Construction Contracts and Contract Documentation - Assignment Example

CONSTRUCTION CONTRACTS Title Name Tutor Course Date Construction contracts and contract documentation Introduction For more than 75 years JCT contracts have been used in the building and construction industry. JCT are leaders in provision of standard forms of building contracts. JCT contracts take care of the contract needs of construction projects. Two major building contracts are discussed below and these are the JCT standard building contract and the JCT design and build contract (Chappell 2006, pp. 57). JCT standard building contract This is a construction contract which is applicable to larger works that are designed and detailed by the employer or on his behalf. It applies where there is need for detailed contract provisions and the employer has to give drawings to the contractor together with a specification or schedules for work to help outline the quality and scope of work. It also applies where the level of complexity does not need the bills of quantities. It also works where a contract administrator or architect and quantity surveyor have to administer conditions. It can apply where a contractor is supposed to design discrete work portions and where work should be done in sections. Both local authority and private employers can use it (Ndekugri, Rycroft 2009, pp. 134). Design and build contract This is type of contract is appropriate where there is need for detailed contract provisions and the requirements of the employer have been given to the contractor. It is also applicable where the contractor is expected to do and finish the work and the design. It also works where an agent is employed by the employer and charged with the duty of administering the conditions. The contract is used where work should be done in sections. Both local authority and private employers can use it (Parris, Chappell 2002, 54). A construction contract normally has four documents. These documents are drawings, specifications, agreement and the conditions. All of them add value to the relevance of the contract (Chappell 2005, pp. 98). Advantages of JCT design and build The employer is able to refer to only one point of responsibility in the entire process of procurement and even after completion of the construction if any latent problems exist. This does not match the traditional systems in which the point of contact of the employer is the architect but in case of difficulties a number of firms may take responsibility among them the quantity surveyor, the architect, engineer, contractor or any other consultants (Speaight 2005, pp. 32).  The risk involved is less since the cost is guaranteed and the chance of a fixed completion date being met is better than average. The total period of procurement is can possibly be shorter when compared to a similar project in which traditional methods are used. The reason for this is that the contractor takes charge of the entire process. Except in cases where DB has been used contractors normally undertake that when the building is finished it must be fit for the purpose it is constructed. The concept of the design can be build easily. The number of claims can be small since the contractor controls the factors that bring about such claims (Speaight 2005, pp. 32-33).  Disadvantages of JCT design and build The control of the employer is lesser than in the case of a traditional system. There lacks flexibility in the system. In case the employer alters the requirements a door is opened for claims about time extension, expense and direct loss (Chappell 2005, pp. 209). The requirements of the employer need to be prepared with a lot of care so that the wishes of the employer can be reflected accurately for the contractor to get a proper scope. The contract does not forgive because if requirements are poorly assembled the contractor can present proposals that cannot give the employer any satisfaction (Chappell 2005, pp. 210). Since the employer and the architect of the contractor is not as close as that between the independent consultant and the client, since and the employer does not choose the architect and because strict instructions from the contractor can make the architect to design down a price the design may not have a quality that is as good as that of a building made in traditional design. The employer pays additional fees. The design fee paid to consultants by the employer is included in the price of designing and building for the contractor. The employer must have independent professional advice which means the employer must pay for that extra cost (Ndekugri, Rycroft 2009, pp. 122). Construction Contract administration a) An architect /contract administrator’s instruction The contract administrator or architect or agent to the employer has been given the power to give instructions to the contractor on matters in which the relevant clause in the conditions within the contract allow for this and the contract binds the contractor to carry out the conditions. When the contract administrator issues the contractor with instructions in most cases it varies the quality, quantity or design of work and therefore tends to have an effect on the value of the contract. Before issue a priced draft copy with all the instructions together with drawing revisions that may increase costs or savings must be faxed or sent to the Capital and assent management representative so that he can approve or comment on it. Issuing of these instructions without the comment or approval of the Capital and Assets management is only allowed where there is a situation of emergency and delays or other consequences are to be avoided. In such a case the Capital and Asset Management Representative must be given a priced copy as soon as possible in the course of 5 working days (Speaight 2005, pp. 37).  b) A practical completion certificate A certificate of practical completion is normally issued to show that work is complete but there can be small bits of work still underway and that the employer is free to take possession of the works and use them for the purpose they were meant for. The need for this certificate goes further than the report that the work is at a certain stage going on to completion. The contractor should have the certificate issued properly and on time (Ndekugri, Rycroft 2009, pp. 45). If case the client is ready to take over the building before it is complete then the certificate upon issue must have a qualification to confirm that the contractor will complete some particular items in a given timescale. These items should be put in a list which is attached to the certificate and another list of the same should be send to the client. Before the issuance of the certificate the consultant should be having the Building Information Schedule (form D2920 and the engineering operating and maintenance manuals (Speaight 2005, pp 10).  Below is a fictitious letter to the construction client concerning the implications of the issuance of the certificate of completion (Ndekugri, Rycroft 2009, pp. 47). Patrick Javalar Matthews Rudmint Construction Company 112, Godley Road, Wandsworth, London, SW18 3HE Mary Clarkskeen C.E.O Manu Chandaria & Bros. Ltd 36, Hillbury Road, Tooting, London, SW17, 8JT Dear Madam, RE: Issuance of a certificate of completion I hereby notify you that my company has already issued you with a certificate of completion for the construction I have been undertaking for you. Note that the implication for this is that you will henceforth take over the remaining tasks on the building construction. The contractor will go on to complete the remaining work on the building but responsibility for the entire structure is hereby transferred from me to you. I wish the best of luck in your new undertaking. Yours faithfully, Patrick Javalar Matthews Construction Project Risk Risk analysis using a risk register A construction risk register is import in the analysis of risks. For a risk analysis to be carried out appropriately the risk register should have been designed with the appropriate format. A risk register with the appropriate format should carry the hazard, its cause and initial risk assessment presented in a very clear way. For the audit to be done well and for the risk mitigation progress to be appreciated well the risk register must go on displaying the first score. Managing the risk starts with mitigation and reassessment cycle which should always be repeated (Speaight 2005, pp 29).  After the mitigation measures have been considered there is provided the current snap shot to the risks in the project. Project actions must be assessed consistently while reference is being made to risk mitigation. The register will only reflect current status of the project if there is planning, logging and re-assessing of actions as reference is made on how they impact particular risks in the project. A critical aspect of risk management is that upon possible avoidance of risks and mitigation of the risks to reasonably practicable levels then the remaining risk should be allocated through contract documents. This must be noted on in the risk register where by referencing is made of specific project risks to the contract or specification sections. Referencing is necessary when the risk register is being transferred to the contractor in the phase of construction in design-bid-build projects so that the specific risk can be linked to where it is considered within the contract documents (Parris, Chappell 2002, pp. 100). hazard Cause of hazard potential consequences Risk consequence Risk consequence Risk consequence Risk likelihood financial Project schedule Contractor’s bid price bigger than owner’s budget allowance Insufficient competition for bids Delay in schedule and increase in costs 4 4 3 Table 2: An example of a risk register; Identification of hazards and initial assessment (Parris, Chappell 2002, pp. 78) The risk register begins with the risk management plan. The project manager gets input from members of the team and stakeholders as well as end users. The risk register is important because it carries the record of risks identified, their severity, as well as action steps that need to be taken. The register is such a simple document, a dataset system or spreadsheet although the table format is the most commonly used. The table carries a lot of information presented on a few pages. Managers have to see the register as a tool for management via a process of review and updating which does the identification, assessment and management of risks to levels that are acceptable. The risk register gives a framework through which problems rising against anticipated benefits delivery are captured. Actions will then be initiated to lower the potential impact and probability of particular risks (Speaight 2005, pp 31).  ID NAME OF RISK R 1 Contracting strategy (LSTK) can make bidders bid very highly R 2 Design changes can be big and go beyond expectations R 3 Suppliers of equipment can be busy R 4 Because of other work the amount of bidders may be low R 5 Labor rate may not be as expected R 6 Labor productivity for construction may not match expectations Table 1: An example of a risk register with model input data (Parris, Chappell 2002, pp. 77). Resolution of disputes Contract agreements are never without disagreements or disputes. When disputes arise there are a number of methods that are used to resolve them. These methods include mediation, arbitration and adjudication (Chappell 2005, pp. 111). Adjudication Adjudication happens to be the most popular mechanism used for resolving construction contract disputes. In this method a third party and mostly a neutral person who does not have any specialized expertise on the subject under dispute is chosen. Legal adjudication goes for consistency as well as results predictability. The parties in the dispute have a right to adjudication and therefore it is not normally mentioned in the construction contract (Chappell 2005, pp. 111). The decisions made through adjudication though, are not followed mandatorily and the original terms of the contract are always effective if the dispute reaches a court of law. The adjudicator mechanism is applied where the parties need prompt decisions especially at times when the process of construction is still going on. The decision of the adjudicator must be made within one month although this is subject to the law of the country. Otherwise the matter is taken to court so that a final verdict is given (Ndekugri, Rycroft 2009, pp. 65). Arbitration Another method of conflict resolution in these matters is arbitration whereby a third party is invited to play the central role of resolving the conflict. The third party is normally chosen through mutual agreement between the concerned parties. The person should be having specialized knowledge about the subject of the dispute. In this method the arbiter can make decisions that bind the participants. Arbitration and adjudication are similar in the way they work. It is applied where either of the parties in the dispute wants to involve the law courts. Same to adjudicator the arbitrator must be impartial and have no vested interest in the dispute (Chappell 2005, pp. 111). Mediation Finally there is the mediation method in which a third party is also involved in the resolution process. This method is almost similar to mediation but the difference is that in mediation the mediator is not allowed to make any binding decisions to the disputing parties (Parris, Chappell 2002, pp. 89). He only comes in as a facilitator to try and help those participating in the process to arrive at a resolution that is mutually acceptable. The procedure is mostly unstructured and very informal. In mediation an agreement to mediate should be signed as well as a confidentiality agreement. Typical mediation should take just one day or if extended it can take 2 days. For part of the mediation period the process can take place in one room and at other times it can be done in separate rooms (Chappell 2007, pp. 110). Bibliography Chappell, D. (2007) Understanding JCT Standard Building Contracts - 8th ed  Anthony Chappell D. (2006), The JCT Intermediate Building Contracts, Wiley Blackwell Chappell D. (2005) JCT design and build contract, Wiley Blackwell Chappell D. (2007) Understanding JCT standard building contracts, Taylor & Francis Ndekugri I., Rycroft M. (2009) A JCT 05 Standard Building Contract: Law and administration, Elsevier Science. Parris J., Chappell D. (2002) Parris standard form of building contract: JCT 98, Wiley Blackwell. Speaight, G. S. (2005) Architect's Legal Handbook - Eighth Edition  Read More