The role of a Financial Director – a life in the spotlight
It has been five months since the publication of the JCT Design and Build Contract 2016 (the “JCT DB 2016”).
Many of the amendments to the 2011 edition are form over substance with the objective being to make the JCT DB 2016 more user-friendly by using clearer and more consolidated drafting. There are also more options for users, such as provision for a performance bond, parent company guarantee and sub-contractor third party rights.
One of the more substantive changes, has been incorporated in the provisions dealing with a contractor’s claim for loss and expense. These changes have already attracted a certain amount of commentary.
Contractor must notify potential claim for loss and expense as soon as it becomes reasonably apparent
The JCT DB 2016 continues to provide that the contractor must notify the employer as soon as it appears that progress of the works is likely to be affected. However, due to changes to how the loss and expense provisions have been structured, some commentators have suggested that a failure by the contractor to comply with this obligation may no longer mean that the contractor would lose its entitlement to claim loss and expense, as it did under the JCT Design and Build Contract 2011 (the “JCT DB 2011”).
However, in our view, this interpretation is incorrect. It remains clear from the wording that, in order to be entitled to loss and expense, the contractor must comply with this notification requirement. In clause 4.19 of the JCT DB 2016, the contractor’s entitlement to loss and expense is stated to be subject to clause 4.20 and clause 4.20 contains the obligation on the contractor to notify the employer of the likely effect on progress as soon as it becomes reasonably apparent.
Employer must deal with Contractor’s loss and expense claims within fixed time period
The JCT DB 2016 has introduced new deadlines by which the employer must deal with the contractor’s loss and expense claims. The employer must determine the contractor’s initial assessment within 28 days of receipt, and any subsequent update within 14 days of receipt. Under the JCT DB 2011, there were no such deadlines.
However, the JCT DB 2016 does not make provision for the employer to be able to defer the determination until the actual loss suffered by the contractor is clearer and it is not clear whether the employer could later challenge the amount awarded. The drafting could, therefore, be interpreted as the employer having to make a determination at an early stage in all cases and that determination being final. Our recommendation is that employers seek advice on amending the JCT DB 2016 to ensure that they have the express right to defer and challenge such determination. It would also be advisable from a contractor’s point of view that these provisions be clarified.
As projects using the new JCT DB 2016 begin to start on site, it will be interesting to see in due course how the courts interpret the new loss and expense provisions.
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