number of organisations have chosen
to adopt a tiered approach to their use of
anti-corruption contractual protections.
This can result in groupings of standard
clauses, deployed according to different
risk categories. In the most straightforward
case, dependent on the scope of the
contractors business in the UK and
elsewhere, this might be possible to split
into as few as two tiers. For example:
1. Standard terms for lower risk
relationships (e.g. UK supply chain
partners to whom the Bribery Act also
applies and have their own adequate
procedures in place, etc)
2. Enhanced terms for higher risk
relationships (e.g. joint ventures,
contracts involving agents,
intermediaries, sponsors and
consultants, all contracts involving public
bodies/governments/state controlled
agencies outside of the UK, etc)
Th|s t|ered approach has the beneft of
simplicity and proportionality and is risk-
based. It must, however, be suitable for the
contractors spread of business dealings
and have add|t|ona| fex|b|||ty to cater
for higher risk contracts where bespoke
fne-tun|ng w||| often be necessary,
notwithstanding the risk-based tiers.
Some key questions for anti-
corruption clauses
Even adopting this risk-based approach,
it is important to be aware of the overall
pitfalls and limitations of anti-corruption
contractual protections. As stated above,
on their own they will not be a substitute
for other adequate procedures.
In addition, the drafting and range
of clauses should be examined to
understand whether their implementation
is proportionate and achievable. If not, an
organisation will be open to criticism that it
did not live by the standards it set itself in
the contract. Some organisations decide it
is better to adopt a smaller number of anti-
corruption contractual controls and enforce
each of these effectively rather than
having a wide suite of rights or protections
that may never be exercised or properly
reviewed. For example, where a contract
provides for a party to have access to
anothers books and records to conduct
an anti-corruption audit, a regulator will be
interested to learn if no audits have in fact
taken place in the term of the contract.
Turning to the scope of different types of
clause, the checklist below provides a non-
exhaustive list of issues to consider:
How does your anti-corruption clause
set the parameters of bribery? For
example, does it take account of
previous corruption laws, given acts
prior to 1 July 2011 could give rise to
a corruption investigation in future?
Does it need to include reference to
any other international anti-corruption
legislation, such as the US Foreign
Corrupt Practices Act?
Are warranties necessary from
contracting parties on the following:
- That they have in place adequate
procedures and/or spec|fc po||c|es
and procedures designed to
prevent bribery?
- That they or their associated
persons have not breached any
relevant anti-corruption laws or
been investigated or convicted
for any bribery-related offence or
currently being investigated by a
regulator?
- Relating to the identity and
ownership and control of a
counterparty (e.g. in respect of
|nfuence or connect|ons to fore|gn
pub||c offc|a|s}?
- That accurate books and records
are maintained?
Are there rights to review the contract
periodically during its lifespan, to
consider any corruption concerns that
have arisen?
Are there termination rights for a
breach of the anti-corruption clause
and what are the triggers to exercise
these? If a party would need to be
convicted of a bribery offence before
termination rights accrue for the other,
this may be considered ineffective
given the length of time before any
corruption investigation or prosecution
would normally be concluded.
Are there obligations on parties to
report bribery-related issues to their
counterparties? Are these drafted in
terms that comply with all relevant
other laws, such as money laundering
laws on tipping off?
On a risk-based analysis, are
enhanced protections required to
allow a party to conduct an audit;
oblige a party to undertake training; or
cooperate with another party during
an investigation?
What obligations are imposed on
a party to conduct anti-corruption
due diligence on its sub-contractors,
agents, and other intermediaries?
Does the clause require compliance
with a partys own anti-bribery policy
or a policy containing similar or
equivalent provisions?
Are any indemnities contrary to
public policy and unenforceable? For
examp|e an |ndemn|ty for cr|m|na| fnes
and penalties
Conclusions
There are a range of issues arising from
deploying contractual anti-corruption
protections. A useful starting point is to
understand, through a risk assessment,
whether the relationships require standard
or more enhanced contractual provisions.
This ensures a proportionate approach
is taken throughout and unnecessarily
burdensome obligations are not inserted
into contracts that do not require these.
Through design of a suitable tiered
approach, contractors can also avoid
the cost and inconvenience of bespoke
provisions on all occasions.
Neil McInnes is a Senior Associate,
Barrister specialising in corporate criminal
investigations at Pinsent Masons LLP.
For recent developments on the Act, see
www.thebriberyact.com, co-hosted by
Barry Vitou, Partner, Pinsent Masons LLP.
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JCT CONTRACTS DIS COVERY:
THE EDUCATION AND LEARNING MODULE FROM THE JOINT CONTRACTS TRIBUNAL
SWEET & MAXWELL
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JCT Contracts Discovery |s an educat|on and |earn|ng modu|e des|gned spec|fca||y for
those studying or teaching JCT Contracts and JCT contractual procedures.
JCT Contracts Discovery:
Explains the major elements of the JCT suite of contracts
Goes through how JCT Contracts are set up and implemented
Looks at the various roles of individuals including contractors, employers, sub-
contractors and contract administrators within the contract process
Discusses how JCT provisions deal with administrative matters, such as payment,
control of the works, and control of time
Visit www.jctcontracts.com
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A NEW WAY TO UNDERSTAND JCT CONTRACTS FOR THE
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