JCT 2016: overview of major changes

30 May 2017

A new suite of JCT contracts were issued last year. Jamie Olsen helps you get to grips with the major changes

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The Joint Contracts Tribunal (JCT) released a new suite of contracts last year to replace the 2011 versions. Below, we set out the significant changes.

Payment provisions

These have been amended and are now clearer to apply:

• provisions for Contract Sum deductions and additions have been replaced with a simplified 'adjustments' clause
• each party can now issue a Pay Less or Final Payment Notice
• a 14-day period is applied to both interim and final payments
• application of Interim Valuation Dates and the due date for final amount amended to include payments up to the end of the Rectification Period or the date of the Notice of Making Good.

Timetabling

Due to the government’s fair payment recommendations and model charter, standard practices should apply throughout the supply chain. The new form introduces the concept of the Interim Valuation Date, which applies under the subcontract form and is intended to ensure that the same schedule of dates is used throughout the chain.

The subcontractor’s application for payment should be made four days before the Interim Valuation Date, although the subcontract allows for it to be made later if the contractor has not issued a Payment Notice five days after the due date and the subcontractor has not previously applied for that payment. The main contractor’s application for payment is either on or before the Interim Valuation Date, although the contract is drafted to allow it to be made after this as well; if so, the due date is altered to seven days after the notice is received by the employer.

The main contract due date is seven days after the Interim Valuation Date, or following receipt of the main contractor’s application by the employer if the application has been received after the Interim Valuation Date. The subcontract due date is 12 days after the Interim Valuation Date, or 16 days after receipt of the subcontractor’s application by the contractor, if the subcontractor’s application is received four days before the Interim Valuation Date; that is, there is a five-day buffer period for the contractor to pay the subcontractor, in addition to the four-day period before the Interim Valuation Date for the subcontractor to submit its application.

Although the contracts allow flexibility on submitting the applications for payments, the intention is presumably that the contractor’s application should be made before the Interim Valuation Date, and the subcontractor’s four days before, because otherwise the due date will also be delayed. The final date for payment is 14 days after the due date under both the main contract and the subcontract, so this would consequently be delayed as well, depending on the timing of the application.

Fluctuation Options B and C have been deleted from the standard form, with the Contract Particulars now allowing the use of Fluctuation Option A, Fluctuations B and C – still available through the JCT website – or a bespoke fluctuation option.

Loss and expense

The contractor must notify the employer as soon as any loss or expense becomes apparent. An initial assessment and any other relevant information must be provided, but can be updated later.

The employer must then ascertain the loss or expense within 28 days of the initial assessment or 14 days of each subsequent monthly update, so differences can be identified quickly. There is a similar loss and expense clause in the JCT subcontracts, requiring the contractor to respond to subcontractors within 42 days of the initial assessment or 28 days of subsequent updates.

Secure performance

A new clause requiring the contractor to provide a performance bond and parent company guarantee (PCG) has also been inserted. The contract anticipates that the employer may require such a bond or guarantee and this should be identified in the particulars, as should the specific entity providing the PCG.

Contracts also now include the option for subcontractors to grant third-party rights to beneficiaries identified in a notice, as an alternative to signing and returning collateral warranties.

Contracting compliance

The JCT has drafted some provisions in response to increasing use of building information modelling (BIM) on centrally procured and local government projects, as well as some private-sector ones. Relatively light, the main emphasis of these provisions is on the incorporation of a full protocol such as the Construction Industry Council’s BIM Protocol as a contract document. Some amendments have also been made to ensure compliance with the Public Contracts Regulations 2015.

The copyright licence for use of the contractor’s design documents can now be assigned or sublicensed to any owner of the works or tenant, in line with common copyright licence provisions for building contracts and professional appointments.

Employers can now list in the contract particulars whether Insurance Option C for existing structures applies or if it should be replaced by alternative arrangements, such as a schedule prepared by the employer. Provisions relating to evidence for claims and contractor’s obligations in each of Options A, B and C have also been moved to section 6 of the contract.

Jamie Olsen is Associate at Pinsent Masons

Further information

• Related competencies include Contract practice
• This feature is taken from the RICS Construction journal (April/May 2017)