JCT in non-UK markets: Going global

The JCT standard building contract has existed in one incarnation or another for over a century. In the UK, the JCT forms are ubiquitous. But like hackney carriages and Marmite, they’re lesser spotted overseas.

Every so often the JCT (Joint Contracts Tribunal) wonders how to grab a slice of the global pie. Now, it has launched a survey seeking experiences in using its contracts abroad and opinions as to how one of these might be shaped to service international projects.

So how might a “JCT International” look? For a start, although the survey refers to projects outside the UK, the JCT is likely to focus on places where local standard forms either don’t exist or aren’t used.

The JCT’s advantage is that its contracts are designed for English law and practice (there are adaptations for Scotland and Northern Ireland). However, an international contract needs to be suitable for more than one country.

And this isn’t the only difference. It also needs to cover procedures, risks and other concerns common to such developments. These include robust design warranties, on demand bonds, caps on both liquidated damages and indemnities and currency exchange risk.

These matters are not addressed in current JCT forms. In catering for an international audience, the JCT may find itself changing much of what makes its contracts so compelling in the first place.

Moreover, FIDIC constitutes a rather substantial elephant in the room. The Geneva-based engineering body is the dominant publisher of international construction contracts. The international contracting market is not so dissimilar from the UK’s; people prefer that which is familiar. Any new contract hoping to make inroads must persuade users to switch.

One way to do this would be to circumvent FIDIC, to produce international forms for a different area. The IChemE and IET have tried this for specialist engineering. Another could be to concentrate on a facet of procurement which FIDIC has paid less attention to; the ACA’s partnering contract and the time-focussed CIOB Complex Projects Contract do this.

Both approaches hold appeal. Though FIDIC provides the basis for many major international real estate projects, for smaller (but still relatively valuable) projects its provisions can be overkill and its short works agreement too basic. A new international form, perhaps following the market-driven convictions of the underrated JCT Major Project Construction Contract, could occupy that middle ground.

The JCT’s substantial back catalogue presents other candidates. EPC (Engineering, Procurement and Construction) is a popular means for developing complex engineering projects. This procurement route transfers most of the project risks to the contractor. However, the clients for these projects are increasingly drawn to EPCM (Engineering, Procurement and Construction Management), a management contracting variant, due to a declining appetite from contractors (and their insurers) for such substantial risks and the high price premiums demanded in turn for accepting such liabilities. FIDIC does not yet have forms readily adaptable for an EPCM procurement route but the JCT does.

There may also be interest in an international version of the JCT Pre-Construction Services Agreement, while a reworked JCT Consultancy Agreement could present an interesting challenger to the White Book, in some ways an outlier in FIDIC’s portfolio.
So opportunity may lie in the niches. But even then, the JCT could face a struggle. From large multinationals to medium-sized players, FIDIC represents a familiar name in international markets, aided by decades of use and an extensive training programme. It’s a long game and one the JCT will need resources and patience for.

Which brings about the question why the JCT – a British body – is interested in the first place? A wider footprint could promote use of its UK contracts but domestic supremacy already exists anyway. It might help the organisation’s members, which represent all sides of the country’s construction industry, win work aboard. However, anyone serious about the global market will already be acquainted with the FIDIC contracts. Perhaps the answer is akin to that given by Mallory when asked why he wished to climb Everest. It’s a challenge which is there. The JCT is a rare leading contract publisher without an international form.

It’s also never been afraid to produce contracts which sell modestly but fill gaps in its suite. In any case, that suite may be about to get bigger.

The JCT’s survey runs until 30 September and can be found at:

www.jctltd.co.uk/non-uk-markets-survey.aspx

Francis Ho is head of construction at Olswang