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Notable Clauses In Icheme Contracts Construction Essay

Paper Type: Free Essay Subject: Construction
Wordcount: 3758 words Published: 1st Jan 2015

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A construction project can be have a good start. Owner according to their own actual situation choose Procurement Methods. And Then according to the time, quality, costs etc, choose the tendering methods. Finally according to their own construction project consider based on the main body of the building design select a standard form of contract.

2. Procurement Methods

The procurement is a term used to describe the activities carried out by the client or employer is seeking to bring construction or renovation of buildings.

It is a mechanism which provides a solution to the question: “how do I get my project built?”

In most projects, the client (usually through their advisers or internal team) will start the procurement process by developing a project strategy. The strategy needs to weigh the benefits, risks, and budget constraints of a project to determine what is the most appropriate method, procurement contractual arrangements will be required.

With every project, the client’s concerns focus on time, cost and quality (or performance) in relation to both the design and construction of the building. Understanding of risk is very important, because although each procurement methods follow a comprehensive set of rules and procedures, there are risks associated with select any particular route.

The JCT contract specifically for different procurement methods are used in the construction industry.

There are three main procurement methods :

Traditional system

Client development projects of the business use cases, provide a brief, budget an designate a team of consultants to prepare a design, plus the tender document. Client appoints the construction contractor construction architect design, by the completion date of the contract and the agreed price. Usually much of the work is sub-contracted to specialist firms but the contractor remains liable. Consulting firm manage the contract on behalf of the client, and suggested that the relevant aspects of the design, progress and stage payments must be paid by the client. Separate contractors from design can mean lost opportunities for contractor or expert contractors to enter. This strategy is the choice of a low-risk client want to reduce their exposure to cost overruns, delays, or design failure.

This is probably the most commonly used method of

procurement and it is suitable for:

all clients, including inexperienced clients

complex projects and projects where functionality is a prime objective

However, it is not suitable for fast track projects

Figure 1: traditional procurement process

Source: http://www.google.com.hk/imgres

Design and build system

The main contractor is responsible for both design and construction and will use either internal designers or employment consultants to perform design. Most of the construction work will be carried out by the experts or subcontractors.

Design and build approach gives the client a single point of contact. However, the cost of construction costs submitted by the client, as well as an earlier design than the traditional method. While the risk transfer of the contractor, which is very important to the design of liability insurance is to keep it to cover the risk.Change by the client in the design can be expensive, because they affect the entire design and construction contract, not just the cost of the design team.

This method of procurement involves the contractor being responsible for design as well as construction, it can be suitable for:

all clients, including inexperienced clients and those requiring distance from the project.

cost certainty

faster track

However, it is not suitable for:

an uncertain or developing client brief

complex buildings

Figure 2: design and build procurement process

Source: http://www.google.com.hk/imgres

Management Contracting

The client appoints designers and a contractor(management contractor) separately and pays the contractor a fee for managing the construction works. A feature is the early appointment of the contractor to work alongside the design team to develop a programme for construction and contribute to the design and costing of the works. The works are let

competitively by the management contractor to subcontractors and specialists in appropriate works packages. This approach often means that design and the start on site overlap, with the design and tender packages becoming available ‘just-in-time’ to suit the construction programme.

Management contractor will not carry out construction work. This preserves the management independent contractors and strengthen a consulting firm’s relationship with its customers. Payment plus a consent fee based on the cost of works package to the management contractor.

This is suitable for:

fast track projects

complex buildings

a developing brief

However, it is less suitable for:

inexperienced clients

cost certainty before starting construction

clients wanting to pass risk to the contractor

Figure 2: Management Contracting process

Source: http://www.google.com.hk/imgres


This offer the time needed to complete a project, money and other conditions related to contractual obligations to complete construction projects collectively form a tender. Management and business decisions to tender is called a tender, to do so is based on a variety of details, such as estimated.

There are three types of tendering methods used in construction industry:

1. Open Tendering

An open tender is a tender invitation sent to all interested contractors, so they can submit the tender. This process is considered to be one of the most fair way, even an unknown or new contractor can have the opportunity to get the contract.

Advantage of the open tender

To the high level of competition and contractors often give the best price and the other bidding methods.

There is no limit bidders list, it does not allow favoritism.

This is a very transparent process, to ensure that the contractors and the best price and meeting all the technical requirements to win the tender.

This process is usually by procurement management board, its staff is trained to make this exercise and the Board to ensure that all procedures involved in the tender.

The disadvantage of the public tender

The low prices are usually damage the quality and often cause the client to get the low-quality work and night to complete the work.

In view of its public tender, where the number does not limit the contractor bidding to become coarse, tender analysis and lengthy work often leads to delays and high cost.

2. Selective Tendering

In this process, the selected contractors were invited to tender to tender. However, this approach leaves a lot of space prejudices. This process can reduce the competition for those invited to tender. The method has been applied to the case when building a little selective and requires high-tech and specialized expertise, skills and experience. Only those contractors to meet all these needs is to invite tenders.

Advantage of selective tender

An advertisement may produce several interested contractors and suitable Firms are selected to tender.

The consultants may contact those they would wish to put on an ad-hoc list.

Many local government and national institutions to maintain approved contractor list in certain categories, such as the type of work and cost range. Require the Contractor to include in the select list of bidders usually required to provide the information on their financial and technical performance, especially when you consider the type of work. National Joint Advisory Committee Building (NJCC) wrote a “standard form of tender questionnaire – Private” so the contractor can be ready to answer related issues in advance. These problems are mainly processing projects in the past three years. Once the form has been completed, it can be used for a specific project or compile a list of the selected contractor

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3. Negotiated Tendering.

This process involves negotiations tender consulting client select contractors consultation contract, its terms and conditions. This process uses a special case. For example, usually in the case of an emergency, you need to complete a project in a very short period of time or complex contracts, financial and technical performance are difficult to identify. This proposed standard procedure for situations involving the safety of major national projects.


A standard form contract (sometimes referred to as an adhesion or boilerplate contract) is a contract between the two parties, the terms and conditions of the contract party, the other is set on a either accept it or leave it “stance with little or noability to negotiate terms that are more favorable to it.

Example of the standard form of contract insurance (insurance companies decide what will and will not guarantee that the wording of the contract) and contracts with government agencies (in some terms must be included by law or regulation).

There are many of the standard form of contract for international construction project. Such as FIDIC JCT IChemE etc.

Standard Form Contracts: FIDIC

FIDIC is International Federation of Consulting Engineers, the French acronym. It was founded in 1913, aims to promote the interests of engineering companies in the global consulting. It is best known for its range of standard contract conditions for the construction of plants and design industry. FIDIC form of contract is the most widely used form of the international community, including the World Bank, its projects.

The the FIDIC “rainbow kit” new contract was published in 1999, including:

Red Book: employer of construction conditions of contract for architectural and engineering design;

Yellow book: Conditions of Contract for Plant and Design;

Silver book: Conditions of Contract for EPC / Turnkey Engineering;

Green book: a short form of the contract conditions.

These “new” form of the first version and user-friendly design, with a standardized method to reduce the general conditions from the more than 60-year-old to 20 terms and conditions.

Additional forms since 1999, including:

Blue book: the contract dredging and reclamation;

MDB / FIDIC Contract: FIDIC conditions included in the standard tender documents multilateral development banks;

The White Paper: client / consultant model services agreement;

Kim’s book: FIDIC design, construction and operation of the project.

Red and yellow book has a similar structure, with 20 of the general conditions. Have guidance, assist in the preparation of the special conditions, and add specific conditions.

The Red Book (construction contract for building and engineering employers) to work for the employer is responsible for the design. This is a re-contract, which means the employer and the contractor agreed to in the the contract rent type of work, and those interest rates will be applied to the amount of work, contractor implementation. Employers need a lot of risk is estimated to be more or less accurate, the contractor must ensure that the number of the unit price is enough.

The yellow book (plants and design, construction contract) works designed for the use of contractors. This is a one-time contract, the Contractor undertakes to deliver the project, a fixed price. Contractors, therefore, requires a lot of risk.

Standard form contracts: JCT

JCT contract, in the form of the most common standard form of construction contract in the United Kingdom, accounting for about 70% of the UK project.

The Joint Contracts Tribunal

Joint Contracts Tribunal, composed of seven members represent a broad range of interests in the building and construction industry. It produces standard forms of contract, notes and other standard documentation used in industry. The JCT’s intention, they represent a balance between the parties to allocate risk arising from contracts.

The JCT suite of contracts

The latest version is the 2011 package. Need to consider the to modify housing grants, construction and regeneration Act of 1996, thus affecting the payment. However, previous JCT is still in use.

Main contract JCT suite (see “the JCT Contract”) listed below. This guide will focus on the following form:

Standard construction contract (SBC);

Design and build (DB).

Format and structure

A JCT contract in the standard format is:

Articles of agreement;

Contract matters: these contain specific information;

Conditions of Contract;


The contract payments JCT flexible. They may allow pre-paid contractor from the employer, usually accompanied by payment of security such as bonds and / or invoice once the work is completed certification. Certification by an independent third party (such as architects, the employer’s agent or contract administrator). Usually paid by the temporary work progress.

Design & Build Contract

D & B is a popular form of contract in the JCT suite and is often used for large-scale, complex construction projects, such as stadiums, shopping centers and office buildings. It uses public and private sectors.

The key characteristics contractor D & B contract will design works to it by the employer based on demand (ie, employers hope from the building). The contractor will have a contractor’s proposal (set how the contractor will receive the needs of employers). Then, it will perform a total work (see the contractor’s proposal)

Standard Building Contract

Sometimes described as traditional contracting, the contractor will not be involved in any aspect of the design in a Southern Baptist. Works will be reference to the drawings and BOQ prepared by or on behalf of the employer to the contractor. “BOQ”is actually a list of project construction cost (including a description of the number of projects and needs) and pay the foundation.

Standard Form Contracts: IChemE

The institution of Chemical Engineers (IChemE) is a global professional engineering organization, was founded in 1922. It creates two sets of forms of contract for international and UK projects in the process industries such as food production, chemical and pharmaceutical.

These are “turnkey contract for the project is transferred to the buyer in a ready-to-use condition. Each form of IChemE Contracts Manual contains a model form of agreement, general conditions and detailed guide pointed out to assist the user to prepare a contract.

This guide provides a simple look at the three main IChemE forms of contract.

The three major forms of contract

IChemE contracts for the procurement process plants – specialized machinery – but can be used for other infrastructure projects.

The three main forms of contract are color-coded according to the pricing mechanism.

Red Book – Lump sum, or fixed-price contract:

A fixed price for the entire work;

Contractor the risk of any additional costs exceed the fixed price;

The contractor may still recover additional costs depending on the agreement.

Green Book – Repayment contract:

Contractor may be required to recover the costs in the implementation;

There is no pre-fixed price;

The contractor will take fewer risks.

Burgundy Book – the target cost contract:

Pricing mechanism is a variation in the terms of repayment;

The costs can be claimed a fixed level (goal of);

The final cost is higher or lower than this target, different – gains or losses – shared in an agreed proportion.

The IChemE publication of the international form of red, green and Burgundy Books in 2007.

Contract structure

The contracts IChemE package follow the same basic structure:

Agreement; contract conditions; generally; special: and other standard forms of contract, specific conditions are necessary and need to be drafted to meet the law applicable to the project. The other specific conditions may also be needed; specification; timetable.

Notable clauses in IChemE contracts

Extensive testing system: IChemE contracts contain a more comprehensive testing program for before and after the completion of, than some other standard forms of contract;

Acquisition of tests and procedures: the IChemE detailed testing mechanism including separate tests when the project is completed, when the plant is in the employer receives.

Analyses the contractor’s obligation against the design consultant’s liability during the design stage

According to this project use the FIDIC(YELLOW BOOK)

Contractor’s General Obligations

The Contractor shall design, execution and completion of the works in accordance with the contract, shall remedy any defects in the works. Once completed, this work should be suitable for the purpose of work as defined in the contract.

The Contractor shall provide plants and contractors in the file specified in the contract, and all contractor personnel, goods, supplies and other things and services, whether it is a temporary or permanent nature, requirements and the design, execution and completion of and repair defects.The Works shall include any work which is necessary to satisfy the Employer’s Requirements,

The contractor’s proposal and timetable, or implied contract, and all the work (although not mentioned in the contract) is necessary, stable or complete, or safety, proper operation works.

Appropriate, stability and security of the Contractor shall be responsible for all site all methods of operation, construction, and all the works.

The Contractor shall, whenever required by the Engineer, submit a detailed arrangements and methods of using contractors for the execution of works. There was no significant change in these arrangements and methods should had informed the engineer.

General Design Obligations

Contractor shall implement responsible design works. Designers should be designed to prepare qualified engineers or other professionals to comply with the standards (if any) specified in the employer’s needs.Unless otherwise provided in the contract, the Contractor shall agree with the name of the matters and each designer and design subcontractors.

The Contractor warrants that, he, his designers and subcontractors have the experience and capacity necessary for the design. Contractors, designers should be available to participate in the discussion of the engineers at any reasonable time, until the expiry date of the Defects Notification Period.

Commencement of the works in the receipt of the notice under section 8.1 [Contractor shall carefully review the requirements of the employer (including design criteria and calculations, if any) and the items mentioned in paragraph 4.7 of the reference [set]. Within the time limit specified in the Appendix to Tender, calculated from the Commencement Date, the Contractor shall notify the Engineer of any error, error or other defect found a reference to the needs of employers, or these entries.

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After receiving this notice, the Engineer shall determine the terms of 13 years [variation and adjustment] applies, shall notify the Contractor accordingly.In a way, (taking into account the cost and time) an experienced contractor due diligence exercise will find the error, error or other defect when the inspection site and employer requirements before submission of tender, completion time may not be extended and the contract. The price shall not be adjusted.


First Based on this case study, the essay show us a Singaporean company proposes to build a 40-storey hotel with 2 levels of basements at City Square, Johor, facing the water front. And then the Singaporean company entered into a contract with Alpha Design Tech. Pvt.Ltd, a Singaporean design consultant. And Alpha Design Tech Pvt. Ltd is responsible for design and selection of contractor for the client. A Malaysian builder was awarded the project with condition that the Malaysia contractor company would enter into a contract with Alpha Design Tech Pvt. Ltd here on. So i think the most suitable procurement system is he novated design and build method. Because the client(Singaporean company ) want to use the design team(Alpha Design Tech. Pvt.Ltd) make plan so They reach the contract relationship. And design team to find think appropriate contractor, the contractor must be use the design team’s drawing. Usually, this way is novated design and build method.

Second in this case study The Singaporean company is concerned about other aspects, among others:



acoustic system

mechanical engineering

marine engineering

fire engineering

So this Singaporean company In order to find a more suitable for this project construction contractor, lists several requirements, This also reflects Singapore company chooses the selective tendering.

finally the client is a Singaporean company, the design team Alpha Design Tech is a Singapore based multi-disciplinary consultant with architects and engineers from Singapore, Thailand, Philippines, and Hong Kong. The contractor is a Malaysia contractor company. So we should use the standard form of contract for international construction project. And FIDIC is the most Professional than others. According to the case study FIDIC(yellow book, Conditions of Contract for Plant and Design-Build ) the most suitable for this project.

Through the case study. I to procurement, tendering, standard form of contract have more deep understanding.


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