JCT contracts suite

Prime Cost Building Contract

The Prime Cost Building Contract 2016 is a cost re-imbursement form where the contractor is paid either a fixed fee or a percentage fee on top of incurred costs. There is little incentive for the contractor to control costs and for this reason this form is rarely used. The RICS contracts in use survey (2010) indicated very limited use (1 instance noted only). There is limited provision in the contract for the contract administrator to disallow incurred costs.

This form is probably used where it is not possible to define the scope of the works (for example, in refurbishment works where initial or intrusive surveys are not possible) or where the works have to start immediately (for example, emergency works after fire damage).

This is a well-drafted contract and has many similarities to the rest of the JCT suite and could be used as an alternative to the NEC3 ECC Main Option E, which is also a cost re-imbursement contract.

Periodic repair and maintenance

Where there is a variety of construction works or works at different locations to be completed over a period of time or periodically (planned maintenance) then the JCT Repair and Maintenance Contract 2016 can be used. This contract can also accommodate emergency call out type work.

A contract administrator issues 'orders' for each of the items of works and makes payment using a schedule of rates. Care should be taken to allow the employer flexibility in terms of the amount of work promised to the contractor, the ability to terminate the contract at any time and the capability to remove parts of the contractor's scope if he or she fails to perform adequately. Amendments to the contract may be required to make clear these points. This form of contract is sometimes linked to partnering objectives such as performance indicators and collaborative working methods.

Management contracts

The JCT produces 2 management forms, which are very different, the Construction Management Appointment (CM/A) 2016 and the Management Building Contract 2016 (MC). Construction procurement using management contracts requires great care and a high level of sophistication by employer and contractor. Construction management is used more than management contracting (with no instances recorded in the RICS contracts in use survey (2010)) although neither form of procurement is particularly popular in the UK.

Often these contracts (particularly construction management) are the only appropriate form of contract suitable for complex and fast track construction such as high-rise buildings. Practitioners should be aware that these forms place considerable risk on the client and do not often give cost certainty.

Seek expert advice if you intend to use these forms of procurement.

Construction management

Under this form of contract, the contractor acts only as a construction manager and manages the works on behalf of the client while the client enters into separate trade contracts with subcontractors. The JCT provides a Construction Management Appointment (CM/A) 2016 for the contract between employer and contractor and a construction management trade contract for the contract between employer and subcontractor. The RICS contracts in use survey (2010) indicated this contract is rarely used but noted its use on schemes under £1 million. The survey also indicated a reversal in its popularity from its previous survey in 2007 to its 2004 popularity.

Management contract

Under this form of contract, the main contractor acts both as construction manager for the works and employs the subcontractors. The main contractor does not carry out any construction works but manages the works for a fee and is paid the actual prime cost of carrying out the works by his or her subcontractor. The JCT provides a Management Building Contract (MC) 2016 for the contract between employer and main contractor.

The management contractor contracts with subcontractors using the Management Works Contract Agreement (MCWC/A) and Management Work Contract Conditions (MCWC/C).

A JCT Management Works Contractor/Employer Agreement (MCWC/E) is used to provide a warranty from works contractor to the employer in relation to the works and any design and also allows some direct work by the employer.

The RICS contracts in use survey (2010) suggested this contract is rarely used; there being no recorded uses.

Partnering and framework contracts

Until relatively recently, the JCT had only limited involvement with collaborative contracts and partnering. There has been a gradual change with the JCT moving slowly into this form of procurement.

A partnering charter was provided in the 1998 JCT Practice Note 4 (issued in 2001), which was a non-binding agreement to work collaboratively. The agreement was signed by all the major parties to the project often at a partnering workshop prior to commencement of the works.

It is debatable whether such agreements have any effect on the behaviour of the parties but some clients like such agreements and the JCT charter can probably be used as a model if required. These charters are rarely, if ever, used. Bear in mind that the courts may take such charters into consideration when dealing with any dispute under the main construction contract (see Birse Construction Ltd v St David Ltd [1999])

This contract is no longer published in paper format but is available in an electronic version on the JCT Contracts Digital Service. Alternatively, a PDF can be freely downloaded.

The JCT Framework Agreement (FA) 2016 is essentially an umbrella or over-arching agreement between employer and contractor (called a 'Provider' in this form). This can be used with most ‘standard’ forms of construction contracts as well as civils contracts or sub-contracts. This contract is EU procurement compliant, clear cut and appears relatively simple to use. No contract administration is required and instead the employer operates the various contract procedures, this ensures the employer is able to capture and benefit from the long-term relationship with the supply chain. This requires the employer to issue an 'Enquiry' document to 'Providers' who are then contracted to do the work via 'Orders'. It is envisaged that the terms of such orders will be JCT standard form contracts but other contract forms could be easily used.

Framework contracts require considerable tailoring to accommodate the requirements of the client, framework contractor selection mechanism (usually a rotating call off or mini-tender/competition process), any partnering and collaborative working objectives plus incorporation of the various panels of contractors and their pricing information. Key Performance Indicators (KPIs) are often included in the framework agreement to monitor performance. Standard KPIs are available from various bodies. This information is usually attached to the framework contract via various appendices.

Framework contracts are often bespoke documents probably because the requirements of employers are so different and the absence of a good standard form.

Small and simple construction works

The JCT suite has several contracts suitable for small works.

The Repair and Maintenance Contract (RM) 2016 form can be used for the repair and maintenance of a building where there is no independent contract administrator. This contract is not a periodic repair and maintenance contract.

The above contract can be used for domestic extension type work or alternatively the JCT 'Home Owner Contract' could be used. The Home Owner contract is probably only suitable for very small projects such as extensions and household renovations. The Home Owner suite also contains a simple contract for employing a consultant.

Sarah Lupton's book Which Contract? discusses small construction contracts for consumers.

Pre-Construction Services Agreement

Where the contractor is required to be involved in the design stage/pre-contract stage of a project (sometimes called early contractor involvement or ECI) or there is a 2-stage tender process, then the JCT Pre-Construction Services Agreement (General Contractor) 2016 (PCSA) can be used. The PCSA is essentially a consultant agreement and the contractor acts in the role of a consultant rather than a contractor. Under the PCSA, the contractor is not expected to undertake any material construction work or substantial design work. Also, being a relatively short-term agreement, it is executed as a simple contract and therefore the contractor only has a 6-year liability.

Where the services of a specialist subcontractor or supplier are required during the design stage, then the JCT Pre-Construction Services Agreement (Specialist) (PCSA/SP) can be used.

Consultancy Agreement (Public Sector) (CA)

The JCT has produced a standard form professional appointment document for the public sector. This is unusual for the JCT as they have traditionally focused on construction contracts. This contract appears to be rarely used in practice.

Initial reviews of this form indicate it is a well-drafted and fair consultant contract and can be used with both public and private sector clients. It is suitable for most medium and large commissions. The requirement to state the number of site visits (clause 3.2.3) is very practical. It is suggested that the arbitration provision (clause article 5) and the PI provision for pollution (clause 2.11.2) may need to be reviewed. The use of the Contracts (Rights of Third Parties) Act 1999 or collateral warranties (Part 2 of the contract) needs to be agreed with the client to establish his or her preference. A consultant collateral warranty (such as the Construction Industry Council (CIC) standard warranties) must be used and not a contractor warranty.

The intellectual property licence in clause 9.1 is a little unclear as it seems to only refer to design information. Does this definition cover other consultant non-design deliverables such as cost reports?

Note the contract particulars at the front of the document have to be completed as well as Annex A and B at the back. A consultant scope of services must be inserted in Annex B to establish the consultant scope and the basis for his or her fee. The JCT Consultancy Agreement 2016 does not provide a scope so this must be obtained from other sources. The professional bodies of most consultants can provide standard form scopes of service as does the Construction Industry Council (CIC) via their standard document called 'CIC Scope of Services'.

Adjudication Agreement (Adj)

The JCT also produces an Adjudication Agreement (Adj) 2016 where an adjudicator is to be appointed in respect of a construction dispute. The agreement assumes a dispute has arisen under a JCT contract but it could be used for disputes under other construction forms.

In practice most adjudicators and adjudication-nominating bodies have their own contracts for appointment.