Strategy For Sustainable Construction 2008

According to OGC Guide (2003), sustainability includes environmental, social and economic factors, and construction affects all three areas. HM Treasury launched a three-year Sustainability Action Plan in June 2000 which sets out how the government client would take forward the sustainable development agenda through better procurement of new works, maintenance and refurbishment.

The Strategy for Sustainable Construction aims to achieve sustainable construction through procurement, good design, innovate the construction process, continuous professional development of people, better regulation, climate change mitigation, climate change adaptation; reduce per capita consumption of water, enhancement of biodiversity, reduction of construction waste to landfill and using materials having least environmental and social impact. (HMG, 2008)

According to Glover (2008), the following points should be taken into account while drafting construction contracts –

• Identify the client and principal contractor;
• Identify who is responsible for complying with the regulations and drafting and updating the SWMP;
• Decisions in relation to sustainability provisions;
• Identify the different types of waste that will be produced in the course of the project and describe what waste management action will be taken;
• Identify who is responsible for removing the waste

Construction Projects and contracts are already subject to certain sustainability provisions like clause 4.18 of the FIDIC Red Book entitled Protection of the Environment. Similarly, clause 16 of the JCT 2007 form states that the provider will assist the employer and the other project participants in exploring ways in which the environmental performance and sustainability of the Tasks might be improved and environmental impact reduced, for instance, selection of materials and adoption of construction techniques which result in reductions in waste. The wording of Clause 16 of the JCT 2007 form is similar to paragraph 56 of JCT Framework Agreement Guide. The government has introduced a number of legislative provisions like Site Waste Management Plans Regulations 2008, Energy Performance of Buildings Regulations 2008, Housing and Regeneration Act 2008, Landfill Tax and Code for Sustainable Homes 2008. (Glover, 2008)

Having identified sustainability as a key issue, the JCT conducted preliminary discussions with senior industry figures. As a result of those discussions, the JCT launched a consultation, to deal with sustainability in construction contracts and ultimately the issue of how sustainability should be addressed in JCT contracts. The findings of the consultation were published in a guidance notes called Building a sustainable future together. It revealed that detailed requirements should be contained in the project specification rather than in the contract. The guidance notes also sought to address the feeling amongst participants that guidance was needed for tackling sustainability in contractual documentation. (Law-Now, 2009)

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The incorporation of suitable provisions in guidance notes or clauses in construction contracts offers the clients to incentivise to improve sustainability. Areas for possible inclusion under the heading of sustainability, are: sustainability targets, desired levels of energy, and water use; targets for waste minimisation and recycling; requirements for use of materials that come from sustainable sources; targets for health and safety of the workforce on site; targets for training and appropriate skills levels; requirements for use of up-to-date integrated supply chain methods including improved logistics and use of logistics plans; and targets for improved working conditions for staff both on and off site. Considerations on the transport side, both for bringing staff on site and bringing materials to the site will also be important to the overall carbon footprint of the project. (JCT Consultation Paper, 2008)

Sustainability Objectives have to be reflected in the employer’s requirements and carried through into contract drafting. There are already a number of existing contractual provisions in many standard form contracts which can be tailored to address sustainability, for example, clause 2.15 of JCT 2005 Design and Build regarding Changes of law. A mechanism similar to liquidated and ascertained damages can be an effective means of ensuring delivery of sustainable requirements. Use of clear objectives and deliverables linked to a compensation mechanism is the key to delivering sustainable development through contract drafting. (Douglas and Oats, 2008)

The principal purpose of Revision 2 is to recognise the increasing importance of sustainability and to provide a flexible framework. The sole alteration has been the insertion of the new Seventh and Eighth Recitals (Framework Agreement and Supplemental Provisions). Entries are provided against the references to them in Part 1 of the Contract Particulars. The default position for each Supplemental Provision is that it applies unless otherwise stated. (JCT Guide, 2009) The sustainability wording encourages the contractor to suggest economically viable changes to the works, which might result in environmental benefits to the works and requires the contractors to provide the employer with information on the environmental impact of the materials they select and use. (Law-Now, 2009)

JCT SBC 05 has fall-back provision regarding sustainable development, which is according to clause 2.1 which deals in compliance with the contract documents, the construction phase plan and the statutory requirements. The key to sustainable construction is that the sustainability provisions are incorporated in the design and specification. In sustainability terms (as with any contract), there are two questions that need to be asked which are, what is the loss and what are the ordinary standards applicable when asked to incorporate sustainability provisions. (Glover, 2008)

Under the Society of Construction Law Delay and Disruption Protocol, it is possible to build sustainability provisions into the definition of practical completion i.e. a project is not complete unless certain sustainability standards have been achieved. The contractor might require the addition of a new relevant event under clause 2.29 of the JCT Standard Building Contract to account for the risks of such provisions. Clause 2.29.12 already deals with the risks of a change in the law i.e. the introduction of new environmental regulatory provisions. The client and the contractor have to decide who carries the risk for increase in prices of commodities for sustainable construction. (Glover, 2008)

According to Glover (2008), the collateral warranty in terms of sustainability can be stated as ‘The consultant warrants and undertakes to the employer that it has and will continue to use reasonable skill and care that it shall endeavour at all times to specify for use materials from the BRE Green Guide to Specification.’

To conclude, the JCT seems to be deciding between Aspirational clauses and specific obligations. The key to incorporating sustainability provisions into your contract lies with getting your specification right. When it comes to enforcing that specification, there are two options. Firstly, monitor the performance of the contractor through the use of Key Performance Indicators, which must of course be agreed in advance. Secondly, make sure that the achievement of practical completion is linked to the achievement of the sustainable goals you want incorporated into your project. (Glover, 2008)

2.

According to NEC3 clause 10.1, the Employer, the contractor, the project manager and the supervisor shall act as stated in the contract and in the spirit of mutual trust and co-operation. This is similar to JCT 05, Schedule 8 (Eighth Recital) paragraph 1, which states that the parties shall work with each other and with other project team members in a co-operative and collaborative manner, in good faith and in spirit of trust and respect.

In the NEC3, when Option C, D, E & F are used, Clause 20.3 states that the contractor advises the project manager on the practical implications of the design of the works and on subcontracting arrangements. Clause 20.4 states that the contractor prepares forecasts of the total defined cost for the whole of the works in consultation with the project manager and submits them to the project manager. According to NEC3 clause 25.1, the contractor cooperates with others in obtaining and providing information which they need in connection with the works. According to NEC3 clause 40.3, the contractor and the supervisor each notifies the other of each of his tests and inspections before it starts and afterwards notifies the other of its result. These clauses illustrate the collaborative working environment. (Telford, 2008)

JCT SBC 05 contains an express undertaking to comply with the statutory requirements and Construction Phase Plan in clause 2.1 which covers Health and Safety legislation. According to clauses 3.23 and 3.24, the contract also makes provision with respect to the CDM Regulations and a CDM Co-ordinator as well as a Principal Contractor is appointed by the Employer. The Part 2 of the CDM Regulations sets out the duties of clients, designers and contractors. According to JCT 05 Schedule 8 (Eighth Recital) paragraph 2, the parties will endeavour to establish and maintain a culture and working environment in which health and safety is of paramount concern. This supplement provision adds an obligation to comply with non-statutory HSE and HSC codes. (JCT Guide, 2009)

This is similar to NEC3 clause 27.4, the contractor act in accordance with the health and safety requirements stated in the works information. It is necessary to include in the contract any particular requirements which the employer has and are in parallel with statutory requirements. These requirements may include such matters as the safety regulations of the factory, a health and safety plan for the whole site, submission of safety policies and which party is responsible for maintaining areas used by several contractors in a safe condition. (Telford, 2008) Also, clause 91.3 of NEC3 deals with the termination of the contractor in substantially breaking a health and Safety Regulation.

For further reading on Health and Safety issues, there is a guide on Health and Safety in the Achieving Excellence suite which identifies how client decisions and activities impact on health and safety. (OGC, 2003)

According to NEC3 clause 16.1, the contractor and the project manager give an early warning by notifying the other as soon as either becomes aware of any matter which could increase the total of prices or impair the performance of the works. Also, the intention of clause 16.3 in NEC3, regarding risk reduction meeting is to take action or make decisions which avoid or mitigate the effects of identified risks on cost, quality and time which helps in saving cost. The concept of Contractor’s share is used in Option C & D of NEC3. The purpose of the Contractor’s share is to encourage effective management control of the final Price of Work Done to Date relative to the target i.e. for saving cost and value improvements. (Telford, 2008) The clause 63.10 of NEC3 deals with the reduction of price if the effect of the compensation event is to reduce the total defined cost. Similarly, the intention of clause 63.11 is to encourage the contractor to apply value engineering principles to the works information and save cost and improve value. (Telford, 2008)

This is similar to JCT 05 supplement provision Schedule 8 paragraph 3, according to which, the contractor is encouraged to propose changes to designs and specifications for the works and to the programme that may benefit the employer in the form of reduction of cost of the works. It is during the pre construction phase that most value improvements are derived by value engineering exercises. Further opportunities for value engineering exercise arise in context of variations where cost saving can be done. (JCT Guide, 2009)

For further reading, there is a guide on Whole-life costing and cost management in Achieving Excellence Procurement Guide suite which provides advice on producing whole-life cost models and explains what needs to be done to keep costs under control at key stages in the project. (OGC, 2003)

Sustainability Development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. (Glover, 2008)

According to JCT 05 supplement provision Schedule 8 paragraph 4, the contractor is encouraged to suggest economically viable amendments to the works which may result in an improvement in environmental performance in the carrying out of the works and the contractor shall provide all such information that the employer requests regarding the environmental impact. According to clause 2.3 and clause 2.9, the JCT has taken an active role in establishing the importance of proper information being available on the environmental impact of materials and goods selected by the Contractor. (JCT Guide, 2009)

Also, JCT SBC 05 has fall-back provisions regarding sustainable development, which is according to clause 2.1; the contractor shall carry and complete the Works in a proper and workmanlike manner and in compliance with the contract documents, the construction phase plan and the statutory requirements. This is similar to NEC3 Option X2 regarding Changes in the Law. Any legislation or regulation by the government regarding sustainable development can be incorporated in the NEC3 through this clause. As well as Option Z can be used in NEC3 to incorporate sustainable construction in the contract by adding additional conditions to the contract.

Performance can be measured by Standard Key Performance Indicators, Post-project implementation reviews and Client performance surveys. The Improving Performance: project evaluation guide as well as benchmarking can be used to measure performance throughout the life of the project. (OGC, 2003)

According to NEC3 Option X20, the contractor reports to the project manager his performance against each of the Key Performance Indicator (KPI) stated in the Incentive Schedule and if the target is not achieved then the contractor submits a proposal to the project manager for improving his performance. If the target is achieved or improved then the contractor is paid the amount stated in the Incentive Schedule. Also, the employer may add a Key Performance Indicator and associated payment to the Incentive Schedule. (NEC3, 2008)

This is similar to JCT 05 supplement provision Schedule 8 paragraph 5, according to which, the employer shall monitor and assess the contractor’s performance by reference to any performance indicators stated in the contract particulars and where the employer considers that the target may not be met, he may inform the contractor who shall submit his proposals for improving his performance.

Another feature of NEC3 Option X17 is that, if a defect included in the defects certificate shows low performance with respect to a performance level stated in the contract data, the contractor pays the amount of low performance damages stated in the contract data. The performance of the contractor is certified by the supervisor following a specified performance test to be carried out between completion and defects date. (Telford, 2008)

In JCT 05, according to Section 108 of the Housing Grants, Construction and Regeneration Act (HGCRA) 1996, a construction contract should enable a party to give notice at any time of his intention to refer a dispute to adjudication. If a dispute arises, the parties should consider whether to allow a reasonable period for negotiation before recourse to adjudication or other external means of resolving the dispute. (JCT Guide, 2009) This is similar to NEC3 which has also incorporated HGCRA 1996 in Option Y (UK) 2. According to NEC3 clause 13.7, a notification which this contract requires is communicated separately from other communications.

In NEC3, Dispute Resolution is dealt using two options namely Option W1 which is used in international contracts outside UK and Option W2 which incorporates HGCR Act 1996 and is used in UK. According to NEC3, Option W1, disputes are notified and referred to the Adjudicator in accordance with the Adjudication Table. While in case of Option W2, a party may refer a dispute to the Adjudicator at any time. According to clause W2.3, a party gives a notice of adjudication to the other party with a brief description of the dispute. Within seven days of a party giving notice of adjudication he refers the dispute to the Adjudicator, provides information and send a copy of the information to the other party. If the subcontract allows, the contractor may refer the subcontract dispute to the Adjudicator at the same time. The Adjudicator may review and revise any action or inaction of the Project Manager or Supervisor, take the initiative in ascertaining the facts, instruct a party to provide further information or instruct a Party to take other action. The Adjudicator decides the dispute and notifies his decision and his reasons within twenty eight days. If a party is dissatisfied by the decision of the Adjudicator, he may notify the other party within four weeks that he intends to refer it to the tribunal. The tribunal has the power to reconsider any decision of the Adjudicator. The parties can settle the dispute through arbitration as well. (NEC3, 2008)

According to JCT 05 clause 9, the parties can settle the dispute in four ways i.e. through mediation by using a third party to assist the negotiation process(Clause 9.1),refer disputes to Adjudication (Clause 9.2) and the procedure is similar to NEC3, refer disputes to arbitration (Clause 9.3 to 9.8) and litigation (Article 9). According to JCT 05 supplement provision Schedule 8 paragraph 6, each party shall promptly notify the other of any matter that appears likely to give rise to a dispute or difference. The senior executives nominated in the contract particulars shall meet as soon as practicable for direct, good faith negotiations to resolve the matter. In the case of the sixth Supplemental Provision (Notification and negotiation), there is a further entry for nominated employees. (JCT Guide, 2009)

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References:

Issaka Ndekugri and Michael Rycroft, 2009, the JCT 05 Standard Building Contract: Law and Administration

JCT Consultation Paper, 2008, Sustainability

JCT 05 Standard Building Contract Guide, 2009

JCT (2009), Standard Building Contract with Quantities 2005

Jeremy Glover, 2008, Sustainable Development in the Construction Industry, Retrieved from: http://www.fenwick-elliott.co.uk/files/Sustainable%20Development%20in%20the%20Construction%20Industry.pdf (Accessed on 25th January, 2010)

Law-Now, 2009, Construction industry body embeds sustainability in its standard form contracts, Retrieved from Blackboard

NEC3 (2008), Engineering and Construction Contract 2005

Simon Oats and Tom Douglas, 2008, Sustainability Contracts

Strategy for Sustainable Construction, 2008, retrieved from: http://www.strategicforum.org.uk/pdf/1381-Report.pdf (Accessed on 25th January, 2010)

Sustainable construction, Retrieved from: http://www.berr.gov.uk/whatwedo/sectors/construction/sustainability/page13691.html (Accessed on 25th January, 2010)

Thomas Telford, 2008, NEC3 Engineering and Construction Contract 2005 Guidance Notes