Unit 7: Contract Administration: Instructing & Certifying - - PowerPoint PPT Presentation

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Unit 7: Contract Administration: Instructing & Certifying - - PowerPoint PPT Presentation

Oct 09, 2023 477 likes •892 views

...last week (or things you should now understand) Structure of the JCT Standard Building Contract With Quantities (SBC/Q) 2011 Purpose of each part of JCT SBC/Q 2011 Required contents of the Contract Documents Employers

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...last week (or things you should now understand)

  • Structure of the JCT Standard Building Contract With

Quantities (SBC/Q) 2011

  • Purpose of each part of JCT SBC/Q 2011
  • Required contents of the Contract Documents
  • Employer’s obligations JCT SBC/Q 2011
  • Contractor’s obligations under JCT SBC/Q 2011
  • The contractual role of the Employer’s “agents;” who they

are; and the Employer’s liability arising from their action (or inaction).

  • Clerk of Works’ Directions
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Unit 7: Contract Administration: Instructing & Certifying

D39PZ: Procurement and Contracts

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  • Contract Administrator’s role
  • Contract Administrator’s instructions
  • Instructions vs. Variations
  • Certification
  • Certificates governing money
  • Certificates noting events (or non-events)
  • Key events in project progression
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CA’s role

  • The CA applies (“administers”) the contract to the project
  • The CA issues formal documents (Clause 1.8), which

serve a contractual purpose, e.g.:

  • tell others to do / not do something
  • update documents to reflect a change in the agreement
  • tell others to make payments
  • signify key events
  • make judgments about progress, completion, breach
  • These formal documents comprise: Instructions;

Variations; Notices; and Certificates

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CA’s role

  • To direct the Contractor in the completion of the Works
  • e.g. identifying and responding to work “not in

accordance”

  • To stimulate payment from Employer to Contractor
  • e.g. by regular issue of Interim Certificates
  • To denote achievement (or otherwise) of a planned event
  • e.g. does the CA think the Works are “practically

complete?”

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  • Contract Administrator’s role
  • Contract Administrator’s instructions
  • Instructions vs. Variations
  • Certification
  • Certificates governing money
  • Certificates noting events (or non-events)
  • Key events in project progression
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CA’s instructions

  • Traditionally called “Architect’s instructions” (or “A.I.s”)
  • Now that any suitable organisation can adopt the Contract

Administrator role, instructions are also called “Contract Administrator’s instructions”

  • The purpose of an instruction is to direct the Contractor’s
  • work. An instruction may:
  • require site practice to be changed
  • require the Contractor to correct its mistakes
  • vary the definition of the Works - i.e. issue a “Variation”

(‘Variation’ is an alteration of the Contract Document)

  • To achieve this, Contract Administrator’s Instructions are

issued by the CA to Employer (Clause 1.8)

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CA’s powers to instruct

  • The CA can only issue instructions where allowed by JCT

SBC/Q 2011

  • All instructions must be in writing (cl. 3.12.1)
  • Verbal instructions must be confirmed in writing within 7

days, or

  • Contractor’s written acceptance of a verbal instruction

becomes a CA’s instruction if a CA’s instruction is not issued within 7 days of the Contractor’s acceptance

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CA’s powers to instruct

  • A Variation is required
  • cl. 3.14
  • The Works are to be postponed
  • cl. 3.15
  • A Provisional Sum is to be spent
  • cl. 3.16
  • Inspection of the Works is required
  • cl. 3.17
  • Work not in accordance must be corrected
  • cl. 3.18
  • Workmanship not in accordance must be corrected
  • cl. 3.19
  • The work is otherwise not satisfactory
  • cl. 3.20
  • A person is to be excluded from the site
  • cl. 3.21
  • Antiquities have been discovered
  • cl. 3.22
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Contractor’s right to query instructions

  • The Contractor has the right to “reasonably object” to an

instruction if:

  • the Contractor believes the CA cannot issue it, or has

done so in error

  • it would change the working conditions as given in clause
  • cl. 5.1.2 under which the Works are to be completed (cl.

3.10.1)

  • The Contractor can ask the CA to prove that it has the

right to issue the instruction (cl. 3.13)

  • The CA must notify Contractor of the SBC/Q provision

that empowers the instruction “forthwith”

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CA’s instruction

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  • Contract Administrator’s role
  • Contract Administrator’s instructions
  • Instructions vs. Variations
  • Certification
  • Certificates governing money
  • Certificates noting events (or non-events)
  • Key events in project progression
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CA’s instructions vs. Variations

  • The distinction between an instruction and a Variation is

critical.

  • Some, but not all, CA instructions are also Variations
  • Variations change the Contract Documents
  • Variations, therefore, update the express agreement

between Employer and Contractor.

  • Variations – clause 5.1.1 and 5.1.2
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CA’s instructions vs. Variations

  • A Variation results in a change to the Works or the

conditions in which the Works are to be completed

  • Such instructions create an opportunity for the Contractor

to recover the cost of this change work or change in the manner by which the work must be completed

  • Variations are generally required because:
  • Employer changes makes a design change during the

construction phase of the work

  • If a mistake or omission is discovered in the Contract

Documents

  • Overcome unforeseen problems
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CA’s instructions vs. Variations

  • An instruction is used to communicate a Variation to the

Contractor

  • Therefore, all Variations are formally documented as

instructions but not all instructions are variations

  • Can the Contract Administrator issue an instruction

requiring a Variation after the issue of the Practical Completion Certificate?

  • Clause 2.38 allows the Contract Administrator to issue

Instructions for the rectification of materials and workmanship defects but is unclear on the rectification of design defects

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  • Contract Administrator’s role
  • Contract Administrator’s instructions
  • Instructions vs. Variations
  • Certification
  • Certificates governing money
  • Certificates noting events (or non-events)
  • Key events in project progression
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Duties of certifiers

  • The certifier (i.e. CA) is a named individual or firm
  • The CA brings specific professional expertise to the

situation

  • The CA cannot, therefore, sublet their role
  • The CA is an agent of the Employer
  • The CA must act fairly, independently, and honestly
  • In its certifying role, the CA issues certain Certificates in

response to events

  • A Certificate is not the same as an instruction
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Requirements of a certificate

  • Certificates document achievement or occurrence of key

events in a project

  • Certificates must:
  • leave no doubt as to their content and consequences
  • be issued when required by the Contract
  • be issued in accordance with the procedure defined by

the Contract

  • be issued by the correct party
  • be issued to the correct party
  • The CA must issue the Contractor all Certificates at the

same time as they are being sent to the Employer (cl. 1.8).

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  • Contract Administrator’s role
  • Contract Administrator’s instructions
  • Instructions vs. Variations
  • Certification
  • Certificates governing money
  • Certificates noting events (or non-events)
  • Key events in project progression
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Interim Certificates

  • Create a payment mechanism that allows the Contractor to

be paid for the Works as they progress

  • There is no equivalent under common law
  • It is therefore important that SBC/Q is properly executed
  • Issued by CA regularly as the Works are being constructed
  • Oblige the Employer to pay the Contractor for Works

completed in the last valuation period

  • Interim Certificates are the mechanism used to regulate
  • the timing of interim payments (frequency of issue defined in Contract
  • Particulars. Default is one Interim Certificate every month. Governed

by Clause 4.9.1)

  • The amount of such interim or instalment payments (governed by Cl.

4.9.2).

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Interim Certificates

  • Interim certificates are issued in accordance with clause

4.9.1, leading to payments to the Contractor

  • as valued by the Quantity Surveyor under clauses 4.9.2, 4.10.2, 4.12.

4.13

  • and/or as applied for by the Contractor under Clause 4.11.1
  • The Contract Sum often requires to be changed during the

progress of the Works

  • Cl. 4.4 governs how this is done
  • The current Contract Sum is defined in each Interim Certificate
  • Cl. 4.12.1 obliges the Employer to pay the Contractor the

amount stated as due on each Interim Certificate within 14 days from its due date.

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Retention

  • Retention is deducted from each amount otherwise due to

the Contractor through each Interim Certificate

  • Retention Percentage agreed in Contract Particulars.

The default Retention Percentage is 3%

  • Retention is intended to incentivise the Contractor to

complete the Works (including making good defects)

  • Some argue that Retention is unfair to the Contractor
  • The Employer has a fiduciary duty towards the Retention

sum (4.18.1)

  • The Employer must keep the Retention in a separate bank account

(cl. 4.18.3)

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Compensation (“set-off”)

  • “Set-off” is when the Employer withholds payment from

the Contractor

  • This can only be done in accordance with the Contract
  • It is the Employer's recourse if the Contractor does not

complete the Works or comply with instructions

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Compensation (“set-off”)

  • Permissible set-offs:
  • Cost of correcting defects arising during the Rectification

Period if the Contractor refuses to fix them (cl. 2.38)

  • Cost of insuring the Works if the Contractor was to do so, but

has not (cl. 6.7; Schedule 3 option A)

  • Cost of determining the Contractor’s employment and having

to employ another Contractor to replace them (cls. 8.7.1; cls. 8.7.4.1)

  • Retention as agreed in Contract Particulars and permitted by
  • cl. 4.20.
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Interim Certificate

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Statement of Retention

Required by cl. 4.18.2

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  • Contract Administrator’s role
  • Contract Administrator’s instructions
  • Instructions vs. Variations
  • Certification
  • Certificates governing money
  • Certificates noting events (or non-events)
  • Key events in project progression
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Certificates denoting events

  • Practical Completion Certificate:
  • Signifies the CA’s judgment that the Works are sufficiently

completed for the Employer to occupy and use them (Clause 2.30)

  • Half of the Retention is released to the Contractor
  • The Rectification Period starts
  • The CA compiles a schedule of defects which the Contractor

must fix

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Certificates denoting events

  • Non-completion Certificate
  • If the CA judges the Works to be incomplete on the

Completion Date (which may, or may not, be the Date for Completion in the Contract Particulars), it issues a Non- completion Certificate (Clause 2.31)

  • Issue of a Non-completion Certificate obliges the Contractor to

pay Liquidated Damages to the Employer at the rate in the Contract Particulars

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Certificates denoting events

  • Certificate of Making Good
  • Issued by the CA when it judges all the defects arising during

the Rectification Period to have been fixed by the Contractor (Clause 2.39)

  • May be issued before the end of the Rectification Period, the

duration of which is defined in the Contract Particulars (default is 6 months)

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Certificates denoting events

  • Final Certificate
  • Defines the final Contract Sum after all damages, Variations,

and any other adjustments are taken into account

  • Can only be issued after (Clause 4.15) :
  • Rectification Period has ended
  • Certificate of Making Good has been issued
  • Damages for Loss and Expense have been agreed in

accordance with clause 4.5.2 (because the Contract Sum has to be adjusted)

  • Is the definitive statement of the contract’s financial
  • utcome
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  • Contract Administrator’s role
  • Contract Administrator’s instructions
  • Instructions vs. Variations
  • Certification
  • Certificates governing money
  • Certificates noting events (or non-events)
  • Key events in project progression
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Key events in project progression

  • Date for Possession

contract period starts

  • Date for Completion [of the Works] / Completion Date

contract period ends - these dates may, or may not, be the same

  • Practical Completion

the Works are practically completed - half the Retention is released

  • Making Good Defects

the Works and all snagging are fully completed - the remaining Retention is released

  • Final Certificate

the final account is settled

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If it all goes to plan...

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If it all goes pear-shaped...

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If it all goes REALLY pear-shaped...

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Remember to read the full Unit notes and Appendices, and complete your independent study