RICS PRACTICE INFORMATION

Appropriate
contract selection
UK
2nd edition, April 2024
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Appropriate contract selection

RICS practice information, UK
2nd edition, April 2024

Published by the Royal Institution of Chartered Surveyors (RICS)

Parliament Square
London
SW1P 3AD
www.rics.org

No responsibility for loss or damage caused to any person acting or refraining from action as a result
of the material included in this publication can be accepted by the authors or RICS.
ISBN 978 1 78321 524 9
© Royal Institution of Chartered Surveyors (RICS) April 2024. Copyright in all or part of this
publication rests with RICS. Save where and to the extent expressly permitted within this document,
no part of this work may be reproduced or used in any form or by any means including graphic,
electronic, or mechanical, including photocopying, recording, taping or web distribution, without the
written permission of RICS or in line with the rules of an existing licence.
This document applies to the UK and Crown Dependencies. If any of the requirements contained
in this document conflict with regional legal requirements, those regional legal requirements take
precedence and must be applied.
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Contents
Acknowledgements ���������������������������������������������������������������������������������������������� iii
RICS standards framework ���������������������������������������������������������������������������������� 1
Document definitions ����������������������������������������������������������������������������������������������������� 2
1 Introduction ������������������������������������������������������������������������������������������������������ 3
2 General principles (Level 1 – Knowing) ���������������������������������������������������������� 5
2.1 Introduction ����������������������������������������������������������������������������������������������������������� 5
2.2 Procurement routes ���������������������������������������������������������������������������������������������� 5
2.3 The use of standard form construction contracts ������������������������������������������� 15
2.4 Publishing bodies and the different forms of construction contract ����������� 16
3 Practical application (Level 2 – Doing) �������������������������������������������������������� 44
3.1 Introduction ��������������������������������������������������������������������������������������������������������� 44
3.2 Procurement, tendering and contract selection ��������������������������������������������� 44
3.3 Other factors influencing the choice of construction contract ��������������������� 44
3.4 Construction contracts for use with the most commonly adopted UK
procurement routes �������������������������������������������������������������������������������������������� 51
4 Practical considerations (Level 3 – Advising) ��������������������������������������������� 56
4.1 Introduction ��������������������������������������������������������������������������������������������������������� 56
4.2 Essential elements required to create a contract ������������������������������������������� 56
4.3 The contract documents ������������������������������������������������������������������������������������ 59
4.4 Amending a standard form construction contract ����������������������������������������� 61
4.5 Executing a contract and duration of liability �������������������������������������������������� 64
4.6 The jurisdiction in which the works are located ���������������������������������������������� 67

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Acknowledgements
Original lead author

Richard Dartnell (Pinsent Masons)

Original expert working group

Andrew Smith FRICS (Laing O’Rourke)

John G Campbell FRICS (BAM Construction Ltd)

David Cohen FRICS (Amicus Development Solutions)

Stuart Earl FRICS (Gleeds Cost Management)

Roland Finch FRICS (NBS)

Christopher Green FRICS (Capita Symonds Ltd)

Roy Morledge FRICS (Nottingham Trent University)

Michelle Murray MRICS (Turner & Townsend plc)

Alan Muse FRICS (RICS)

Michael T O’Connor FRICS (Carillion Construction Ltd)

Kevin Whitehead FRICS (McBains Cooper Consulting Ltd)

2nd edition authors

Roland Finch FRICS

Steven Thompson FRICS (RICS)

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RICS standards framework

RICS’ standards setting is governed and overseen by the Standards and Regulation Board
(SRB). The SRB’s aims are to operate in the public interest, and to develop the technical
and ethical competence of the profession and its ability to deliver ethical practice to high
standards globally.

The RICS Rules of Conduct set high-level professional requirements for the global chartered
surveying profession. These are supported by more detailed standards and information
relating to professional conduct and technical competency.

The SRB focuses on the conduct and competence of RICS members, to set standards that are
proportionate, in the public interest and based on risk. Its approach is to foster a supportive
atmosphere that encourages a strong, diverse, inclusive, effective and sustainable surveying
profession.

As well as developing its own standards, RICS works collaboratively with other bodies at
a national and international level to develop documents relevant to professional practice,
such as cross-sector guidance, codes and standards. The application of these collaborative
documents by RICS members will be defined either within the document itself or in
associated RICS-published documents.

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Document definitions
Document Definition
type
RICS Set requirements or expectations for RICS members and regulated firms
professional about how they provide services or the outcomes of their actions.
standards
RICS professional standards are principles-based and focused on
outcomes and good practice. Any requirements included set a baseline
expectation for competent delivery or ethical behaviour.

They include practices and behaviours intended to protect clients and

other stakeholders, as well as ensuring their reasonable expectations of
ethics, integrity, technical competence and diligence are met. Members
must comply with an RICS professional standard. They may include:

• mandatory requirements, which use the word ‘must’ and must be

complied with, and/or
• recommended best practice, which uses the word ‘should’. It is
recognised that there may be acceptable alternatives to best practice
that achieve the same or a better outcome.
In regulatory or disciplinary proceedings, RICS will take into account
relevant professional standards when deciding whether an RICS member
or regulated firm acted appropriately and with reasonable competence.
It is also likely that during any legal proceedings a judge, adjudicator or
equivalent will take RICS professional standards into account.
RICS practice Information to support the practice, knowledge and performance of RICS
information members and regulated firms, and the demand for professional services.

Practice information includes definitions, processes, toolkits, checklists,

insights, research and technical information or advice. It also includes
documents that aim to provide common benchmarks or approaches
across a sector to help build efficient and consistent practice.

This information is not mandatory and does not set requirements for RICS
members or make explicit recommendations.

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1 Introduction
This practice information reviews the various types of construction contract that are
available for use in the UK. It also covers factors to consider when choosing the most
appropriate construction contract for a particular project.

This practice information focuses on how clients (referred to here as the employer) and their
professional advisers should select a construction contract to engage a main contractor
(referred to here as the contractor) to carry out work on private or public sector construction
projects. Similar factors may determine how contractors select appropriate sub-contracts
to engage their sub-contractors (although this should largely be driven by the type of main
contract in use on a particular project), but an analysis of this area is outside the scope of
this practice information.

Guidance is given under the following headings, which conform to the RICS’ Assessment of
Professional Competence (APC):

• General principles (Level 1 – Knowing)

• Practical application (Level 2 – Doing)
• Practical considerations (Level 3 – Advising)
The first part of this practice information provides a summary of the most commonly
adopted procurement routes in the UK. The procurement route is a key factor in determining
which construction contract is then chosen for a particular project. The opposite should
not occur, i.e. a form of construction contract should not be chosen prior to selection of the
procurement route.

The first part of this practice information also provides an introduction to the various bodies
that publish forms of construction contract for use in the UK and an explanation of the
various forms of construction contract that are available.

The second part of this practice information provides an in-depth analysis of some of the
different types of ‘standard form’ construction contract that can be selected for the most
commonly adopted procurement routes in the UK.

The third part of this practice information considers various practical issues relating to
contract creation, formation and amendment.

All parties in the construction process should realise that the choice of construction contract
will not, on its own, determine whether a particular project is completed on time, to budget
and with minimal defects. Many factors will determine whether a project is a success or
not (e.g. the choice of procurement route, the tendering strategy, the balance of risk in the
contract, the skills of the contractor and its supply chain, good programming and planning,

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and the goals, attitude and approach of the parties). The interrelationship of all these factors
will determine the outcome.

Readers should be aware that this practice information does not cover the needs of the
consumer/domestic market, where individual owner/occupiers are contracting with small
building firms for home improvements, extensions or repairs for a lump sum. Consumers
enjoy additional protection through various pieces of consumer legislation and certain key
pieces of legislation (e.g. the Housing Grants, Construction and Regeneration Act 1996 (as
amended)).

Finally, this practice information does not cover other contracts that employers may require
on their construction projects, such as those for the appointment of their professional team
(e.g. an architect, structural engineer or quantity surveyor).

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2 General principles (Level 1 –

Knowing)

2.1 Introduction
This section covers the primary information required to satisfy the ‘knowing’ requirements of
the Level 1 competency of the APC, and includes:

• a summary of the most commonly adopted procurement routes in the UK

• the use of standard form construction contracts, and
• an introduction to the various bodies that publish forms of construction contract for use
in the UK and the different forms of construction contract that they produce.

2.2 Procurement routes

This section provides a summary of the most commonly adopted procurement routes in the
UK. It is recommended that all factors influencing a project are identified and the project
requirements analysed before selecting the appropriate procurement route.

The terms ‘procurement’ and ‘contracting’ are sometimes confused. In its broadest sense,
‘procurement’ is a process involving several relationships throughout the supply chain that
may be the subject of formal contractual arrangements.

Typical contracts are usually bilateral, but in some cases can involve complex multiparty
agreements. During a procurement process there will usually be a network of contracts,
with some parties entering into several of them. It is therefore important to distinguish
contractual relationships from simple managerial links and understand the differences and
implications for each party.

The appropriate procurement route for the design and construction of the project can then
be developed. Some procurement routes involve the separate appointment of the design
and construction teams and provide little opportunity for integration or collaboration (e.g.
during the design process). Other procurement routes enable the design and production
processes to be closely integrated.

There could be more than one procurement route that could be adopted to achieve the aims
of the employer and requirements of the project. It is advisable to consider each option
carefully, as each will address the various influencing factors to a different extent.

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2.2.1 Traditional (‘design-bid-build’)

This procurement route is typically characterised by a separation of responsibility for the
design and the production/construction of the project.

Figure 1: Typical contractual structure for a project procured on a traditional basis

The employer appoints the contractor via the construction contract and also separately
appoints the team of professional consultants (e.g. the architect, structural engineer, building
services engineer and quantity surveyor). The contractor assumes the responsibility and
financial risk for constructing the project in accordance with the design produced by the
employer’s team of professional consultants, for the agreed contract sum and within the
agreed contract period.

The employer bears the responsibility and risk for the design and performance of the
team of professional consultants. An architect, project manager or contract administrator
will administer the construction contract on behalf of the employer. The architect will
also generally take the lead in coordinating the design produced by all the other design
consultants. However, in civil engineering projects, the lead designer will generally be a civil
engineer who will coordinate the design provided by other specialist engineers.

Projects procured on a traditional basis typically have a contract sum that is developed on a
‘fixed price lump-sum’ basis. The fixed price lump-sum is what the employer will pay to the
contractor for carrying out the works described in the construction contract. However, most
construction contracts permit the contract sum to be altered in certain circumstances, for
example:

• if the employer requests changes to the project during its construction

• if certain events occur during the construction of the project that are specifically stated
in the construction contract to entitle the contractor to more money, e.g. if the employer
causes a delay to the project by failing to procure the requisite access to the site for the
contractor, or

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• by the inclusion of ‘fluctuations’ clauses, which allow the contractor to claim increased
costs of materials and/or labour.
Therefore, although a traditional contract may be procured on a fixed price lump-sum basis,
the final contract sum that is paid to the contractor may be higher or lower than the original
contract sum stated in the construction contract.

In addition, although projects procured on a traditional basis typically involve the separation
of responsibility for design and construction, there are certain circumstances in which an
employer may ask the contractor to design a discrete element or elements of a project (e.g.
the cladding system or certain mechanical and electrical works and interfaces). This is often
known as a Contractor’s Designed Portion (CDP). A construction contract with a CDP element
will still generally be described as a traditional contract, rather than a ‘design and build
contract’ (under which the contractor is typically responsible for the design and construction
of the whole of the project). Design and build contracts are discussed in section 2.2.3.

However, in contrast to a pure traditional contract, where a construction contract contains

a CDP element, the contractor takes on additional obligations that specifically relate to the
design element. These include:

• an obligation to take out and maintain professional indemnity insurance

• the grant of a copyright licence to the employer (to enable the employer to use the
copyright material contained with the contractor’s design for the CDP), and
• a warranty to the employer that the contractor will use an appropriate level of skill, care
and diligence in carrying out the design for the CDP.

2.2.2 Traditional (‘re-measurement’ or ‘measure and value’)

Most contracts that are procured on a traditional basis are paid for by way of a fixed price
lump-sum. However, occasionally, traditional contracts are paid for on a ‘re-measurement’
or ‘measure and value’ basis (e.g. in civil engineering projects where there is uncertainty
regarding the amount of work to be done).

The organisational structure of a measurement contract is identical to the traditional fixed

price lump-sum approach (as shown in Figure 1). The principal difference is the basis on
which the work is valued and payment is made.

With a re-measurement contract, the contract sum is only established with certainty upon
completion of construction, when re-measurement of the quantities of work actually carried
out takes place. It is then valued on an agreed basis.

Therefore, a re-measurement contract is based upon the principle that the work carried out
is measured and valued at rates for each type of work tendered by the contractor. There is
no ‘contract sum’ as such. Instead the bill of quantities effectively constitutes a schedule of
rates for each unit or item.

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2.2.3 Design and build

While a traditionally procured construction contract is characterised by the separation of
responsibility for the design and the production/construction of a project, a construction
contract that is procured on a design and build (D&B) basis is characterised by the contractor
taking responsibility for both the design and the production/construction of a project.

One of the main reasons employers often choose this form of procurement route is the
desire to have one party (the contractor) as the single point of responsibility for the design
and production/construction of a project. However, the extent of the creation of a true single
point of responsibility will depend on the terms and conditions of the construction contract
with the contractor.

Figure 2: typical contractual structure for a project procured on a D&B basis

The employer appoints the contractor under a single construction contract, typically on
a fixed price lump-sum basis, to carry out the dual role of design and construction. It is
then the contractor’s responsibility to appoint its own professional design team (e.g. the
architect, structural engineer and building services engineer) and subcontractors in order
to fulfil those responsibilities. The contractor will bear the risk of completing the design and
construction of the project in accordance with the agreed contract sum and contract period.

D&B contracting encompasses a range of approaches that involve the contractor taking
on responsibility for the design and construction of a project. For example, sometimes the
contractor will be left to interpret the requirements of the employer and provide a building
as a completed package. On other occasions, an employer may initially employ the design
team to work up the initial concept design and develop their requirements (in response
to which the contractor submits the contractor’s proposals) before that design team is
transferred (by way of novation or ‘switch’ agreements) to the contractor. This enables the
contractor to complete the design for the project using a design team that has already been

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involved in the project. The contractor will assume responsibility for the design of the project
as well as the construction of it.

2.2.4 Construction management

Under a construction management (CM) route, the employer does not allocate risk and
responsibility to a single main contractor. Instead, the employer employs the design team
(e.g. the architect, structural engineer and building services engineer) and a separate
construction manager is engaged as a fee-earning professional to manage, programme and
co-ordinate the design and construction activities and to facilitate collaboration.

Figure 3: Typical contractual structure for a project procured on a CM basis

The construction manager arranges for the employer to appoint specialist trade contractors
(e.g. for foundations, concrete, electrical installation or decorating). The employer enters into
the trade contracts with the trade contractors. The construction manager administers the
trade contracts, but does not enter into contract directly with the trade contractors. In this
way, the construction manager is liable to the employer for the proper performance of its
construction management services, but the construction manager is not responsible for the
design or construction of the project by the professional consultants and trade contractors.

With the CM route, design and construction can overlap. Because this speeds up the overall
project programme, CM is known as a ‘fast track’ route. However, although the time for
completion may be reduced, price certainty is not achieved until design and construction
have advanced to the point where all of the construction (trade) packages have been let.

Employers should also be wary of choosing the CM route if they have little experience of
construction matters. In adopting the CM route, the employer will generally be closely
involved in each stage of design and construction. The employer should have a body of
staff with sufficient time and expertise to assess the recommendations of the construction
manager and take the necessary action (e.g. effective decision making and dealing with the
administrative role of payments to the professional consultants and trade contractors).

2.2.5 Management contracting

Under a management contract, the employer engages a management contractor to
participate in the project at an early stage, contribute construction expertise to the design,

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and manage the construction of the project. The management contractor does not carry
out any construction work, but manages the project for a fee, which is paid on top of the
construction costs incurred by the management contractor. The management contractor
then employs and pays works contractors to carry out the actual construction works.

In effect, management contracting consists of 100% subcontracting. Every item of the

construction works is subcontracted to the works contractors. It is this subcontracting
feature that distinguishes management contracting from construction management
(discussed in Section 2.2.4), under which the separate trade contracts are all entered into
directly between the employer and trade contractors.

The design of the project is generally carried out by the professional consultants engaged
directly by the employer, although certain discrete parts of the design may be carried out by
the works contractors.

Figure 4: Typical contractual structure for a project procured on a management contracting

basis

Management contracting has many similarities with traditional contracting. However,

because of the complete subcontracting of all construction works, the management
contractor’s role is more on a level with the other professional consultants as they
administer the construction works being carried out by the works contractors. The employer
looks to the management contractor to see that the construction work is properly carried
out, but the management contractor is usually only liable to the employer for:

• the management contractor’s own negligence or breach of the management contract,

and
• breaches of the works contracts, but only to the extent that the management contractor
recovers damages from the works contractors.
In addition, even though the management contractor appoints the works contractors, the
employer usually also enters into a separate direct agreement with each works contractor.
Under these agreements, the works contractors warrant to the employer that they will

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carry out their works properly. In some respects, these agreements are similar to collateral
warranties.

Unlike traditional or D&B contracting, a management contract is not a fixed price lump-sum
contract. The amount to be paid to the management contractor is the prime cost of all work
done under the management contract, plus the management contractor’s fee. Therefore,
while the management contractor is under an obligation to control costs, the employer has
to pay whatever the management contractor spends, plus an amount for the management
fee (which may either be a lump sum or a percentage of the prime cost). Because of these
arrangements, the contract between the employer and the management contractor can be
considered a ‘cost reimbursement’ or ‘prime cost’ contract.

2.2.6 Partnering
Partnering is not, of itself, a procurement route. Instead, it is a concept that can be applied
to many procurement routes. Partnering represents a cooperative relationship between
business partners formed in order to improve performance in the delivery of projects. It is
a set of collaborative processes, attitudes and behaviours which emphasise the importance
of common goals and the desire to move away from confrontational attitudes or behaviour
intended to take inappropriate commercial or legal advantage of the other party.

The precise meaning of partnering varies between parties, projects and contracts, but it can
be applied on a project-specific basis or as part of a longer term, multi-project, relationship.

Under project partnering, the employer, the contractor(s) and professional consultants agree
to work collaboratively on a single project. The parties may use a partnering contract or
a non-binding ‘partnering charter’. They may use a contract such as from the NEC suite of
contracts that has a partnering ethos, even if not formally labelled as a partnering contract
(unless the relevant NEC secondary Option is chosen). Alternatively, they could use a contract
such as the Association of Consultant Architects’ PPC2000 that has been drafted specifically
for use as a partnering contract.

In contrast, strategic partnering takes place over time, usually across the course of a number
of projects. An employer will work with a group of contractors and professional consultants,
sometimes without a guarantee of specific work, to meet mutually agreed targets. The
targets are formalised in a binding (or non-binding) partnering agreement. The prospect of
a medium/long term flow of work incentivises all parties to work together in a collaborative
manner, designed to benefit all parties and the projects they are working on, rather than
each party acting solely for its own benefit.

2.2.7 Public Private Partnerships (PPP)

The term Public Private Partnership (PPP) is an umbrella term that covers a diverse range
of business structures and partnerships involving the public and private sectors. Typically,
private sector companies will form a consortium, sometimes referred to as a ‘special purpose

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vehicle’ (SPV), and enter into some kind of partnership with the public sector for supporting
or providing a public service, sometimes described as Build-Own-Operate-Transfer (BOOT).

One key aspect of PPP schemes is that the public sector seeks to transfer much of the
development and financing risk to the private sector. For example, the private sector agrees
to finance, design, build and operate a particular asset (e.g. a hospital, school, road or prison)
that the public sector is able to use. The private sector is also obliged to provide long term
lifecycle investment and routine maintenance; sometimes together with ‘soft services’ (e.g.
catering, cleaning, rent collection).

In return, once the particular asset is built, the public sector pays a regular service charge to
the private sector consortium for the duration of the contractual term for the operation of
the particular asset. Payment of that service charge is reduced in the event of poor service
delivery or performance by the private sector. At the end of the contractual term, the asset is
then returned to the public sector. Other PPP schemes have more diverse approaches, which
might not involve transferring the ownership of the asset at the end of the contractual term.

Figure 5: Contractual structure for a PPP project

A PPP scheme involves a complex web of contractual relationships. A PPP project is typically
delivered through the creation by the private sector of a consortium (known as a special
purpose vehicle (SPV)). The SPV will be financed by its parent companies and also by loans
from banks. The SPV will enter into the concession agreement with the public sector and
will also enter into agreements with those contractors who will be carrying out the actual
construction and maintenance services. Only once the asset is constructed will the public
sector start paying the service charge to the SPV, although the construction contractor is
paid by the SPV throughout the construction period.

The position in Scotland is slightly different. PPP-type schemes are procured in Scotland
through the non-profit distributing (NPD) model or the ‘hub’ model. The NPD model is used
for larger scale assets such as roads, acute healthcare and larger further education projects,

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whereas the hub model is used for smaller scale community services projects such as
primary care centres and schools.

Both of these models share many characteristics with PF2 and the aspects described above.
The defining characteristics of NPD/hub models include the following.

• Non-dividend bearing equity: shares in the NPD SPV do not pay dividends, with investors
earning their return through the loans that they provide to the SPV.
• Capped returns: on both hub and NPD schemes the SPV is required to share ‘excess’
profits with the procuring authority.
• Increased public sector involvement/transparency over SPV: on NPD projects a public
interest director is appointed to the board of the SPV and is able to exercise certain
controls over the SPV. On hub schemes, two of the five SPV directors will be from the
public sector.
• No soft services: both the hub and NPD projects limit the maintenance service to ‘hard’
facilities management only.

2.2.8 Others
In addition to the main procurement routes already described, there are other forms of
procurement used in the UK that are often offshoots or variants of the main procurement
routes. These include, but are not limited to, the following.

• Cost plus/cost reimbursable/prime cost: This form of contracting is known by a

number of different names, but the key feature is how the contractor is paid under
the construction contract. Under a cost plus/cost reimbursable/prime cost contract,
the contractor is paid the ‘prime cost’, i.e. the contractor is reimbursed the full cost it
reasonably incurs in discharging its contractual obligations. In addition, the contractor
is entitled to recover a fixed fee (usually expressed as a certain percentage of the prime
cost) to cover its overheads and profit. As such, it is a low risk procurement route for
the contractor with very limited cost control for the employer. However, apart from this
payment structure, the contractor’s other obligations under this form of contract are very
similar to those found in a traditional or design and build contract.
• Target cost: Target cost contracts are a further variant to cost reimbursable contracting.
Under a target cost contract, the employer and contractor agree a target price for
carrying out the works and the basis for adjusting the target price. They also agree
their respective shares of any savings made if the cost of carrying out the works is less
than the target price, or any additional cost incurred if the target price is exceeded. This
provides a means by which financial ‘pain’ and ‘gain’ are shared between the employer
and the contractor. Therefore, target cost contracts are often said to contain a ‘painshare/
gainshare’ mechanism. This mechanism should actively encourage both parties to work
together to manage the cost of the works. As with cost reimbursable contracts, apart
from the payment structure of target cost contracting, the contractor’s other obligations

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under this form of contract are very similar to those found in a traditional or design and
build contract.
• Term contracts: Term contracts enable employers and contractors to enter into long term
arrangements where there is likely to be a regular flow of work for the contractor. Term
contracts are particularly useful where an employer requires a contractor to carry out
regular maintenance or some other kind of minor works to an existing asset for a specific
period. The term contract will contain a mechanism that enables the employer to issue
instructions (often known as ‘call-off orders’) to the contractor that will detail the exact
nature of the works required. Term contracts are a form of measurement contract, so
the contractor’s work is measured and valued after completion on the basis of an agreed
schedule of rates. The use of term contracts requires a high degree of trust between
the employer and the contractor, as it is unlikely that the employer will have sufficient
resources to directly supervise all the work the contractor undertakes.
• Framework agreements: As with term contracts, framework agreements enable
employers and contractors to enter into long-term arrangements where there is likely
to be a regular flow of work for the contractor. However, in contrast to term contracts,
framework agreements are often used to procure the construction of a new asset, as
opposed to term contracts which generally cover the maintenance of an existing asset.
Instructions to carry out works are also issued by way of a call-off order to the contractor
but, depending on how the framework agreement is drafted the call-off order may
itself constitute a separate contract that is distinct from the overarching framework
agreement.
• Alliancing: This form of procurement wraps together some of the key concepts of
partnering and target cost contracting to produce a highly sophisticated form of contract
that has so far mainly been used by large employers on major projects in the utilities,
rail, and oil and gas sectors. An alliancing contract is typically a multi-party contract
under which an alliance (comprising the various contractors and the employer as ‘owner/
participant’) contracts with the employer to deliver a particular project. Alliancing
necessitates a radically different mindset (from all parties) when compared with other
forms of contracting. For example, an alliancing charter will be a key document in the
contract and core themes include ‘everybody wins or everybody loses’, decisions on
a ‘best for project’ basis, participants having an equal say, payment is on a target cost
painshare/gainshare basis, and there is a ‘no claim/no blame’ culture allied with only
minimal grounds for parties to bring formal proceedings against each other. The principal
difference between partnering and alliancing is that whereas partnering requires all
parties to work together in a collaborative way, an alliancing arrangement will usually
contain some measurable goals.
• EPC contracts: Engineering, procurement and construction (EPC) contracts are a common
form of contract used by the private sector on large scale or complex construction and
engineering projects. For example, EPC contracts may be used in the energy sector to
procure a new power station or offshore wind farm. EPC contracts are aimed at delivering
engineering, procurement and construction projects that have single point responsibility

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(for engineering design, procurement and construction), a fixed programme with a set
date for delivery, a fixed price, and guaranteed performance and reliability levels. As such,
they can be considered as a variant of design and build contracting.

2.3 The use of standard form construction contracts

When setting up a project based on one of the procurement routes previously detailed, it is
common practice for the construction contract between the employer and the contractor to
be based on a ‘standard form construction contract’. These are construction contracts that
are typically drafted by construction industry bodies or trade associations, with the intention
of providing a set of standardised terms and conditions for employers and contractors to
contract upon.

Using standard form construction contracts should save parties (particularly the employer)
time and money because they are not drafting and negotiating bespoke contracts for each
new project. Indeed, standard form construction contracts are designed to be used in an
unamended manner, i.e. without alteration to the standard terms and conditions, although
the contract particulars would need to be completed and the relevant contract documents
appended to the contract. However, in practice, standard form construction contracts are
frequently amended by employers (e.g. by deleting certain clauses and adding new clauses
that are designed for any specific requirements an employer may have), particularly on
larger projects. The employer and contractor then have to spend time (and possibly money)
reviewing, negotiating and agreeing the amendments to the standard terms and conditions.
Amending standard form construction contracts is discussed in further detail in Section 4.

Many of the standard form construction contracts are sector specific or have been adopted
for use by a particular sector of the construction industry. For example, certain standard
form construction contracts are more designed for general commercial construction (e.g.
constructing an office block or school, or a major refurbishment of a hotel), whereas others
are designed for use in the civil engineering or process engineering sectors. These different
types of standard form construction contract have evolved because of the complexities and
risks involved in the different construction and engineering sectors and the great difficulty,
and probable impossibility, of trying to create a single standard form construction contract
that could apply to the whole construction industry. Other standard form construction
contracts are drafted by particular industry bodies or trade associations, and the risk
allocation in those contracts may therefore be more favourable to the members of that
particular industry body or trade association.

One of the other benefits of using a standard form construction contract is to create a
known set of terms and conditions that the construction industry (or a particular sector of it)
can become familiar with over time. By using the same types of contract on similar projects,
parties can come to understand the risk allocation within those contracts and respond
accordingly (e.g. a contractor deciding on whether or not to factor a particular risk into its
tendered price for carrying out the works).

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However, it is common for the parties in large projects to amend standard form construction
contracts and this invariably alters the risk allocation in those contracts.

Parties need to be aware of these alterations in risk allocation so that they can react
accordingly (e.g. by taking out appropriate insurance, by pricing for a particular risk, or by
setting up any required administrative procedures). Problems often occur on contracts when
the risk allocation has been altered and this has either not been understood by one of the
parties or has been understood but not reacted to, and the relevant party has not taken
appropriate steps to mitigate the risk.

Finally, those parties who are involved in deciding upon an appropriate procurement route
and contract selection should understand that the standard form construction contracts
deal with risk and the allocation of risk in different ways. They do not approach the same
risks (e.g. adverse site conditions) in the same way. Most standard form construction
contracts seek to allocate risk to the party that is most able to manage that risk, but
because this will differ on a sector-specific basis, each standard form construction contract
approaches the apportionment of risk in different ways.

Therefore, although a particular risk (e.g. adverse site conditions) may be treated in a certain
way in one standard form construction contract that does not necessarily mean that it will
be treated in the same way in all other standard form construction contracts. This means
that those parties involved in choosing the contract for a particular project are advised to
understand the risk allocation within the various standard form construction contracts. This
will then help inform which contract is the best starting point for the particular project they
are working on.

2.4 Publishing bodies and the different forms of construction

contract
There are many different standard form construction contracts available for use in the UK
market. These are typically published by construction industry bodies or trade associations.
Some of these publishers produce standard form construction contracts for many of the
procurement routes detailed previously, whereas other publishers (generally the trade
associations) only concentrate on certain procurement routes or the production of a
standard form construction contract for a certain sector of the construction industry (e.g.
demolition).

This section is a summary of the main publishers and their construction contracts in the UK
market.

2.4.1 The Joint Contracts Tribunal (JCT)

The JCT is an affiliation of interest groups in the construction industry. It operates as a forum
for discussing and determining the content of the standard form construction contracts that
it produces.

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The JCT publishes a wide range of contract documentation including main contracts,
subcontracts, consultancy appointments, collateral warranties, an adjudication agreement,
pre-construction services agreements and documents for use by homeowners. The JCT
contracts are aimed at the mainstream commercial construction market in the UK, rather
than other sectors such as civil or process engineering.

At present, the latest suites of JCT contracts were published in 2016, but a new edition is
to be published shortly. For this reason, specific references to the 2016 edition have been
removed and will subsequently be reinstated when the new edition is published .

These suites were produced in order to bring the JCT’s contracts into line with the
amendments that were made to the Housing Grants, Construction and Regeneration Act
1996. In addition to those necessary changes, the JCT also took the opportunity to update
other parts of the contracts, e.g. the list of adjudicator nominating bodies, the insurance
provisions and the list of insolvency events that could lead to termination.

The JCT contracts discussed below are those in use in England and Wales. The Scottish
Building Contract Committee Limited (SBCC) produces adapted contracts for use in Scotland
but they are very similar to the versions for England and Wales. In Northern Ireland, the
Royal Society of Ulster Architects publishes ‘Adaptation Schedules’ to the JCT’s Standard
Building Contract, Design and Build Contract, Intermediate Building Contract, Minor Works
Building Contract and Measured Term Contract that adapt those contracts to reflect the law
in Northern Ireland.

The contractual suites produced by the JCT are as follows.

The Standard Building Contract

The JCT’s Standard Building Contract (SBC) is often regarded as an ‘industry standard’ against
which all others are measured. The JCT currently produces three versions of the Standard
Building Contract:

• the Standard Building Contract with Quantities (SBC/Q)

• the Standard Building Contract without Quantities (SBC/XQ), and
• the Standard Building Contract with Approximate Quantities (SBC/AQ).
The Standard Building Contract is designed for use when the traditional procurement route
has been chosen. The ‘with Quantities’ and ‘without Quantities’ versions are both fixed price
lump-sum contracts with monthly interim payments to the contractor. The only difference
between the two being whether bills of quantities are used to define the quantity and quality
of work.

The ‘with Approximate Quantities’ version is a re-measurement contract, as an approximate

bill of quantities is used to define the quantity and quality of work which is then re-
measured. The price and payment structure of the contract is based on a tender figure that
is converted to a final sum on re-measurement and valuation of all work. Interim payments
are monthly as a default.

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The SBC can be used by private or public sector employers and is intended for larger
projects where detailed contract provisions are necessary. Because this contract is used
for traditional procurement, the design of the works is carried out by or on behalf of the
employer (usually by an architect). However, the contract also provides an option that
enables the employer to require the contractor to design discrete parts of the works (a
Contractor’s Designed Portion).

An architect/contract administrator and quantity surveyor are used to administer the

performance of the contractual obligations. Provisions are also included for collaborative
working, sustainability, advance payment, bonds (advance payment, off-site materials and
retention), third party rights and collateral warranties.

In addition to the three main SBCs, the JCT also publish a number of subcontracts for use
with the SBC and two guides:

• Standard Building Sub-Contract Agreement (SBCSub/A)

• Standard Building Sub-Contract Conditions (SBCSub/C)
• Standard Building Sub-Contract with Sub-Contractor’s Design Agreement (SBCSub/D/A)
• Standard Building Sub-Contract with Sub-Contractor’s Design Conditions (SBCSub/D/C)
• Standard Building Contract Guide (SBC/G) and
• Standard Building Sub-Contract Guide (SBCSub/G).
The Intermediate Building Contract

The JCT’s Intermediate Building Contract (IC) is designed for use when the traditional
procurement route has been chosen. The contract was developed to help fill the gap
between the detailed and lengthy provisions of the SBC and the relative simplicity of the
Minor Works Building Contract. As such, it is designed to be a very versatile form of contract.

The IC is a fixed price lump-sum contract with interim monthly payments to the contractor.
The employer is required to provide drawings and either a bill of quantities, specification, or
work schedule to specify the quantity and quality of work.

Because this contract is used for traditional procurement, the employer is responsible for the
design. This is usually supplied to the contractor by the architect or design team working on
the employer’s behalf.

If the appointed contractor is to be responsible for designing specific parts of the works,
the normal JCT IC should not be used. Instead, the JCT publishes an Intermediate Building
Contract with Contractor’s Design (ICD) for this purpose. When using the ICD, the employer
is required to also detail the requirements for the parts of the works that the contractor is
responsible for designing.

If the employer requires the contractor to have full responsibility for both the design and
construction of the project, the ICs are not appropriate. Instead, the employer should
consider using a full design and build contract.

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The IC can be used by both private and public sector employers. An architect/contract
administrator and quantity surveyor are used to administer the performance of the
contractual obligations. Provisions are also included for collaborative working, sustainability,
advance payment, bonds (advance payment, off-site materials, and retention), third party
rights and collateral warranties. The contract can be used where provisions are required
to cover named specialists. All sub-contractors are domestic and their performance is the
responsibility of the contractor.

In addition to the two versions of the IC, the JCT also publish a number of subcontracts for
use with the ICs, contract conditions where named subcontractors are used and two guides:

• Intermediate Sub-Contract Agreement (ICSub/A)

• Intermediate Sub-Contract Conditions (ICSub/C)
• Intermediate Sub-Contract with Sub-Contractor’s Design Agreement (ICSub/D/A)
• Intermediate Sub-Contract with Sub-Contractor’s Design Conditions (ICSub/D/C)
• Intermediate Named Sub-Contract Tender and Agreement (ICSub/NAM)
• Intermediate Named Sub-Contract Conditions (ICSub/ NAM/C)
• Intermediate Named Sub-Contractor/Employer Agreement (ICSub/NAM/E)
• Intermediate Building Contract Guide (IC/G), and
• Intermediate Sub-Contract Guide (ICSub/G).
The Minor Works Building Contract

The JCT’s Minor Works Building Contract (MW) is designed for use when the traditional
procurement route has been chosen. It is designed for use on smaller, lower value, more
basic construction projects where the work involved is simple in character.

If the project is of a large value or more complex nature then the IC or SBC may be more
appropriate. As such, the MW is not suitable where the project is complex enough to require
bills of quantities, detailed control procedures, or provisions to govern work carried out by
named specialists.

The MW is a fixed price lump-sum contract with interim monthly payments to the contractor.
The employer is required to provide drawings, a specification, or work schedules to define
the quantity and quality of work.

Because this contract is used for traditional procurement, the employer is responsible for the
design. This is usually supplied to the contractor by the architect or design team working on
the employer’s behalf.

If the appointed contractor is to be responsible for designing specific parts of the works, the
normal JCT MW should not be used. Instead, the JCT also publishes a Minor Works Building
Contract with Contractor’s Design (MWD) for this purpose. When using the MWD, the
employer must also detail the requirements for the parts of the works that the contractor is
responsible for designing.

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If the employer requires the contractor to have full responsibility for both the design and
construction of the project, the MWs are not appropriate. Instead, the employer should
consider using a full design and build contract.

The MWs can be used by both private and public sector employers. An architect or contract
administrator is used to administer the performance of the contractual obligations.
Provisions are also included for collaborative working and sustainability.

In addition to the two versions of the MW, the JCT also publishes a Minor Works Sub-Contract
with Sub-Contractor’s Design (MWSub/D). This form of sub-contract is for use where the
main contract is the MWD and the subcontractor is to design all or part of the subcontract
works. If a subcontractor does not have any design responsibility, the JCT recommends using
its Short Sub-Contract (ShortSub).

The JCT does not currently produce any separate guidance notes for use with its MWs or
Sub-Contract. Instead, a short section of guidance notes is included at the back of the MWs.

The Design and Build Contract

The JCT’s Design and Build Contract (DB) is designed for use where the design and build
procurement route has been chosen. As such, the contract is for use where the contractor
carries out the construction of the works and also completes the design of the works.
Design and build projects can vary in scale, but the DB is generally suitable where detailed
provisions are needed. Therefore, the DB can be considered as the equivalent of the SBC,
but is for use with the design and build procurement route rather than the traditional
procurement route.

One of the key documents forming the DB is the employer’s requirements. This details what
the employer requires from the completed project and, among other things, sets out the
required level of design undertaken by the contractor.

The contractor may be required only to complete the design based on a concept provided by
the employer or the contractor may be required to carry out virtually the whole of the design
for the project. This could be done either via the contractor’s own in-house design team
or through engaging a specialist design team. The parties may agree that any design team
initially engaged by the employer should be transferred (by way of novation or switch) from
the employer to the contractor. If this is required, the DB will require amendment to achieve
this, as the unamended contract does not contain novation provisions. The contractor can
then use that design team to complete the design for the project.

The contractor will also take responsibility for those services that the novated design team
carried out prior to the novation, as well as their services after the novation.

The JCT recommends that, where the contractor is only required to design small discrete
parts of the works and is not made responsible for completing the design for the whole
works, consideration should be given to using one of the other JCT contracts that provide
for such limited design input by the contractor and the employment of an architect/contract

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administrator. The SBC (using the Contractor’s Designed Portion) or ICD may be more
appropriate in these circumstances.

The price and payment structure of the DB is based on a fixed price lump-sum with stage
or periodic payments to the contractor. Provisions are included for collaborative working,
sustainability, advanced payment, bonds (advance payment, off-site materials, and
retention), third party rights and collateral warranties, and named specialists. The contract
can also be used on private or public sector projects.

For use with the DB, the JCT publishes the Design and Build Sub-Contract Agreement
(DBSub/A) and Design and Build Sub-Contract Conditions (DBSub/C). This subcontract
can only be used where the main contract is the DB, and can be used whether or not the
subcontractor has any responsibility for designing the subcontract works.

The basis of payment is also flexibly drafted, as the subcontract can be used for subcontract
works that are to be carried out on the basis of an adjusted subcontract sum (e.g.
adjustment for variations, etc.) or by complete re-measurement. Provisions are also included
for collaborative working, sustainability and bonds (off-site materials and retention).

As well as the main contract and subcontract, the JCT also publishes two guides for use with
the Design and Build suite of contracts:

• Design and Build Contract Guide (DB/G) and

• Design and Build Sub-Contract Guide (DBSub/G).
Major Project Construction Contract

The JCT’s Major Project Construction Contract (MP) is also designed for use where the design
and build procurement route has been chosen. However, unlike the DB, the MP is stated to
be for use on large scale construction projects where major works are involved. Therefore,
the JCT recommends that the contract is used by employers who regularly procure large-
scale construction work, and that the work is carried out by contractors (and subcontractors)
with the experience and ability to take greater risk than would arise under other JCT
contracts.

The MP is also shorter and simpler than the DB because the parties are assumed to have
their own in-house contractual and administrative procedures to carry out the contract.

Because this form of contract is designed for use with the design and build procurement
route, under this contract the contractor is responsible for both the construction of the
works and completing the design of the works. The employer will prepare their requirements
for the project and provide these to the contractor. Among other things, the requirements
will detail the contractor’s level of design responsibility.

The scale of design work to be carried out by the contractor can vary. The contractor may
be required just to complete the design based on a concept provided by the employer or the
contractor may be required to carry out virtually the whole of the design for the project. This
could be done either via the contractor’s own in-house design team or through engaging a

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specialist design team. The MP also enables the employer to transfer to the contractor (via
a novation) any members of the design team (e.g. an architect) that the employer initially
engaged for the project. The contractor can then use that design team to complete the
design for the project. The contractor will also take responsibility for those services that
the novated design team carried out prior to the novation, as well as their services after the
novation.

Payment to the contractor is on a fixed price lump-sum basis, but the flexibility of the
pricing document enables the parties to agree a range of payment options. These include
interim valuations, stage payments, scheduled payments and/or any other terms that the
parties might agree. The contract also provides for a high degree of flexibility regarding the
insurance arrangements that the parties wish to put in place for the project. This is because
large construction projects often use specific, bespoke, insurance arrangements.

Because of these differences in approach, the JCT considers that the MP will be most
effective where both the employer and contractor, their teams of advisers and sub-
contractors are experienced in detailed risk management and undertaking large commercial
projects.

For use with the MP, the JCT publishes the Major Project Sub-Contract (MPSub). This
subcontract can only be used where the main contract is the MP, but can be used whether or
not the subcontractor has any responsibility for designing the subcontract works. The basis
of payment is also flexibly drafted, as the subcontract can be used for subcontract works
that are to be carried out on the basis of an adjusted subcontract sum (e.g. adjustment
for variations, etc.) or by complete re-measurement. Provisions are also included for
collaborative working and sustainability.

As well as the main contract and sub-contract, the JCT also publishes two guides for use with
the MP suite of contracts:

• Major Project Construction Contract Guide (MP/G), and

• Major Project Sub-Contract Guide (MPSub/G).
Management Building contracts

The JCT’s suite of Management Building contracts (MC) is designed for use where the
management contracting procurement route has been chosen. Where a project is carried
out via the management contracting procurement route, the employer will appoint a
management contractor to oversee the works, who in turn appoints a series of works
contractors to carry out the construction, and manage the project and the works contractors
for a fee. The JCT’s MC is the contract that is used by the employer to appoint the
management contractor.

Under the JCT’s MC, the employer provides the design to the management contractor
(although this may not be complete when the works start) along with drawings and
a specification. The price paid to the management contractor is the prime cost of the
project plus a fee for managing the project and the works contractors. The contract also

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includes provisions for collaborative working, sustainability, third party rights and collateral
warranties. The MC can also be used on both private and public sector projects.

In addition to the MC between the employer and management contractor, the JCT also
publishes the form of works contract between the management contractor and works
contractors, a direct agreement, collateral warranties, and a guide:

• Management Works Contract Agreement (MCWC/A)

• Management Works Contract Conditions (MCWC/C)
• Management Works Contractor/Employer Agreement (MCWC/E)
• Management Contractor Collateral Warranty for a Funder (MCWa/F)
• Management Contractor Collateral Warranty for a Purchaser or Tenant (MCWa/P&T)
• Works Contractor Collateral Warranty for a Funder (WCWa/F)
• Works Contractor Collateral Warranty for a Purchaser or Tenant (WCWa/P&T), and
• Management Building Contract Guide (MC/G).
Construction Management contracts

The JCT’s suite of Construction Management contracts is designed for use where the
construction management procurement route has been chosen. Thus, the JCT’s Construction
Management contracts are for use on construction projects where the employer appoints
separate trade contractors to carry out the works and a construction manager to oversee
the completion of the works for a fee.

As such, the suite of contracts is used where separate contractual responsibility for design,
management and construction of the project is desired. The employer provides the design
and enters into direct separate Trade Contracts (the Construction Management Trade
Contracts (CM/TC)) with suppliers to carry out the construction of the works. The employer
appoints the construction manager (using the Construction Management Appointment
(CM/A)) to manage the project and act as an agent on the employer’s behalf, issuing
instructions, making decisions and preparing certifications. The construction manager also
administers the conditions of the CM/TCs.

Therefore, in addition to the construction management appointment between the employer

and construction manager, the JCT also publishes the form of CM/TCs between the employer
and the trade contractors, collateral warranties, and a guide:

• Construction Management Trade Contract (CM/TC)

• Construction Manager Collateral Warranty for a Funder (CMWa/F)
• Construction Manager Collateral Warranty for Purchaser or Tenant (CMWa/P&T)
• Trade Contractor Collateral Warranty for a Funder (TCWa/F)
• Trade Contractor Collateral Warranty for a Purchaser or Tenant (TCWa/P&T), and
• Construction Management Guide (CM/G).

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JCT – Constructing Excellence Contract

The JCT has collaborated with Constructing Excellence to develop the JCT – Constructing
Excellence Contract (CE).

The JCT – Constructing Excellence Contract (CE) can be used to procure a range of
construction services and is specifically tailored for use in partnering and where participants
wish to engender collaborative and integrated working practices.

The contract is designed for use throughout the supply chain for the appointment of main
contractors, subcontractors, and consultants. It can be used whether or not the supplier is to
carry out design, and the supplier’s design input (as either contractor or consultant) can vary.

The contract expressly underpins collaborative working and the formation of integrated
teams when used with the project team agreement, providing for the use of a risk register,
risk allocation schedules and performance indicators. The project team agreement (CE/P) is
used where members of the project team are to enter into a multi-party painshare/gainshare
arrangement.

A JCT – Constructing Excellence Contract Guide (CE/G) is also published that covers both the
CE and the project team agreement.

Measured Term Contract

The JCT’s Measured Term Contract (MTC) is designed for use by both private and public
sector employers who have a regular flow of maintenance, minor works and improvements
projects that they would like carried out by a single contractor over a specified period of time
and under a single contract.

Works are instructed to the contractor from time to time by way of ‘orders’. A contract
administrator is normally appointed by the employer to administer the conditions, issue
orders, describe the works and completion dates and certify payments.

This is a ‘re-measurement’ type of contract. The price of the contract is based on the
measurement and valuation of each order according to the prices in an agreed schedule of
rates.

A Measured Term Contract Guide (MTC/G) is also published that provides a general
introduction to the MTC and checklists of information required to complete the contract.

Prime Cost Building Contract

The Prime Cost Building Contract (PCC) is the JCT’s contract for use where the contractor
is procured on a traditional basis and is to be paid on a cost reimbursement or cost plus
payment structure. The JCT states that the contract is designed for private or public sector
projects that require an early start on site, often for alterations or urgent repair work (such
as fire damage). The exact nature and extent of the work is not known until the project is
underway, so full design documents are not completed until work has commenced.

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It is to be used where detailed contract provisions are necessary and the employer is to
provide a specification describing and showing the items of work. Drawings may also
be provided. An architect/contract administrator and quantity surveyor administer the
conditions.

Under the PCC the work proceeds on the basis of a brief specification, drawings (if any) and
an estimate of cost. The contractor is paid the prime cost of the works, as well as a contract
fee in respect of its non-site overheads and profit. The fee can be a lump sum, which is
adjusted if the prime cost is more or less than that estimated in the contract by a certain
percentage. The fee can also be calculated as a ‘percentage fee’ based on the actual prime
cost incurred. The fee can also be changed if the employer changes the nature and scope of
the works outlined in the schedules.

Therefore, there is a higher risk for the employer in terms of cost. The cost of the project
depends on the ability of the contractor to work efficiently and carry out the works
as economically as possible. Provisions are included in the contract to help keep the
expenditure of the prime cost to a minimum.

A Prime Cost Building Contract Guide (PCC/G) is also published that provides a general
introduction to the PCC.

Framework Agreement

The JCT’s Framework Agreement (FA) operates to provide a structure in which the parties can
enter into multiple contractual arrangements over a period of time. It also seeks to engender
a positive and collaborative relationship between the parties.

The FA is designed for use by employers who procure work on a regular basis and want to
capture the benefits of long-term relationships within the supply chain. For example, the FA
can be used by a high street bank to engage a contractor to fit-out and refurbish a number of
bank branches over a certain period of time. The FA puts in place the process to enable the
parties to enter into the individual contracts for the carrying out of the required works. This
means that the individual call-off orders are contracts in their own right, rather than mere
instructions to carry out work.

The FA can be used in an employer-contractor relationship, or can be used further down

the supply chain between a contractor and its subcontractors and/or suppliers. The FA
can be used to procure multiple projects or could be used on a single- project basis where
engendering a collaborative approach is desired.

Because the FA is designed to engender a collaborative approach it contains many

contractual provisions that are not found within any of the other JCT main contracts. For
example, the FA contains provisions dealing with organisational structures and decision
making, collaborative working, the supplier’s supply chain, the sharing of information and
know-how, early warning, performance indicators and a team approach to problem solving.

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Repair and Maintenance Contract

The JCT’s Repair and Maintenance Contract (RM) is designed for use on individual projects
that involve a defined programme of repair and maintenance works to specified buildings or
sites. This contract is primarily for use by local authorities and other employers who regularly
place small and medium-size contracts for jobbing work, and are sufficiently experienced
that an independent contract administrator is not required.

The JCT states that the RM is not suitable for periodic repair and maintenance over a fixed
period of time. Using the JCT’s MTC may be more appropriate in these circumstances. The
RM is also not suitable on projects for private home owners.

Home Owner contracts

The JCT’s Home Owner contracts are designed specifically for people looking for the benefits
and protection of a contract when appointing consultants or contractors to carry out their
building work.

The JCT currently publishes a Building Contract and Consultancy Agreement for a Home
Owner/Occupier (HO/C and HO/CA) and a Building Contract for a Home Owner/Occupier who
has not appointed a separate consultant to oversee the work (HO/B). There is also a freely
available JCT Home Owner Repair and Maintenance Contract (HO/RM).

2.4.2 NEC
The NEC is a suite of standard form contracts, each of which has the following
characteristics.

• Their use is intended to stimulate good management of the relationship between the two
parties to the contract and of the work included in the contract (e.g. in each NEC contract
there is an obligation on the parties to ‘act in a spirit of mutual trust and co-operation’).
• They are intended to be used in a wide variety of commercial situations, for a wide variety
of types of work and in any location.
• They are intended to be clear and simple documents, using language and a structure
which are straightforward and easily understood.
The NEC suite of contracts can be used on private and public sector projects, including civil
engineering, general commercial construction, nuclear, utilities, infrastructure, facilities
management, oil and gas, and purchasing and supply. They are also intended for global
application and are being adopted for many multi-disciplinary projects by clients in nearly 20
countries, e.g. Australia, New Zealand and South Africa.

The NEC suite of contracts has also received endorsement from a number of governmental
and industry bodies in the UK and internationally. This included an endorsement from the
Construction Clients’ Board of the UK Cabinet Office, which recommended NEC for use on all
public sector construction projects. The JCT Constructing Excellence Contract and PPC2000
have also both subsequently received endorsement. Therefore, when working on public

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sector construction projects there is little to no choice regarding which form of construction
contract to use.

The NEC contracts are also supplemented by a dedicated website, guidance notes and flow
charts, various public events, user groups and training courses.

The style of the NEC contracts is noticeably different to most other standard form contracts.
The contracts are shorter, are written in the present tense, use bullet points and contain
no cross referencing between clauses. The same structure and definitions are used, as far
as possible, across the suite of contracts. The intention is for everybody in the construction
industry to be able to understand and use these contracts, not just lawyers.

In contrast to other standard form construction contracts, the NEC contracts are structured
in a modular format, with different contract options being selected to suit the needs of
the particular project. Therefore, each contract contains a set of core clauses that always
apply. These are then supplemented by a series of main options (relating to payment)
dispute resolution options and secondary options (e.g. relating to delay damages, bonds and
guarantees) which the parties can choose to apply depending on the needs of the particular
project.

The philosophy of the NEC contracts is also quite different to other mainstream construction
contracts. For example, a feature of the NEC contracts is their focus on good project
management. The contracts are more than a statement of rights, obligations and sanctions;
they try to encourage a successful project outcome. This can be seen in the emphasis on
communications, programming, cooperation between the parties (in relation to each of
which the contracts are unusually prescriptive), the early identification of matters which
may prejudice the successful outcome of the project (early warning) and the early resolution
of contractors’ claims (compensation events) based on forecast effect rather than a
retrospective examination of what actually happened. Dealing with matters on a projected
basis means there is no final account type process of the kind in other forms.

The programme is a key document in an NEC contract. It is crucial to administering the

contract, and requires constant updating and is backed-up with sanctions if it is not provided
and/or updated. This means that aspects of the NEC contracts are time consuming to
manage, in particular the programming and compensation event provisions, which may
make NEC contracts less appropriate for small projects.

In further contrast to other standard form construction contracts, whose various suites of
contract have been developed for use with specific procurement routes, the NEC contracts
have been developed for use in three broad areas:

i the procurement of works

ii the procurement of services and

iii the supply of goods and services.

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The appropriate contractual options are then chosen to make the contracts work with the
desired procurement and payment routes.

The contracts contained in the NEC suite include the following.

Contracts for the procurement of works

The flagship contract in the NEC suite is the Engineering and Construction Contract (ECC).
This is the contract for use where an employer wishes to appoint a contractor to carry out
engineering and construction work.

As noted previously, the ECC is structured in a modular format. There are nine core clauses
(e.g. dealing with the contractor’s main responsibilities, time, the payment process and
compensation events) that will always apply to the contract.

The parties then choose one of six main option clauses (A–F). The main options allow the
employer different ways of pricing the project and ways of paying the contractor. The main
options do not change the remainder of the ECC’s provisions (except to deal with pricing and
payment), but they are more than a set of payment schedules. The main option clauses are
as follows:

• Option A – Priced contract with activity schedule

• Option B – Priced contract with bills of quantities
• Option C – Target contract with activity schedule
• Option D – Target contract with bills of quantities
• Option E – Cost reimbursable contract, and
• Option F – Management contract.
Options A–E descend in terms of certainty of price for the employer, reflecting similarly
descending certainty of work scope. Each option provides merely a different type of pricing
basis from lump sum (Option A – higher risk to the contractor) to cost reimbursable (Option
E – lower risk to the contractor). Options C and D are Target Cost contracts that contain
a painshare/gainshare arrangement so that the employer and contractor share any cost
savings or overspend. Option F (Management Contract) does not differentiate between the
construction management and management contracting procurement routes. It is perhaps
suitable for contracts with a high degree of specialist contractor input. Specialist contractors
are paid on the basis of prime cost and the contractor tenders based on preliminaries and
fee percentage.

Following selection of the main option, the parties will select a dispute resolution option –
either Option W1 or W2. Option W2 is chosen if the contract is governed by the UK’s Housing
Grants, Construction and Regeneration Act 1996 (as amended). The parties can then select a
number of secondary option clauses to apply to the contract. Again, if the contract will take
place in the UK, there are certain secondary options that should be chosen. The parties can
also opt to amend the ECC and import additional clauses through use of Option Z.

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This modular format means that the ECC is drafted on a ‘jurisdiction neutral’ basis and so can
be used either in the UK or internationally. If the ECC is being used internationally, Option Z
can be used to import any jurisdiction-specific requirements and the NEC’s website also has
sections referring to use in certain overseas jurisdictions.

Because the ECC is structured on a flexible basis, it can also be used regardless of the level of
design responsibility that the contractor will have. The contractor’s design responsibility will
be detailed in one of the contract documents (the Works Information) that makes up the ECC.
The contractor may have little or no responsibility for the design of the works, or could have
full responsibility for design.

Accompanying the terms and conditions of the ECC are three key documents that help make
up the ECC:

i the Contract Data

ii the Works Information (renamed as ‘Scope’ in NEC4) and

iii the Site Information.

The Contract Data details the project-specific requirements for the contract (e.g. a
description of the works, the identity of people carrying out various key roles, and dates for
commencement and completion of the works). The Works Information is critical because
the contractor is obliged to carry out the works in accordance with the Works Information.
Certain compensation events (which entitle the contractor to additional time and/or money)
are also determined by reference to what is stated in the Works Information. The Works
Information/Scope therefore sets out the detailed requirements for the carrying out of the
works (e.g. details of which parts, if any, of the works the contractor is to design). The Site
Information contains the factual material that concerns the site, boreholes, soil reports, etc.
The information is usually provided by the employer. In addition to these key documents,
there is a Schedule of Cost Components (and a Shorter Schedule of Cost Components), which
helps to define certain costs that are paid to the contractor.

The employer is infrequently mentioned in the ECC. Instead, the administration of the ECC
is generally carried out by a project manager and a supervisor. The project manager acts for
the employer, issuing instructions, approving programmes, assessing compensation events
and payments, etc. The supervisor performs a role that is similar to a clerk of works, only
more so. The supervisor is particularly prominent in the provisions relating to defects in the
works.

As well as the ECC, the NEC also publishes the following documents relating to the
procurement of works:

• NEC Engineering and Construction Contract Guidance Notes

• NEC Engineering and Construction Contract Flow Charts
• NEC Engineering and Construction Short Contract (ECSC)
• NEC Engineering and Construction Short Contract Guidance Notes and Flow Charts

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• NEC Engineering and Construction Subcontract (ECS) and

• NEC Engineering and Construction Short Subcontract (ECSS).
Contracts for the procurement of services

The two principal contracts produced by the NEC relating to the procurement of services
are the Professional Services Contract (PSC) and the Term Service Contract (TSC). The PSC is
used to procure services for a particular project, whereas the TSC is used to procure services
(possibly relating to a number of different projects) over a specified period of time.

The PSC can be used to appoint a professional consultant to carry out the role of project
manager or supervisor under the ECC, or could be used to appoint a designer (e.g. an
architect) or other professional consultants. It follows the modular structure present in all
the NEC contracts and has four main options for its pricing mechanism:

• Option A – priced contract with activity schedule (essentially a lump sum contract)
• Option C – target contract (essentially a cost reimbursable contract with a painshare/
gainshare mechanism)
• Option E – time based contract (essentially a cost reimbursable contract) and
• Option G – term contract (this contains reimbursable and lump sum payment elements),
for use where the employer wishes to have the right to issue Task Orders to the
consultant during a specified period.
Following selection of the main pricing option, there are also a series of dispute resolution
clauses (‘W clauses’) and secondary option clauses (‘X’, ‘Y’ and ‘Z’ clauses) for the parties to
select depending on the needs of the particular project and the jurisdiction (e.g. the UK) in
which the project is taking place. The key document in the PSC is the Scope. This specifies
and describes the services to be provided and states any constraints on how the consultant
provides the services.

The TSC can be used to procure a wide variety of services, not just those related specifically
to construction. For example, the NEC’s TSC Guidance Notes state that the TSC:

‘has been designed for use in a wide variety of situations, and is not restricted to
construction. It is essentially a contract for a Contractor to provide a service (not limited
to a professional or construction service) to an Employer.’

As such, the TSC can not only be used to procure professional consultancy services related
to construction, but can also be used to procure services such as landscaping and cleaning,
highways maintenance, and housing maintenance and repairs.

The three main pricing options to choose from for the TSC are:

• Option A – priced contract with price list

• Option C – target contract with price list (essentially a cost reimbursable contract with a
painshare/ gainshare mechanism) and

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• Option E – cost reimbursable contract (essentially a cost reimbursable contract, but

without any painshare/gainshare mechanism).
Following selection of the main pricing option, there are also a series of dispute resolution
clauses (‘W clauses’) and secondary option clauses (‘X’, ‘Y’ and ‘Z’ clauses) for the parties to
select depending on the needs of the particular project and the jurisdiction (e.g. the UK) in
which the project is taking place. The key document in the TSC is the Service Information and
the contract is administered by a service manager appointed by the employer.

Individual pieces of work are instructed to the contractor via Task Orders.

As well as the PSC and the TSC, the NEC also publishes other documents relating to the
procurement of services, as follows:

• NEC Professional Services Contract Guidance Notes and Flow Charts

• NEC Professional Services Short Contract (PSSC)
• NEC Professional Services Short Contract Guidance Notes and Flow Charts
• NEC Term Service Contract Guidance Notes
• NEC Term Service Contract Flow Charts
• NEC Term Service Short Contract (TSSC) and
• NEC Term Service Short Contract Guidance Notes and Flow Charts.
Contracts for the supply of goods and services

The NEC Supply Contract (SC) is recommended for use in the local and international
procurement of high- value goods and related services, including design.

Examples provided by the NEC of what can be procured under the SC include transformers,
turbine rotors, rolling stock, loading bridges, transmission plant, and cable and process plant,
together with lower risk goods and associated services such as building materials, simple
plant and equipment, stationery, PPE, manufacturing parts, components and store items.

The SC can be used at various tiers of the supply chain. The payment and pricing mechanism
is fixed (there are no choices) but there are a variety of secondary option clauses to choose.
The contract is administered by a ‘supply manager’ appointed by the ‘purchaser’.

As well as the SC, the NEC also publishes the following documents relating to the supply of
goods and services:

• NEC Supply Contract Guidance Notes

• NEC Supply Contract Flow Charts
• NEC Supply Short Contract (SSC) and
• NEC Supply Short Contract Guidance Notes and Flow Charts.

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2.4.3 GC Works
The GC (Government Contract) Works suite of contracts evolved following World War 2
to become standard forms of contract used by the UK Crown and the government for
the procurement of building and civil engineering projects such as prisons and military
establishments, etc.

Between 1998 and 2000, the suite was expanded and the resulting suite of contracts was as
follows.

GC/Works/1 Building & Civil Engineering Major Works with Quantities (1998)

This contract is for use with bills of quantities, where all or most quantities are firm and not
subject to re-measurement and a lump sum contract is required.

GC/Works/1 Building & Civil Engineering Major Works without Quantities (1998)

For use where lump sum tenders are to be invited based on a specification, drawings and
schedule of rates but not bills of quantities.

GC/Works/1 Single Stage Design and Build (1998)

This is for use where a lump sum is required and the contractor is to prepare or complete the
design. It is only suitable for a single stage design process whereby the design is completed
in the contractor’s proposals. It is not suitable for use where a second stage design process is
intended after the contract has commenced.

GC/Works/1 Two Stage Design and Build (1999)

This envisages a separate design phase for which the contractor is paid a design fee.
Before work on site commences, a design process event has to be achieved. This will have
two elements – determination of the contract sum and achievement of a design process
milestone, usually the completion of the design itself. The employer has absolute discretion
whether or not to proceed with the construction phase of the contract.

The two design and build contracts were also subject to an amendment, ‘Achieving
Excellence’ (Amendment 1, 2000).

GC/Works/1 Construction Management Trade Contract (1999)

There are two versions available, with quantities and without quantities.

GC/Works/2 Building and Civil Engineering Minor Works (1998)

This is designed for use in projects with a minimum value of £25,000 and a maximum value
of £200,000. It is also said to be suitable for demolition works of any value.

The contractor’s tender is based on a specification and drawings only, but there is an option
for a schedule of rates for the valuation of variations.

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GC/Works/3 Mechanical & Electrical Engineering Works (1998)

This is for use when lump sum tenders are to be invited on the basis of specification and
drawings, with the optional use of bills of quantities or a schedule of rates. The contract
should be suitable for use in relation to mechanical and electrical works of any value.

GC/Works/4 Building, Civil Engineering, Mechanical & Electrical Engineering Small Works
(1998)

This contract is designed for building, civil engineering or mechanical and electrical works
with a value up to £75,000. Lump sum tenders are submitted on the basis of a specification
and/or drawings only.

GC/Works/5 Consultant’s Appointment (1998-2000)

As well as a single project appointment, there is a Framework Agreement where consultancy

services are required on a call-off basis over a period of years.

GC/Works/6 Dayworks Term Contract (1999)

This is for works of a ‘jobbing nature’, where a labour charge is based on an hourly rate.
Materials are charged at cost plus a percentage addition.

GC/Works/7 Measured Term Contract (1999)

This allows the employer to issue orders as and when required, based on a schedule of rates,
and is to be used for a period of three to five years.

GC/Works/8 Specialist Term Contract for Maintenance of Equipment (1999)

This contract is for use where the employer requires specified maintenance of equipment,
where the work can be costed per task. The contractor prices a schedule of work and interim
payments are made on the basis of work carried out.

GC/Works/9 Lump Sum Term Contract for Operation, Maintenance and Repair of M&E Plant,
Equipment and Installations (1999)

This is for use in relation to a single establishment or complex of buildings, with a contract
period of one to five years. The price includes one-off repairs up to a specified maximum
cost per repair.

GC/Works/10 Facilities Management (2000)

This facilities management version of the contract allows the appointment of a facilities
management contractor either as a one-stop shop or as a managing agent. It can be used
with either input or output specifications and on one or more sites.

GC/Works/11 Minor Works Term Contract (2000)

This is for activities such as window cleaning or the maintenance of gardens or grounds at a
single establishment or complex of buildings. It can be used with either an input or an output
specification.

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However, following publication of these contracts, use of the GC Works documents declined.
This was in part due to adoption of the NEC suite of contracts for public sector projects. As
a consequence, the GC Works contracts are now out of date, not having been updated since
they were published in 1998–2000. They are still used occasionally for public sector projects,
but are still perceived as ‘employer friendly’ contracts. Today, a GC Works contract would
require extensive amendment (e.g. to the payment and dispute resolution provisions) in
order to bring it into line with current law.

2.4.4 The Infrastructure Conditions of Contract

The ICC suite of contracts includes a Measurement Version (which is effectively a re-print of
the old 7th Edition of the ICE Conditions of Contract), a Design and Construct Version and
Target Cost Version, as well as more specialist contracts such as the Ground Investigation
Version and Archaeological Investigation Version.

Subsequently, an amendment sheet was published for use with the ICC suite of contracts
to bring them into line with the amendments to the Housing Grants, Construction and
Regeneration Act 1996 contained in the Local Democracy, Economic Development and
Construction Act 2009.

The ICC contracts are designed for use on civil engineering and infrastructure projects and
are based on the earlier ICE conditions. Selected examples from the full suite of ICC contracts
as set out below. Each ICC contract is supported by associated guidance notes.

Measurement Version

This is one of the standard contracts used for UK civil engineering and infrastructure work.
The ACE state that the contract has been drafted by employers, consultants and contractors
to provide a clear and standardised contract specifically tailored for civil engineering and
infrastructure projects.

The Measurement Version is for use on a traditionally procured project where the contractor
carries out the construction of the works in accordance with a design provided by or
on behalf of the employer. Valuation of the contractor’s works is by measurement. This
form of contract is intended to provide a comprehensive and clear set of conditions, with
a fair balance of risks between employer and contractor and with administration by an
independent engineer.

Design and Construct Version

This contract is for use where the design and build procurement route has been chosen.
Therefore, the contractor is responsible for all aspects of design and construction, including
any design originally provided by or on behalf of the employer unless otherwise stated.

Payment to the contractor is on a lump sum basis but other forms of payment may be used.

The contract encourages the benefits of team working and current procurement initiatives.
If the procedures are followed, the parties to the contract will be provided with an ‘early

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warning’ of circumstances that may give rise to additional costs or delay in completion of the
contract in order to assist in the mitigation or prevention of such events.

The ACE state that the contract is based on the Design and Construct Version of the ICE
Conditions of Contract and will be familiar to those who know that contract.

Term Version

Under this contract, a contractor is appointed to carry out such work for an agreed period
of time (the term), carrying out such packages of work as may be required by the employer
under conditions set out in the contract. The Term Version uses call-off orders (known as
Works Orders) to accommodate rolling renewal or replacement requirements (based on
re-measurement or a lump-sum quotation for a particular operation). The engineer also
maintains its traditional role of advising the employer, designing and supervising the works
and certifying payment.

The ACE envisages the Term Version to be suitable for planned maintenance or
refurbishment work, as well as for emergency works where a contractor may be on call.

The contract is based on the Term Version of the ICE Conditions of Contract and will be
familiar to those who know that contract.

Minor Works Version

This is a traditional procurement contract (i.e. employer designed) for minor civil engineering
works.

The Minor Works Version is based on the former ICE Conditions and includes amendments
resulting from experience in use, including a responsibility on the employer to provide
the contractor with all relevant information to the works and a right for the engineer to
have access to work in hand whether on or off site. In view of the short duration of these
contracts, retention provisions have been removed.

Target Cost Version

This contract is the newest member of the Infrastructure Conditions of Contract family and
has been produced due to industry demand.

This contract allows the employer, usually with the assistance of the contractor, to set a
clear target for the cost of the civil engineering works to be carried out, in order to avoid
projects overrunning on cost and deadline. The contract also includes a painshare/gainshare
mechanism so that the employer and contractor can share any cost savings or overspend.

The ACE also states that to utilise the Target Cost Version effectively, a more open style
of control and management is required which will permit an early and joint approach to
the identification and management of risks. This is intended to lead to better channels of
communication between employer and contractor, at every project stage.

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Ground Investigation Version

The Ground Investigation Version is based on the traditional pattern of an investigation

designed by an engineer and carried out by a specialist contractor.

The ACE states that this contract is intended for the situation where the employer wishes
to develop a site and has geotechnical specialists who will carry out any initial desk study,
identify the geotechnical requirements of the project and design a ground investigation to
suit those requirements.

Archaeological Investigation Version

This is a specialist contract relating to archaeological investigations. It can be used whenever

there is a need to procure an archaeological investigation, e.g. as part of the planning
process or as part of an environmental impact assessment.

Partnering Addendum

This is a partnering agreement, where parties to a contract work together and collaborate to
deliver a project.

The ACE states that the Partnering Addendum ‘aims to deliver an effective and flexible
mechanism for multi-party partnering using Infrastructure Conditions of Contract,
ACE Agreements 2009 and CECA Forms of Subcontract’. The document governs the
implementation of the partnering arrangement and the relationship between the partners.

The ACE and CECA have subsequently revised and published the ICC suite of contracts.
Details of these new forms will be set out in the next revision of this practice information.

2.4.5 Institution of Chemical Engineers (IChemE)

The IChemE currently publishes two suites of contracts – one for use in the UK and another
for use internationally. Both suites are used extensively across a wide range of process
industries and are suitable for the provision of any performance-based plant or project. The
contract forms have been formulated to reflect best practice and relationships in the process
plant sector. This practice information will focus on the UK suite of contracts.

The IChemE first published its contracts in 1968 and the latest versions (including helpful
introductory guidance notes) for contracts for use in the UK include the following.

IChemE Form of Contract for Lump Sum Contracts (the ‘Red Book’)

The Red Book is specifically published for lump-sum contracts for the design, construction
and commissioning of performance based process plants. Therefore, the contract has
been prepared with process plants and manufacturing facilities in mind, but the IChemE
acknowledges that the contract is also being used in other sectors such as nuclear,
pharmaceuticals, water and tunnelling.

The Red Book is for use where the design and build procurement route has been selected
and is a ‘turnkey’ contract. The contractor is required to go beyond the usual responsibility

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of a design and build contractor on a construction project, taking responsibility for designing
and constructing the plant and for carrying out performance tests to establish that the plant
works properly.

As the Red Book is a lump sum contract, the cost of completing the works is at the
contractor’s risk. The employer (known in the IChemE contracts as the ‘purchaser’) and
contractor will agree a price for completing the works and that is what will be paid to the
contractor regardless of the actual costs incurred by the contractor (subject to certain
exceptions, such as variations instructed by the purchaser).

IChemE Form of Contract for Reimbursable Contracts (the ‘Green Book’)

Like the Red Book, the Green Book is a turnkey contract requiring the contractor to design
and construct the plant and to take responsibility for performance testing the plant to
demonstrate that it works properly.

However, it is the pricing and payment mechanism that is one of the key differences between
the Red and Green Books. The Green Book is a ‘cost reimbursable’ contract, which means the
contractor is reimbursed for all the actual costs it incurs in providing the goods and services
that the purchaser requires. This includes any corrective costs arising from design and
construction errors, but will depend on the exact terms of the contract and the contractor’s
exercise of normal professional skill and care.

Because of this, the purchaser takes much greater financial risk under the Green Book
than he would do under the Red Book. The Green Book may therefore be best suited to a
sophisticated and well-informed purchaser who is experienced in the relevant sector, and
who has the necessary skills and expertise to work with the contractor in the design and
construction of the works.

IChemE Form of Contract for Target Cost Contracts (the ‘Burgundy Book’)

The Burgundy Book is specifically published for target cost contracts for the design,
construction and commissioning of performance based process plants.

The IChemE states that the intention of its target cost contract is to encourage both parties
in the contract to work together in order to find ways of carrying out the work as efficiently
as possible and to be rewarded as a result (i.e. painshare/gainshare). The Burgundy Book is
used for either setting the target cost at the time of making the contract or for agreeing the
target cost during the contract, typically when the detailed scope of work has been agreed
but before commencement of any construction or manufacture of the plant.

In terms of financial risk for the purchaser, the Burgundy Book therefore sits somewhere
between the lump sum contract (Red Book) and cost reimbursable contract (Green Book).

IChemE Form of Contract for Minor Works (the ‘Orange Book’),

The Orange Book has been developed for ‘minor’ packages of work within an existing
process plant but for which the far more comprehensive forms – whether for contracts

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based on ‘lump sum’ (the ‘Red Book’), ‘reimbursable’ (the ‘Green Book’) or ‘target cost’ (the
‘Burgundy Book’) forms of payment – would be both inappropriate and cumbersome.

On the premise that significant items of plant or equipment to be installed by the contractor
would be purchased under separate purchase orders and ‘free-issued’ to the contractor,
IChemE envisage that this form of contract would normally be applied for works not
exceeding about £250,000 in value. The work would typically comprise activities such
as installation of equipment or plant, repair and maintenance of equipment or plant, or
modifications to existing facilities.

IChemE Form of Contract for Subcontracts (the ‘Yellow Book’)

The Yellow Book is a form of subcontract that is designed to be ‘back-to-back’ with the
conditions contained in the Red Book, Green Book and Burgundy Book.

The IChemE states that the Yellow Book is primarily intended for subcontracts that include
the design, supply, site construction/erection/installation and testing of equipment and for
when the subcontractor is to supply plant and equipment that will be significant in terms
of the main contract plant. Typically, this might be because the subcontractor is to supply a
significant process package or system that might be of some size or complexity.

IChemE Form of Contract for Civil Engineering Subcontracts (the ‘Brown Book’)

The IChemE states that the Brown Book is specifically for civil engineering subcontracts in
relation to work that is often required prior to the construction of the process elements of a
process plant, such as access roadways, foundations and other ‘non-process plant’ elements.
As with the Yellow Book, this subcontract is fully compatible with the Red, Green and
Burgundy Books.

2.4.6 FIDIC
‘Fédération Internationale des Ingénieurs – Conseils’ (International Federation of Consulting
Engineers) (FIDIC) contracts are the most widely used forms of contract internationally,
including by the World Bank for its projects. They are mentioned briefly in this practice
information because some of the FIDIC contracts (e.g. the Yellow Book) are sometimes
used as a basis for contracting in the UK (e.g. for the design and construction of offshore
windfarms). If being used as a construction contract in the UK, FIDIC contracts require
amendment in order to comply with UK legislative requirements.

The FIDIC ‘Rainbow Suite’ of New Contracts was originally published in 1999 and includes the
following.

The Red Book: Conditions of Contract for Construction for Building and Engineering Works
Designed by the Employer

The 1999 Red Book is suitable for all projects where main responsibility for design lies with
the employer (or its representative, the engineer).

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The contractor usually carries out the works in accordance with the employer’s design.
However, the works may also include some elements of contractor-designed civil,
mechanical, electrical and/or construction works.

The work done is measured, and payment is made according to a bill of quantities, although
there is an option for payment on a lump sum basis.

The Yellow Book: Conditions of Contract for Plant and Design-Build

The Yellow Book is suitable for all types of projects where the main design responsibility lies
with the contractor. In practice, the contractor’s designs follow the employer’s requirements.
For that reason, the testing procedures are usually more complicated than those in the Red
Book.

Payment is made on a lump sum basis, usually against a schedule of payments.

The Silver Book: Conditions of Contract for EPC/ Turnkey Projects

The Silver Book is intended for EPC (Engineering, Procurement and Construction)
arrangements. Under an EPC contract, the contractor is responsible for all the processes
and design required to provide a fully equipped facility to the employer that is ready for
operation at the ‘turn of a key’, i.e. a ‘turnkey’ arrangement.

Under the Silver Book, the contractor assumes time and cost risks that are greater than it
would otherwise assume under a Yellow Book.

The Green Book: Conditions of Short Form of Contract

The Green Book is designed for use on projects with a relatively small value, short
construction time or involving simple or repetitive work.

Under the Green Book, It does not matter whether the design is provided by the employer
(or his engineer/ architect if he has one) or by the contractor. It also does not matter whether
the project involves construction, electrical, mechanical, or other engineering work.

The Blue Book: Contract for Dredging and Reclamation Works

The Blue Book is designed to be used for all types of dredging and reclamation work and
ancillary construction, with a variety of administrative arrangements. Under the Blue Book, it
is the employer who designs the project, but this could be modified to provide for some or all
of the works to be designed by the contractor.

The Pink Book: Conditions of Contract for Construction for Building and Engineering Works
Designed by the Employer (for bank-financed projects only)

The Pink Book is a new version of the FIDIC Red Book called the ‘MDB Harmonised Edition’.
It was originally published in May 2005. It is to be used on projects funded by participating
Multilateral Development Banks (MDB), such as the World Bank.

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The White Book: Client/Consultant Model Services Agreement

The White Book is a consultancy contract for the appointment of a professional consultant
(e.g. an architect or engineer). The White Book was first published in 1998.

The Gold Book: FIDIC Design, Build and Operate Projects

The Gold Book is the most recently published form of the ‘FIDIC rainbow’. The First Edition of
the Gold Book was published in September 2008.

The Gold Book combines design, construction, operation and maintenance of a plant in a
single contract, and is drafted to be used in Design, Build and Operate (DBO) scenarios.

2.4.7 Project Partnering Contracts

The Association of Consultant Architects (ACA), now in joint venture with the Association for
Consulting and Engineering (ACE), currently publishes a number of contracts for use in the
UK and internationally that have been specifically drafted for use where the parties wish to
adopt partnering principles and behaviours. The most commonly used contracts published
by the joint venture are as follows.

PPC2000 Standard Form of Contract for Project Partnering

The ACA first published its Standard Form of Contract for Project Partnering PPC2000, in
September 2000.

PPC2000 is a multi-party contract primarily between the ‘client’, ‘constructor’ and the ‘client
representative’. However, other parties such as specialist contractors and consultants can
also join the contract and become part of the partnering team. The contract has a partnering
ethos running throughout its terms and includes provisions dealing with incentivisation,
continuous improvements, performance indicators, co-operative and transparent exchange
of information and a painshare/gainshare mechanism.

The level of the constructor’s design responsibility under PPC2000 will vary according to
the requirements of the project and the drafting of the contract. The design of the works is
generally to be carried out by the lead designer and any other members of the design team.

However, the client can also select a particular option in PPC2000 that places full
responsibility on the constructor for the design, supply, construction and completion of the
project, including any design carried out by other partnering team members. PPC2000 also
enables the client to select a ‘fitness for purpose’ obligation (which may not be covered by
the constructor’s professional indemnity insurance) and a ‘net contribution clause’ (which
would be more acceptable to the partnering team members and their insurers).

If being used in Scotland, a Scottish Supplement is published for use with PPC2000 that
provides alternative attestation clauses and other provisions that are compliant with Scottish
law.

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SPC2000 Standard Form of Specialist Contract for Project Partnering

SPC2000 is a subcontract for use between a ‘constructor’ and a ‘specialist’. It is designed for
use where the main contract is PPC2000 and so its provisions are ‘back-to- back’ with those
found in PPC2000.

TPC2005 Standard Form of Contract for Term Partnering

TPC2005 is a partnering contract for use where the ‘client’ wishes to appoint the ‘service
provider’ to provide services over the course of a specified period of time.

TPC2005 is thus the term version of PPC2000 and contains equivalent provisions to those
found in PPC2000.STPC2005 Standard Form of Specialist Contract for Term Partnering

STPC2005 is a subcontract for use between a ‘service provider’ and a ‘specialist’. It is

designed for use where the main contract is TPC2005 and so its provisions are ‘back- to-back’
with those found in TPC2005.

TAC-1 Term Alliance Contract

TAC-1 is described as ‘a versatile standard form term alliance contract that can enable a client
and its team to obtain better results from any term contract’.

It is endorsed by the Construction Industry Council and by Constructing Excellence.

2.4.8 Others
The publishers and contracts discussed are the main ones currently used in the UK. However,
a number of other publishers exist and sometimes produce more specialist contracts for
their particular sector. Some of the other publishers are as follows.

Chartered Institute of Building

In April 2013, the Chartered Institute of Building launched its ‘Contract for Use with Complex
Projects’ (CPC2013).

CPC2013 is marketed as being suitable for building and engineering projects, both in the
UK and internationally. Its drafters state that it is intended for use by government agencies
and companies in a variety of procurement methods (including build only, design and build,
and turnkey). It focuses on time management, providing for a dynamic programme (called
a works schedule) and a ‘project time manager’, together with requirements for detailed
record keeping. It is ready for use with building information modelling (BIM) and electronic
information exchange. CPC2013 also works with a range of design responsibilities – from
continuing employer design through to full design of the works by the contractor.

LOGIC

LOGIC is a not-for-profit wholly-owned subsidiary of Oil & Gas UK. LOGIC currently supports
a suite of 10 standard form contracts (including construction contracts, consultancy
appointments, and purchase orders) that are available for use throughout the oil and gas

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industry. At the time of writing this guidance note, LOGIC is in the process of reviewing and
updating all of its standard form contracts. The latest edition of each contract is available on
LOGIC’s website.

RIBA

The Royal Institute of British Architects published two building contracts in November 2014.
These are the Concise Building Contract (CBC) and the Domestic Building Contract (DBC). The
CBC can be used on all types of commercial building works in both the private and public
sectors, while the DBC is designed for use by consumer clients (as defined). Both contracts
are suitable for use in England and Wales only.

The UK government and local authorities

The UK government and local authorities regularly engage with the private sector to
construct, maintain and operate assets used by the public sector. They often use Public
Private Partnerships (PPP) arrangements such as PFI (now discontinued). For more
information on such arrangements, see Section 2.2.7.

The Scottish ministers, through their subsidiary (known as the Scottish Futures Trust (SFT)),
produced a standard form Project Agreement for use on most NPD projects (with Transport
Scotland having developed an equivalent for roads projects). A user guide has also been
produced that provides required and alternative recommended drafting. The SFT has also
produced a standard form ‘Design Build Finance and Maintain Agreement’ (which is almost
identical to the NPD equivalent) for use on hub PPP-type schemes.

Finally, SFT has also produced a standard form ‘Design and Build Development Agreement’
for use on simple design and build schemes being let through the hub programme.

IMechE/IET

The Institution of Mechanical Engineers (IMechE) and the Institution of Engineering and
Technology (IET) issue a range of model forms of general conditions of contract specifically
for electrical and mechanical work and consultancy.

There are seven current ‘primary publications’, comprising four model forms (MF/1 to MF/4)
and three commentaries as follows.

• MF/1 – A model form of contract for use in connection with home or overseas contracts
for the design, supply and installation of electrical, electronic and mechanical plant,
including special conditions for the ancillary development of software. The wording in
Revision 6 has also been updated to ensure that the contract can be used internationally.
• MF/2 – A model form of general conditions of contract for use in connection with home or
overseas contracts for the supply of electrical, electronic or mechanical plant.
• MF/3 – A model form of general conditions of contract for use in connection with home
contracts for the supply of electrical and mechanical goods.

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• MF/4 – A model form of terms and conditions of engagement for an engineering

consultant, for use in connection with home or overseas projects.
• Commentary on MF/1.
• Commentary on MF/2.
• Commentary on MF/4 .

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3 Practical application (Level 2 –

Doing)

3.1 Introduction
This section covers the further information required to satisfy the ‘doing’ requirements of
the Level 2 competency of the APC.

This section covers:

• the interrelationship between procurement, tendering and contract selection

• other factors that will influence the choice of construction contract, and
• an explanation of the different types of construction contract that can be selected for use
with the most commonly adopted procurement routes in the UK.

3.2 Procurement, tendering and contract selection

Professional consultants who are advising an employer on appropriate contract selection
should appreciate that selection of an appropriate construction contract results from the
choice of procurement route and those other factors described in Section 3.3. A contract
should not be ‘pre-selected’ and then used to drive the choice of procurement route.

In addition, professional consultants should also have an appreciation of the differences

between procurement, tendering and contract selection and how they interrelate.

Procurement is the overall process of obtaining goods and services from external sources
(e.g. a contractor). This includes deciding the strategy on how those goods and services
are to be acquired by reviewing the employer’s requirements (e.g. relating to time, cost,
quality and responsibility for design) and their attitude to risk. The choice of an appropriate
construction contract will flow from this analysis of the employer’s requirements and the
chosen procurement route.

Tendering is an important phase in the overall procurement strategy. Tendering is the

bidding process and the actual process of appointing a contractor.

3.3 Other factors influencing the choice of construction

contract
The choice of procurement route will influence the choice of appropriate construction
contract because certain construction contracts are designed for use with certain

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procurement routes. For example, the JCT’s Design and Build Contract is designed for use
only where the design and build procurement route has been chosen.

The contract is not appropriate for another procurement route. Similarly, the JCT’s Standard
Building Contract is designed for use where the traditional procurement route has been
chosen and is not appropriate for another procurement route (e.g. design and build or
construction management).

Therefore, the choice of procurement route will be a key influence on the choice of
appropriate construction contract, but there are a number of other factors that need to be
considered before finally deciding on the most appropriate contract for a particular project.

3.3.1 The types of works required and sector

The nature of the required works and the particular sector that the works relate to should
influence the choice of construction contract.

In advising on appropriate contract selection, professional advisers need to consider the

types of work that will be covered by the contract. For example, is the work building or
engineering related? Is it a new building or the refurbishment or alteration of an existing
building? Are there any areas of specialist design required? Are they major works or small
works, perhaps ‘jobbing’ in nature? Are they one-off works, part of a pipeline of required
work or maybe even part of a programme of work to an existing set of assets?

In addition, certain standard form construction contracts are designed for use in particular
sectors of the construction industry. Certain sectors of the construction industry are also
used to working with particular standard form construction contracts. For example, the
commercial construction market in the UK is very familiar with the JCT suite of contracts,
but less familiar with the NEC, FIDIC and ICC contracts. In contrast, the infrastructure and
engineering markets are more familiar with the NEC and ICC contracts, but less so with JCT
contracts and PPC2000. Therefore, imposing an unfamiliar form of construction contract
on a particular sector may create additional and unnecessary risk, as either or both of
the employer and contractor may not understand the balance of risk and their rights
and obligations under a particular contract. Unfamiliarity with a contract may also lead
contractors to price for risks (that may or may not exist) in their tender price.

Examples of the sectors in the UK that use particular forms of contract are as follows
(although readers should note that these are indicative examples only and there may be
good reasons why an employer could use a form of contract that is not ordinarily used in a
particular sector).

• JCT contracts. The mainstream construction sector procuring works such as new-build
office blocks, office remodelling and refurbishments, hotels, new apartment blocks, fit-
out of shops and office premises, accommodation projects, education projects, sports
stadia and leisure.

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• NEC contracts. The engineering and infrastructure sectors procuring works such as
new roads and upgrades to the existing road network, new rail lines and assets, nuclear
facilities, the London 2012 Olympics, and water utilities.
• GC Works contracts. Although now experiencing a general decline in use, the GC Works
contracts were previously used by central government and local authorities to procure
a range of major building and civil engineering works, as well as more mainstream
construction, e.g. new local authority office facilities. The use of GC Works contracts has
declined as the public sector increasingly uses the NEC contracts and other collaborative
forms of contract.
• Infrastructure Conditions of Contract. The engineering and infrastructure sectors
procuring works such as new rail lines and assets, tunnelling, ports and docks, energy
and water utilities.
• IChemE contracts. The process engineering sector procuring works such as
process plants and manufacturing facilities, and also other sectors such as nuclear,
pharmaceuticals, water and tunnelling.
• FIDIC contracts. These are not commonly used in the UK, but have found use in the oil
and gas sectors, and onshore and offshore renewables sectors (e.g. offshore windfarm
projects).
• PPC2000 contracts. Can be used in the mainstream construction sector, but have found
particular use by local authorities (e.g. term maintenance arrangements for housing
stocks), housing associations and some central government departments (e.g. the
Ministry of Justice and Department for Work & Pensions).
• CIOB’s Contract for Use with Complex Projects. It is intended for use by companies and
public authorities in the UK and in any other country where works comprise complex
building and/or engineering which cannot reasonably be expected to be managed
intuitively. It can also be used with a variety of procurement methods (including build
only, design and build, and turnkey).
• LOGIC contracts. These were developed for use in the offshore oil and gas sector in
the UK. The contracts cover a variety of services and works including design, general
construction and marine construction. With suitable adaptations, the LOGIC contracts
have also been used for offshore windfarm projects.
• IMechE/IET contracts. These were developed specifically for electrical and mechanical
work and consultancy, e.g. the design, construction and commissioning of anaerobic
digestion plants or combined heat and power plants, and the design, installation and
commissioning of complex automated systems in distribution warehouses.
Therefore, those who are advising an employer on contract selection will need to factor
the nature of the works and particular sector into the decision on which contract is
most appropriate for the particular project. Professional advisers should also familiarise
themselves with which standard form construction contracts are most commonly used for
particular works and in particular sectors.

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3.3.2 Size, value and complexity of the project

The size, value and complexity of a particular project should also influence the choice of
construction contract, although advisers should be aware that one does not necessarily
affect the others. For example, a project could be large in scale and value but relatively
simply to construct, e.g. the construction of the shell for a large manufacturing facility.
Similarly, a project could be relatively low value and size but contain lots of complicated
design and programming relationships.

As noted in Section 2, there is a large range of construction contracts available for use
in the UK, but some of these are designed for higher value and more complex projects,
whereas others are designed for lower value, simpler projects. Therefore, the employer and
professional advisers should choose a form of construction contract that is appropriate and
proportionate to the size, value and complexity of the works. A simple, small value project
does not necessarily need a lengthy and detailed construction contract. To cater for this,
many of the major publishers of standard form construction contracts produce contracts
that are appropriate for differing values and complexities of work. For example, the JCT
produces the Standard Building Contract (suitable for large value projects where detailed
contractual provisions are required), the Intermediate Building Contract and the Minor Works
Building Contract.

In addition, the size, value and complexity of the works are also likely to determine the
size and sophistication of the contractors who carry out those works. The larger and more
sophisticated contractors will be attracted to large scale projects and would probably expect
to contract on a lengthy and detailed construction contract. However, a smaller contractor
working on a relatively small project would probably not expect to contract on a lengthy and
detailed construction contract. The risk balance and number of administrative requirements
placed on the contractor may not be proportionate to the value and complexity of the works
they are undertaking.

3.3.3 The employer and their level of sophistication and familiarity with
construction
Private sector clients generally have a greater range of construction contracts from which to
choose when compared to public sector clients. This is because, for non-PPP projects, the
public sector is generally required to use the NEC suite of contracts for construction projects,
although the JCT Constructing Excellence Contract and PPC2000 have also been endorsed
for public sector use. For PPP projects, there may be other forms of contract (such as those
for use with PF2 or the Priority Schools Building Programme) that the public sector has to
use. Therefore, when working on public sector projects, there may be little or no choice as to
which construction contract to use.

Similarly, quasi-governmental bodies, such as Network Rail and the Highways England
also have their own preferred forms of contract that they use on all their projects. For
example, Network Rail uses a suite of contracts that includes amended versions of the JCT
and ICC contracts. Highways Englands contract of choice is the NEC ECC. Therefore, when

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dealing with certain organisations such as these, the choice of contract may already be pre-
determined and there may be little or no scope for alternative terms.

The level of an employer’s familiarity and comfort with a form of contract may play a part in
driving the choice of contract for a particular project. For example, some employers in the
mainstream commercial construction market may be very familiar with working with the
JCT contracts, but less familiar with the NEC or ICC contracts. Similarly, an employer in the
infrastructure market may be familiar with NEC or ICC contracts, but less so with the JCT
contracts or the PPC2000.

In addition, some forms of construction contract are better suited to those employers
who have a higher level of sophistication, familiarity with construction and administrative
capability. For example, the JCT’s Intermediate Building Contract and Minor Works Building
Contract can be used by employers who are relatively unfamiliar with construction. The
employer is able to rely on others (e.g. a contract administrator) to help administer the
contract and the contractual procedures and administrative requirements are short enough
that the parties to the contract should not be overwhelmed by them.

In contrast, the JCT’s Major Project Construction Contract, Management Building Contract
and Construction Management Appointment are best suited to sophisticated employers
who are used to procuring complex construction projects. These contracts demand that
the employer has a higher level of administrative and decision making capability and is
sophisticated enough to handle complex contractual relationships with multiple parties. Such
employers are thus able to take on greater obligations and take more risk on a particular
project.

The status of the employer also needs to be considered. Where for example, the employer
is a consumer – defined in the Consumer Rights Act as ’an individual acting for purposes
that are wholly or mainly outside that individual's trade, business, craft or profession’, they
enjoy additional statutory rights which may make the use of some standard form building
contracts unsuitable. As noted elsewhere, there are some contracts, such as those published
by JCT for home owners, and the RIBA for domestic clients, which are specifically designed
for this purpose.

Therefore, those advising an employer on contract selection need to consider the level of
risk and obligations that the employer is able to accept, and choose an appropriate contract
accordingly. They also need to bear in mind the employer’s familiarity and comfort with
certain contracts and consider whether the advantages of using a different type of contract
for a particular project outweigh any disadvantages. This should all be discussed with the
employer.

3.3.4 Balance of risk/risk allocation

The choice of procurement route also has a major impact on the balance of risk within a
project and the chosen construction contract. This is because certain procurement routes
place inherently more risk on the contractor than the employer, whereas other procurement

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routes are riskier for the employer. For example, design and build contracting is considered
to be far riskier for the contractor, whereas a Management Contract is considered far riskier
for the employer.

In addition, even between those contracts that are designed for use with the same
procurement route there can be a great deal of divergence between the risk allocation on the
parties. For example, the design and build procurement route generally places responsibility
for the design and construction of a project with the contractor. There are also a number of
standard form construction contracts that have been designed for use with this procurement
route. However, the exact level of design and construction responsibility placed on the
contractor will vary between those contracts, depending on their terms and conditions.

The various procurement routes also differ in other areas such as:

i the employer’s relative level of involvement

ii the separation of design from management and construction

iii the speed from inception to completion, and

iv certainty of price.

These will all have an impact on the terms and conditions and risk allocation that are present
within standard form construction contracts that are designed for use with particular
procurement routes.

Therefore, those advising an employer on contract selection need to appreciate the different
balances of risk that are present within the standard form construction contracts and how
these relate to the procurement route that has been chosen.

3.3.5 Design responsibility

Another major influence on the choice of contract is which party will have predominant
responsibility for design.

While this will also be driven by the choice of procurement route, employers and their
professional advisers will need to consider exactly which parts of the works should be
designed by which party.

For example, the employer may retain responsibility for the design of most of the works, but
may wish the contractor to take responsibility for the design of certain parts of the works
(e.g. certain mechanical and electrical works). Similarly, if significant design input is required
from specialist sub-contractors and suppliers, the choice of contract will need to facilitate
this and give the parties sufficient control over what is being designed by the supply chain.

Therefore, the choice of contract will need to allow for this allocation of design responsibility.
Some forms of contract work with a wide range of design responsibilities (the NEC ECC and
the CIOB’s Contract for Use with Complex Projects), whereas others have been developed for

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use with specific allocations of design responsibility (e.g. the JCT’s Standard Building Contract
and Design and Build Contract).

3.3.6 Basis of the contract sum and payment

The basis of the contract sum and method of paying the contractor will be another major
influence on the choice of construction contract.

As noted previously, there are various possible arrangements for calculating the contract
sum under a construction contract. These include fixed price lump-sum arrangements, re-
measurement arrangements and target cost arrangements. The contractor could also be
paid on a prime cost basis plus a management fee.

Although the basis of calculating the contract sum will, to a large extent be driven by the
choice of procurement route, there are still some choices that employers could be required
to make. For example, an employer may choose to use the traditional procurement route
for a new manufacturing facility. If the employer retains responsibility for most of the design
of the project, they may wish to use a JCT Standard Building Contract (SBC) (possibly with a
Contractor’s Designed Portion). The employer would then have to choose whether to pay
the contractor on a fixed price lump-basis (in which case the ‘with Quantities’ or ‘without
Quantities’ versions of the JCT SBC should be used), or on a re- measurement basis (in which
case the ‘with Approximate Quantities’ version of the JCT SBC should be used). In contrast,
the NEC ECC is a very flexible contract and contains six different options for calculating the
contract sum. These include fixed price lump-sum and target cost options.

Therefore, professional advisers will need to consider the chosen procurement route and
the preferred basis for calculating the contract sum when advising on appropriate contract
selection.

The actual timing and method of paying the contractor will also need evaluating. Some
contracts enable payment by way of interim valuations, milestone or stage payments,
whereas others are less flexible. The manner and timing of payments will often be a matter
for commercial negotiation between the parties, but professional advisers should ensure
that the chosen construction contract can accommodate what has been agreed by the
parties.

3.3.7 Control over subcontractors

The employer’s ability to exert control over the choice of sub-contractors may also influence
the choice of construction contract. Certain contracts allow greater control over the selection
of subcontractors than others.

Professional advisers will need to discuss the extent to which the employer requires any
control over subcontracting and the most appropriate manner of reflecting this in the chosen
contract.

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A ‘domestic’ subcontractor is one in whose selection and appointment the employer

generally plays no part, although the employer may be required to give consent to the
appointment where specified in a particular contract. As such, because the appointment of
such subcontractors is generally purely a matter for the contractor, these are considered
‘domestic’ issues. In any event, if the contract between employer and contractor does
contain provisions on sub-contracting, these are usually restricted to clauses that are
designed to protect the employer’s interests, e.g. termination, ownership of materials
brought on to site, insurances and collateral warranties.

In contrast, the use of ‘nominated’ sub-contractors is increasingly rare. A nominated

subcontractor is one who is selected by the employer, but who then enters a subcontract
with the contractor. However, the employer remains responsible for certain aspects of the
nominated subcontractor’s performance even though the contractor has an overarching
obligation to carry out and complete the works.

Most of the standard form construction contracts in the UK market contain provisions
regarding domestic subcontractors, for example, the JCT SBC and the NEC ECC. However, few
contracts now provide for nominated sub-contractors. The ICC Measurement Version and
the Infrastructure Conditions of Contract do permit nominated subcontracting (as well as
domestic subcontracting), and the JCT Intermediate Building Contract provides for ‘named
subcontractors’, while there is provision under other JCT contracts for ‘listed domestic
subcontractors’ and ‘named specialists’, but otherwise true nomination is rare.

Overall, control over subcontractors should probably not be one of the primary reasons for
choosing a particular contract, although it is one of the issues that should be considered. If
the employer wishes to use a particular contract but the subcontracting provisions do not
provide sufficient control, it is always possible to amend a contract to reflect the employer’s
wishes. However, as noted elsewhere, legal advice should be sought when making
amendments to contractual terms.

3.4 Construction contracts for use with the most commonly

adopted UK procurement routes
The previous sections have reviewed the different procurement routes commonly used in
the UK construction market, the main publishers of standard form construction contracts
and the contracts themselves. This section considers the various standard form construction
contracts for the appointment of a contractor by the employer, which are available for use
with the various procurement routes. The decision-making process should also take into
account those factors detailed in Section 3.3.

Note that the following contracts are standard form construction contracts. It is also possible
to create bespoke contracts for each of the procurement routes detailed below, but legal
advice should be sought before doing so.

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Also note that this section only details the most well known and commonly used standard
form construction contracts. Other standard form construction contracts may be available
for each of the procurement routes detailed.

Some contracts are listed under a number of headings as they are versatile enough to be
used in a number of different ways and with different procurement routes.

3.4.1 Traditional (lump sum)

Where a project is procured on a traditional (lump sum) basis the following contracts are
available for use.

• JCT Standard Building Contract (the ‘with Quantities’ and ‘without Quantities’ versions)
• JCT Intermediate Building Contract
• JCT Minor Works Building Contract
• NEC ECC Option A
• ICC Minor Works Version
• GC/Works/1 Building & Civil Engineering Major Works with Quantities
• GC/Works/1 Building & Civil Engineering Major Works without Quantities
• GC/Works/2 Building & Civil Engineering Minor Works
• GC/Works/3 Mechanical & Electrical Engineering Works
• GC/Works/4 Building, Civil Engineering, Mechanical & Electrical Engineering Small Works
• CIOB’s Contract for Use with Complex Projects), and
• RIBA Concise Building Contract.

3.4.2 Traditional (‘re-measurement’ or ‘measure and value’)

Where a project is procured on a traditional (‘re-measurement’ or ‘measure and value’) basis,
the following contracts are available for use:

• JCT Standard Building Contract (the ‘with Approximate Quantities’ version)

• JCT Measured Term Contract
• NEC ECC Option B
• FIDIC Red Book
• FIDIC Pink Book
• ICC Measurement Version
• ICC Minor Works Version and
• ICC Ground Investigation Version.

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3.4.3 Design and build

Where a project is procured on a design and build basis the following contracts are available
for use:

• JCT Design and Build Contract

• JCT Major Project Construction Contract
• NEC ECC Options A–E
• ICC Design and Construct Version
• GC/Works/1 Single Stage Design and Build
• GC/Works/1 Two Stage Design and Build
• IChemE Red Book
• IChemE Green Book
• IChemE Burgundy Book
• FIDIC Yellow Book
• CIOB’s Contract for use with Complex Projects and
• MF/1.

3.4.4 Construction management

Where a project is procured on a construction management basis the following contracts are
available for use:

• JCT Construction Management Appointment

• NEC ECC Option F and
• GC/Works/1 Construction Management Trade Contract .

3.4.5 Management contracting

Where a project is procured on a management contracting basis the following contracts are
available for use:

• JCT Management Building Contract and

• NEC ECC Option F.

3.4.6 Partnering
Where a project is procured on a partnering basis, the following contracts are available for
use:

• PPC2000
• TPC2005

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• NEC ECC with secondary Option X12

• JCT Constructing Excellence Contract
• JCT Non-Binding Partnering Charter and
• ICC Partnering Addendum.

3.4.7 Public private partnerships

The types of contracts available where parties are entering into a public private partnership
are numerous and diverse. Depending on the nature of the project, a central government
department or local authority may choose to use one of the standard form construction
contracts, a bespoke contract, or one of the contracts produced by central government.

Wider discussion around the nature of public sector contracting is outside the scope of this
practice information.

3.4.8 Others
(i) Cost plus/cost reimbursable/prime cost

Where a project is procured on a cost plus/cost reimbursable/prime cost basis, the following
contracts are available for use:

• IChemE Green Book

• JCT Prime Cost Contract and
• NEC ECC Option E.
(ii) Target cost

Where a project is procured on a target cost basis the following contracts are available for
use:

• NEC ECC Options C and D

• IChemE Burgundy Book and
• ICC Target Cost Version.
(iii) Term contracting

Where a series of projects is procured on a ‘term’ basis, the following contracts are available
for use:

• JCT Measured Term Contract

• NEC Term Service Contract
• TPC2005
• ICC Term Version
• GC/Works/6 Dayworks Term Contract

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• GC/Works/7 Measured Term Contract

• GC/Works/8 Specialist Term Contract for Maintenance of Equipment
• GC/Works/9 Lump Sum Term Contract for Operation, Maintenance and Repair of M&E
Plant, Equipment and Installations and
• GC/Works/11 Minor Works Term Contract.
(iv) Framework agreements

Where a series of projects is procured on a framework basis, the following contracts are
available for use:

• JCT Framework Agreement and

• NEC Framework Agreement.
(v) Alliancing

There are a small number of ‘standard' construction contract specifically designed for
use where a project is procured on an alliancing basis, and feature the term in the title,
including those published by NEC and the Association of Consulting Architects (ACA)Although
alliancing is becoming more popular in the UK (for example in the utilities, rail and oil and gas
sectors), each sector and employer tends to have its own bespoke form of alliancing contract
that it will use to procure projects.

(vi) EPC

Where a project is procured on an Engineering, Procurement and Construction (EPC) basis,

the following contracts are available for use:

• FIDIC Yellow Book and

• FIDIC Silver Book.

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4 Practical considerations (Level

3 – Advising)

4.1 Introduction
This section covers the further information required to satisfy the ‘advising’ requirements of
the Level 3 competency of the APC.

Once an appropriate contract has been selected, the contractual requirements have been
negotiated and agreed and the tendering process has been completed, the parties will be
ready to execute (i.e. sign) the contract documents. Those professional consultants who
assist in the collation of the contract documents and execution process need to be aware of
the basic elements that are required to create a contract and the practical issues of agreeing
and executing a contract.

This section covers the following areas:

• essential elements required to create a contract

• understanding the contract documents and pitfalls to avoid when compiling a contract
for execution
• amending standard form construction contracts and how to incorporate schedules of
amendments, including why standard form construction contracts are amended
• executing a contract and duration of liability, and
• the jurisdiction in which the works are located.

4.2 Essential elements required to create a contract

A contract is a legally enforceable agreement which gives rise to various rights and
obligations for the parties to the contract. A contract is formed when the following key
elements coincide:

• offer
• acceptance
• consideration
• certainty of terms and
• intention to create legal relations.
Only once all of these elements are in place will a contract arise. However, it is not
uncommon to see a formal contract document signed months or even years after the

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commencement of a project. Even if a formal contract is signed by the parties, it is quite

often just regarded as a record of a state of affairs that already exists.

Professional advisers should be aware that a contract can come into existence in many ways.
A contract does not necessarily have to be made in writing. It can be made orally, or by email,
or via the internet. As long as the key elements for contract formation have been met, then a
contract can come into effect.

This also has greater implications in the construction industry because following the
introduction of the Local Democracy, Economic Development and Construction Act 2009,
the law now applies to construction contracts that are created in any form (not just those in
writing).

Therefore, the payment, suspension for non-payment, and adjudication provisions in

all construction contracts must comply with the requirements of the Housing Grants,
Construction and Regeneration Act 1996 (as amended).

If they do not, terms from the Scheme for Construction Contracts (England and Wales)
Regulations 1998 (as amended) will be implied into the contract to fill the gap. Equivalent
secondary legislation also exists in Scotland.

Therefore, as a matter of good practice, parties should seek to enter into a formal contract as
soon as is practical. Failing to do so could result in further rounds of negotiations and even
eventual failure by the parties to understand just what it is they have each agreed to do.

Conversely, the parties involved in the negotiation process should be careful not to
bind themselves inadvertently to a contract at a time when they only intend to reach an
understanding on the scope of the works by agreeing preliminary matters. The parties
should be careful to avoid making an enforceable contract accidentally and prematurely.

4.2.1 The offer

An offer is a proposal or promise by one party (often known as the ‘offeror’) to enter into a
contract, on a particular set of terms, with the intention of being bound as soon as the party
to whom the offer is made (often known as the ‘offeree’) signifies their acceptance.

Therefore, an offer is advised to contain the basic terms of the agreement and evidence an
intention that no further bargaining is to take place.

In the context of the construction industry, a contractor’s tender for a particular project
could be considered as an offer. The contractor’s tender is made in response to an invitation
to tender sent by the employer to a number of different contractors. The invitation to tender
is not considered to be an offer itself. Instead, it is known as an invitation to make an offer or
an ‘invitation to treat’.

An offer is generally revocable and can be terminated in a number of ways. For example, an
offer may be terminated by the lapse of a certain period of time (e.g. a contractor’s tender
may state that it is open for 28 days after which it will lapse), or after a reasonable period of

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time has passed. Offers can also be terminated if withdrawn by the offeror before they are
accepted or rejected by the offeree.

4.2.2 The acceptance

Acceptance is the final and unqualified assent to an offer. It is made in response to an offer
and to be effective in creating an enforceable contract, it is required to correspond exactly
with the terms of the offer with no variation of the terms.

It is generally the case that acceptance is advised to be communicated to the offeror to be

effective, although sometimes conduct will be considered acceptance (for example, where
a supplier does not communicate acceptance of an order, but it delivers the goods ordered
and requests payment). However, conduct will only amount to acceptance of an offer if it is
clear that the party did the act in question with the intention of accepting the offer.

A purported acceptance that attempts to introduce new terms, or vary those contained in
the offer, will be regarded as a counter-offer (which will itself be capable of acceptance) and
not as acceptance of the original offer.

As a result of the offer/counter-offer process, one consequence often encountered in

the construction industry is a ‘battle of the forms’. This occurs during the negotiation of
contracts between the parties, each of whom wants its own standard terms and conditions
to be incorporated into the contract. However, this is more likely to occur in a contractor/
subcontractor or contractor/supplier relationship rather than an employer/contractor
relationship. In trying to work out which party’s terms and conditions apply, courts will often
look to see ‘who fired the last shot’, but every case will depend on its particular facts and the
correspondence between the parties.

4.2.3 Consideration
As a general rule, a promise is only enforceable where it is made in the form of a deed, or the
party seeking to enforce it has given some ‘consideration’ (i.e. something of value) in return
for the promise. The law does not enforce a gratuitous promise, e.g. the promise of a gift.

In the context of a construction project carried out on the basis of a standard form
construction contract, the consideration from both parties should be relatively easy to
ascertain, i.e. the contractor agrees to carry out a particular scope of work and in return
the employer agrees to pay the contractor. However, as the project develops or if additional
contracts are required, there may be occasions where the consideration is less easy to
define. Professional advisers should be aware of this when seeking to conclude additional
contracts or when seeking to incentivise a party to carry out an existing obligation.

4.2.4 Certainty of terms

For a binding contract to exist, and to be enforced, the terms are advised to be certain.
Parties are advised to ensure that their agreement is complete (i.e. not lacking in some

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essential term) and that their agreement is not otherwise uncertain (e.g. vague or
ambiguous). If an agreement is incomplete or otherwise uncertain, a court may not be able
to enforce it.

In the context of a construction contract, the essential terms are generally considered to
be the ‘what’ (i.e. scope of work), ‘when’ (i.e. the time for performance) and ‘how much’ (i.e.
the contract sum). If agreement has not been reached on these elements or if the contract
records these elements in an ambiguous or vague manner, it could be found that the
contract lacks sufficient certainty to be binding.

Therefore, professional consultants should ensure that a contract is drafted clearly and
unambiguously, incorporating all the essential terms that have been agreed.

4.2.5 Intention to create legal relations

A contract cannot be made without a mutual intention to create a legally binding
arrangement. Where no such intention can be attributed to the parties, there is no contract.
However, in commercial circumstances there is a rebuttable presumption that the parties
intend their agreement to be legally binding. If a party wishes to rebut this presumption, it
will have to produce clear evidence to that effect.

This can have an effect during contract negotiations. The parties may hope to enter into legal
relations at a particular point in the future (e.g. once all essential terms have been agreed),
but either or both of the parties may not wish to enter into legal relations any earlier than
that (e.g. because there are outstanding matters to be agreed). In these circumstances, the
relevant party will need to be clear that it does not wish to enter into legal relations at that
earlier point in time.

The words ‘subject to contract’ are commonly used to evidence an intention not to enter
into legal relations at a particular point in time. The relevant party can use these words, or
any other way of expressing the same sentiment, until it is actually ready to enter into legal
relations.

4.3 The contract documents

Once agreement has been reached between the parties on terms of the contract and they
wish to enter into a contract, the contract needs to be created, collated and made ready
for execution (signature) by the parties. This job is often done by one of the employer’s
professional consultants such as the architect/contractor administrator, employer’s
representative or quantity surveyor. In order to create and collate the contract for execution,
the professional consultant needs to be familiar with how to fill in any project-specific parts
of the contract (e.g. the contract particulars in the JCT contracts and the contract data in the
NEC contracts) and also which other contract documents go into forming the contract.

As an example, under the JCT Standard Building Contract with Quantities, the following
actions are needed as a minimum.

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• Completion of all the information in the Articles of Agreement (e.g. inserting the details of
the employer and the contractor, filling in the Recitals and Articles, filling in all parts of the
contract particulars, and inserting the relevant information on the execution (signature)
pages).
• Collating all the contract documents and putting them together in a bound pack (i.e. the
contract drawings, the contract bills, the Articles of Agreement and conditions of contract,
together with (if there is a Contractor’s Designed Portion) the employer’s requirements,
the contractor’s proposals and the CDP analysis).
• If any amendments to the terms and conditions have been agreed, these will need to be
reflected in the contract. See Section 4.4 for discussion on how this can be achieved.
As a further example, under the NEC Engineering and Construction Contract Option C, the
following actions are needed as a minimum.

• Producing a form of agreement for the parties to sign. This is needed because the
NEC ECC Option C does not contain an area where the parties can sign the contract. A
separate form of agreement is required for this purpose. A bespoke form of agreement
can be produced, or the NEC produces a template form of agreement that can be used
for this purpose.
• Completion of all the information in the Contract Data Part 1 (data provided by the
employer) and the Contract Data Part 2 (data provided by the contractor).
• Producing the activity schedule (this is needed for the NEC ECC Option C).
• Producing the Works Information. The Works Information should be in two parts:
Works Information provided by the employer and Works Information provided by the
contractor. The Works Information is a critical document and there are many references
to it throughout the NEC ECC Option C. The professional consultant needs to ensure that
the Works Information contains appropriate information for each of these contractual
references. The NEC produces guidance notes that provide comprehensive guidance.
• Producing the Site Information. There are a number of references to the Site Information
throughout the NEC ECC Option C. The professional consultant needs to ensure that
the Site Information contains appropriate information for each of these contractual
references.
• Collating all the above contract documents and putting them together in a bound pack.
If any amendments to the terms and conditions have been agreed, secondary Option Z
should be selected. This should be noted in the Contract Data Part 1, which should also
identify which document the ‘Z clauses’ are contained in.

In producing and collating the contract documents, the professional consultant should note
that a ‘less is more’ approach pays dividends. Often contracts are produced that have lots
of pre-contract correspondence (e.g. emails) included within them or additional documents
that are not referred to in the terms and conditions. Doing this runs the risk of creating
uncertainty, ambiguity, a lack of clarity and inconsistency between the terms and conditions

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and other contract documents. Therefore, the professional consultant should carefully
consider which documents are to be included in the contract.

The contract documents, such as those that detail the scope of work, should also be
written using the same language and terminology as the contractual terms and conditions.
For example, if the terms and conditions use the phrases ‘employer’, ‘contractor’ and
‘subcontractor’, these phrases should also be used in the other contract documents. It
could cause confusion if other terminology is used (such as ‘client’, ‘main contractor’ and
‘specialist’).

The professional consultant should also agree with the employer how many copies of the
contract documents will be produced. It is common to create two or even three copies of
the contract documents. That way, each party to the contract will have their own copy and a
further copy could also be kept on site.

4.4 Amending a standard form construction contract

Standard form construction contracts are generally drafted in a balanced manner, reflecting
the views of different parties to a construction project (e.g. employers, contractors and
consultants). The contracts are drafted so that risks are borne by the party best able
to manage those risks. As such, it is entirely possible for parties to use standard form
construction contracts on an unamended basis. If they wanted to, they could negotiate and
agree the project specific requirements (e.g. the scope of work, programme and contract
sum), insert these into the contract particulars, append the relevant contract documents,
sign the contract and start work.

However, it is common in the construction industry to amend the terms and conditions
contained in a standard form construction contract. These amendments are generally driven
by employers, and then flow down from the contractor to their subcontractors and the
supply chain.

Many employers and their professional consultants (particularly the larger ones) have
their own pre-prepared amendments to the standard form construction contracts which
they generally use on all their projects. Other employers may create a set of amendments
specifically for a particular project. Professional consultants advising employers on their
contracts need to know why standard form construction contracts are amended and the
most appropriate means of amending these contracts. Amendments to standard form
construction contracts should only be drafted by legally qualified professional advisers.

Standard form construction contracts may be amended for a number of reasons. These
include the following.

4.4.1 Altering the risk allocation in a contract

As noted in section 4.4, the standard form construction contracts are generally drafted in
a balanced manner, with risks allocated to the party best able to manage those risks. For

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example, a standard form construction contract will generally include a list of events that
entitle the contractor to claim additional time and/or money for carrying out the works.
These are typically events that the contractor does not have any control over (i.e. the
contractor cannot manage those risks) and so the contractor is entitled to claim additional
time and/or money if one of those risks materialises.

However, when a standard form construction contract is amended, this is often done in
order to alter the allocation of risk within that contract. Risk is generally moved away from
the employer and transferred to the contractor. This can be done in a number of ways. For
example, the list of events that entitle the contractor to claim additional time and/or money
could be reduced. This would result in the contractor bearing the risk of any delays to the
project or cost overruns if any of those deleted events arose.

Other amendments may seek to lengthen the final date for payment of sums due to the
contractor, or may specifically place the risk on the contractor if any adverse site/ground
conditions occur. In design and build contracting, it is common to see amendments (e.g. to
the JCT Design and Build Contract) that make the contractor responsible for the design of the
entirety of the project, including any design that was carried out by the employer’s design
team and included in the employer’s requirements.

4.4.2 Inserting additional obligations

Standard form construction contracts are also typically amended by inserting additional
contractual obligations. For example, a contract can be amended by inserting a requirement
for the contractor to provide certain bonds, guarantees and collateral warranties at a
particular point in time. This is often backed up by additional remedies for the employer if
the contractor fails to comply with these obligations. Other amendments may require the
contractor to keep the employer more informed about the contractor’s programme for the
works, or could require the contractor to comply with any administrative requirements of the
employer.

4.4.3 Removing rights

Other amendments may seek to remove certain rights or insert additional requirements
before a right can be claimed. For example, if a contractor is claiming an extension of time
and/or payment of additional sums, a contract may be amended so that the contractor loses
his right to claim these entitlements if he fails to provide a notice to the employer within
a particular time. Other amendments may seek to reduce the contractor’s entitlement to
object to a proposed variation to the works.

4.4.4 Project-specific requirements

The requirements of a particular project or site may necessitate amendments to a contract.
For example, there may be a particular risk or hazard affecting a project (e.g. the possibility
of contamination coming onto the site from a third party’s land) that needs to be addressed
in a contract and a project-specific amendment is required. Alternatively, the parties may

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agree that one of them is required to obtain a specific consent relating to the works and the
consequences that may follow if that consent is not obtained. Again, this project-specific
requirement may need to be reflected in a contract amendment. As a further example, the
parties may agree that a particular stage of the works cannot proceed until the employer has
the required funding in place. The contract may need amending to introduce a ‘hold point’
beyond which the works cannot proceed until the employer has given notice.

Therefore, the employer and professional advisers need to carefully review the nature of
the project and consider if any specific amendments are needed to the chosen contract.
Legal advice should be sought on the best means of effecting any required project-specific
amendments to a contract.

As can be seen, there are a number of reasons why an employer may wish to amend a
standard form construction contract. But those who are advising on these matters will need
to consider both the purpose of a particular amendment and the likely affect that it will have
on the contractor and the overall project. Professional advisers should consider whether a
contractor would be likely to increase their tender price as a result of having to take on more
risk. Is this an acceptable trade-off for moving the risk to the contractor? How else might the
contractor alter his behaviour as a result of taking on more risk? Does this represent best
value for the employer and the project?

Amendments to standard form construction contracts should also be proportionate to the

parties and the size, value and complexity of the project. A 30-page schedule of amendments
to a ‘minor works’ contract may not be proportionate relative to the sophistication of the
parties and the nature of the project. Professional consultants should therefore carefully
consider why a standard form construction contract may need amending and then, if
required, insert amendments that are proportionate and best value for the employer and
the overall project.

Professional consultants should also appreciate that the contractual provisions within
standard form construction contracts are generally interlinked. Although there may not be
any specific cross-references that highlight areas of connection, if certain parts of a contract
are amended then this generally has a knock-on consequence elsewhere in the contract.
For example, amending a JCT Design and Build Contract so that the contractor takes full
responsibility for any design carried out by the employer’s design consultants and contained
in the employer’s requirements requires a number of amendments throughout the contract.
It is not done in just one place. Therefore, those professional consultants who advise on
and prepare amendments to contracts need to be aware of these interrelationships so that
amendments do not cause conflict or create uncertainty or ambiguity within a contract.

Any amendments to a contract should also be made in the same language, style and
terminology of the underlying contract. For example, the NEC contracts are written in the
present tense so any amendments to an NEC contract should also be written in the present
tense and use the same language, style and terminology as the underlying contract.

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Once any amendments to a contract have been agreed between the employer and the
contractor, a professional consultant may be required to advise on the most appropriate way
to incorporate those amendments into the contract.

If there are few amendments and they are relatively short, the standard form construction
contract itself can be physically amended. Any necessary deletions can be made by striking
through the relevant provisions. Any necessary additions can be made by writing the
required amendment onto the contract or attaching additional sheets of paper containing
the required amendment. All the deletions and additions should then be initialled by all the
parties to the contract to signify their acceptance of the amendments.

Alternatively, if there are many amendments and/or the amendments are lengthy, a separate
document can be prepared that shows all the agreed amendments to the standard form
construction contract. Those professional consultants who are responsible for preparing
the contract for signature should ensure that this schedule of amendments is specifically
included in the list of contract documents (see Section 4.3) and also takes priority over the
terms and conditions in the underlying contract. If a professional consultant has any doubt
about how to achieve this, legal advice should be sought.

4.5 Executing a contract and duration of liability

4.5.1 England and Wales

Deeds and simple agreements

In England and Wales, one of the final stages in creating a contract is to ascertain whether
the parties will execute (i.e. sign) the contract as a deed or as a simple contract.

In the context of a construction project, the principal difference between the two relates to
how long the parties will be liable for any breaches of contract.

A contract that is signed as a deed will have a 12-year liability period (as provided for under
the Interpretation Act 1978). A contract that is signed as a simple agreement will have a six-
year liability period. In addition, for historical reasons, a contract that is executed as a deed
does not have to contain any ‘consideration’ (see Section 4.2.3).

In respect of liability periods, reference should be made to the extended liability periods
introduced by the operation of the Building Safety Act 2022, which itself amends the
provisions of the Defective Premises Act 1972.

However, in the context of a construction contract where one party agrees to carry out
works in return for payment, consideration would be present anyway.

If a contract is to be valid as a deed, there are four key requirements:

• a deed must be in writing

• it must be clear from the face of the contract that it is intended to take effect as a deed
(this is known as the ‘face value requirement’)

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• the contract must be validly executed as a deed, and

• a deed must be delivered.
Since a simple contract can come into effect orally, there is no requirement for a simple
contract to be signed. But, if a contract is to take effect as a simple agreement, it is still good
practice for both parties to execute the contract. This helps signify both parties’ acceptance
to the terms of the contracts and may help to prevent any future disagreement about what
the terms of the contract are.

Executing a contract

As long as all the elements required to create a contract are present (see Section 4.2), a
contract can come into effect whether or not a formal contractual document is signed.
However, it is strongly recommended that employers and contractors do enter into formal
contractual documents in order to signify both parties’ acceptance to the terms of the
contracts and it may help to prevent any future disagreement about what the terms of the
contract are.

Once it has been agreed whether the contract is to be executed as a deed or as a simple
contract and the contract is ready for execution, it is good practice to ascertain who will
execute the contract on behalf of each party. It is also good practice to ascertain whether
those persons have the necessary authority to execute contracts on behalf of the relevant
party. For example, if a person has been granted a Power of Attorney to execute a contract
on behalf of a particular party, it is good practice to obtain a copy of that Power of Attorney
and also a copy of any relevant board minutes evidencing the decision to grant the Power of
Attorney.

There are many different types of organisations which may enter into construction contracts
(e.g. private companies, limited liability partnerships, individual persons, and industrial and
provident societies). Each of these organisations will have their own rules regarding who
executes contracts on their behalf and how contracts are executed. If there is any doubt, it
is good practice to seek confirmation of who is permitted to execute contracts on a party’s
behalf and also seek confirmation on the preferred method of execution by each party. The
execution wording in the contract should be drafted to reflect these requirements.

4.5.2 Scotland
In one sense, matters are more straightforward in Scotland. Building contracts and
professional appointments are entered into as contracts – the distinction between simple
agreements and deeds is not a feature of Scottish law in the same way as it is in England and
Wales. There are, however, some key points to understand regarding execution of contracts
in Scotland – in particular the duration of the parties’ liability and the manner of execution.

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Duration of liability – prescriptive periods

The Prescription and Limitation (Scotland) Act 1973 (as amended) provides, among other
things, for contractual rights and obligations to be extinguished after a specified period of
time (known as a ‘negative prescription’).

(i) Short negative prescription

The ‘standard’ prescriptive period in Scotland (known as ‘short negative prescription’) is a

period of five years.

If an obligation subsists for a continuous period of five years without any relevant claim being
made in respect of that obligation, or without a relevant acknowledgment being made of the
existence of that obligation, then that obligation is extinguished. If such a claim or
acknowledgment is made, the prescriptive period is interrupted and the obligation continues
to exist until a further, uninterrupted five-year period has elapsed.

Generally, the five-year period starts to run on the date on which the obligation became
enforceable. For breach of contract situations, this is the date when loss, injury or damage
occurred. However, in cases where breach constitutes a continuing process, e.g. where
building works disturb another part of a building, the period does not start until the end of
the process. In addition, where the damage is latent, the five year period does not start to run
until the person owed the duty is aware or by using reasonable diligence, should have
become aware of the harm.

(ii) Long negative prescription

Given the above, in a latent defects scenario the five-year ‘window’ would continually be
extended. The law then steps in to provide a ‘longstop’ date on liability through the operation
of what is known as ‘long negative prescription’.

If, after the date when any obligation becomes enforceable, 20 years has passed without any
claim being made and without the subsistence of the obligation being acknowledged, then
the obligation is extinguished.

Unlike the five-year short negative prescription, there is no ‘discoverability’ element to long
negative prescription. Therefore, it does not matter that the person relying on the right was
not aware of the loss that they suffered or, whether or not they ought to have been so aware.
The 20-year period will start running from the date the loss actually occurred, which is a
question of fact.

(iii) Time periods

The 1973 Act states that parties to a contract are not permitted to ‘contract out’ of the
negative prescriptions, whether long or short. It is generally considered that this would
prevent the parties extending these 5- and 20-year periods, but not shortening them.
Therefore, Scottish building contracts and professional appointments usually have time
limitation clauses.

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The standard period included in construction contracts in Scotland is 12 years and this is
typically because there is a lot of commercial sense and expectation that time periods would
be the same whether contracting in Scotland or England and Wales.

Executing a contract in Scotland

Similar to England, it is generally possible to constitute a contract orally. However it is good

practice to arrange for the parties’ rights and obligations to be captured in writing and have
that executed by them. This signifies their acceptance to the terms of the contract and helps
to minimise any future disagreement about what the terms are.

The Requirements of Writing (Scotland) Act 1995 governs the execution of written contracts
under Scottish law. The requirements are detailed but, in summary, to validly execute a
contract parties are required to sign the document at the end of the final page (excluding
schedules and annexes, etc.) and note their full name.

The 1995 Act also provides for ‘self-proving’ execution. This means that if certain formal
requirements are met the document is legally presumed to have been signed by those
parties (unless the contrary can be proven). The requirements for self-proving execution vary
depending on who the parties are, but a contract will be taken at face value regarding the
executing parties, date and place of signing if, for example:

• where the party is a natural person, the contract is signed by that person and a witness
(note that witnesses need to provide both their name and address)
• where the party is a company, the contract is either signed by two directors, two
authorised signatories or a director and company secretary (or one of the above with a
witness)
• where the party is a partnership, the contract is signed by a partner or authorised
signatory and a witness, or
• where the party is a limited liability partnership, the contract is signed by two members
or a member and a witness,
and the contract also notes the place and date of execution by each party. Note that the
same advice applies in Scotland regarding steps to be taken to verify the authority of each of
the people noted above.

Counterpart execution in Scotland

While it is relatively common to see agreements executed in England and Wales by

counterpart (i.e. each party executes their own copy of the contract, which are then taken
collectively to bind them), in Scotland execution must take place on the same document.

4.6 The jurisdiction in which the works are located

Those advising on appropriate contract selection need to ensure that the choice of contract
and the actual conditions of contract are appropriate for the jurisdiction in which the works
are located and the governing law of the contract. This is because there are variances in the

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law between England, Wales, Scotland and Northern Ireland. The chosen contract needs to
reflect those variations.

Professional advisers need to be aware of which contracts are available for use in different
jurisdictions and the types of amendment that are required in order for a contract to be
consistent with the law in a particular jurisdiction.

For example, the JCT contracts are drafted primarily for use in England and Wales. If a project
is based in Scotland and the employer wants Scottish law to apply to the contract, then
professional advisers should be aware that the Scottish Building Contract Committee Limited
publishes JCT contracts that are amended to reflect the law in Scotland. Similarly, if a project
is based in Northern Ireland, the Royal Society of Ulster Architects publishes Adaptation
Schedules for certain JCT contracts, to bring them into line with the law in Northern Ireland.

Other forms of contract also have certain country- specific amendments. For example,
there is a Scottish Supplement for the PPC2000 contract that introduces contractual
amendments for use in Scotland. However, currently there is no Northern Irish supplement
for that contract and the other contracts in the PPC2000 suite are also not provided with any
template Scottish or Northern Irish amendments.

Therefore, these would need to be produced on a bespoke basis for projects in these
jurisdictions.

The NEC contracts have options, W2 and Y(UK)2 that should be selected where the Housing
Grants, Construction and Regeneration Act 1996 (as amended) applies to a particular
contract. Option Y(UK)3 is used where parties wish to use the Contracts (Rights of Third
Parties) Act 1999 (or its Scottish equivalent) to confer rights on a third party to enforce a
term of the contract. Otherwise, Option Y(UK)3 can be used to confirm that no third party
has such rights to enforce a term of the contract. However, readers should be aware that the
Contracts (Rights of Third Parties) Act 1999 does not apply in Scotland (which has a different
method of conferring third party rights) and so specific legal advice should be sought on how
to manage these issues within a contract.

The ICC contracts, e.g. the Measurement Version, have been written for use in England
and Wales. However, each of the ICC contracts details how they are to be construed,
operated and interpreted if the works are situated in Scotland or Northern Ireland. Further
amendment to specific legislative references in the contract may also be needed. In contrast,
because the ACE and CECA would like the revised Infrastructure Conditions of Contract
to be capable of use both in the UK and overseas, the Consultative Draft of the revised
Infrastructure Conditions of Contract does not pre-determine the governing law of the
contract. This is to be stated in the Appendix to the contract.

Other forms of contract may be drafted on a more generic basis for wider use, or may make
specific reference to particular pieces of legislation. For example, the FIDIC, IChemE, IMechE
and CIOB could all need amending depending on the location of the works.

Appropriate contract selection

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IP

Therefore, professional advisers should take note of the particular jurisdiction that a project
is to be carried out in, and ensure that the chosen contract and its terms are consistent
with the law of that particular jurisdiction. Specific legal advice should be sought if the
professional adviser is in any doubt.

Appropriate contract selection

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