The JCT’s much heralded Design & Build 2016 mini-suite finally became available a few weeks ago. After dipping a toe in the water with the re-write of the Minor Works mini-suite, this was JCT’s real opportunity to update and improve their most popular contract, five years after the Construction Act changes were brought in by the 2011 edition. JCT contracts are much the marmite of the construction industry’s standard forms (and like marmite, also experienced a few supply issues in recent weeks) – often seen as too adversarial but nonetheless clearly one of the most used contracts in the UK. Overall, JCT D&B 2016 contains some positive changes, some that have the potential to cause significant problems for users, and, disappointingly, misses a number of opportunities for improvement.
A lot of the changes are semantic: drafting oddities have been tidied up and this helps the contract to read better. In particular, cross-references have been removed in some places and replaced by defined terms (e.g., referring to Contractors’ Design Documents in clause 2.2, rather than “documents referred to in clause 2.8”).
The material changes include the obvious incorporation of Amendment 1 (CDM Regulations 2015): goodbye CDM Co-ordinator, hello Principal Designer.
Other matters dealt with include:
Parent Company Guarantees and Performance Bonds: JCT have acknowledged the frequent requirement for Parent Company Guarantees and/or Performance Bonds and have therefore introduced requirements at clause 7.3 (with the opportunity to complete details in the Contract Particulars).
BIM: This much talked-about change is the introduction of references to BIM, although, as discussed below, the D&B 2016 stops short of incorporating a BIM Protocol.
Payment: This is another area which has been heavily amended in text, though with little material impact. Many of the amendments simply improve the contract’s alignment with the Construction Act (and arguably about time too). In addition:
• users of the JCT D&B 2016 will be acutely aware of the new entitlement for the Contractor to make monthly interim applications after PC (where this used to be bi-monthly) and
• the final date for payment is now the same for interim and final payments – 14 days from the due date in each case.
Delay: Arguably one of the most common and most complex areas for dispute on construction projects is delay. This is one of the areas where the various industry standard contracts differ most significantly in their approach. In the 2016 edition, JCT has updated the procedure for notification and ascertainment of loss and expense (clause 4.20) but has stopped short of giving the Contractor a deadline for submitting such applications. It does, however, give the Employer only 28 days to assess each loss and expense application. It is not yet clear how this sits with clause 2.25.2 which is unamended and continues to give the Employer 12 weeks to assess any extension of time application. A Contractor could therefore submit an application for an extension of time and loss and expense in the same letter, and the Employer would have only 28 days to assess the loss and expense but a further 8 weeks to consider the extension of time which is clearly a case of putting the cart before the horse.
It would clearly benefit both parties to set clear deadlines for both parties and to set out what happens if those deadlines are breached. Further evidence of contractor-bias is in the wording of 4.20.1 itself (author’s underlining): “The Contractor shall notify the Employer as soon as the likely effect of a Relevant Matter on regular progress… becomes (or should have become) reasonably apparent to him.” This is a long way from the NEC3’s early warning system: the existence of a Relevant Matter may be apparent but until its “likely effect” is known, the Contractor is under no obligation to notify the Employer.
Overall, the changes to clause 4.20, particularly when read against clause 2.25 create a recipe for much confusion and are yet another example of where the JCT missed an opportunity to make improvements and so a schedule of amendments could benefit both parties not by shifting risk, but by clarifying obligations and procedures.
Insurance: The insurance provisions see significant changes, most notably where the JCT finally acknowledge the need to deal with the frequency with which their D&B contract is used for tenant fit-out works in multi-let commercial premises. The clauses on insurance claims have also been moved from the schedules into the main contract conditions. (We will be looking at insurance under the JCT 2016 (and other industry standard forms) at a special seminar in the New Year. Watch this space for more information.)
Consents: Anyone reading the Tracked Changes version may be alarmed to see the deletion of the words “such consent not to be unreasonably withheld or delayed” in several clauses. However, clause 1.10 introduces a general obligation on both parties not to unreasonably withhold consent (where such consent is required). This seems to be a baby step towards a more collaborative, and dare I say it “NEC” way of working.
What isn’t new?
In some respects, D&B 2016 has been a missed opportunity for the JCT.
Changes or Variations: As solicitors, we are trained to ensure consistency of drafting within and across suites of contract documents for projects. It therefore continues to sit uncomfortably with the author at least, that JCT D&B 2016 still refers to a “Change” when all the other JCT contracts (including, even more bizarrely, the JCT D&B Sub-Contract) use the term “Variation”. Whilst historically this distinction does have a logical explanation (“Variations” are seen as employer led but “Changes” are contractor driven), the decision not to bring the terminology neatly into line does seem a strange one.
Instructions: Following the MWB Business Exchange Centres case earlier this year, a clear structure for instructions and variations has become all the more crucial. Whilst that case clearly laid down the ability to orally vary contracts notwithstanding a clause in the contract requiring variations to be in writing, it will clearly always be a matter of evidence. Clauses 3.5 – 3.11 inclusive deal with instructions and are, frankly, as clear as mud. JCT had an opportunity with the 2016 edition to draft simple clauses with overarching rules about confirmation of oral instructions and when and how each party could object to instructions. Another opportunity missed.
BIM: Despite the introduction of BIM terminology, clause 2.38 (Copyright and use of Contractor’s Design Documents) has not been amended/extended to deal with an express copyright licence in the BIM documents. Whilst this may be dealt with by the BIM Protocol (again, the JCT missed the opportunity to draft their own, so it seems), it may have made sense to incorporate this within the main body of the contract.
Consequences: A final general observation is that the JCT suite as a whole continues to set out a number of clear and absolute obligations. Some may see this as excessively prescriptive, but one advantage is that it does make clear what should happen in operating the Contract. However, there are still far too many occasions when the JCT D&B 2016 fails to say what will happen if the prescribed action is not taken. Clearly in some cases a failure to comply with a clause will be a breach of contract and each party’s rights thereafter should be fairly clear. However, given that many of the absolute obligations are placed on the Employer’s Agent/Contract Administrator and he/she is not a party to the contract, the resulting ambiguity can leave the parties in a position of uncertainty during the works, making it harder to complete the works on time, on budget and on spec.
The JCT Design & Build 2016 has added in a number of provisions that had become “standard amendments” to previous editions: clarifying payment, insurance, performance bond/parent guarantee guarantees, CDM 2015 and BIM. However, some of the changes have the potential to cause more confusion than they eliminate and a number of opportunities for significant improvement have been overlooked entirely. Based on current patterns, it may be 2021 before these issues are addressed. In the meantime, users of the JCT D&B 2016 would do well to consider bespoke amendments to provide clarity, as well as ensuring a risk profile that suits the parties on each specific project.
These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.