Playing with the big boys

The Joint Contracts Tribunal launched the major projects form in the summer. It was produced to address the problems caused by the use of bespoke contracts or extensive amendments to existing JCT forms.

It is aimed at experienced project clients. Does this include registered social landlords? Should housing associations welcome it as a simplification of previous JCT forms, or worry that it omits necessary protections?

To answer these questions, we need to analyse the differences between the major projects form and previous JCT forms and recognise that these are driven by commercial demands for a hands-off procurement approach. The major projects form could be described as the opposite of project partnering, because it expects the client to take little or no role in the process.

The major projects form is about one-sixth the length of the JCT98 suite of contracts. As a consequence, there are many radical departures.

Design
The contractor is responsible for the completion of the design, not for any design carried out by or on behalf of the employer. The standard of care is raised to the skill level expected of a professional experienced in carrying out work of a similar scope.

The contractor must also execute the design so it complies with statutory performance specifications. Any materials used must be in accordance with the Ove Arup Good Practice Guide. The contract contains a standard copyright clause and an obligation on the contractor's part to take out professional indemnity insurance.

Third-party rights and assignment
Most employers amend the JCT contracts to include the provision of collateral warranties. By contrast, the major projects form includes a third-party rights schedule to protect funders, purchasers and tenants. It uses the 1999 Contracts (Rights of Third Parties) Act.

The form allows the employer to instruct the contractor to accelerate work, provided the parties can agree on terms

The rights created for a funder are unlimited, but the contractor's liability to a purchaser or tenant is limited to the reasonable costs of repair/renewal and/or reinstatement. There is an optional provision for the contractor to accept responsibility for other losses, subject to a financial limit.

To reflect what is now a standard funder requirement, the major projects form entitles the employer to assign the benefit of the contract to a funder at any time without the consent of the contractor. It also allows for the benefit and the burden of the contract to be transferred – novated – from the employer to a funder at any time. The contractor's position is the same as under other JCT forms: it cannot assign its rights or obligations without the consent of the employer.

Payment and insurance
The major projects form contains no provisions for retention, payment for materials or cost fluctuations. However, the most notable difference is in the payment advice that the employer issues each month after the contractor's application. In addition to the usual amounts payable in respect of the contract sum and any changes, the employer must include all other sums that either party is liable to pay. The contract contains no mandatory insurance requirements – recognising that on major commercial projects, insurance will be the subject of specific project- or client-based arrangements. However, the contract does provide for an appendix to identify the policies needed and the party responsible for taking them out. It is envisaged that the relevant policy documents or a summary of this cover can be annexed.

Delays and value engineering
Again, the major projects form recognises the tendency of major clients to reduce the grounds for time extensions. The contract dispenses with the grounds of adverse weather conditions, labour disputes and problems in obtaining workers or materials. Unlike previous JCT forms, the major projects form allows the employer to instruct the contractor to accelerate work, provided the parties can agree on the terms.

In an attempt to foster a more collaborative approach, the major projects form encourages the contractor to identify variations that benefit the employer. If the contractor's suggestion is implemented, it is entitled to an agreed proportion of the saving. This is the only example of active client involvement in the project process. The opportunities for effective value engineering, in an environment where the contractor is otherwise left on its own to complete the work, are likely to be limited.

Dispute resolution
The major projects form allows disputes to be resolved by mediation, adjudication or litigation. No adjudication provisions are included and the parties will need to rely on the procedures in the scheme for construction contracts.