UK: JCT Management Building Contract 2008

Last Updated: 5 January 2009
Article by Francis Ho

A few weeks ago the JCT unveiled two of its final new contracts for 2008, the JCT Pre-Construction Services Agreement for two-stage tendering which comes in General Contractor and Specialist forms. Both are designed for use under both traditional and design and build procurement.

No doubt much will be written about them since the construction market has embraced two-stage tendering in recent years. The JCT at the same time launched a public sector Consultancy Agreement, maintaining a recent trend amongst contract publishers for introducing appointments which can be used to appoint an entire professional team.

That is not to say that the JCT has suddenly come over all populist. In fact, its first contract launch of the year was a new version of its management contracting suite of contracts. The RICS Contracts in Use Survey of 2004 revealed that, of the 2,300 plus projects considered, a mere 0.2% used management contracting.

The JCT's approach seems to be to possess a contractual solution for all procurement strategies, hence the update to its management contract. Usage of management contracting has plummeted in the last decade, resulting in a muted initial response to its 2008 revision. Partly this decline is due to bad publicity from a few high-profile developments under management procurement routes but the increasing popularity of design and build with its single point of responsibility has also contributed.

Management contracting is an option for fast tracking construction works whilst the design process is still underway. A Management Contractor is engaged to manage and supervise the construction process and assist the Employer during both the pre-construction period and the construction phase. The works are divided into packages and the Management Contractor appoints Works Contractors (usually by competitive tender) to carry these out. The Management Contractor does not carry out any works itself and the Employer engages the professional consultants.

The current management contract suite supersedes the 1998 version (save for the collateral warranties, which are new to the suite, and the Invitation to Tender and Tender documents which are surplus to requirements). A Management Works Contractor/Employer Agreement within the suite sets out the obligations between the Works Contactor and the Employer.

The main changes are summarised below:

  • Recognising that the previous method of calculating the management fee could give the Management Contractor less incentive to minimise construction costs, the 2008 suite introduces alternatives for fixed or capped rates and amounts
  • The transition from pre-construction period to construction period has been simplified. If no Notice to Proceed is issued, the Management Contractor may only terminate after giving at least 14 days' notice to the Employer
  • The Employer's Architect/Contract Administrator now deals with Works Contractors' loss and expense claims. The Management Contractor must consult with the Architect/Contract Administrator before granting extensions of time to the Works Contractors
  • Options for third party rights or collateral warranties have been included
  • The Employer can specify key personnel that the Management Contractor is to use
  • The Management Works Contract now allows for Works Contractor designed works

The 1998 contracts addressed a number of criticisms of the original 1987 editions. In contrast the new changes reflect a process of evolution, quietly extending the Employer's control over the works whilst clarifying the Management Contractor's liabilities.

The layout is shared with JCT's 2005 building contracts. The result is a more readable document which for those new to management contracting and who might otherwise have been tempted to use NEC3's Option F: Management Contract, which is written in plain English but leaves the parties to decide how parts of the contract will work.

All that aside, there is no hiding from the fact that management contracting is a higher-risk procurement route. Add to that the fact the proposed amendments to the Housing Grants Construction and Regeneration Act 1996 in the Local Democracy, Economic Development and Construction Bill which is currently going through Parliament will outlaw pay-when-certified clauses (one of the features of the JCT Management Contract). Have we heard the death knell for this particular form of procurement?

Ruth Burgin assisted with this article.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 31/12/2008.

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