Construction and Engineering

Procurement strategies

Preparation ahead of a construction project is crucial. Procurement is the process of selecting the best contractual arrangement for the project, inviting tenders and agreeing contracts with the various service providers.

Our team of construction lawyers have the experience and know-how to advise on the most suitable methods of procurement. Depending on the project, this could be the traditional method (where the contractor is only responsible to build), management contracting, design and build or joint venturing/partnering.

Professional appointments

Most construction projects, big or small, will require specialist professional advisers while the contractors carry out the work. This could be architects, structural engineers, mechanical & electrical engineers or project managers. It could also include archaeological consultants or traffic management specialists.

When appointing advisers, it is important that suitable contracts are drawn up to make clear the balance of risk between the different parties. It some cases it is also necessary for the client to do so to evidence it has complied with statutory obligations placed upon it such as under the CDM (Design and Management) Regulations.  This process should be carried out with the assistance of experienced lawyers.

Appointment documents should cover clear and detailed obligations to be performed, standard of care, payment specifics, prohibited materials and copyright and insurance considerations.

We have seen on many occasions how failure to draft binding agreements can cause significant problems.

Construction contracts

There are many various types of construction contracts that are suitable for different projects. Each have advantages and disadvantages - and their own legal challenges.

A JCT contract is usually made between an employer and a contractor to deliver a building project. The contract sets out all the terms and conditions of the project, including the obligations of the parties, costs and specifications. In a nutshell, it explains what needs to be done, as well as timescales. Crucially, a JCT should include provisions on how to deal with any disputes, avoiding costly, drawn-out litigation. For this reason, it's important that a JCT is professionally and adequately drafted by experienced legal professionals.

The NEC4 is a suite of construction contracts intended to promote partnering and collaboration between the contractor and client. They should be clear and simple and are used in a wide variety of projects, from minor works to major projects. The overriding ethos is one of collaboration between all parties. Despite their simple language, they must be drafted with care and accuracy.

Created by the International Federation of Consulting Engineers, FIDIC contracts provide an internationally recognised basis for a wide variety of engineering or construction projects. They aim to streamline the contract management process and cover issues such as roles, labour conditions and delays caused by authorities. Procedure for disputes is also covered.

Our lawyers are also experienced in preparing bespoke forms of construction contract; more commonly used by main contractors with sub-contractors or sub-contractors through the supply chain. These contracts may or may not incorporate the standard form contracts.

Pre-construction services agreements

Pre-Construction Services Agreements (PCSAs) enable clients to employ contractors before the main contract for the construction works has been awarded. This can allow a contractor to contribute in a multitude of ways, including advising on the design process, buildability and method of construction, as well as developing a cost plan and obtaining prices from sub-contractors. Engaging with a contractor early on can help to keep costs down and reduce the chance of disputes.

Collateral warranties

Collateral warranties are commonly used to bridge the gap between parties who have a contractual link and third-parties who do not.

Usually, an employer and a contractor will enter into a contractual agreement to carry out building works. Construction projects are usually much more complicated than that, though, as they involve a wide range of parties with an interest in the development, such as funders, purchasers or tenants, as well as contractors and consultants. These parties will not have a direct contractual link.

This means that, for example, if the work of a subcontractor was found to be inadequate, the employer would have to rely on a claim in negligence, which can be difficult to prove and will often limit recovery of losses.

A collateral warranty is a shortened version of the underlying contract that acts as a useful security by formalising the relationship between all stakeholders. It legally joins everyone involved in the project.

Collateral warranties can be in a standard form or bespoke form and offer a range of rights in favour of the beneficiary.

Development agreements

Landowners frequently use a development agreement to engage a developer to build on their land. These agreements are usually highly-specific to the circumstances and are, therefore, legally complex documents.

There are different types of development agreements, including: agreement for lease, forward purchase agreement, forward funding agreement, speculative funding agreement and stand-alone development agreement.

It is vital the development agreement reflects the arrangements agreed by the parties and in particular, the obligations of each of the parties in respect of the project.

Guarantees and bonds

 The success of most projects depends on contractors meeting the requirements of the construction contract. Performance bonds and guarantees are guarantees are used to ensure contractors meet their obligations.

A performance bond is a financial guarantee usually provided by a bank or insurance company on behalf of the contractor. If the contractor fails to meet performance standards or doesn't deliver as agreed, the developer can make a claim on the bond to recover losses. This affords the developer a level of protection to enable it to complete the project even if the original contractor fails to do so. This is particularly important in large scale local authority projects where public money is being used.

Our lawyers can help negotiate effective, binding guarantees and bonds to give you peace of mind before a brick is laid.

Payment notices and pay less notices

The Housing Grants Construction and Regeneration Act 1996 (as amended) (“the Construction Act”) sets out statutory obligations which apply to the majority of construction and engineering contracts (there are some exceptions).

The Act implies default terms, amongst other matters, in respect of:

• the right to adjudicate – a bespoke quick-fire form of dispute resolution specific to the construction industry;
• right to payment including terms in relation to the frequency of payment and timescales for payment;
• the provision of payment notice and pay less notices;
• the right to suspend works for non-payment;
• the prohibition of pay when paid and pay when certified clauses