DAVID THOMAS QC
David Thomas
QC
Keating Chambers,
London
Standard form construction
and engineering contracts:
current and recent
developments
One of the perceived benefits of standard forms of contract is stability. If
successful, they are widely used in the industry and will become familiar.
Parties and their advisers are used to their features, including general
standpoint and tone, physical layout and any individual provisions which
need scrutiny and may require amendment. While no contract will be
uniformly acclaimed, familiarity leads to acceptance and a sense of ‘comfort’.
I
t is a matter of some significance when a
standard form is changed. The UK has
seen major changes in its principal forms
within the last few months and those engaged
in international work are awaiting the new
edition of the FIDIC suite currently in the
course of preparation.
JCT 2011
The Joint Contracts Tribunal (JCT) is the most
widely used of the British1 domestic forms of
construction contract. JCT produces one of the
biggest suites of contract documents in the world,
with a whole range of different agreements from
Minor Works, via Intermediate up to the Major
Project Construction Contract and through a
variety of pricing and procurement options:
Design and Build, Management, Prime Cost,
Measured Term, With and Without Quantities,
as well as specialist Repair and Maintenance and
Homeowner contracts. JCT has now produced
its 2011 edition of the suite, which supersedes
JCT 2005. This became the current edition on
1 October 2011. The date is significant because
the main driver behind the revision was the
effect of the Local Democracy Economic
Development and Construction Act 2009
(‘LDEDC Act’) upon contracts entered into
since that date. The LDEDC Act includes, among
much unrelated material, amendments to the
Housing Grants Construction and Regeneration
CONSTRUCTION LAW INTERNATIONAL Volume 7 Issue 2 June 2012
Act 1996 (‘HGCR Act’) which since 1998 has
imposed mandatory provisions on those (many)
construction contracts caught by it, in relation
to adjudication of disputes and mechanisms for
payment. JCT produced amendments reflecting
the LDEDC Act provisions in 2009 and these
have been incorporated into the 2011 edition
to coincide with the impact of the Act on post1 October 2011 contracts. JCT has also taken the
opportunity for some other revisions, much of
which can be characterised as ‘tidying’.
ICE and Infrastructure Conditions
of Contract
The latter part of 2011 saw the conclusion of
a remarkable train of events at the Institution
of Civil Engineers (ICE). After over 60 years
of publication, on 1 August 2011, the ICE
officially withdrew its form of contract, which
was in its 7th edition (1999). The ICE Contract
was one of the best-known of the traditional
engineer-based forms of contract and was
indeed the original basis of the FIDIC suite;
the 1957 1st Edition of the Red Book closely
followed the ACE (Association of Consulting
Engineers) form, which was a version for
international use of the ICE 4th edition.
The decision to withdraw the ICE forms was
taken in 2009 by the Institution’s Council and
appears to have generated some dissension
amongst membership. It has two major
33
DAVID THOMAS QC
consequences of note for industry users. First,
perhaps to propitiate the dissenters who
remain loyal to the traditional model, a
successor to the ICE forms has been published
jointly by the ACE and the Civil Engineering
Contractors Association (CECA). The new
suite, which includes Design and Construct,
Measurement and Ground Investigation
versions, has been named the Infrastructure
Conditions of Contract.2 It too takes into
account the LDEDC Act amendments and so
can be regarded as ‘Construction Actcompliant’. The ACE and CECA launched the
new suite on 1 August 2011, referring,
presumably without intention of irony, to its
basis in the ‘highly successful ICE Conditions
of Contract’.
Secondly, the withdrawal of the ICE suite
has meant that the only form endorsed by
the Institution is now NEC3.
NEC3
There is no new edition of the New Engineering
Contract (NEC), the current 3rd edition
having been introduced in 2005. However, it
continues to command widespread attention,
not least because of its use on high-profile
projects, the most notable of which is currently
the London 2012 Olympic site.
This has only been increased by its new
status as the sole contract endorsed by the
ICE, as explained above. It had also been the
sole contract endorsed by the Office of
Government Commerce (OGC) for public
sector projects until the Arup Review at the
end of 2008 also considered the merits for
collaborative contracting purposes of the
Project Partnering Contract and the JCT’s
Constructing Excellence form. It is still much
favoured in public sector circles and has also
been used by Sainsbury’s for its supermarket
construction and internationally, for example,
on Abu Dhabi’s Al Raha Beach Development.
It is not the case that all the attention
focused on NEC3, however, is adulatory. The
unique ‘narrative’ style of the text, for
example, clause 30.3, ‘[t]he Contractor does
the work so that the Condition stated for each
Key Date is met by the Key Date’, continues to
trouble lawyers and, apparently, judges. In
Anglian Water Services Ltd v Laing O’Rourke
Utilities Ltd [2010] EWHC 1529 (TCC), Mr
Justice Edwards-Stuart in the Technology and
Construction Court said that he had ‘[n]o
doubt this approach to drafting has its
adherents within the industry but... from the
34
point of view of a lawyer, it seems to me to
represent a triumph of form over substance’.
Notwithstanding criticism, NEC’s position
as an alternative approach to engineering
and
construction3
contracts
looks
unassailable and its influence is likely only to
grow. Keating on NEC3, by this author and a
team from Keating Chambers, will be
published by Sweet & Maxwell in May 2012.
FIDIC
A full appreciation of FIDIC developments
must await the comprehensive review of the
‘Rainbow’ suite understood to be moving
towards a new edition in 2013, which will be
FIDIC’s centenary year. It is sufficient for
present purposes to note the introduction in
October 2011 of the official 1st Edition of the
Sub-Contract, for use with the 1999 Red Book
and Multilateral Development Bank (MDB)
version of the Red Book, sometimes referred to
as the Pink Book. The formal launch of the new
Sub-Contract is the conclusion of the process
begun by the introduction of the Test Edition
in December 2009.
Conclusion
Nor mally, the life of standard for m
construction and engineering contracts is
characterised by the stability which is a main
part of their attraction. The last few months
have been a period of almost unprecedented
change in this respect in the UK. Practitioners
who advise the industr y on choices and
interpretation of contracts are having to adapt
to the features of the new landscape.
Notes
1It should be noted in referring to ‘British’ or ‘UK’
forms that the Scottish Building Contract Committee
is a member of the JCT and is responsible for adapting
JCT contracts for use in Scotland and drafting Scottish
documents where required.
2The infelicitous abbreviation to ICC opens up the
possibility of confusion with the Model Turnkey
Contract for Major Projects of the International
Chamber of Commerce.
3 It should be noted that the title of the principal contract
is the Engineering and Construction Contract; it is
intended to be both.
David Thomas QC is a member of Keating
Chambers in London. He practises in the UK and
internationally. His special areas of expertise include
construction, engineering, infrastructure, energy and
technology projects.
CONSTRUCTION LAW INTERNATIONAL Volume 7 Issue 2 June 2012