Shifting standards: new JCT contracts

The changes made by the Local Democracy, Economic Development and Construction Act 2009 to the Housing Grants, Construction and Regeneration Act 1996 were a long time coming. Some would say too long, whereas others have suggested they were not even necessary. Wherever you stand we now know that Part 8 of the 2009 Act will apply to construction contracts in England and Wales that are executed on or after 1 October 2011, and for Scotland, 1 November.

Because of the legislation’s long gestation period, JCT’s May 2009 revisions to its 2005 edition, incorporating changes arising from JCT’s own review and published at that time because of a lack of clarity regarding the timing of any new legislation, will now be superseded by JCT 2011. New standard form contracts and subcontracts are to be published during this month. In order to ease the transition and to satisfy interest in the changes, JCT has made available tracked change versions of its proposed contracts.

The principal purpose of the 2011 edition is to reflect those legislative amendments insofar as they relate to payment terms and payment-related notices, but they also include changes such as the inclusion of a new insolvency definition and the updating of the statutory reference to the Bribery Act 2010. Of the other changes, users will be interested in the revision to the professional indemnity insurance entries, as those relating to asbestos and fungal mould, only introduced in 2009, have been removed. This reflects the changing insurance scene and that cover for those items is limited.

In May this year the Cabinet Office published the government construction strategy. The strategy is welcome not least because it recognises the important role that the industry plays in the growth and well-being of this country. Its reference to construction contracts and issues that are pertinent to such contracts is of direct relevance to JCT. For central government works it states its intention to move towards using only standard forms of contract with minimal amendment. JCT supports this concept while recognising that in practice parts of the market have been diverging on this point. Providing the appropriate freedom of contract, while maintaining the full benefits of standardisation, has always created a tension and one that has intensified with the advent of electronic documents.

The strategy refers to greater collaborative and integrated working (including integrated project insurance), adopting BIM, better use of frameworks, encouraging use of outcome-based specifications and processes, fair payment, increasing the use of project bank accounts, and sustainable targets. Those matters all relate to construction contracts but will impact differently on central government and private sector projects.

The government is an important player because of the substantial percentage of work it funds both directly and indirectly and because of its impact through its changing procurement practices. JCT contracts are aligned with the government’s construction strategy and also the market generally.

JCT produces a range of contracts that cater for everyone from consumers carrying out domestic work through to major private and public sector clients carrying out large projects such as The Shard or Emirates Stadium. However, in recognition that some clients dealing with government-funded projects are unsure how they will satisfy its requirements, JCT is to publish a public sector supplement. This will cover payment, transparency and BIM and goes further than the existing schedule of supplemental provisions. Although JCT contracts have always complied with the Fair Payment Charter the supplement will make reference to the government’s payment timescales.

For “public sector clients” the use of the public sector supplement in conjunction with a JCT contract and its project bank account documentation (and where appropriate a framework agreement) will facilitate collaborative and integrated working and assure public sector clients that the latest relevant government requirements are met. For those wishing to further enhance collaborative and integrated working there is also the JCT Pre-Construction Services Agreement which is one means of enabling the government’s “exploration” of integrated project insurance to become a reality.

As David Cameron has so often said, we are all in this together. JCT, through its consensus-based collegiate structure, represents every segment of the construction industry and is committed to providing its part of the means required to meet the government’s construction strategy.

Professor Peter Hibberd is chairman of the JCT