A JCT Constructing Excellence (CE) contract has been used by the Historic Royal Palaces (HRP) for the first phase of conservation works at the Devereux Tower at the Tower of London. The works were completed by the Chichester stone and conservation specialists, Cathedral Works Organisation (CWO) in collaboration with architects Carden & Godfrey, English Heritage and Oxford Archaeology. The works are part of a four-year programme to conserve the inner curtain wall on the Devereux Tower.

The tower was built between 1238 and 1272 by King Henry III. It was named after Robert Devereux, the Earl of Essex, who was imprisoned in the tower prior to being executed for treason by Elizabeth I in 1601 following his attempted uprising.

HRP chose the CE contract as it was in accordance with its partnering approach to procurement – the contract is specifically designed to promote partnership working and has been used by HRP on other projects. It enabled HRP to engage CWO as part of the design team, allowing it to receive input from CWO from the outset, and gain the benefit of preliminary works, obtaining samples and enabling works being carried out before the contract for the conservation works were finalised.

The Devereux Tower project involved assessing the current level of deterioration of the stone, to slow the rate of decay and to preserve the fabric of the building using traditional materials and methods with as little intervention as possible. It also included preparing the wall walk ready for visitors.

The project was particularly complicated as it involved a building subjected to numerous alterations over its 800 year history, all of which were of historic interest and had to be preserved where possible. The tower was originally only two storeys high (it is now three) and the roof was used as a gun platform.

Works, which required Scheduled Ancient Monument Consent from English Heritage, were completed in eight months, with the cladding and scaffolding being removed late last year.

Peter Hibberd, JCT chairman, said: “It is pleasing to see that as JCT celebrates its 80th birthday, as the country’s oldest established contract drafting body, one of JCT’s newest forms of contract has been used on one of the country’s oldest buildings.”

JULY 2011

JCTNEWSTHE JCT CONTRACTS UPDATE FOR THE CONSTRUCTION PROFESSIONAL

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3 6 8 10 11 12Ode to the JCT Measured Term ContractPatricia Nathan-Amissah - Charles Russell LLP

Working North of the Border – Key Differences between JCT and SBCC ContractsShona Frame - MacRoberts

Can insurance ever catch up?Bill Gloyn - Partner, Jardine Lloyd Thompson European Real Estate; Immediate Past-President, City Property Association

Education and Training Initiative announced, as JCT celebrates landmark 80th Anniversary

JCT News Flash

Tower of LondonTower of London

The Architecture of Austerity

Richard Saxon CBE

WORLD HERITAGE SITE UNDERGOES WORK USING A JCT CONTRACT

Chairman’s Letter

JCT NEWS

At JCT’s 80th birthday celebrations held at the RIBA in April I had the privilege to announce the JCT’s education and training initiative. This initiative is timely because it comes at a time when the country and the construction industry in particular are faced with significant challenges. Education and training is and always has been recognised as the most important of issues. We are all aware of the saying ‘education, education, education’ but does the way it is delivered meet the needs of individuals and the communities in which they live?

In 2006 Don McKinnon at the World Teachers’ Day Conference said education is the key to everything and is the key to billions of human beings fulfilling their unique potential. One would not disagree with that but one can always question the form and nature of education. Education has to do more than fulfil a human’s potential, it must also ultimately provide a benefit to the community through the workplace: no one is an island. This point touches on the education versus training debate – where education is acquiring knowledge, whereas training is acquiring skills by the application of that knowledge. JCT throughout its long existence has always been about education, not just education but also training and it wants to do more by emphasising training throughout the supply chain and by further reducing the learning curve.

I have heard it said that today’s younger generation of employees want to be trained, not educated and I have also heard it said that many employers are less than satisfied with the ability of graduates to perform in the workplace. If these are valid observations then it says something about the relationship of universities and colleges with the workplace or indeed our understanding of what that should be. Survey data published by the Centre for Higher Education Research and Information at The Open University in 2009 indicate that the UK has one of the lowest rates of participation in work placements in Europe, at around 30 per cent as compared with France where it was over 80%. This, to some extent, may help explain why some employers hold the view that many people lack the appropriate skills to operate within the workplace.

The UK has some excellent ‘sandwich degrees’ and other forms of placement within construction courses but their existence is always severely threatened when industry stops growing or faces higher than average levels of risk. So rather than see growth in ways of bridging the gap we tend to see a decline. Somehow we need to further encourage and facilitate the conversion of knowledge acquired through academic study into a skill that can be used in the workplace – learning by doing being the most obvious. Part time courses were a traditional approach and many still offer the potential for bridging the gap between knowledge accumulation and its application. However, it should neither be left entirely to academia nor entirely to business to ensure the conversion takes place; it must be a joint effort and despite the extent of dialogue that exists in some areas this must not only be extended but more importantly acted upon.

In order to train for the workplace one must be clear what you want people to accomplish and JCT is making the case that wherever you might be placed in the supply chain a working understanding of construction contracts is an essential component in the efficient running of a project. JCT’s initiative therefore is, amongst other things, aimed at not only encouraging the accumulation of knowledge of construction procurement and of construction contracts but importantly the application of that knowledge through training.

We believe that this will not only lead to a more efficient construction industry but will also stimulate wider interest in the industry and what it has to offer both individuals and the communities in which they live.

Peter Hibberd Chairman of JCT

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Peter Hibberd

EDUCATION AND TRAINING NOT EDUCATION VERSUS TRAINING

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Architecture had a bull run in the UK from 1993 to 2008. The profession had a sharply rising workload, eventually drawing in thousands of professionals from overseas to meet the demand. The quality and reputation of British architecture boomed also, raising public awareness through the media and the RIBA Stirling Prize and winning work all over the world. CABE was formed to promote better architecture. Architecture was named by the government as a leading part of the newly identified Creative Industries and architects earned £3 billion in annual fees out of £14b for the whole construction professional service sector in the 2007 survey by the Construction Industry Council.

However, the cost of building rose inexorably faster than RPI throughout the period, stretching affordability and making substitutes like information technology more attractive. Reports on the reform of the industry from Latham (1994) through Egan (1998) to Morrell (2010) all attacked its cost and wastefulness. Both Latham and Egan thought that a 30% reduction in cost was possible from improved process alone. Whilst some leading clients did make big savings, the mainstream showed little effect from those reports and the industry struggles with ever-rising materials costs and regulatory burdens. The latest load is that of reaching low carbon-dioxide emission targets. Estimates of the cost of getting to zero-carbon (whatever that turns out to mean) vary up to an extra 30% over the regulations of 2000.

The coalition government has recently been blaming architects for this situation. The education minister castigates architects for extravagant design in BSF schools and a free-school champion says that architects add no value and should be avoided. And there have been some very expensive examples as well as some great outcomes. Even the government’s Chief Construction Advisor says that we should be softening the message that ‘good design’ is vital. ‘Good-enough design’ is all we need and can afford, says former CABE Commissioner Paul Morrell. He also calls for a cut in construction costs sufficient to make low-carbon buildings cost no more than conventional buildings. Thus the link has been made in the public mind between expressive architecture and avoidable cost. ‘Good design’ in the sense that the now-gutted CABE has promoted becomes a ‘nice-to-have’ option. Austerity architecture is what is wanted.

To a profession where LC used to be shorthand for radical modernist Le Corbusier, it must now mean Low Carbon and Low Cost.

So how can we avoid an era of banality and cramped shoddiness in what little building gets done? Are there ways to reduce cost whilst increasing value and keeping relevant quality?

The conventional response to tight budgets has always been to favour refurbishment over new build, to lower the quality of specification and to minimise the size of the building. Refurbishment scores well on the low carbon agenda, saving embodied carbon, waste and cost, but the result may underperform. Lower specification can push up whole-life costs or it can be a worthwhile simplification. Smaller area can be reasonable with new ways of working, or it can be a false economy. The iron triangle, Area times Specification equals Cost, rules some cost consultants’ minds. The Latham/Egan reformers saw however that the way we work adds major cost. We have some of the

Richard Saxon CBE

THE ARCHITECTURE OF AUSTERITY RICHARD SAXON CBE

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most expensive buildings in Europe whilst paying low wages and salaries to participants. UK productivity and profitability in construction is low and many clients pay a high price for low risk. Why is our lowest-tender system producing such high prices?

The way ahead surely lies in both taking cost out of the process and creating more value in the product. Professor de Ridder’s graph (Fig 1) suggests a utopia where buyers see value well above the price they pay and suppliers keep costs well below price. Both do well. The Toyota system called Lean Thinking suggests that concentrating on what customers really value allows cost to be taken out, making both margins grow. This has to be our roadmap, raking out wasted effort whilst increasing client satisfaction.

New ways to cut costs include:

• Using design-build teamwork to reach low-cost solutions; not ‘here’s my design, what’s your price?’ but ‘here’s our goal, what’s your idea to get there?’ Teams formed early and incentivised to collaborate and to beat a reasonable benchmark showed in the Building-Down-Barriers (BDB) experiment in 1996-9 that they could cut whole-life costs and get well paid for it. The American Integrated Project Delivery (IPD) concept is prospering now, with client-led teams delivering more for less.

• Using Building Information Modelling (BIM) to reduce risk. BIM is a multi-dimensional CAD model of the project which all participants share and which reduces errors enormously by coordinating designers and rehearsing construction. It can save more than the cost of design on a job and goes on helping the owner run the building over its life. It’s a basic part of IPD.

• Reducing over-specification. We use belt and braces in the UK, especially for M&E design. Over-regulation needs to be reviewed as well.

• Using a smaller range of standard products and never specials. Europe has ten times the range of products available compared to the USA and many have small orders but raise whole industry costs. Standard assemblies and even building elements, like school toilets and hotel bathrooms, can reduce cost.

• Building Offsite. Design for manufacture cuts waste, time and risk. Elements can be manufactured directly from BIM data. Higher air-tightness and insulation is achievable and the building can start earning sooner.

New ways to raise value:

Better client leadership. Most public and many private clients are inexperienced and risk-averse. Bringing suitable client advisers on board at the earliest stage reaps rewards by defining the project well and buying design and construction intelligently. The RIBA now has a cohort of accredited Client Advisers to offer, bringing strategic thinking to bear so that the right product is asked for and the right process used.

• Defining whole-life best value: A building costs more to run over 20 years than it costs to build. And it houses activity worth many times more. A good value-seeking process optimises the outcomes for the owner and occupier, sets acceptable operating cost and then the capital budget to achieve those goals.

• Spending more up front to spend less on building. Ships, cars and aeroplanes all have more elaborate design stages than they used to do in order to have lower build and operating costs. Only construction tries to save on preparation as an aim in itself, condemning it to repeat old errors. A thorough briefmaking and design process, with BIM and constructor involvement, redistributes cost but can cut it overall. As a current US slogan has it: “Pre-work, not Re-work”.

Fig 1: Opening Space between Value, Price and Cost. Prof. Hennes de Ridder

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• Commission well and operate to learn. Buildings don’t work as well as designers and constructors expect, and they don’t know why because they are off the scene. A leap in customer satisfaction and supplier understanding follows if you use ‘Soft Landings’, the commissioning and feedback convention developed by consultants and Cambridge University and now available from BSRIA. For low-carbon building it’s an essential step.

Austerity architecture could turn out to be elegant and long-lasting. No one will thank us for dropping unsympathetic standard schools onto sites as if they were McDonalds. But we don’t need to go there (see Fig 2). Low cost, low carbon architecture could be high whole-life value through excellence in the process, choice of simple strategies over complex ones, flexible space working hard and a building made of standard components and recycled elements of the former building on the site. The last thing we should do is cut down on the thinking.

The initial strategy-making for a project can cost less than 1% of construction cost or 1/3000 of the value delivered in the building over 20 years. The chance to leverage high performance is large. We need cost-effective buildings, not just cheap ones.

Perhaps UK architects’ iconic buildings will increasingly be in the Gulf and in Asia. Let’s focus here in the UK on understated value.

Richard Saxon CBE is an accredited RIBA Client Adviser at www.saxoncbe.com. Formerly chairman of BDP and of Be, Collaborating for the Built Environment, president of the BCO and vice-president of the RIBA. He was also inaugural Povey Lecturer for the JCT.

Fig 2: Nurture Future School: a low-carbon, low-cost system by Tarmac and Cartwright Pickard Architects

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Maintenance contracts differ from other forms of procurement. The contract length can often be for periods of between 3 to 5 years which, in these difficult times, can offer contractors much needed continuity of work and income. The form of contract needs to cater for the ebbs and flows of work type, volume and pricing. Choosing the appropriate JCT contract for maintenance work needs careful consideration and often choices can be fettered by the comfort regular users of JCT contracts may have with traditional lump sum contracts.

Generally, Measured Term Contracts or Framework Agreements are best suited for maintenance, improvement and in some cases minor works.

So how do Measured Term Contracts work? Usually a contractor undertakes to carry out a series of works orders placed over a period of years within a defined geographical area – the work is then measured and valued using rates in a pre-priced Schedule of Rates or hourly rates which usually include a negotiated contract percentage, applied to the relevant work.

To encourage economies of scale one contractor may be appointed, however as the administration of Connaught PLC shows, there is a benefit to spreading the risk. To reduce the effect of contractor insolvency two or more contractors may be appointed to undertake the work required under a term agreement. This also has the benefit of enabling direct comparisons to be made and facilitating benefit of common supply chains.

Many major clients such as registered landlords, local authorities, churches, universities, care homes and other large property owners, often use inappropriate bespoke contracts or the wrong form of JCT contract.

Forms of Measured Term Contracts

Contracts let on a term basis often use the JCT Measured Term Contract 2006 (JCT MTC), which was first published in 1989 and is considered “tried and tested”. The latest version of the JCT MTC is Revision 2 2009. There are other forms of term contracts published by the NEC (NEC3 Term Service Contract published in 2005) and the TPC 2005 ACA Standard Form of Term Contract for Term Partnering – amended 2008.

JCT Measured Term Contract Revision 2

The JCT MTC is not written about or reported as often as other JCT contracts and its use is dwarfed by the

more commonly used main forms of JCT contract. As its title suggests, the JCT MTC is designed for use where there is “a regular flow of maintenance and minor works, including improvements, to be carried out by a single contractor over a specified period under a single contract”. Consequently other forms may be better suited if the volume of work is not large enough or where the work can be fully designed and completed in less than a year.

The JCT MTC consists of over 40 pages of printed conditions, many of which would be familiar to users of other JCT contracts. The JCT MTC refers solely to the Contract Administrator (as opposed to the Architect). The Contract Administrator is usually a surveyor engaged by the Employer and is intended to be someone who is experienced and skilled in construction procurement. The Contract Administrator is responsible for administering the terms of the contract in an impartial manner.

The latest JCT MTC Revision 2, as with other JCT contracts, includes provisions relating to

• collaborative working

• health and safety

• cost savings and value improvements

• sustainable development and environmental considerations

• performance Indicators and monitoring, and

• notification and negotiation of disputes.

There are other amendments to the text but generally the contract remains unchanged from Revision 1.

The Articles, Recitals and Contract Particulars set out the Contract Period (usually at least a year), the Contract Area and the work types in respect of which orders may be given. Unless otherwise agreed between the Contractor and the Contract Administrator orders will be of a size consistent with the minimum or maximum orders stated in the Contract Particulars, as long as they are reasonably capable of being carried out within the Contract Period. The Contract Particulars also include an anticipated value of work but there is no guarantee of work nor are there any provisions in the standard form for exclusivity.

Not only does the contract include termination provisions it also contains break notice provisions

ODE TO THE JCT MEASURED TERM CONTRACTPATRICIA NATHAN-AMISSAH - CHARLES RUSSELL LLP

Patricia Nathan-Amissah

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which allow either party to reduce the duration of the Contract Period by giving the other party at least 13 weeks notice (or such shorter period of notice set out in the Contract Particulars). The notice may expire at any time not less than 6 months after the date of commencement of the Contract Period. Consequently the break mechanism cannot be used to reduce the Contract Period to less than 6 months but the period of notice required can be specified as less than 13 weeks. The guidance notes suggest that such break clauses are rarely used in practice.

The contract is designed for use where the Employer does not commit to minimum order levels or to any degree of exclusive dealings so the level of orders may fall below expectation or where there is an unexpected and material change in market rates or prices.

The JCT MTC makes no provision for liquidated damages as the implementation of such clauses in term contracts gives rise to difficulties in terms of a genuine pre-estimate of loss, either with reference to individual orders or orders collectively. The contractor will be liable to pay unliquidated damages for a material delay or disruption in carrying out any order.

JCT Framework Agreement 2007

The JCT Framework Agreement, which is a two party agreement between the Employer and the “Provider”, is designed for use as an umbrella agreement for underlying contracts such as the JCT Design and Build Contract and the Minor Works Building Contracts. Individual tasks are instructed as required, subject to the pre-agreed terms of the underlying contract. The Framework Agreement aims to encourage the parties to work with all those involved in an open, co-operative and collaborative manner and “in a spirit of mutual trust” to achieve the objectives set out in the Framework Agreement.

Conclusion

The JCT MTC is a stand-alone contract appropriate for use by Employers who have a regular flow of maintenance and minor works, whereas the JCT Framework allows Employers to call off discrete contracts, which may be quite diverse in nature. Both forms of contract can be used to foster the collaborative and long term relationships with suppliers that are now recognised as best practice.

If you require any further information arising from this article, please contact Patricia Nathan-Amissah at Charles Russell LLP by email at patricia.nathan-amissah@charlesrussell.co.uk or by telephone on 01483 252638.

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The aim of the Scottish Building Contract Committee (SBCC) in its standard form contracts is to create as much uniformity across the UK as possible, adopting the JCT forms wherever possible. However, it remains the case that because of the different legal system north of the border, there are certain key differences in approach.

The SBCC standard forms have made the changes required to the JCT forms to bring them in line with Scots law and terminology but they do not change the risk profile or make other substantive amendments. They follow the JCT colour coding, section headings and clause numbering and, as far as possible, follow the JCT names and dates.

The SBCC forms are now published in one amalgamated document so that it is no longer necessary (as was the case with the JCT 80 and 98 forms) to read a separate Scottish supplement into the JCT form. The consolidated approach is one that users will find easier to read.

Key differences are:

• Arbitration – Like the JCT form, the default dispute resolution method is Court as opposed to Arbitration. Where arbitration applies, the applicable legislation is the Arbitration (Scotland) Act 2010 which came into force on 7 June 2010. The Arbitration Act 1996 does not apply in Scotland. The Arbitration (Scotland) Act 2010 is relatively brief, consisting of 37 sections, but supplemented by 84 Rules contained in Schedule 1, the Scottish Arbitration Rules. It can apply equally to domestic, inter-UK or international arbitrations. The Scottish Arbitration Rules are stated to govern every arbitration seated in Scotland. Some of the Rules are mandatory meaning they cannot be modified or disapplied and some are non-mandatory (referred to as the “default rules”). The default rules apply unless the parties have agreed to modify or disapply them. It is possible to disapply a rule in whole or in part. The appointment of the arbitrator is dealt with by “Arbitral Appointments Referees” which are bodies authorised by the Scottish Ministers to act in this role.

• Adjudication – the Rules of the Scottish Scheme are applied.

• Nominating bodies – the Adjudicator nominating bodies are the Royal Incorporation of Architects in Scotland, The Royal Institution of Chartered Surveyors in Scotland, National Specialist

Contractor’s Council and Scottish Building Federation. The Arbitrator nominating bodies are the Chairman or Vice Chairman of the board of the Scottish Building Contract Committee Limited and the Chairman or Vice Chairman of the Chartered Institute of Arbitrators (Scottish Branch).

• Off site materials and goods – JCT clause 2.25 provides that where a payment is made under the contract of the value of the off-site materials, the materials will become the property of the client notwithstanding that delivery has not been made. This is not contained in the SBCC contract because in Scotland, under a building or engineering contract, ownership of property can only pass when there is both an intention to transfer ownership and delivery. This can be achieved when the property is incorporated into the works. It may also be achieved when the materials are delivered to site and then paid for by the Employer by inclusion in an interim certificate. However, where the contract can be characterised as a contract of sale, it will be subject to the Sale of Goods Act 1979 and ownership of the property may pass, by agreement, on payment being made rather than on delivery. The way this is dealt with is for the client to enter into a separate contract for the purchase of the materials from the contractor or sub-contractor so that the materials will no longer form part of their contract. This is provided for within SBCC clause 4.17. It is in quite different terms from the equivalent JCT clause and provides that the Employer may enter into a separate contract for the purchase of materials or goods prior to their delivery to site. If such a contract is entered into, the purchase of the materials or goods is excluded altogether from the building contract.

• Trust – A trust cannot be effectively created in Scotland unless the parties divest control of the relevant assets to the trustee. This means that most trust mechanisms in English standard form contracts, e.g. in respect of retention, will be ineffective under Scots law.

• Signing – In Scotland the law in relation to the formalities of the execution of contracts is contained in the Requirements of Writings (Scotland) Act 1995. To be validly executed a document requires to be properly subscribed by each of the parties on its last page. At least part of the written document must appear on the page which is signed, and that page

WORKING NORTH OF THE BORDER – KEY DIFFERENCES BETWEEN JCT AND SBCC CONTRACTSSHONA FRAME - MACROBERTS

requires to be signed by at least one of the parties. It is not appropriate for the parties to sign on a blank page that is merely attached to the document to be executed. The proper method of subscription depends on the nature of the party signing. A document may be executed in such a way as to make it self-proving. The 1995 Act also sets out rules for the incorporation of schedules and other attachments to a document. Schedules should be referred to in the document itself and each schedule should be identified on its face as being the schedule that is referred to in the contract. There is no need generally for a schedule to be signed unless it is a contract which “relates to land”. There is no Scottish equivalent to the English rule on counterparts or exchange of contract.

• Registration for preservation and execution – In Scotland the parties may agree to have the contract, and more particularly any arbitration clause, registered in the Books of Council and Session in Edinburgh. Registration for preservation means the document is kept safe in the Register so it does not get lost. Registration of the contract for execution together with any decree arbitral that may

be subsequently issued means that any arbitral award under the contract can be enforced without the need to go to court for enforcement.

• Third Party Rights – the Contracts (Rights of Third Parties) Act 1999 does not apply in Scotland. The equivalent right in Scots law derives from the Scottish common law doctrine of jus quaesitum tertio. This allows a third party who is not party to the contract to obtain and enforce rights under the contract. It is necessary to identify the third party in the contract by name, as a member of a class or as answering to a particular description. It is also necessary to show that the contracting parties intended to benefit the third party. The third party rights procedure is not commonly used. Collateral warranties remain the preferred option in Scotland.

• Prescription & Limitation – The law in Scotland on prescription and limitation of claims is to be found in the Prescription and Limitation (Scotland) Act 1973 and the case law regarding its interpretation and application. The short negative prescriptive period is five years. This period runs from the date any loss, injury or damage occurred as a result of an act, neglect or

default. If the person who suffered the loss, injury or damage was not aware and could not, exercising reasonable diligence, have become aware of its occurrence at the time it occurred, then the period runs from the date the person became aware or could, exercising reasonable diligence, have become aware. The long negative prescription is twenty years which acts as a longstop. This runs from the date of the act, neglect or default rather than the date of discovery of the defect. Relevant proceedings (broadly court action or arbitration) need to be commenced prior to the deadline date otherwise the claim is extinguished.

In general terms, the similarities between the JCT and SBCC forms by far outweigh the differences but it is important to bear in mind the key differences above if contracting north of the border.

Shona Frame is a Partner at MacRoberts LLP. She is accredited by the Law Society of Scotland as a Specialist in Construction Law. She can be contacted on shona.frame@macroberts.com

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There are some changes afoot to the insurance obligations in clauses 6.11 and 6.12 (and associated Contract Particulars) of the proposed 2011 version of the Design and Build contract. These relate to the requirement to include cover for asbestos and toxic fungal mould within the Professional Indemnity insurance that the contractor has to effect. Having been put there in the 2009 amendments, it is now planned to remove them as the required cover has proved difficult to obtain.

This change led me to think about the reason for insurance being an integral part of the obligations of both parties in the first place – to provide a financially secure way of transferring risk. Insurance is a vital ingredient of commerce; without it the risk that a business would fail in the event of a disaster would be too great for many transactions to go ahead.

Risk is a moving target. As many people and businesses have found out over the past few years, areas previously unaffected by flooding have experienced devastating damage and subsequent consequential losses. And that ignores the human tragedy often involved. Tragically, the catastrophic events in Japan seem to have been largely uninsured, due to a lack of underwriting capacity for earthquake and tsunami exposures.

Fortunately, at least for those that can effect insurance, most serious disasters are covered. The UK has a very mature market that has seen, and responded to, most of the dangers that nature – and fellow humans – can throw at us.

Occasionally something new comes along and, after a while, insurance usually steps up to the plate and provides protection. A classic example was terrorism. After two major bombings in London in the early 1990’s, individual insurers, and their reinsurers, felt unable to shoulder the burden of another attack under the normal arrangements. However, with the support of H M Government acting as re-insurers of last resort, the whole market got together and formed a mutual insurance company – the Pool Re – that enabled insurance to be offered. First this was against the risk of fire and explosion only but, after the atrocities of 9/11 – with the world market removing any cover for damage and subsequent losses arising out of an act of terrorism – the extent of the protection was extended to an “all risks” basis, including radioactive, chemical and biological contamination.

That makes the cover available in the UK arguably the widest anywhere in the world. We are the envy of many other countries, giving comfort to the many overseas investors that have put their money into the UK over the past decade. So, insurance does respond when needed.

Reinsurers, mentioned earlier, are basically a global group of mega insurance companies who insure the primary insurer – the one that issues the policy – against catastrophic losses that would otherwise affect their financial stability. Consequently, reinsurers have considerable power in dictating underwriting policy. Sometimes reinsurers take a particular dislike to a certain risk and, being a basically unregulated global grouping, they can therefore take decisions in concert – unlike direct insurers who must act so as not to offend anti-competitive legislation.

Where reinsurers do object to a particular risk one often sees standard exclusions from most policies. One such risk is the legal liability that might arise from working with asbestos. There, of course, the insurance market has suffered enormously from the industrial disease claims that started flowing during the 1970’s but which reached a peak some 20 years after. It is not possible to estimate how much insurers will have to pay out but a recent estimate of the total cost in the US alone put the potential figure at over $200 billion. The relatively low premiums that these losses related to had often been collected decades earlier and forgotten about, and so the volume of claims that hit the insurance market posed a severe threat to its stability. Fortunately, the situation was managed and now seems under control.

Not surprising that there is now a reluctance to get involved with asbestos exposures. There is a similar reluctance to get involved with toxic mould; not yet a major problem in the UK but one that has reportedly led to some 30,000 claims in the United States – at a cost of over $500million. The fear, confirmed by an RICS commissioned report which estimated that some 3 million homes in the UK are potentially affected by it, is that toxic strains of mould are becoming more prevalent in the UK and may eventually lead to the volume of death, illness and property damage/valuation claims seen in relation to asbestos.

No wonder that claims from mould are also becoming a widespread exclusion from many types of policy – including professional indemnity. Also, understandable is JCT’s view that insurance against claims arising from asbestos and toxic mould should therefore not form part of the standard contract requirements.

However, insurers do respond to demand. Perversely, just as the requirement is being removed a fledgling market has emerged among specialist underwriters. So, anyone who wants to retain the requirement for wider cover may find it, that is if they look hard enough and are not fobbed off by assertions that it is not available.

CAN INSURANCE EVER CATCH UP?BILL GLOYN - PARTNER, JARDINE LLOYD THOMPSON EUROPEAN REAL ESTATE; IMMEDIATE PAST-PRESIDENT, CITY PROPERTY ASSOCIATION

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JCT used its recent 80th birthday celebration to announce plans of its new Education and Training Initiative.

Professor Peter Hibberd, JCT chairman, introduced the initiative in his speech at a special event held at the Royal Institute of British Architects (RIBA) in London.

Hibberd will be championing education and training throughout the year with a phased roll-out, aimed at improving understanding of the construction industry, and in particular, procurement and construction contracts.

Plans for the Education and Training Initiative include:

• The JCT Academic Box Set, a comprehensive tool for education providers which includes the full set of JCT contracts as well as a range of benefits via membership of JCT’s Education and Training Provider Group.

• Closer collaboration with institutions providing construction-related courses, with the creation of a bespoke JCT module to enhance the understanding of procurement and contracts.

• A competition for students with the chance to win bursaries towards the funding of courses.

• A dedicated area of the JCT website.

Peter Hibberd explained: “Many of the industry’s problems could be addressed through better education and training.

“...if trades and subcontractors had a better understanding of contractual objectives, contract provisions, and the impact of their actions, many of the problems and disputes which escalate up the supply chain could be avoided.

“This is not just about skills; it is also about understanding the industry, about educating those within the industry, and those entering it.”

80 years and counting...

“The announcement of the initiative marks another exciting period for JCT, which enters its 80th year at the forefront of the industry, setting standards for construction contracts,” commented Neil Gower, JCT chief executive

“Throughout its history JCT has been an example of effective collaboration in the construction industry. It was, and remains a consensus-based organisation serving every part of the construction supply chain. Through the support of its members and the industry as a whole, JCT continues to provide real benefits. Its wide portfolio of construction contracts is estimated to be used on 80% of construction projects.”

The continued impact of JCT’s work across the industry was reflected in the warm and lively celebration at the RIBA on 12 April.

EDUCATION AND TRAINING INITIATIVE ANNOUNCED, AS JCT CELEBRATES LANDMARK 80TH ANNIVERSARY

The Jive Aces: celebrating success with JCT

Recognition of JCT’s achievements was echoed across the industry:

“When it was established, JCT was revolutionary, [...] saving huge amounts of time and money. [...] JCT has built on its leadership in the industry with the recent introduction of provisions and guidance on sustainability and fair payment.” Mark Frisk MP, construction minister

“[...] It is a tribute to its success that it is now both the UK’s leading construction contract authoring body and provides the largest portfolio of standard form contracts in the world.” Ruth Reed, RIBA president

“JCT is also a superb demonstration of the industry resolving its own issues. [...] This consensus remains today, with all new and revised JCT contracts being approved by all sides of the industry before publication.” Tony Bingham, leading construction barrister and arbitrator

“JCT is proof if ever it was needed that whilst the world of commerce changes, good ideas last. [...] It is worth reflecting on the man-hours the JCT saves our sector each year through its sterling work on standardisation.” Liz Peace, BPF chief executive

“Our Contracts in Use Survey showed them [JCT] to be leading the market in contract use. [...] Clearly the market sees the JCT contract as the mainstay of the construction industry in the UK.” Robert Peto, RICS president

SWEET & MAXWELL

JCT NEWS FLASHNEW SERVICES AND PRODUCTS FROM JCT

JCT CONTRACTS 2011 EDITIONNEW ACT, NEW EDITION

The new edition of JCT Contracts – JCT 2011, will cover the new payment legislation and other updates. Currently, the Department for Business, Innovation & Skills (BIS) are working towards an implementation date of October this year for the new Construction Act.

If implementation is confirmed by mid July for October, JCT 2011 will be published in September, to give you time to make the transition to the new suite.

The JCT 2005 suite will remain available for nine months after the implementation date and will be labelled to show they no longer comply with the current legislation.

If you are a current subscriber to JCT’s Digital Contracts Service, you will receive your CD in early September.

Watch the press and your JCT News for more details. Email stanform@jctltd.co.uk to sign up to receive the paper or E version.

JCT CONTRACTS COMPLETE WORKSJCT 2011 Complete Works comprises of a full set of JCT documents, in JCT branded binders, for your library or office.

Pre-order from your local stockist today.

START YOUR TRANSITION TO JCT 2011 WITH JCT TRACKED CHANGE DOCUMENTSTHE CHANGES TRACKED FOR YOU

To help make the move to the new edition of JCT Contracts as smooth as possible, the JCT have produced the JCT Contracts Tracked Change Documents that show the tracked changes to the existing JCT 2005 contracts that will form the JCT 2011 suite of contracts.

Especially helpful for professional advisers who have requested advance notice of the changes so that they can advise their clients, the Tracked Change Documents are available in hard copy only.

HOW TO GET THE TRACKED CHANGE DOCUMENT YOU NEED

The following Tracked Change Documents are available to order in bound hardcopy from your local stockist.

• Standard Building Contract with Quantities 2011 Tracked Change Document

• Standard Building Contract with Approximate Quantities 2011 Tracked Change Document

• Standard Building Contract without Quantities 2011 Tracked Change Document

• Design and Build Contract 2011 Tracked Change Document

• Intermediate Building Contract 2011 Tracked Change Document

• Intermediate Building Contract with contractor’s design 2011 Tracked Change Document

• Minor Works Building Contract 2011 Tracked Change Document

• Minor Works Building Contract with contractor’s design 2011 Tracked Change Document

All other contracts are available through Docdel by emailing: sweetandmaxwell.Docdel@thomson.com.

When you purchase a Tracked Change Document through Docdel, you will receive an unbound hardcopy print out of the PDF version.

JCT EDUCATION AND TRAININGThe JCT Education and Training Provider Pack includes a set of highly beneficial tools and support for academic institutions and other education and training providers.

E-mail us today at stanform@jctltd.co.uk to find out more and register your interest.

MAKE SURE YOU RECEIVE EVERY ISSUE OF THE JCT NEWS Please email us at stanform@jctltd.co.uk to add yourself, colleagues or your organisation to the JCT News mailing list, or to amend your contact details.

You can find full pricing and a list of stockists at jctcontracts.com

JCT 2011COMPLETE WORKS ISBN: 978-0-414-04793-8