Understanding JCT Contract Disputes

JCTs are actually the Joint Contracts Tribunal which provides standard forms of contract, guidance notes, and other standard documentation for clients use in the construction industry. The Joint Contracts Tribunal comprises of 8 members; these are the Association of Consulting Engineers, the British Property Federation, the Construction Confederation, the Local Government Association, the National Specialist Contractors Council, the Royal Institute of British Architects, the Scottish Building Contract Committee and the Royal Institution of Chartered Surveyors.

The main contracts that are formed by the Joint Contracts Tribunal are, major project Form; Standard form of building contract; Intermediate form of building contract; Minor works agreement; Management contract; Building contract for home owner/occupier where the client has dealt directly with the builder; Building contract for home owner/occupier who has hired a consultant; Contract for home repairs and maintenance; and construction management documentation.

Standard United Kingdom construction contracts are all usually drafted by the Joint Contracts Tribunal, and are regarded as the industry standard for general or traditional contracting. There are six versions of the Joint Contract Tribunal contract, with quantities, with approximate quantities and without quantities with a private and Local Authority edition in each different contract. Further provisions are available where required, which could include a contractor designed portion supplement.

Adjudication will apply if there has been a dispute following from Joint Contracts Tribunal contracts between the customer and contractor. Adjudication also applies to disputes between a client and a consultant under a consultancy agreement for a home owner or occupier. Adjudication can be applied for by the client or even the contractor in relation to any dispute which comes about under a construction contract from the date the work starts up until 6 years after the work has been completed.

If the construction dispute will be decided by an adjudicator, the client or contractor must complete the application form and send in payment of £117.50 to an appointed member of the Joint Contracts Tribunal. Once the member has received the application and the payment, within 48 hours it will confirm it has receive it in writing to both the client and the contractor. The member will then hire an adjudicator within 7 days of giving the confirmation of receipt of the initial application, which is extremely quick. Once the adjudicator has been appointed, the role of the member is ended and all further correspondence with parties will be made straight to the adjudicator.

Construction Loans? When And Why To Use Them

Why use a Construction Loan?

Building your dream home, though exciting, may present many challenges. Although you may be familiar with the traditional mortgage process, a construction loan includes additional elements of risk. In a typical construction project, the contractor will request funds when work is completed. Many times a homeowner will build their dream home without the use of financial institution funds. There are various ways to pay your contractor, many people feel they should pay cash, use a home equity line of credit from another property or cash out an investment.

This presents unique challenges for the homeowner. The homeowner must manage the additional responsibility of ensuring all subcontractors and suppliers are paid in a timely fashion. The homeowner must also understand the statutory documentation requirements in their state. If the draw process is not properly managed and the contractor does not pay the subcontractors and suppliers, the homeowner may be subject to mechanics liens. To mitigate your risk throughout the fund control process, consider the benefits of a construction loan and the process. The construction process is a complicated one and the construction draw process will ensure all subcontractors and suppliers are paid so that you don't have to pay the bill twice.

A construction loan is a check and balance of the funds that are dispersed throughout the build of a new home. With the help of the lender(s), inspectors and draw processing staff your funds are reasonable protected.

Understanding the Costs Involved

As you begin the process of building a new home, you'll want to understand the costs associated with your construction and permanent loans. You'll also need to know when the expenses occur so that you can prepare an accurate budget.

o You can begin construction with as little as a 10% down payment or 10% equity in the total cost to acquire your lot and build your new home. If you don't own your lot, the first draw of your construction loan may be used to pay off your lot. There are instances that a borrower will not be required to have any money down.

o The interest rate on your construction loan is typically tied to the Prime Rate. You will be billed monthly for interest only, and your payments will be based on the current balance of it at the current interest rate for the previous 30 days. Borrowers can build in an interest reserve account to pay the interest payment during construction.

o When you finish building your new home, we will modify your construction loan to a permanent loan of your choice. Various options for locking in your rate are available depending on the product selected.

Total Project Costs

This is the cost to complete the home and consists of soft costs, hard costs, land value, closing costs, contingency and interest reserves.

Soft costs: Permit fees, engineering fees, architectural fees and other costs associated with building the home but not directly a part of the actual construction costs. Many times the borrower has already paid some of these costs. To consider these paid items as "equity," the borrower must document the cost with a bill and a canceled check or a paid receipt.

Hard costs: The actual cost of construction covering all materials and labor associated with the building of the home. Typically the borrower will enter into a contract with a contractor to build the property. Like a purchase contract for an existing home, this contract will set forth the work to be done and the costs associated with that work. All contracts must be for a fixed price; "Cost Plus" contracts are not acceptable. To support this cost, we require a signed and dated copy of the contract along with a detailed Line Item Cost Breakdown prepared by the contractor. All contracts and budgets must be reviewed by, and contain terms acceptable, to standard lending guidelines.

Closing Costs: Costs associated with the closing of the loan (e.g., title costs, loan fees, discount fees, inspection fees, appraisals, etc.)

Contingency: In certain circumstances a reserve account will be needed to cover unforeseen cost overruns in the construction of the home. A required 5% of the hard costs will be established in the Contingency Account (Contractors may hold a reserve other than what usually required by the Lender.)

Interest Reserve: At loan closing, an account is established to pay the estimated interest costs during the construction of the home. Since the borrower is only charged interest on the amount of funds disbursed, an estimate of the average disbursed amount is made. Our construction specialists will estimate that, on average, 60% of the loan amount will be disbursed during the term of the construction period. This interest reserve account is paid up front and is held to pay the interest during the time of construction.

Major Reconstruction - Sooner Or Later, a Challenge For All Community Associations

Every association will face a major reconstruction project several times in the life of the development. This may occur because of clearly anticipated problems, such as re-roofing or re-painting, but it also will occur because of completely unanticipated (and unreserved-for) problems such as dry rot repair, soil subsidence, and leaks in windows, siding, and foundations. The Davis-Stirling Act only requires a reserve for those components that visual inspections into accessible areas reveal have a useful life of 30 years or less.

But what about components in areas that are not accessible? What about areas under staircases that sponsor dry rot due to long-term intrusion of water? Framing components under siding that have allowed water to enter slowly for years without any way to get it out except evaporation? Deteriorating concrete walkways or driveways due to the invasion of roots or soil subsidence due to unconsolidated fill? Or, balcony railings rotting off at their interior supports? Three people in Antioch were severely injured last week when such a railing collapsed. None of these building components would be included in the typical reserve or maintenance budget.

So now you have a collapsed balcony or maybe a lot of rotted siding and no funds to repair any of it. What to do? This scenario has occurred to many associations which have encountered unexpected repairs that were not funded by the usual reserve fund.

Finding the Right Expert

The first thing to do is retain the services of someone who can advise the association on the proper means of repair. General contractor, architect, engineer, or construction manager? Which expert will you need? A lot depends on the complexity and extent of the problem. If, for example, you have a failed balcony support beam-say something that has rotted due to years of water intrusion-just replacing the failed beam may not be enough. You don't want it to happen again.

The first thing would be to retain someone who is a pro with waterproofing. Would you choose a building consultant or an architect? Architects are more expensive, but for a very complex waterproofing issue you want someone who has enough skill and understanding to re-design the system to make it water tight.

On the other hand, if the basic design is sound, but the materials have failed to do their job, a materials consultant who specializes in waterproof membranes may be the right choice. In our practice, we would start with the architect or an engineer because this particular balcony railing example involved a life-safety issue and because a re-design and/or strength calculations may be necessary.

If their opinion is that the problem is relatively simple to solve such that a re-design of the waterproofing system or a re-calculation of the strength of the system isn't required, and the project simply requires a re-build of the original design, then a building consultant or a general contractor might provide the specifications.

On the other hand, if the basic structure has proven inadequate for other reasons, such as deflection over time, or failed joists or columns, a structural engineer might be necessary to do the proper calculations and provide a re-design of the structural components. A few hours of an architect's time will usually be enough to determine the level of expertise required for the project, so if in doubt, hire an architect first.

Bidding the Job

Once the problem has been analyzed and the plans and specifications for repair have been drawn, the bidding process can start. Normally a list of preferred bidders is prepared. This preference usually comes from past experience or specialty. For political, as well as economic, reasons several bids should be obtained. Even if the board or management favors a particular contractor-perhaps because of a successful project performed earlier-it is advisable to obtain at least three bids to demonstrate due diligence in the bidding process.

When the bids are opened it is up to the board, with management's recommendations, to choose the right contractor. Price may not be everything. Past performance, specialty, and availability may have important roles to play. All of those factors should be considered before the final choice is made.

Drafting the Contract

Your attorney can assist in reviewing and negotiating the contract. There are a lot of considerations, and good contract drafting is a topic all of its own. But some of the considerations are:
(1) is this a cost-plus or a lump sum contract?
(2) Does the owner furnish all plans and specifications (and except responsibility for them) or is there an element of "design-build" in the contract?
(3) Are there unconscionable provisions-a provision buried in fine print, or a disclaimer of all express or implied warranties? Courts will often not enforce such provisions.
(4) What are the payment provisions? Will there be progress payments or a lump sum at the end of the job? Will the owner hold back (retain) a portion of the payment to be sure that all mechanics liens are cleared?
(5) What if the project is delayed? Should there be penalties for that? What about incentives for bringing in the job sooner?
(6) How are we to deal with changes?
(7) Who bears the responsibility for misleading drawings or specifications (see 2 above.)?
(8) What insurance will the contractor be required to carry? (8) What warranties or indemnity will the contractor be required to provide?
(9) What licenses must the contractor have?
(10) Will the owner have the right to stop work and under what circumstances?

We could go on, but you get the idea. There are many questions that must be asked and which can only be answered in the context of the particular job. Your attorney working with your architect or engineer can fashion a contract that is appropriate for the job.

Funding the Project

How will the association pay for all of this, especially if it is a job that no one expected to have to do? Generally speaking there are only a few options. If the job is contemplated and funded in the reserve fund, then no problem. But what about all of those unexpected reconstruction projects?

The association can borrow the money-either from a bank or from itself. Or it can go to the members for a special assessment to pay for it. But if the association is hit with a large, unexpected job, then borrowing may be the only option unless the members are willing to approve a special assessment. If the assessment is no more than 5% of the existing budget or requires only a 20% increase in the monthly assessment, the board can simply impose it; otherwise it will have to go to a vote of the members, not usually an easy thing to win. But a big job can quickly outdistance those statutory maximums and if the member vote does not support a special assessment, recourse to a bank may be the only option. The association's attorney can assist with the necessary review of proposed assessments or bank loan documents.

If all goes well and the job is completed on time and on budget, terrific! But if the contractor defaults, either because he does not complete the job or is proceeding so slowly that it will not be completed on time, or because work has been rejected by the inspectors, it may be time to consider termination of the contract. But before that happens, consult with the association's attorney to be sure that the contract provisions are followed so that the association will not itself be in breach.

A big, unexpected construction job is probably one of the most disrupting events in an association's life. Some associations never recover. This can be avoided with early inspections of all building components, whether visible or not, so that failure can be anticipated in enough time to adequately reserve for the costs. Like cancer, early detection offers the best chance for a cure.

Tips to Overcome the Recent Fall in Construction Activity

The Chartered Institute of Purchasing and Supply (CIPS) recently found that construction contracts have fallen for the first time in nine months from 51.8 index to 49.1 during December 2010. The reason behind this is being associated with the recent adverse weather conditions. There was a sharp decrease in employment and confidence in future business ventures with a low availability of construction tender contracts or contract tenders.

All construction sectors have seen a drop in activity including residential construction, civil engineering and house building. However, commercial activity remained strong during December and was the only sector of the industry to see a rise.

Many businesses within the construction industry now fear that 2011 will see a loss in finances so here are some tips to prevent this from happening as much as possible.

The pre qualification stage of the tender process is an ideal place to make to make efficiency savings, and the easiest way to do this is by becoming a member of a pre qualification scheme. This will mean you only need to fill out one pre-qualification questionnaire that will be held on a database for all the buyers who are also registered on the scheme to access as and when they have work opportunities or have frameworks up for renewal.

A good pre-qualification scheme will also have an Opportunities Notice Board/Construction Contract Notice Board where procurers registered with the scheme can post their construction contracts. You will then be able to sign up to be notified when new contracts match your categories of work and the locations you operate in. Trawling through numerous sites looking for contracts to bid on can be time consuming and involves sifting through vast amounts of data, therefore an Opportunities Notice Board is a great way to reclaim wasted time and allow you to get on with the contracts you have already won..

Some pre-qualification schemes also hold "Meet the Buyer" events where you can meet face-to-face with key procurers in your local area. This allows you to present your business to potential new clients and find out about any upcoming contract tenders and how you can go about applying.

Moreover, signing up to these online databases, known as pre qualification schemes, will boost your visibility in the industry, help you stand out from your competitors and re-assure Buyers that you are competent to carry out work for them.

Joining a pre-qualification scheme is usually has a relatively low yearly membership fee, in relation to the amount of time and money it could save your organisation. Be sure to look out for schemes that allow you to choose multiple work categories and include access to a tender notice board at no extra cost.

The Basics Of Civil Engineering and Contracting

Civil engineering is a broad field that encompasses many different areas of work, such as hydraulics, sanitation services, and construction. Engineers can be employed in a variety of positions responsible for the construction of sewage systems, highways, and other structures. One will normally decide to specialize in only one division of engineering so as to be an expert in that sector.

Because of the varying positions within the field of engineers, there is also a wide variety of responsibilities. Usually an engineer is only responsible for a specific genre with his or her chosen division. Many work only on plans and development, while others oversee construction.

When studying to be an engineer, one will learn the disciplines of math and science. Critical thinking and communication skills are paramount to one's success in this field. It is often required that an individual possess a four-year Bachelor's degree from an accredited institution in order to be qualified for a position within this career field.

The individual must possess specific knowledge in fields like stress analysis. The social sciences are also sometimes a requirement, as knowing how best to work with other individuals and their ideas is a standard in this career field. Also, many times, certain areas of expertise will require that the individual obtain a license from his or her state that signifies that he or she is an expert in that field.

Once the individual has completed all of his or her schooling and the required amount of on-the-job experience, he or she can advance within engineering in a variety of ways. Most large corporations hire engineers. There are many reasons that engineers are highly valued within the confines of a large company.

The levels of engineering are junior, assistant, and associate. This provides plenty of room for advancement within the field and within the company that one works for. Engineers can become highly trained in specific branches of this field, making them highly in demand within their specific field. The average salary for an engineer is around $75,000 per year.

This is a great career choice for those that have a high aptitude for math and science. Also, those who enjoy creativity in hopes of creating a better community will also thrive in this field. Since the individual can choose which specific genre he or she wishes to specialize in, this job can be quite rewarding for the right individual.