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A Guide to Standard Forms of Construction Contracts

A Guide to Standard Forms of Construction Contracts. (Source: Rethinking Construction, 2004). The need for contracts.

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A Guide to Standard Forms of Construction Contracts

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  1. A Guide to Standard Forms of Construction Contracts (Source: Rethinking Construction, 2004)

  2. The need for contracts • The transition from successful design to successful project completion requires the selection of a contract which reflects the aspirations of all Parties involved and meets the demands of the project. • Key criteria must be identified and risks allocated before the form of contract is selected.

  3. Client Requirements • Balance of time/quality/cost • Can be defined by following criteria: • Speed – design & construction • Separation of design & construction • Cost certainty • Dealing with complexity • Client involvement • Capacity for variations • Clarity of remedies

  4. Procurement Method • Choice of contract dependant on procurement method • General contracting • Design & build • Construction Management • Partnering • Management contracting

  5. Risk • The allocation of risk is a major element of any contract. • Contractor includes cost of risk in tender calculation • E.g. ‘Price certainty’ is bought by paying the contractor to accept the risk in a changing commercial market • Degree of risk must therefore be assessed and the economics of risk apportionment assessed – part of ‘best value’ calculations • Key areas of risk are: • Default • Delay • Quality

  6. JCT 98: Standard Form Building Contract • 6 versions; private, L.A., +/- quantities, approx. quantities • A much used standard form

  7. JCT: IFC (Intermediate Form of Building Contract) • Used for well specified traditional building work without complex service packages. With or without BoQ

  8. JCT: MW 98,Agreement for minor work • For small & simple works, Conditions give bare outline of duties & responsibilities. Risk allocation very simple

  9. JCT: PCC 98Prime cost contract • Cost plus contract, works not fully defined, all work on instruction of Architect

  10. JCT: CD 98Standard form with contractors design • Let on basis of ‘Employers Requirements’ and performance specification

  11. JCT: MC 98Management contract • All works sub contracted, main contractor coordinates

  12. JCT: MTC 98Measured term contract • Used for regular maintenance or repeating minor works

  13. JCT Construction management contract • Alternative clauses give flexibility, tailored for specific contract

  14. ICE Conditions of Contract • Work to satisfaction of the Engineer, who has high powers of control

  15. FIDIC Conditions of Contract • Engineer employed as Client’s agent (as JCT 98) • 2 parts – 1)General Conditions, 2)Project specific conditions

  16. NEC - Engineering and Construction Contract • Core clauses common to all projects plus suite of alternative procurement options • Common in Partnering Agreements, written in plain English, promotes team approach

  17. Conclusions • Many forms of contract have developed • The initial form has often been amended to suit particular role definitions and issued as a separate standard document • The type of contract influences; • Degree of client involvement • Design & management separation • Complexity • Variations • Speed • Cost certainty and • RISK APPORTIONMENT

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