JCT Design and Build Contract 2016: key changes to be aware of

This article was produced by Nabarro LLP, which joined CMS on 1 May 2017.

Summary and implications

The Joint Contracts Tribunal (JCT) has now published its JCT Design and Build Contract 2016 (DB 2016), the successor to the 2011 Edition. DB 2016 is the second arrival in the 2016 Edition of contracts, following the release of the Minor Works family in June 2016.

The majority of updates were noted in a JCT press release in February 2016 and do not alter the risk position between the Employer and the Contractor. We have highlighted the key changes to be aware of below.

Payment

One of the most significant structural changes in DB 2016 is the simplification of the payment provisions, such as the mechanism for adjusting the Contract Sum in clause 4.2 and the consolidation of the notice requirements under the Housing Grants, Construction and Regeneration Act 1996. The same interim payment arrangement now applies both before and after practical completion (up to the final payment).

There is also a move towards a common payment regime for interim and final payments (so that the final date for payment of each interim payment and the final payment is 14 days from its due date) and the procedure for assessing loss and expense payable has been amended with the aim of accelerating the process.

Insurance

A well-known problem in the industry has been that, in cases where a tenant is carrying out works in an existing property which is insured by the landlord, compliance with the requirements of the previous JCT option C arrangement was difficult to attain. In DB 2016 the JCT has included a purported solution to the problem faced by tenants in circumstances where they are unable to procure a waiver of their landlord's insurer's rights of subrogation against the Contractor for damage to existing structures.

DB 2016 amends insurance option C and allows parties to put in place a "C.1 Replacement Schedule" to suit their particular insurance requirements. Whilst this provision for an alternative insurance arrangement introduces greater flexibility, how this works in practice will be determined by the insurance market and it is unclear how the predicament of who will actually insure the existing structure is to be resolved. At the very least, its inclusion in the Contract Particulars serves to highlight the need for parties to consider the issue.

CDM Regulations

A further change is the full incorporation of the requirements of the CDM Regulations 2015 (currently dealt with under the 2011 suite of contracts by way of the JCT's amendment sheet), thereby replacing references to the CDM Co-ordinator with the Principal Designer and amending the relevant footnote in the Articles to reflect that a Principal Designer and Principal Contractor must now be appointed whenever there is more than one contractor (which for these purposes includes sub-contractors) on a project even if the project is not notifiable.

Consent

The JCT has introduced a new clause 1.10 which provides that where the consent or approval of either party is expressly required under the Contract such consent shall not be unreasonably withheld or delayed (although this will not apply to requests for consent to assignment). Parties will need to consider carefully whether this blanket requirement is appropriate.

Key changes in other areas

• DB 2016 makes express provision for the use of building information modelling (BIM) and includes a new definition of "BIM Protocol", the details of which must be included in the Contract Particulars.
• DB 2016 contains new provisions for granting performance bonds and parent company guarantees. Parties must now select whether these will be required in the Contract Particulars.
• The updated contract provides that sub-contractors can be required to grant third party rights as an alternative to collateral warranties.
• There are also a number of changes to ensure compliance with the Public Contracts Regulations 2015 (the Regulations) giving the Employer the right to terminate the Contract in certain circumstances as prescribed by the Regulations.

Summary

While there are a number of changes in DB 2016, it should be noted that there are few changes which materially alter the existing risk allocation between the parties and, in any event, employers will continue to seek a series of amendments to the JCT forms, as they have always done. Construction parties do, however, need to familiarise themselves with the procedural changes in DB 2016, particularly with regard to amended payment regimes and insurance arrangements.

The remaining contract families will follow.