Be prepared

A recent problem for one of my clients has prompted me to go into print on a subject that is perhaps not as widely appreciated as it should be. It concerns employers who have used the JCT design-and-build contract, and it highlights the dangers faced if problems arise with interim payments.

The significant difference between this form and the remainder of the JCT family is that there is no provision for the contract administrator or QS to value the work executed by the contractor. Indeed, unless there are special amendments, there is no provision for the certification by a contract administrator of money due to the contractor. Here are some of the problems that can arise.

The scheme of the contract is such that that the contractor carries out the valuation, which naturally puts it in the driving seat. Thereafter the contractor applies for payment and the employer has 14 days from the date of receipt of the interim application to pay the contractor, but it must do rather more in that period if it wants to challenge the application.

Clause 30.3.2 makes the important proviso that each application must be accompanied by whatever details the employer has set out in the employer's requirements. This means that it pays to specify what is needed so that the employer's agent or other consultant can advise appropriately when the application comes in. Sadly, as I have now seen on three occasions, this is commonly overlooked. In fact, the contractor is entitled to submit his application as a lump sum – which might be nigh on impossible to check. This warrants not merely a health warning but a blue flashing light and armed escort.

As with all of the current JCT contracts, in order to comply with the Construction Act, the employer must give the contractor written notice not later than five days after receipt of the contractor's application, specifying the amount of payment it proposes to make and say why. Therefore, if he objects to the valuation, it must do so within this time, otherwise there may be serious consequences on its right to withhold.

The contractor is entitled to submit its application as a lump sum – which might be impossible to check. This warrants not merely a health warning but a flashing light and armed escort

The employer's contractual right of withholding or deduction is dealt with by clause 30.3.4. In theory the employer may exercise any right under the contract against any amount due to the contractor even if retention is included in the amount. But to do so it must give written notice to the contractor no later than five days before the final date for payment. Again that is pretty standard stuff. The notice must allow the contractor to understand why he is not getting all the dosh he applied for.

Because of the absence of the contract administrator's certification, however, the employer must an administrative regime that is able to cope with processing the application of the contractor within these time limits.

But the real shock is the fact that under clause 30.3.5 of the contract, the failure, for example, to serve a withholding notice in relation, say, to a set off or deduction, is that the amount of the contractor's application – which may be wickedly inflated – becomes payable.

As the readers of this column will know, although missing the boat under the section 110 and section 111 regime is a serious embarrassment, it was held in Whiteways Contractors vs Impresa Castelli that the regime of these provisions did not apply to abatement (where it is asserted the value of the works done should be diminished). This enables the good old adjudicator to review such matters in determining whether the sum applied for by the contractor properly reflects what he asserts it has done.