You’re not alone if you’ve never heard of the JCT Design and Build Contract, but it’s likely because you don’t work in the construction or building industries. Even for individuals in the construction industry, precisely what the JCT Design and Build Contract does can still sometimes prove a mystery.
What is a JCT?
The JCT, or Joint Contracts Tribunal, creates standard construction contract forms, guidance notes, and other standard documentation for use in the United Kingdom’s construction industry.
JCT has expanded in the number of contributing organizations since its establishment in 1931. The current operational structure, which was established in line with the 1994 Latham Report’s recommendations, consists of seven members who approve and authorize publications. The JCT became a limited company in 1998.
What is a JCT Design and Build contract?
JCT Design and Build contracts are typically made between an ’employer’ and ‘contractor’ to facilitate the delivery of a building project. They include all of the relevant terms and conditions, such as the party’s obligations, the costs involved, and the project specifications. This enables all parties to understand exactly what needs to be done, when it needs to be done, who will do the work, and how much it will cost.
Crucially, a JCT contract clarifies each party’s roles and responsibilities in order to ensure a smooth project delivery.
The JCT Design and Build Contract is drafted in such a way that the contractor is responsible for both the design and execution of the works. The developer gives detailed information to outline its requirements.
The JCT Design and Build Contract is a lump-sum contract (i.e., the total cost of constructing the works is specified in the contract) in which the contractor is paid periodically. For large developers, this form of contract is preferred because there is a single design party – the contractor.
This means that the developer must only pursue the contractor to retrieve all the losses related to the defective design if the design of the works is poor.
The JCT suite of contracts
The main JCT contracts are listed here below:
1.Standard Building Contract (SBC):
The contractor will not be involved in any aspect of the design under an SBC, sometimes referred to as ‘traditional contracting.’ The works will be described using drawings and bills of quantities created by or for the employer and given to the contractor.
‘Bills of quantities’ are essentially lists of goods that will be required for construction (including a description of the item and the quantity required) and on how payment is made.
There are three types of SBC; the best one depends on whether the employer prefers a lump-sum contract price or a measurement contract price.
Lump-sum: The SBC/Q and SBC/XQ are lump-sum contracts. This means that the contract price will change only if the works are varied or delayed (due to the employer’s risk/fault).
- SBC/Q – the employer provides the contractor with bills of quantities to define the quantity and quality of the work;
- SBC/XQ – the employer provides the contractor with the specification or work schedules to define the scope and quality of the work adequately but with no bills of quantity. Likely to be appropriate where the degree of complexity is not such as to require bills of quantities;
- SBC/AQ – A measure contact, explained below:
This type of contract would be appropriate where the quantity of work is uncertain, such as in a civil engineering contract scheme where large amounts of earthworks may be required, but the exact quantity is unknown.
It is also used when there is insufficient time to prepare the detailed drawings required for accurate bills of quantities to be produced.
The employer can then send the contractor with approximate bills of quantities that must be re-measured;
This indicates that the contract price can alter if the task is changed or delayed (due to the employer’s risk/fault), similar to a lump-sum contract. However, the contract price will be adjusted to reflect the actual work performed:
The works are ‘measured,’ and the rates specified in the approximate bills of quantities are applied to the measured quantities.
2.Design & Build (DB):
The Design & Build Contract (DB) is a popular form of the JCT suite that is frequently used for big, complex construction projects such as sports stadiums, shopping malls, and office buildings. It is used by both the public and private sectors.
The main feature of the DB contract is that the contractor would design the work based on the specifications provided by the employer (i.e., what the employer wants in terms of construction).
The contractor will create proposals (detailing how the contractor will meet the employer’s requirements). The contractor will subsequently do the works (as detailed in the contractor’s proposals) for a lump-sum.
Format and structure of a JCT contract
The standard format is:
- Articles of Agreement;
- Contract Particulars: these contain project-specific information;
- Conditions of Contract;
- Schedules.
The schedules cover some of the more commonly used ‘add-ons’ to a construction contract, such as insurance options, a design submission procedure and fluctuations.
Main Provisions of JCT Contracts
There are nine main sections to the JCT suite of contracts. They cover:
- definitions
- carrying out the works
- control of the works;
- payment;
- variations;
- injury, damage, and insurance;
- assignment, third party rights, and collateral warranties;
- termination;
- settlement of disputes.
The payment provisions of the JCT contract are flexible. They may allow employers to make upfront payments to contractors, usually accompanied by payment security such as a bond and/or invoicing once work has been certified as finished.
An independent third party (such as an architect, an employer’s representative, or a contract administrator) frequently certifies the work. Interim prices are usually made while work progresses.
JCT envisages retaining an agreed-upon percentage of the contract sum until practical completion, followed by a reduced percentage until a period beyond the final completion. This is typically designed to serve as an incentive to the contractor to address flaws discovered after the project’s completion.
JCT provides a defined completion date and the upfront agreement of liquidated damages as an estimate of the employer’s losses if the contractor fails to complete the works by the contractually agreed date. If an occurrence occurs at the employer’s risk and delays the contractor, the contractor will be allowed to request an extension of time for completion.
What is a JCT Minor Works Contract?
The JCT Minor Works Contract is designed for smaller projects. One version of the JCT Minor Works Contract allows the contractor to design a part of the works, whereas the other version assigns the entire design responsibility to the developer.
The JCT Minor Works Contract is commonly used for projects such as retail fit-outs or commercial property extensions, but there is no hard and fast rule limiting its use to a specific size or value of construction project.
JCT Design and Build Contract Summary Explained
1. It can be used on large or small-scale projects but is most commonly used when detailed provisions are necessary.
2. The Contractor is responsible for designing and executing the work, and the employer must provide detailed documents outlining their requirements.
3. The contract’s price and payment structure are based on a lump-sum payment with interim stage or periodic payments.
4. Collaborative working, sustainability, advance payment, bonds (advance payment, off-site items, retention), third-party rights, and collateral warranties are all included in the contract.
5. This contract can be used with a Pre-Construction Services Agreement (General Contractor) (PCSA) or a Pre-Construction Services Agreement (Specialist) (PCSA/SP).
6. The JCT contract can be used with the Framework Agreement (FA).
7. The JCT Contract can be used for both private and public sector projects.
Benefits of a JCT contract
JCT contracts might include more than just roles and responsibilities. In fact, there are different benefits to employing one, including:
1. Standardisation and protection over common issues,
JCT contracts have changed over time, and as such, they account for the majority of issues that can be reasonably expected to arise during a construction project.
Because most builders and contractors will be familiar with these concerns, rather than drafting a new and bespoke contract, these issues are included in the contract template. This assures both sides of a risk management baseline.
2. Recognisable and equitable allocation of risk
Because of the standard format of JCT contracts, all parties are usually familiar with a project’s risks and how they are distributed across each side. The JCT ensures that these risks are split equally by all parties so that the terms are not favorable to one side over the other.
3. Dispute resolution
Suppose, in the worst-case situation, a dispute arises throughout construction. In such cases, a JCT contract will include provisions for handling such disputes. These clauses will frequently nominate an arbitrator or adjudicator who will make decisions regarding the accountability of the parties.
A JCT agreement permits the parties to avoid more costly and time-consuming court proceedings. JCT contracts are primarily used in the construction sector to provide a standard document on which to depend in the case of a dispute arising.
4. Dangers surrounding the industry are addressed
JCT contracts are frequently used to protect employers from unprofessional contractors. The employer can rest easy knowing that most eventualities, such as penalties for late completion of work or circumstances, are covered by the contract.
Furthermore, a JCT contract is written in such a way that the agreement’s terms are comprehensive and cover the majority of the risks associated with the construction industry.
Considerations in JCT Contracts
Although JCT contracts follow a standard format, it is still important to understand what the document contains, especially if you are unfamiliar with using them. The following are some of the risks:
1. Lack of flexibility
When a JCT project is formed, it can be difficult for either party to adjust its requirements. Given the standard formatting of JCT contracts, any changes could cause project delays due to unfamiliarity.
2. Inaccurate requirements
Any requirements listed in a JCT contract must be accurate. If an employer needs to construct their needs fully, the contractor’s work may not satisfy the employer’s expectations. For example, if the employer provides the contractor “freehand” over the design, the employer has granted the contractor decision-making authority under the JCT contract.
As a result, if the contractor works to the bare minimum of standards, the employer is not protected by the contract.
3. Negotiations
A JCT contract might take time and a lot of money to produce. When there are disagreements, the project’s time frame and cost will rise. Disagreements lead to contract negotiations about the terms and conditions.
4. Improperly produced
If you sign a contract that has not been adequately drafted, reviewed, or has been frequently amended, you may be agreeing to unfavorable terms and conditions.
Features of the JCT Standard Building Contract
1. Traditional Procurement
Using the JCT Standard Building Contract indicates that the client has chosen traditional procurement – a method that became standard practice over 150 years ago. The main difference is that the design process is completely separate from the construction process, and full documentation is required before the contractor is invited to tender for the work.
The client has complete control over the design. Their consultants’ appointment sets the quality and standard of the materials used throughout; typically, the contractor does no design.
Because the design and construction teams are fragmented, the two aspects are treated as separate sequential processes, resulting in a longer project schedule than other procurement types.
2. Bill of Quantities
The JCT Standard Building Contract is available with or without quantities; however, it is most usually supplied with quantities measured by the Employer’s Quantity Surveyor. Next, the contractor will typically utilize these quantities to value and price the works, with rates appended to the quantities.
On this basis, a contract sum is computed, which is usually a fixed-in price but may be subject to remeasurement in some cases.
3. Roles and Responsibilities
The JCT Standard Building Contract has a detailed set of terms and conditions that outline the rights and obligations of both the employer and the contractor, as well as the powers and duties of the Architect / Contract Administrator and the Quantity Surveyor.
There is no single point of contact for the Design and Build in this type of contracting, with the Architect in charge of the design and the Contractor in charge of the build. This frequently leads to conflicts and/or variations to the Contract Sum where there are discrepancies, divergences, and/or errors in the information.
It is the Contract Administrator’s responsibility to manage this and ensure that disputes are avoided.
Conclusion
The JCT Standard Building Contract and traditional procurement have been around for 150 years and have served the construction industry well for a long time. It has been criticized in modern construction for its lack of flexibility, reliance on construction consultants, and the resulting fragmentation in project teams, which can sometimes lead to delays and disputes.
