The JCT Design and Build Contract 2016 was released last month – so what has changed?
Last month saw the release of the JCT Design and Build Contract 2016, the second (after the Minor Works Building Contract) of the 2016 updates, with the remainder of the updated suite due to be released over the coming months.
Alongside a number of minor drafting changes, there are some key amendments:
The payment provisions have been simplified and include:
- A new procedure for prompt assessment by the employer within 28 days of receipt of loss and expense claims. Interestingly, the drafting appears to indicate that compliance by the contractor with the notification provisions is a pre-requisite to any entitlement to loss and expense.
- Interim valuation dates that apply throughout the construction period and rectification period. Payments during the rectification period will now be every month rather than every two months.
- Interim and final payments are now consolidated so that a 14-day payment period after the due date applies to both.
Performance bonds and parent company guarantees
There is now a standard clause requiring the contractor to provide a performance bond and/or a parent company guarantee.
The form of bond is not prescribed.
JCT Public Sector Supplement 2011 and the Public Contracts Regulations 2015
The JCT Public Sector Supplement provisions have been incorporated, together with provisions addressing the relevant aspects of the Public Contracts Regulations 2015.
For instance, a public authority employer will have the right to terminate where the contract has been subject to substantial modification, which would require a new procurement procedure to be implemented.
Insurance of existing structures
There is an option to incorporate bespoke insurance arrangements for insuring any existing structures.
The new option will assist employers who are unable to insure an existing structure in joint names with the contractor, often a problem when the employer is a tenant of part of the building undertaking fit out works.
Third party rights / collateral warranties
Part 2 of the Contract Particulars has been deleted with the parties to add their own document detailing which rights are to be granted to the relevant parties.
Although this change does streamline the document it arguably makes the contract less user-friendly as a significant component now has to be individually prepared.
The changes required for the Construction (Design and Management) Regulations 2015 published in a stand-alone supplement last year are now directly incorporated into the contract.
While the changes do generally make the form more user-friendly and more in line with current market practice, the update does not represent a significant change in the risk profile.
A major change that has been overlooked is the common practice of requiring the contractor to assume single point design responsibility.
Another missed opportunity is the absence of a definition of practical completion.
It is therefore likely that employers and their funders will continue to insist upon lengthy schedules of amendments.
James Worthington is a senior associate and Chris Busaileh is an associate in the construction, engineering and projects team at Charles Russell Speechlys