New JCT contracts: arrival of the Design & Build 2016

The JCT launched its 2016 family of contracts together with guidance notes at the beginning of the summer with the publication of its new Minor Works Building Contracts. The Scottish equivalent, the SBCC Minor Works Building Contracts, are expected to be released in the very near future.

Last week, the JCT issued the second contract in its new series – the Design and Build form. The new contract is accompanied by a Design and Build Sub-Contract intended for use with the main form, as well as guidance notes to each of the two new contracts. In Scotland, we await publication of the new edition SBCC Design and Build Contract. The Scottish Building Contracts Committee has confirmed that its new SBBC contracts will be issued in the same order as the JCT 2016 forms.

Looking ahead, the JCT intends to publish the variants of its Standard and Intermediate Building Contracts by the end of the year with the new editions of its remaining agreements being rolled out piecemeal next year – but, for consistency, they will still be labelled ‘2016’.

We reported on the key features of the new suite in our summer Law-Now on the JCT 2016 Minor Works Building Contracts which contained a link to our CDM 2015 webinar.

To recap, the common features across all the new contracts include:

• The incorporation, into the body of each contract of the JCT’s own amendments (previously published as ‘Amendment 1’) to reflect the coming into force of the Construction (Design and Management) Regulations 2015, eighteen months ago.
• Provisions that reflect the Public Contracts Regulations 2015 and the JCT’s own entitled Public Sector Supplement.
• Simplified payment provisions designed to make the Construction Act notice requirements clearer. Under the interim payment due date provisions, the monthly cycle of payment due dates now continues to apply after practical completion, up to the due date for the final payment. This is consistent both with the new loss and expense ascertainment procedure and Fair Payment principles.
• Flexibility in relation to fluctuations provisions.
• A revamp and consolidation (within the conditions themselves) of the general insurance provisions that apply to Insurance Options A, B and C - evidence of insurance, insurance claims and reinstatement work.
• In the new JCT building contracts used for larger works, there is a new procedure for the prompt assessment of loss and expense claims, provisions for the grant of performance bonds and parent company guarantees and an extension of the optional provisions for obtaining collateral warranties from sub-contractors to include (as an alternative) the granting of third party rights by sub-contractors.

JCT 2016 also seeks to address the perennial problem of insuring existing structures – often a difficulty when the employer under the contract is not actually the owner of the building - this key change moves away from the conventional insurance position and acknowledges that the works and existing structures can now also be insured by other means. So Option C is effectively extended to allow alternative bespoke solutions to deal with the problems encountered by the previous drafting.

It is anticipated that over the next few years, the requirement for more tailored insurance solutions will be encountered more frequently and we will see greater focus on the refurbishment of premises as a result of legislative changes both north and south of the border concerning minimum energy efficiency standards for the built environment. In England and Wales, regulations in relation to ‘MEES’ come into force tomorrow, 1 October 2016: click here for our Law-Now update. In Scotland, separate regulations imposing obligations on the owners of non-domestic buildings to assess and improve energy performance efficiency came into force last month, on 1 September 2016 click here for our Law-Now on this development update. Whilst England and Wales have opted for a ban on poorly performing properties with an EPC rating of “F” and “G”, in Scotland a more lenient approach has been adopted, without a ban or significant penalties for non-compliance.

In summary, users of the JCT and SBCC forms will find some welcome changes in the 2016 suite of contracts, in particular in respect of the improved ease of use insurance and simplified payment provisions which can both be two of the most complicated and vitally important aspects of construction contracts.