Production Information
Once all details regarding design and construction has been finalised, the production information concerning the building is required. These documentation can be vaguely categorised into three sections; drawings, schedules and written documentation. Drawings are supplied in the form of schematics layout and elevations and are used to assist the client as well as other professionals to understand the work to be performed.
The drawings are also necessary to gain planning permission and building regulation approval and required by the construction team of the main contractor in order to plan and construct the work. Additional visual aids will include 3D models and computer aided illustrations.
Schedules are used to communicate information for items of work which is numerous and repetitive such as for windows and doors etc. These schedules will be useful for the Quantity Surveyor during the preparation of the Contractors Quantities
Written documentation will be mandatory to provide details which drawings fail to do so such as the quality of the materials and workmanship expected. They will be used as a basis for ensuring that work is properly executed and for valuing work in progress. Forms of such documentation are bills of quantities and specification and method statements.
Contractor’s Quantities
The contractor’s quantities are used to price each aspect of the work and are similar to that of the Bills of Quantities. The contract’s quantities are produced by the quantity surveyor of the contractor but both him and the professional quantity surveyor of the employer’s agent will both price up the works and then compare the prices.
STAGE 3
THEME 2: CONTRACTUAL ARRANGEMENTS; COMMUNICATION BETWEEN THE PARTIES.
- Minutes of Meetings
- Summary of Decisions
- Agreed Decisions
- Research Notes
THEME 2 mEETING aGENDA and mINUTES
Meeting Agenda 2.1
Project: Hertfordshire School of Construction Ltd
Meeting: Starting Meeting (Theme 2)
Date: 6th March 2004
Time: 14:00
Location: Marylebone Campus, Library
Present :
Taha Sheikh-Noor (TSN), Courtney Bramwell (CB), Shazad Mahmood (SM)
Ali Faizollahi (AF), Nikolaos Michalakis (NM)
Agenda Items
Minutes 2.1
Project: Hertfordshire School of Construction Ltd
Meeting: Starting Meeting (Theme 2)
Date: 6th March 2004
Time: 12:30pm
Location: Marylebone Campus, Library
Present :
Taha Sheikh-Noor (TSN), Courtney Bramwell (CB), Shazad Mahmood (SM)
Ali Faizollahi (AF), Nikolaos Michalakis (NM)
Meeting Agenda 2.2
Project: Hertfordshire School of Construction Ltd
Meeting: Progress Meeting (Theme 2)
Date: 9th March 2004
Time: 13:45
Location: Marylebone Campus, Library
Present :
Taha Sheikh-Noor (TSN), Courtney Bramwell (CB), Shazad Mahmood (SM)
Ali Faizollahi (AF), Nikolaos Michalakis (NM)
Agenda Items
Minutes 2.2
Project: Hertfordshire School of Construction Ltd
Meeting: Progress Meeting (Theme 2)
Date: 11 March 2004
Time: 12:30pm
Duration 1 hour 20 minutes
Location: Marylebone Campus, Library
Present :
Taha Sheikh-Noor (TSN), Courtney Bramwell (CB), Shazad Mahmood (SM)
Ali Faizollahi (AF), Nikolaos Michalakis (NM)
Meeting Agenda 2.3
Project: Hertfordshire School of Construction Ltd
Meeting: Progress Meeting (Theme 3)
Date: 16th March 2004
Time: 12:30pm
Location: Marylebone Campus, Library
Present :
Taha Sheikh-Noor (TSN), Courtney Bramwell (CB), Shazad Mahmood (SM)
Ali Faizollahi (AF), Nikolaos Michalakis (NM)
Agenda Items
Minutes 2.3
Project: Hertfordshire School of Construction Ltd
Meeting: Progress Meeting (Theme 1)
Date: 25 March 2004
Time: 12:30pm
Duration 2 hours 5 Minutes
Location: Marylebone Campus, Library
Present :
Taha Sheikh-Noor (TSN), Courtney Bramwell (CB), Shazad Mahmood (SM)
Ali Faizollahi (AF), Nikolaos Michalakis (NM)
Theme 2 SUMMARY of Decisions
Theme 2: Agreed Decisions
The key issues that Theme 2 is concerned with is the contractual arrangements which will take place between the parties involved in the project, namely between the client and the employer’s agent, the client and the contractor, the contractor and the DOM 1 subcontractors and the contractor and the DOM 2 subcontractors.
In addition Theme 2 will also deal with the forms of communications that will take place between the parties involved.
Contractual Arrangements
A contract is an agreement made between two or more persons which is intended to have legal consequences, it is used to define the relationship between the parties, their roles and reinforce the agreement so that a certain party does not withdraw. Thus with a process as complex as a building project contractual arrangements must be formed between the relevant parties involved to protect both the party itself and each other.
Standard Form of Contract
For this project the use of a standard form of contract will be used for all contractual arrangements where possible has been chosen over the use of bespoke contracts since it has been agreed that the use of a standard form of contract has proven to bring numerous advantages to the construction project.
Standard forms of contract are defined by Tuner (1990) as a form of contract produced by a recognised body such as the Joint Contracts Tribunal. They have been developed over many years and provide ‘formal, predetermined arrangements and mechanisms to cope with the situations that can arise during and after the course of a construction project’ (Ramus & Birchall, 1996).
According to Ramus & Birchall (1996) the use of standard forms of contracts is most advisably used in complex construction projects and where a high levels of risks exists but also in all apart from the smallest of projects. In addition the use of standard forms is both cost and time efficient since the client avoids paying for expensive legal services which are required since they will draw up the contracts and the time to draw up the contracts will take longer than compiling a standard form contract.
The use of standard forms of contract has been drawn up by experts and the contracts have been tried and tested and any problems that may have arisen would have been already been resolute by contract law. Furthermore standard forms of contract reduce ambiguity between the parties.
JCT Standard Form of Contract
There are many forms of standard forms of contracts, one of them being the Association of Consultants Architects’ Form of Building Agreement (ACA), this form however is not widely accepted and has had minimal use in the industry as to The British Property Federation System. Another form is the GC/Works Contracts which is mainly used for government or public sector work thus not suitable for this private sector project. The Joint Contracts Tribunal (JCT) is considered by the majority of the industry as ‘industry standard’. (Ramus & Birchall, 1996)
The JCT standard from of contract is the most widely used since it is used in a majority of building projects (91% quoted in 1998) at a value of about three-quarters of all private building projects. This trend in using such contract by clients and contractors demonstrates a high degree of trust and success by all the parties in the use of such contracts. The contract is formed by the Joints Contract Tribunal which according to Ramus & Birchall (1996) consists of members from all sectors of the construction industry:
- Association of Consulting Engineers
- Association of County Councils
- Association of District Councils
- Association of Metropolitan Authorities
- British Property Federation
- Confederation of Associates of Specialists and Subcontractors
- Construction Confederation
- Royal Institute of Chartered Surveyors
- Scottish building Contract Committee
Since the introduction of the JCT standard from of contract, there has been a huge increase in the law and procedures contents matched by a similar increase in continuing professional development dealing with contractual issues, this brings in greater understanding of the issues and obligations involving all the parties who wish to enter in such contracts.
A further advantage of JCT standard from of contract with regards to the issuing parties highlights benefits such as familiarity from use such as greater understanding of the processes, interpretation and tasks involved, saving on drafting time, saving on negotiating time, or saving on senior staff time where transactions can be concluded by clerical staff.
Client and Employer’s Agent
Although it is advisable to use a standard form of contract between the client and employer’s agent, the JCT or any other standard form of contract has specifically designed contracts for this relation. As a result the contract used to form the contractual relations between the client and employer’s agent can only be by obtaining a standard form of contract and then tailor the conditions to suit the relationship here. The contract will need to include the obligations of both parties including the duties the employer’s agent has to carry out. Such duties have been identified by Ramplings Associates as follows:
Budget estimates 1.0
1.1 The employer’s agent will prepare elemental cost budgets to allow the Client's cost requirements to be established at the outset of the scheme.
Tender documentation 2.0
2.1 The employer’s agent will prepare all necessary Employer's Requirements, schedules of work and specifications, based on information provided by the Employer, in order to facilitate competitive tenders and contract documentation.
Assessment and 3.0
negotiation of contracts
3.1 The employer’s agent will examine Contractors'
Proposals and meet with prospective Contractors to negotiate tenders, adjustments to design details, reductions in tender prices and all contractual matters and report to the Employer.
Cash flow forecasts 4.0
4.1 The employer’s agent will analyse tender prices to establish the spread of expenditure for our clients' budget and cash flow forecasting purposes.
Contract documentation 5.0
5.1 The employer’s agent will compile full sets of contract documents including correctly edited Standard Forms, Employer's Requirements, Contractors' Proposals, drawings and the like and arrange for signatures of parties.
Periodic financial reports 6.0
6.1 The employer’s agent will issue Reports on the financial progress of projects and monthly or other appropriate intervals.
Site supervision 7.0
7.1 The employer’s agent will examine work on site to verify compliance with the Contract, and where required will issue Change instructions and convene Site Meetings.
Interim valuations 8.0
8.1 The employer’s agent will value works carried out in site and issue Interim Certificates for payment on account.
Valuing of Changes 9.0
9.1 The employer’s agent will value Changes instructed by the Employer or negotiate prices with the Contractor where appropriate.
Agreement of final 10.0
accounts
10.1 The employer’s agent will negotiate final accounts within the relevant time scales, having due regard to Changes and all provisions of the contract.
Ascertainment of claims 11.0
11.1 The employer’s agent will report on Contractors' claims for additional costs, ascertain the proper valuation of the claim and negotiate with the Contractor where appropriate.
Altering a standard form is considered best in comparison to creating a bespoke contract. This is because of the extra expense and time that will have to be incurred by the client.
Client and Contractor
In contracts where the majority of the design is to be done by the contractor, it’s common and appropriate to use the JCT standard from of contract with contractor’s design (CD81) than the JCT 98. This is due to the fact that it further enhances the understanding to the contracting parties covered in the contract and includes many of the clauses found in the “parent” JCT 98 which is specially designed to deal with this type of contractual procurement arrangements. Thus since the use of JCT contracts have been chosen CD81 will used to form the contractual relation between the client and the contractor.
According to Ramus & Birchall (1996), this contract has been widely accepted by the industry since its introduction and its popularity has continued to increase. Another reason for its popularity has been suggested to be because of effective marketing of the process since other customers has been dissatisfied with the use of other procurement systems. As this is so the system has become more common which in effect has lead to a greater use of CD81. With an increase practice in CD81 it has proven that this contract is much more dependable and reliable as any problems which may have occurred will have been dealt with.
The JCT Standard-form Contract with Contractor’s Design (CD81) is divided into 39 clauses and the characteristics and conditions of contract of CD81 according to Murdoch & Hughes (1996) is as follows:
- Clause 2: Contractor’s obligations are defined and state that the
contractor must execute the works as referred to in the employer’s requirements, contractor’s proposals and other contract documents.
- Clause 4: Concerned with the issuing and power of employer’s instruction
- Clause 5: The contractor must supply all the necessary drawings of the works as
built and information concerning the maintenance and operation of the works.
- Clause 6: Concerned with statutory obligations such as arrangements for
planning permissions, building regulation approval etc.
- Clause 12: Deals with variations which are referred to as ‘changes’ in CD81
- Clause 25: Deals with extensions of time and is extension is granted by the
employer since no contract administrator or architect exists to handle
such a duty.
- Clause 26: Deals with loss and expense
- Clause 30: Conditions as to payment are covered by this clause.
Contractor and Subcontractors
The subcontractors involved (as identified in Theme 1) are domestic subcontracts and the JCT Standard forms of contracts have forms of contracts that are prepared by the Construction Confederation which can be used to form the contractual arrangements between the contractor and the DOM 1 and DOM 2 subcontractors. (Ashworth, 2001)
The documents include (Ashworth, 2001):
- Dom/1a – Domestic subcontract articles of agreement
- Dom/1c – Domestic subcontract conditions
- Dom/2a – Domestic subcontract articles in connection with contractor’s design (CD81)
- Domestic subcontract conditions with CD 81.
Communication between the Parties
Construction projects requires numerous lines of communication which can and needs to taken between all members of the parties involved and the quality and extent of communication and social interaction between the parties of the project will greatly influence the success of the work. According to Ashworth (2001), communication skills are essential if valuable ideas and experiences are shared amongst the parties, in addition communication is required to ascertain facts and delegate tasks in an effective, concise and understandable manner.
According to the Aqua Group (1996) there are certain rules which should be observed when dealing thus effectively communicating with members or parties involved in the project:
- The clauses within the CD81 contract should not be altered in any manner since doing so can have huge impact on the contract, for instance ambiguity to the new wording or one party can be exposed to risks.
- The contract must have executed prior to any start of the Works on site.
- Checks should be made to ensure that all team members have certified copies of the contract documents.
- Figures which are inserted in the appendix to the contract should be realistic and not over optimistic.
- All instructions to the contractor should be only issued by the employer.
- All instructions to the sub-contractor and/or suppliers should be issued through the contractor.
- Standard formats or forms should be used for all routine matters such as instructions, site reports, minutes of meetings, valuations and certificates. As each distinct format becomes familiar with each party the communication links will improved thus encouraging better understanding and flow of information.
- All verbal instructions should be confirmed in writing almost immediately after it has been issued.
- Steps should be taken to ensure that all parties are informed on the progress of the project, development and any other necessary details and not just those who have to act.
- Every member must strive to be precise and unambiguous is all that they do and request.
- All parties must act promptly.
There are three main forms of communication, these being written e.g. letters and e-mails, visual e.g. drawings and slides and oral e.g. meetings and talks off and on site. Within these forms the main lines of communication which takes place between the parties to the contract are:
- Meetings
- Production Information and Co-ordinated Project Information
- Site communication
- Site Visits
- Extranet
Using project extranet all formal communications include all documents that are produced and used to communicate to other parties; informal communication is those which are mainly in the form of meeting and informal gatherings etc.
Meetings
Meetings are defined to be an informal method of communication and are the most common form of communication between the parties which will take place throughout the duration of the project.
Meetings will continuously take place between the client and the employer’s agent. The agent acts on behalf and in the interest of the client and to be able to carry out actions which is the most appropriate for the client the agent must fully comprehend the wishes and requirements of the client as well as the client’s capabilities and constraints, through regular meetings the agent will be able to ‘learn’ about the client. Thus initially the meetings will be used to find out and gather information regarding the client and his needs towards the project in order to produce the employer’s requirements.
Once the contractor’s proposal have been received, the client and employer’s agent will engage in further meetings to discuss and advise the client on the suitability of the proposal submitted in relation to the requirements of the clients. These meetings will help guide the client to decide on whether the client should accept the proposal and the necessary steps that needs to be taken by the client.
When the contractor has been appointed the employer’s agent will have to supervise the contractor’s works as part of his contractual duties to the client. To keep the client informed of the progress of the works as well as consult him on any decisions which needs to be made concerning matters such as the design and construction of the works, the issuing of variations and claims for certain insurances etc, this permits the need for further meetings between the two parties.
The meetings can be in a formal manner where minutes would need to be taken to record any decisions which have been made and actions which needs to be taken or the meetings could take an informal manner, to the extent that it could be e-mails, telephone calls, or casual discussion over lunch etc. Meetings between the employer and employer’s agent of either manner should take place at least once a week so that the employer can be adequately kept up to date on the progress of the works. If certain events arise then the regularity of these meeting will inevitably increase.
Meeting will take place between the client, employer’s agent and the contractor. The employer’s agent will always be present where the contractor and client will meet so that he can provide guidance and advice to the client who has been assumed to be inexperienced with the construction process. Initially the meetings will be concerned with discussing and finalising the contract conditions, this will involve discussing the contractor’s proposal, the contract sum and other relevant issues. Once the contract has been finalised, subsequent meetings between the three parties would be to discuss all aspects of the progress and development of the project and the works and any problems and/or issues which may arise during the works such as variations and injuries etc.
Again the meetings could be of a formal manner where minutes are taken to record the decisions agreed upon and record the actions that has to be taken by certain parties or an informal manner where meetings have not been prearranged. An example of informal meeting could be as general as the client talking to the contractor on the phone or along Building corridors. Any situation where the parties can communicate will provide valuable exchange of information concerning the project. The regularity of these meetings will depend on the complexity of the project, and considering this project is rather simple, monthly meetings may be sufficient. In between these
periods the contractor will hold regular meetings with the employer’s agent who will in turn report back to the client through meetings.
As soon as the contract is in place the building team must hold a meeting as soon as practicable. The manner this meeting is held is greatly significant to the success of the project as it is at this initial meeting as this is where the objective of the project is declared and this should be delivered in a clear and undisputable manner so that no party is unclear or ambiguous to the requirements of the project. This first meeting should be chaired by the employer’s agent since he represents the client and is the party who knows the most about the project, the agenda of the meeting will however have been discussed between the employer’s agent and the contractor. The following attendance will be required:
- Quantity Surveyor
- Clerks of Works
- Quantity Surveyor
- Design Team representative
- Building Team representative
- Building Services consultant
- Structural Engineer
- Foundation Sub-contractor
- Roof Sub-contractor
According to the Aqua Group (1996), the agenda for this meeting should include:
- Introducing those who are attending: A formality to introduce to the team the parties that are taking part.
- Factors affecting the carrying put of the work: These factors may include access to site, space availability, working hour restrictions, site investigation etc.
- Programme: To introduce the basic programme drafted for the project so that the parties are aware of the time scale they are working with.
- Lines of communication: The forms an types of communication which could and should be used to communicate between the parties when required.
- Insurances
- Procedure to be followed at subsequent meetings: Identify procedures which should be followed during subsequent meeting. For instance the employer’s agent and/contractor must notify the parties of the times, dates and location of site meetings. The agenda should be agreed beforehand and minutes should be impartially drafted to provide an accurate account of the decisions reaction and actions defined from each meeting.
Again scheduled meeting will take on the formal manner of taking minutes etc, which will take place at no more than four week intervals, but informal meetings can also take place between any of the parties involved. For instance the quantity surveyor of both the employer’s agent and the contactor can exchange general information without the need of arranging meetings and recording minutes.
In replace of the contractor meeting with the client, the contractor will have more frequent meetings with the employer’s agent. The contractor will arrange formal meetings with the employer’s agent to discuss the progress of the works. Any concerns which either party may have can be discussed here and if the client’s opinion is required then the agent will report back to the client or in order to save time these two parties as well as the client will hold meetings as described above.
The meetings between the employer’s agent and the contractor will occur on a weekly basis. The formal approach will be taken to meetings at the initial stages of the project especially during the design stage where changes to the design of the works can be vast. When the construction of the works is at a mature stage, the formal meetings can be scheduled to a fortnightly basis and during the intervals between meetings the two parties can hold informal meetings to provide each other a quick and efficient way to report any problems and discuss any issues.
Meetings will take place between the contractor and DOM 2 sun-contractors. DOM 2 sub-contractors are responsible for a portion of the design works, in this case it is the foundation, roof and window and thus both parties will need to engage in meetings to discuss the integration between the design of the building and the designs of the other structural features.
Meetings between the two parties will be on a weekly basis during the design stage as the contractor needs to ensure the changes made to the design is still compatible with the designs provided by DOM 2 sub-contractors and if not, the designs will need to be changed. Once the works has entered the construction phase, the frequency of the meetings will be kept as the contractor needs to be constantly informed on the progress of DOM 2 sub-contractor’s work so that the contractor can report back to the employer.
Meetings will take place as part of communication between the contactors and the DOM 1 sub-contractors. These will take place during the final design stage this just before the mobilisation stage. The meetings will be used to arrange the contractual arrangements between the two parties; discuss what the contractor will expect of the subcontractors including its compliance with the works programme and the services which the sub-contractor will provide.
The main parties which will communicate with each other has been discussed but it must be noted that informal communication may occur between any of the parties involved. For example communication could occur between the client and the DOM 2 subcontractor during the client’s site visit. Such exchanges can also provide valuable knowledge for both parties.
Production Information and Co-ordinated Project Information
The production information identified in Theme 1 is considered to be a formal method of communication between the parties.
The employer’s requirement is one of the most important communication links between the employer and the contractor, this document is responsible for instigating the project by requesting for offers. The document contains information on the client’s needs and the project’s objectives and requirements and this information is communicated to the contractor.
The contractor’s proposal is again used as a communication link between the client and the contractor. The proposal is use to explain to the client the contractors intentions i.e. his proposed approach, design and cost for the project which the contractor believes will meet the requirements of the client.
The contract sum analysis further provides additional communication between the parties since the document is used to demonstrate the financial and contractual obligations between the parties.
Production information in terms of drawings and specifications of the final design is highly important since it communicates from the contractor to the subcontractor or vice versa and from the contractor to the client the nature of the design and how all the relevant compensate integrate together. In addition, such information provides the client valuable information on the cost of the project since with such documents the quantity surveyor is able to draw up a more accurate forecast of the costs of this project.
Since documentation in the form of drawings and specification acts as a communication link between all members involved in a project. It should ideally provide accurate and adequate information to all parties since it is vital in allowing the planning, execution and management of building work to take place.
Coordinated Production Information (CPI) was created to act as a probable standardisation of project information so that is was a universal working method which would be understood throughout the industry. CPI is a set of conventions devised by the Co-ordinating Committee for Project Information and is listed as follows:
- Common arrangement of work section for building works (CAWS)
- Production Drawings, a code of procedure for building works
- Project Specification, a code of procedure for building works
- National Building Specification
- National Engineering Specification
- Standard Method of Measurement of Building Works, Seventh Edition
- SMM7 Standard Descriptions.
If these conventions were adopted during the creation of production drawings it would enhance the clarity of the written and visual documents thus be able to communicate information in a more transparent manner to all parties.
In addition written notices are also recognised as part of production information, these written notices would be used in situation such as:
- Issuing of employer’s instructions
- Application for extension of time
- Application for insurance claims
- Application for loss and expense
- Variations
Site communication
Site communication is an important aspect in ensuring the safe and efficient management of the works on site. Such communication takes place between various members who work on site for instance between the site manager and its labourers.
Such communication can be orally in the form of meetings, written in the form of documents concerning the works to be executed or procedures to be taken and visual in the form of charts, schedules, filling in drawings and timetables etc.
Site Visits
Inspection of the works by the client and the employer’s agent during site visits and without oral or written documents be able to communicate from the contractor to the client and the employer’s agent of the progress of the works.
Such visits should ideally take place on a monthly basis thus the client is therefore kept up to date on the progress of the works. As mentioned above, during client’s site visit he has the opportunity to communicate between other parties involved in the project, these being the sub-contractors.
Such communication is based on ensuring that each member understands their tasks and duties which need to be carried out and provide them the opportunity to voice any concerns or problems which they may face.
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The incorporation of using technology and the internet within the administrative processes of project has numerous advantages which is beyond the scope of this project, but is a valuable line of communication between the contractor and the employer and employer’s agent in respect to exchanging financial information regarding the project.
The contractor will store and analyse costs and expenses using database computer applications which will provide a quick and relatively accurate account of all costs providing human errors are not made. This data can be easily manipulated and changed where necessary. Using the wide area network, the contactor is able to send this information to the employer in a time efficient manner, thus avoids the time delay experienced using the postal system or the time consuming process of meetings
sTAGE 4
THEME 3: CONTRACT VARAITIONS; DELAYS TO THE WORKS.
- Minutes of Meetings
- Summary of Decisions
- Agreed Decisions
- Research Notes
THEME 3 mEETING aGENDA and mINUTES
Meeting Agenda 3.1
Project: Hertfordshire School of Construction Ltd
Meeting: Starting (Theme 3)
Date: 23 March 2004
Time: 12:30 pm
Location: Marylebone Campus, Library
Present :
Taha Heikh-Noor (TSN), Courtney Bramwell (CB), Shazad Mahmood (SM)
Ali Faizollahi (AF), Nikolaos Michalakis (NM)
Agenda Items
Minutes 3.1
Project: Hertfordshire School of Construction Ltd
Meeting: Starting (Theme 1)
Date: 30th March 2004
Time: 13:30
Location: Marylebone Campus, Library
Present :
Taha Heikh-Noor (TSN), Courtney Bramwell (CB), Shazad Mahmood (SM)
Ali Faizollahi (AF), Nikolaos Michalakis (NM)
Meeting Agenda 3.2
Project: Hertfordshire School of Construction Ltd
Meeting: Progress Meeting (Theme 3)
Date: 1 April 2004
Time: 12:30pm
Location: Marylebone Campus, Library
Present :
Taha Heikh-Noor (TSN), Courtney Bramwell (CB), Shazad Mahmood (SM)
Ali Faizollahi (AF), Nikolaos Michalakis (NM)
Agenda Items
Minutes 3.2
Project: Hertfordshire School of Construction Ltd
Meeting: Progress Meeting (Theme 3)
Date: 8th April 2004
Time: 12:30pm
Duration 2 hours
Location: Marylebone Campus, Library
Present :
Taha Heikh-Noor (TSN), Courtney Bramwell (CB), Shazad Mahmood (SM)
Ali Faizollahi (AF), Nikolaos Michalakis (NM)
Meeting Agenda 3.3
Project: Hertfordshire School of Construction Ltd
Meeting: Progress Meeting (Theme 3)
Date: 19th April 2004
Time: 12:00
Location: Marylebone Campus, Library
Present :
Taha Sheikh-Noor (TSN), Courtney Bramwell (CB), Shazad Mahmood (SM)
Ali Faizollahi (AF), Nikolaos Michalakis (NM)
Agenda Items
Minutes 3.3
Project: Hertfordshire School of Construction Ltd
Meeting: Progress Meeting (Theme 3)
Date: 8 April 2004
Time: 11:00am
Duration 45 minutes
Location: Marylebone Campus, Library
Present :
Taha Heikh-Noor (TSN), Courtney Bramwell (CB), Shazad Mahmood (SM)
Ali Faizollahi (AF), Nikolaos Michalakis (NM)
Theme 3 SUMMARY of Decisions
Theme 3: Agreed Decisions
The key stages which Theme 3 is concerned with are the contract administration during the course of the works on site. This includes the contractual provisions for dealing with the issuing of variations and the valuation of variations to the contract between the client and the contractor and the establishment of a suitable procedure for managing this procedure and reporting the costs. In addition the contractual provisions for dealing with delays to the progress of the works will also be attained within this theme.
Since the project uses the JCT Standard Form of Building Contract, With Contractor’s Design (CD81) between the client and the contractor, all contractual provisions will be taken from the appropriate JCT contract clauses.
Contract Variations
Variations in a project is just one of many items which can lead to a change in the contract sum, this variation or ‘change’ as it is referred to in CD81 needs to be evaluated in terms of its costs impact on the forecast of the final cost.
It is noted that variations are less likely to occur than in other methods of procurement such as the Traditional system, since if these are executed they can be expensive and have huge implications on the cost of the project. Nonetheless, variations can occur in projects.
Origin of variations
Variations can arise in three ways, the first being from the client who may have changed their minds on certain aspects of the work (Hughes & Murdoch, 1996). If this is the case the variation is introduced by means of an employer’s instruction, these are equivalent to that of architect’s instructions but since an independent architect is not required to design the work in , the client is left with the authority to
issue such instructions. However according to The Aqua Group (1996) whilst all variations are a consequence of employer’s instructions not all employer’s instruction are variations.
Clause 4 in CD81 is concerned with employer’s instructions; however the employer’s power to issue such instructions is slightly restricted. For instance if he requires the need to issue instructions which will affect the design of the works, he cannot do so unless with the consent of the contractor. In addition variations which can go to the root of the contract are not permissible. (Wainwright and Wood, 1983)
Another mean which variations can arise is from the contractor who may not have finished the design of the work when the contract was signed or an error was made on their part during the designing stage (Hughes & Murdoch, 1996). The contractor cannot however issue variations, he will need to discuss with the client the need for the variation and request for the client to issue the variation, in essence the contractor requires the client’s approval to the variation.
The third way through which variations can occur is through force majeure (acts of gods) or other external forces such as changes in legislations which can lead to variations in design or construction. (Hughes & Murdoch, 1996), they were beyond the control of both parties.
Regardless of the origin of the variation, the contractual provision by way of Clause 12 will deal with the variations in the same manner. The only deviation is the party who will become responsible for funding the variation.
Clause 4: Employer’s Instruction
Within CD81 clause 4 is included to deal with the issuing of employer’s instruction which is needed to validate all variations regardless of the variation’s origin. Further, any oral instructions which concerns a variation will not be valid unless it is supported by written confirmation. If this is not done the quantity surveyor is unable to value the variation since the quantity surveyor’s duties under the contract only has authority
to measure and value variations for the final account which has been authorised by the employer in writing. (Wainwright and Wood, 1983)
Variation instructions are written on a special form headed ‘Variation Order’ and provisions are made for the variation issuer i.e. the client to sign at the bottom. This will constitute as a valid document verifying the validity of the instruction. (Wainwright and Wood, 1983)
Clause 4 continues to state that the contractor must comply with all instructions issued to him by the employer. If the contractor fails to correspond to the instruction within seven days of receipt of the clause allows the employer to seek other persons to execute the instruction and all costs incurred will be deducted from the monies due to the contractor. If the contractor wishes to reasonable object to the instruction he can do so through writing to the employer under clause 4.2 request the client to specify in writing the contractual provisions which allows the employer to issue such an instruction.
Clause 10: Person in Charge
Although clause 10 was not identified in the contract in theme 2 it has been decided to include clause 10 in the contract since it is a communication point involved in the issuing of the variation.
Clause 10 of CD81 states that the contactor must appoint a person to be kept on site constantly; this is by way of the Site Manager who was identified in theme 1. The site manager is then held responsible for any instructions given to him by the employer thus the equivalent of passing the instruction to the contractor. (Wainwright and Wood, 1983)
Clause 12: Change
A contractual provision to deal with all matters concerning the issue of variations has been included in the CD81 as mentioned above, by way of Clause 12 as agreed upon in Theme 2. The advantage of including such a clause is that the contract can accommodate any necessary changes which have to be made, otherwise any changes
would necessitate the need to draw up a new contract which would be costly and inconvenient to both parties (Ashworth, 2001)
For clarification purposes, the Clause 12.1 attempts to define variations:
12.1 The term ‘Change” in the Employer’s requirements or “Change” means a change in the Employer’s Requirements which makes necessary
12.1 .1 the alteration or modification of the design, quality or quantity of the
Works including
.1 .1 the addition, omission or substitution of any work
.1 .2 the alteration of the kind or standard of any of the materials or
goods to be used in the Works,
.1 .3 the removal from the site of any work executed or materials or
goods brought on the site by the Contractor for the purposes of the Works; but not the removal from the site of any work executed or materials or goods brought in the site which are not in accordance with this Contract
12.1 .2 the addition, alteration or omission of any obligations or restrictions
imposed by the Employer in the Employer’s Requirements;
.2 .1 in regard to access to the site or use of any specific parts of the site; or
.2 .2 limitations of working space; or
.2 .3 limitations of working hours; or
.2 .4 the execution or completion of the work in any specific order.
(Jones, 1984)
It is noted that clause 12 does the grant the employer the power to order variation where the work is entirety omitted only to be awarded to another contractor. (Wainwright and Wood, 1983)
Clause 12.2 makes provisions for the instructions from either the client or the contractor which requires a variation. The clause states that without the consent of the contractor, the employer may not execute a change which “is an alteration of modification in the design if the Works; or makes necessary an alteration of modification of the works.” (Jones, 1984), and the contractor should not unreasonable delay the reply. In addition the variation required by the employer or those that are sanctioned by him will not invalidate the contract.
Clause 12.4 refers to the how the variation should be valued. The clause provides two alternatives these being Alterative A and Alterative B. With Alternative A the contractor is requested to produce a contractor’s price statement within 21 days from the receipt of the employer’s instruction. The price statement will include the contractor’s price of the works based on the rules of valuation of variation stated in clause 12.5 and any direct loss or expense costs due to variations which delay the progress of the work and cannot finish at the stipulated practical completion date. The quantity surveyor of the employer’s agent will then consult the employer and decide upon whether to accept of reject the statement. Where the statement is not accepted the quantity surveyor must provide reasons to the contractor as to why it has been rejected. A further probability is the quantity surveyor will only accept the statement if the changes stipulated by the quantity surveyor are made. If no agreement is reached between the two then both parties can resort to dispute resolution. If Alternative B is chosen then the works is valued according to clause 12.5 by the employer’s agent quantity surveyor.
Clause 12.5 provides several methods for the use of valuation of variations; the method used is dependent on the circumstances of the variation and decided upon by the quantity surveyor and does not have to be stipulated on the outset. These methods are summarised by Smith (2004) as follows:
- Where work as can be measured (regardless of whether the work is measured on site or off site from drawings)
- Where the work is of a similar character and executed under similar conditions and the work does not significantly change the quantity of the work set, the contractor’s quantities and the sum analysis will be used.
- Where the work is of a similar character and executed under similar conditions but the quantity of the work has significantly changed in quantity, the schedule of rates is again used but a fair allowance is included to compensate for the difference in quantity.
- Where the work is of a similar character and does not significantly change the quantity of the works but is executed under dissimilar conditions, the schedule or rates is used and a fair allowance is included to compensate for the difference in conditions.
- Where the work is dissimilar is character, conditions and quantity fair rates and prices are used.
- Where work cannot be measured the work is valued using dayworks. In these circumstances the contractor is required to submit vouchers on a weekly basis (Clause 12.5.4) which gives full details on of labour, materials and plants used in carrying out the work. These vouchers are verified by the clerk of works before the variation could be valued.
It has been assumed that both Alternative A and Alternative B is provided in the contract since CD81 does not stipulate that only one should apply, thus when variations does arise the parties has the choice of either.
Clause 12.5.7 is a contractual provision for the contractor to make a written application to the employer for reimbursement of addition expenses due to the variation (Ramus & Birchall, 1996). Thus according to Wainwright and Wood (1983), if the contactor suffers any direct loss and/or expense as a result of a variation valued in accordance with Clause 12.5, the employer or in this case the quantity surveyor of the employer’s agent must determine the amount that is lost to the contractor and include it in the contract sum (Clause 26.3). Further, Wainwright and Wood (1983) also states that claims for ‘disturbance costs’ or ‘loss of anticipated profit’ could come under this heading.
Clause 25: Extension of Time
If and when variations are executed the work is likely to be delayed, if and when this becomes the case the contractual provision of clause 25 used in CD81 can come into effect.
Under clause 25.2 the contractor must give written notice to the Employer when a delay “becomes reasonably apparent” (Jones, 1984), the notice must also include reasons for the cause of delay and the estimated period of delay (Ashworth, 2001). The aim for this application is to apply for an extension of time which can be granted under clause 25.4.5.1 (Jones, 1984) and must be submitted no later than 12 weeks before practical completion of the works. If the extension of time is granted then the contractor can avoid paying liquated and ascertained damages (LAD), which are damages agreed on the outset of the contract that has to be paid by the contractor to the client if the contractor does not complete the works on the stipulated practical completion date.
Upon the receipt of the notice of delay, the employer’s agent and the client will hold meetings to discuss whether the events listed are Relevant Events. Relevant Events are delays caused by the employer or through no fault of either party, if the event in their opinion is considered to be relevant the extension of time is granted and a new completion data is fixed under clause 25.3. As a result variations which are caused by the client or external forces are likely to be granted an extension of time and avoid the burden of paying LAD. However variations caused by the contractor themselves may be less successful in their application for extension of time.
(Refer to: ‘Delays to the Progress of Works; Clause 25: Extension of Time for a further discussion on this issue)
Clause 26: Loss and Expense
The inclusion on clause 26 in CD81 is to deal with losses and expenses which may arise from any situation including variations which has occurred through no fault of the contractor. The clause is used to reimburse the contractor of any loss or expense caused to him which cannot be reimbursed elsewhere under the terms of the contract.
The loss and expense claim must be of matters which materially affects regular process of the works. The clause 26.2 lists the matters as follows, which could affects the regular process of works thus would most likely qualify for loss and expense claims.
- Delays in the receipt of instructions
- Opening up of work for inspection or testing of materials, providing the items were in accordance with the contract.
- Inconsistent or conflicting items between the contract drawings, contract bills and numbered document.
- Work being carried out by firms employed directly by the employer, including the supply of good and/or materials by the employer.
- Postponement of any work to be executed under the provisions of the contract.
- Ingress or egress from the works at the appropriate time is not provided by the employer.
- Variations issued by the client under clause 12.2
- Where the approximate quantity which was included at the outset of the project was not a reasonably accurate forecast of the work that was actually executed.
- Compliance of non-compliance by the employer with clause 6 (Statutory obligations, notices, fees and charges)
- Suspension by the contractor of the performance of the contractor’s obligations, providing the suspension was not frivolous or vexatious.
The matters listed are those for which the employer is responsible for, being acts of omissions of the employer of the employer’s agent. The list therefore does not cater for circumstances which are unknown, undefined, the result of commercial risk, bad pricing, bad weather or bad organisation or management of he contract (Ramus & Birchall, 1996). Further, such cases which involve bad weather etc. would be covered by insurance policies taken out under clause 21 and clause 22.
To ensure the clause is complied with, the procedure which needs to be followed begins with clause 26.1 which states that the contractor should make a written application to the employer as soon as it becomes apparent the work is/will be affected, stating that “he has incurred or is likely to incur direct loss/or expense in the
execution of the contract” as a direct result of any or more of the those matters listed in clause 26.2 and would like to be reimbursed for any loss or expenses suffered. The application has to be in written form since an oral application made to the employer is insufficient and the employer will need take no action from such an application.
To support his claim the contractor needs only to provide the necessary information which is required to ascertain the amount of loss or expense encountered. As a result the contractor has to be prepared to disclose information concerning for example, actual wages, bonuses paid to operative, details of head office overheads etc. (Ramus & Birchall, 1996). The information provided should be presented in an orderly and transparent manner as this will help the quantity surveyor’s of the employer’s agent to evaluate the claim. Once the quantity surveyor of the employer’s agent has received the documents from the contractor he will, according to Ashworth (2001), examine whether the claim is justified. To do this he must firstly assess and agree that the regular progress of the works has been delayed by one of more of the listed events and he will make reference to the contractor’s master programme for this purpose, then he will ascertain the accurate and fair amount which the contractor is due. This amount is then added to the contract sum.
The head of claim may be as follows (Ramus & Birchall, 1996):
- Inefficient use of labour and/or plant
- Increase in costs of labour, materials, etc. during the period of disruption
- Site running costs
- Head office overheads
- Finance charges and interest
- Loss of profit
In relation to variations Clause 26.2.6 applies as the matter here is “employer’s instruction issued under clause 12.2 effecting a Change or under clause 12.3 in regard to the expenditure of provisional sums”. If the variation is due to the requests
or fault of the employer then the contractor therefore may have reasonable grounds to apply for loss and expense if any such loss and expense has occurred.
Clause 22A: Erection of new building; all-risk insurance of the works by the contractor.
In instances where the variation is through no fault of the client and extra costs are incurred, Hertfordshire School of Construction Ltdor the contractor can recover such costs through clause 22A.
(Refer to: ‘Delays to the Progress of Works; Clause 22: Insurance of the Work’ for further discussion on this issue)
Valuation and Measuring of Variations
To begin the process of measurement and valuation of variations the work, the quantity surveyor will take analyse each employer’s instruction which has lead to a variation in turn and the work that is was originally designed and will now be substituted is identified, isolated and valued; the sum which arises as a result of such an analysis will be deducted from the contract sum accordingly. Following this the work which will be required to replace the omitted work will again be identified, measured and valued. This value will then be included in the contract sum. (Ramus & Birchall, 1996)
If the work can be measured the measurements are taken from the drawings and the contractor’s quantities produced by the contractor or physically measuring the work on site if the drawings are not available. If the measurements are to be taken on site then it would be done after the site visits since at this time all the necessary parties i.e. the contractor’s representative, site manager, employer’s agent, clerk of works, the subcontractors, and the quantity surveyor of both the client and contractor are in attendance. This is supported by Wainwright and Wood (1983) who suggests that as the contractor’s surveyor is present the opportunity is there for the quantity surveyor of the employer’s agent to measure the work since clause 12.6 lays the duty upon him to provide the contractor the opportunity to be present when such measurement takes place. (Ramus & Birchall, 1996)
However the quantity surveyor of the employer’s agent must give notice to the contractor of his intentions to visit the site to measure so that the contractor can be present and make the necessary provisions. (Ashworth, 2001)
The rules that were followed in the SMM7 to measure the initial work that was omitted should also be used to measure the substituted work on site or from the drawings (Ramus & Birchall, 1996). This is so that the measurements are consistent with one another.
When recording the measurements the quantity surveyor will record the dimensions for each variation on a new page of the bound dimension book. The page will be clearly headed with the employer’s instruction number and include further details such as the date the employer’s instruction was issued, date measures and a description of the variation (Wainwright and Wood, 1983). For clarity and ease of work, every column in the dimensions column work to be omitted will be title OMIT and written in red ink. Work to be added will be headed with ADD and written in black ink.
To manage the variation documents both the quantity surveyor of both parties will as suggested by Wainwright and Wood (1983), keep a special file for all variation documents. The file will include instructions issued by the employer in numerical order as well as copies of all drawings which relate to the variations and are marked distinctly in red as variation drawings.
When the measurements has been completes the dimensions will be worked up into variation accounts and the relevant amount is omitted or added to the contract sum accordingly. (Ramus & Birchall, 1996)
Contingency Sum
Another contractual provision used to deal with variations is the establishment of a contingency sum. The sum will account for 3% to 5% of the contract sum and is included to cover the expenditure of items of work which were reasonably unforeseeable at the design stage; the sum however is not used to fund to pay for design variations except with the approval of the employer. (The Aqua Group, 1996)
To account for the monthly expenditure, the professional quantity surveyor who is part of the employer’s agent’s firm will produce reports on a monthly basis. The reports will identify the amount of contingency sum still remaining and the adequacy of this amount in the circumstances. For instance as the project progresses this sum may be reduced as the risk of unforeseen circumstances reduces or having spent a substantial portion of the sum at the early stages consideration must be given to whether an additional amount needs to be allowed for. The report will highlight these issues and report back to the client accordingly. (The Aqua Group, 1996).
Delay to the Progress of the Works
In the event that a storm has delayed the progress of the work and has caused the contractor to carry out additional work which was not envisaged when the contracts were signed several issues will arise and have to be dealt with.
Clause 25: Extension of time
As a result of the storm the work as mentioned will inevitably be delayed, consequently the contractor runs the risk of not completing the work on time at the practical completion date and he may have to pay liquidated and ascertained damages to the client as a result.
To avoid paying for such damages CD81 will contain the express contractual provision through clause 25 which permits the contractor to apply for an extension of time thus the period allowed for the contractor to undertake and complete the works can be extended and the practical completion date is extended. However clause 26 only caters for delays which are neither the fault nor the responsibility of the contractor (Murdoch & Hughes, 1996). In addition, an extension will only be granted if the delay is likely to delay completion, if with the delay completion can be achieved within the stipulated date or where the contractor is ahead of schedule and when the delay occurs the ‘slack’ can be taken up when the delay occurs then the application will be refused. (Murdoch & Hughes, 1996)
The completion date can only be extended if the circumstanced from which the delay arises from is strictly in accordance with the contract provisions and so if the contract does not cover the event then the contractor cannot claim for an extension (Murdoch & Hughes, 1996). Such events which can qualify for a successful application for an extension of time are listed under Relevant Events.
Events which are regarded as Relevant Events are as follows:
- Clause 25.4.1: Force majeure.
- Clause 25.4.2: Exceptionally Adverse weather conditions.
- Clause 25.4.3: Loss or damage occasioned by any on or more of the clause 22
perils. (These perils are those items which are insurable risks e.g. fire, lighting, explosion, storm etc. thus will refer to the insurance clause of clause 22.)
- Clause 25.4.4: Civil commotion, local combination of workmen, strike or
lock-out affecting:
- any of the trades employed upon the works;
- any of the trades engaged in the preparation, manufacture or transportation of any of the good or materials required for the Works
- any persons engaged in the preparation of the design of the Works
- Clause 25.4.5.1: Compliance with the Employer’s instructions under statements:
- Divergence
- Changes (Variations)
- Provisional Sums
- Postponements
- Antiquities
- Clause 25.4.5.2: Compliance with the Employer’s instructions in regard to the
opening up for inspection of any work covered up (including
making good in consequence of such opening up) unless the
inspection showed that the work, materials or goods were not in
accordance with the Contract.
- Clause 25.4.6: The contractor not having received in due time necessary
instructions, decisions, information or consents from the Employer which the Employer us obliged to provide or give under the Conditions for which the Contractor specifically applied in writing. Providing the application was made on a date which having regard to the Completion Date was neither unreasonable distant form nor unreasonable close to the date it was necessary for the Contractor to receive the same.
- Clause 25.4.7: Delay in the receipt of any necessary permission or approval of
any statutory body which the Contractor has taken all practical
steps to avoid or reduce.
- Clause 25.4.8.1: The execution of work, not forming part of this Contract, by the
Employer himself or failure to execute such work or by the
persons employed or otherwise engaged by the Employer or
failure to execute such work
- Clause 25.4.8.2: The supply by the Employer of materials and good which the
Employer has agreed to provide for the Works or the failure so far to supply.
- Clause 25.4.9: The exercise after the Date of Tender by the UK Government
of any statutory power which directly affects the execution of the Works by restricting the availability or use of labour which is essential to the proper carrying out of the works or; by preventing the Contractor from, or delaying the Contractor in, securing goods materials fuel or energy essential to the proper carrying out of the Works.
- Clause 25.4.10: The contractors inability for reasons beyond his control to
secure labour, goods or materials essential to the proper carrying out of the Works, which reasons the Contractor could not reasonably have foreseen at the Date of Tender.
- Clause 25.4.11: The carrying out by a local authority or a statutory undertaker
of work in pursuance of its statutory obligations in relation to
the Works, or the failure to carry out such work.
- Clause 25.4.12: Failure of the Employer to give in due time ingress or egress
through or over any land, buildings, way or passage (adjoining or connected with the site and in the possession and control of the Employer) to or from the site of the Works; in accordance with the Employer’s Requirement after receipt by the Employer of any notice the Contractor may be required to give or as agreed between the Employer and the Contractor.
- Clause 25.4.13: Delay which the contractor has taken all practicable steps to
avoid or reduce consequent upon a change in the Statutory Requirements after the Date of Tender which affects the Works or; has taken practicable steps to avoid or reduce consequent upon an amendment to the Contractor’s Proposal.
(Jones 1984)
Certain procedures will have to be followed in order to comply with the provisions of clause 25 and an extension of time is validly granted. To begin, the contractor must do his utmost to prevent delays from occurring in the works as stated in clause 25.3.4.1:“The contractor must use constantly his best endeavours to prevent delay in the progress of the works howsoever cause” (Jones, 1984).
When the main contractor is reasonable aware that the progress of the works is likely to be delayed and completion may not be achieved at the practical completion date as assumed here, the contractor must under Clause 25.2.1 inform the employer in writing of such an occurrence. This notice must provide the employer with details of the “material circumstances including the causes of the delay and the contractor must identify any event which in the Contractor’s opinion is a Relevant Event” (Jones, 1984). In addition the contractor should where possible provide information on the expected effects of the delay (Clause 25.2.2.1) and an estimate of the extent of the delay with respect to the date of the completion of the works (Clause 25.2.2.2) Where this information cannot be provided the contractor should declare that the details will be forthcoming if and when they become available (Ashworth, 2001). Further the sub contractors that are affected must be sent a copy of any notices which refers to them. (Murdoch & Hughes, 1996)
When the employer receives the notice of delay, he and the employer’s agent will discuss the application for an extension of time. They must first consider whether the contractor has reasonable basis for an extension of time i.e. does the circumstances arising constitutes to any of the relevant events listed in the contract. If it does, as the case here since it is agreed to fall under clause 25.4.1, the employer must next consider whether the completion of the works will be delayed beyond the completion date by this delay. (Murdoch & Hughes, 1996)
Whether an extension of time is or is not granted, under clause 25.3.3, the employer must inform the Contractor in writing and no less than 12 weeks before the practical completion date if practical or before the completion date if this is less than 12 weeks away (Murdoch & Hughes, 1996).
If it is granted the written document will contain details on the events which in the employer’s opinion constitutes to relevant event thus is the basis for the extension of time (Clause 25.3.1.3). The new completion date is fixed and is deemed by the employer to be fair and reasonable (Clause 25.3.1.). In compliance with Clause 25.2.3, from this point forward the contractor must keep the employer’s agent and employer up to date with any developments such as further delay, further notice or further extension of time (Jones, 1984). If further time is required then the contractor must repeat the procedure from the beginning.
Then again, under clause 25.3.2, the employer reserves the right to bring forward the date due to the deduction of other work, but cannot be earlier than the original completion date stipulated at the outset of the contract (Murdoch & Hughes, 1996). The employer must give reasonable notice (12 weeks) to the contractor informing the contractor of his decision and demonstrate that this is a fair and reasonable action to take. (Ashworth, 2001)
In relation to Theme 3, the act of the storm causing delay to the progress of the work has been decided to be a force majeure (an act of god) as neither party i.e. the client of the contractor is liable since they could not foretell such an event will occur nor do they have the ability to prevent such an occurrence thus was beyond the control of both parties (Ashworth, 2001). Since the contractor has to carry out additional work in the form of operations to minimise the impact of flood water works the Work may not be completed on time thus the contractor can apply for an extension of time under Clause 25.4.1
As the roof finishing were stored on the roof and where blown off the roof and damaged, new roof finishing will have to be ordered and delivered to the site, this could lead to a possible delay in the work. From this the contractor can also apply for an extension of time since it was again due to the storm (force majeure) but the employer would give consideration to that fact that negligence had contributed to this delay since the materials should have been stored in a more appropriate location thus may effect the period of extension that will be granted if granted at all.
Clause 24: Damages for non-completion
If in the event that the contractor fails to be granted an extension of time and must pay liquidated and ascertained damages then clause 24 is the contractual provision for such an occurrence.
Liquated and ascertained damages are a genuine pre-estimate of loss and not a penalty inserted to make it a bad bargain for the contractor to not to carry out his part of he contract. The sum is agreed at the outset of the contract, stated in the appendix to the contract and is intended as compensation for the client’s loss and not as punishment for the defendant.
If and when the work is not completed by the completion date the employer’s agent will issue a certificate accordingly. Under clause 24.1, this certificate allows the employer to deduct monies from that due to the contractor the liquated and ascertained damages. (Ashworth, 2001)
Insurance clauses
Where damage and delays to the works has arisen these events will no doubt have cost implications, in most if not in all circumstances extra expenditure is required and the party who will bear the cost liabilities are either the client or the contractor, dependent of the circumstances. Insurance clauses are contractual provisions used to financially protect the parties who are involved with construction.
Clause 20: Injury to Persons and Property and Indemnity to the Employer
Clause 20 is included in CD81 to cater for the protection of the employer by the contractor if the employer is sued by a third party and is a type of liability insurance policy. It is taken out under the contractor’s name and places an obligation on the contractor to indemnify the employer against the consequences of injury to persons or property (Ramus & Birchall, 1996).
Clause 20.1 states that the contractor must indemnify its employer against any expense, liability, loss, action brought against him regarding personal injury or death to any person (Ramus & Birchall, 1996) “arising out of in the course of or by reason of the carrying out of the works” by the contractor or the contractor’s appointed subcontractors However this indemnity does not extend beyond circumstances where personal injury or death is due to an act or neglect of the employer or persons directly under the employer’s control. (Ashworth, 2001)
Clause 20.2 states that the contractor must indemnify the employer in respect to damage to property to the extent that it is due to “negligence, breach of statutory duty, omission or default” by the contractor or by someone directly under the control of the contractor (Murdoch & Hughes, 1996), thus the clause does not apply to instances either where the damage was due to the fault of the client or neither party was at fault.
In the case of Theme 3, the owner of adjoining properties that were damaged by the blown off roof finishing may pursue legal action and sue the employer i.e. Hertfordshire School of Construction Ltdfor damages. Since the roof finishing were not stored in a secure manner the roof subcontractor and the contractor were negligent, and so the contractor must take on the responsibility of paying any damages the employer owes to the owners if their legal action is successful.
Clause 21: Insurance against injury to persons of property
To ensure the contractor is able to handle the financial duties allocated to him by clause 20, clause 21 places a contractual responsibility on the contractor to arrange insurance and requires the insurance to cover personal injury and death to third parties and damage to property (Ramus & Birchall, 1996). Thus if the contractor has to indemnify the employer which is the case in Theme 3 then the contractor is financially covered if and when he has to pay damages to the owners of the adjoining properties.
The procedure which will have to be followed in order to comply with such a provision is the contractor will have to take out the necessary insurance policies as stipulated by the clause and both the contractor and the client are both responsible for verifying that such insurance have been taken out and maintained in a proper manner.
Clause 21.1 requires insurance for personal injury or death to a contractor’s employees to be in accordance with the Employer’s Liability Act 1969 as well other insurances which will be sufficient to cover all other liabilities that the contractor has imposed upon him through clause 20.1 (Ramus & Birchall, 1996). Further, according to Ashworth (2001), the policies must include clauses to protect itself against claims from the public where negligence from the contractor could not be proven. Given that the contractor has to indemnify the client against all possible claims, he must also arrange suitable insurance to support this indemnity.
The amount of the financial cover provided must not be less than the sum stated in the Appendix to the contract and the contractor can if preferred, insure for a greater amount than required. (Ashworth, 2001)
Clause 21.2 makes provisions concerning situations where damage to property has occurred but not through negligence. Clause 21.2 requires the contractor to take out insurance which protects the client’s liabilities from such circumstances. This clause does not imply the contractor indemnifies the client merely obligates them to arrange such insurance on behalf of the employer to cover the employer’s liability. (Ramus & Birchall, 1996)
If and when this insurance has been decided to be taken out, the contractor is instructed by the employer to take out a Joint Names Policy i.e. the client and contractor and the insurance amount should be appropriate as stated in the contract bills. According to Ramus & Birchall (1996), the insurance should indemnify the client for any expense, liability, loss or claim proceedings against the client as a result from injury of damage to the property “caused by collapse, subsidence, heave,
vibration, weakening or removal of support or lowering of ground water” as a result of the construction work. However the instances listed below which could cause damage or injury is exempt from the insurance (Ramus & Birchall, 1996):
- Contractors liabilities under clause 20.2; or
- Caused by design error; or
- An inevitable consequence of the construction work; or
- Is the responsibility of the Employer to insure under clause 22C.1; or
- Arises from war risk or Excepted Risks.
The contractor has a responsibility to ensure that its subcontractors have also made insurance arrangements which will cover the liability of the contractor which has been imposed upon the contractor due to clause 20. (Ashworth, 2001)
The employer’s responsibility of ensuring that the necessary insurance policies have been taken out and properly maintained will be passed onto the employer’s agent who will handle all legal aspects of the project on behalf of the client. The employer’s agent could at any reasonable times request the contractor or the subcontractor to elicit documentary evidence to demonstrate that the required insurances in respect to third party have been put in place and properly maintained (Ramus & Birchall, 1996). This may require for the appropriate policies to be produced during the early stages of the contract (Ashworth, 2001). The procedure to follow upon when the contractor receives such a request is to send the necessary documents to the employer’s agent or employer for their inspection. The employer’s agent will then check whether the documents are in accordance with the requirements of the contract. (Ramus & Birchall, 1996)
If the contractor or subcontractor fails to insure properly or continue to insure the works as requested, the client are empowered to take out insurance against liability or expense on behalf of the contractor. The client will pay the premiums and the cost can either be deducted from the monies due to the contractor or can be recovered as a debt from the contractor. In these circumstances the client need only to take out insurance covering their own liabilities and not that of the contractor.
Clause 22: Insurance of the works
Clause 22 is the contractual provision which instructs the contractor and/or employer to take out all risk insurance which is defined as insurance which provides cover against any physical loss or damage to work executed and site materials. (Ashworth, 2001)
Clause 22.1 states that there are three alternatives listed under clause 22.2 and that only one should apply.
Clause 22.2 identifies three alternatives 22A, 22B and 22C. Clause 22A deals with all risk insurance of the Works by the contractor for new buildings. Clause 22B deals with insurance of the Works by the employer for new buildings and clause 22C deals with insurance of existing structures and insurance of the Works in, or extension to, existing structures. Only one will apply to the project.
Since the project is a new build, clause 22C is automatically eliminated. Clause 22A and clause 22B are very similar except that with clause 22A the contractor is responsible for taking out the insurance and provide the necessary documentary evidence for inspection due to the employer requests for them to ensure the insurance is maintained. With clause 22B the role is reversed and the employer is responsible for taking out the insurance.
It has been decided that the project should adopt clause 22A. Clause 22B is more suited to clients who are frequent developers thus might be able to purchase insurance at a competitive price (Ramus & Birchall, 1996). In addition as the client is going through a ‘one-off’ building process and so he will not want to go through the difficulty and complex task of taking out and maintaining the correct insurance policy for which he may have no experience in and will only have to rely on the employer’s agent advice. This will be more time consuming in comparison to just allowing the contractor to deal with this insurance who will have had experience and most probably have an annual policy which they have taken out as normal pattern of business efficacy. (Ashworth, 2001)
Assuming the contractor has continuous work, it is also assumed that the contractor will comply with clause 22A.3. The contract will because of normal pattern of business efficacy will have already taken and maintained an all risk policy.
To ensure the contractor is maintaining the insurance polices in an appropriate manner, the employer may request for the contractor to produce documentary evidence on the up keep and the suitability of the insurance policies which will be inspected by the employer’s agent.
To comply with clause 22A the contractor is required to take out a Joint Names Policy for All Risks insurance to cover the full re-instatement of the work (Ramus & Birchall, 1996). The policy in join names ensures protection is provided to the parties and this protection is extended to domestic sub-contractors. In addition the contractor’s financial exposure in the event of loss or damage is covered, thus safeguarding both parties (Ramus & Birchall, 1996). This clause is covered by compliance with clause 22A.3 where the contractor has already taken out an annual insurance policy which provided All risk insurance.
The all risk insurance would be maintained until either the issue of certificate of practical completion date or the date of determination of the employment of the contractor, dependent on which ever is the earliest.
If the contractor fails to take out or maintain the insurance, the client again is empowered to take out Joint Names cover and the cost can be deducted from the monies due to the contractor or recovered as a debt.
If loss or damage occurs as a result of insured risk and an insurance claim is to follow then the contractor should proceed as follows:
- The employer’s agent and the employer should immediately be informed in writing providing details of the extent, nature and location of the loss or damage.
- The loss or damage should not effect payments due to the contractor and so no account should be taken of the loss or damage when calculating payments due to the contractor.
- The location should be allowed for inspection.
- Once the insures have inspected the loss and damage and out of good practice have obtained notice from the insurers that they have finished inspecting the site, the contractor should start to restore the damage. He should restore, replace and repair any site materials which has been lost or damaged and dispose of any debris.
- The contractor must then authorize the insurers to pay all sums due under the insurance claim to the Employer. (Ramus & Birchall, 1996)
- The contractor will be paid for the costs of reinstatement of the work by the employer in installments which will be issued within the normal interim payments.
In relation to Theme 3, the contractor would most probably rely on clause 22A since the damage to the materials was due to his negligence and the insurance policy should cover the cost for new materials.
Clause 22 D: Insurance for the employer’s loss of liquidated damages
If under clause 25.4.3 the contractor has been granted and extension of time which in effects cancels the contractor’s obligation to pay liquidated and ascertained damages then the financial loss the employer suffers can be covered by clause 22D which is insurance to cover the employer’s loss of liquidated damages.
The procedure required to follow this clause is to ensure the contractor takes out an insurance policy which covers him for such a loss and that an extension of time was granted to the contractor which lead the loss of liquated damages. In addition if this insurance is required then a statement should be made in the Appendix to the Contract Conditions.
sTAGE 5
Theme 4: Evaluation of Project
- Agenda and Minutes of Meetings
- Evaluation
Stage 5 mEETING aGENDA and mINUTES
Meeting Agenda 4.1
Project: Hertfordshire School of Construction Ltd
Meeting: Starting (Theme 3)
Date: 20th April 2004
Time: 14:00
Location: Marylebone Campus, Library
Present :
Taha Heikh-Noor (TSN), Courtney Bramwell (CB), Shazad Mahmood (SM)
Ali Faizollahi (AF), Nikolaos Michalakis (NM)
Agenda Items
Minutes 4.1
Project: Hertfordshire School of Construction Ltd
Meeting: Progress Meeting (Theme 3)
Date: 22nd April 2004
Time: 11:00
Location: Marylebone Campus, Library
Present :
Taha Heikh-Noor (TSN), Courtney Bramwell (CB), Shazad Mahmood (SM)
Ali Faizollahi (AF), Nikolaos Michalakis (NM)
Evaluation
The themes involved in this project exists so that it is able to provide a well designed process/strategy into the design and construction of this project. It is intended to be fair and satisfactory on both parties involved (client and contactor) at the end of the project.
However it’s to be noted that the process of such a contract can take many forms to arrive at the same success. This is because there is no defined rule into the construction of such projects. A lot of the issues are based on client or client representatives and the contractor to work in hand for the success of the construction project.
Theme 1
This involved the establishment of the parties involved, the procurement/ tendering system and the production information method used for this project.
The type of building work is assumed to be used as an office block funded by the client who will occupy the building. There have been no details on this matter included in the assignment brief therefore the group’s decision in choosing such a use is primarily based on the evidence of the information relating to the type of building and the individual ideas of the group members which can be refereed to in the minutes taken in the group meetings.
The choice of using procurement system method was influenced by looking at the client’s perspective to gain the advantages on the overall project cost, to meet the handing over deadline, to planning a high quality output and most importantly giving the contractor the upper hand in managing the responsibility of his employees output throughout the process. In addition the system is suitable for employers who do not acquire an advanced knowledge of the industry which aptly suits the nature of our client.
The parties involved were identified as a result of defining the procurement system and having analysed each stage in the project a relatively extensive list or all the parties that were involved was drawn up. By adopting a similar method the production information required from the inception to completion were identified.
In retrospect the group considers the decisions on the building procurement system remains to be the most effective. This is supported by the numerous research materials that suggested and agreed with t
Theme 2
This involves the contractual arrangements and forms of communication between the parties.
The reason for choosing a JCT Standard form of contract is in effect due to its common uses within the industry, saves in production time, reduces cost and less ties to the client’s legal responsibilities to the construction parties.
The communication between the parties to the contract is highlighted in various different forms, some of the methods may look not have much effect to the contract however this cannot justified until it has been put to the test to value its operation.
The choice of using the JCT family of contracts, although was hastily chosen was supported by sufficient material produced by the group. The standard form provided numerous advantages over the use of a bespoke contract and was in effect the most effective contract. In addition the JCT family contains contracts that were specifically designed for the relationship between the client and contractor and the contractor and subcontractor in a procurement system situation.
Although a specific contract could not be defined for use between the client and the employer’s agent the group feels they have adequately dealt with the situation as best as possible by specifying the mandatory obligations the employer’s agent should follow. Despite this the group considered that Theme 2 was handled objectively and judiciously.
Theme 3
This involves mainly the contract administration also including variations and the delays to the works.
The method of procurement used for the project gives a limited chance for variation to the project to occur. This is due to the fact that the client appoints his agent at the
inception stage of the design for their knowledge in the type of work in hand. The agent, the client and contractor being appointed and working from the early stage of the design limits the possibilities of variation arising.
However, contract provisions are required to deal with variations, despite that the occurrence of variations may be unlikely or seldom. As a result of extensively analysing the situation the relevant clauses that were required to deal with such situations were identified. As a result the contract would provide all the necessary provisions which would be required to deal with the occurrence of such an event. The procedures identified where through adequate research undertaken from a majority of sources thus indicative that the procedures documented is most likely to be the actual standard procedures which should be taken in practice to comply with the clauses.
Overall
In essence the group considers that they have approached, managed and executed the project with a satisfactorily rational and conscientious manner. The extensive research undertaken has allowed the group to have understood the themes well thus allowing them to achieve the requirements set upon them.
The decisions taken have been reached upon the basis of that which is the most advantageous and beneficial to all participating parties but especially to the Hertfordshire School of Construction Ltd Buildings. A further criterion used for the basis of choosing a particular option is that it maintains the good working relationship between the participating parties which is mandatory for the success of the project which is the core to all building work.
Bibliography /REFERENCE
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Ashworth. A (2001), Contractual Procedures in the Construction Industry (Fourth Edition), Longman
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Cox, S. & Clamp, H. (2003). Which Contract? : choosing the appropriate building contract. London: RIBA Publications.
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The Aqua Group (1996), Contract Administration for the Building Team (Eighth Edition), Blackwell Science.
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The Aqua Group (2003). Pre-contract practice and contract administration. Blackwell Science.
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Jones. G.L (1984), A New Approach to the JCT Contract, Longman
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Murdoch.J & Hughes.W (1996), Construction Contracts: Law and Management (Second Edition), E & FN Spon
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Ramus. J, Birchall. S (1996), Contract Practice for Surveyors (Third Edition), Laxton’s
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Turner. D. F (1995), Contract Practice (Second Edition), Longman
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Turner. A (1990), Building Procurement , Macmillan
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Wainwright. H & Wood.A.A.B(1983), Variation and final account procedure (4th edition), Hutchinson
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Frank. James (1990), Building procurement systems, CIOB
- Brick layers
- Labourers
- Plumbers
- Mechanical Engineers
- Carpenters
- Furnishing installation team
- Plant services
- Suppliers
- Excavation Team
- Water Services
- Electrical Services
- Gas Services
- Scaffolding Team
- Steel fixer Team for steel trench
Client
Employer’s Agent
Client
Employer’s Agent
Contractor
Client
Employer’s Agent
Contractor
DOM2 Sub-contractors
Employer’s Agent
Contractor
Contractor
DOM 2 Sub-contractors
Contractor
DOM 1 Sub-contractors
