The JCT republishes its standard form building contracts - all change, or more of the same?

• In 2016, the JCT started republishing its contracts. Rather than publish the entire suite in a single issue, they are publishing the new contracts on a gradual basis. The first contract was issued in July 2016 and has been followed by several others, but the final contract is not due for publication until later this year. However, each contract follows the same pattern, so it is already possible to get a feel for how the new contracts will look. So what are the changes?

The Changes

The JCT has made the following changes to the 2016 contracts:

• Insurance – insurance has always been a challenging issue in building contracts, and there have been some complaints that the JCT contracts can be too inflexible to meet some more bespoke insurance arrangements. This is particularly true where building work is being undertaken to leasehold property, where it is not necessarily possible to persuade the landlord to offer the level of insurance required by JCT contracts. The JCT has sought to address this difficulty by allowing the parties to agree to bespoke insurance solutions, which are not fully set out in the contract. Whilst this may offer flexibility, this can carry some risk: construction insurance is relatively complex, and it is easy to find oneself underinsured. This is an area where specialist advice is usually beneficial.
• Construction (Design and Management) Regulations 2015 – the JCT has incorporated the requirements of the latest edition of the CDM Regulations, which regulate the management of health and safety in the design and construction of building work.
• Payment – modest changes have been made to the payment provisions. Most of these changes are technical, but a useful change is the requirement for the contractor to comply with the government's Construction Supply Chain Charter. This should help to ensure that sub-contractors are paid more timeously, leaving the school slightly less exposed in the (all too regular) occurrence of a contractor's insolvency.
• Loss and expense – one of the risks of development is having to pay contractors "loss and expense" claims – that is, claims for the contractor's increased overheads as a result of progress being delayed on site. The JCT 2016 do not rule out (or even restrict) loss and expense claims, but they do require the contractor notify problems more quickly. This may enable contract administrators to manage claims before they become problematic.
• Ancillary documents - the JCT now includes provisions requiring the contractor to deliver a performance bond and a parent company guarantees. This is a welcome development, as performance bonds are almost universally required by certain banks who lend on building projects.
• Building Information Modelling - the JCT has published provisions dealing with BIM. BIM will not be appropriate for every building project, but given the increased use of computer modelling to design building projects, this is also welcome.Public Contracts Regulations 2015 - the JCT has included provisions satisfying the termination requirements of the Public Contracts Regulations 2015. This provision will be important to schools in the public sector.

Summary

Each of these changes is important in its own context: it is important, for example, that Schools ensure that the insurance provisions in their building contract accurately reflect the insurance available to them.

However, it is unlikely that the republication of the JCT contracts will radically change the way that schools purchase building works. Schools still need to properly understand their contracts, and in most cases it will still be appropriate to amend the standard form contract to accurately reflect the school's specific requirements. However, the vast majority of building contracts will still be based on a standard form published by the JCT.

Indeed, perhaps the absence of major change is a measure of success for the JCT: if standard forms are becoming increasingly settled and understood, the contracting parties can focus on managing the more important commercial issues which affect their projects.

If you require further information on anything covered in this briefing please contact Edward Banyard Smith ([email protected]) or your usual contact at the firm on 020 3375 7000. Further information can be found on the Schools page of our website.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, February 2017