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Guide to the JCT form of building contract

with contractors design

2000

STATUS IN WALES

ARCHIVED

Guideto the

JCT Standard Formof Building Contract

With ContractorsDesign, 1998 Edition

London: HMSO

Crown copyright 1996, 2000. Published with permission of NHS Estates, an Executive Agency of the Department of Health, on behalf of The Stationery Office.

Applications for reproduction should be made in writing to The Copyright Unit, The Stationery Office, St Clements House, 216 Colegate, Norwich NR3 1BQ.

First published 1996Second edition 2000

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About this publication

This publication provides guidance on

the JCT Standard Form of Building

Contract With Contractors Design,

1998 Edition. It replaces the existing

guidance on the JCT Standard Form of

Building Contract With Contractors

Design, 1991 Edition.

It provides advice on the amendments

necessary to the contract to comply

with Government and Departmental

policy, as well as good professional

practice in respect of the use by NHS

bodies (NHS trusts and authorities,

health authorities (HAs) and other

centrally funded bodies).

Contents

About this publication

1. JCT Standard Form of Building Contract WithContractors Design, 1998 Edition page 3

1.1 The contract 1.5 JCT Practice Notes

2. Government and Department of Health policyrequirements page 4

2.1 Introduction 2.4 Project director 2.5 Project manager 2.6 Co-ordinated project information (CPI)2.7 Electronic data interchange (EDI)2.9 Use in the NHS 2.13 Liquidated and ascertained damages 2.24 Specifications EC Works Directive 2.27 Employers professional consultants 2.32 Value Added Tax (VAT) 2.37 Insurances 2.40 Supplementary provisions 2.41 Named sub-contractors 2.43 The employers requirements 2.59 The contractors proposals 2.63 Contract sum analysis

3. JCT Standard Form of Building Contract WithContractors Design 1998 Edition page 11

3.1 Introduction 3.12 Articles of agreement 3.15 Recitals

3.16 First recital 3.17 Second recital 3.18 Third recital 3.19 Sixth recital

3.20 Articles 3.22 Article 2 3.23 Article 3 3.24 Article 4 3.25 Article 5 3.26 Articles 6A and 6B3.27 Articles 7.1 and 7.2

3.28 Attestation 3.31 JCT Amendment(s) 3.32 The conditions 3.182 Code of Practice: referred to in clause 8.4.3.

Appendix 1 JCT documents, Practice Notes andpublished amendments page 48

Appendix 2 Bibliography page 49

Appendix 3 Valuations required for partialpossession page 50

Appendix 4 Insurance in the NHS page 51

Appendix 5 JCT sectional completion modificationspage 53

Appendix 6 Parent company guarantees page 55

References page 60

Other publications in this series page 61

About NHS Estates page 62

1

The contract

1.1 The JCT Standard Form of Building Contract WithContractors Design, 1998 Edition (WCD 98) is publishedfor the Joint Contracts Tribunal (JCT) by RIBA PublicationsLtd.

1.2 The 1998 edition has been based on the 1981edition incorporating amendments 1 to 12 together withvarious corrections.

1.3 It should be noted that although references aremade in the 1998 edition to other documents to be usedin conjunction with this form, these publications may notbe available immediately. Until these documents areavailable, NHS bodies should continue to use thepublications produced for use with the 1981 edition ofthe form, making any amendments as necessary.

1.4 This form is of the type sometimes referred to asdesign and build. The fundamental difference betweenthis version of the JCT Standard Form and other versions isthat the design of the works is included in the contractorsobligations to the employer as well as the construction.

JCT Practice Notes

1.5 JCT Practice Notes are published separately from theforms of contract and contain comment and guidance onvarious aspects of the forms and their use. NHS bodiesshould inform staff responsible for the management ofcontracts to study the Practice Notes and apply themexcept where they are incompatible with Government andDepartmental policies (see Appendix 1).

1.6 The following Practice Notes have particularreference to the JCT Standard Form of Building ContractWith Contractors Design 1981 Edition:

Practice Note CD/1A: The With Contractors DesignForm of Contract; The Employers Requirements; TheContractors Proposals; The Contract Sum Analysis;Value Added Tax (VAT); Insurance: Contractors DesignLiability;

Practice Note CD/1B: Commentary on the Form ofContract; Notes on the Contract Sum Analysis;Application of Formula Adjustment;

Practice Note 20: Deciding on the Appropriate Form ofJCT Main Contract (revised August 1993);

Practice Note 22: Practice Note and Guide to theAmendments to the Insurance and Related LiabilityProvisions: 1986;

Practice Note 23A: Contract Sum Analysis.

1.7 The following Practice Note has particular referenceto the JCT Standard Form of Building Contract withContractors Design 1998 Edition

Series 2: Practice Note 1: Construction Industry Scheme(CIS).

3

1.0 JCT Standard Form of Building Contract WithContractors Design, 1998 Edition

Introduction

2.1 Government and Departmental policy on matterssuch as:

contract strategy;

selection of contractors and consultants;

contract conditions;

EC Works Directives, etc

are dealt with in Contracts and commissions for the NHS estate Guide to contract procedures which iscomplementary to the Capital Investment Manual, or inScotland, ScotConcode, which is complementary to theScottish Capital Investment Manual for Contract andCommission Policies.

2.2 NHS bodies are reminded that they must complywith the policies laid down in Contracts and commissionsfor the NHS estate: Policy, or in Scotland, ScotConcodewhich is complementary to the Scottish InvestmentManual for Contract and Commission Policies. Thesepolicy documents were produced to assist NHS bodies inthe implementation of Government and Departmentalpolicies.

2.3 NHS bodies are particularly referred to the followingparagraphs of Contracts and commissions for the NHSestate Guide to contract procedures when using theJCT Standard Form of Building Contract With ContractorsDesign, 1998 Edition (WCD98):

a. 3 Requirements of European Community Directives;

b. 18 Construction industry tax deduction scheme;

c. 19 Value Added Tax;

d. 20 Execution of contracts with firms;

e. 21 Liquidated and ascertained damages*;

f. 22 Loss/expense claims and settlements;

g. 24 Fluctuations:

(i) NHS bodies insurances*;

(ii) Works insurance*.

* Further guidance on these subjects is given later in thissection.

Project director

2.4 NHS bodies should appoint a project director for allprojects on which WCD98 is used. This may be a seniormember of management with responsibility for a specificmajor contract. The project director will be an officer ofthe NHS body who, where they are not technicallyqualified or experienced, should obtain appropriateprofessional support. When referring to guidanceproduced by the Procurement Practice and Development(PPD), HM Treasury, NHS bodies should substitute theterm project sponsor for project director. NHS bodiesshould refer to Section 2 of the Project Organisation andSections 1, 3 and Appendices 5 and 6 of theManagement of Construction Projects parts of theCapital Investment Manual or in Scotland, the ScottishCapital Investment Manual for more details on the rolesand duties of the project director/sponsor. In addition tothe above, the duties/actions of the project sponsor areidentified within the Agreement for the appointment ofproject managers for construction projects in the NationalHealth Service (see Schedule 2 of the Memorandum ofAgreement).

Project manager

2.5 NHS bodies must appoint project managers for allmajor capital schemes.

Co-ordinated Project Information (CPI)

2.6 The Department recommends the use of CPI whichaims to improve the technical content of documents andalso the effectiveness of the co-ordination between them.CPI emphasises the relationship between quality andtimeliness of project information and the quality, speedand cost of construction on site. The conventions of CPIaim to promote co-ordination via recommendationsconcerning:

a. procedures for production documents;

b. technical content of documents; and

c. arrangement of documents.

Further information is contained in Co-ordinated ProjectInformation for building works, a guide with examplesobtainable from RIBA Publications Ltd.

4

2.0 Government and Department of Health policyrequirements

Electronic Data Interchange (EDI)

2.7 The NHS relies increasingly on EDI to passinformation between NHS bodies. In 1992 the NHSadopted EDIFACT (Electronic Data Interchange ForAdministration, Commerce and Transport) for theelectronic exchange of structured messages between NHSorganisations and between the NHS and externalorganisations. EDIFACT is an international standard (ISO9735) syntax for electronic data collection (EDC) transferof structured textural information.

2.8 The Department recommends the use of EDI. Theprinciples of which are that information produced by oneapplication system is sent in a standard message toanother application for further processing with no, orminimal, human intervention. EDI allows a much closerintegration of business processes throughout the supplychain by ensuring that information on orders, schedules,invoices etc, which supports the business relationshipbetween customers and suppliers, need only be enteredonce into the system. For NHS bodies to realise thebenefits of EDI, management must be fully committed toits use.

Use in the NHS

2.9 The Department is in general agreement with theJCTs views on the use of the Standard Form of BuildingContract with Contractors Design as set out in PracticeNotes CD/1A and Practice Note 20.

2.10 The JCTs advice set out in Practice Note CD/1A andPractice Note 20, and the Departments subsequentrecommendations should be observed.

2.11 As a consequence of this, the contract documentsare substantially different. The customary drawings,specification and/or bills of quantities are replaced by the:

a. employers requirements (see paragraphs 2.44 to2.59);

b. contractors proposals (see paragraphs 2.60 to2.63);

c. contract sum analysis (see paragraphs 2.64 to 2.67).

2.12 Works for which WCD98 may be suited include:

design and construct in association with an NHSbodys brief, with or without sketch designs;

serial tenders for design and construct with an NHSbodys brief for each project.

2.13 Works for which WCD98 may not be suited are:

a. where an architect and other professionalconsultants have been appointed to preparedetailed designs;

b. where purchasing contractors standard units.

Liquidated and ascertained damages

2.14 WCD98 contains a provision to enable the employerto recover liquidated and ascertained damages in theevent that the contractor does not complete the works bythe completion date or a new completion date fixedunder the contract conditions. The rate of liquidated andascertained damages must be a genuine pre-estimate ofthe damage likely to be sustained by the employer. Therate must be carefully assessed by an NHS body for eachproject in the light of its particular circumstances and it islikely that it will include some or all of the following:

additional costs arising from extra time spent byadministrative, professional, supervisory and otherstaff (including the NHS bodys own officers) in themanagement of the contract;

direct losses and expenses arising from the necessityto rent or use alternative accommodation while anew building is not available;

loss of revenue;

loss of amenities for providing healthcare (that is,since health building schemes mostly provideadditional facilities, there is a loss of expectedamenities when the scheme is not completed ontime).

2.15 Additional staff costs and direct losses and expensescan be fairly estimated, but loss of amenities cannotnormally be assessed by any generally acceptablecalculation other than by expressing the loss as beingequivalent to a return, by way of interest, on theanticipated contract sum.

2.16 There are two alternative methods of estimating thedamages, the choice between them depending on theparticular project:

a. where loss of amenities is not a significant featureof the project, damages may be assessed byestimating additional costs and direct losses andexpenses;

b. where loss of amenities is significant (which itfrequently will be for NHS projects), a rate ofinterest of 15% per annum of the anticipatedcontract sum (pre-tender estimates) should beadopted instead. This rate (which includes 2% foradditional staff costs) has been adopted by otherGovernment departments and is independent ofshort-term changes in general interest rates.

2.17 It is emphasised that the loss of amenities method isan alternative to direct costs, losses and expenses but,nevertheless, the Department would not expect to see a

2.0 Government and Department of Health policy requirements

5

rate which represented much less than 15% per annumon a contract without special features.

2.18 When calculating the rate of liquidated damages,the NHS bodys Director of Finance should be asked ifthere are any special revenue features of the projectwhich would warrant a sum different from that basedupon the loss of amenities method.

2.19 Clause 24 of WCD98 requires the rate of liquidatedand ascertained damages to be stated in the appendix tothe contract as a specific sum of money per period ofdelay. Where the damages have been assessed by taking apercentage of the anticipated contract sum, the amountobtained should be divided by 365, roundedappropriately and stated as per day.

2.20 NHS bodies should note that the Courts have heldthat an arbitrarily fixed penalty is not acceptable. It istherefore not possible to incorporate penalty clausesinto a contract that attempt to force a contractor toperform to time.

2.21 Clause 25 sets out the detailed procedures forclaiming, granting and reviewing an extension of time andfixing a new completion date so that the contract doesnot become at large.

2.22 If the contractor fails to complete the works by thecompletion date, the architect/contract administrator mustissue a certificate to that effect.

2.23 A certificate of non-completion must be issuedbefore liquidated damages can be claimed by theemployer. In addition, the employer must give notice inwriting to the contractor stating an intention to deductliquidated damages.

2.24 It is Government policy that the deduction ofliquidated damages following unjustified delay in thecompletion of a project by the contractor should bepursued vigorously.

Specifications EC Works Directive

2.25 The quality of goods and materials for use incontracts should be defined wherever possible byreference to European Standards because the ECConstruction Products Directive requires that contractingauthorities must be willing to consider works products orequipment from alternative sources within the EC.

2.26 As a general rule, the specifying of proprietaryarticles in contract documents should be avoided in ordernot to deprive the NHS body of the benefit of theresulting competition when the contractor is given a widerchoice.

2.27 When using named sub-contractors and suppliers,NHS bodies must add the words or equivalent to ensurecompliance with the provision of the EC Works Directiveunless the selection is a result of pre-tender activitieswhich has complied with EC procedures.

Employers professional consultants

2.28 The Department strongly recommends that NHSbodies appoint professional consultants to:

a. formulate the employers requirements based on acomprehensive and unambiguous project brief;

b. make a preliminary appraisal; and

c. make an appraisal of the tenders to enable an NHSbody to make an informed choice.

2.29 Professional consultants should also be retained byan NHS body to advise during the course of the contracton such matters as:

a. the implications of design changes the NHS bodymay require; and

b. any technical matters that may arise where theemployers agent is not appropriately qualified.These may include such aspects as:

(i) monitoring compliance with the contractdocuments and management which the NHSbody may deem to be critical;

(ii) claims for delays, additional payments, etc.

2.30 Should professional consultants appointed by anNHS body to formulate the employers requirements beengaged by others to assist in the preparation of a tender,and, if successful, complete the design, the NHS bodyshould ensure that it has adequate professional support toappraise the tenders and to provide advice during thecourse of the contract.

2.31 The contractor will be employing his own designteam and an NHS body cannot look to this for anythingbut general advice which will be given on behalf of thecontractor. NHS bodies without in-houseprofessional/technical support will need to appointprofessional consultants.

2.32 Monitoring of compliance with the contractdocuments (the employers requirements and thecontractors proposals) and management needs to becarried out throughout the design and construction stageto ensure that the standards set by the employer aremaintained.


6

Value Added Tax (VAT)

2.33 It is important to note that tender sums, contractsums and the sums payable under the employerspayments are exclusive of VAT: the calculation andpayment of VAT is between an NHS body and thecontractor by agreement.

2.34 Tenders should always be invited on the basis oftheir being exclusive of VAT, for which an NHS body maybecome liable to pay the contractor in respect of theworks, and this should be made clear in the tenderdocuments. An NHS body is entitled to ask tenderers foran indication of the amount of VAT for which it may beliable.

2.35 Practice Note CD/1B contains guidance on theapplication of VAT to design work. Separate figures forthe value of design work carried out before and afterconstruction commences should be given in the contractsum analysis.

2.36 It should be noted that where Alternative A ofAppendix 2 (stage payments) applies and payment fordesign work in advance of construction is required, thismust be identified in the description of the stages inAppendix 2.

Insurances

2.37 General information on Government policy is inChapter 6 of Contracts and commissions for the NHSestate: Guide to Contract Procedures.

2.38 NHS bodies have been provided with Departmentalapproval to make their own decisions on insurancematters. They should therefore make a consideredjudgement whether:

a. they are prepared to carry the particular risk;

b. they require insurances to be taken out by thecontractor at a cost to the employer (the NHSbody).

2.39 NHS bodies are particularly referred to JCT PracticeNote 22 and Guide to the Amendments to the Insuranceand Related Liability Provisions: 1986. This provides acommentary on the various related clauses in the StandardForm of Building Contract, 1980 Edition and gives adviceon their operation in practice. It also contains notes onadapting these clauses for use with JCT 81. If NHS bodiesare in any doubt whatsoever on a particular situation, theDepartment recommends that they should obtain suitableprofessional advice (see Chapter 1 of Contracts andcommissions for the NHS estate: Policy).

2.40 The Department has issued Health Service CircularHSC 1998/174 Insurance in the NHS (see Appendix 4)which contains information on new arrangements thatwill be in place for some categories of risk from 1 April1999. The principal non-clinical risks cover employersliability, public liability, motor, buildings and property. Theaim of this is to improve value for money by self-insuranceagainst risk rather than taking out commercial insurance.

Supplementary provisions

2.41 The Department recommends the optionalsupplementary provisions S2 to S7 to be incorporated inthe contract conditions. The employers requirements (seeparagraphs 2.44 to 2.59) should state that the optionalsupplementary provisions will apply and this should berecorded in Appendix 1 of the contract.

Named sub-contractors

2.42 The employer may require a named sub-contractorto execute certain work identified in the employersrequirements if the optional supplementary provision (S4)is incorporated in the contract conditions (see paragraph2.41). The Department does not recommend the use ofthis supplementary provision due to the possibility that:

a. the contractor may be unable to enter into a sub-contract with the named sub-contractor;

b. the employment of the named sub-contractor underthat sub-contract may be determined.

These reasons are discussed more fully in JCTAmendment 3 and Guidance Notes.

2.43 The contract conditions do not contain provisionsenabling the employers agent to issue instructions underthe contract for the nomination of suppliers orsubcontractors, nor are there provisions whereby thecontractor selects a domestic sub-contractor from a list ofpersons provided in the tender documents. It isinappropriate to amend the conditions to include any suchrequirement and the employers requirements will need tospecify specialist work.

The employers requirements

2.44 NHS bodies need to strike a careful balance betweenmatters of importance to the scheme and allowing thecontractor sufficient scope to benefit fully from hisexpertise in buildability, information and programmemanagement and the procurement of materials andcomponents.

2.45 It is important that those firms invited to tenderhave proven experience and competence for work of the


7

character and extent contemplated. Advice on theselection of firms to be invited to tender is to be found inChapter 8 of Contracts and commissions for the NHSestate: Guide to contract procedures.

2.46 The time required for the detailed design stagecarried out by the contractor under the design andconstruct method should be reduced from theconventional method, due to the ability of the contractorto tailor design information to his site needs. However,the period for tendering in all but simple projects is likelyto be substantially longer than traditional tendering. Thelonger tendering period is required to enable sufficientdesign work to be carried out before the contractorsubmits his tender otherwise realistic tenders will not bereceived.

2.47 The purpose of the employers requirements is togive a clear and accurate brief to the contractor about thebuilding, accommodation, ancillary works, etc that an NHSbody requires. This will enable the contractor to formulatehis proposals. It should be borne in mind that thecontractors proposals are dependent on the employersrequirements adequately specifying the criteria requiredfor the scheme.

2.48 The employers requirements are the basis of thetender. The care with which the employers requirementsare prepared will greatly influence the quality of thetender and the success or otherwise of the scheme.Adequate time must be allowed in the managementcontrol plan for the preparation of the employersrequirements.

2.49 The employers requirements should set out thefollowing in as much detail as an NHS body considersnecessary:

a. the site;

b. the accommodation requirements;

c. the purpose for which the building(s) is to be usedand its operation (for example room sheets,departmental/room relationships);

d. whether planning requirements have been cleared;

e. any other matter which would be likely to affect thepreparation of the contractors proposals materially;and

f. the lump sum price.

Further information is contained in the Capital InvestmentManual, Management of construction projects, Appendix 4: The Brief.

2.50 The Department strongly recommends that anyplanning or other necessary permission and/or approvalsshould be obtained by an NHS body before the tenderdocuments are issued. This will enable any constraints

imposed, or any conditions that have to be fulfilled whenexecuting the works, to be incorporated in the employersrequirements. If an NHS body has no permission and/orapprovals at all, or has received only outline permissionand/or approvals, the employers requirements mustclearly state whether it is the employer or the contractorwho will be responsible for obtaining full permission andapprovals. Any amendment to the contractors proposalsin this respect after the date of tender will be treated as achange in the employers requirements (see paragraphs3.41 and 3.42).

2.51 The employers requirements should state therelative importance of:

capital cost;

running and maintenance costs;

quality;

appearance;

flexibility of use;

time for construction;

expected lifespan of the building(s).

2.52 Specification notes should be as comprehensive asnecessary, defining the minimum standards and quality ofmaterials and workmanship required, particularly for thoseelements which are important to an NHS body. Thenotices will usually be written partly in prescriptive termsand partly in performance terms, for example engineering.The quality of the building(s), ancillary works, etc willdepend on the employers requirements.

2.53 The employers requirements should also include anyconditions regarding form, content and structure of thecontractors proposals and the contract sum analysis. Inaddition, any supporting design proposals, drawings,calculations, etc to be submitted with the tender toenable the contractors proposals to be fully evaluatedshould be stated.

2.54 NHS bodies should include a provisional sum in theemployers requirements to cover the cost ofcontingencies which may arise during the progress of theworks. It is stressed that a contingency sum is intended toprovide only for unforeseen and unforeseeableoccurrences arising during the works. It is not intended tocover increases in cost arising from:

a. lack of detailed design at tender stage;

b. changes in specification; or

c. changes in an NHS bodys brief to the design team.

2.55 Whenever there is a possibility that some work mayhave to be carried out under the contract that can only beproperly valued by daywork charges, it is advisable to

8

include provisional sums in the employers requirements.These will cover labour, materials and use of plant to beemployed on daywork and require tenderers to add tothose sums the percentage additions that they wouldmake in the event of daywork charges being permitted.This procedure has the advantage of introducing anelement of competition into the cost of daywork charges.

2.56 In order that tenders should not be unduly increasedby the inclusion of provisional sums for contingencies anddayworks, it is recommended that these sums should beassessed so that their total value (after allowing for theanticipated additions by tenderers to the dayworkprovisions) should not exceed 2% of the estimatedcontract value.

2.57 In some instances (such as contracts which containsome element of repair of fire or storm damage, or ofalterations to existing buildings), it can be readily foreseenat tender stage that some work will need to be instructedthat cannot be sufficiently described or quantified in thetender documents to enable tenderers to quote firm costsfor carrying it out.

2.58 In that such work is foreseeable, it is incorrect toregard the contingency sum as the source of funds tocover its cost and it is also incorrect to increase thecontingency sum for this purpose. The correct procedureis for the additional works to be allowed for by means ofa provisional sum.

2.59 In general, the use of provisional sums by theemployer in his requirements is not recommended.

The contractors proposals

2.60 The contractors proposals, in accordance with theemployers requirements, should be submitted at thesame time as the tender. These should satisfy theemployers requirements; in theory the more detailed therequirements, the more detailed the proposals should be.The contract sum analysis and any supporting documentsshould also be submitted at the same time as the tenderbut in a separate package endorsed with the tenderersname. In this way, the contract sum analysis and anysupporting documents of tenders not considered foracceptance can be returned unopened.

2.61 The contractors proposals and supportingdocuments should be carefully evaluated (adequate timemust be allowed within the management control plan forthis) to establish that the employers requirements and thecontractors proposals are consistent and do not containany conflicting provisions (see paragraph 3.18 on theThird recital of the contract conditions). It is essential thatany divergence between the employers requirements andthe contractors proposals are resolved before the tender

is accepted. NHS bodies should also be satisfied with theway in which the employers requirements are to befulfilled. The quality of the proposed design should beexamined by NHS bodies for functional efficiency,standards of specification, standard of workmanship,maintenance characteristics and aesthetics. If thecontractor submits a programme and method statementwith the tender, these should not be incorporated as acontract document. If they are incorporated, thecontractor and the employer must comply with theirprovisions. If the contractor is prevented from working tothe programme and/or method statement for reasonsbeyond his control, he may be able to claim for additionalpayment.

2.62 The form of tender should state the period requiredbetween acceptance of tender and commencement ofwork on site for completing the design and suchproduction drawings as are necessary.

2.63 There may be scope within the employersrequirements for alternative offers which are compatiblewith the brief. The price of each alternative offer andalternative periods for completion may be submitted withthe tender if the tender documents state that they will beconsidered.

Contract sum analysis

2.64 The contract sum analysis is required for:

a. the valuation of changes in the employersrequirements;

b. the valuation of work executed for which aprovisional sum is included in the employersrequirements (clauses 12.4 and 12.5);

c. the application of clause 38 (Use of the priceadjustment formulae), if required;

d. preparation by the contractor and checking by theemployer of applications for interim payment whereinterim payments are periodic (Alternative B,Appendix 2 of the form).

2.65 The contract sum analysis should be submitted bythe contractor in the form and detail stipulated in theemployers requirements (Practice Note CD/1B andPractice Note 23 give guidance on this subject). Thetender documents should state whether the overall priceor the contract sum analysis is dominant. The Departmentrecommends that the overall price is selected. If errors arefound when tenders are examined tenderers should to beasked to confirm or withdraw their tender. If a tendererconfirms their offer then an endorsement should be madeto the priced document(s). This should state that allprices/rates are to be treated as being increased/decreasedin the same ratio as the total exceeds/falls short of the

3.0 The conditions of contract 1998 edition

9

total. The adjusted prices/rates should not includepreliminaries/contingencies.

2.66 Provisional sums should only be included in thecontract sum analysis if they are given in the employersrequirements. A provisional sum should be included in theemployers requirements for contingencies for unforeseenand unforeseeable work, or costs arising during theexecution of the works. Other provisional sums should beincluded, as appropriate, for work or costs which are

known to be required to complete the works, but cannotbe entirely defined when the employers requirements areprepared, for example diversion of existing drains andunderground services and daywork charges (seeparagraphs 2.54 to 2.56).

2.67 The contract sum analysis should separately identifythe value of design work completed beforecommencement and during construction.


10

Introduction

3.1 The form is examined and guidance is given on itscompletion and amendment. The contract documentsinclude:

a. the JCT Standard Form of Building Contract WithContractors Design, 1998 Edition, together withJCT amendments to be incorporated. It should stateclearly all amendments that the employer will maketo the printed form when preparing the documentfor execution by himself and the contractor;

b. the employers requirements;

c. the contractors proposals;

d. the contract sum analysis.

3.2 It should be noted that the NHS body is described asthe employer.

3.3 Amendments are made occasionally to JCT forms ofcontract and are usually incorporated into the text of theform at the next reprint. Separately issued amendmentscan be incorporated into the contract in one of two ways:

a. amend the wording of the form, as printed, in blackink before it is signed by the parties. Each separateamendment must be initialled by, or on behalf of,each of the parties; or

b. attach the relevant printed sheets carrying theamendments firmly to the form of contract. Eachpage must be initialled by, or on behalf of, each ofthe parties.

3.4 The Department recommends that the secondoption of attaching the printed sheets carrying theamendments is used.

3.5 This section is based on the reprint of the formdated November 1998.

3.6 A summary of the contents of each JCT amendmentincorporated and corrections included in a reprint isprinted at the end of the form.

3.7 All employer amendments to the form must be inaccordance with those stated in the employersrequirements. Each amendment must be initialled by, oron behalf of, each of the parties.


11

3.0 JCT Standard Form of Building Contract WithContractors Design, 1998 Edition

Incorporating Amendment 1: 1999

Commentary Notes/amendments

3.8 Where the wording of a printed clause is varied byan amendment, the Department recommends that, forclarity, the printed clause is deleted entirely and a typedamendment slip attached showing the revised wording.Additional clauses should be incorporated in a similar way.

3.9 It is good practice for each amendment to beidentified for initialling by the parties.

3.10 The original of the executed contract is retained bythe employer in safe keeping and a certified true copyprovided by the employer to the contractor, free ofcharge.

3.11 Any parent company guarantee required relating tothe main contract should normally be executed as a deedbefore the main contract is executed. The original isretained by the employer in safe keeping with theoriginals of the contract documents. Further guidance onparent company guarantees is contained in Appendix 6.

Articles of agreement

3.12 The contract date will normally be entered afterboth parties have executed the contract and should bebefore the date of possession stated in Appendix 1 to thecontract (see paragraph 3.30).

3.13 The names and addresses of the parties should beentered. The addresses will normally be the addresses towhich instructions, notices, etc should be sent. If eitherparty wishes to have documents, communications, etcdelivered to addresses other than those entered in thearticles of agreement, this should be clearly stated here.

3.14 The contract date and the names and addresses ofthe parties should also be entered on the back cover ofthe form (see paragraphs 3.12 and 3.30 regarding thecontract date).

Recitals

3.15 The recitals are statements which explain and setout the purpose of the contract and the facts upon whichthe contract is based.

First recital

3.16 Insert an adequate description to identify the workto be carried out and location of the project. A fulldescription of the works must be given in the employersrequirements. The project title and reference should betyped on the front cover of the form. Where it is stated inAppendix 1 that all of the Construction (Design and


12


Management) Regulations 1994 (CDM Regulations) are toapply, NHS bodies should note the need to state whetherthe contractor is appointed as planning supervisor.

Second recital

3.17 The second recital refers to the contractor havingsubmitted his contractors proposals and contract sumanalysis to the employer. Where applicable the contractoralso has to take account of the requirement on a designerunder the CDM regulations. Where all of the CDMregulations apply and the contractor has been appointedplanning supervisor the contractor has to take account ofthe requirements on a planning supervisor and ensure thata health and safety plan is prepared.

Third recital

3.18 The statement they appear to meet the EmployersRequirements stresses the importance of carefullyexamining the contractors proposals and the contractsum analysis.

Sixth recital

3.19 The sixth recital allows NHS bodies to request bondson terms other than those agreed between the JCT andthe British Bankers Association. These terms must becopied to the contractor. To accord with Governmentpolicy the use of advance payment bonds should not beused (see Appendix 6). For guidance on the use of bondsfor payment of off-site materials see paragraph 3.117.

Articles

3.20 The articles incorporate the conditions and othercontract documents by reference.

3.21 When the printed form is modified by a JCTamendment not yet included in the reprinted form and itis desirable to incorporate the JCT amendment in theexecuted contract the Department recommends anadditional Article is inserted. This article should be insertedafter the last Article and the relevant printed sheetsspecified in the instructions on use of the JCT amendmentshould be firmly attached to the executed contract afterthe attestation and before the conditions.

Article 2

3.22 Insert the contract sum (excluding VAT) in wordsand figures. The contract sum will normally be the tendersum unless it has been varied by agreement of the parties.Copies of the following should be bound into, andbecome part of, the contract documents:

Insert the following additional article to incorporate a JCTamendment not yet included in the reprinted form beingused:

Article *

Amendment The Condition shall have effect as modifiedby the amendments set out in the Amendments **attached hereto.

* allocate the next available article number** insert number(s)of JCT amendments


13


a. the accepted tender with supporting documentsreturned with the tender by the contractor; and

b. copies of any letters, documents, etc varying thetender sum or the conditions upon which thetender was invited.

Article 3

3.23 The form does not contain a provision for thenaming of the architect/contract administrator or aquantity surveyor. However, NHS bodies must nominate aperson to act as the employers agent for the purposes ofthe contract in accordance with Article 3. The personnominated as the employers agent should be suitablyqualified in works matters and be competent to co-ordinate the preparation of the tender documents,evaluate tenders and administer the contract on behalf ofan NHS body. The employers agent may have the supportof architects, quantity surveyors, etc.

Article 4

3.24 Article 4 refers to Appendix 3 of the contract whichidentifies the documents comprising the employersrequirements, the contractors proposals and the contractsum analysis.

Article 5

3.25 This article notes that any dispute or differencearising under this contract may be referred to adjudicationby either party.

Articles 6A and 6B

3.26 These articles contain the provision to delete theoption of arbitration and to make disputes the subject oflegal proceedings. The decision on whether to retainarbitration is a matter of commercial judgement. Ifdisputes are to be decided by arbitration clause 39B in theAppendix should be obtained. Clause 39B in the Appendixshould only be deleted if disputes are going to be decidedby legal proceedings.

Articles 7.1 and 7.2

3.27 NHS bodies need to decide whether all of theConstruction (Design and Management) Regulations 1994apply or just regulations 7 and 13. Where the fullregulations apply, insert either the address of thecontractor or the name and address of the person actingas planning supervisor. If only regulations 7 and 13 apply,articles 7.1 and 7.2 should be deleted.


14


Attestation

3.28 Page 11 of the form has alternative clauses toenable the contract to be executed under hand or as adeed.

3.29 The Department normally expects all contractsentered into using the JCT Standard Form of BuildingContract With Contractors Design, 1998 Edition, to beexecuted as a deed.

3.30 The contractor should complete his/her attestationbefore the employer. The contract should be dated whenthe employer completes his/her attestation. The contractmust be signed by all parties prior to commencement.

JCT amendment(s)

3.31 TC/94/WCD contains amendments to the form tocater for terrorism cover and should be incorporatedfollowing the principles in paragraph 3.21 The JCT haspublished Guidance to terrorism cover which explainsthat these amendments are not intended to be permanentamendments and therefore will not be incorporated inreprints. The address of the company where insurancecover can be obtained is:

Pool Reinsurance Company Limited51 Gresham StreetLondon, EC2V 7HQ (Tel: 020 7600 9510)

The conditions

Clause 2: Contractors obligations

Contractors design warranty

3.32 Clause 2.5.1 of the form places a similar obligationon the contractor with regard to design work carried outby him under the contract as would be placed on anarchitect under a commission from a client. Under thelatter arrangement, no limit is placed on the architectsliability to the client and the Department sees no reasonwhy any limit should be set when a contractor designsinstead of an architect.

3.33 The Department therefore recommends that theoption of a limit in Appendix 1 of the form regardingclause 2.5.3 should be deleted. That is to say, no limit willbe placed on the contractors liability set out in clause2.5.1.

Delete 2.5.3 applies with a limit of


15


3.34 It is, however, important to appreciate that the formdoes not include any requirement that the contractorsliability (which could be substantial) be covered byinsurance. This point is discussed at length on page 14 ofPractice Note CD/1A and the Department considers itimportant that NHS bodies should adopt a procedure toensure that suitable insurance cover is taken out by thecontractor and maintained not only during the period ofthe contract, but also for a reasonable period of yearsthereafter. (Design defects may well not become apparentfor a considerable time after completion of the works.)

3.35 The Department recommends that NHS bodiesadopt a procedure broadly similar to that used in regardto professional consultants insurance. At tender stage, anNHS body should require submission of the contractorsinsurance certificate and make it a condition of thecontract that the contractor takes appropriate cover untilthe expiration of six years from the date of completion ofthe contract. NHS bodies should make an annual checkthat the necessary cover is being maintained by obtainingfurther certificates from the insurer.

3.36 The certificates, which should be given by thecontractors insurer/insurance broker (not by thecontractor himself) should be to the effect that thecontractor is currently insured for the period ending .......(date) for all claims arising as a direct result of anynegligent act, error or omission in the conduct andexecution of designs entrusted to him/her or entrusted byhim/her to any other party. The limit of indemnity for eachand every claim and the amount (if any) of any excesscarried by the contractor on each and every claim shouldbe stated.

3.37 Should it be found that the contractor does notcarry insurance covering liability for design work, his/hersuitability for the award of a design and constructcontract should be reconsidered.

Clause 3: Contract sum additions or deductions adjustment interim payments

3.38 Attention is drawn to this clause, which should beaccepted by NHS bodies. NHS bodies are subject toGovernment policy on prompt payment of accounts andshould therefore pay any sums due to the contractorunder the provisions of this clause as soon as they havebeen ascertained. If such payments are thought likely toexceed the business case threshold, an NHS body shouldtake any necessary action at once under CapitalInvestment Manual procedures (see Business case guide,Appendix 4 Capital costs, and Management ofconstruction projects, Appendix 7, paragraph A.7.8.6).However, NHS bodies should not fail to meet theircontractual obligations to the contractor.


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Clause 5: Custody and supply of documents

Limits to use of documents

3.39 Clause 5.6 as it stands would bar the use of tenderinformation for statistical or indexing purposes, forexample, by the Building Cost Information Service (BCIS).A sentence should be added at the end of clause 5.6.

Clause 6: Statutory obligations, notices, fees andcharges

Race relations

3.40 NHS bodies are subject to the legislation on racialdiscrimination (including the penalties for contravention).They are required to remind contractors of the need tocomply with the provisions of the Race Relations Act 1976or any statutory modification or re-enactment thereofrelating to discrimination in employment. While the onuson complying with the requirements of the legislationrests with the contractor, an additional clause (6.4) shouldbe included in the contract.

Clause 12: Changes in the employers requirementsand provisional sums

3.41 The employers requirements should be prepared inthe expectation that an NHS body will not subsequentlymake changes in the employers requirements unless achange becomes unavoidable as a result of an unforeseenand unforeseeable change of circumstances. The contractconditions, however, enable the employer to vary hisrequirements by making a change under clause 12.2 ofthe contract conditions: this clause includes a provisionthat the employer must obtain the contractors consentwith regard to changes of a fundamental nature. Thedesign and build method of procurement should not beemployed if a large number of changes are anticipated.

3.42 The valuation of changes and of provisional sumsincluded in the employers requirements by the contractorwill include an element for the relevant design work.

3.43 Under Clause 12.4 there are two ways of valuingvariations. It is important to note the differences betweenthese options.

a. Alternative A: Contractors Price Statements

This option applies to a variation and provisionalsum work or work under approximate quantitiesthat the contractor and the employer has to pay.The contractor may submit his price for:

Insert the following additional sentence at the end ofclause 5.6:

The use of rates or prices contained in the Contract SumAnalysis for compiling cost records or statistical analyses ofthe cost of construction works shall not constitute abreach of this clause.

Insert the following additional clause after clause 6.3:

Race Relations

6.4 The Contractor shall not unlawfully discriminatewithin the meaning and scope of the provisions of theRace Relations Act 1976 or any statutory re-enactmentthereof relating to discrimination in employment.

The Contractor shall take all reasonable steps to ensurethe observance of the provisions of the precedingparagraph by all servants, employees or agents of theContractor and all Sub-Contractors.


17


(i) a variation the architect/contract administratorhas been instructed;

(ii) work for which an approximate quantity hasbeen included in the contract bills; or

(iii) the expenditure of a provisional sum.

The contractor can separately attach an amount forany ascertainment of direct loss and/or expense andany adjustment to the time for completion.

b. Alternative B

This applies instead of Alternative A where thecontractor does not submit a price statement orwhere a price statement has been submitted butnot agreed and the disagreement has not beensubmitted to adjudication. However, if thesupplementary provisions have been incorporatedinto the contract, provision S6 requires thecontractor to submit an estimate prior to complyingwith an instruction. This option applies to aninstruction for a quotation from the contractorwhich the employer may require. Sufficientinformation may be supplied by the employerregarding the nature and extent of the work toenable the contractor to accurately price the work.If the quote is accepted and confirmed by theemployer the adjustment to the contract sum statedin the confirmed acceptance is in place of anyvaluation under clause 12.4 and any loss andexpense under clause 26 including the cost ofpreparing the quotation. An adjustment to the timefor completion of the works together with anyrevised completion date if the confirmed acceptanceis in place of any fixing under clause 25.4.5.1.

Clause 14: Value Added Tax supplementalprovisions

3.44 Clause 14.2 provides an alternative method (clause1A of the VAT agreement) for dealing with theassessment of VAT due from the employer on VAT-exclusive amounts in all interim payments and in thepayment of final statement. Clause 1A of the VATagreement can only apply where the contractor is satisfiedat the date of signing the contract that his/her output taxon all supplies to the employer under the contract will beeither at a positive or a zero rate of tax. The relevant itemin Appendix 1 to the form of contract must be completedto state whether or not clause 1A of the VAT agreementis to apply. Where clause 1A applies at thecommencement of the contract, either party, by writtennotice to the other, may revoke the use of clause 1A andthereafter the provisional assessment procedure will apply.


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3.45 The inclusion of clause 1A of the VAT agreement inthe contract does not involve the employer in certifyingthe VAT due from the employer since he only certifies asto the VAT-exclusive amount due. The amount shown onthe payment for VAT is merely the application by theemployer of the system instituted by the employer and thecontractor in having entered into a contract in which thealternative clause 1A is applicable.

3.46 General guidance on the application of VAT isincluded in Chapter 19 of Contracts and commissions forthe NHS estate: Guide to Contract Procedures.

Clause 16: Practical completion and defects liability

3.47 The defects liability period has to be specified inAppendix 1 in relation to clause 16.2, and is six monthsunless otherwise stated. Where the works includemechanical and electrical types of engineering work, itmay be considered necessary to specify a period of 12months in order to give test operation through onecomplete climatic year, but the period should neverextend beyond 12 months. On no account should anyattempt be made to specify different periods for buildingand engineering; there must be only one period and thiswill apply to the whole of the works. Longer termprotection against latent defects is given under the law ofcontract or the law of tort.

Clause 17: Partial possession by employer

3.48 This clause provides a facility for the employer totake possession of a part of the works prior to practicalcompletion of the works as a whole, subject to agreementwith the contractor at the time. (See paragraph 4 ofAppendix 5 regarding the distinction between sectionalcompletion and partial possession.)

3.49 The employer shall issue a written statement to thecontractor identifying the part or parts of the works takenin possession and giving the date when the employer tookpossession.

3.50 The clause provides that the defects liability periodfor a part of the works so taken over by the employershall commence on the date the employer takespossession of that part. It also provides that the rate ofliquidated and ascertained damages applicable to theremainder of the works shall thereupon be reduced fromthat stated in Appendix 1 by the same proportion as thevalue of the part taken over bears to the contract sum.

3.51 Guidance on valuations following partial possessionby the employer is given in Part C of Practice Note 22.This advice is adapted and reproduced in Appendix 3.


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3.52 See Notes/amendments opposite if the contract isfor works in, or extensions to, existing structures.

Clause 18: Assignment and sub-contracts

Clause 18.1: Assignment

3.53 To provide for possible future transfer of thecontract by the employer to another NHS body withoutthe consent of the contractor, a sentence should beadded at the end of clause 18.1.1.

3.54 Clause 18.1.2 (which can either apply or not at theemployers option) is for use where the employer intendsto transfer an interest in the works referred to in theclause to a purchaser or tenant immediately upon practicalcompletion. Any proceedings which an assignee may wishto bring have to be in the name of the employer undersuch arrangements on costs, etc of such proceedings thatthe employer and assignee may have agreed. NHS bodiesshould note that arrangements on the costs ofproceedings are not dealt with by the clause and must bemade separately. NHS bodies should note that this clausewill not normally apply and Appendix 1 to the contractshould be completed to reflect this situation. TheDepartment should be consulted in cases where the clauseis to apply.

Sub-letting

3.55 To protect the employers interest in the event of aclaim due to the negligence of a domestic sub-contractor,an additional clause should be inserted after clause18.2.3.

3.56 Where the sub-contractors are domesticsubcontractors, Domestic sub-contract DOM/2 articles ofagreement, 1981 Edition (as amended), and Domesticsub-contract conditions for use with domestic sub-contract DOM/1c, 1980 Edition (as amended) issued bythe Building Employers Confederation (BEC) for use withJCT 80 are available. Their use is at the contractorsdiscretion. Formula rules for Domestic sub-contractDOM/FR, 1980 Edition are incorporated in the currentedition of the JCT sub-contract/works contract formularules.

Clause 20: Injury to persons and property andindemnity to employer


It should be noted that if the contract is for works in, orextensions to, existing structures, there will beconsequential amendments to clause 17 if NHS insuranceof the works clauses 22G, 22J and 22P are selected (seeparagraph 3.78).

Insert the following additional sentence at the end ofclause 18.1.1:

However, the Contractors consent shall not be requiredto the assignment of this Contract by the Employer toanother NHS body.

Insert the following side heading and clause after clause18.2.3:

Indemnity to Employers

18.2.4 The Contractor shall indemnify the Employeragainst all claims, proceedings, costs and expenses arisingfrom negligence on the part of Domestic Sub-Contractors.

It should be noted that if the contract is for works in, or extensions to, existing structures there will beconsequential amendments to clause 20 if NHS insuranceof the works clauses 22G, 22J and 22P are selected (seeparagraph 3.80).


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3.58 Amendments will also be required if an NHS bodywishes to make the contractor responsible in cases ofvandalism or theft of site materials (see paragraph 3.82).

Data Protection Act 1984

3.59 NHS bodies are subject to the legislation on dataprotection (including the penalties for contraventionthereof). They must therefore ensure that any contractorsthey employ indemnify them against any contravention ofthe provisions of the Data Protection Act 1984 or anystatutory modification or re-enactment thereof relating todata protection. NHS bodies should therefore include anadditional clause (20.4) in the contract after clause 20.3.

Clause 21: Insurance against injury to persons orproperty

Contractors insurance

3.60 Appendix 1 of the form contains an item referringto clause 21.1.1 where the employer must state the sumof insurance cover for any one occurrence or series ofoccurrences arising out of one event in respect of claims(other than claims under the Employers Liability(Compulsory Insurance) Act 1969 etc) to which clause21.1. applies. (The sum stated by the employer is theminimum sum of cover as the clause provides for thecontractor to insure for a greater sum if he so chooses.)

3.61 The sum that the employer should state mustdepend on the particulars of each contract (for examplevalue, location, extent of risk, etc). While it is thereforenot possible for the Department to recommend a sumthat has general applicability, it is recommended that aminimum sum of 5 million at 1994 prices be inserted.

3.62 Before a contract is executed, an insurers certificateof insurance cover in respect of injury to persons and/ordamage (clause 21.1) must be obtained from theproposed contractor, and NHS bodies must subsequentlymonitor that the insurance is maintained until at least theexpiry of the defects liability period or the date of issue ofthe notice of completion of making good defects,whichever is the later. In no circumstances should coverbe terminated at the date of practical completion and theDepartment considers it is prudent to keep the cover inforce until the issue of the final statement.

Insurance liability etc of employer

3.63 NHS bodies need to consider whether insurance,under clause 21.2.1, for loss or damage to adjoiningproperty or to property in which the works are beingcarried out is to maintained by the contractor. This

Insert the following side heading and clause after clause20.3:

Data Protection Indemnity to Employer

20.4 If during the subsistence of this Contract theContractor or any Sub-Contractor, or any employeeservant or agent of them, is furnished by the Employerupon any medium with, or otherwise obtains (with orwithout the knowledge or consent of the Employer),access to confidential or personal or commercial dataowned or held by the Employer either in relation to theEmployer's own affairs or those of others and at any timeeither directly or indirectly discloses or copies or makesimproper use of any such data to a third party or allows athird party unauthorised access to them or if theContractor or any Sub-Contractor, or any employeeservant or agent of them, is responsible for or causes theloss, damage or destruction of all or any such data, theContractor shall be liable in damages for any loss ordamage suffered by the Employer and shall indemnify theEmployer against all or any claims, proceedings, costs orexpenses to which the Employer may be or become liableat the suit of any third party in respect thereof.


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insurance is in respect of any injury or damage to propertydue to the negligence, breach of statutory duty, omissionor default of the contractor or for whom the contractor isresponsible for under clause 20.2. The appropriate entry inthe Appendix should be made together with any amountof indemnity that may be required.

Clause 22: Insurance of the works

3.64 In order to ensure that contracts awarded by theNHS correctly implement Government policy, NHS bodiesshould observe the following guidance and make thestated amendments to the contract (see Chapters 24 ofContracts and commissions for the NHS estate: Guide toContract Procedures and paragraphs 2.36 to 2.39).

3.65 The insurance options available to NHS bodies areshown in Table 1.

Table 1 Insurance options available to NHS bodies

3.66 Particular attention is drawn to the guidance oninsurance matters contained in:

a. JCT Practice Note 22 and Guide to the Amendmentsto the Insurance and Related Liability Provisions:1986; and

b. the printed contract footnotes (h.1) to (i).

3.67 Appendix 1 to the form contains an item referringto clauses 22A, 22B.1 or 22C.2, as applicable, whichrequires an entry in the executed contract stating thepercentage of the value of the works to cover professionalfees. NHS bodies must make an assessment of thepercentage and state it in the tender documents. Inassessing the percentage, NHS bodies must take intoaccount the range of professional design consultants andclerks of works (both an NHS bodys own officers andprivate consultants) engaged on the contract. The cost oftheir services, together with allowances for expenses andVAT, should be expressed as a percentage applied to thepre-tender estimated cost of the works.


22


Clause 22A Clause 22B Clause 22C Clauses 22G, 22J and 22P New building New building In, or extension In, or extension

to, existing to, existing structuresstructures

Insurance by Insurance by Insurance by Risks takencontractor employer employer by employer

NHS bodies Yes No No Yes

Guidance paragraphs3.74 to 3.77 3.78

3.68 When clause 22A is used, all policies must be ajoint names policy a policy of insurance which includesthe contractor and the employer as the insured (seeWCD98 Definitions: clause 22.2).

3.69 It is essential that NHS bodies regularly review thatthe insured sum of single policy insurance is adequate.Recognition should be made of the cost of anyinstructions of the employer and the increased costs thatwill be incurred when restoration takes place, includingthat resulting from inflation.

3.70 Where a single policy for the works is taken out, itsduration will normally be expressed as ending at thecontract date for completion. However, if the date forcompletion is extended so that a new date for completionis fixed; or the written statement of practical completion isnot issued until after the completion date has passed, it isessential that the single policy is extended to expire on thedate of issue of the written statement of practicalcompletion. It is essential that NHS bodies regularly reviewthe anticipated dates of the issue of written statements ofpractical completion to ensure that policies are kept inforce until those dates. Should it become apparent thatthe date of practical completion of a project will exceedthe duration of the policy, NHS bodies must take steps toensure:

a. the issue of necessary extension endorsements; and

b. payment of additional premiums by the contractor ifclause 22A applies.

3.71 The term full reinstatement value is used on theform to emphasise that the sum insured must reflect theactual cost of reinstatement at the time of reinstatementwhenever that may be. However, the term is onlyintended to cover:

a. the actual cost the contractor incurs in reinstatingthe works;

b. site materials which have been lost or damaged;

c. the cost of removing debris in order to prepare forreconstruction; and

d. any additional sum prescribed in the contract forprofessional fees.

3.72 The term is not intended to include consequentialloss such as:

a. the increased cost of carrying out works notundertaken at the time of the damage and delayedin its completion by reason of that damage; or

b. loss suffered by the employer (the NHS body) due tothe delay in securing the completed works.


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Clause 22A: Erection of new building All RisksInsurance of the works by the contractor

3.74 If the contract is for the erection of a new buildingand the insurance of the works is provided by thecontractor, clause 22A will apply and clauses 22B and 22Cshould be deleted in their entirety.

3.75 The insurance provided by the contractor may be asingle policy for a particular contract (clause 22A.2) or anannual policy maintained by the contractor (clause 22A.3).

3.76 Clause 22A.2 sets out the conditions that apply ifthe contractor takes out a single policy insurance.

3.77 When a contractor maintains an annual policy, theNHS body must obtain a certificate of insurancecompleted by the contractors insurers before the contractis executed and subsequently monitor that the insurance ismaintained. The last sentence of clause 22A.3.1 providesfor the contractor to supply the annual renewal date ofthe policy which is entered in Appendix 1 to the form.

Clause 22G: Works in, or extensions to, existingstructures loss or damage to the works by the riskscovered by the definitions in clause 22.2 All RisksInsurance

Clause 22J: Works in, or extensions to, existingstructures loss or damage to the structures andcontents risks covered by the definition in clause1.3 of specified perils

Clause 22P: Loss or damage caused by negligence

3.78 Where the work is in, or in extensions to, existingstructures and the risk of loss or damage to the existingstructures and their contents and the works is taken bythe employer (the NHS body), amendments to clauses 17,20, 22, 23 and 25 should be made. Clauses 22A, 22B and22C should be deleted in their entirety and the additionalheadings and clauses 22G, 22J and 22P included.

If the contract is for works in, or extensions to, existingstructures, there will be consequential amendments toclause 22 if NHS insurance of the works clauses 22G, 22Jand 22P are selected (see paragraph 3.78).

Delete clauses 22B and 22C in their entirety if clause 22Aapplies.

Delete clauses 22A, 22B and 22C in their entirety ifclauses 22G, 22J and 22P apply and insert the headingsand clauses 22G, 22J and 22P. In addition, make theconsequential amendments listed to clauses 17, 20, 22and 23 together with the amendment to clause 25(paragraph 3.97).


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Table 2 Clauses 22G, 22J and 22P

22G

Definitions 22G.1

Loss or damage to the 22G.2work at risk of employer

Restoration etc of 22G.3loss or damage obligations ofContractor andEmployer

22G.3.1

22G.3.2.1

22G.3.2.2

22G.4

Works in, or extensions to, existing structures lossor damage to the works by the risks covered by thedefinition in clause 22.2 All Risks Insurance.

The definitions in clauses 1.3 and 22.2 shall apply to thisclause.

Subject to the provisions of clause 22P, all work executedand all Site Materials shall be at the risk of the Employerin respect of loss or damage by the risks covered by thedefinition of All Risks Insurance up to and including thedate of issue of the certificate of Practical Completion orup to and including the date of determination of theemployment of the Contractor under clause 22G.3.2 orclause 27 or clause 28 (whether or not the validity of suchdetermination is contested) whichever is the earlier or,where clause 18 has been operated, up to the relevantdate in respect of the relevant part.

If any loss or damage affecting work executed or any partthereof or any Site Materials is occasioned by any one ormore of the risks covered by the definition All RisksInsurance then, upon discovering the said loss ordamage, the Contractor shall forthwith give notice inwriting to the Employer of the extent, nature and locationthereof and

the occurrence of such loss or damage shall bedisregarded in computing any amounts payable to theContractor under or by virtue of this Contract;

if it is just and equitable so to do the employment of theContractor under this Contract may within 28 days of theoccurrence of such loss or damage be determined at theoption of either party by notice by registered post orrecorded delivery from either party to the other. Within 7 days of receiving such a notice (but not thereafter)either party may give to the other a written request toconcur in the appointment of an Arbitrator under Article 5and clause 41 in order that it may be determined whethersuch determination will be just or equitable;

upon the giving or receiving by the Employer of such anotice of determination or, where a reference toarbitration is made as aforesaid, upon the Arbitratorupholding the notice of determination, the provisions ofclause 28.2 (except clause 28.2.2.6) shall apply.

If no notice of determination is served under clause22G.3.2. or, where a reference to arbitration is made asaforesaid, if the Arbitrator decides against the notice ofdetermination, then


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22G.4.1

Valuation of restoration etc work 22G.4.2Employer's right of deduction from valuation

22J

Definitions 22J.1

Existing structures and contents 22J.2Specified Perils at risk of Employer

Modification of clauses 22J.3

Loss or damage caused by negligence 22P

the Contractor with due diligence shall restore such workdamaged, replace or repair any such Site Materials whichhave been lost or damaged, remove and dispose of anydebris and proceed with the carrying out and completionof the Works; and

the restoration, replacement or repair of such loss ordamage and (when required) removal and disposal ofdebris shall be treated as if they were a Variation requiredby an instruction of the Employer under clause 13.2 andvalued accordingly and paid by the Employer. In makingthat payment the Employer may deduct from the amountof the valuation that part (up to but not exceeding thewhole of the valuation) which relates to the restoration,replacement or repair of loss or damage and the removaland disposal of any debris to the extent that the loss ordamage was caused by the negligence of the Contractoror of any Domestic Sub-Contractor. Provided that on orafter the earlier of the relevant Terminal Date (as definedin the Nominated Sub-Contract Conditions NSC/C) theprovisions of model clause 8G.4 shall apply in respect ofany loss or damage to the relevant Nominated Sub-Contract Works.

Works in, or extensions to, existing structures loss or damage to the structures and contents risks covered by the definition in clause 1.3 ofSpecified Perils

The definitions in clause 1.3 shall apply to this clause.

Subject to the provisions of clause 22P, the existingstructures (which shall include from the relevant date anyrelevant part to which clause 18.1 refers) together withthe contents thereof owned by him or for which he isresponsible shall be at the risk of the Employer in respectof the full cost of reinstatement, repair or replacement ofloss or damage due to one or more of the Specified Perils.

Any reference in a clause to clause 22C shall be deemedto be a reference to clause 22G or clause 22J whereappropriate.

Notwithstanding the matters set out in clauses 22G and22J for which the Employer bears the risk under theseclauses the Employer may have recourse against theContractor if the loss or damage to the Works or SiteMaterials (clause 22G) or to the existing structures andtheir contents owned by the Employer or for which he isresponsible (clause 22J) is caused by the negligence of theContractor, his servants or agents or of any Sub-Contractor, his servants or agents employed upon or inconnection with the Works or any part thereof includingtheir failure to take precautions to prevent loss or damageto the Works or existing structures or extensions, tominimise any such loss or damage or to act uponinstructions issued by the Employer in relation to thesematters.


26


The amendments to be made to clauses 17, 20, 22 and23 and the consequential amendments to Appendix 1when additional clauses 22G, 22J and 22P are used are:

a. clause 17.1.3:

Delete sub-clause and insert (Number not used);

b. clause 20.2:

(i) in line 1, delete 22C.1 and insert 22J;

(ii) in line 3, after property real or personalinsert including loss or damage by theSpecified Perils;

c. clause 20.3.1:

(i) in line 1, after clause 20.3.2 insert and22P;

(ii) in line 6, delete 22C and insert 22G;

(iii) in line 6, delete 22C.4.3 and insert22G.3.2;

d. clause 22.1:

delete sub-clause and insert (Number not used);

e. clause 22.3:


f. clause 23.3.1:


g. clause 23.3.2:

amend clause to read:

The Employer may, with the consent in writing ofthe Contractor (which consent shall not beunreasonably withheld), use or occupy the site orthe Works or part thereof whether for the purposesof storage of his goods or otherwise before thedate of issue of a written statement of PracticalCompletion by the Employer;

h. clause 23.3.3:


j. Appendix 1:

(i) delete entries relating to clause 22.1Insurance of the Works alternative clausesand insert clauses 22G, 22J and 22P apply;

(ii) against clauses 22A, 22B.1 and 22C.2Percentage to cover professional fees insertnot applicable;

(iii) against clause 22A.3.1 Annual renewal date ofinsurance as supplied by Contractor insertnot applicable.


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Vandalism and theft of site materials

3.79 An amendment to clause 22P will be required if anNHS body wishes to make the contractor responsible incases of theft of site materials or vandalism (seeparagraphs 3.80 to 3.82).

3.80 Where clauses 22G and 22J are used, the employermay receive claims from contractors for losses resultingfrom vandalism or theft of site materials, etc in caseswhere the contractor is not negligent. NHS bodies maywish to consider an amendment to clauses 20.2, 20.3 and22P to avoid such claims. NHS bodies should be awarethat the incorporation of these amendments into thecontract may result in contractors taking out additionalinsurance and the cost of such insurance may be reflectedin their tender prices.

3.81 Where clause 22A is used, the same situation, but inrespect of theft only, could arise.

3.82 If an NHS body wishes to make the contractorresponsible in cases of vandalism or theft of site materials,the amendments given opposite should be made.

Clause 22D: Insurance for employers loss ofliquidated damages clause 25.4.3

3.83 Clause 22D gives the employer the option to requirethe contractor to arrange for insurance to compensate theemployer for the amount of damages which he is notcontractually able to recover under clause 24: Damagesfor non-completion. This is because of the extension oftime given by the employer in respect of the occurrence ofthe relevant event in clause 25.4.3 (loss or damageoccasioned by any one or more of the Specified Perils),which has caused loss or damage to the works or to workexecuted or to site materials, or temporary buildings, plantand equipment for use in connection with and/or adjacentto the works.

The following amendments should be made if an NHSbody wishes to make the contractor responsible in casesof vandalism or theft of site materials:

a. clause 20.2

after whatsoever in line 3 insert including theftof Site Materials or vandalism;

b. clause 20.3.1:

after Site Materials in line 2 insert except thatwhich is lost or damaged as a result of theft orvandalism;

c. clause 22P:

after thereof in line 10 insert or is due to theft(if applicable) of Site Materials or vandalism.


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3.84 The option can be operated by the employer bystating in Appendix 1 to the form that the employer mayrequire insurance under clause 22D and by inserting theperiod of time for which the employer requires the suminsured to be paid. The cost to the contractor of takingout and maintaining the insurance is added to thecontract sum.

3.85 Where a specific loss of income in the event of delaycan be identified by an NHS body, consideration should begiven to instructing the contractor to obtain insurancequotations. Cases where this will happen are expected tobe few and the Department should be consulted.Appendix 1 to the form will usually be completed to statethat the insurance to which clause 22D refers is notrequired.

Clause 23: date of possession, completion andpostponement

3.86 The wording of the contract anticipates unimpededpossession of the whole site from a specific date. Wherephased or serial possession is envisaged, this must beclearly defined in the tender documentation and thecontract appropriately amended (see paragraph 3 ofAppendix 5).

3.87 Clause 23.1.2 (which can either apply or not at theemployers option) enables the employer to defer givingpossession of the site to the contractor until the date ofpossession referred to in clause 23.1.1. The relevant itemin Appendix 1 to the form must be completed by theemployer to state whether or not the clause is to apply:the period of deferment is not exceeding six weeks unlessa lesser period is stated.

3.88 The Department recommends that clause 23.1.2should be selected to apply as without it the contractwould be silent as to the position arising if the stated dateof possession is not adhered to. Nevertheless, NHS bodiesshould make every effort to avoid being late in givingpossession of the site as any deferment is expressly statedas a ground for an extension of time (see clause 25.4.14)and for the reimbursement to the contractor of direct lossand/or expense so incurred (see clause 26.1).


Date of possession and date for completion

3.90 In order that all tenders are based on the sameinformation, the Department recommends that for tenderpurposes, the date of possession is normally given as a

It should be noted that if the contract is for works in, or in extensions to, existing structures, there will beconsequential amendments to clause 23 if NHS insuranceof the works clauses 22G, 22J and 22P are selected (seeparagraph 3.78).


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number of days (normally not exceeding 60 days) fromthe date of acceptance of contract. In addition, the datefor completion should be given as a specific number ofconsecutive calendar weeks after the date of possession.Specific dates for possession and completion must beestablished with the successful tenderer and inserted inAppendix 1.

3.91 Tenderers, if they wish, should not be precludedfrom submitting an alternative tender for considerationbased on a different construction period to that stated inthe tender documents.

3.92 The period for the execution of the works stated inthe tender document is normally assessed by the employerin consultation with the employers professional advisors.

Clause 24: Damages for non-completion

3.93 Appendix 1 to the form requires the rate at whichliquidated and ascertained damages will be deductible tobe specified when the contract is drawn up for execution,notice of which will have been given in the tenderdocuments.

3.94 The methods of assessment of the rate for damagesare discussed in paragraphs 2.14 to 2.24.

Clause 25: Extension of time

3.95 Clause 25 sets out the detailed procedures forclaiming and granting an extension of time for completionof the works and lists the grounds (referred to asrelevant events) on which an extension of time may begranted.

3.96 Clause 25.4.2 provides for an extension of time tobe granted for exceptionally adverse weather conditions.Government policy is to encourage improvements inproductivity in the construction industry, especially bylooking to contractors to take all reasonable steps tomitigate the effects of exceptionally adverse weatherconditions. To comply with this general policy theDepartment requires that the preliminaries section of thetender documents and contract documents must includethe following clause:

Building in adverse weather conditions

The Contractor, as part of his best endeavours toprevent delay in the progress of the Works, will beexpected to adopt all reasonable measures to preventor minimise harmful effects of weather conditions onthe Works. The extent to which he has taken suchmeasures will be taken into account by the Employerwhen considering any notice of delay due toexceptionally adverse weather conditions underContract Conditions clause 25.


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3.97 It is Government policy not to place itself in aposition where it is not possible to recover the cost of lossor damage caused by the negligence of other parties.Clause 25.4.3 (loss or damage occasioned by any one ormore of the Specified Perils) should therefore beamended.

3.98 NHS bodies should note that it is necessary to provenegligence and that the employer will be required to valuework and to deny payment, as well as seeking therecovery of liquidated and ascertained damages. In theevent of a serious delay these damages may prove verysubstantial.

3.99 An alternative to amending clause 25.4.3 is for theemployer to arrange insurance which covers loss ofrevenue/additional cost resulting directly from theextension of time which would otherwise be granted. Inorder to offset the cost of such insurance, alternativequotations can be sought from the contractor, that is,with and without the amendment to clause 25.4.3.

3.100 This insurance is not confined to thecontractors/sub-contractors negligence and gives addedvalue where the extension of time under clause 25.4.3would otherwise have to be granted.

Clause 26: Loss and expense caused by mattersaffecting regular progress of the works

3.101 The attention of NHS bodies is drawn particularlyto the list of matters in clause 26.2 which may give rise toa claim for direct loss and/or expense from a contractor orsub-contractor. NHS bodies must manage contracts sothat, as far as possible, situations are avoided which maygive rise to claims for additional payments.

3.102 It should be noted that the provisions of clause 26are without prejudice to any other rights and remedieswhich the contractor may possess.

3.103 Clause 26.2.9 enables contractors to suspendperformance of their obligations under the contract. Thisis because under clause 30.3.8 the contractor has theright, subject to written notice not having been given, tosuspend the works for non-payment of a sum due. Shouldthis occur then NHS bodies must immediately take expertinsurance advice on the effect of suspending any of theContractors obligations.

The following amendments will be made to clause 25.4.3:

a. where clause 22A is used, insert provided that thisis not due to any negligence, omission or default ofthe Contractor, his servants or agents or of anySub-Contractor, his servants or agents; or

b. where clauses 22G and 22J are used, insertprovided that this is not due to any negligence,omission or default of the Contractor, his servantsor agents or of any Sub-Contractor, his servants oragents for which the Contractor is liable at theend of the clause.


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3.104 Claims and settlement are discussed in Chapter 3of Contracts and commissions for the NHS estate: Guideto Contract Procedures.

Clause 27: Determination by employer

3.105 As the reference to the Local Government Act1972 in clause 27.3 is irrelevant in the NHS, this should bedeleted.

Clause 29: Execution of work not forming part ofcontract

3.106 Clause 29 provides for work not forming part ofthe works to be executed by the contractor to be carriedout by the employer himself or by persons employed orotherwise engaged by him. Every person employed orotherwise engaged for the purpose of clause 20 (Injury topersons and property and indemnity to employer) isdeemed to be a person for whom the employer isresponsible and not a sub-contractor.

3.107 Clause 29 work does not form part of the contractand thus will not be within the meaning of the wordWorks or the phrase Works executed and/or SiteMaterials which are covered for All Risks Insurance.Therefore, under clause 22A, the employer (the NHS body)needs to consider what cover is required for clause 29work.

3.108 Full descriptions of work to be executed by theemployer or persons employed or otherwise engaged byhim must be given in the tender documents and thecontract documents together with details of anyattendance and builders work to be provided by thecontractor. In addition, the estimated date forcommencement and duration related to the date forcomp

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