The Joint Contracts Tribunal (JCT) has published the second of its 2016 edition of contracts, the JCT Design and Build suite.
The contracts available include:
- JCT Design and Build Contract 2016;
- JCT Design and Build Sub-Contract Agreement 2016; and
- JCT Design and Build Sub-Contract Conditions 2016.
The JCT issued the JCT Minor Works 2016 suite on 24 June 2016 and our previous article sets out the key changes to this edition of contracts.
JCT 2016 guides to accompany the Design and Build Contract and Design and Build Sub-Contract have also been provided.
Tracked changed documents showing the differences between the previous 2011 edition and the current 2016 edition are available on the JCT website.
What are the key changes?
In addition to the changes highlighted by our previous article, the key changes of the 2016 Design and Build contracts include:
- Payment - the payment provisions have been revised and simplified to:
- establish (for fair payment purposes) Interim Valuation Dates that apply to main contract, sub-contract and sub-sub-contract levels. Payments during the rectification period will now be every month rather than every 2 months. If the payment provisions are unamended, payment will be made from the top to the bottom of the chain within thirty days. The Interim Valuation Dates will be specified in the Contract Particulars and Sub-Contract Particulars;
- enable Interim Valuation Dates in certain months to be altered to the nearest business day in a month, a change which will affect the due date and the 5 day period for the issue of the payment notice, the last day for giving a Pay Less Notice and the Final Date for Payment;
- consolidate the interim and final payments into one sub-section. A 14 day period of time between the due date and the final date for payment now applies to both interim and final payments (clause 4.9.1 of the Design and Build Contract);
- increase flexibility in relation to fluctuations provisions. The Design and Build Contract allows for an alternative bespoke fluctuation or cost adjustment formula to be used; and
- consolidate the notice requirements of the Housing Grants, Construction & Regeneration Act 1996.
- Insurance of the works - the insurance provisions relating to the works and existing structures have been amended to make them more flexible. Parties should take care in defining their chosen insurance arrangements.
- Termination – a new right to terminate in relation to the Public Contracts Regulations 2015, where the employer is a public authority, has been included. Regulation 73 of the Public Contracts Regulations 2015 requires a contracting authority to include a condition in all contracts allowing it additional rights to terminate consistent with the provisions of the Regulations.
- Intellectual property – new clause 2.20.2 of the Design and Build Contract requires the contractor to promptly notify the employer if he is or becomes aware that complying with any instructions may infringe any patent rights. Such instructions will not then take effect unless confirmed by the employer. If so confirmed by the employer, any royalties, damages or other sums payable by the contractor will be added to the Contract Sum.
- Copyright Licence – the copyright licence is now assignable to any owner of the Works and may be sub-licensed to any owner or tenant of the Works or to any person engaged in any of the permitted purposes referred to in clause 2.38.2 of the Design and Build Contract (the main copyright and use clause).
- Loss and Expense – the contractor is under an obligation to notify circumstances which may give rise to loss and expense and keep the employer updated, on a monthly basis, “for as long as necessary for final ascertainment”. The employer is required to notify the contractor of his initial ascertainment of the loss and expense claim for delay within 28 days of receiving the required information from the contractor (clause 4.20 of the Design and Build Contract). Within 14 days of each subsequent update from the contractor, the employer is required to make further notifications.
What to consider when using the Design and Build 2016 contracts
Users of the Design and Build 2016 suite should note the changes to the payment, insurance termination, intellectual property, copyright and loss and expense clauses. The JCT may reflect these changes in the remainder of its 2016 edition standard form building contracts and sub-contracts.
Practically, users should consider the following when using the Design and Build 2016 suite:
- it is likely that there will be a transitional period in which both the new and previous editions of contract can be used;
- employers, contractors and those advising them may need to review current business processes and update their standard form documents to reflect the new editions;
- a prospective employer should seek specialist insurance advice prior to tender;
- an employer-tenant should consult his landlord on the insurance arrangements;
- due to the change in counting days due to bank holidays, employers and in relation to sub-contracts, contractors should bear in mind the importance of serving payment notices and pay less notices on time and the consequences of not doing so; and
- users of the new documents will need to be trained in their use.
Employers and their funders regularly look to amend the Design and Build Contract so the contractor accepts a single point of responsibility for both the design and construction of a development. This often involves the novation of design consultants to the contractor. However, it should be noted that the JCT has not taken this common industry amendment into account in the 2016 update and so under an unamended JCT Design and Build Contract the contractor does not take full design responsibility.
The JCT suites are being updated on a suite by suite basis; however, the date for publication of the other updated suites of contracts has not yet been confirmed.
For more information on the new suite of JCT contracts or if you would like assistance with drafting a suite of JCT documents for an upcoming project please contact David Rintoul.