Procurement routes for JCT contracts

Design and build forms

Design and build is probably the most common UK procurement route for construction and the JCT provides both a Design and Build form or allows the contractor to provide discrete parts of the design. Where the contractor provides a discrete part of the design then these forms are not design and build contracts.

Previously under the JCT form, a discrete design portion could be added via a 'design supplement' that was attached to the JCT standard form. The 'design supplement' is incorporated into the JCT 2011 and 2016 forms with a 'contractor design portion', which requires no separate design supplement.

The latest edition is the JCT Design and Build Contract 2016 which includes a Contract Guide (DB/G), Sub-Contract Agreement (DBSub/A), Sub-Contract Conditions (DBSub/C), Short Form of Sub-Contract (ShortSub), Sub-Subcontract (SubSub), Sub-Contract Guide (DBSub/G) and Design and Build Contract (DB) Tracked Change Document.

Management forms

Management forms of contracts are very specialist forms of contract and not used very often in the UK although were very popular in the 1980s and early 1990s. They are recommended by some specialist consultants and contractors and may be appropriate on large, complex and fast track projects.

Always seek specialist advice if you wish to use these types of contract.

Letters of intent

These bespoke documents are very common on construction projects, see Letters of intent for more information. As a general rule, letters of intent should be avoided as they are legally uncertain and cause endless dispute. The JCT forms are not designed to work with letters of intent or to have the letter of intent as a precursor to an executed JCT contract.

Instead, the JCT contract should be assembled and executed as soon as possible. Note that once a contractor starts working, there is little incentive for him or her to execute the construction contract and it is often in the contractor's interest not to execute.

If a formal contract cannot be assembled prior to the commencement of the works and the contractor starts work under a letter of intent, one must ask on what basis is the contractor providing the works? There must be some project information for the contractor to commence work and this should form the basis of the construction contract. Contract assembly and agreement should not be seen as a protracted process but something that can happen in a week or 2 once the tender is accepted. Moreover, the information required to execute the contract is likely to be the same information that is necessary to enable the successful management of a project: programme, cost and quality information, so there should be limited reasons to proceed with a letter of intent in the first place save for administration in producing and refining particular points of contract.

Target cost contracts

Target cost contracts are sophisticated construction contracts where the contractor is paid its actual cost. At the end of the project, the actual cost is compared with the project target cost and any difference (the pain/gain) is split between the parties in accordance with a pre-agreed formula.

Target cost contracts have become a popular form of procurement in recent years particularly on public sector projects such as the 2012 Olympics and Crossrail.

The JCT does not produce target cost contracts. The JCT Constructing Excellence (CE) can work on a target cost basis but the contract appears to be quite different from traditional target cost contracts and the CE is rarely used in practice. The NEC3 ECC Option C appears to be a more widely used target cost contract in the UK. The Institution of Civil Engineers (ICE) and the Institution of Chemical Engineers (ICHEME) produce target cost contracts. See What type of contract do I need?