This essay has been submitted by a law student. This is not an example of the work written by our professional essay writers.
The Design and Build Contract
The Design and Build Contract is a construction project delivery system where the design and construction aspects are contracted for with a single entity known as the design-builder or design-build contractor. The design-builder is usually the general contractor, but in many cases it is also the design professional architect or engineer. This system is used to minimize the project risk for an owner and to reduce the delivery schedule by overlapping the design phase and construction phase of a project. Where the design-builder is the contractor, the design professionals are typically retained directly by the contractor. The most efficient design-builder has design and construction professionals working directly for the same at-risk entity. This is one of the oldest forms of construction since developing from the "Master Builder" approach. The design/build delivery system often cites the original "Master Builder" model used to build most pre-modern projects. Under the Master Builder approach, a central figure of the architect held total project accountability. From inception to completion, the master builder was the key organizational figure and strictly liable to the owner for defects, delays, and losses. The design/build system is a return to some of the fundamentals of the Master Builder approach.
It is a kind of standard forms agreed by the industry made by the JCT (Joint Contracts Tribunal Ltd.)The Joint Contracts Tribunal was established in 1931 and has for 79 years produced standard forms of contracts, guidance notes and other standard documentation for use in the construction industry.
In 1998 The Joint Contracts Tribunal became incorporated as a company limited by guarantee. The company is responsible for producing suites of contract documents and in operating the JCT Council.
It is appropriately used under the following situations:
Where detailed contract provisions are necessary and Employer's Requirements have been prepared and provided to the Contractor;
Where the Contractor is not only to carry out and complete the works, but also to complete the design; and
Where the Employer employs an agent (who may be an external consultant or employee) to administer the conditions.
However there are situation where it can be used and implemented:
Where the works are to be carried out in sections;
By both private and local authority employers.
Where the Contractor's design responsibility is restricted to discrete parts of the works and he is not responsible for completing the design for the whole works, consideration should be given to using one of the JCT contracts that provide for the employment of an Architect/Contract Administrator and limited design input by the Contractor.
1.1 OVERVIEW OF THE PROCESS
Design-build focuses on combining the design, permit, and construction schedules in order to streamline the traditional design-bid-build environment. This does not shorten the time it takes to complete the individual tasks of creating construction documents (working drawings and specifications), acquiring building and other permits, or actually constructing the building. Instead, a design-build firm will strive to bring together design and construction professionals in a collaborative environment to complete these tasks in an overlapping like fashion i.e. construction has begun while the building is still being designed.
Typically the hallmark of a Design and Build project is that one organization is responsible for both design and construction of the project. If this organization is a contractor, the process is known as "Contractor-led Design-Build". If the organization is a design firm, the process is known as "Design-led Design-Build". In either case, the organization employed by the owner rarely handles both aspects of design and construction in-house. In fact, the organization often subcontracts with on-site personnel (if design-led) as well as architects and engineers (if contractor-led).
Design-build streamlines project delivery through a single contract between the owner and the design-build team. This simple but fundamental difference saves money and time by transforming the relationship between designers and builders into an alliance which fosters collaboration and teamwork.
2.0 MAJOR DOCUMENTS OF D-B CONTRACT:
There are three major documents used in conjunction with a standard design and build contract:
Contract sum analysis
2.1 EMPLOYER’S REQUIREMENT’S
Over the last 15 years, the popularity of design and build contracts has increased steadily. As construction projects become increasingly litigious, the primary and obvious advantage of design and build contracts is that this form of arrangement leaves the employer with a single point of responsibility for any problems, whether they involve design or construction and with sensible drafting, the extent of the contractor’s liability can be well defined.
A key feature of design and build contracts is the document commonly known as the 'employer's requirements' which is drawn up by the employer and which provides the outline design. Therefore a certain amount of design input must be provided by the employer at the outset although this can be turned to the employer’s advantage by utilising the opportunity to provide greater design detail within this document.
The contractor then responds with its contractor’s proposals, providing more detailed design of the employer’s requirements and which will be developed once the contract commences.
2.1.1 NEED & IMPORTANCE
There are lots of important considerations and decisions to be made during the time line of fitting out project, some of which employer may have knowledge of and others he most probably have never even considered due to their technical nature, such as building services. All major decisions can have a financial and non-financial impact on the performance of his business. So it is really important to afford sufficient time to understand what options are available so that he can begin to develop a clearer understanding of his requirements.
It is fair to state that one of the most common reasons for Contract disputes between Clients and Contractors is a direct result of either party not understanding what is required or what is going to be provided. Unfortunately, these types of disputes happen far too often within the industry and can prove very costly and time consuming for both parties. It is particularly disturbing when disputes of this nature do happen, because they should simply not occur in the first instance if the Employer's Requirements have been fully set out before a Contractor is appointed.
When the decision has been made as to start a new project, it is then the right time to contact an Employer’s Agent (EA) or any Project Management Consultation Firm, who can add value to the forthcoming project. This is achieved by working closely alongside the employer and his colleagues in developing his requirements or referred to within the industry as the "Employer's Requirements".
The purpose of the Employer's Requirements document is to set out precisely his requirements to facilitate Contractors to price the works accurately. Whilst at the same time removing any risk of unforeseen costs for elements of work that have not been accounted. The size of the project and the complexity of his business requirements will be the driving factor as to what the Employer's Requirements should contain.
2.1.2 HOW TO DEVELOP
The Employer's Requirements document is developed for individual projects, but would typically incorporate the following pre contract information. Once completed these documents would form the basis of the Contract between the Employer and the Contractor.
Pre acquisition or survey reports forming part of the building due diligence
Building appraisal report
Proposed form of Building Contract and completed appendices
Contract specific Terms & Conditions
Proposed tender and construction programme
Detailed scope of works, which would include:
Requirements for the works to comply with statutory requirements
Health & Safety compliance
Mechanical & Electrical performance specification
Voice & data requirements
Audio visual specification
Wall and floor finishes schedules
Furniture specification and space standards
Proposed drawing package
Concept and detailed design proposals
Form of tender
Too often the importance of Building Services or Project Management Firms are overlooked by clients as these works are concealed from view within ceiling and floor voids and can represent as much as 55% of the contract value. This percentage could even be higher in business sectors that require specialist services installation such as Laboratories.
It is important from the start of your project that a senior member of staff within the employer’s company is appointed as project leader. Their role will be to appoint the professional team and have authorisation to issue both financial and non-financial instructions. They will also be responsible for identifying key personnel that would form an essential part of the work groups.
The project leader must have a thorough understanding of employer’s business and the requirements of the project.
Work groups are normally identified by department, discipline or business sectors. Work groups are an effective medium to communicate the business objectives to employer’s staff and for attaining buy in from employees during the process. Where it is applicable work groups should be provided with set objectives, which are measurable and time specific.
Work groups should be a good cross section of the department/discipline and should be kept to a minimum number of staff to ensure productivity.
The aim of the work groups is to find ways of improving employer’s business performance by creating a working office environment that will meet the business objectives. The outcome of the working groups would then form an integral part of Employer's Requirements.
This method of communication can be extremely effective if employer’s business is wishing to implement new ways of working in an effort to improve efficiency across the business.
Room Data Sheets
If employer’s business has several different departments and facilities, which have a high dependency on Building Services or Project Management Firms, the use of room data sheets is a very effective means of collating employer’s requirements by either room or department. The completed data sheets will record both current and future facilities and would from an integral part of Employer's Requirements.
New Ways of Working
When contemplating your forthcoming refurbishment or fitting out project, it is an ideal opportunity to give careful consideration to the various options for new ways of working that are available. These options could reduce employer’s requirement for office space, which could result in reducing annual operating costs.
Once all options have been duly considered and a conclusion reached, the findings should be embraced within Employer's Requirements.
Effective communication to employer’s staff and customers is an essential part of achieving a successful conclusion to project. The participation and contribution from employees will play an important part in the development of Employer's Requirements. However it must not be overlooked that the outcome of the consultation period with the work groups is communicated at the appropriate stages.
As a result of adopting this process you will have a much greater chance of ensuring Employer's Requirements fully embrace the requirements of the business and his employee's.
DB1/99: Employers requirements- An amendment for SFA/99 and CE/99 where an architect is appointed by the Employer Client to prepare Employer's Requirements for a Design and Build Contract. Includes replacement Services Supplement and notes on completion for initial appointment, where a change to Design and Build occurs later or where 'consultants switch' is contemplated. Updated on April 2004.
Sample document attached as example in the Appendix A.
2.2 CONTRACTOR’S PROPOSALS
Contractor's proposal is a document prepared by the contractor under design and build procurement, showing how the contractor proposes to meet the Employer's Requirements. A contractor proposal is a written outline that includes the key terms of the project to be completed by the contractor. A contractor proposal is usually drafted after the contractor has spoken with the client to assess his or her needs as well as the time and resources that the contractor will need to devote to the project. A contractor proposal generally includes such information as an estimated cost or “quote" and terms of payment, the name and address of both the contractor and client, a detailed description or drawing of the project, and the start and completion dates.
2.2.1 NEED & IMPORTANCE
Like all specialized industry professionals, contractors in the Building Trades require specific forms and documents to keep their business running smoothly, ensure their operations are legally protected, and all contractual obligations are faithfully discharged.
No matter how big or small a construction company is, there are certain forms that every contractor must have and use in order to do business effectively.
It is not uncommon for an individual or organization to collect more than one contractor proposal from various contractors and use them as project bids. However, when comparing various proposals, one should take into consideration whether or not the contractor has included cost of materials. The client should also note which, if any, responsibilities the contractor has outlined as his or her own in addition to the completed project. For example, if the project is construction-related, then it might require that either the client or contractor obtains certain building permits. The contractor proposal should also note whether or not the contractor will take responsibility for insurance, warranties, and project clean-up.
If the client decides to accept the contractor proposal, he or she might decide to perform basic due diligence before signing the final contract or agreement. Due diligence items could include asking the contractor for his or her professional project references, business registration number, or the name of the contractor’s insurance carrier, if applicable. As disputes over construction contracts are not uncommon, the client should also feel free to check with his or her local Better Business Bureau (BBB) to determine whether or not previous clients have lodged any complaints over the prospective contractor.
A contractor proposal may require that the client put forth a down payment prior to beginning the project. It is also not uncommon for a contractor proposal to outline interim payments for various project milestones. However, it is up to the client to ensure the milestones have been completed prior to paying the contractor, and to collect a signed receipt from the contractor for any payment
2.2.2 HOW TO DEVELOP
The Contract Proposal is an extremely important document. It should contain several elements written to protect the construction company and the contractor personally from misunderstandings.
There are five major elements to a contract proposal.
1. The contract proposal should contain all the data needed, including names, addresses, and phone and fax numbers for the job, owner, architect, and general contractor. This element tells an interested party what the job is, where it is, and how to get in touch with the important entities.
The first element also should list the contract date and time, plan date, number of addenda and their dates, what division you are covering, and the architect's job number. This information prevents anyone mistakenly thinking that the proposal is for another job or from a different set of plans.
2. The contract proposal should have all the pricing, including alternates and unit pricing, if any. Include the cost of bonds, extra insurance requirements, and voluntary alternates that the contractor may want to present. He should be careful with voluntary pricing; however, it can be a good inclusion because it might get the company in the door. Contractor should be sure of the value engineering provided because it sometimes jumps up and can bite him later.
3. The contract proposal presents the clarification and qualification of the contractor’s scope. This area should have three parts to it: What the contractor is going to include, what he is going to exclude, and what others are going to provide to him.
In the first of these sections, all types of materials included should be listed, as well as the services that are a part of the inclusions. It should be made clear about inclusion of sales taxes and what is contained in the labour burden.
In the second section, it should be very specific about exclusions and the services that are not part of the proposal. Architects often try to slip in items that are not a part of the contractor’s trade. It should be made sure that these items are specifically covered.
In the third section, items that will are going to provided by employer should be listed, such as power and water, roads and level areas to build scaffolding, adequate lighting, safe work environment, site security, and foundation and floor preparation. This element should include something like this: "The utilization of this contract hereby constitutes the acceptance of the terms and conditions listed and outlined below. This proposal is contingent on our right to review, modify, and/or negotiate the subcontract agreement, and any issuance of a subcontract should include this proposal in its entirety."
4. The contract proposal functions as a disclaimer. Include such things as "This proposal is based on being provided with reasonable access to all of the work areas on the project. It is also based on having a reasonable schedule. No overtime has been calculated into this project, and is therefore excluded." the contractor may want to provide a time-duration of the work based on a certain number of bricklayers. Insist on three sets of clear and legible drawings to work from, with no ambiguities.
Any restrictions as to who can use the contractor’s equipment, and the requirements involved for that privilege should be clarified. Contractor should have the employer sign an agreement relieving the contractor of claims or injury, and/or get an insurance certificate naming the contractor’s company as additionally insured with a waiver of subrogation. There may be a cost involved, and that could be spelled out here.
Payment requirements should be a part of this section. Using Texas as an example, it could read "Pursuant to the Prompt Pay Act of Texas Government Code Section, (2251.022 & 023), payment is due within 10 days after the payment by the owner to general contractor, then will become subject to the legal interest rate of 12% per annum prescribed by Law (Section 2251.025). Final payment is to be made within 45 days after satisfactory completion and acceptance of the work." It is advisable to get an attorney to help with this wording.
Breakouts are for accounting purposes only, unless otherwise indicated. This proposal is void if not accepted by issuance of a subcontract or letter of intent within 30 days of the contract date shown herein.
5. The contract proposal is the dosing. This area is where you would sign the document with thanks and appreciation for the opportunity to be allowed to present a quote and contract on the project.
184.108.40.206 SOME TERMINOLOGY INVOLVED
“Building permits" are documents issued by a city's planning department to oversee and approve any changes to structures. You must get a building permit if you plan on making home improvements yourself or with the help of a contractor, architect, or construction worker. Building permits ensure that you are in compliance with building codes that regulate the processes of demolition, renovation, installation, construction, augmentation, or other changes in the use of a building. It's necessary to register for building permits when you are involved with property construction because the government regulates the safety and purpose of buildings. For example, someone may want to convert a home into a small veterinary office. Even if they weren't doing any major renovation, they'd need a building permit. It would change the designation from residential to commercial use, provided that the property is zoned for a business.
Building permits are not just pieces of paper, but rather several stages in the process of getting your construction "permitted." At first, one has to submit plans, like blueprints, of what he intends to do. A city planner will approve the idea, and then you will be allowed to begin construction. After demolition and part-way through building, the city sends a contractor to sanction what you have done so far. When construction is complete, someone else will sign off to make the building legal, official, and open for use.
“Due diligence" is a somewhat technical phrase used to describe a range of assignments, legal obligations, reports and investigations which take place in business, manufacturing and law. Its most frequently heard version is the one pertaining to business, where "due diligence" refers to the steps taken by venture capitalists before investing a round of capital in a start up, the ongoing investigation as to how the funds are being distributed, or the precautionary steps taken by a larger company in deciding to acquire a smaller company.
A down payment is a portion of available money given at the outset of a loan to demonstrate commitment to the purchase. A down payment is often given in cash, though in some cases it may be attached to an alternate line of credit. A down payment is usually only used in sales which involve a large amount of money. Loans to purchase houses and land are the most common loans to require a down payment, though loans for cars, boats and other luxury goods purchased on credit may also ask for a portion of the total cost up front.
Here is a sample checklist of the most important contractor forms and documents required:
- form to define and present the contractor’s bid on a job.
- an Estimate Recap sheet to help spell out the job.
- full Contract for all construction, home and property improvement projects.
Service and Repair Contract
- shorter contract, suitable for all Service & Repair jobs under a certain amount.
Attachment-A, Description of Work and Materials
- contract attachment describing work and materials in detail.
- contract attachment specifying allowances.
Attachment-C, Notice of 3-Day Right To Cancel
- Three-Day Right To Cancel notice and cancellation form.
- comprehensive Change Order form. These documents attach to and modify your contract.
Change Order Log
- worksheet to keep track of all the Change Orders on a job.
Owner Consent To Subcontract
- form giving Owner consent to subcontract a portion of the job.
- contract between Contractor and Subcontractor.
Project Start up Checklist
- detailed checklist for starting up a project.
- individual scheduling for each job aspect.
Finish Schedule By Room
- details schedule for Finish items, room by room.
Daily Construction Report
- track daily items and subcontracts progress, site conditions.
Daily Equipment Report
- track daily equipment usage and rates.
Daily Material Report
- track daily materials usage, delivery, quantities, location.
Daily Work Sheet
- track all daily cost aspects of the job including conditions, employees, materials.
Notice of Intent To Stop Work
- notice to owner and financing company of intent to Stop Work.
10-Day Stop Work Order
- statement of Stop Work.
Release of Stop Work Notice or Notice To Withhold
- document to release Stop Work and resume job.
Final Project Punch list
- final checklist, with owner item signoffs.
Project Closeout Checklist
- detailed checklist for closing out a project.
- invoice detailing work.
Lien Waiver – final payment
- Unconditional Lien Waiver on final payment for the job.
Lien Waiver – progress payment
- Unconditional Lien Waiver on partial payment for the job.
Depending on the size of the contractor’s business, many other specialized forms and documents may be required for each job and daily operations. Also, local ordinances may require specific documents for each job or particular aspects of a job. But at the very minimum, this checklist will ensure the construction contractor can keep the job straight, the books straight, and the legal behind covered.
A sample version is attached in Appendix B.
2.3 CONTRACT SUM ANALYSIS
In design and build, a breakdown of the contract sum. Its main purpose is to enable the Employer's Agent to value changes in the Employer's Requirements (or variations). Usually found at the end of the Contractor's Proposals. The contractor's proposals must incorporate the sum the contractor requires for carrying out the work necessary to meet the employer's requirements. Under JCT 98 (Build and Design), the contractor submits a lump sum together with a contract sum analysis. This facilitates agreement of additional costs resulting from any changes in the employer's requirements ordered after the date of the contract.
2.3.1 NEED & IMPORTANCE
The contract is for a lump sum price payable in stages or by valuation adjusted as necessary in accordance with the conditions in respect to changes in the Employer’s Requirements, etc. As there is no provision for bills of quantities or schedules of rates the form provides for a Contract Sum Analysis to assist in dealing with interim payments to the contractor and in the valuation of changes in the Employer’s Requirements. The Contract Sum Analysis is prepared by the contractor in accordance with the Employer’s Requirements. The form and content of the Contract Sum Analysis are not prescribed in the contract and will vary from project to project. However, to assist, the JCT have produced a Practice Note No. 23, which provides a useful framework and which can be adapted for most projects.
The Quantity Surveyor shall prepare a statement of all adjustments to be made to the contract sum.
It is referred to in JCT 98 Standard Form Without Quantities, IFC 98 and WCD 98.
It should be noted that contract sum analysis is not a contract document except in WCD 98 although in all circumstances where it is used, it is the priced document for valuation purposes.
It is used for valuation of variations of provisional sum work.
It is also used to enable the calculations of fluctuations in accordance with the formula rules.
It is also used to help in the calculations of interim certificates and payments.
If the formula rules are to be operated, it is important for the invitation to the tender to state clearly what form the contract sum analysis must take to enable the calculations to take place.
2.3.2 HOW TO DEVELOP
Before developing this document, one should check the instructions in his client's bid specification. These will usually detail how the costs should be displayed so that bids are easier to compare.
This document should normally contain:
A breakdown of component costs at each stage of the project (eg weekly or monthly)
Staff and labour time and costs
Management time and costs
Administration time and costs
Estimates of reimbursable expenses
The provision for valuation of changes by daywork where valuation by measurement is not reasonably practicable is identical to that in JCT 98. The relevant percentage additions to prime cost must be set out.
The value of the adjustment to the Contract Sum, supported by all necessary calculations by reference to the values should be incorporated.
A detailed breakdown should be provided. In this document, contractor’s overall price should be set out in both words and figures. It should be clear which currency the contractor is dealing in and whether his price includes VAT.
He should also state how long his prices will be valid for. It can sometimes take a long time for tender decisions to be made - by which time the costs may have increased.
It is a good idea to add a contingency for any unexpected costs or additional work that may arise.
Contract sum analysis (1987)
Series/doc. No- Practice Notes (JCT) Practice Notes (JCT) 23
Subject(s) Legal issues and Management Contracts; JCT Contracts; Generic JCT Contracts
3.0 CASE STUDY
The case study concerns a commercial office development initiated by an experienced client. The project was let on the basis of a concept design completed before the appointment of the contractor to stage C+, with detailed planning permission in place.
The design team was always going to be novated to the contractor. Their terms of engagement reflected this, with separate duties to the employer and contractor, including a post-contract monitoring role on behalf of the employer.
Contractor appointment was based on a two-stage tender, let in the first stage on the basis of programme, preliminaries, overheads and profit. During the second stage, a “not to exceed" price was agreed before the completion of all package procurement.
In order to accelerate the programme, the client directly procured demolition and piling works, later novating them to the successful D&B contractor.
The project was let on the basis of an amended JCT98 with Contractor’s Design. In addition to the standard EA duties required under the contract, the EA took a broader project management role – for example, managing the compliance team, liaising with tenants and managing the design changes and enhancements they introduced.
The development secured many tenants before construction so managing the tenants’ input while protecting the programme and the contractor’s resources was a priority. This became complex as differences emerged in what changes were permitted by the contract and tenant agreement, requiring negotiation to protect the client’s interests.
The project was delivered on time and rated highly successful by the developer and tenants. The contractor’s team was retained intact and given the opportunity to negotiate other projects with the employer.
A building contract is an agreement between an employer and a contractor, to undertake an agreed amount of work, to an agreed standard and for a fixed sum of money. There are common elements which every contract should include:
• Provisions for every party to deal fairly with each other and to mutually co-operate.
• A clear separation of the roles and responsibilities of all involved.
• Established methods of payment.
• A clear description of the work to be carried out.
• An agreed timescale for start and completion.
• An adjudication system acceptable to all parties.
JCT 98 (Build and Design), is a design and build contract and places more risk on the contractor. Design and build is based on the ‘employer's (landlord's) requirements’, which are issued with the invitation to tender. They are intended to describe the work which the landlord requires the contractor to carry out. The employer's requirements may be fairly brief or can be extremely detailed, tending to remove the contractor's discretion to the design of the works. There are no guidelines on the extent of detail required.
The other key document is the ‘contractor's proposals’ which is submitted by the contractor with the tender submission and represent the contractor's proposals for the design and construction of the works in accordance with the employer's requirements. The proposals should include plans, elevations, layout drawings and specifications of the materials to be used and workmanship to the extent that these matters are not covered in the employer's requirements.
The contractor's proposals must incorporate the sum the contractor requires for carrying out the work necessary to meet the employer's requirements. Under JCT 98 (Build and Design), the contractor submits a lump sum together with a contract sum analysis. This facilitates agreement of additional costs resulting from any changes in the employer's requirements ordered after the date of the contract.
Cite This Essay
To export a reference to this article please select a referencing style below: