CPD articles

CPD: CIOB Contract for Complex Projects 2013

30 January 2014

Trevor Drury outlines the key features of the CIOB’s Contract for Complex Projects and what it offers above other common construction contracts.

The construction industry does not have the best of track records for delivering projects to time. In the CIOB’s study Managing the Risk of Delayed Completion in the 21st Century, published in 2008, one of the conclusions was that “a high proportion of complex projects are likely to be completed more than six months late”.

In fact, the survey results showed 67% of projects completed late with 18% completing more than six months late. The CIOB’s survey also identified that records of resources used and work performed were usually inadequate for proper time management and few projects used modern methods of time control.

As a result of the survey a Time Management Working Group was established by the CIOB and I was one of the members of the group. In 2011 the group published the Guide to Good Practice in the Management of Time in Complex Projects which attempts to set out a code of practice which programmers/schedulers should work to.

However, in attempting to raise the standard of time management in the construction industry, the problem was that there were no standard forms of contract that properly addressed the management of time, the monitoring and reporting of progress and the updating of the programme/schedule.

To further reinforce the point and need for change, in a NBS National Construction Contracts and Law Survey, nearly half the respondents said disputes had increased in the year and that the most common reason for the dispute concerned claims for extensions of time. This is a recurring theme that will probably not be a great surprise to many in the industry.

The main standard forms of contract do not specify the form in which the programme is to take or what evidence is to be kept to record progress and reasons for changing/updating the programme. To illustrate the point Table 1 below sets out the main clauses relating to the management, reporting of progress and notification of delays in respect of time for the JCT 2005 and NEC3, which were in use at the time of the CIOB survey although little has changed regarding time management in the latest editions.

The Rio 2016 Olympics, masterplanned by Aecom, is typical of the type of project that could benefit from the CIOB Contract for Complex Projects

While it is unrealistic to replicate in full all of the contractual provisions word for word, the above hopefully highlights the different approaches between the two main standard forms of contract used in the UK. The JCT only requires a master programme to be produced and amended by the contractor. The form that this master programme is to take is not specified nor is the level of detail to be provided. Usually the contractor will provide a bar chart (Gantt chart) showing the contractor’s activities with a critical path or paths highlighted.

Unfortunately, unless the critical path network is provided from which the schedule was produced, this has limitations for updating. From my experience, contractors are often unwilling to provide this information in a form that can be checked by the employer and their team by using proprietary programming/scheduling software. This is so that any errors in logic and float are not identified by the employer.

Progress reports and updated programmes/schedules are usually provided in PDF form by the contractor and therefore of little use for interrogating and checking their accuracy.

Moreover, the contract does not require records to be kept as evidence to support progress and the reasons for a programme/schedule to be revised. When delays are notified and extensions of time requested, the contractor’s claim frequently lacks the necessary linkage between cause and effect plus a lack of contemporary records as evidence of what has happened and why. Many a claims consultant and expert witness have spent many hours trying to piece together what has gone wrong from limited records and how that has affected activities and the completion date!

So the employer and their design and project consultants are largely passive in terms of managing the programme/schedule and do not input into the creation, monitoring, reporting and management of the contractor’s programme of works.

The NEC3 is more prescriptive in its requirements in terms of what a programme/schedule is to contain and includes risk meetings, updating of risk registers and early warning notices into the management of time. That said, the contract does not specify the means of presentation of the programme/schedule and so the programme submitted and used to monitor and report on progress will be in the Gantt chart format with its limitations. The contract also does not require records to be kept as evidence to support progress, or the lack of it.

An alternative contract

To address the above time management deficiencies, the CIOB has produced its own contract: the Complex Projects Contract (CPC 2013). It comprises four volumes: an agreement, the conditions, the appendices, and User Notes. As it says on the tin, it is for complex projects both in the UK and overseas.

The User Notes state that it is for use on projects where “works comprise complex building and/or engineering, which cannot reasonably be expected to be managed intuitively”. It is fair to say that this is not a light contract and its size, complexity and need for additional management resources, on economic grounds, would make it only viable for high value, large complex projects.

The first document is the Contract Agreement, which lists the party’s representatives, the name and address of the contract administrator and so on. However, there are some new characters on the scene:

The data security manager 
A result of the digital age and the amount of data now exchanged in a digital format. With BIM this requirement is inevitably going to increase so a specific person is needed to manage the volumes of data and the privileges associated with access to documents/data provided electronically, in particular that related to BIM.

The Design Coordination Manager
Responsible for maintaining a database of contractor design submittals and for maintaining the employer’s BIM.

The project time manager (PTM) 
An adviser to the contract administrator. A key aspect of the role is in the management of risk, employment of mitigation measures, recovery of culpable delay and acceleration. The PTM checks information submitted by the contractor concerning time related matters. In contrast to the existing major standard forms of contract, for the first time the person responsible for managing the programme/schedule is a consultant employed by the employer. The PTM also has responsibility for keeping records and evidence to support progress and changes to the working schedule.

The valuer 
Advises on the content of the contractor’s pricing document, values activities in the working schedule, values variations, advises the employer on the predicted out-turn cost and values the works for the purposes of payment.
In the UK this function will no doubt be carried out by quantity surveyors.

Auditor 
The person named as the time management expert or such person appointed by the project time manager. The auditor examines the contractor’s planning method statement, working schedule and progress records. The auditor also ensures that the contractor’s submittals comply with the Guide to Good Practice in the Management of Time in Complex Projects.

The roles and responsibilities for these and others are described more fully in the User Notes but from the brief descriptions above, it is easy to see that the contract is focusing on the management of time. There are at least three completely new roles and new resources to be paid for. While many will argue the need to cut costs, these additional resources will be a relatively small percentage of the cost of delivering a large complex project.

In addition, prevention is better than cure, as the cost of the cure, ie the employment of teams of lawyers and expert consultants in managing disputes, will be far greater than good project governance, particularly in the management of time. Remember, the most common area for disputes concerns extensions of time.

Flexible friend

The CPC 2013 can be used for traditionally procured projects, partially contractor designed or full contractor design and construct schemes and so it is very flexible as to the type of project and procurement being sought.

This form of contract has features and wording in parts that will seem familiar to many practitioners and it borrows some features from other well-known standard forms of contract, such as the obligation to “cooperate in a spirit of mutual trust and fairness”. and there is the requirement for the contractor to issue early warning notices. However, there are some significant differences from the popular standard forms in terms of the way in which it stipulates how time is to be planned, represented and monitored, and progress recorded and evidenced, managed, updated and reported.

CPC 2013 has features and wording in parts that will seem familiar to many practitioners and it borrows some features from other well-known standard forms of contract

This is a contract for the 21st century and the digital age. In the User Notes it states: “The contract requires complete transparency in the submittal of information required for the management of risk.” This is to try to counter the adversarial nature and tendency to transfer risk down the supply chain without managing or mitigating that risk in a number of the standard forms of contract used in the construction industry. The CPC 2013 is a contract moving towards collaboration and its drafting to accommodate BIM also reflects this.

Publication of all information is by electronic means either by submittal in the common data environment – that is the project management system to which everyone who needs project information will have access – or by email or electronic transfer via a file transfer protocol. This obviously helps with reducing physical storage space, but requires discipline in terms of electronic storage and file management, hence the need for a data manager.

Key Features

A dynamic time model The contractor’s critical path network or working schedule. At Appendix D the type and version of software to be used is stated.

Progress records The working schedule is updated regularly from actual progress records evidencing progress as specifically required by the contract.

Priced working schedule The contractor’s tender is broken down and allocated to the scheduled activities and amended to account for variations/changes and provides an out-turn predicted cost of the works. Interim payments are made in terms of the work completed according to the actual records of progress made and the updated working schedule. From this the valuer calculates the current value of works and a contract administrator’s notice of payment due authorises the payment to the contractor.

Updating the working schedule The contract requires detailed information on things such as when each activity started, the resources used, quantity of work completed, the date activities were completed and milestones achieved.
The contractor produces a draft updated working schedule with a recalculated critical path showing the effect on the completion date of the project.

The contractor also has to advise on how it is to overcome any delays for which it is culpable. The project time manager then accepts, rejects or conditionally accepts the revised working schedule. If the contractor disagrees with the decision, for example it may consider a delay is due to a variation, not something that is a contractor’s risk, it must submit to the process of issue resolution.

Quality control The auditor checks that the draft working schedule, draft planning method statement etc conforms with the principles of the Guide to Good Practice in the Management of Time in Complex Projects. The contractor must rectify any issues within 10 business days.

Early warning notification The contractor is required to notify of any event or occurrence that will adversely affect the project. A risk meeting is convened and the risk register is updated within five business days.

Time contingencies The employer’s time contingency is identified as a separate activity within the working schedule and the contractor also has to set out its time contingencies against contractor risks.

Risk This is allocated between the parties and is set out in Appendix F. 15 are employer risks and eight are contractor risks with space provided to allocate additional risks between the parties.

Acceleration If the employer wishes to achieve an earlier completion or overcome a delay, the contractor may be instructed to accelerate. If the contractor fails to comply with an instruction to recover lost time for which it is responsible or achieve dates by acceleration, for which it has been paid, then the employer may impose sanctions against the contractor as set out in the contract.

Extensions of time (EOT) The contractor is only granted an EOT if it can demonstrate an entitlement by showing records of performance as evidence and by calculation using the updated working schedule. Given this is updated frequently it should be used as a predictive tool. There is no need for a subjective “fair and reasonable” assessment.

Building information modelling (BIM) This contract has been drafted for use with BIM as this becomes more prevalent within the industry and is timely given that by 2016 public sector projects are to be procured using BIM.

Conclusion

If the parties comply with the requirements of CPC 2013, there should be few surprises and fewer disputes, as problems will be managed and solutions found contemporaneously along with a predicted final out-turn cost. What needs to happen, though, is for a larger proportion of the industry to understand planning, scheduling, critical path analysis and how to use the software, and for employers and their advisers to take on the CPC 2013. Therein lies the challenge!

Trevor Drury FCIOB is managing director of Morecraft Drury and a specialist in procurement, construction contracts and claims

Click here to be taken to the online CPD test paper for February 2014

Table 1: Clauses relating to management and notification of delays in JCT and NEC contracts 
Clause
JCT 2005
Clause NEC3
2.9.1.2
The contractor is required to provide the architect or contract administrator with its master programme. Only if required by the contract particulars is it necessary to show the critical paths 31.1 If a programme is not contained in the contract data, the contractor is to submit its first programme to the project manager for acceptance within the period stated
2.9.2
Within 14 days of an architect’s/CA’s decision the contractor is to provide an amendment/revision to the master programme 31.1 The NEC3 lists those items which the contractor’s programme must include, such as: start, finish and key dates, the order and timing of operations, float, and risk allowances


31.3 Within two weeks the project manager must accept or provide reasons for not accepting the programme


16 The contractor and the project manager give an early warning to the other as soon as they become aware of anything which could increase costs, cause delay to completion or delay a key date
Each may instruct the other to attend a risk reduction meeting
The risk register is amended and reissued
2.27.1 The contractor is required to provide a notice to the architect/CA of delay “whenever it becomes reasonably apparent that the progress of the works....” is delayed or likely to be delayed. The contractor is to provide details of the material circumstances including the cause or causes of delay and the relevant event. The relevant events are set out in clause 2.29 61 — Notifying compensation events
62 — Quotations for compensation events
The project manager notifies the contractor of a compensation event at the time of giving an instruction. The contractor is requested to provide quotations which will include for any effects on the programme
Compensation events are listed at clause 60.1
2.27.2 The contractor is to provide details of the expected effects of the delay such as an estimate of the amount of time of the delay to the completion of the works or section of the works 32.1 The contractor must show on each revised programme:
Actual progress
Effects of accepted compensation events & early warnings
How the contractor plans to deal with delays & rectification of defects
2.27.3 The contractor is required to notify of any changes to their estimate of delay and supply the architect/CA
61.3 The contractor notifies of an event which they consider to be a compensation event within eight weeks
2.28.1 If the architect, on receiving the above notice and particulars, is of the opinion that the contractor has
been delayed due to one of the relevant events, then they give an extension of time as they estimate is fair and reasonable
61.4 The project manager notifies the contractor if they consider that no compensation is due and no adjustment to the prices, key dates or completion date is to be made
Assessing compensation events is in accordance with clause 63. In terms of time clause 63.3 states how a delay to the completion date is to be assessed
2.29.4 The architect/CA may subsequently give notice to the contractor of an earlier completion date to that already given    
2.29.5 The architect/CA may fix a new completion date for the works/section up to 12 weeks after practical completion 61.6 If the project manager considers that the effects of a compensation event are too uncertain to forecast, then they state the assumptions to be made by the contractor in any quotation and when the facts are known, updated accordingly

Comments

Have any projects decided to adopt CPC yet - will it not take a brave party to take the plunge?

J Wilson, 4 February 2014

An interesting approach. Time to brush up on planning skills. I will be watching to see how quickly this form of Contract is adopted for use, particularly internationally.

A. ONEILL, 5 February 2014

Very Good

Dr Lee, Fook Pui Billy, 7 February 2014

Complex projects get delayed...true! But again I see all the discussion in amending the contract is to restrain the contractor. Many of the complex projects, specially in Middle East get delayed mostly due to abrupt changes in client requirements, lack of studies done by the consultants and poor documentations...(cut/paste specs etc).....FIDIC is widely used but not considered in the comparisons
..just wondering..

Farhan Aftab, 15 February 2014

Please how do I become a member of this association?

John Afriyie Mensah, 20 February 2014

To join the CIOB go to http://www.ciob.org/become-a-member or call: +44 (0) 1344 630700

Julie-Anne Gyton, 21 February 2014

I have been promoting the CPC for some time now in the Middle East and there is significant interest in it especially given this region's propensity for large ambitious and complex projects. I would very much like to hold a one day CPD event here in Qatar through which we can properly launch the Contract as a viable alternative to the contract forms currently being used and abused. Can I request that I be contacted to make arrangements.

Andrew Robertson, 1 March 2014

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