| Date | 2003 |
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| Judgment | The new JCT Major Project Form |
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printOn 23 June 2003 the JCT launched the Major Project Form (MPF), being the latest in their family of construction contracts. Brewer Consulting has been involved in its preparation since 2001, when it was appointed by the JCT to undertake the detailed drafting under the direction of a steering group drawn primarily from representatives of the Construction Confederation and British Property Federation. Brewer Consulting is currently working with the JCT and a steering group drawn primarily from the Construction Confederation and the National Specialist Contractor’s Council to prepare a subcontract for use with the MPF, which should be published in the near future. This note contains a brief introduction to the contract, its structure and its key features. For more information, or to arrange in-house training, please contact Geoff Brewer or Owen Fox. Intoduction The MPF has been published by the JCT to respond to a demand from the users of contracts on major projects to address the problems caused by either the use of bespoke contracts or the making of extensive amendments to the existing JCT forms. As a consequence the steering group was willing to start with a clean sheet of paper in order to prepare a document that reflects the requirements of large commercial projects, without necessarily following either the format or approach of existing JCT forms. In another departure from their usual practice, a small steering group and external draftsmen were used to speed the production of the form. The MPF is intended for experienced users who require a contract that contains only limited procedural matters, so as to enable clients to adopt their own in-house procedures. As a consequence, it has been possible to reduce the amount of detail within the contract conditions such that they are both shorter and simpler than the existing JCT standard form of building contract. By way of indication, the JCT 1998 ‘With Contractor’s Design’ form of contract contains approximately 85,000 words, excluding guidance notes. The MPF is of the order of 14,500 words in length. Although prepared with major projects in mind, there is little doubt that the straightforward approach of the MPF will appeal to experienced users undertaking a wide range of projects. The intention of the MPF is that, having defined its requirements (and bound these into the contract in a document simply called the ‘Requirements’), the employer should then permit the contractor to undertake the project without the contractor being reliant upon the employer for anything more than access to the site, the review of the design as it progresses, and payment. In particular, there is no requirement for the employer to issue any further information to the contractor, as all design information beyond that contained in the Requirements will be produced by the contractor. Under the MPF the contractor assumes more risks and responsibilities than under existing JCT standard forms, and to allow this approach to work it is essential that the demands of the project are fully identified at tender stage in order that they can be properly appreciated by the contractor. The identification and transfer of risk at this stage permits the contractor to both allow for these matters within its pricing and, equally importantly, to subsequently manage its responsibilities in the most efficient manner. This form will therefore be most effective where both the employer and the contractor, together with their respective teams of advisors and subcontractors, are experienced in undertaking large commercial projects. The Contract The MPF comprises: The Contract Conditions – to be executed as a deed by the employer and the contractor. The Appendix – setting out all of the project specific information relevant to the contract conditions, the Third Party Rights Schedule and the Pricing Document. As there are no articles of agreement the Appendix also contains or identifies much of the information they would normally contain such as, for example, the contract sum. Where it is possible to do so, a ‘default’ option has been identified for each of the matters addressed by the Appendix. The Third Party Rights Schedule – by which funders, purchasers or tenants are given the right to enforce certain of the provisions of the contract. The Requirements – setting out what the employer requires the contractor to provide. The Proposals – setting out the manner in which the contractor intends to meet the Requirements. The Pricing Document – containing financial information concerning the calculation of the contract sum, the evaluation of changes and the manner in which the contract sum is to be paid to the contractor. Key Features Conflict and discrepancy Clear rules exist for dealing with conflict and discrepancy within and between documents. Where there are discrepancies within the Requirements, the contractor may decide which to follow. Where there are discrepancies within the Proposals (or between the Proposals and the Requirements) the employer may decide which should be followed. None of these decisions will give rise to a change. Design The contractor will undertake any further design beyond that contained in the Requirements. Depending upon the manner in which the Requirements are prepared, the contractor could find itself undertaking the design or detailing of specific elements only, or could be responsible for the whole of the design. The employer has the right to review and comment upon all designs prepared by the contractor in order to monitor whether they comply with the contract and is only obliged to pay for works that have been executed in accordance with designs upon which it has either “no comment” or only limited comments. The Site The employer gives the contractor access to the site, rather than possession of it, and the MPF anticipates that the employer may require others to undertake work on the site at the same time as the contractor. If desired, the contract can require completion in pre-defined sections or allow the employer to take over parts of the project prior to Practical Completion. Completion and extensions of time The term ‘Practical Completion’ is defined in the MPF as occurring when the project is complete for all practical purposes and, in particular:
In circumstances where delay to the completion of the project is caused by both a cause that would entitle the contractor to an adjustment to the completion date and a cause in respect of which no entitlement to an adjustment exists (i.e. where there is “concurrent culpable delay”), the MPF provides that an adjustment to the completion date should be made. Cooperative features The MPF includes provisions to permit acceleration, the payment of a bonus for early Practical Completion and the sharing of the benefit of any savings or value improvements suggested by the contractor. Naming of specialists and novation of consultants The employer may “name” within the Requirements (either uniquely or by their inclusion in a list) both consultants and subcontractors who must be used by the contractor for specific elements of work. Responsibility for the performance of these ‘Named Specialists’ rests with the Contractor. By an optional provision selected in the Appendix, the contractor can be required to accept the novation of one or more consultants that have been previously appointed by the employer in connection with the project. If this option is selected, the contractor takes responsibility for the whole of the services that have been or are to be provided by the consultant, other than the preparation of the Requirements. The novation is achieved by means of the use of a model form of novation agreement that must be contained within the Requirements. Changes By making the contractor responsible for the production of all further design information and by providing clear rules for dealing with discrepancies it is intended that changes will be largely limited to true alterations, brought about by a genuine change of mind on the part of the employer, rather than the correction of deficiencies or anomalies in the original information. The employer may however require changes to either the Requirements or the Proposals or to the manner in which the contractor undertakes the project. The financial consequences of any changes are to be determined on an “all inclusive” basis (e.g. they will include any loss and/or expense that might be incurred as a consequence of the change) and will either be agreed in advance of the change being instructed (the preferred method) or determined by the employer on the basis of a fair valuation. In the valuation of a change (or elsewhere in the evaluation of loss and expense) the MPF seeks to ensure that loss and/or expense will only be included if it has not been contributed to by the contractor’s own default. Payment The MPF contains an “adequate mechanism” that satisfies the requirements of Housing Grants, Construction and Regeneration Act 1996, including provisions in respect of payment and withholding notices. Interim payments will be made monthly and through the use of the ‘Pricing Document’ it will be possible to adopt a range of options for the payment of the contract sum, including interim valuations (rule A), stage payments (rule B), scheduled payments (rule C) or any other terms the parties may wish to agree. The employer is required to issue a payment advice on a specific date each month that identifies a balance that is to be paid by one party to the other. Each payment advice will reflect amounts payable to the contractor in respect of the contract sum and amounts in respect of changes. There is no express entitlement to payment for unfixed materials either on or off site, nor are there any provisions in relation to cost fluctuations. The MPF does not provide for the employer to keep a retention. Additionally, the payment advice will reflect sums that the contract makes one party liable to pay the other, such as loss and/or expense, liquidated damages, and bonus payments. Thus these amounts become a part of the determination of the amount due, rather than a wilding from the amount due, and a payment advice may therefore require payments from either party to the other, rather than simply from the employer to the contractor. Where payments are not made by either party in accordance with the provisions of the MPF there is an express entitlement to interest. Insurance As major projects will normally be the subject of bespoke insurance arrangements, the MPF allows for the relevant insurance documents to be attached to the contract in order to define the insurances that are to be maintained by one or other of the parties. Other than providing a framework by which these insurances are to be maintained and operated, the MPF contains no specific requirements in respect of insurances. Third party rights The MPF utilises the Contracts (Rights of Third Parties) Act 1999 as a means of avoiding a proliferation of separate warranties and other collateral agreements between the contractor and any funders, purchasers or tenants. The rights of funders, purchasers or tenants are set out in the Third Party Rights Schedule, which is incorporated into the contract by clause 30. Funders receive the benefit of a warranty from the contractor that it will comply with the contract and also “step in” rights in the event that either the funder terminates its agreement to provide finance or the contractor seeks to terminate its employment under the contract. Similarly, subject to the employer serving appropriate notices upon the contractor, first purchasers or first tenants of the project receive the benefit of a warranty from the contractor that it has executed the project in accordance with the contract. The third party rights are capable of assignment twice. No separate warranties from subcontractors and consultants are called for by the MPF (the contractor being wholly responsible for any design that it may undertake) and it will be for the contractor to ensure that appropriate obligations are owed to it by any subcontractors or consultants that may be appointed to undertake work on its behalf. Disputes There is no provision for arbitration and disputes may be resolved by mediation, adjudication or litigation. Any adjudication is conducted in accordance with the Scheme for Construction Contracts.
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