Introduction
The inclusion of new conditions of contracts in the construction industry is an indicator of the modernization and modification of contracts. In other words, the introduction of a New Engineering Contract (NEC) and legal requirements for the implementation of Joint Contracts Tribunal (JCT) policies indicates the value of these documents in the construction industry.
The NEC, JCT, and International Federation of Consulting Engineers (FIDIC) are the major institutions that ensure standard forms of contract in the modern construction industry are achieved. Theoretically, the law of contracts considers two main issues, its concepts, and how it regulates commercial and social transactions (Li et al., 2020). The paper aims at analyzing the most common forms of contracts that are currently used in the construction industry and their value in promoting quality service delivery.
Standard Forms of Contract (SFoC) Studied
SFoC area agreements put emphasis on the use of standard and non-negotiated requirements in civil engineering operations. In the construction industry, the implementation of SFoC is supervised by various organizations including NEC, JCT, and FIDIC. These organizations form the basis of the main SFoC model. They give a reliable outcome of agreements between parties in the engineering when compared to bespoke contracts, housing grants construction, and the regeneration act. The objective of SFoC is to specify chief variables in the construction activities and processes (Li et al., 2020). The concept helps in standardizing terms of contracts within the industry and aids in balancing the obligations of both the supplier and the consumer.
Joint Contracts Tribunal
The Joint Contract Tribunal known as JCT is tasked with the production of standard forms of contracts for the construction industry. It also publishes guideline notes and standard documentation used in the industry within the UK. Since its inception in 1931, JCT has increased the contributing organizations with the aim of increasing efficiency (Mewomo et al., 2018). JCT has 17 traditional contracts which include lump-sum contracts, measurement contracts, and cost reimbursement products among others.
New Engineering Contract
NEC is a chain of contracts that are designed with the ability to manage any project from the beginning to the end. Its aim is to stimulate excellent project management by focusing on the obligations of both the supplier and the customer. The structure and design of the contract are straightforward to enable easy understanding. It was developed in 1993 with the aim of averting costly disputes. NEC contracts have a positive track record in the successful delivery of large-scale projects (Mewomo et al., 2018). Some examples of NEC contracts include the engineering and Construction Contract (ECC) and Professional Service Contract (PSC) among others. There have been key changes in the provisions of the NEC which are in line with the changes in the industry.
International Federation of Consulting Engineers (FIDIC)
The FIDIC contract embraces a multi-tier dispute and conflict resolution process. It emphasizes the amicable dispute settlement between various parties. Generally, it is used in low-cost projects that are under $500,000 in value and are developed within 6 months. Some of the prominent examples of FIDIC are the Red Book, Yellow Book, and Silver Book. Its organization is usually the same hence it has a general provision. The contracts have been developed for over 50 years (Chen et al., 2018). As such, they have become the international standard in the Consulting Industry.
Forms of Contract and Their Roles
Joint Contracts Tribunal
The main type of work for JCT is to facilitate the building construction processes. It sets out responsibilities and obligations for all parties involved in the construction. It is the leading creator of standard forms of contract. JCT works on the principle of promoting the adaptation of the established benchmarks that suit a variety of projects. The standard form of building contract contains conditions applicable to a diversity of building works. In this area, JCT specifies a set of requirements that meet the defined needs. It also apportions risks in an appropriate manner for procurement methods used (Chen et al., 2018). Its main objective in building production processes is to minimize transaction costs when contracting and provision of benchmarks.
International Federation of Consulting Engineers
The FIDIC forms of contract which are most frequently used are the Red FIDIC and Yellow FIDIC. The Red FIDIC is used in conditions of contract such as in engineering and building works designed by the employer. The Yellow FIDIC is used in contract conditions which include the mechanical and electrical works designed by the contractor (Fischer-Lescano and Teubner, 2019). FIDIC also represents the global Consulting Engineering through the promotion of the interests of engineers.
Similarly, companies’ interests are enhanced by dealing in technology-based services in the natural and built environment. It is also used by the World Bank which ensures that international funding institutions adopt the use of FIDIC contracts. The Green FIDIC is commonly applied in low-value developments where payments are done on a monthly basis (Fischer-Lescano and Teubner, 2019). Its application condition ensures the availability of market legal systems that guarantee free and fair competition.
New Engineering Contract
NEC contracts are frequently used in crucial infrastructural schemes of high profile. Some of the projects it has been used in include Crossrail, the London 2020 Olympic Games, and Christchurch International Airport among others. As a family of contracts, NEC facilitates the implementation of critical project management practices and legal relationship definitions. NEC is suitable for the procurement of a different range of works spanning from major task frameworks to minor works (Fischer-Lescano and Teubner, 2019). Its implementation often results to both international and national project benefits in terms of quality improvement, time, and cost savings.
NEC also works in the area of promoting partnerships and collaborations. It sets out the contract data needed for the operation of the agreement and in the identification of work information. It is made up of options 3, 4, C, and E where NEC Option C is used in target cost agreements in sharing the risks between suppliers and clients. NEC Option E refers to a cost-reimbursement accord that involves the reimbursement of the contractor costs incurred in delivering the work (Ran and Xu, 2019). Option 3 is the major construction contract that is used in the appointment of a contractor for the designated work. Additionally, NEC 4 consists of construction contracts for the promotion of collaboration and partnering.
Aspects of Contracts Administered by SFoC
The majority of Civil Engineering projects are dominantly connected with substandard performances associated with costs, product quality, and time. Therefore, SFoC promotes the adoption of contractual behavior of participants in a construction project. The aspects of contracts that are administered by SFoC mainly deal with prompt payments and environmental uncertainty (Ran and Xu, 2019). These aspects can be categorized into two main areas including contractual conduct and task characteristics.
Quality as an aspect of consideration plays a critical part in a construction project. It refers to the production of services or products which are of a high standard and fit for purpose. As such, ensuring quality is an important variable that is ensured by the standard forms of contract (Ran and Xu, 2019). Other major features of contracts that are administered by SFoC are stiff project milestones, project budget, and definition of project scope, complexity, and size. It also emphasizes the clarity of a venture which is an important role in governing all aspects of the mission.
The predominant features of SFoC contract are that it acts as an offer, an acceptance, intent for the creation of legal relationships, and a consideration. It has a structure that includes details of constricting parties. They contain the period of the agreement and the definition of key provisions used in the contract (El-Adaway et al, 2020). SFoC also ensures that the contract describes the services or goods that a business receives or provides with its major deliverables.
Key Similarities and Differences between JCT and NEC Forms of Contract
Key Similarities between JCT and NEC
The aspects of time, quality, and cost are considered the main principles that cause the differences and similarities in the contracts. Both contracts allow a person to represent the employer in case the employer does not have appropriate people with capacity (El-Adaway et al., 2020). In such situations, in NEC, the project manager usually assumes the role of employer, while in JST the contract administrator assumes the roles of both the contractor and customer.
In regard to time, both contracts allow the employer to specify the commencement date, completion date, the date of access, and any other required timeframe for sectional completion. They also provide for the inclusion of damages in case of late completion of work by the contractor. Further, on costs, both NEC and JCT provide for contractor payable price to be based upon bills of quantities (Gransberg and Molenaar, 2019). They rely on the provision of lump-sum arrangements including cost-based open-book contracts.
On quality issues, the contracts expect a specific employer quality obligation which is provided on a different technical document. Such a document is further expected to express the agreement conditions by determining the level of quality be provided. Generally, both NEC and JCT are considered standard forms of contract that facilitate the procurement of consultancy, goods, works, or services (Gransberg and Molenaar, 2019). They both entail obligations that relate to cost, time, and quality.
The key differences between JCT and NEC
In terms of price; the JCT contract is presented as a fixed lump sum contract. While NEC option B has a fixed price lump sum contract, options C and D present a target cost agreement. Similarly, in regard to provisional sums; the JCT contract entails provisional sums and NEC contracts do not contain the variable. In Cost Scrutiny; the JCT contract has cost scrutiny through tender negotiations, while the NEC contract implements an open book system and emphasizes disallowed and defined costs (Birtch et al., 2016). In terms of Ground Risks; the JCT contract position risk is defined by the contractor, as the NEC contract adopts the ICE test.
The JCT contract program is not defined as an agreement document; whereas in the NEC contract the program is the major factor of ethical consideration. NEC also has key features including float, time risk allowance, and completion float. Considering payment, the JCT payment section is clearer and contained in one section. Although, in NEC the payment is not clear since it is placed under three diverse locations (Birtch et al., 2016). JCT gives separate employer-design contracts even as NEC identifies a completion state defined within works information. Similarly, JCT depends on the subjective judgment of practical completion determined at a given time.
Wider Perspectives on SFoC
The absence of clarity within the contract document often results in disputes and conflicts between the constricting parties. SFoC has evolved as a result of the increasing complexity of the construction business across the globe. This has been caused by the difficulties in drafting bespoke conditions of a contract in every project. There have been numerous advantages in the adoption and use of SFoC. However, some clauses of SFoC are often modified by clients to capture some specific requirements for the development (Salmerón-Manzano and Manzano-Agugliaro, 2019). The modification of these clauses should ensure that SFoC established standards are either enhanced or restored.
Effective use of SFoC brings with it numerous advantages to both the employer and the client. It plays a significant role in both engineering and construction works. There is a wide array of SFoC which suites specific types of works, parties, and procurement routes in all construction and engineering initiatives (Salmerón-Manzano and Manzano-Agugliaro, 2019). The major objective of SFoC is that it works to cut the negotiation time, disputes, and costs.
Conclusion
The main SFoCs which are used in the construction industry is the JCT, NEC, and FIDIC. They are often supplemented by other types of contracts which widen the focus of a project requirement. SFoCs are highly adopted by both consumers and suppliers due to the fact that they reduce the drafting time, provide a checklist of items to be agreed upon, and also provide a negotiable benchmark. As such, the implementation of SFoC in the modern construction and engineering field has become one of the key standards which ensure the success of projects.
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