Building contracts: Setting the standard

This year the Joint Contracts Tribunal celebrates 80 years of serving the construction industry. Eighty years during which the industry has changed fundamentally, although some may say still not enough, and during which procurement options have increased significantly. This has led to many challenges and opportunities both for the industry and the JCT.

Although the benefits of standardisation had been appreciated for many years, it was not until the RIBA formed the Joint Contracts Tribunal in 1931 and published the standard form, that standardisation of a building contract came of age. A local authority version followed in 1937 and subsequent editions of the standard forms of building contract were published in 1939, 1963, 1980, 1998 and 2005. A 2011 edition is imminent, pending the government’s announcement as to a date for the new Construction Act.

Until 1967, the Standard Form of Building Contract was the only form issued by JCT and was in four versions - that is, private and local authority versions, both with and without quantities. Since 1967, and corresponding to changes in procurement, practice and attitudes to risk, many different types of “main” contract and contract supplements have been published. There are now more than 70 JCT published documents that reflect the diverse requirements of the marketplace.

Standardisation must not stultify progress. It is right that a standard template is challenged, and different approaches investigated

Today, JCT represents both the supply and demand sides across large parts of the industry, and this wide membership is its great strength. JCT as a body overcomes much of the fragmentation that the construction industry has been criticised for by the government, and provides a forum for the industry to solve its own problems. JCT is now an independent self-funded organisation with its income derived solely from the sale of its products and services, with surpluses ploughed back into developing new ones.

JCT sets the standards for construction contracts and is the leading provider of standard forms of building contract; surveys (such as the RICS contracts in use survey) show that JCT contracts are used on around 80% of all building projects. Unnecessarily adopting different and untested practices is a costly and inefficient process and one with high risks. The benefits of a standard product are clear, but JCT also recognises the desire for amendments. The need for individualism and for bespoke requirements was acknowledged with the creation of a
CD, which became the JCT Contracts Digital Service, and will ultimately be delivered online.

Despite the benefits of standardisation, it must not stultify progress. It is right that a standard template is challenged. Different approaches to risk allocation, methods of payment, and incentivisation are all reasons for investigating and developing different approaches. Without those challenges contracts for design and build, management type contracting or partnering concepts would never have emerged. Nor would the development of the Major Project Form or the JCT Constructing Excellence partnering contract have happened. However, it would be naive to challenge the need for a contract because, regardless of how well the team is integrated and the excellence of management, things need to be agreed and set down in a legal context so as to reduce the likelihood of a dispute and efficiently resolve any disputes should they arise.

The challenge for the 21st century is to recognise the changing means of delivering construction projects. Today’s developments not only demand a new contractual response but the means for users to produce contracts that meet their needs without losing the benefits of the low transaction costs that standardisation brings.

It is interesting to speculate on what the construction industry might look like in 80 years’ time. It may have followed in the footsteps of other manufacturing industries, where projects are largely prefabricated, but on the other hand, the built environment may have become so treasured that bespoke projects are the norm (difficult to imagine at present). Regardless, the processes involved will continue to be dynamic and JCT has a significant part to play in improving the efficiency of the contractual process.

Professor Peter Hibberd is chairman of the JCT