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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. 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 . 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. 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 . 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;
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;
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. 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. 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. 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.
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. 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;
Some of the risks associated with the project are;
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. 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. 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;
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. The most basic three strategies in order to reach a point of agreement or getting a solution to the situation are;
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. 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.
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. 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.
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”.
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