Contract Management Coursework

1

Standard forms of contract on

projects and their key areas.

2 Discussion points

Reading [Incl look at contract]

Websites

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Coursework Groups

• Groups will be published on Bb Friday 10th

Feb at 1200

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Section Aim and Objectives

• The section aim is: – To examine the application and use of standard forms of contract

on projects and their key areas.

• Within the overall aim the following measurable objectives are set

• The student will be able to: – Explain the need for standard forms;

– Discuss what constitutes a standard form;

– Explain why standard forms are used;

– Understand the problems with standard forms;

– Describe the content of standard forms

– Describe the key areas of standard contract on projects

– Discuss the position of the professional PM in standard forms

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Contracts

• Simple classification contracts allocate risk

– Lump sum [most detail known, can give a full price]

– Measure and value [outline known but detail unknown, cant give full price but give some rates measure later]

– Cost Reimbursement or Cost Plus [outline unknown detail unknown, will pay cost plus say addition for overheads [cost plus]]

• Rough guide Building contracts lump sum; Civil Engineering Measure and value; Asbestos removal cost plus

• The NEC3 Engineering and Construction Contract (ECC) does all 3

• IMechE 4

3 things or 3 questions

• What are SFs

• What do PMs have to do with it

• Why so many

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Standard forms of contract

• Standard forms of contract are a feature of

commercial life; they are the standardised terms

and conditions which businesspeople use

instead of drafting a bespoke contract each and

every time a contract between parties is required

• Standard forms are widespread in projects; so many available that it might be argued that they are not standard; printed might be a better term.

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Why standard forms are used

• Avoid reinvent the wheel

• Reflect how things are done [and should

be]

• Rules and principles transparent

• Allow efficient use of time [speed]

• Bilateral/ multipartite /NOT UNILATERAL

[see JCT later]

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Some Examples

• IMechE Model Form MF/1/2/3/4

• ICE; NEC; ECC

• Joint Contract Tribunal

• IChemE

• FIDIC

• GC/works/1;

• Model services contract

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IMechE Model Form MF/1/2/3/4

• MF/1 (Revision 4) Home or overseas contracts for the supply of electrical, electronic or mechanical plant with erection.

• MF/2 (Revision 1) Home or overseas contracts for the supply of electrical, electronic or mechanical plant.

• MF/3 (Revision 1) Home contracts for the supply of electrical and mechanical goods.

• MF/4 Home or overseas agreements for the provision of consultancy services by engineering consultants. Link at Bb

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Institutions of Civil Engineers

• ICE Conditions of Contract

• This is a family of standard conditions of contract for civil engineering works, which is at the forefront of best practice and modern procurement methods. Produced by the Conditions of Contract Standing Joint Committee (CCSJC), the ICE Conditions of Contract are jointly sponsored by ICE, the Civil Engineering Contractors Association (CECA) and the Association of Consulting Engineers (ACE)

• http://www.ice.org.uk/knowledge/contracts_conditions_of_contract.asp

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ICE Forms

• Measurement Version 7th Edition

• Design & Construct 2nd Edition

• Term Version 1st Edition

• Minor Works 3rd Edition

• Partnering Addendum

• Tendering for Civil Engineering Contracts

• Agreement for Consultancy Work in Respect of Domestic or Small Works

• Archaeological Investigation 1st Edition

• Target Cost 1st Edition

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The Joint Contracts Tribunal

• Constituent Bodies

• British Property Federation

Construction Confederation

Local Government Association

National Specialist Contractors Council

Royal Institute of British Architects

The Royal Institution of Chartered Surveyors

Scottish Building Contract CommitteeLimited

British

Property

Federation

Construction

Confederatio

n

Local

Government

Association

National

Specialist

Contractors

Council

Royal

Institute of

British

Architects

The Royal

Institution of

Chartered

Surveyors

Scottish

Building

Contract

Committee

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JCT Forms

• JCT 05 Standard Building Contract

• JCT 05 Major Project Construction

Contract

• JCT 05 Design and Build Contract

• JCT 05 Intermediate Building Contract

• JCT 05 Minor Works Building Contract

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Institution of Chemical Engineers

• IChemE’s contracts have been specifically written to reflect the particular needs of the process industries.

– Multi disciplinary

– Technology based (purchaser, contractor or licensor’s technology)

– Close integration between design and construction

– Project success measured by extensive performance testing

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IChemE

• UK contracts - current editions

• the red book, fourth edition, 2001 the green book, third edition, 2002 the burgundy book, first edition, 2003 Minor works, the orange book, second edition, 2003 Subcontracts, the yellow book, third edition, 2003 Subcontract for civil engineering works, the brown book, second edition, 2004

• International contracts

• The international red, International green, International burgundy and International yellow books

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FIDIC

• Fédération Internationale des Ingénieurs Conseils International Federation of Consulting Engineers

• http://www.fidic.org/

• Historically based on ICE form

• Now – Red book [building and engineering work]

– Yellow book [electrical and mechanical plant]

– Silver book [estimated prime cost]

– Green book [ building or engineering work of small value]

• Clause in relation to epidemics, burial of the dead and repatriation

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Model services contract

• Choosing the right terms and conditions of contract is

essential for government and public sector buyers to get

best value.

• Suitable for use with the range of business services that

government purchases and contains applicable

provisions for contracts for business process outsourcing

and/or IT delivery services.

• 100 pages!

– In comparison MF4 4 pages

• Why?

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Examine a form

• JCT and ICE form via Construction

Industry Information Service: Library;

Electronic Resources; Databases

• IMechE MF/4 • https://www.imeche.org/docs/default-source/knowledge-

library/Mf4.pdf?sfvrsn=0

• Model services contract https://www.gov.uk/government/publications/model-

services-contract

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Construction forms the problems

• The industry itself

• Adversarial

• Lots of case law

• Lots of amendments

• Lots of everything

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NEC; ECC

• The New Engineering Contract was devised on the initiative of the Institution of Civil Engineers, and first published in 1993.

• The Latham report of 1994 then recommended that the NEC should become a national standard contract across the whole of the construction industry.

• In response, the ICE introduced various changes as recommended in the report, resulting in the publication of the second edition (re- titled “The Engineering and Construction Contract“).

• One such recommendation was for a requirement of the parties to work “in a spirit of mutual trust and co-operation”.

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NEC

• Management had moved on

• Contracts had not

• NEC make improvements in three areas

– Flexibility

– Clarity and simplicity

– Stimulus to good management

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Olympics Form

• NEC3 chosen for London 2012

Olympics

• The UK Olympic Delivery Authority (ODA)

has chosen the NEC3 suite of contracts to

procure all fixed assets and infrastructure

for the London 2012 Olympic Games. • http://www.neccontract.com/newsletter/article.asp?NEWS_ID=576

• APM adopts NEC

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The problems with standard forms

• Amendments

– Updates

– Inconsistencies

• One size fits all

• Tension between law and management

[see NEC]

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Contracts

• 2 parties [normally]

• NB the client/employer may OR MAY NOT

be the owner/funder/user

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Employer /

client

PM Other professional

e.g. Architect

Main Contractor

Sub Contract Engineer Sub Contractor

Sub Sub Contractor 25

PMs in Contracts

• Two parties normally

• Supply side – demand side

• Contractor – Employer

• Who is this PM then?

• Principal Agent Theory

• PM acting as Employer’s Agent

• Paid by Employer but decides on things

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The Key Areas of Standard

Forms • Payment

• Start

• Finish

• Changes

• LADs

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PAYMENT

• BEFORE THE WORK IS DONE

• AFTER THE WORK IS DONE

• AS THE WORK IS DONE

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Commencement

• All contracts are constrained by time it’s a

scarce resource

– Start date and end date

– Start date and time allowed

• If not specified then – reasonable time

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Completion

• … Completion is perhaps easier to

recognise than to define

– Practical

– Substantial

• Jarvis & Sons v Westminster Corporation

[1970] 1 WLR 637

• P&M Kaye v Hosier& Dickinson [1972] 1

WLR 146

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Practical Completion

• Snagging list

– Punch list

• PMs’ Certificate around the world

• Is a PM’s certificate conclusive evidence that a

contractor has finished the work?

• Its bad news [or good depending on your view] for you

• Type the term in any search engine and define practical

completion

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Variation

• Standard forms contain detailed provisions governing variations or changes

• Without this a contractor could simply refuse to change the works.

• Frequently the PM is empowered, on behalf of the employer, to order variations to the works [and to evaluate an appropriate change in the price / contract sum]

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