Key features

1.1 The JCT Standard Building Contract 2016 (SBC16) is the most recent edition of the longstanding JCT Standard Form of Building Contract. It is intended for use in traditional procurement, i.e. the design is largely complete at tender stage, but the form also makes provision for limited contractor design (the contractor’s designed portion). The current edition is published in three versions: With Quantities, Without Quantities and With Approximate Quantities. The differences between them relate to the documents on which the contract sum is based, and the calculation of sums due to the contractor. Unless otherwise indicated, this Guide makes reference throughout to the With Quantities version (SBC/Q), with attention drawn to other versions where the differences are significant.

1.2 All three versions of the form are intended for use by both private clients and local authorities. The contract particulars indicate that certain provisions (e.g. cl 4.7, provisions for advance payment and an associated bond) do not apply where the employer is a local or public authority. Special provisions are included which are required by or essential to its use by local authorities and public bodies, as discussed below at paragraph 1.17.

1.3 In larger construction programmes a traditional contract may be linked to an umbrella framework agreement, or used in connection with single-project partnering. Although originally developed in the private sector, this approach is also often used in the public sector, and SBC16 includes provisions that reflect this context. There is reference to a framework agreement (seventh recital), which would be used alongside the form; and as an alternative, in cases where there is no partnering agreement, several of the optional supplemental provisions in Schedule 8, such as collaborative working and key performance indicators, reflect a partnering ethos and could be used as a basis for single-project partnering.

1.4 As a traditional form, SBC16 is relatively simple in its overall structure. The contractor must carry out the work shown in the contract documents for the sum entered in the contract particulars, and within an agreed time period. Use of the form requires the appointment of an ‘Architect/Contract Administrator’, a quantity surveyor, a principal designer and a principal contractor, all of whom are named in the articles. There are provisions for varying the work, and adjusting the contract sum and the completion date on the occurrence of certain events, all provisions shared with most other traditional standard forms of contract.

1.5 The contractor’s primary obligation is to carry out the work shown or described in the contract documents, and the contractor takes overall responsibility for ensuring that the standards set out in the contract documents are achieved. In general terms, the form assumes that all work is designed by the employer’s design team, and that the contractor will be supplied with all information necessary to carry out the works.

1.6 The contractor may, however, be required to carry out the design of a ‘Contractor’s Designed Portion’. The provisions relating to this requirement in many ways reflect those of the JCT Design and Build Contract. The part of the works to be designed is identified in the recitals, which also refer to the employer’s requirements and the contractor’s proposals for the contractor’s designed portion, and to the contractor’s analysis of the portion of the contract sum relating to the contractor’s designed portion, termed the ‘CDP Analysis’. The requirements are sent out with the tender documents and the proposals returned with the tender, together with the analysis. The form includes a procedure for the submission of the related design information by the contractor for comment by the contract administrator, who retains responsibility for integrating the contractor’s designed portion with the rest of the design. The contractor is required to carry insurance to cover its design liability.

1.7 The contract administrator has a significant role under the contract, which includes the issuing of certificates and the power to order variations to the works. At some points the contract administrator is acting as the employer’s agent, and at others as an independent administrator. A court would assume that the parties have contracted on the basis that the contract administrator will act fairly at all times in applying the terms of the contract and particularly so when acting as an independent administrator. This duty of fairness, however, does not place the contract administrator in the same position as an arbitrator, in that the contract administrator is not immune from being sued.

1.8 The form makes provision for three different methods of sub-contracting: to a domestic sub-contractor selected by the contractor and approved by the contract administrator; to a sub-contractor chosen from a list of three named in the contract documents; or to a ‘named specialist’, who may be identified in the contract documents or in an instruction relating to a provisional sum. With the contract administrator’s approval the contractor’s design obligations may be sub-contracted to a domestic sub-contractor. There are now two JCT sub-contracts specifically for use with SBC16: the Standard Building Sub-Contract, and the Standard Building Sub-Contract with Sub-Contractor’s Design. The contractor is required to sub-let on these terms where appropriate, and there is a requirement for specific terms to be incorporated in any sub-contract.

1.9 The contract requires that the contractor commences work on an agreed ‘Date of Possession’, and completes the works by an agreed ‘Date for Completion’. The contractor is required to produce a master programme, although the form does not set out any particular requirements for the programme, or a sanction for its non-production. There are provisions which allow for the date for completion to be adjusted on the occurrence of specified events, and for the contractor to pay damages in the event of non-completion.

1.10 SBC16 allows for phased working, in that it is possible to divide the works to be carried out into sections, and set separate start and completion dates in relation to each section. In general the conditions relating to timing operate independently with respect to each section. For example, the contractor must notify the contract administrator of delays to any section, and there is provision for fixing new completion dates for each section as appropriate. A separate practical completion certificate is required for each section, and a separate certificate of making good, but only one final certificate. There are implications for non-completion, liquidated damages and retention.

1.11 Both the With Quantities and Without Quantities versions are lump sum contracts. In other words, all the work ‘shown, described or referred to’ in the contract documents must be carried out for the contract sum ‘or such other sum as shall become payable under this Contract’. The amount of work, which is covered by the contract sum, should be described in exact terms in the contract documents. In the With Quantities version the work is described in drawings and in a bill of quantities, whereas in the Without Quantities version the description is in drawings and a specification or schedules of work. Generally, if the description is inaccurate, any resulting addition to the cost is borne by the employer. If the contractor has made an error in pricing, however, then any shortfall will be borne by the contractor. The contract administrator has wide powers to order variations to the works if required, and the contractor has a corresponding right to be paid any additional costs that arise from such variations.

1.12 JCT With Approximate Quantities is a remeasurement contract, where only approximate quantities are given for all of the work to be carried out, and the contract assumes that all work will be measured prior to certification. This version would normally be used where it may be difficult or impossible to measure the majority of the work accurately in advance, for example in a contract for refurbishment or repair following a fire or other damage. An approximate quantity may also be given for identified items when using SBC16 With Quantities. All versions allow for the use of provisional sums where it is impossible to specify or describe the work accurately in advance.

1.13 Payment to the contractor is made upon the issue of contract administrator’s certificates at predetermined intervals. In general terms, the certificates will reflect the amount of work that has been properly completed up to the point of valuation in accordance with the terms of the contract. The provisions regarding payment, including the requirements for notices and the contractor’s rights in the event of non-payment, reflect those required under the Housing Grants, Construction and Regeneration Act (HGCRA) 1996 Part II, as amended by the Local Democracy, Economic Development and Construction Act (LDEDCA) 2009 Part 8 (see Table 1.1).

1.14 In addition to the core provisions concerning quality, design, programme and payment, SBC16 also contains detailed provisions covering matters such as injury, damage and insurance, third party rights and warranties, default and termination, and dispute resolution, all of which are discussed in detail in this Guide.

Table 1.1 Provisions required under the HGCRA 1996 as amended by the LDEDCA 2009

1.15 The form follows the normal JCT format of agreement, recitals, articles, contract particulars, attestation and conditions. The seventh recital makes reference to a framework agreement which may supplement the provisions of the contract. The form also includes nine ‘Supplemental Provisions’ under Schedule 8. These optional provisions are referred to in the eighth recital, and are incorporated by indicating whether or not they are to apply in the contract particulars (note that the supplemental provisions generally apply unless stated otherwise, with the exception of Supplemental Provisions 7 and 8, which apply only where the employer is a local or public authority, and Supplemental Provision 9 (Named Specialists), which applies only if selected (see footnote [14]).

1.16 The form contains an advance payment bond (Schedule 6: Part 1), a bond in respect of payment for off-site goods and materials (Schedule 6: Part 2) and a retention bond (Schedule 6: Part 3). The JCT collateral warranties from the contractor to a funder (CWa/F) and purchaser or tenant (CWa/P&T), which are published separately, may be used with SBC16, as may the JCT collateral warranties from a sub-contractor to a funder (SCWa/F), purchaser or tenant (SCWa/P&T) and employer (SCWa/E).

1.17 SBC16 has many features required for public sector procurement, including Fair Payment provisions, transparency and the use of BIM (building information modelling). These were originally published as a supplement to the JCT contracts, but have now been incorporated into the form with some further amendments. The Fair Payment provisions arise from the stated aims of the government in Construction 2025, which include equitable financial arrangements and certainty of payment throughout the supply chain. The aims are reflected in initiatives such as the Construction Supply Chain Payment Charter 2014, the HGCRA 1996 (as amended), the Late Payment of Commercial Debts Regulations 2013 and the Fair Payment Charter, as well as regulation 113 of the Public Contracts Regulations 2015. These require that the final date for payment should be ‘no later than the end of a period of 30 days from the date on which the relevant invoice is regarded as valid and undisputed’ (regulation 113(2)(a)), and that similar provisions are included in sub-contracts and sub-subcontracts. Under the charter, the value of work and materials supplied by all three tiers is to be assessed as at the same date. Adopting SBC16 together with the appropriate JCT sub-contracts will ensure that the government requirements are met. The contract also includes provisions (Supplemental Provision 7) relevant to any employer that is subject to the Freedom of Information Act 2000 (which would include local authorities). This provides that the parties accept that the contract is not confidential, except for material that may be ‘exempt’ and which the employer has the discretion to determine. The Public Contracts Regulations 2015 also deal with corrupt practices and bribery, and breach of the statutory requirements is a ground for termination under clauses 8.6 and 8.11.3 of SBC16. Furthermore, under Supplemental Provision 8 the contractor must include similar provisions in any sub-contract.

1.18 The JCT publishes a guide for use with SBC16 (the Standard Building Contract Guide, SBC/G). This gives general guidance on the scope of the clauses and the changes since SBC11. It also includes a model form for the rights particulars and a list of related JCT publications, at appendices A and B.

Deciding on SBC16

1.19 The JCT Standard Form of Building Contract has been the first choice of form for many contemplating a traditional procurement route. Long accepted as an industry standard, it has a tried and tested track record that gives users the reassurance that there should be little to surprise them, and much guidance is available on its use. However, there are some aspects that should be given careful consideration before deciding to proceed with this form.

1.20 Compared with some other traditional forms, such as the JCT Major Project Construction Contract (MP), this form places more risk on the employer. One of the primary functions of any construction contract is to allocate risk between the parties. In many ways it is meaningless to describe any particular contract as being ‘fair’ or ‘unfair’ in that, as long as the allocation of risk reflects what the parties intended, they enter into it as a commercial decision and the price agreed would reflect that balance. The more risk the employer is prepared to accept, the lower the price is likely to be. A good example from SBC16 is the operation of the fluctuations clauses, which allow the contract sum to be adjusted to take account of changes in market prices. If this provision is not used then the contractor must anticipate the risk of price changes, and this may result in a relatively high tender.

1.21 A further example is that the responsibility for providing the contractor with all information reasonably necessary to construct the project lies with the employer, except for work forming part of the contractor’s designed portion. Even here, the contractor is not responsible for checking the employer’s requirements, and is entitled to proceed with its design on the assumption that all information provided is accurate. Any delay in providing information, or in commenting on information provided by the contractor, is the employer’s risk. The contractor is also entitled to claim additional time upon the occurrence of various neutral events, such as exceptionally adverse weather, which is not the case in some other standard form contracts. It is therefore important that anyone advising an employer on the possible selection of SBC16 as the contract form to be used on a project understands how the balance of risk between the parties is affected.

1.22 SBC16 can admittedly be criticised for being lengthy and complex in its procedural rules. The construction of large projects is, however, a complex process often involving many risks, therefore in order for parties to decide in advance what should be the outcome of various eventualities the form is necessarily detailed and long. By comparison it should perhaps be pointed out that there are far longer forms of building contract in regular use today; for example, the Engineering Advancement Association of Japan (ENAA) Model Form of Contract runs to five volumes! An alternative approach, and that adopted by MP, is to provide the parties with a set of core clauses, and require them to draft additional terms to suit their particular needs, but this method requires expert advice, and is likely to produce a document at least as long as SBC16, or otherwise the parties will be left ‘in the dark’ as to their relative positions in certain circumstances. Administrators of large and complex projects must be prepared to undertake the sophisticated procedures and levels of complexity that attend major forms of contract.

1.23 JCT Ltd has had to respond to changes in working practices, to take account of new legislation and to act where the judiciary has indicated that parts of the form are unclear, or has sometimes placed an interpretation on the form that it was never intended to have. As a result of this the provisions of SBC16 are balanced and finely honed. To carry out ad hoc amendments can produce an imbalance and bring unexpected consequences.

1.24 SBC16 contains some features that are unique among JCT forms for traditional procurement, including the procedures for ‘variation quotations’ and ‘acceleration quotations’, the provisions for ‘third party rights’ and the option of a retention bond (see Table 1.2). The introduction of the ‘named specialists’ facility in 2012 will have increased the appeal, as this had been lacking since the removal of the nominated sub-contractor provisions in 2005 (although it should be noted that the named specialists provisions differ significantly from those for nominated subcontractors). In situations where these features are an advantage, SBC16 will no doubt remain a popular choice.

Table 1.2 Comparison of JCT contract provisions

Changes in the 2016 edition

1.25 Prior to the 2016 edition, the JCT had published two sets of adjustments to the 2011 edition: the ‘Named Specialist Update’ (February 2012), a new optional method for introducing client-selected sub-contractors, and Amendment 1 (March 2015), relating to the CDM Regulations 2015. The JCT had also published a Public Sector Supplement in 2011, for use by local or public authorities. These changes are now all incorporated in the 2016 edition.

1.26 The key 2016 changes are set out in Table 1.3 and can be summarised as follows:

• incorporation and updating of provisions from the JCT Public Sector Supplement relating to Fair Payment principles, transparency and BIM;
• amendments relating to the CDM Regulations 2015;
• reference made to various provisions of the Public Contracts Regulations 2015;
• changes in respect of payment, designed to reflect fair payment principles and to simplify and consolidate the payment provisions;
• payment is monthly, including during the rectification period;
• removal of Fluctuations Options B and C – these are now published separately;
• the inclusion of performance bonds and parent company guarantees;
• tightening up of the arrangements to secure provision of third party rights/warranties from sub-contractors;
• simplification and rationalisation of drafting in many areas; for example, calculation of amounts due and provisions for rectification following damage covered by insurance.

Table 1.3 Key changes