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CONSTRUCTION CONTRACTS

CONSTRUCTION CONTRACTS

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CONSTRUCTION CONTRACTS

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  1. CONSTRUCTION CONTRACTS 2014

  2. Contracts “It is not the beauty of a building you should look at; its the construction of the foundation that will stand the test of time.” - Unknown

  3. Construction Contracts • Provides, based on what is known at the time of contract, for what is ultimately Deliverable, by When and at what Price; • Deals with a relationship (not necessarily founded on good faith, mutual cooperation and trust) just as much as it deals with the Deliverable. • Defines or restricts the extent to which the common law would otherwise govern the relationship. • Defines the relationship - it is not a mere formality in the process.

  4. Construction Contracts • The Deliverable: To define the Deliverable, with the degree of accuracy possible at the time, and to allow the Deliverable to evolve in a controlled manner; • The Price: To define the Price of the Deliverable based on what is known and what ought to be reasonably foreseeable to an experienced contractor at the time, and to provide for the Price to change in a controlled manner;

  5. Construction Contracts • The When: To define the Time for Completion of the Deliverable based on what is known and what ought to be reasonably foreseeable to an experienced contractor at the time, and to allow the Time for Completion to change in a controlled manner; • The Risks: To respectively allocate the foreseeable and unforeseeable / likely and unlikely risks to each of the Parties; and • Possible Disputes: To provide a mechanism to principally avoid, but to otherwise effectively deal with disputes.

  6. THOUGHT FOR THE DAY • The type of contract form to be used will depend on the Employer’s preference as well as the Works to be executed • Many employers use standard form contracts developed and published by industry-based organisations • The idea of standard form contracts is to include provisions which are beneficial to both parties to the contract in accordance with good practice • Some contracts are, however, not based on the approach of good practice • Therefore it is important to know the three R’s:

  7. THOUGHT FOR THE DAY • The type of contract form to be used will depend on the Employer’s preference as well as the Works to be executed • Many employers use standard form contracts developed and published by industry-based organisations • The idea of standard form contracts is to include provisions which are beneficial to both parties to the contract in accordance with good practice • Some contracts are, however, not based on the approach of good practice • Therefore it is important to know the three R’s: • Rights

  8. THOUGHT FOR THE DAY • The type of contract form to be used will depend on the Employer’s preference as well as the Works to be executed • Many employers use standard form contracts developed and published by industry-based organisations • The idea of standard form contracts is to include provisions which are beneficial to both parties to the contract in accordance with good practice • Some contracts are, however, not based on the approach of good practice • Therefore it is important to know the three R’s: • Rights • Responsibilities

  9. THOUGHT FOR THE DAY • The type of contract form to be used will depend on the Employer’s preference as well as the Works to be executed • Many employers use standard form contracts developed and published by industry-based organisations • The idea of standard form contracts is to include provisions which are beneficial to both parties to the contract in accordance with good practice • Some contracts are, however, not based on the approach of good practice • Therefore it is important to know the three R’s: • Rights • Responsibilities • Risks

  10. THOUGHT FOR THE DAY • The type of contract form to be used will depend on the Employer’s preference as well as the Works to be executed • Many employers use standard form contracts developed and published by industry-based organisations • The idea of standard form contracts is to include provisions which are beneficial to both parties to the contract in accordance with good practice • Some contracts are, however, not based on the approach of good practice • Therefore it is important to know the three R’s: • Rights • Responsibilities • Risks • Within standard form contracts you will find your three R’s within the General Conditions of Contract read together with the amendments thereto as set out in the Contract Data and Special / Particular Conditions

  11. THOUGHT FOR THE DAY • The type of contract form to be used will depend on the Employer’s preference as well as the Works to be executed • Many employers use standard form contracts developed and published by industry-based organisations • The idea of standard form contracts is to include provisions which are beneficial to both parties to the contract in accordance with good practice • Some contracts are, however, not based on the approach of good practice • Therefore it is important to know the three R’s: • Rights • Responsibilities • Risks • Within standard form contracts you will find your three R’s within the General Conditions of Contract read together with the amendments thereto as set out in the Contract Data and Special / Particular Conditions • The obvious benefit of the standard form is common understanding and the resultant efficiency in Tender and Execution Phases.

  12. THOUGHT FOR THE DAY • The role players are: • Employer • Main Contractor • Sub-contractor • (Designer / Supplier / Manufacturer etc) • Importantly: • Familiarise yourself with the contract • Be aware of all changes to standard form contracts • Strict compliance

  13. Integrity,quality,consistency.

  14. Standard Forms

  15. Available standard forms • What Standard Forms are available for use (and required to be used by State Owned Entities):

  16. Available standard forms • The FIDIC Suite (latest is 1999) • Silver Book – EPC; • Yellow Book – Design & Build; • Red Book – Construction Work; and • Green Book – Minor Work.

  17. Available standard forms • New Engineering Contract:

  18. Available standard forms • New Engineering Contract • Engineering and Construction Contract

  19. Available standard forms • New Engineering Contract • Engineering and Construction Contract • Construction Short Contract

  20. Available standard forms • New Engineering Contract • Engineering and Construction Contract • Construction Short Contract • Joint Building Contracts Committee Series 2000 (5th Edition 2007):

  21. Available standard forms • New Engineering Contract • Engineering and Construction Contract • Construction Short Contract • Joint Building Contracts Committee Series 2000 (5th Edition 2007): • Principal Building Agreement;

  22. Available standard forms • New Engineering Contract • Engineering and Construction Contract • Construction Short Contract • Joint Building Contracts Committee Series 2000 (5th Edition 2007): • Principal Building Agreement; • N/S Subcontract

  23. Available standard forms • New Engineering Contract • Engineering and Construction Contract • Construction Short Contract • Joint Building Contracts Committee Series 2000 (5th Edition 2007): • Principal Building Agreement; • N/S Subcontract • General Conditions of Contract for Construction (2004)

  24. Available standard forms • The standard forms of contracts can, and usually will, be changed to fit the different requirements for different projects or to suit the requirements of a particular employer • These conditions may change the rights and responsibilities of the employer and contractor

  25. Global reach;local specialistknowledge.

  26. Before Signing

  27. Before signing • Completion Date

  28. Before signing • Completion Date • Contract Price: • Lump Sum / Re-measurable • CPA? • Cost Plus

  29. Before signing • Completion Date • Contract Price: • Lump Sum / Re-measurable • CPA? • Cost Plus • Payment Structures: Progress / milestone based

  30. Before signing • Completion Date • Contract Price: • Lump Sum / Re-measurable • CPA? • Cost Plus • Payment Structures: Progress / milestone based • Bond Requirements • Performance • Retention • Advanced Payments

  31. Before signing • Completion Date • Contract Price: • Lump Sum / Re-measurable • CPA? • Cost Plus • Payment Structures: Progress / milestone based • Bond Requirements • Performance • Retention • Advanced Payments • Penalties

  32. Before signing • Completion Date • Contract Price: • Lump Sum / Re-measurable • CPA? • Cost Plus • Payment Structures: Progress / milestone based • Bond Requirements • Performance • Retention • Advanced Payments • Penalties • Material Terms

  33. Before signing • Completion Date • Contract Price: • Lump Sum / Re-measurable • CPA? • Cost Plus • Payment Structures: Progress / milestone based • Bond Requirements • Performance • Retention • Advanced Payments • Penalties • Material Terms • Programming Requirements

  34. Before signing • Completion Date • Contract Price: • Lump Sum / Re-measurable • CPA? • Cost Plus • Payment Structures: Progress / milestone based • Bond Requirements • Performance • Retention • Advanced Payments • Penalties • Material Terms • Programming Requirements • Entitlements to Extension of Time and Additional Costs • Variation Orders • Omissions • Delays

  35. Before signing • Completion Date • Contract Price: • Lump Sum / Re-measurable • CPA? • Cost Plus • Payment Structures: Progress / milestone based • Bond Requirements • Performance • Retention • Advanced Payments • Penalties • Material Terms • Programming Requirements • Entitlements to Extension of Time and Additional Costs • Variation Orders • Omissions • Delays • Limitation of Liability

  36. Before signing • Completion Date • Contract Price: • Lump Sum / Re-measurable • CPA? • Cost Plus • Payment Structures: Progress / milestone based • Bond Requirements • Performance • Retention • Advanced Payments • Penalties • Material Terms • Programming Requirements • Entitlements to Extension of Time and Additional Costs • Variation Orders • Omissions • Delays • Limitation of Liability • Resolution of Anticipated Disputes

  37. Integrity,quality,consistency.

  38. Contract Phases

  39. Contract Phases

  40. Contract Phases

  41. Contract Phases

  42. Contract Phases

  43. Contract Phases

  44. Global reach;local specialistknowledge.

  45. It’s not just a contract

  46. Construction Contracts – it’s not “just a contract” • An evolving “merx” against a backdrop (very often over an extended period of time) of evolving circumstances (both unforeseeable and foreseeable, albeit not always predictable). • Reasonable programming. • Breach (albeit not material) is expected. A degreed of breach is the rule rather than the exception and events or circumstances giving rise to disputes are common place; not because of the nature of the industry players but rather the nature of activity. • Risk is considered (not avoided at all costs), understood and allocated.

  47. Construction Contracts – it’s not “just a contract” • Principal Drivers: Traditional: Time, Cost and Quality – modern approach includes Health &Safety. • Quality: Workmanship and Performance (as appropriate). • Time and Cost are moving targets - One of the Parties has to accept the risk. The extent / lack of planning and the proper allocation of risk are a key factors in Time and Cost optimisation. • Health & Safety: statutory requirements and corporate policy considerations. The concept of best practice and zero harm is most often required and/or adopted in mature jurisdictions and by responsible corporations.

  48. Construction Contracts – it’s not “just a contract” • Main Contractor Rights: • Timeous Payments

  49. Construction Contracts – it’s not “just a contract” • Main Contractor Rights: • Timeous Payments • Variations or alterations

  50. Construction Contracts – it’s not “just a contract” • Main Contractor Rights: • Timeous Payments • Variations or alterations • Extensions of Time