A New Form of Construction Contract
The JCT-Constructing Excellence Contract
January 2008
On 1 March the JCT-Constructing Excellence contract was formally launched at the Houses of Parliament. It is intended that the JCT Contract can help you to deliver more successful construction projects offering better value for money and delivering efficiencies through better management of risks.
"The first thing to say about this Contract is that it is highly readable. It is brief, it is in plain English, it is user-friendly, and it is perfectly understandable and practical. That is very welcome and is not true of all contracts."
"Secondly, the Contract is based on trust and fairness. Clause 2.1 goes straight to the point. The "Overriding Principle" as it calls it, is collaboration. The Purchaser and Supplier – the actual terms used – have the "intention to work together with each other and with all other project participants in a co-operative and collaborative manner in good faith and in the spirit of mutual trust and respect". Clause 2.9 makes it clear that it is to be the basis of any subsequent dispute, with the adjudicator or the Court taking into account whether the parties have adhered to the "Overriding Principle" of clause 2.1. So it really is about best practice: and if things go wrong, did they slide away from collaboration, because they should not have done so."
"A third reason to welcome this document is because it is firmly client-driven.”
(i) Better management of risk and pricing – the JCT contract is unique in enabling parties to consider risks and their likely time and cost consequences openly (rather than clandestinely) allowing them to decide who is best placed to manage a risk or whether it should be shared. Instead of risk contingencies being hidden in prices, they can be discussed openly and managed under the contract. So, instead of paying for risks whether or not they occur, you as clients can pay for risks only if they do occur and can further cap liability (in terms of time and cost consequences) by agreement in a Risk Allocation Schedule. This enables you, your contractors and wider project teams to better manage risks so they do not occur and to set out the parties' maximum exposure if they do occur.
(ii) Flexibility – depending on how the Contract Particulars are completed, the JCT contract can be used to engage not simply contractors, but also consultants, sub consultants and subcontractors. Thus, the same contract terms can be applied to all parties so that there is clarity and consistency of approach normally lacking in most existing arrangements. There is also an optional multi-party Project Team Agreement which spells out in greater detail the obligations of the key players (likely to be client, designers, main contractor and key specialist contractors).
Schools should think carefully about their present construction procurement arrangements and consider whether the JCT Contract could improve the deliverability of future projects.
Why clients should be interested in the new construction contract
Sir Michael Latham provided the key note speech at the launch of the JCT Contract and summed up why organisations undertaking a construction project should consider using it:"The first thing to say about this Contract is that it is highly readable. It is brief, it is in plain English, it is user-friendly, and it is perfectly understandable and practical. That is very welcome and is not true of all contracts."
"Secondly, the Contract is based on trust and fairness. Clause 2.1 goes straight to the point. The "Overriding Principle" as it calls it, is collaboration. The Purchaser and Supplier – the actual terms used – have the "intention to work together with each other and with all other project participants in a co-operative and collaborative manner in good faith and in the spirit of mutual trust and respect". Clause 2.9 makes it clear that it is to be the basis of any subsequent dispute, with the adjudicator or the Court taking into account whether the parties have adhered to the "Overriding Principle" of clause 2.1. So it really is about best practice: and if things go wrong, did they slide away from collaboration, because they should not have done so."
"A third reason to welcome this document is because it is firmly client-driven.”
What differentiates the new contract from other forms of construction contract?
There are two key distinguishing features:(i) Better management of risk and pricing – the JCT contract is unique in enabling parties to consider risks and their likely time and cost consequences openly (rather than clandestinely) allowing them to decide who is best placed to manage a risk or whether it should be shared. Instead of risk contingencies being hidden in prices, they can be discussed openly and managed under the contract. So, instead of paying for risks whether or not they occur, you as clients can pay for risks only if they do occur and can further cap liability (in terms of time and cost consequences) by agreement in a Risk Allocation Schedule. This enables you, your contractors and wider project teams to better manage risks so they do not occur and to set out the parties' maximum exposure if they do occur.
(ii) Flexibility – depending on how the Contract Particulars are completed, the JCT contract can be used to engage not simply contractors, but also consultants, sub consultants and subcontractors. Thus, the same contract terms can be applied to all parties so that there is clarity and consistency of approach normally lacking in most existing arrangements. There is also an optional multi-party Project Team Agreement which spells out in greater detail the obligations of the key players (likely to be client, designers, main contractor and key specialist contractors).
What is Bevan Brittan's involvement in the new contract?
Martin Howe, one of our partners in our Planning, Property and Construction department is the joint author of the new contract. Being involved from the outset with the Be Collaborative Contract (on which the JCT Contract is based), we understand not simply the contract but also the way in which the contract should be used. (We also have a similar understanding of the NEC and the PPC 2000 forms of contract on which we regularly advise clients. However, neither of these contracts offers the unique benefits of the JCT Contract referred to above).Schools should think carefully about their present construction procurement arrangements and consider whether the JCT Contract could improve the deliverability of future projects.
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