Bills of Quantities Are standard methods of measurement unique to the UK?

No, many countries have their own standard method of measurement, some based on SMM7.

Can the rules of measurement be altered?

Yes, provided that any departure from SMM7 is clearly stated in the contract bills in order that tendering contractors may take this into account.

Is it a contractual requirement that bills of quantities are prepared in accordance with SMM7?
No but, some contracts, for example JCT (05) Clause 2.13.1, states that unless otherwise indicated the contract bills are to have been prepared in accordance with the SMM.

What are operational bills of quantities?

This approach was developed during the 1960s and was based on breaking the project into operations. It was never adopted as the resultant bills of quantities were so large and the format so unfamiliar there was little incentive to adopt this approach.

What percentage of contracts is based on lump sum bills of quantities?

The latest statistics from the RICS indicate that recently the number has increased slightly to around 30%

Building Control
Can I discuss my proposal before making a formal application?
Yes. Building control surveyors in both the public and private sectors encourage pre-application consultation, as it helps them as well as you to get the job right first time. All you need to do is telephone and make an appointment to see a building control surveyor. However, under the Building (Local Authority Charges) Regulations 2010, the local authority may make a charge for advice regarding a future application, but cannot charge for the first hour of advice. This charge, if ever made, may be deducted from the subsequent building regulation charge.

Do Building Regulations apply to all types of building work?

Generally, the Building Regulations apply if you intend to: erect a building; extend a building; make an alteration to a building (including underpinning or re-roofing); provide, extend or alter services or fittings (including drainage, washing and sanitary facilities, heating appliances or replacement windows and doors); Change the use of a building (for example, from a barn to a dwelling).

How do I make an application? Local authority route

There are two ways of making an application to a local authority. These are the full plans application method, and the Building Notice procedure. Full plans This method can be used for any type of project, domestic or commercial. Under this method, you submit detailed drawings that are checked for compliance with the Building Regulations. You will be advised if any amendments are required to your scheme. Once confirmed and agreed, an approval is issued. Building Notice This method is generally suited to minor domestic projects, and cannot be used for any building work that involves a workplace (such as shops, offices or commercial buildings). No drawings are required unless the project comprises a new building or extension - in these cases, a block plan is needed, showing the size of the building and its relationship to the site boundaries. The drains should also be indicated on this plan. No approval will be issued, as there will be no detailed drawings to check, but an 'acceptance' will be given within three days. You should only use this procedure if you are confident that the work will comply with the Regulations, as you do not have the 'protection' of an approved plan.

Approved inspector route

A list of approved inspectors is available from the Construction Industry Council (CIC). Under this method, you first choose an approved inspector and agree contract terms, conditions and fees. You then instruct the approved inspector to act for you and jointly serve the local authority with an initial notice. You supply initial design information for checking; if you wish, you may also supply detailed plans and request a 'plans certificate'. In this case, the approved inspector will check the plans for compliance with the Building Regulations and, if necessary, will consult on your behalf with the local fire authority. You then notify the approved inspector at agreed stages of the work. The inspector will check the building work on site for compliance with the Building Regulations. Once the work is completed to the satisfaction of the approved inspector, he or she will give a 'final certificate' to the local authority indicating that the work has been completed in accordance with the Regulations.

How long does my approval last?

For an approval issued by a local authority to remain valid, you must start work within three years of submitting the application. If you do not start work within this time, the application or building notice will have expired and you will have to apply again and pay a new charge. In addition, if the Regulations have been amended in the meantime, you will be required to comply with the new legislation. In the case of an initial notice given jointly with an approved inspector, if it appears to the local authority that the work has not commenced within three years from the date of acceptance of the initial notice, the local authority can cancel the initial notice (section 52(5) of the Building Act1984).

Is any building work exempt from the provisions of the Building Regulations?
Yes. Certain minor works do not need Building Regulation approval, including: porches and conservatories not exceedingm in floor area; detached garages not exceedingm in floor area; detached or attached carports open on at least two sides, not exceedingm in floor area; detached buildings such as garden sheds or greenhouses, not exceedingm and built of substantially non-combustible material, or sited at least 1m from the site boundary; detached buildings such as garden sheds or greenhouses not exceeding 15m in floor area; and agricultural buildings. This list of exempt buildings is only a general guide. You are strongly advised to contact the local authority building control unit or an approved inspector for confirmation of the particular circumstances of your own building work. You should also bear in mind that some buildings may be exempt from the Building Regulations but not from the requirement to obtain planning permission. The building control unit or approved inspector will be able to put you in touch with a planning officer who can advise you.
2 2 2 2 2

Is Building Regulation approval the same as planning permission?

No. Although a local authority's building control officers and planning officers often work in the same department, their functions are entirely different, as is the legislation pertaining to each. That said, they do work closely together on projects that require permission, in order that you do not receive conflicting advice. When you make a Building Regulation application, a planning officer will look at the proposal to check if planning permission is needed, and vice versa. In the case of an approved inspector, it is the duty of the client to check if planning permission is required; however, the approved inspector will help you by putting you in touch with the relevant planning department.

Is there a charge for this service?

Yes. The charge (or fee in the case of an approved inspector) that you are required to pay depends on the type of work you are carrying out. In the case of local authorities, there is no difference in the overall charge whether you use the full plans or the building notice procedure. Certain building work that provides facilities for disabled people is exempt from any charge. Full details of the relevant charges are contained in local authority guidance notes on charges. If you have used the services of an approved inspector, you will have already agreed the fee as part of your contract.

What happens when I want to start work?

You, or your builder, will have to notify the local authority or approved inspector when work is to commence, and also at other key stages of the project. A building control surveyor will then make the necessary inspection on site, to ensure that the work is in accordance with the Building Regulations. You will generally be notified, with your approval or acceptance, of which stages the surveyor needs to inspect. You can also usually request an inspection at any stage of the project if you want advice. With an approved inspector, you will already have agreed an inspection programme.

What happens when the work is complete?

This is the last stage at which you need to notify the building control surveyor. Provided that the surveyor has carried out all the inspections that have been requested, and the work is satisfactory, we will issue you with a completion certificate (or final certificate in the case of an approved inspector).

What if I disagree with my local authority and/or they reject my full plans application?
The easiest way to proceed is to resubmit the application, incorporating the amendments suggested by the local authority. However, if you feel that the plans comply with the Regulations, you can refer the matter to the Building Regulations Division of Communities and Local Government and ask for a determination as to whether your proposals comply with the Building Regulations. You can ask for a determination before or after your application has been rejected, but it must be before building work has substantially commenced on site. Alternatively, if you feel that the requirements of the Building Regulations are too onerous in your particular case, you can apply to the local authority to dispense with or relax those requirements. If this is refused, you can appeal to the ODPM for a decision. You must appeal within one month of the refusal to dispense or relax.

Collateral Warranty
Does the collateral warranty give the offeror additional benefits?
Sometimes collateral warranties are drafted to give the offeror some additional benefits but usually they are only intended to offer benefits to the beneficiary. Some collateral warranties with funders will offer step-in rights in the event that the employer defaults and that can bring significant benefits to the contractor.

Should the offeror have the same rights against the beneficiary to a collateral warranty as he has against the employer in the building contract?
Ideally the collateral warranty should do no more than expand the number of parties who may have a right of action against the offeror. However there are legitimate reasons for third parties wanting to limit the defences available to the offeror. For example a tenant who has a grievance about a defect will not want to become embroiled in a dispute over fees between the offeror and the developer. However sometimes third party rights are abused to dramatically increase the potential liability of the offeror above that arising from the principal contract. For example collateral warranties sometimes contain a fitness for purpose obligation which is not present in the principal contract.

Should I ask for collateral warranties or use the provisions of the Contracts (Rights of Third Parties) Act 1999?
Many more beneficiaries are now accepting on the provisions of the Contracts (Rights of Third Parties) Act 1999. One of the principal advantages for the employer and the contractor is the reduction in the opportunity to re-negotiate terms. Whether the provisions of the Contracts (Rights of Third Parties) are used or more traditional warranties are used, the relevant provisions should be carefully drafted by a lawyer. The Contracts (Rights of Third Parties) Act can introduce some dramatic unintended consequences if the provisions are drafted too widely.

Why do collateral warranties contain a net contribution clause?

Beneficiaries to collateral warranties have historically been much more willing to accept net contribution clauses than have parties to the principal contract.

Why should I offer collateral warranties?

As an offeror (usually consultant or contractor or subcontractor) collateral warranties (or rights afforded pursuant to the Contracts (Rights of Third Parties) Act 1999) expand your potential liabilities to third parties. You should therefore not offer these rights to third parties willingly. Often however the provision of third party rights is a pre-condition to being awarded a contract. Therefore the third party rights should be assessed as part of the overall risk when preparing the tender or deciding whether or not to accept the contract.

Commencement of work
If the employer fails to afford possession of the site on the agreed date, can the contractor terminate the contract?
Ultimately, this will depend upon the terms of the contract in question. If the contract provides for what is to happen in this eventuality, the relevant provisions will govern the party's rights and obligations. However, if the contract contains no such provision, then one of the contractor's options is to terminate the contract for repudiatory breach.

How should the employer delay commencement of the works due to e.g. problems obtaining planning permission?
If problems obtaining planning permission have been anticipated before the contract is signed, the employer can and should make express provision in this regard. For example, it could be provided that the commencement of the works will be 'x' number of weeks from the date of obtaining planning permission. However, it is most likely in this situation that the contractor would be well advised to seek the insertion of a 'long stop' date which if exceeded, would bring the contract to an end. Employer's rights will be governed by the terms of the contract if planning permission issues arise after the contract has been entered into.

Is the contractor liable once in occupation of the site to trespassers who suffer personal injuries whilst on the site?
There is no definitive answer to this question. The situation is likely to be governed by the provisions of section 1 of the Occupier's Liability Act 1984 (as amended). The contractor may be liable to a trespasser for injuries suffered if it can be successfully established that the contractor knew or should have known that such a trespasser was in the vicinity of a danger on the site and that danger posed a risk against which, in all the circumstances, the contractor should have guarded against. The outcome of each case will be very fact dependent.

Is the employer obliged to give possession of the whole of the site to the contractor?
Without express provision in the contract to the contrary, the contractor can ordinarily expect to be given possession of the entirety of the site. It is possible for the employer to make provision in the contract for phased handover or granting possession of the site to the contractor in stages. This could be appropriate for e.g. the refurbishment of a large number of individual properties or the resurfacing of a long stretch of road.

Is the employer liable to the contractor in the event that a third party prevents the contractor from obtaining possession of and/or access to the site?
This will depend upon the terms of the relevant contract. If the contract contains an express obligation on the part of the employer to afford possession of the site by a particular date, then unless the contract provides a remedy for such an occurrence, the employer will be in breach of contract and liable to the contractor for the consequences of the third party's actions. Standard form contracts may provide a remedy in the form of an extension of time and loss and expense.

CAD
I have just purchased a CAD package. Do you have any helpful advice before I implement the system?
A few things to consider before implementing a CAD system are the drawing register, drawing issue sheets, the drawing naming convention and company-specific drawing templates and styles.

How regularly are most CAD packages upgraded?

As a general rule, most CAD packages are updated annually.

Is it possible to try out CAD software before I purchase?

As a rule, no. However, some CAD program developers do enable you to try out a trial version of their software before you buy. Once you have a short list of your preferred packages, visit the developers' websites to see whether a trial version is available.

What is a drawing naming convention and why is this important?

A drawing naming convention is a set of guidelines or rules to help you accurately name, number and file any drawings produced. It is important to give some early thought as to how you will name, number and file the drawings you produce, as many problems can arise from implementing a convention too quickly. A good drawing naming convention should be clear and uncomplicated and preferably give some indication of the content of the drawing.

Where can I find CAD software developers' websites?

Try out the following links to the most commonly used CAD software developers: Autodesk (Developers of AutoCAD) Graphisoft (Developers of ArchiCAD) Bentley (Developers of Microstation)

Contracts
Is it possible to have a contract that is a guaranteed maximum price (GMP)?
Many construction contracts are termed a GMP contract but it is hard to see how a contractor can be held to a contract price if the project circumstances/scope change as a result of employer requested change or employer risk items. It is unlikely that any construction contract is a true GMP contract and the term should be avoided as it leads to client misunderstanding and false expectations with regards to project cost certainty. Target cost contracts can achieve an effect that is in some ways similar to a GMP by making the pain element of any overspend the sole responsibility of the contractor. That said, any change in scope or variation under a target cost contract will potentially result in additional money entitlement to the contractor so in this respect (i.e. scope change) there is no GMP.

Is the use of an unamended standard form negligent?

The use of an unamended standard form is not negligent. Standard forms are drafted by professionals and reflect the current consensus in the construction industry. That said, most standard forms will require some amendment to suit procurement and project requirements.

What is a lump sum contract?

There is currently a lump sum philosophy in the construction industry where the contractor is to perform all the obligations identified in the construction contract and complete the works for a specified sum of money. Providing the project requirements have not changed and none of the compensation mechanisms (extensions of time, loss and expense, etc) in the contract are triggered then the contractor is only entitled to this sum of money for completing the works. A lump sum contract is not a guaranteed maximum price (GMP) contract. A lump sum price is sometimes called a fixed price; although it is suggested a fixed price is probably a price that cannot be adjusted for inflation. The terms all inclusive price or inclusive price are also sometimes used to mean a lump sum price.

Construction enforcement
What are the most common subjects stated in an Enforcement Notice?
Examples which I have personally dealt with recently include: Failure to make a suitable and sufficient Fire Risk Assessment. Failure to review the Fire Risk Assessment. Failure to ensure that, in the event of danger, it must be possible for persons to evacuate the premises as quickly and as safely as possible. General fire precautions to, so far as is reasonably practicable, ensure the safety of relevant persons have not been implemented. The procedures to be followed in the event of serious and imminent danger to relevant persons are inadequate. All relevant persons are not aware of the steps to be taken to protect themselves from imminent danger. In addition to the above, non-compliance has been identified relating to:

Inadequate fire compartmentation. Inadequate fire alarm systems being installed. Effective fire safety management systems not being in place. Inadequate emergency lighting. Ineffective management regimes for fire safety equipment and systems.

What can be done by a responsible person to prevent such an Enforcement notice being issued?
Be proactive; Have everything in order for audit purposes in case the Brigade call. Ensure that all fire safety systems and equipment are serviced and repaired at intervals recommended in the relevant British Standards. Ensure that a suitable and sufficient Fire Risk assessment is carried out for each premises. Carry out any recommended actions in the timescales suggested and to an acceptable standard. Have all risk assessments reviewed at regular intervals. The frequency of this depends on varying factors such as the type of premises, its main usage and the risk to life involved. Have an efficient Fire Safety Management System in place to ensure continued compliance with the Regulatory Reform (Fire Safety) Order 2005. Where necessary, employ qualified and experienced persons to assist in the discharge of all fire safety functions. It is worth noting that the Enforcing authorities do not treat the issuing of Enforcement notices lightly. There must be compelling grounds for them to ensure that the risk to life due to fire is maintained at an acceptable level by this means. Everyone concerned, professionally, with the fire safety management of any premises would much prefer not to find premises where these orders are necessary. The solution is to be proactive about your risk assessment and fire safety precautions.

Construction fire saftey What might prompt a Fire Brigade visit?

Fire Brigade Fire Safety departments will have compiled a prioritised list of premises to inspect. As each one rises to the top of the list, they will be visited and inspected. A fire at a premises may prompt an inspection. This is more likely to be the case if possible infringements are discovered by the operational firefighting crews or the Fire Investigation officer. If an allegation of non-compliance is made by any person, a visitor, employee or any other concerned person, then the Fire Brigade have a duty to carry out.

Construction fire safety: Fire assembly points What are the requirements for the location and management of a fire assembly point?
Most of the available information is contained within the guides of the Regulatory Reform (Fire Safety Order) 2005 but they are spread throughout the document. A synopsis of the salient points gathered from the legislation and experience is below. Fire Assembly points should: be far enough away from the building to not be endangered by the fire; be large enough to accommodate all premises occupants safely; be clearly sign posted. If it is on other persons property or a public space such as pavement, grass verge, a sign should point to it but not necessarily at it; be weatherproof if possible, but this is unlikely; be well illuminated if its to be used at night; be accessible without crossing roads; not cross the path of approaching fire engines. The danger to those fleeing the fire is too high; be away from fire hydrants and anything else the fire service might need access to; be a specified location in fire evacuation plan; be included in Fire marshall training and induction training. Also in annual fire awareness training; have an alternative meeting point, much further away, for bomb incidents; have details of location of assy pt & route to it on staff notice boards; be located in such a place as to easily facilitate liaison between the ICO and the fire brigade incident commander. Also: Incident Control Officer (ICO) must be nominated to take charge of assembly point and report to/liaise with the fire service; Make sure nobody leaves the assembly point until told to do so by the ICO; Have roll call or other procedure, agreed beforehand, such as handing in department name checksheets or coloured tags etc. This list will help you to cover all necessary considerations when nominating and locating a fire assembly point for any premises you may have dealings with.

Construction Information
Does the employer have a duty to provide construction information at all?
This issue is normally dealt with by way of an express term of the contract. However, where that is not the case, generally speaking, where a contractor is employed by an employer to do a piece of work, then it will be an implied term of the contract between the parties that the employer agrees to do all that is necessary on their part to bring about the completion of the contract, and will co-operate with the contractor to that effect. As Lord Asquith stated in the Cory Ltd v City of London Corp case: 'In general ... a term is necessarily implied in any contract, the other terms of which do not repel the implication, that neither party shall prevent the other from performing it.'. That implied term of co-operation extends to those things which the architect must do to enable the contractor to carry out the work and the employer is liable for any breach of this duty by their architect (see London Borough of Merton v Leach). This term would include for the provision of information, instructions, plans and details etc., and any such information, instructions, plans or details must be supplied at reasonable times. What is deemed reasonable depends upon the express terms of the contract in question and all the surrounding circumstances. Therefore, in Neodox v Swinton and Pendlebury BC, it was said that what was reasonable did not depend solely upon the convenience and financial interests of the contractor, but depended also on the point of view of the engineer, the engineer's staff and the employer. Despite this, it would normally be taken to be the case that necessary instructions should be given to the contractor at such times and in such manner as not to hinder or prevent the contractor from performing their duties under the contract, noting that one of the principal duties of the contractor is to complete the project within the stipulated time.

Extension of time
Under a Design and Build contract the contractor submitted information in time but the employer's agent had comments and refused to approve the information for construction. The contractor claims for a delay. Is the contractor entitled to an extension of time? It is quite common that in respect of contractor design and build projects (and also projects where the contractor is responsible for some element of the design), that the contractor is required to submit design information to the employer's team for 'approval' before proceeding with the works. In such a situation, any 'approval' by the employer's team will not normally take away the liability of the contractor for their design, unless the terms of the contract expressly state otherwise. However, a frequent problem occurs when the contractor submits their design information for approval at a time consistent with the programme, but the employer's team do not approve the information timeously thus causing a delay to the execution of the works.

Contractor entitlement to an extension of time

Most standard forms of contract incorporate an approval system that sets out a timescale for approval to take place. However, if there is no such approval system in a contract then the courts would normally find that approval must be given within a reasonable time. Therefore, if the approval was not given within that 'reasonable time', the employer would be in breach of their obligations, and a resultant extension of time may be awarded in respect of that breach. What is deemed reasonable time would of course depend upon the circumstances of each case, which would include matters such as any time for approval allowed on the programme, the rate of the progress of the work on site, and the date fixed for completion. Clearly, it is not entirely satisfactory relying upon what the courts may consider to be a 'reasonable time' in any particular case and because of that concern, some of the standard forms of contract have developed an approval system and a timetable that must be complied with. For example, under the JCT 2005 Standard Building Contract, Schedule 1 includes the 'Contractor's Design Submission Procedure', setting a time limit of fourteen days from receipt by the architect/contract administrator of the contractor's design information, to either approve or reject that design information. If the architect/contract administrator does not comply with the required timescale and if the contractor could show that such failure by the architect/contract \dministrator caused a delay to the completion date and/or caused it to incur loss and expense, then the contractor would be entitled to an extension of time and/or to loss and expense pursuant to clause 2.29.6 and 4.24.5 respectively. The JCT Design and Build Contract includes very similar provisions. The NEC 3 does not contain a detailed design submission procedure, but simply states (under clause 21.2) that the contractor submits the particulars of their design as the works information requires, to the project manager for acceptance. Clause 21.2 does not set out a period for acceptance by the project manager, but a 'period for reply' is to be inserted into the Contract Data Part 1. That 'period of reply' is inserted as a period of time on a project by project basis. Under the NEC 3 form, there are not separate provisions for extensions of time and loss and expense. All matters relating to a change of prices (including what would normally be considered as being loss and expense) and a change of the completion date are encompassed within what is called a compensation event. An example compensation event is where the project manager does not reply to a communication from the contractor within the period required by the contract. In this scenario, if the 'period for reply' was inserted into the Contract Data Part 1 as being fourteen days, but the project manager did not accept (or reject or otherwise comment upon) a design submission by the contractor within that period, then that could be the basis of a compensation event. If it could be shown that the matter was likely to delay the completion date on the accepted

programme and/or was likely to incur the contractor in additional expense, then the contractor would be entitled to have the compensation event assessed accordingly.

The contractor says they were delayed by late information, but didn't ask for it. Are they still entitled to an extension of time?
Depending upon the express terms of the contract, information should be provided to the contractor in sufficient time to allow the contractor to complete by the completion date or, if the contractor appears unlikely to complete by that date, at a date when 'having regard to the progress of the works' it is reasonably necessary for the contractor to receive the information. When it is 'reasonably necessary' for the contractor to receive the information is usually determined on all of the relevant facts, which may include: the contractor's existing or expected rate of progress; the contractor's expressed intention to increase the rate of progress and their ability to achieve that intention; the date that the contractor said that it needed the information; agreement by e.g. the architect/contract administrator to issue information at a given time. Generally, a term will be implied into the contract that the employer agrees to do all that is necessary on their part to bring about the completion of the contract, and the employer will therefore be required to provide the information necessary to allow the contractor to perform its duties under the contract. This obligation on the employer is not (normally) dependant upon a request for information first being made by the contractor, and an architect (for example) would be expected to provide the information irrespective of any request being made by the contractor. In this regard, the employer would be liable for any breach of this duty by their architect.

Is an architect required to provide information to suit an 'early completion' programme?

An architect's responsibility to provide information to complete an 'early completion' programme depends upon the express terms of the contract.

The JCT forms position

Under the JCT forms, a contractor will sometimes either at the commencement of, or during the early part of the works, prepare or submit to the architect/contract administrator a programme of works showing completion at a date considerably before the contract completion date. The contractor will normally do this because they will have only allowed site running costs for the shorter period in their tender, with the intention of making their tender offer more competitive. The architect/contract administrator may approve the contractor's submitted programme, or they may simply accept it without comment. At a later stage, when the architect/contract administrator does not provide information to suit that 'shortened' programme, the contractor puts forward a claim for an extension of time and/or for loss and expense because the architect/contract administrator provided 'late' information. This situation was considered in the Glenlion Construction v The Guinness Trust case in respect of a contract being operated under the 1963 JCT (RIBA) Standard Form of Contract, and in that case it was decided that although the contractor was entitled to programme to complete before the contractual completion date, there was no implied term that the employer should perform the agreement so as to enable the contractor to complete by the earlier date. The reasoning behind this was that the contractor was not contractually obliged to complete by the earlier date shown on their programme and therefore the unilateral imposition on one party (i.e. the employer) of an earlier completion date would result in the whole balance of the contract being lost. Although every case must depend upon the particular express terms and circumstances, the position in the Glenlion Construction v The Guinness Trust case is taken to be the position that usually applies for JCT contracts.

The NEC 3 position

The position with the NEC 3 form of contract is entirely different. If the 'accepted programme' (a programme that has been accepted by the project manager) showed an earlier completion date than the contract completion date, the project manager would be obliged to provide information to suit that early completion date, principally because under the NEC 3 form of contract the contractor 'owns' any residual float shown on an accepted programme. Therefore, if the project manager did not comply with the requirement to provide information to suit the accepted programme the contractor would be entitled to claim for a compensation event for any resultant delay (to the accepted programme) and/or for any resultant increase in the prices.

Construction Insolvency

Can a contractor serve a statutory demand on an employer after the final date for payment of an interim payment?
Yes. However, if the employer has any other cross claims against the contractor these may be used to support an application for the setting aside of the statutory demand (if the employer is an individual) or for an application that no winding up order be made on the basis of the statutory demand. Such cross claims need not have been the subject of a withholding notice.

Can the liquidator of an insolvent contractor commence adjudication proceedings against the contractors employers for unpaid work?
Yes, but the employer will be entitled to rely upon the contractor's insolvency to resist enforcement of the adjudicator's decision, if it has an arguable claim or cross claim against the insolvent contractor.

Can an employer bring proceedings against a contractor in liquidation or administration?

Not without the permission of the court or the consent of the administrator.

The contractor has become insolvent and ceased work after the final date for payment of an interim payment. Does the employer have to pay?
Yes, unless there has been a valid withholding notice or there is a contractual provision entitling the employer to withhold payment after the contractor's insolvency. See for example clause 27.6.5.1 of JCT 1998 with Contractor's Design and Melville Dundas Ltd v George Wimpey UK Ltd [2007] UKHL 18.

After a winding up order has been made against a contractor, should an employer be concerned about the expiry of limitation periods after the date on which the winding up order was made?
No. Under the principle in established in In re General Rolling Stock Company LR 7 Ch App 646, at the date of the winding up order time stops running against all creditors in respect of liabilities subsisting at the date of the winding-up order.

How can a contractor protect itself against the possible insolvency of his proposed employer?
By obtaining a payment guarantee from the employer's parent or associate company, a payment bond, or ensuring that the employer sets up a trust fund into which all retention moneys are paid.

The main contractor has become insolvent and not paid the subcontractor. Can the subcontractor claim payment for its works directly from the employer?
No, unless the subcontractor can show that the employer entered into a direct contract with the subcontractor that guaranteed payment to the subcontractor.

Document management
Can we do it ourselves?
This depends upon your level of IT support. In the first instance, documents can be stored in an indexed system using Excel or Access Database to reference and link the documents. This is at its most basic and will only work for documents produced by the business. More complex arrangements can be achieved using Access and a good example appears as one of the case studies on Isurv but, if you have the resources to do this, it would be worth looking at an 'off the shelf' solution which might end up costing less to install.

Do I need an Electronic Document Management System?

Read the guidance published on isurv. As each year goes by more practices are realising that they need to manage their documents and Electronic Document Management is becoming more cost effective.

If we adopt an EDMS will we have to change what we do?

You probably do not have to change what you do but more likely you will want to change what you do. Electronic Document Management Systems make it easier to do tasks which previously would not have been considered and the practical use of the systems evolves with time.

We are adopting an EDMS, what should we do with our existing hardcopy and electronic documents?
This depends upon many factors, how much work is involved against what risks and how retrievable you wish the documentation to be in the future. If the risk is low and retrievability not an issue then leave it as it is. Conversely if the risk is high and/or retrievability is an issue then the first thing that can be done is to scan all hardcopy into the system with suitable indexing to enable retrieval. Saving of the electronic records to the new system is more difficult unless the index data is held with each document in which case it may be possible to run a small program to suck the documents and data into the new system. Without this it is better to leave the electronic documents where they are.

What are the main advantages/disadvantages of electronic document management systems?

The advantages include speed of access, recovery of documents and the saving of storage space. There are other advantages but these nearly all depend upon the integration of the system into the practice. The main disadvantages are that a higher level of IT involvement is required and smaller businesses may find this difficult to sustain. Little things that are taken for granted become big issues - for example, contacts stored in Outlook may have to be copied into the document management system to make best use of it.

What can go wrong?

Where do you want to start? Legacy documents are always an issue and transferring these into the new system can take considerable effort and may not be totally successful. The more systems that you have in place before looking at Electronic Document Management Systems, the more that you have to convert to the new system. Compatibility and transferability are also major issues. Not all EDMS programmes can read all document types e.g. DWG files, and other non Microsoft products. Training is needed for all staff. Even though the systems themselves are simple, people resent change and need to be helped through the settling in process. No IT solution gets installed without problems. These need to be planned for and people's expectations managed. There may be a problem with system speed if your existing hardware and operating systems are not suitable. Unfortunately whilst most providers will advise on the correct hardware and operating systems, it is only when the software is running fully that it is possible to check that there are no speed problems. It is not unusual to find systems that have been running successfully for sometime have problems which only appear when trying to run the new software.

EOT
Do I have to do a delay analysis and how sophisticated does it have to be?
If there is a dispute over the actual extent of delay caused the tribunal is likely to give more credence to a sophisticated delay analysis than to a superficial impressionistic appraisal. In many standard forms of contract the architect or engineer is appointed as an independent certifier to assess delay and grant an extension of time. In such a role it is not sufficient for the certifier to adopt a superficial impressionistic appraisal but must carry out a more sophisticated delay analysis.

If the contractor is late but does not delay the works because the employer is also late providing information is the contractor entitled to an extension of time?
This is often referred to as concurrent causes of delay. Traditionally standard forms of contract have not addressed this scenario and therefore it has been up to the courts to determine whether an extension of time should be granted in such cases. As a result of this a body of inconsistent case law has developed and a number of inconsistent approaches have been adopted. Perhaps the most widely held view is that where the contract is silent on such matters an extension of time should be granted for the full delay if the delay caused by the employer is the dominant cause of delay to the project. However, if the dominant cause of delay is the delay caused by the contractor then no extension of time should be granted. Many employers now amend standard forms of contract to clarify whether an extension of time should be granted where there are concurrent causes of delay. In such cases the courts will interpret the intentions of the parties as set out in the contract.

Is the employer entitled to use float in the contractor's programme?

There are many types of float in the programme. One type of float is attributed to activities that are not on the critical path. Another type of float may be an activity specific contingency. Yet another type of float may be whole project float where the contractor plans to finish the project before the contract completion date. If the employer causes a delay most standard forms of contract require the contractor to minimise the impact of that delay by restructuring activities on site. Therefore the employer's delay will use the float in the non-critical activities without a detrimental impact on the completion date of the project. With regard to activity specific contingencies most delay analyses will involve an analysis and validation of the contractor's programme. If it is found that activities are unreasonably long (eg contain too much contingency) or are unreasonably optimistic then they will be adjusted accordingly. This author submits that the contractor is entitled to retain a reasonable amount of activity specific float by way of contingency which the employer is not entitled to use until after the risk for which the contingency has been allocated has either materialised or passed. With regard to whole project float there are two competing theories. For example if there are 3 weeks whole project float but the employer defers possession by 3 weeks. During construction events arise which delay the contractor by 3 weeks. On the one hand the employer's delay analysed in isolation has not caused any delay (it has only used up the float) and therefore no extension of time should be granted. On the other hand there is some case law to suggest that the benefit of such float ought to be apportioned equally across all of the various causes of delay.

When is time at large?

Time is said to be 'at large' when there is no definite completion date. The contractor's only obligation is to complete the works within a reasonable time. This may either be where no completion date was agreed in the contract or where the employer has delayed the contractor and cannot extend the contract completion date.

Why are extensions of time of benefit to the employer?

If the employer delays the contractor then, in the absence of extension of time provisions, the employer is unable to deduct liquidated damages. Therefore by granting an extension of time in such circumstances the employer is protecting his right to deduct liquidated damages.

Fidic
Are there any ways round the condition precedent?
Is there the possibility that a court/arbitral tribunal might decline to construe the time bar as a condition precedent, having regard to the particular circumstances of the matter before it and the impact of the applicable law? The Scottish case of City Inn Ltd v Shepherd Construction Ltd suggests there may be. The dispute related to the construction of a hotel under a contract incorporating the JCT Standard Form (Private Edition with Quantities) 1980 as amended. The core element of the dispute was whether or not the contractor was entitled to an extension of time of 11 weeks and consequently whether or not the employer was entitled to deduct LADs. Clause 13.8 contained a time bar clause, requiring the contractor to provide details of the estimated effect of an instruction within ten days. Lord Drummond Young characterised the clause thus: 'I am of opinion that the pursuers' right to invoke clause 13.8 is properly characterized as an immunity; the defenders have a power to use that clause to claim an extension of time, and the pursuers have an immunity against that power if the defendants do not fulfil the requirements of the clause.' However, the Judge also felt that an immunity can be the subject of waiver. The architect and employer have the power, at least under the JCT Standard Forms, to waive or otherwise dispense with any procedural requirements. This was what happened here. Whilst the employer (in discussions with the contractor) and the architect (by issuing delay notices) both made it clear that the contractor was not getting an extension of time, neither gave the failure to operate the condition precedent at clause 13.8 as a reason. The purpose of clause 13.8 is to ensure that any potential delay or cost consequences arising from an instruction are dealt with immediately. The point made by the Judge is that whilst clause 13.8 provides immunity, that immunity must be invoked or referred to. At a meeting between contractor and employer, the extension of time claim was discussed at length. Given the importance of clause 13.8, the Judge felt that it would be surprising if no mention was made of the clause unless the employer, or architect, had decided not to invoke it. Significantly, the Judge held that both employer and architect should be aware of all of the terms of the contract. employers and certifiers alike will need to pay close attention to their conduct in administering contracts in order to avoid the potential consequences of this decision. In a construction context: parties should take care when concluding contracts to check any time bar clauses governing claims they might make; parties should appreciate the risks they then run of not making a claim (even if to maintain goodwill) unless the other party agrees to relax the requirements or clearly waives them. Of course, time bar clauses, if cautiously operated, may generate a proliferation of claims, which may test the partnering ethos of forms such as the NEC3; the courts see the benefits of time bar provisions and support their operation. A tribunal might bar an entire claim for what seems like a technical reason (by which time it will usually be too late to make a new, compliant, claim); and it may be that non-compliance with a specific requirement (e.g. that a notice should be 'communicated separately from other communications', as per the NEC3 form) would not be so minor that it might be ignored. Nor should claimants necessarily rely upon the other party already having the information they are required to provide.

How does the employer make a claim under the FIDIC form?
Subclause 2.5 of the FIDIC Conditions of Contract for Construction provides details as to how the employer is to make a claim. The key features of this subclause are: if the employer considers himself entitled to either any payment or an extension of the Defects Notification period under the Contract, the employer or Engineer shall give notice and particulars to the contractor; the notice relating to payment should be given as soon as practicable after the employer has become aware of the event or circumstance which gives rise to the claim; any notice relating to the extension of the Defects Notification Period should be given before the expiry of that period; the employer must also provide substantiation including the basis of the claim and details of the relief sought; once notice has been given, the Engineer shall make a determination in accordance with subclause 3.5; any amount payable under subclause 2.5 may be included as a deduction in the Contract Price and Payment Certificates; the employer cannot make any deduction by way of set-off or any other claim unless it is in accordance with the Engineer's determination; and notice is not required for payments due to the employer for services under subclause 14.19 or equipment under subclause 4.20. Subclause 2.5 is a new 'contractor-friendly' clause which is designed to prevent an employer from summarily withholding payment or unilaterally extending the Defects Notification Period. One particularly important feature can be found in the final paragraph which specifically confirms that the employer no longer has a general right of set-off. The employer can only set-off sums once the Engineer has agreed or certified any amount owing to the contractor following a claim. The employer should remember that in accordance with subclause 14.7, he must pay any amount certified, even if he disagrees with the Engineer's decision. By subclause 14.8, were the Dispute Adjudication Board to decide that the employer had not paid the amount due, the contractor would be entitled to finance charges. Unless the employer follows the procedure laid down by this subclause, he cannot withhold or otherwise deduct any sums due for payment to the contractor. The notice must be in writing and delivered in accordance with the requirements of subclause 1.3. It is unclear as to whether the particulars are required to be provided at the same time as the

notice is served. The subclause does not require that the particulars are provided at the same time as no time limit or frame is imposed on either. The employer must give notice 'as soon as practicable' after becoming aware of a situation which might entitle him to payment. Therefore unlike subclause 20.1, where a contractor has 28 days to give notice, there is no strict time limit within which an employer must make a claim, although any notice relating to the extension of the Defects Notification Period must of course be made before the current end of that period. In addition it is possible that the Applicable Law might just impose some kind of limit. Under subclause 3.5 of the Construction and Design-Build Conditions, the Engineer must first try and agree the claim. Under the EPC/Turnkey Conditions, the primary onus to agree or determine any claims lies with the employer. If either party is not satisfied with the determination made by the Engineer under subclause 3.5, then the resulting dispute could be referred to the Dispute Adjudication Board under clause 20. An employer would therefore be advised not to deduct the amount to which he believes he is entitled, before any such determination of the Dispute Adjudication Board, as to do so would leave the employer liable to a claim from the contractor.

In what circumstances can a contractor make a claim?

A different set of rules apply to the contractor than to the employer. Under clause 20.1, the contractor has a duty to notify the employer of an entitlement to additional time or money. The key features of subclause 20.1 are that: the contractor must give notice to the engineer of time or money claims, as soon as practicable and not later than 28 days after the date on which the contractor became aware, or should have become aware, of the relevant event or circumstance; any claim to time or money will be lost if there is no notice within the specified time limit; supporting particulars should be served by the contractor and the contractor should also maintain such contemporary records as may be needed to substantiate claims; the contractor should submit a fully particularised claim after 42 days; the engineer is to respond, in principle at least, within 42 days; the claim shall be an interim claim. Further interim updated claims are to be submitted monthly. A final claim is to be submitted, unless agreed otherwise, within 28 days of the end of the claim event; payment certificates should reflect any sums acknowledged in respect of substantiated claims; and contrary to the old FIDIC Books (In the Orange Book (1995), subclause 20.1 only sets a notification deadline in respect of claims for additional payment. However, similar provisions in respect of time-related claims can be found at subclause 8.6.) the notice to be served under subclause 20.1 relates to claims for an extension of time as well as claims for additional payment. The 28-day deadline does not necessarily start on the date of the claim event itself but on the date the contractor objectively should have become aware of the event. Whilst it is relatively easy to identify the claim event in the case of a single event such as the issuing of engineers' instructions or the receipt of borehole tests indicating unforeseen ground conditions, when, however, the claim event is a continuous event, such as unforeseeable weather over a certain period of time, it can become extremely difficult to pinpoint the exact start of the 28-day period. The contractor also needs to remember that where the effects of a particular event are ongoing then, rather unusually, the contractor is specifically required to continue submitting notices at monthly intervals.

n what respects can an employer make a claim under the FIDIC Red Book or what does subclause 2.5 cover?
There are a number of different clauses throughout the contract which provide the employer with a right to claim payment from the contractor. These include: Subclause 4.19 - Electricity, water and gas; Subclause 4.20 - employer's equipment and free-issue material; Subclause 7.5 - Rejection; Subclause 7.6 - Remedial work; Subclause 8.1 - Commencement of works; Subclause 8.6 - Rate of progress; Subclause 8.7 - Delay damages; Subclause 9.4 - Failure to pass tests on completion; Subclause 10.2 - Taking over of parts of the works; Subclause 11.3 - Extension of defects notification period; Subclause 11.4 - Failure to remedy defects; Subclause 13.7 - Adjustments for changes in legislation; Subclause 15.3 - Valuation at date of termination; Subclause 15.4 - Payment after termination; Subclause 17.1 - Indemnities; and Subclause 18.1 - General requirements for insurances.

What does the requirement in clause 4.1 that any design produced by the contractor must be 'fit for its purpose' mean?
The general rule under English jurisdictions, is that a contractor who agrees to be responsible for both design and build of a structure assumes a duty to ensure that it will be fit for its purpose as communicated to that contractor. The fitness for purpose duty is stricter than the ordinary responsibility of an architect or other consultant carrying out design where the implied obligation is one of reasonable competence to 'exercise due care, skill and diligence. This duty is absolute. In Greaves v Baynham Meikle [1975] 1 WLR 1095, Lord Denning said this of the fitness for purpose obligation: 'Now, as between the building owners and the contractors, it is plain that the owners made known to the contractors the purpose for which the building was required, so as to show that they relied on the contractors skill and judgement. It was therefore, the duty of the contractors to see that the finished work was reasonably fit for the purpose for which they knew it was required. It was not merely an obligation to use reasonable care, the contractors were obliged to ensure that the finished work was reasonably fit for the purpose.' Further, in Viking Grain Storage v T.H. White Installations Ltd (1986) 33 BLR, Judge John Davies said: 'The virtue of an implied term of fitness for purpose is that it prescribes a relatively simple and certain standard of liability based on the 'reasonable' fitness of the finished product, irrespective of considerations of fault and of whether its unfitness derived from the quality of work or materials or design.' Where an employer can be seen to rely on a contractor for the design, the contractor's legal responsibility is to produce (in the absence of express provision in the contract) a final work which is reasonably suitable for its purpose. Given that there is express provision in the FIDIC conditions, the absence of negligence in the design, will not therefore be a defence for the contractor. The obligation to provide Works that are fit for their purpose will only be effective if elsewhere in the documentation the purpose of the plant has been clearly made known to the contractor. It is not enough for a contractor to assume from the Tests on Completion which may need to be carried out under clause 9 that it knows what the employer requires. A contractor should ensure that he has been provided with a general description of any outputs that the employer intends to achieve, or an indication of how the employer expects the plant to perform in a given number of years.

What happens if the contractor misses the 28-day dead-line? In other words, is subclause 20.1 a condition precedent?
Yes. Subclause 20.1 is a condition precedent and potentially provides the employer with a complete defence to any claim for time or money by the contractor not started within the required time frame. Generally, in England and Wales, the courts will take the view that timescales in construction contracts are directory rather than mandatory, so that the contractor should not lose its right to bring its claim if such claim is not brought within the stipulated timescale. In the case of Bremer Handelgesellschaft mbH v Vanden Avenne Izegem nv 1978] 2 Lloyd's Rep. 113, (HL) per Lord Salmon, however, the House of Lords held that a notice provision should be construed as a condition precedent, if: it states the precise time within which the notice is to be served; and it makes plain by express language that unless the notice is served within that time the party making the claim will lose its rights under the clause. Subclause 20.1 plainly fulfils both these conditions as: the notice of claim must be served 'as soon as practicable, and not later than 28 days after the contractor became aware, or should have become aware, of the event or circumstance', and 'If the contractor fails to give notice of a claim within such period of 28 days, the Time for Completion shall not be extended, the contractor shall not be entitled to additional payment, and the employer shall be discharged from all liability in connection with the claim.' Subclause 20.1 was thus clearly drafted as a condition precedent. However, there is always a possibility that a court/arbitral tribunal might decline to construe it as a condition precedent, having regard to the particular circumstances of the matter before it and the impact of the applicable law. Note that the courts have generally stated their approval for condition precedents, provided they fulfil the conditions laid out in the Bremer case. In the case of Multiplex Construction v Honeywell Control Systems [2007] EWHC 447 (TCC), where Mr Justice Jackson held that: 'Contractual terms requiring a contractor to give prompt notice of delay serve a valuable purpose; such notice enables matters to be investigated while they are still current. Furthermore, such notice sometimes gives the employer the opportunity to withdraw instructions when the financial consequences become apparent.' Judge Jackson's words were endorsed by HHJ Davies QC in the case of Steria Ltd v Sigma Wireless Communications Ltd [2008] CILL 2544 who said that: 'In my judgment an extension of time provision confers benefits on both parties; in particular it enables a contractor to recover reasonable extensions of time whilst still maintaining the contractually agreed structure of a specified time for completion (together, in the majority of cases, with the contractual certainty of agreed liquidated damages, as opposed to uncertain unliquidated damages). So far as the application of the contra proferentum rule is concerned, it seems to me that the correct question to ask is not whether the clause was put forward originally by Steria or by Sigma; the principle which applies here is that if there is genuine ambiguity as to whether or not notification is a condition precedent, then the notification should not be construed as being a condition precedent, since such a provision operates for the benefit of only one party...'

Why is the clause 15.1 Notice to Correct so important?

The engineer is empowered to issue a notice requesting that the contractor remedy any default under the contract. This is a short, simple subclause which gives the engineer the right to issue a notice to the contractor requesting that it rectifies poor performance under the contract. The importance of the clause is that it is a potential pre-cursor to termination. Under subclause 1.3, the notice must be in writing. Although the giving of a notice potentially has a very significant effect, the requirement on the Engineer is an optional one. He does not have to issue such a notice. Nevertheless as the notice (and the failure to comply with any such notice) is one of the pre-cursors to termination, the FIDIC Guide recommends that the notice should: 1. state that it is a notice under subclause 15.1; 2. describe clearly the nature of the failure; and 3. specify what constitutes a reasonable time to rectify the failure. All three recommendations are sensible. The reason for including an actual reference to subclause 15.1 is to avoid disputes as to the nature of notice. For example, the Engineer can issue instructions under subclause 3.3 requiring the remedying of defects or serve a notice under subclause 7.5 rejecting works carried out by the contractor. The second item adds similar clarity, whilst the third is already a requirement of the subclause. The subclause refers to a failure to carry out 'any' obligation under the Contract. Given the fact that minor defects by themselves would be unlikely to amount to a sufficient breach of contract to justify termination, there might be thought to be a question mark over whether the failure to remedy a minor defect will empower the employer to exercise its right to terminate under subclause 15.2. The legal principle 'de minimis non curat lex' - the law does not concern itself with trifles - applies both at common law and to most civil codes. However it is not the nature of defect itself which becomes relevant but the failure of the contractor to remedy the effect when requested to do so. At common law the non-compliance with such a term after receipt of notice may amount to repudiation regardless of the contractual effect set-out in subclause 15.2. In the case of Hong Kong Fir Shipping Co. v Kawasaki Kisen Kaisha [1962] 2 QB 26. the charterer argued that it had had the right to terminate the charterparty on the basis that the incompetence of the engine room staff was in breach of an implied term that the ship would be seaworthy. This claim was rejected. However Sellers LJ suggested an alternative way in which the claim could have been made: 'It would be unthinkable that all the relatively trivial matters which have been held to be unseaworthiness could be regarded as conditions of the contract or conditions precedent to a charterer's liability and justify in themselves a cancellation or refusal to perform on the part of the charter. If, in the present case, the inadequacy and incompetence of the engine-room staff had been known to them, the charterers could have complained of the failure by the owners to deliver the vessel at Liverpool in accordance with clause 1 of the chaterparty... have given the shipowners a week in which to bring the engine room staff into suitable strength and competency for the vessel's 'ordinary cargo service'. If the shipowners had refused or failed so to do, their conduct and not the unseaworthiness would have amounted to a repudiation of the charterparty and entitled the charterers to accept it and treat the contract as at an end. This is exactly the type of situation the subclause is attempting to deal with. It is not the defect itself but the conduct in failing to remedy the defect that is important.

Why must a contractor provide detailed progress reports?

The simple answer is because clause 4.21 spells out in some detail the information a contractor is required to provide. Second, a contractor may not be entitled to payment if the reports are not provided. Clause 14.3 notes that payment will only be made within 28 days of receipt of the application for payment and the supporting documents. The progress reports makes up part of the supporting information that has to be provided with every interim application for payment.

The contractor has just received the final certificate two months after the date on its face. Is the contractor still able to challenge the contract sum?
In this example, the contract provides that the final certificate is to be conclusive of the adjusted contract sum unless legal proceedings are commenced within 28 days of the date of issue. Most contracts provide that a final certificate must not merely be signed, but also issued in order to be valid. Further, it is generally the case that the final certificate will need to be issued to all interested parties, not just the employer. This is particularly the case where the certificate purports to have conclusive effect. If the difference between the date on the face of the certificate and the date of issue is only a couple of days, then it is likely for reasons of certainty that the date on the face of the certificate will be taken as the date of issue. If, however, the certificate is withheld for a substantial period of time it is likely that the true date of issue will be considered when determining deadlines. Hence, the 28 day time limit should, in a case such as this, run from the date the certificate is, as a matter of fact, issued to the contractor.

Final Certificates Challenging the contract sums if there is a delay between the date on final certificate and its receipt, The contract administrator has issued the final certificate but now the employer has discovered that the glass is not the correct colour. Is the employer entitled to compensation?
The answer to this question depends entirely upon the wording of the contract between the employer and the contractor. It is submitted that generally where a contract is silent it should not prevent a claim in breach of contract for defective workmanship. However, each individual contract must be assessed on its own terms and it might be that, correctly interpreted, the final certificate is conclusive as to the works being in accordance with the contract.

The employer has failed to issue a withholding notice against the sum certified in respect of the final interim certificate. What should the contractor do?
In this example, the employer is refusing to pay the full amount certified on the basis that the employer expects the final certificate to substantially reduce the amount owing to the contractor. However, because the employer has failed to serve a withholding notice, the contractor is entitled to, and generally should, seek immediate payment of the amount certified in the last interim certificate by either adjudication or summary judgment in the courts. It is no defence for the employer to allege that the final certificate is likely to alter the sum due.

The contract administrator has issued a final certificate which fails to include any deductions for omissions instructed by the employer during the contract period. What should the employer do?
The employer should initially serve a withholding notice so as to entitle him to retain the contested sum. Consideration should then be given as to whether there is any need to commence adjudication or legal/arbitral proceedings in order to prevent the final certificate becoming conclusive as any matters which it might subsequently wish to contest. Again, the wording of the contract might be somewhat complex and consideration should be given to immediately seeking legal advice.

The contract administrator has issued a final certificate when the contractor was still seeking to persuade the CA to increase the value of the final account. What should the contractor do?
The exact answer to this question depends greatly upon the wording of the contract. The contractor may be able to challenge the final certificate on one of two bases: the contractor may be able to argue that the final certificate has not been validly issued if the procedural requirements of the contract have not been complied with; and the contractor may be able to challenge the amount certified in court or arbitral proceedings. The primary issue that the contractor must bear in mind is that prompt action may be required under the contract to prevent the final certificate acquiring conclusive effect. Each case will depend upon the exact wording of the relevant contract which can often be fairly complicated. As such, the contractor should consider immediately seeking legal advice.

The employer believes that some of the workmanship is not up to standard, but the contract administrator fails to make any deduction. Will clause 1.10.1.1 render the final certificate conclusive?
The employer believes that some of the workmanship is not up to the required standard, but the architect/contract administrator fails to make any deduction in the final certificate. Will clause 1.10.1.1 render the final certificate conclusive? In this example, works are being carried out under a JCT Standard Form of Building Contract 2005 where the contract documents state that the contractor is to exercise reasonable skill and care in the construction of the works. Clause 1.10.1.1 will not render the final certificate conclusive because it only applies where the contract explicitly states that the standard of goods, materials or workmanship is to be to the approval of the architect/contract administrator. This contract does not state that, requiring instead that the contractor simply use reasonable skill and care.

JCT Is it possible to have a contract that is a guaranteed maximum price (GMP)?

Many JCT contracts are amended to make them a GMP contract. However, it is hard to see how a contractor can be held to the contract sum if the project circumstances change as a result of employer requested change or employer risk items. It is unlikely that any construction contract is a true GMP contract and the term should be avoided as it leads to client misunderstanding and false expectations with regards to project cost certainty. Cost certainty via a GMP clause is illusionary. The JCT Constructing Excellence contract uses the terms Guaranteed Maximum Cost but this sum will be adjusted if there is change or client risk items are triggered. Target cost contracts with a pain gain mechanism that puts all the 'pain' on the contractor can achieve a situation that is similar to a GMP but still does not guarantee a GMP particular if there is change or variations. Except for the JCT Constructing Excellence contract, the JCT does not produce a target cost contract.

Under a JCT Design and Build form, is there a precedence between the employer's requirements and contractor's proposals?
There is some uncertainty on this point as this JCT form does not expressly state what takes precedence. This confusion is apparently a result of the JCT drafting committee (a mixture of clients, consultants and contractors) being unable to agree on this point with the result that an unsatisfactory compromise was reached, which is the current drafting. In 'Understanding JCT Standard Building Contracts' David Chappell argues that the employer's requirements must take precedence as the contract philosophy requires the employer to set out its requirements and it is logical that the contractor works to this. The JCT guidance notes for this contract also provide some explanation on this matter although it provides no overall guidance on precedence. There is uncertainty on this point and it is suggested that the practitioner make an amendment to the third recital making it clear which part of the design takes precedence. This will reduce arguments on the subject.

Should a standard form be amended?

Not necessarily but some amendments are currently (in 2010) fairly standard such as the removal of the inflation/fluctuations provision and the requirement for a lump sum contract. Most standard forms will require some amendment to suit the project requirements although efforts should be made to keep these to the minimum to preserve the essential nature of the JCT. Your client (particularly the larger client) will often have their own standard amendments and most consultants have their own in house amendments. Public bodies and local authorities often have mandatory contract amendments such as provisions on the Freedom of Information Act and anti-discrimination.

JCT: What is a fixed price contract?

This is normally a contract where the contract sum is not to be adjusted for price/ inflation increases. Many of the JCT contracts have detailed provisions for dealing with inflation via 'Fluctuation' provisions. The operation of these provisions can be quite complex. An amendment is normally added to such contracts, deleting the fluctuation provisions and making the contract sum fixed for the contract duration. Fixed price contracts are currently (in 2010) the norm in the construction industry but this may change

What is a lump sum contract?

A lump sum contract requires the contractor to perform all the obligations identified in the construction contract and complete the works for a specified sum of money. This is sometimes called the 'Inclusive Price Principle'. Providing the project requirements have not changed and none of the compensation mechanisms (variations, extensions of time, loss and expense, etc) in the contract are triggered then the contractor is only entitled to this sum of money for completing the works. A lump sum contract is not a guaranteed maximum price (GMP) contract.

Who takes the risk on ground conditions under a JCT contract?

This is a difficult question on a complex issue. Firstly most JCT contracts do not have any express clauses on ground conditions, which suggests the contractor carries all the risk on ground conditions on JCT forms. Moreover, JCT contracts are often amended and include terms that exclude liability for ground conditions. However, many JCT contracts also include or make reference to ground investigation reports so there may be the risk of the employer making some form of

representation or warranty to the contractor on the nature of the project ground conditions (Bacal Construction v Northampton DC (1975) 8 BLR 88). Representations and warranties are very legal based arguments and require a legal professional to advise on such issues. It is likely that the risk of ground conditions under a JCT is with the contractor and included for in its price. If the contract is a remeasurement contract, then there may be the ability to recover the cost of additional excavation and earthworks. Much will depend on what the contract expressly states but if the contract is silent then this risk is probably with the contractor. Specialist advice should always be sought on this matter

Lean Construction
Why is the Toyota relationship with its suppliers so much more constructive than that which exists within the construction sector?
This is summed up very succinctly in Seeking the Best Suppliers in the World from Toyota: 'Suppliers were responsible throughout the supply chain for producing drawings and participating fully in the design and development phase and were selected not just on price, but on system/design capability and their added value contribution to a longterm relationship.

Can lean construction work effectively in the craft-based construction sector?

Stripped of all the confusing jargon that has grown up around the term in the construction sector, lean thinking is merely the means by which the firms that make up the total supply chain (which must obviously include designers and trades contractors) collaborate closely together within long-term, supply-side alliances or partnerships to constantly search out and eliminate all the unnecessary costs caused by the ineffective utilisation of labour and materials. Because supply chain management is primarily about the way the firms in the design and construction supply chain collaborate with each other at a strategic level to make themselves more competitive it will obviously work equally well in any business sector.

Why has the construction sector never utilised the power of lean thinking to drive out unnecessary costs?
Unfortunately, and unlike all other business sectors, the construction sector has never needed to react to the market pressure caused by the arrival of an aggressive, lean, foreign competitor who could offer the end-customers better quality buildings that were delivered more quickly and at far lower prices. As a consequence, the UK construction sector had very little commercial incentive to make the heavy investment necessary to introduce supply chain management and lean thinking, and thus move away from the inefficient and fragmented way it had always operated. However today's harsh market conditions ought to create an excellent incentive for an astute construction contractor to work with a select group of trade contractors and designers to embrace a lean thinking regime using the Toyota concept of supply chain partnerships. To quote Toyota UK: 'Once we have selected a supplier, we will look to work with them to develop a long-term relationship. It is important not to misunderstand, this does not mean we award long-term contracts. A long-term relationship in our eyes is not the consequence of being given an order, but will be the result of mutual effort over many years in search of continuous improvement.'

What are 'lean thinking', 'continuous improvement', 'supply chain management', 'last planner' and 'lean construction'?
'Lean thinking', 'continuous improvement' and 'supply chain management' are powerful, high-level, strategic tools that are used within the long-term supplier relationships to drive out unnecessary costs and drive up quality. 'Last planner' is a far less powerful, low-level, project-based tool. 'Lean construction' is construction industry jargon for a process that has never, to my knowledge, been unambiguously defined or clarified. The concept of lean thinking and supply chain management was first developed by an American called Demming and was introduced into Japan shortly after the Second World War to help the reconstruction of their manufacturing sector. Marketing leading firms such as Toyota have since developed and refined supply chain management techniques, especially the primary lean thinking tool, to constantly reinforce and improve their market dominance. Over the last four decades, supply chain management (and its key ingredient, lean thinking) has been used extensively in all nonconstruction business sectors as the primary means to improve competitiveness. The main ingredients of lean thinking and supply chain management are: compete through eliminating all forms of unnecessary costs; set-up long-term, strategic relationships with all key firms in the total supply chain; and develop a culture of continuous improvement.

Who needs to act first to enable the introduction of lean thinking into the construction sector?
In order for supply chain management to work effectively, all the firms that make up the total design and construction supply chain need to be able to work together in close collaboration at a strategic level (i.e. at a level that over-arches individual projects) to continually search out and eliminate the unnecessary costs that are regularly caused by the ineffective utilisation of labour and materials in project after project. It follows from this that the main construction contractor is best positioned to initiate the process.

Why should the construction industry bother with lean construction?

Because the unnecessary costs caused by the ineffective utilisation of labour and materials (caused by reworking, lack of adequate pre-planning, delays by the previous trades, access problems, errors in the drawings, faulty materials, insufficient or inappropriate labour, untidy and cluttered working spaces, changes to the brief, scrapped materials, etc.) can amount to as much as 40 per cent of the total construction cost. This means that prices to the end-customer are unnecessarily high and the profit margins for the supply-side firms are unnecessarily low. Extensive experiences over the last four decades in other business sectors have proved beyond any possible doubt that lean thinking, within a well-managed supply chain, is the only truly effective means of eliminating unnecessary costs and driving up quality across the entire supply chain and it therefore makes sense for the construction sector to take advantage of this well-proven lesson.

Why should the construction sector import lean thinking from the automotive sector?
This is best answered through quoting Seeking the Best Suppliers in the World from Toyota: 'A couple of decades ago in Europe and the US, supply chain selection was not based around the partnership methods of today ... The automakers ... held onto total design responsibility for the parts, which allowed them to freely issue drawings, carry out bids, and resource parts as regularly as they wished. This system led to well-known dysfunctional shortcomings. From the suppliers view, there was no guarantee of gaining future business. Price cutting meant using inferior/cheap materials and no incentive was provided for future investment ... The bidding system, although superficially appearing fair and correct to market theory, could actually lead to hostile relationships and rather poor levels of customer satisfaction in the industry.' Does this sound familiar? I doubt there are any trades contractors that wouldn't recognise this as an accurate description of the situation within the construction sector.

Letter of intent
Are letters of intent safe to use?
Letters of intent are a safe and useful tool if used appropriately and with care. Unfortunately they are very often prepared without sufficient care. Pressure is then taken off completion of the formal contracts which are all too often signed much later than they need to have been. In the meantime risks and uncertainty may have been much higher than expected.

Do letters of intent create a binding contract?

Whether or not letters of intent create a binding contract and the terms of the contract that they create very much depends on terms of the letter which must therefore be very carefully drafted. It is better not to use letters of intent at all but to enter into contract before works commence. However if this is not possible then the formal contracts should be completed as soon as possible.

Do letters of intent serve the employer or the contractor?

Letters of intent serve both parties by allowing works to commence before contract documents have been prepared, checked and signed. However, badly drafted letters of intent can also introduce a great deal of uncertainty or misunderstanding as to the parties' respective rights and obligations and this serves neither party.

Should letters of intent be drafted by a lawyer?

Yes. There are many examples of expensive and time consuming court battles regarding the interpretation of letters of intent. If they are to be used they should be drafted by lawyers and replaced by formal contracts as soon as possible.

What happens if the letter of intent contains a cap on entitlement which is exceeded?
If there is evidence that the party now relying on the cap had at all times preserved its intention to do so then the cap will usually apply. However if the party now relying on the cap can be shown to have waived its intention to do so then the cap will usually no longer apply.

LADS
Do liquidated damages have to be a genuine pre-estimate?
Liquidated damages must be no more than a genuine pre-estimate. It is perfectly legitimate for liquidated damages to be less than a genuine pre-estimate.

Does an estimate really have to be done?

It is relevant though not essential that a genuine estimate is actually undertaken. If the estimate is substantially wrong, the genuineness of the efforts wil not save the clause, nevertheless it is a relevant factor.

What happens if in fact there is no loss or only a relatively small loss?

The actual loss is irrelevant provided that the level of liquidated damages is not significantly more than the range of possible losses foreseeable at the time that the contract was entered into.

What happens if liquidated damages exceed the genuine pre-estimate?

The liquidated damages have to be unconscionable before they will be deemed unenforceable. The gap between the range of possible losses and the level of liquidated damages has to be significant before liquidated damages will be classified as a penalty.

What is the relevant time for the genuine pre-estimate to be undertaken?

The genuine pre-estimate is judged at the time that the contract was entered into.

Loss and Expense Can a formula be used to calculate loss of overheads and profit?
Once the contractor has passed the hurdle of proving that there has in fact been an actual loss there is precedent to support the use of formulae to calculate the extent of loss suffered.

Do contractors have to prove actual loss of overheads and profit?

Yes. Contractors who are claiming for loss of overheads and profit have to prove that there has been an actual loss as a direct result of the relevant matter.

What are the problems with claiming for disruption?

Proving loss of productivity arising as a direct result of a relevant matter is notoriously difficult. Rarely are there reliable and complete records of productivity levels before and after the relevant matter and rarely does the relevant matter arise in isolation of other confounding influences.

What do contractors have to prove?

Contractors have to prove, on the balance of probabilities, that they have in fact incurred loss or suffered expense as a direct result of the relevant matter and the extent of that loss or expense.

What happens if contractors fail to give proper notices?

Many standard forms of contract require the contractor to give notice of events that might give rise to a claim for loss and expense. Only if the contract makes it clear that the provision of such notices is a condition precedent to the recovery of loss and expense will the failure to provide such notices act to preclude such a claim. In other cases the failure to provide such notices may be a breach of contract for which the client may be able to recover damages if it is possible to demonstrate an actual loss resulting from the breach.

Managing client relationships

Is it appropriate to offer to take my public sector client to see their favourite team play football?
It is highly likely that this would not be an appropriate form of client entertaining. Most public sector clients would be precluded from accepting such an invitation under their own organisations policies. If allowable they may be required to declare the entertaining internally. The safest option in such a situation is to ask the client what is permissible and appropriate for them first and then decide what form your client care activities should take.

Is my organisation able to hold contact details of clients under the Data Protection Act?
An organisation can legitimately hold information on a client that is required for their business activities such as their name, contact details, what previous events they have attended and the like. Greater care is required when 'harvesting' client data such as taking details from seminar lists and adding them to the client database for use in other marketing exercises. In these examples it should be made clear that the information may be retained and the individual given an 'opt out' option. Best practice is that an individual should be required to proactively opt to have their details retained (normally by means of a tick box). The Data Protection Act precludes an organisation passing on client details to any other organisation unless permission has been obtained and at any time a client can ask to see the information held and require their details to be removed.

My client wants a free flow of information between their team and ours. Are there any problems with allowing this or should the information flow be more controlled?
There is nothing fundamentally wrong with this approach provided that in addition all correspondence is sent to a central point of contact. Without that central contact person who sees all the information it would be very difficult to control the project and ensure that there is no scope creep. It is also recommended that a senior point of contact is nominated in the supplier organisation with whom contact can be made should the client have any concerns regarding the service being delivered.

What requirements do RICS place on a quantity surveying company with respect to the management of complaints?
RICS requires all organisations that fall under their governance to have a formal complaints handling procedure which is available for both the RICS and clients to inspect. This procedure should have at least two levels at which a complaint is reviewed. The first is a review by a senior member of staff within the supplier organisation and the second is resort to a specified independent party such as an ombudsman.

Measurement
Is there a standard way of calculating Element Unit Quantities (EUQs)?
The model used is one compiled by the BCIS.

When using the elemental method of estimating should Element Unit Rates (EURs) of Cost/m2 of Gross Floor Area (GFA) should be used?
If possible it is preferable to use EURs as when used in connection with Element Unit Quantities (EUQs) produced a more accurate and carefully considered estimate.

Is it mandatory to follow the measurement conventions set out in the RICS New Rules of Measurement: Order of cost estimate and elemental cost planning?
The measurement rules have the same status as RICS guidance notes. The code provides advice to RICS members on aspects of the profession. Where procedures are recommended for specific professional tasks, the code embodies best practice. Members are not required to follow the code of measuring practice. They should, however, note the following points. When an allegation of professional negligence is made against a surveyor, the court is likely to take account of the contents of any relevant guidance notes published by RICS in deciding whether or not the surveyor had acted with reasonable competence. On the other hand, it does not follow that a member will be judged negligent if he has not followed the practices recommended in these notes. It is for each individual surveyor to decide on the appropriate procedure to follow in any professional task. However, where members depart from the recommended practice, they should only do so for good reason. In the event of litigation, the court may require them to explain why they decided not to adopt the recommended practice.

What information is required to carry out a functional area analysis?

The minimum information is: The RICS Code of Measuring Practice 6th Edition (2007) Drawings showing the internal layout of each floor to be measured as well as thickness of internal partitions and areas of circulation and storage space. Drawings showing the presences or pavement vaults, conservatories, etc. Elevations and sections showing heights of rooms and areas less than 1.5m high.

Non standard bespoke contracts

Do functional units include circulation areas or just functional areas, such as classrooms and bedrooms?
The cost or rate per functional unit includes all circulation and other areas, for example reception areas and meeting rooms. However, it is usual to measure and cost external works separately as this element is not included in the functional rate.

Do I need to involve a lawyer?

Yes. For non-standard bespoke contracts it's not just what the contract says but how it says it and what is not said that governs how the courts will interpret the rights and obligations of the parties.

Which terms and conditions apply?

I received a purchase order which referred to the client's terms and conditions. I accepted on the basis of my terms and condition, but which terms and conditions apply? The courts will attempt to discern the objective intentions of the parties at the time that the contract was entered into. Terms and conditions presented after the contract has been made will usually be irrelevant. The last exchange of correspondence prior to the point of contract will be especially relevant although earlier exchanges that are not inconsistent with later exchanges may also record agreed terms and conditions. Therefore identifying the actual point of contract will be crucial but is sometimes difficult to discern.

Why are non-standard bespoke contracts not used more?

Non-standard bespoke contracts create a large number of legal issues in terms of their drafting, review and negotiation. Contractors are naturally suspicious of bespoke contracts which leads to the appointment of lawyers and extended negotiations.

Payment

he employer issued a pay less notice against the previous notice of payment but has not issued a fresh notice against the current notice of payment. Does the previous pay less notice still apply?
No. Each notice of payment requires a fresh pay less notice.

The employer issued a withholding notice against the previous certificate of payment but has not issued a fresh notice against the current certificate. Does the previous notice still apply?
No. Each certificate or other trigger for payment requires a fresh notice.

Can the employer rely on sums claimed against the contractor under another contract in a withholding notice or pay less notice?
The answer to this question depends on the nature of the claims under the other contract: If the employer's claims under the other contract are for a liquidated amount which is known or can readily be ascertained, they can be relied on as a legal set-off. If they are not liquidated sums legal set-off is not available. The employer may be able to rely on an equitable set-off if he or she can show that the claims under the other contract are so closely connected to the sums due under the first contract that it would be inequitable to consider one without the other. This will be very difficult to establish where the claims arise under separate contracts. Both of the above points are subject to the terms of the contract under which the claim for payment is being. That contract may contain an express clause allowing the employer to set off claims which arise under other contracts with the contractor. Alternatively, it may contain a clause which expressly forbids such a set-off.

What happens if a contract is concluded after 1 October 2011 using a pre-LDEDCA standard form? I am acting as contract administrator under a contract dated 2 October 2011. The contract uses the JCT 2005 Standard Form of Building Contract. Should I follow the payment provisions laid down in the contract or those laid down in the Scheme for Construction Contracts?
Contracts entered into on or after 1 October 2011 should not use JCT or other standard forms of contract which were issued prior to 2011. Such standard forms were drafted to comply with the requirements of the Housing Grants, Construction and Regeneration Act 1996 in its original form and so they are unlikely to comply with the new requirements introduced by the Local Democracy, Economic Development and Construction Act 2011. If you find yourself in this situation the most sensible way forward may be to advise your client to seek the other partys agreement to amend the contract so that it uses the relevant form from the JCT 2011 suite of contracts. If agreement cannot be reached on this, you should follow the payment provisions in the Scheme for Construction Contracts, as amended by the Scheme for Construction Contracts (England and Wales) 1998 Amendment (England) Regulations 2011, to the extent that the terms of the contract you are using do not comply with the requirements of the amended.

What happens if the employer's withholding notice or pay less notice is served late?
It will be of no effect and payment of the 'sum due' in the certificate or application (in pre-LDEDCA contracts) or the notified sum (in post LDEDCA contracts) will have to be made in full. If the employer fails to do this, the contractor may apply for summary judgment to recover the full amount paid, or pursue a similar claim through arbitration or adjudication. However, the employer is free to make the desired deduction against the next interim payment, assuming he or she serves a withholding notice or pay less notice in time on that occasion.

Post tender estimates

How do you treat inflation?
The post-tender estimate needs to take into account the basis for the tender. If the tender is a fixed price tender then the inflation associated with the construction works has already been catered for. However the post-tender estimate does include non construction elements of the project and such these may be subject to different allowances. Prior to applying inflation it is important to ensure that the inflation costs are not already covered within the quotes/tenders that are in place. Once the elements of work/costs are identified, which are base dated, then the inflation associated with these needs to be calculated bearing in mind the elements of works these need to cover. Guidance on the rate of inflation can be sought through the BCIS. Building Cost Index allows for the inflation during the course of a project. Due to the varied nature of the elements which make up a post-tender estimate, inflation may need to be applied differently to the various components. Elements such as financing are more likely to be tied to interest rates whereas many of the non-construction elements could be more related to retail or consumer price index.

How is it different to a tender appraisal?

A tender appraisal deals with the tender return comparing the returns against each other and checking that the return is complete with no caveats. The tender appraisal highlights any issues with the tender returns and ranks the returns in order of cost (with normalisation as necessary) to allow a recommendation to be made. A post-tender estimate forecasts costs and utilises the tender return as a base. A tender appraisal should not alter the figures from the tender returns, below the line adjustments would only be made to normalise the tenders. A post-tender estimate calculates project out put costs. Allowances can be made to cover alterations or proposed changes. There will always be an aspect of forecasting and estimating based on drawn information when developing an estimate. This is in contrast to the tender appraisal, based on the facts and figures with no interference or interpretation.

Is there a standard method of measurement for use while compiling a post-tender estimate?
Post-tender estimates should follow the NRM Order of cost estimating and elemental cost planning rules. Although the estimate does not quite conform to the standard estimating approach and does sit outside the cost planning time period. The post-tender estimate needs to be able to cater for the scope of works/project scope that needs to be included. The principles associated with the NRM Order of cost estimating and elemental cost planning rules would provide a sufficient platform from which the estimate should be based.

What happens if the post-tender estimate is well over the budget?

The post-tender estimate is a final warning, before entering into contract, of the final project cost. If the cost is above budget it should be considered carefully and the appropriate steps taken. Firstly there needs to be a reconciliation of the post-tender estimate to determine where the major movements have been and determine whether the scope of works has been varied by the client or other third parties. If the additional cost is not justifiable or is beyond the clients expectation then it would be necessary to look at how the costs could be brought in line with the budget. The next step is to instigate Value Engineering reviewing the either project from top to bottom in order to filter out what is important thereby establishing a hierarchy of project needs. It is essential that any cost reductions are achievable and are not reductions in necessary works which will invariably find themselves back into the project before the works are complete. This can create a false position at the commencement of the works which is not sustainable and will increase cost in accommodating necessary change. If the risk that something will be required is 100% certain then it needs to be factored into the costs. A review would need to take place on work that has a high probability of being required

Why do you need a post-tender estimate?

The post-tender estimate may be used as an appraisal document to determine the viability of the project and whether it should go ahead. As this is a recasting of the costs based on a tender it constitutes the most accurate assessment of cost. At this stage an analysis can take place which factors in any additional items giving a full appraisal of the cost of the project. This is an important stage because it is the last opportunity for a client to stop the project without incurring excessive costs and disruption. The other use for the post-tender estimate is as a report to record changes since the tender in the window before entering into contract. This may have been as a result of continued design development during the tender stage or changes introduced by the client. In this respect the estimate can be used as a reconciliation of the costs prior to entering into contract.

Practical Completion Are the works practically complete when the employer can beneficially occupy?
Beneficial occupation is often referred to as a test of practical completion although in practice is a much lower standard than that applied by the courts. If the works have not reached a state of completion such that they can be beneficially occupied they are clearly not practically complete. However, even if they can be beneficially occupied but there are patent defects which are not of such a minor nature as to be disregarded by a reasonable person then the works are not practically complete.

Can the architect certify practical completion before the works are finished?
The architect will usually have a discretion to certify practical completion of the works notwithstanding that there remain minor patent defects or small items of outstanding works. The extent of this discretion will depend on the nature of the project. On occasions the employer may be so commercially motivated to occupy the works that the architect certifies completion when the works are clearly still far from complete. In such circumstances the contractor may wish to challenge the certification if the consequent occupation by the employer would affect his ability to efficiently complete the outstanding works.

Can the architect refuse to certify practical completion because he is searching for defects?
The architect cannot refuse to certify practical completion on the basis of a suspicion of the existence of latent defects alone if there are no patent defects. Usually the architect will have visited the works at sufficiently frequent intervals to have already identified any defects in hidden works. Further if the architect issues an instruction for works to be uncovered in his search for hidden defects the works will not be complete until after those instructions have been followed.

Pre tender estimates

Are there any special considerations for procurement routes?
The procurement route would influence how the pre-tender estimate is configured. There are items in a construction management contract which do not appear in a traditional main contractor contract. Overall, the cost of the project should be broadly the same regardless of procurement approach. The distribution of cost will differ though. Typical deviation would include (but not limited to): Design and build: Design fees would be part of the estimate and subsequent tender. Risk and contingency would be included within the estimate to reflect developing the design. Construction management: The design would not be resolved before construction and as a result design contingency would need to be carried into the construction period. Risks may be held with the client. Pure construction management projects would not be fixed price (however the trade packages would be fixed price) due to fluidity of design. Traditional main contract: Risks and inflation will be part of the tender and therefore need to be reflected in the pre-tender estimate.

How do you treat inflation?

The pre-tender estimate needs to reflect what the tenderers have been asked to price. If the tender documentation asks for a lump sum fixed price contract then the pre-tender estimate should be priced in the same way with allowance for fixed priced to be either included in the individual rates and/or a single line provision in the general summary. It may be necessary to add an allowance for risk if the contract asks for a Guaranteed Maximum Price (GMP). On the other if the contract allows for fluctuation then the pre-tender estimate would be priced accordingly with no allowances made for fixed price. If this is the case then the project should have a separate contingency fund to deal with any additional costs arising from this as these would not be covered by the tender. When pricing a pre-tender estimate many of the rates available will be historic or current day. In this case due allowance should be made for either inflation or deflation. Guidance on the rate of inflation can be sought through BCIS. The Building Cost Index allows for the inflation during the course of a project which would be incorporated into the rate. When looking at historical rates then it may be necessary to use the tender price index to base date the historical tender to that of the pretender estimate. It is important to note, when using inflation indices, that these are not generally tailored to specific rates but rather deal with a project as a whole. It will average out the peaks and troughs in the elements. This can cause an issue when looking at a project that has a heavy bias towards a certain trade. For example if there was a disproportionate amount of mechanical and electrical services then this would influence the distribution of the inflation allowance and would put the increases outside that of an average building. This can also be the case with projects that have a large amount of specialist and bespoke features, whether this is faade cladding, internal finishes or services installations. The nature of the design may limit who can manufacture the designed items that has the knock on effect of losing competitiveness in the tender. Where elements of the building are no longer standard they should be priced accordingly and the rates will become bespoke and not necessarily relate to industry norms for inflation.

How is it different to a cost plan?

A pre-tender estimate is very different from a cost plan. A cost plan determines the cost of a project at a stage where the design has not been completed and the programme not set. Therefore it is a projection of the cost of the project. A separate design reserve allowance will be included for design development as elements of design will not have been completed. As the cost plan is likely to be prepared prior to geotechnical surveys being completed, which will mean that there is still uncertainty about ground conditions, the contingency sum will be higher based on lack of information. The cost plan may also contain additional items which would be outside the main contract works, these could include fees, design costs, aspects of the scheme which are outside of the project being tendered (typically enabling works, demolition, other buildings or phases). Where the cost plan projects costs for either the specific project or the overall out put costs for the client, the pre-tender estimate is based solely on what is going out to tender. The pre-tender estimate is based on the tender information and therefore has a clear defined scope. There are no allowances for design development or filling in the blanks. If there are elements of the cost plan which do not form part of the tender then separate financial provision should be made for these. In this way the pre-tender estimate should reflect the tender. If, during the process of carrying out the estimate, it is found that the information is lacking or elements of works which should have been included have either been left out or have not been sufficiently detailed, then these should be identified and an action plan put into place to determine how these can be incorporated into the tender. As a consequence of doing the pre-tender estimate it may be found that it is necessary to have a tender addendum to pick up the shortfall from the design information.

If you know the tenderers, can you consider this in the pre-tender estimate?
The pre-tender estimate should reflect the cost of the project which should not be influenced by who the tenderers are. Its important that the tender returns also reflect the project value or they will not represent value for money. A very complex project might require tenderes to be preselected. In this case the complexity of the project should be reflected in the pretender estimate, and the tender list is a consequence of this. However the pre-tender estimate should not be influenced by the tender selection.

Is there a standard method of measurement for use while compiling a pre-tender estimate?
Strictly speaking a pre-tender estimate is the order of cost pricing of the tender information. In this respect there is not a standard method of measurement associated with a pre-tender estimate. The pre-tender estimate is based on whatever information is available. The standard method of measurement would be utilised when preparing the pricing documents and bills of quantities on which the pretender estimate is based. If there is no quantified tender document then the pre-tender estimate would follow the rules as set out in the NRM. The information and understanding of the works should be more advanced than that at cost planning stage therefore there may be further items in the pre-tender estimate than in the cost plan including items covering the method of construction in more detail.

What happens if the pre-tender estimate is well over the budget?

The pre-tender estimate is an early warning of the cost of the tenders. If this does produce a value which is above budget the extent at which it is over budget needs to be considered. If the difference is marginal then the action may be to wait and see how the tenders look, bearing in mind that the pre-tender estimate should not be the lowest possible and lower tenders may be on budget. If the pre-tender estimate is well over budget then a number of actions need to be taken. Firstly there should be a reconciliation of the pre-tender estimate and the cost plan to determine where the major movements have been and determine whether the scope of works has been varied by the client or other third parties. If the additional cost is not justifiable or is beyond the clients expectation it is necessary to look at how the costs could be brought in line with the budget. This cost review could be as simple as identifying specification substitutes (for example chrome taps in lieu of gold) where the design does not change. If this doesnt make the required savings then the scope should be reviewed, possibly omitting some aspects of the project that could be covered in notes and minor design changes (for example not fit out one of the floors). Some cost reductions require redesign. In order to generate cost savings based on redesign the designers need to alter their drawings so that there is a record of the change and this can be implemented as a variation to the contract or dealt with through tender negotiations. As with all cost reductions these fall into the Value Engineering category and a hierarchy of needs must be established. The revised cost position should be established before the tender are returned. This can be fine tuned in response to the actual tender returns. The key changes should form part of the final negotiations which are incorporated into the contract. If these happen after the contract has been placed they will be variations to the contract and might cause disruption to both sequence of work and programme. It is best to deal with these changes pre-contract to ensure that the programme has captured any change. It is also possible depending on the extent of the variations that they may change the ranking of the tender returns, i.e. the lowest placed figure once adjusted may no longer be lowest, depending on how the tender documentation has been priced. This is particularly prevalent if the tenders are close which may require the negotiations to be held between the lowest two or at least the second lowest to be held in reserve depending on how the negotiations progress.

What happens if the pre-tender estimate is well under the budget?

For example the client may want the best building possible for X. Your cost data and cost planning means that the quality he is receiving is now lower than what he could have afforded. This is an interesting dilemma, it is usually seen as a good result if a project is under budget. When there are significant cost changes then these should be reconciled against the cost plan to check whether the cost differential is justified. However if a project at pre-tender estimate stage is significantly below budget then this can have a number of consequences for a client, such as: the client will have secured financing for the project at a much higher level than is required and this may have a cost to the client. concessions may have been made to the design to achieve the budget, many of these concessions may have been unnecessary and as a result the client may have a building that they are not entirely happy with, this could result in the project being redesigned to put back elements of the design which were omitted during the design stage. How a clients finances are organised will determine their attitude to the costs being considerably below budget. A self funding client may be happy with this outcome as this frees up funds for other projects or indeed would make a speculative development more viable. Public clients have a series of procedures to secure funding and future budgets are often related to the previous years expenditure therefore the reduced costs would have implications beyond this specific project.

Clients who have to secure funding from financial institutions are potential incurring additional costs and possible uncompetitive rates (if the sums are outside certain thresholds), this additional financing costs have a direct impact on the Client and this may have other implications which could come back to the Surveyor/Commercial Manager giving the advice.

What's the point of a pre-tender estimate?

A pre-tender estimate is actually quite important. It sits somewhere between cost planning and the post contract cost control. It is the quantity surveyors final costing of the works. Once the tender has been received the contractors costs will form the basis of the future cost control. The pre-tender estimate is an additional check of the adequacy of the tender information. The simple answer being if you find it impossible to price with the information available then how can you expect the contractor to price the items. The pre-tender estimate allows a reconciliation of the cost plan with the tender information from which any deviations to be identified. If changes have occurred without the clients approval then this is the final opportunity to capture these before it is too late. It also identifies whether changes to the design are additions or require the implementation of Value Engineering. The pre-tender estimate also gives a benchmark by which the returned tenders can be measured. This is particularly prevalent when the procurement route is single contractor negotiation. The pre-tender estimate allows for market testing with accurate information which can further influence negotiations with the tenderer.

Why would you need a pre-tender estimate over the RIBA work stage E cost plan?
Tender documentation is RIBA work stage G and is another key milestone. The majority of the information should have remained the same. However additional design information may have additional costs due to interpretation of the design elements as they stood at stage E. This design evolution combined with potential external influences from the client, future tenants, third parties (local authority and English Heritage), changes in legislation due to time lag between stages. In reality the design does continue past stage E. A good illustration of this is to compare the number of drawings at tender compared to the number at stage E. The additional drawings and supplementary information may result in some alteration to the costs of the project (this should be balanced against the residual design reserve held on the project).

Standard Form of contract

To amend or not to amend?
It is better not to amend standard forms of contract or to do so as little as possible. Tendering contractors will tend to be comfortable with unamended standard forms of contract, but will be naturally suspicious of bespoke amendements.

What amendments should I include?

I am preparing a contract for tender and am wondering what amendments to include. The client has handed me some proposed amendments, a colleague has given me some from a previous job and I have a precedent book with proposed amendments listed. Don't make any amendment unless you understand why the amendment is being made and until you have satisfied yourself and your client that the benefit of the amendment outweighs its disadvantage (in terms of loss of familiarity with the standard form, possible perception of additional risk by the tendering contractor, possibility of getting the amendment wrong or of not including all of the consequential amendments, possible impact on other documents such as collateral warranties, sub-contracts, etc., and possible difficulties with contract administration). If in doubt, leave it out. If you are not qualified to give legal advice or do not have professional indemnity cover for the provision of legal advice, always advise your client to have any proposed amendments validated by a lawyer.

What information should I use to select a form?

The standard form of contract should usually be selected on the basis of appropriate procedures for the project in hand and the familiarity of the tendering contractors. Often standard forms of contract are (wrongly) proposed from a relatively small list of contracts with which the architect or engineer is familiar.

Which additional documents should I include?

I represent a contractor. We have agreed terms with a subcontractor and I am compiling the contract for execution. Which of the following additional documents should I include in the package of contract documents? Pre-tender qualification enquiry/response Health and safety pre-tender questionnaire Tender enquiry Tender response/Tender qualifications Mid-tender correspondence Post-tender correspondence If you have agreed terms, then these should all be included in the Sub-contract Agreement. There is no need to include all of the correspondence and other documents leading up to the agreed terms, just the agreed terms themselves. For example, if the tender contains tender qualifications, you will most likely have been through a round of post-tender negotiations. Some of the qualifications will probably have been withdrawn by the tenderer and some may have been accepted by you. If you include the accepted tender qualifications by way of an amendment to the contract terms or preambles/preliminaries, then you do not need to include the tender return and the tender enquiry documents at all. Indeed, doing so could add confusion as to which qualifications have been accepted and which have been withdrawn. Amend the Sub-contract Agreement to reflect the finally agreed terms, get the sub-contractor to approve those amendments as reflecting the finally agreed terms, then file the other documents, but do not include them as contract documents.

Taking the brief

The client has explained his objectives at various levels from high level business plans to operational level. Am I liable if these requires are inconsistent or unachievable?
Ultimately, if the client is providing incorrect information then they should be responsible. However, as project manager you are expected to disseminate information provided from various sources and distribute this to the team. Depending on the nature of the issue, the project manager should have an awareness of all matters in hand and, if it is obvious that a requirement is inconsistent or unachievable, then he has a duty to challenge or highlight it. If the issue is more complex and outside of the project manager's sphere of knowledge, then, depending on the extent of the design team (and what is included in their scope of services), there may be an implied or even express obligation for the relevant consultant to challenge the requirement.

Are the level of fees indicative of the level of service?

If the question relates to work carried out in the production of the brief at the early stages of the project, then yes. Many firms will provide free or cheap up-front service advice as a 'loss leader', in the hope they will win the follow on work, should the project proceed. Any consultant who does this, runs the risk of being considered 'cheap' which may infer that they are not of a very good quality. Also from a client's perspective, one should be wary of advice offered for a low price as this may not be of the quality anticipated. As it is important to get the early stages of the project right, it is also equally important that this stage is completed using quality advice.

The project is at an early stage (and may not go ahead) and the client doesn't want to incur significant fees. How can I ensure the brief is properly taken without the potential for problems down the line?
One should always tread with caution if a client is reticent to commit funds at the beginning of a project. If you are project manager or lead consultant and if you don't provide a sufficient brief for the team to proceed on, if the project subsequently fails, then you could find yourself responsible. An answer here may be to produce a feasibility report, so the client only has to commit to this distinct package initially.

My client is very busy and hasn't really got time to talk through the brief in any great detail. He trusts me and really just wants me to get on with it. Is this ok?
No. Without proper open dialogue with the client you will naturally be making assumptions from the outset, which could have disastrous consequences later on in the project. Remember, as project manager or lead consultant, you will take responsibility for delivering this project and if it fails because of an inaccurate or insufficient brief, there will be an implication upon you. The more (relevant) information you can get at the outset, the better.

I am thinking of carrying out a refurbishment of a 1960s office building. I know a friendly contractor who I could describe the job to on site and I am sure this could save time and money. Is this acceptable?
Whether a professional team is appointed or not, you need to be very clear on what is and what isn't required. This needs to be communicated in a formal way. At the very least, there are legal obligations you will need to discharge yourself (such as provision of asbestos registers and information for the pre-construction health and safety pack) not to mention what contractor to discharge obligations on your behalf (e.g. building regulation consent). My recommendation - always appoint a professional advisor or a team of advisors. The client won't be very friendly or easy-going when he doesn't get what he expected.

original contractor if they are already 6 months late on the project?

The contractor is already 6 months late on a 12 month project and shows no signs of speeding up or any urgency to finish the work. Can the client terminate, appoint another contractor and charge the additional cost to the original contractor? The starting point is the contract, to examine whether a contractual right to terminate in such circumstances exists. If there is a termination clause, care must be given to interpreting its provisions to determine whether the preconditions to the right to termination are made out, and if so, to ensure that any procedural steps (for example, the giving of notices) are complied with.

The additional cost involved in terminating and appointing another contractor to finish the work may be recoverable from the original contractor under the terms of the termination clause. Where no contractual right to terminate exists, the client may have a right at common law to treat the contract as discharged. Reference should be made to whether the contractor's breach (if any) is of a repudiatory nature, such that it gives rise to a right to terminate the contract. In general, delay on the part of the contractor will not entitle the client to terminate the contract unless it is sufficiently serious that it demonstrates the contractor's unwillingness or inability to carry out the work. It should be remembered that this is a high test, and that only serious delay will give rise to such a conclusion. Alternatively, where time is 'of the essence' either because the completion date is a condition of the contract or upon the giving of a notice, the client may be entitled to terminate for delay. However, very careful consideration should be given before terminating, due to the potential for the client themselves to be in repudiatory breach if they terminate illegally. Where the client terminates for repudiatory breach they will be able to claim damages from the contractor, to include the additional cost of engaging others to complete the works.

Where the breach is also repudiatory, should the client terminate under the contract or accept the repudiatory breach?
The contractor is in breach of contract, for which the client is entitled to terminate. Where the breach is also repudiatory, should the client terminate under the contract or accept the repudiatory breach? Again, the starting point is the contract to see whether the termination clause provides that the contractual right it confers is to be the exclusive remedy available for the breach in question. Assuming that the contract does not so provide, the client has the option of either remedy.

Valuation for interim Certificates

Can the contractor claim interest for late certification?
The contractor's entitlement to claim interest for late certification (or under certification) are usually outside the terms of the contract and therefore should not be included within interim payments. Most standard forms of contracts include a provision to pay interest on late payment but where the payment date is fixed by the certification date such clauses would not respond to late certification. The contractor's proper remedy for alleged under-certification is to apply to have the certificate reviewed by an adjudicator.

Can the valuation be reduced from one payment certificate to the next?
Yes. Each interim certificate is a re-valuation of the works. There is nothing to stop an architect or engineer from re-assessing and reducing the value of works previously assessed. However in practice contractors often rely on the value of works certified in their payment certificate as a basis for valuing works of their subcontractors. A reduction in the value of one element of works by the client's surveyor can have a serious impact on the contractor's cash flow if the contractor has already paid his subcontractors on the basis of the previous valuation.

Does the employer have to pay the sum certified?

The employer has rights to withhold money from certified sums provided that notices are issued at the required time and contain required information. The timing and information to be provided with such notices are often the subject of contractual provisions which must be carefully followed. If the the notice is not issued in the required form or at the required time or by the required party then the employer's right to withhold money from the certified sum may be lost the whole amount of which then becomes payable.

Should on-account payments be made for loss and expense?

If it is clear that loss and expense has been incurred but assessments are on-going as to the true extent of the contractor's entitlement then an on-account payment up to at least the lower end of the possible range of values for the eventual assessment should be made and regularly reviewed.

Waste Management
Can the client rely on the contractor to draft and update the plan?
No. The Regulations require the client to initially draft the plan, which will then be passed over to the principal contractor once appointed. It is an offence not to comply with this.

Do I need to produce a plan if my work exceeds 300k in value, but only involves fitting out a commercial kitchen?
Yes. The Regulations are explicit on what type of work is covered. M&E and fit out works are included and will be covered by the Regulations. Whilst there is likely to be very little construction waste, packaging will be a significant waste stream.

Does the client need to do anything once the plan is adopted by the contractor?
Yes. The client has a duty of care to ensure that these Regulations are being followed. There is also an additional duty placed on the client to ensure that the plan is regularly updated.

How will the Regulations be enforced?

The local authority or Environment Agency will enforce the Regulations, although a phased approach will be adopted at first. Planning or environmental officers already involved on projects are likely to keep an eye out for waste issues during their normal inspections.

Whole life costing How can whole life costing help with sustainability issues?
By proving that investing will result in greater energy (and carbon) savings, for example using biomass boilers and ground source heat pumps which cost more in capital, maintenance and replacement terms than the traditional solution, but which more than pay for themselves through energy savings.

It's just a guess isn't it?

No. It is becoming increasingly scientific especially as more data becomes available from performance in use of PFI projects. The supply chain are also getting better at advising on the life of their products. For example Swedoor who manufacture doors, together with their ironmongery partner Assa, commissioned the Timber Research and Development Association to independently test their product for schools. Inner city school doors were analysed, for example classroom doors were counted as opening and closing 16000 times per year. A testing rig then simulated the opening / closing of the door 1,000,000 times which therefore equates to over 60 years in the life of a classroom door. The results allowed the manufacturer to give extended guarantees so reducing the risk of pricing door and ironmongery replacement and therefore giving greater cost certainty.

The capital cost of construction is still the most important factor though isn't it?
It often depends upon the time horizon of the client and the element(s) being considered. For example foundations will not incur any whole life costs but floor finishes in a hospital will be totally dominated by cleaning costs.

What is the difference between life cycle costing and whole life costing?
The terms are often used interchangeably but in general whole life costing incorporates all of the costs over the life of a building including capital cost of construction, cost of maintenance and cleaning, energy costs, and lifecycle replacement. Life cycle costing, especially within PFI procurement, often just refers to the latter of these i.e. the cost of replacing components/elements.

Which profession is best placed to carry out whole life costing?

WLC requires the capital cost expertise of the Quantity Surveyor, the performance in use knowledge of the Building Surveyor and the energy data and technical knowledge of the Mechanical and Electrical Consultant. It is a team effort which the surveyor is ideally placed to champion and facilitate.