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Construction Procurement strategy and Construction law Assignment Sample

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Construction Procurement strategy and Construction law

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Part one

Answer 1.

The issue originated with the detection of boulders of large size during the excavation of the building. NEC is the most the used contract within the Construction business (AEC) and JCT SBC/Q is just right after that. It has been seen that not only within the Construction industry, even in engineering and the Architecture world, JCT SBC/Q is exclusively used, due to its working perceptive towards the A/CA. It works according to the needs of the employer's and it is supervised by the "Architect/ Contract Administer (A/CA)", also the "Bill of Quantities" is managed by a specialist in quantity surveyor[1]. This task comprises of addressing the issues and the relevant JCT clauses, so that follows;

Delay Causing Issues and relevant JCT clauses

BDC contractors were awarded the respective contract by Preston Development and as is mentioned, the contract was in form of JCT SBC/Q 2016. As the case details revealed that documents of the contract were delayed and the reason behind it is the inadequate design. However PD for obvious reason wanted BDC to start at the earliest possibility, and that would not be an issue, since PD or the employers gave the site possession to the BDC [2]. BDC started the work on the site and during their excavation, they discovered large boulders and it came as an unexpected incident, so it is pretty evident that these can affect the time and cost of the proceeding. Some other unfortunate and unexpected event follows and they all come under JCT clauses, such as;

The boulders cause the most impact within the timeframe or schedule. Two weeks were taken to remove those boulders from the site (September 2018). This kind of event lies within the section of "JCT SBC/Q CL: 2.29.15 i.e. force majeure”.

During the February of 2019, the work got delayed again, and this time for one week. According to BDC, the reason for the delay was a strong wind and heavy precipitation. This was again an unexpected event, as contractors are usually aware of the weather condition of a certain place during their contract period, but this much heavy rainfall was not expected within the February month, and not only it delayed the work, it impacted the momentum and affected the work progress. JCT have clauses for it too, this lies within; “JCT SBC/Q CL: 2.29.9 i.e. exceptionally adverse weather conditions”

Also during excavation, the whole delayed gain due to restrictions created by electric cables. They hindered the work so much that needs to be removed and though BDC contacted the Electricity Company in time, still the process took one week to remove those cables and again it delayed the work. The incident did not stop there from impacting the project, a relocation takes time, and also BDC without informing PD hired a subcontractor in the form of an electric conductor, but the recruitment process is flawed and due to inexperienced workers of the subcontractor, the installation was terrible and as a result, it delayed the workflow more and also affects as additional cost[3]. The event of hindrance is little similar to the first one, as both of them are not in control of the contractor, so this event also lies within the clause of "JCT SBC/Q CL: 2.29.15 i.e. force majeure”

Impact on Payment

As these events are not associated with the plan and also most of them are unexpected and can not be controlled by the contractor company, additional payments were claimed by the BDC contractor. This is potentially right, as Preston Development is somehow legally bound to make some changes in the contract in regards to these events and the changes have to make in the department of additional time and finance [4]. The clause that made PD legally bound is; “JCT SBC/Q CL: 4.20-4.24”. Although to initiate the clauses, the contractor company requires tod some work, such as;

  • Notification to the “Architect/ Contract Administrator” about the events and their impact and has to be done within seven days of the events occurring.
  • Also, the loss due to these events within any aspects, resource, or finance or time, should be properly assessed, and then that needs to be reported to the A/CA. Mostly the direct material loss assessment is the most vital one and also the A/CA should be reminded about these reports and claims in the regular interval until it is added to the respective contract bill.

Damages and relevant legal actions

Two legal clauses of JCT can be applied here, they both are relevant but one was removed from the contract, so that can not be implied. They are;

  • “CT SBC/Q CL: 3.7-3.9”: It is the one that got removed from the contracts, otherwise through this clause Preston Development can take any legal action against the Contractor (BDC), for the delays and their applied demands[5]. Specifically in regards to the defective works within the electrical section by the sub contractor.
  • JCT SBC/Q CL: 2.38”: On the other hand this particular clause is relevant to the contract and through this Preston Developments can levy “Liquidated Damages” from their contractor BDC.

Answer 2.

According to the project estimation, 25% of the project lies within the four storeys of student accommodation along with bar and gymnasium region, all of these were partially taken possession of by the Preston Development during June 2020. The most relatable JCT clause to this situation is; “JCT SBC/Q CL: 2.33”, it states that If somehow the employer ends up taking partial possession of a site, it is the "Architect or Contract administrator (A/CA)'s" duty to issue the certificate for section completion, and that has to be issued before the issue of certificate for practical completion, and these have to be done in regards to relevant information regarding the situation like data or part of contract relevant to the events or situation. This information needs to be stated within the issued certificate too[6]. Also according to the "JCT SBC/Q CL: 2.37” this partial possession is capable of affecting the rectification cost and the liquidated damages of a certain project. So in this case, as the Preston Development took partial possession of 25% of the site (four levels of student's accommodation building, bar, and gymnasium), the rectification cost and liquidated damages changed proportionally.

In November 2019 PD identified that the project is incomplete and BDC was working behind schedule so PD demanded pre-estimation of Liquidated damages from their contractor company, BDC. Although BDC refuses to pay and these events come under "JCT SBC/Q CL: 2.37". Also, the argument from PD stated that pre-estimation of liquidated damages prepared by the BDC is not genuine and the estimation report needs to be calculated again. BDC also holds its ground and pushed PD for enforcing the damages[7]. For the sake of better understanding, the case law which can be referenced is

“GPP Big Field Vs Solar EPC”

 In this particular case, the delay was the issue too. According to the case law, the delay occurred due to some protection by the local people regarding the high power cable lines through their local area. The form of contract was Five engineering procurement and Construction" (EPC) contracts. From the EPC clause 21.3, the contract has the delay case as force majeure. So as the clause stated the employer is bound to change the electric cables way. The process of changing the way of electric cables comprises of time-consuming steps, such as; planning the new way and relevant survey needs to be conducted and it will require extra time and finance and other resources, in a simple way it will affect the contractor in various ways, such as; GPP Big field, schedule, and cash flow. As all of these aspects are directly related to the employer, so in this case too, the contractor company contacted the employer and they refused to take part in this and also refuse to provide extra time. Also in this case the employer demanded liquidated damages three months prior to the expected completion date as per the contract and the clause the made reference of is EPS 21.5 as the laying cable delayed the work and the estimation of liquidated damages was allegedly not genuine thus not enforceable, quite similar to the case of PD Vs BDC.

The case concluded at the court and it decided that no additional cost would be addressed towards the contractor by the employer; however, the delay is genuine and out of control of the contractor. Thus the court demanded that a new completion date would be provided concerning the delays. As for the liquidated damages, the court pointed out that the estimation was wrong thus making it not genuine and not enforceable.

Soil Pipe defect

As PD was not satisfied with the work due to all delays and demands from BDC, it got increased when PD, the employer in this case took back the possession of the project in January 2020. In July 2020 they detected the defect in the soil pipes of the building and they require immediate work, so PD recruited a third party and it cost them so they demanded rectification cost from the contractor, and this comes under the JCT clause too, in the form of "JCT SBC/Q CL: 2.38". Also as the PD recruited a third party, that is legally accurate as per "JCT SBC/Q CL: 2.31". Although under this clause the employer rather the "Architect/ Contract Administrator" is required to notify the contractor about the issues they are having and this has to be done within the rectification period and the clause is only applicable if the contractor did not complete the defected work within the completion date[8]. In this case, the A/CA can issue a certificate for non-completion and deduct fees from the contract bills or can ask the contractor to pay them directly to the employer. From the contractor perspective, the most relevant clause would be “JCT SBC/Q CL: 2.39”, which also requires BDC to complete the defective work, but as they did not and PD already took the possession back and hired a third party to correct the defective work of soil pipes, so the clause states that BDC needs to pay the amount.

Answer 3.

As it is mentioned the followed procurement method is the Traditional method. In this way, the employer requires hiring two other parties, one for consultancy and the other is the contractor, who will complete the project. The consultant is accountable for all the prior project initiation work and evaluation of the progress of a certain project, and all of them are vital, such as; planning, designing, monitoring, evaluating, and eventually reporting, Contractor will execute the work according to these aspects. This process is very flawed in a practical context, as authority over project objectives is complicated to understand, due to lack of sync between two parties the budget exceeds and Contractors have a problem in executing as the design and planning is not done by them, also all the unpredicted contract bills affect the cash flow and this also leads to disputes and project failure[9]. This is exactly what happened in this specific case and impacted the employer

According to Muriro and Wood, 2021, Design-build procurement can be more accurate in this situation, it does not offer those cons and it offers advantages such as;

  • There is no pressure about the beginning of a project, so the contractor can start the work at their earliest convenience and can deliver the work before the expected time.
  • Before completing the designing process the Lum Sum can be estimated.
  • The employer has to deal with only one party, so the work becomes simple and they can have control over the quality and scope of the project.

 Some of the risks associated with the project are;

  • The materials should be specifically mentioned in the contract or the quality of the project can be compromised by the contractors.
  • There are very few clauses within the contract about safety, so then the contractor can conduct risky high elevation work without securing their safety.

Part 2

Answer 4.

Part a:

In accordance with the situation, the relevant clause is “HGCRA CL: 109”. It states that the contractor is bound to get the accurate payment for their work within seven days after the assessment; in this case, the day of assessment is 20th September 2019. Also other relevant clauses like "NEC CL: 51.1" states that the employers are bound to issue the certificate for assessment five days after the assessment days[10]. Also about the payment intervals, the most relevant clause is the “HGCRA CL: 109”, as it states that these needs to be decided with agreement from both the parties, employer and contractor, as long as the whole construction project takes more than 45 days to complete. In this case, the payment is not made till 12th November 2019 by the HR7 and this affected the cash flow of speedy rails. So according to the "HGCRA CL: 110B" speedy rail is capable of sending notice for default payment to HR7, and also the clause made HR7 accountable to reply to that notice five days after receiving it. Also, another relevant clause to the situation is "HGCRA CL: 111" and that states that not only does HR7 have to pay the notified amount to the contractor, they also have to pay it before or on the final payment date.

On the other hand from the perspective of the speedy rails, they have a range of rights about the payment, and workflow[11]. The clause of “NEC CL: Y 2.3” allows them to have authority over the workflow and they can decide to stop work, even if affects the cost or time of the project. The case law which can be referenced according to this situation is;

Hoeing Vs Issacs

This particular case law works as a paradigm, it provides a lucid image of how the employer is liable to make payments following the service that means if there is any contractual breach within the clauses in the agreement, such as contractors leaving the work without providing adequate reasoning, and the employer can decide the payment then on the basis of actual work done, Although the employers are always bound to make the payment, they can not refuse that but what they can do is that they can press relevant and legally supported claims for any defect in work, and they can deduct payments from the contract bills in the name of rectification cost. In this particular case law, the contract was initiated with the contractual amount of 750 pounds and in the end, the contractor gets only 400 pounds, and the employer did not pay the rest and justified that by stating that the work is defective. That is why the contractors, Issacs sued the employer company; Hoeing, and the court concluded the case with hearings such as;

  • The contract was about a lump sum, so every way the contractor has to be paid, but also the defect is significant, so the court ordered either to solve the defective work or an amount would be deducted from the contractual payment.
  • Also as for the employer goes the same they are bound to pay, but also as the defect is significant their claims are legally justified. Although the employer, Hoeing can not claim as the whole project scope is incomplete, they can only claim in regards to the defect or associated damages.

Part B

Now that HR7 did not respond according to the clauses, as speedy rail submitted their payment notice along with payment application, but HR7 never really got back to them, there are lots of potential ways to deal with the situation[12]. The most basic three strategies in order to reach a point of agreement or getting a solution to the situation are;

  • Negotiation
  • Meditation
  • Adjudication

Negotiation

This is the most simple one and this can be done with the minimum effort although this demands utmost co-operation and most of the cases where employers do not respond to the notice, are not that much of co-operative to negotiate[13]. So, in this case, speedy rail or Rapid rail along with HR7 will send the Contract administrator as their representative in a neutral place to conduct the negotiation process, and if things go well, with a mutual agreement both companies will sign agreement papers regarding the new payment plans. All the papers for the negotiation agreement will be prepared with mutual consent.

Mediation

This is the next best choice if the negotiation does not work accordingly. In respect to this situation, negotiation is most likely to not work. Within Mediation a third party will be recruited with mutual consent[14]. This third-party representative will be a professional and with the help of Cost-benefit analysis, the third party will propose a new plan for payment and this plan will be prepared after listening to both parties without any personal judgment, and then the decision lies on both parties agreement if they agreed with the new payment plan or not.

Adjudication

This is the final binding and both parties have to agree with this. For Adjudication, an Adjudicator exists, who will have authority over the agreement plan regarding a certain project. There is also a senior administer or project manager, who acts as the senior representative, they can be contacted by both parties if they find any dispute, but whether it is notified to them or not under the clauses of “NEC CL: W 2.2 and NEC CL: W 2.1", any party can refer any dispute directly to the Adjudicator. Adjudicators have authority over the project manager of both parties, so in regards to any dispute He or they can summon them and they need to address the nature and impact of the dispute with evidence and relevant statement. The Adjudicator is responsible to listen and judge all the evidence and judge the statements and critically review the actions leading to the certain dispute for the sake of delivering the solution and they are bound to decide within 28 days, according to the clauses of "NEC CL: W 2.3.8 or NEC CL: 2.3.9”. The parties can agree to the decision or go to tribunal, “NEC CL: W 2.3.11”.

References

Journals

  1. Rahman A, and Sainati T, 'Adapting Standard Forms Of Contract To Facilitate Building Information Modelling' [2021] Proceedings of the Institution of Civil Engineers - Management, Procurement and Law
  2. Grebenyuk V, 'EMPLOYMENT LAW CONTRACT AS A SPECIAL TYPE OF EMPLOYMENT CONTRACT' (2020) 1 Law and public administration
  3. Sanni A, Adebiyi O, and Okorie N, 'RESIDUAL RISKS OF PAYMENT PROVISIONS IN FIDIC AND JCT CONDITIONS: A QUANTITY SURVEYOR’S VIEW' (2020) 1 Open Journal of Physical Science (ISSN: 2734-2123)
  4. Abdul-Malak M, Srour A, and Demachkieh F, 'Decision-Making Governance Platforms For The Progression Of Construction Claims And Disputes' (2020) 12 Journal of Legal Affairs and Dispute Resolution in Engineering and Construction
  5. Assaad R, and Abdul-Malak M, 'Timing Of Liquidated Damages Recovery And Related Liability Issues' (2020) 12 Journal of Legal Affairs and Dispute Resolution in Engineering and ConstructionGonzzlez Chapela J, and Labeaga Azcona J, 'Further Econometric Evidence On The Extent And Sources Of Cost Savings In Competitively Tendered Contracts' [2016] SSRN Electronic Journal
  6. Loosemore M, 'Social Procurement In UK Construction Projects' (2016) 34 International Journal of Project Management
  7. Naoum S, and Egbu C, 'Modern Selection Criteria For Procurement Methods In Construction' (2016) 9 International Journal of Managing Projects in Business
  8. Tuomela-Pyykkönen M, Aaltonen K, and Haapasalo H, 'Procurement In The Real Estate And Construction Sector (RECS) – Preliminary Context-Specific Attributes' (2015) 21 Procedia Economics and Finance
  9. Hu Y and others, 'Measurement And Analysis On Power Quality Of Electric Railway Traction Substation Based On Labview' (2011) 383-390 Advanced Materials Research
  10. Huo J and others, 'Dynamic Behaviour And Catenary Action Of Axially-Restrained Steel Beam Under Impact Loading' (2017) 11 Structures
  11. Jaafar P, and Ismail A, 'Cointegration Between Macroeconomic Variables And Sectoral Indices Movement In Bursa Malaysia' (2017) 7 Global Journal Al Thaqafah
  12. MacMillan C, 'The Impact Of Brexit Upon English Contract Law' (2016) 27 King's Law Journal
  13. Gogulanathan S, 'The Doctrine Of Substantial Performance: Comparisons Between English And Malaysian Law' (2018) 44 Commonwealth Law Bulletin

[1] Assaf Rahman and Tristano Sainati, 'Adapting Standard Forms Of Contract To Facilitate Building Information Modelling' [2021] Proceedings of the Institution of Civil Engineers - Management, Procurement and Law assignment.

[2] V. Grebenyuk, 'EMPLOYMENT LAW CONTRACT AS A SPECIAL TYPE OF EMPLOYMENT CONTRACT' (2020) 1 Law and public administration.

[3] A. G. Sanni, O. J. Adebiyi and N. V. Okorie, 'RESIDUAL RISKS OF PAYMENT PROVISIONS IN FIDIC AND JCT CONDITIONS: A QUANTITY SURVEYOR’S VIEW' (2020) 1 Open Journal of Physical Science (ISSN: 2734-2123).

[4] Mohamed-Asem U. Abdul-Malak, Ali H. Srour and Farah S. Demachkieh, 'Decision-Making Governance Platforms For The Progression Of Construction Claims And Disputes' (2020) 12 Journal of Legal Affairs and Dispute Resolution in Engineering and Construction.

[5] Rayan Assaad and Mohamed-Asem Abdul-Malak, 'Timing Of Liquidated Damages Recovery And Related Liability Issues' (2020) 12 Journal of Legal Affairs and Dispute Resolution in Engineering and Construction.

[6]Jorge Gonzzlez Chapela and J. Maria Labeaga Azcona, 'Further Econometric Evidence On The Extent And Sources Of Cost Savings In Competitively Tendered Contracts' [2016] SSRN Electronic Journal.

[7] Martin Loosemore, 'Social Procurement In UK Construction Projects' (2016) 34 International Journal of Project Management.

[8] Shamil George Naoum and Charles Egbu, 'Modern Selection Criteria For Procurement Methods In Construction' (2016) 9 International Journal of Managing Projects in Business.

[9] Marika Tuomela-Pyykkönen, Kirsi Aaltonen and Harri Haapasalo, 'Procurement In The Real Estate And Construction Sector (RECS) – Preliminary Context-Specific Attributes' (2015) 21 Procedia Economics and Finance.

[10] Yang Yu Hu and others, 'Measurement And Analysis On Power Quality Of Electric Railway Traction Substation Based On Labview' (2011) 383-390 Advanced Materials Research.

[11] Jingsi Huo and others, 'Dynamic Behaviour And Catenary Action Of Axially-Restrained Steel Beam Under Impact Loading' (2017) 11 Structures.

[12]Pyeman Jaafar and Ahmad Ismail, 'Cointegration Between Macroeconomic Variables And Sectoral Indices Movement In Bursa Malaysia' (2017) 7 Global Journal Al Thaqafah.

[13] Catharine MacMillan, 'The Impact Of Brexit Upon English Contract Law' (2016) 27 King's Law Journal.

[14] Sri Bala Murugan Gogulanathan, 'The Doctrine Of Substantial Performance: Comparisons Between English And Malaysian Law' (2018) 44 Commonwealth Law Bulletin.

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