Appropriate-contract-selection-2nd-edition

RICS Practice Information

  • Title: Appropriate Contract Selection UK

  • Version: 2nd Edition, April 2024

  • Author: RICS

  • ISBN: 978 1 78321 524 9

  • © Royal Institution of Chartered Surveyors (RICS) 2024

  • Copyright: No reproduction without permission, except as allowed by existing license.

Introduction

  • Purpose: Review various forms of construction contracts available in the UK, and guide clients and advisers in selecting the appropriate one for their projects.

  • Focus: Selection by clients (employers) for engaging contractors for private/public sector projects.

  • Structure: Organized into three levels of professional competency:

    • Level 1: General Principles (Knowing)

    • Level 2: Practical Application (Doing)

    • Level 3: Practical Considerations (Advising)

RICS Standards Framework (Page 5)

  • Governed by: Standards and Regulation Board (SRB).

  • Aims: Public interest, ethical competence of the profession, adherence to high standards.

  • Collaboration: RICS works with various bodies for developing codes and standards.

Document Definitions (Page 6)

RICS Professional Standards

  • Set expectations for service delivery, ethical behaviour, and client protection.

RICS Practice Information

  • Non-mandatory guidance including processes, toolkits, and insights to aid professional performance.

Level 1 – General Principles (Page 9)

Introduction

  • Overview of commonly adopted procurement routes and forms of construction contracts.

Procurement Routes

  • Importance of analyzing project requirements before selecting the procurement route.

Traditional Procurement (‘Design-Bid-Build’) - (Page 10)

  • Characteristics: Separation of design and construction responsibilities.

  • Process: Employer appoints contractor and design consultants separately.

  • Contract Sum: Usually fixed price lump-sum, but may vary in specific circumstances.

Design and Build (D&B) (Page 12)

  • Characteristics: Contractor responsible for both design and construction.

  • Benefits: Single point of responsibility enhances communication.

  • Process: Contractor assembles their design team and manages the project.

Construction Management (CM) (Page 13)

  • Characteristics: Separate appointment of a construction manager to oversee a network of trade contractors.

  • Benefits: Design and construction can overlap; provides flexibility.

Management Contracting (Page 14)

  • Characteristics: Management contractor oversees construction but does not execute the work itself.

  • Contractor manages subcontracted works for a fee above project costs.

Partnering (Page 15)

  • Concept: Collaborative working relationship aimed at improving project delivery.

  • Can be applied across procurement routes.

Public Private Partnerships (PPP) (Page 16)

  • Characteristics: Collaboration between public and private sectors to provide public services.

  • Risk Management: Public sector transfers significant risks to the private sector.

Factors Influencing Construction Contract Choice (Page 44)

Project Requirements

  • Type of works and sector should drive contract selection.

Size and Complexity

  • Large, complex projects require detailed contracts whereas simpler projects may not.

Employer Understanding

  • Familiarity with contracts influences choices; simplified ones for less experienced employers.

Risk Allocation

  • Different contracts allocate risks differently based on procurement routes selected.

Contracts for Common Procurement Routes (Page 51)

Traditional (Lump Sum)

  • JCT Standard Building Contract, Intermediate Building Contract, and NEC contracts.

Design and Build

  • JCT Design and Build Contract, NEC options.

Construction Management

  • JCT Construction Management Appointment, NEC.

Management Contracting

  • JCT and NEC contracts for management.

Partnering and Framework Agreements

  • PPC2000, TPC2005, JCT Constructing Excellence.

Practical Considerations (Level 3 – Advising)

Contract Creation Essentials (Page 56)

  1. Offer - Proposal/intention to contract.

  2. Acceptance - Must meet exact terms of the offer.

  3. Consideration - Value exchange necessary.

  4. Certainty - Clear and unambiguous terms are essential.

  5. Legal Intent - Parties must intend to create legal relations.

Contract Execution

  • Importance of clear and agreed contract documents for legal enforceability.

  • Jurisdiction and its impact on contract validity.

Amending Standard Contracts

  • Reasons: Risk allocation changes, inserting obligations, or specific project requirements.

  • Engage legal advisors for amendments.

Duration of Liability

  • Deeds impose a 12-year liability period compared to 6 years for simple contracts. Includes critical conditions for validity.

Selection Considerations for Jurisdiction

  • Different jurisdictions require specific terms and conditions; legal advice is essential for compliance with local laws.

Summary

  • Effective contract selection is crucial for the success of construction projects. Understanding different contracts, risks, procurement routes, and legal requirements plays a vital role in making informed decisions.