A Guide to Standard Forms of

Construction Contracts

(Rethinking Construction 2004)

The need for contracts
 The transition from successful design to
successful project completion requires the
selection of a contract which reflects the
aspirations of all Parties involved and meets the
demands of the project.
 Key criteria must be identified and risks allocated
before the form of contract is selected.
Client Requirements
 Balance of time/quality/cost
 Can be defined by following criteria:
Speed – design & construction
Separation of design & construction
Cost certainty
Dealing with complexity
Client involvement
Capacity for variations
Clarity of remedies
Procurement Method

 Choice of contract dependant on procurement

method
General Contracting
Design & Build
Construction Management
Partnering
Management Contracting
Risk
 The allocation of risk is a major element of any contract.
 Contractor includes cost of risk in tender calculation
 E.g. ‘Price certainty’ is bought by paying the contractor
to accept the risk in a changing commercial market
 Degree of risk must therefore be assessed and the
economics of risk apportionment assessed – part of
‘best value’ calculations
 Key areas of risk are:
Default
Delay
Quality
 A Selection Criteria (blue)
 The blue area of the matrix covers six key criteria to consider when selecting a
contract form.
 B Risk Areas (green)
 The green area of the matrix covers three key risk areas to consider when
selecting a contract form.
 C High/Low
 The scale for reading the “characteristics” bars for each key criterion.
 Indicates high/low capacity for accommodating each criterion. The bars
indicate the range which can be achieved and within which a level can be
selected for a specific contract.
 D Contractor/Employer
 The scale for reading the “allocation” bars for each key risk area.
 Indicates where each risk is allocated. The bars indicate the range over which
the risk can be allocated for a specific contact.
 E Cost certainty
 This can be used to achieve moderate to reasonably high price certainty.
 F Capacity for variations
 This enables a moderately high capacity for managing variations.
 G Client involvement
 That it can enable a moderate to high level of Client involvement in the management of
the project.
 H Speed
 Low to moderate speed of implementation from design to completion.
 I Clarity of remedies
 Low clarity = relatively difficult to trace contractual remedies.
 J Complexity
 Ability to be applied to projects covering a wide range of complexity.
 K Design/management separation
 That the project designers and the managers of the contract are the same or very
closely related.
 There is low separation of design and management.
 L Default
 The Contractor bears the main risk for default under the Contract
.
 M Quality failure
 The Contractor bears the main risk for failure of construction
quality.
 N Delay
 The Contractor bears the main risk for delay under the Contract.
JCT 98: Standard Form Building Contract

 6 versions; private, L.A., +/- quantities, approx. quantities

 A much used standard form 10
JCT: IFC (Intermediate Form of Building Contract)

 Used for well specified traditional building work without complex

service packages. With or without BoQ
11
JCT: MW 98, Agreement for minor work

 For small & simple works, Conditions give bare outline of duties
& responsibilities. Risk allocation very simple
12
JCT: PCC 98 Prime cost contract

 Cost plus contract, works not fully defined, all work on instruction
of Architect
13
JCT: CD 98 Standard form with contractors design

 Let on basis of ‘Employers Requirements’ and performance

specification
14
JCT: MC 98 Management contract

 All works sub contracted, main contractor coordinates

15
JCT: MTC 98 Measured term contract

 Used for regular maintenance or repeating minor works

16
JCT Construction management contract

 Alternative clauses give flexibility, tailored for specific contract

17
ICE Conditions of Contract

 Work to satisfaction of the Engineer, who has high powers of

control
18
FIDIC Conditions of Contract

 Engineer employed as Client’s agent (as JCT 98)

 2 parts – 1)General Conditions, 2)Project specific conditions
19
NEC - Engineering and Construction Contract

 Core clauses common to all projects plus suite of alternative

procurement options
 Common in Partnering Agreements, written in plain English,
promotes team approach 20
 Conclusions
 Many forms of contract have developed
 The initial form has often been amended to suit
particular role definitions and issued as a separate
standard document
 The type of contract influences;
Degree of client involvement
Design & management separation
Complexity
Variations
Speed
Cost certainty and
RISK APPORTIONMENT