JCT Design and Build – new 2016 edition coming soon to a project near you

JCT have just released the latest of their 2016 suite of documents, the Design and Build Contract and Design and Build Sub-Contract.

Whilst there are a number of minor changes which we will cover in other articles, this article will review some of the key changes and their significance in practice, for employers and contractors alike.

Payment Provisions

Section 4 of the Contracts have been revised and generally simplified. However, one of the major additions  is the inclusion of a new clause 4.20, which provides a procedure for the assessment of loss and expense claims.

The new clause 4.20 requires Employers to assess claims for loss and expense within 28 days. This is intended, in our view, to focus the mind of the Employer on promptly assessing claims and to keep a contract moving. The clause also creates an obligation on a Contractor to notify the Employer of Relevant Events throughout the course of the contract, and to not 'save-up' problems for the end, which inevitably takes longer to pick apart. This also reflects the approaches taken in other industry standard contracts, such as the NEC3.

In a similar vein to keeping funds flowing throughout a contract, the payment period due date for both interim and final payment accounts has been set to 14 days, whereas before there was a discrepancy between the two.

Performance Bonds/Parent Company Guarantees

There is now a standard clause 7.3 which requires that, at the election of the Employer, the Contractor is to provide, upon the execution of the Contract, a performance bond or Parent Company Guarantee (PCG). The exact form of bond to be used has not been provided or set by the JCT.

Whilst this is an optional clause, it does provide the Employer with an element of insurance over and above pre-existing Retention mechanisms. However, as with all performance bonds/PCG's, these will only be worthwhile if the bond/parent company is of sufficient covenant/liquidity strength and as such does not really alter views of commercial risk.

For Contractors seeking to obtain insurance to cover such a bond, there are potential difficulties as the Contract provides for non-date specific events for bond expiry – being the date of practical completion, two weeks after the rectification period or the date for issue of completion of making good. In all three scenarios, there are no set expiry dates which are likely to deter insurers who have an inherent need for certainty.

Third Party Rights from Sub-Contractors

A new clause 7.4 has been provided, allowing the parties to agree an option that Sub-Contractors are to provide rights to beneficiaries, either by way of collateral warranties or by third-party rights. Whilst this will be welcome for Contractors seeking to ensure that Sub-Contractors do not escape liability for defects, it should be considered that placing onerous conditions at this stage could deter Sub-Contractors from become involved in a project. Whether this plays out in practice will very much be a case of wait and see.

Building Information Management

The Public Sector Supplement provisions of the new 2016 Design and Build contract have been made compliant with provisions relating to Building Information Management (BIM). As a reminder, from April 2016, all centrally procured government projects are to be procured with BIM level two and the new form of JCT Design and Build makes allowances for this.

If you would like to discuss the new forms of JCT contracts please contact our Construction and Engineering Team on 01392 688688.