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Status Note amended March 2013

CONCODE

Guide to building, engineering and grounds

maintenance contracts

1996

STATUS IN WALES

ARCHIVED

Guideto

Building, engineering andgrounds maintenance

contracts for the NHS estate

London: The Stationery Office

This publication provides those in the

National Health Service who are

responsible for building, engineering

and grounds maintenance contracts

with information about the various

contractual arrangements that are

available for them to use.

This guide should be read in

conjunction with:

• Contracts and commissions for

the NHS estate – Policy;

• Guide to contract procedures;

• Guide to procedures for

commissioning building and

engineering consultants;

• Estatecode;

• Health Facilities Note (HFN) 16 –

Re-engineering the facilities

management system.

About this publication

1

About this publication

1.0 Introduction page 31.1 General1.3 Competitive tenders1.4 Single/negotiated tenders1.5 NJCC codes of procedure1.6 NJCC Guidance Notes1.7 Supervision of maintenance contracts1.10 Forms of contract1.12 Fluctuations1.13 Prompt payment of accounts1.14 Construction (Design & Management)

Regulations 19941.15 Scope of work1.16 Tender evaluation1.18 Monitoring and evaluation

2.0 Contractual arrangements page 62.1 General2.6 Facilities management2.7 Private Finance Initiative

3.0 Measured term contract and supplementarylump sum element page 7

3.1 General3.3 Contract period3.4 Payment3.6 Supplementary lump sum element3.8 Use of measured term contracts by NHS bodies

4.0 Lump sum term contract and supplementarymeasurement work element page 8

4.1 General4.3 Contract period4.4 Payment4.6 Supplementary measured work element 4.7 Use of lump sum term contracts by NHS bodies

5.0 Specialist term contracts page 95.1 General5.3 Contract period5.4 Payment5.6 Use of specialist term contracts by NHS bodies

6.0 Jobbing contracts page 106.1 General6.3 Use of jobbing contracts by NHS bodies

7.0 Schedules of rates page 117.1 General7.4 Standard schedules of rates

7.5 Bespoke schedules of rates7.6 Contractor’s percentage7.8 Fluctuations

8.0 Conditions of contract page 128.1 General8.2 Government and departmental policy8.4 Conditions of contract generally

9.0 Works order with standard contract conditions page 14

9.1 General9.4 Standard contract conditions generally

10.0 Facilities management page 1510.1 General10.6 Appointment of facilities manager10.8 Conditions of contract generally

11.0 Private Finance Initiative page 1611.1 General

Appendix 1: Forms of contract page 17

Appendix 2: Schedule of rates page 18

Appendix 3: JCT Standard Form of Measured TermContract (1989 edition) (as amended) page 19

Appendix 4: JCT Conditions of contract for buildingworks of a jobbing character page 36

Appendix 5: Prompt payment page 41

Appendix 6: Parent company guarantees page 43

Appendix 7: Insurances – terrorism cover page 44

References page 49

Other publications in this series page 51

About NHS Estates page 52

Contents

© Crown copyright 1996. Published for NHS Estates, an Executive Agency of the Department of Health, under licence from the Controller of Her Majesty’s Stationery Office.

Applications for reproduction should be made in writing to The Copyright Unit, Her Majesty’s Stationery Office, St Clements House, 2–16 Colegate, Norwich NR3 1BQ.

ISBN 0-11-322041-3

First published 1996

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General

1.1 Detailed guidance on the selection of tenderers andtender invitation, together with tendering procedure,evaluation and appointment of contractors is contained in‘Guide to contract procedures’. Similar guidance relatingto consultants is contained in ‘Guide to procedures forcommissioning building and engineering consultants’.

1.2 The following guidance amplifies the advicecontained in the above where it is more applicable tomaintenance.

Competitive tenders

1.3 Competitive tendering is the method that shouldnormally be used to appoint contractors, with quality andprice being evaluated to ensure that value for money isbeing obtained. Firms to be invited to tender are eitherselected from a list of firms that are considered suitable bythe NHS body to carry out the maintenance works or,where the requirements of European Directives (orassociated UK Regulations) apply, from the list of thosefirms responding to an advertisement in the Supplementto the Official Journal of the European Communities.Detailed guidance on the requirements of EuropeanDirectives (or UK Regulations) can be found in ‘Guide tothe requirements of European Community publicprocurement directives’.

Single/negotiated tenders

1.4 Negotiated tenders are normally used onmaintenance contracts due to the fact that there may onlybe one firm that is capable of maintaining a specific itemof plant. Such circumstances may make it more difficult tosuccessfully conclude negotiations with a contractor onterms proposed by NHS bodies; it is more likely that acompromise will be reached.

NJCC codes of procedure

1.5 The National Joint Consultative Committee forBuilding (NJCC) has published ‘Code of procedure forsingle-stage selective tendering’ (1994). Although thiscode envisages the use of a standard form of buildingcontract, the principles contained in it are still applicableto maintenance work.

NJCC Guidance Notes

1.6 The NJCC has issued Guidance Note 9 – ‘Chargesfor admission to approved and select lists and for tenderdocuments’. The Department generally supports theprinciples set out in this code, in particular not chargingcontractors and consultants for the provision of tenderdocumentation where selective competitive tendering isused.

Supervision of maintenance contracts

1.7 NHS bodies may need to appoint consultants tosupervise maintenance contracts on their behalf. If this isnecessary then the consultants should be appointed onthe basis of a term commission which would normally befor the same period as that of the term contract andsubject to the same provisions in respect of the following:

a. value of work required by client is not guaranteed;

b. break provisions should be incorporated as providedfor in the term contract.

1.8 The consultants should be provided with a briefwhich will contain information that will enable them tofully understand the extent of the service they arerequired to provide.

1.9 The brief should provide detailed information aboutthe contract(s) and will include:

• scope of the maintenance contract(s);

• constraints such as time and methods of working;

• location of the buildings and plant to bemaintained;

• cost limits, both for overall and single items;

• the level of reliability to be achieved;

• the response time required;

• performance requirements for the quality of service;

• reporting procedures;

• health and safety policy;

• provision/contribution of information for inclusion inthe health and safety file.

The above is not comprehensive and will need to betailored to suit individual situations.

3

1.0 Introduction

1.0 Introduction

Forms of contract

1.10 Appendix 1 contains a list of standard forms ofcontract that are suitable for maintenance works. This listis not intended to be comprehensive.

1.11 Should contractors put forward their ownconditions of contract, NHS bodies are strongly advised toobtain appropriate professional advice on the termscontained to ensure that they understand the risks andliabilities to which they will be committing themselves.

Fluctuations

1.12 If maintenance contracts are let using termcontracts the contract period may be a period of one tofive years. Where the estimated contract period exceedstwo years (which is the threshold for the use of firm pricecontracts), there will be a requirement for a method ofprice indexing to be written into the contract conditionsto permit fluctuations to be taken into account.

Prompt payment of accounts

1.13 NHS bodies must ensure that accounts formaintenance work are paid promptly within any timelimits set by the conditions of contract and should notnormally exceed 30 days. Failure to meet such time limitsis a breach of contract and could involve additional costs.All contracts must contain a clause requiring contractorsto pay any sub-contractors and suppliers within 30 days ofreceipt of accounts.

Construction (Design and Management)

Regulations 1994

1.14 The Construction (Design and Management)Regulations 1994 impose specific duties on clients,designers and contractors. All NHS bodies are subject tothe requirements of the regulations together with thepenalties for contravening them and therefore therequirements of these regulations must be taken intoaccount where maintenance work is being undertaken towhich they apply. Further advice is contained in ‘Guide tothe requirements of the Construction (Design andManagement) Regulations 1994’.

Scope of work

1.15 When drawing up a contract it is essential that bothparties are fully aware of their respective obligations andresponsibilities. NHS bodies should therefore ensure thatthe work that contractors are expected to carry out is

defined as accurately as possible, whether it is containedin a works order or detailed in drawings and specificationsand/or bills of quantities. For larger schemes an estimateshould be prepared and the scope of the work ascertainedby inspection.

Tender evaluation

1.16 When evaluating tenders it is important to ensurethat tenderers submit a tender based strictly on thedocuments sent to them. NHS bodies may be willing toaccept alternative tenders, but no alternative tendershould be considered unless a tender based strictly on thedocuments without qualification is submitted. This shouldbe clearly stated in the Invitation to Tender. Anyalternative tender must also be free of qualifications andbe fully priced to show clearly how and where costswould differ from the primary tender.

1.17 As maintenance contracts may not be as specific intheir content as new construction it may prove necessaryto carry out a technical evaluation of each firm’s tenderdocuments. The evaluation should be carried out bysomeone who has detailed technical and contractualknowledge of the work to be undertaken. The followinglist indicates some areas that may need to be evaluated, itis not intended to be comprehensive:

• technical ability of staff to be used;

• frequency of inspection;

• work to be subcontracted;

• facilities to be provided by the client;

• limits (including timing) of work involved;

• location from which contractor intends to provideservices.

Monitoring and evaluation

1.18 NHS bodies need to monitor the performance ofcontractors and consultants to ensure that theirrequirements are being fully met. Monitoring providesfeedback that allows targets to be adjusted in the light ofexperience. Technical feedback allows NHS bodies toidentify where work is being carried out as specified inaddition to work that is under/over maintained. Workshould be inspected both during execution and also oncompletion to ensure that the quality of materials used,and the workmanship, meets the set standards.Inspections should be timed according to the complexityof the work and whether written work instructions needamplifying.

1.19 The information collated during inspections can beused for measuring performance or comparing internal

4

data with external data as a check on efficiency. Thischeck will only be useful if the information is collated andcollected under similar circumstances.

1.20 Monitoring the pattern of expenditure will enableNHS bodies to establish whether any items appear torequire regular sums of money spending on them. Thisinformation can then be used to decide whether it isworthwhile to continue maintaining items or if it is moreeconomic to renew them. Additionally, this informationmay be used to ascertain the effectiveness of any plannedmaintenance policy by looking at the incidence of costsover a period of time.

5

1.0 Introduction

General

2.1 There are a number of alternative contractualarrangements available for use by NHS bodies (or theirfacilities managers) in respect of maintenance work.

2.2 The more common ones are:

a. measured term contracts;

b. lump sum term contracts;

c. specialist term contracts;

d. jobbing contracts;

e. works order with standard contract conditions.

Guidance on the general characteristics of each of theabove are provided in the following sections of this guide.

2.3 The contractual arrangements may include pricingon the following basis:

• labour only;

• all inclusive (that is, labour, materials and plant);

• a combination of the above.

2.4 There are a number of standard forms of contractavailable in respect of the aforementioned contractualarrangements, the more common ones are listed inAppendix 1.

2.5 NHS bodies (or their facilities managers) may useone or a combination of contractual arrangements toachieve their objectives when letting maintenancecontracts.

Facilities management

2.6 It is not intended to cover this subject in detailherein as this is provided elsewhere. Brief guidance hashowever been provided in respect of building, engineeringand grounds maintenance in respect of those issuesconsidered to be important to NHS bodies if they areconsidering the appointment of a facilities manager.

Private Finance Initiative

2.7 Guidance has not been provided in respect ofbuilding, engineering and grounds maintenance under thePrivate Finance Initiative as this is available elsewhere,although a few brief statements have been included forinformation purposes.

6

2.0 Contractual arrangements

General

3.1 A measured term contract has no fixed contractvalue. The cost of any work placed on the contract isdetermined from pre-agreed schedules.

3.2 This type of contract is designed in such a way thatthe contractor undertakes to carry out work ordered by anNHS body for stated work categories, for example buildingand civil engineering, decorating, electrical engineering,mechanical engineering, ground maintenance, minorworks and maintenance of roads and pavings (items ofspecialist engineering, such as sterilizers, piped medicalgases, nurse call systems and portable equipment, shouldnormally be dealt with as lump sum or specialist termcontracts) within pre-defined financial limits (that is,minimum and maximum values for orders).

Contract period

3.3 The contract operates for a minimum period of oneyear and a maximum period of five years, but can beterminated by either party at the end of the minimumperiod or any given time thereafter, provided the requiredadvance notice has been given.

Payment

3.4 The contractor is paid for each order carried outunder the contract in any of the following ways or anycombination thereof, dependent upon the conditions ofcontract being used:

a. for measured work(the measured amount of work carried out × pricequoted in appropriate schedule of rates) +contractor’s percentage + updating percentage;

b. for work carried out as day work(hourly labour rate + overheads) × hours worked +(cost of materials + overheads) + (cost of plant +overheads);

c. for work carried out on a firm price basisthe sum agreed prior to commencement of thework;

d. for work carried out by a named sub-contractorthe price payable by the contractor to the sub-contractor, less any applicable contract discountplus a percentage for profit and attendance etc;

e. for materials supplied by the contractorwhich are not included in the schedule of ratesthe standard list price ruling at the date of supply,less any applicable contract discount plus apercentage for profit and overhead.

3.5 Suitable schedules of rates for use with this contractare referred to in Appendix 2. The updating percentage tobe applied to any order is obtained by using availableindices as provided for in the conditions of contract beingused. The contractor’s percentage is the percentagevariation from the schedule of rates required by thecontractor and entered by him on the tender form.

Supplementary lump sum element

3.6 There may be a supplementary lump sum elementwhich requires that selected named properties covered bya measured term contract may, if so required, bemaintained by the contractor to a defined acceptablemaintenance condition.

3.7 The supplementary condition will normally make thecontractor responsible for all minor repairs andmaintenance up to a fixed value per job in the buildingsspecified and the contractor undertakes to maintain theproperty(s) to a defined acceptable maintenancecondition. The contract period is the same as that of themeasured term contract and the contractor is paid a lumpsum for carrying out the repair and maintenance involved.The tendered price (lump sum) is adjusted at intervals ofsix months by use of suitable indices.

Use of measured term contracts by NHS

bodies

3.8 The measured term contract is most suitable for usewhere it is known that a number of items of work will berequired during a given period. The work need not be pre-planned at the time the contract is let although someindication of the estimated annual value of orders shouldbe given to tenderers.

3.9 With the addition of supplementary conditions asexplained above the contract may be extended to caterfor day to day maintenance in specified properties.

7

3.0 Measured term contract and supplementarylump sum element

General

4.1 This type of contract extends the use of lump sumcontracting into the field of maintenance. It can be used,with minor variations, for the operation, repair,maintenance and modification of separate buildingelements/installations, for example. buildings, electricaland mechanical plant, equipment and installation etc; forthe maintenance of grounds as a whole or by individualservices; and separately for the maintenance of specialistequipment and installations, that is, fire alarms, medicalgases, vehicles etc.

4.2 The contract is designed to make the contractorcompletely responsible for the operation, repair,maintenance and modification of the plant, equipmentand installations. In the case of general services, there isnormally a limit placed on the maximum cost of any singlerepair or replacement to be carried out under the contract(the level to be decided locally) and work above thismaximum cost would be subject to separate contractarrangements, or a separate order in cases wheresupplementary conditions for measured work areincluded. Where it is used for specialist equipment andinstallations the contractor would be responsible forindemnifying the NHS body against all cost penaltiessuffered by the NHS bodies arising from any failures dueto fair wear and normal operation, provided that the NHSbody carries out stipulated user tests and maintains asuitable power supply and environmental conditions forthe equipment.

Contract period

4.3 The contract operates for a minimum period of oneyear and a maximum period of five years, but can beterminated by either party at the end of a minimumperiod or at any time thereafter, provided that therequired notice has been given.

Payment

4.4 The contractor is paid a lump sum for carrying outoperation, repair and maintenance functions. In the caseof specialist equipment and installations the contractor isnormally paid for any modification or additional work (dueto change of use or defects for which the contractor isnot liable) on a time-charge basis plus the cost ofmaterials, whereas for general services such work (wherethe cost exceeds the maximum sum) will be subject toseparate contract arrangements or a separate order in

cases where supplementary conditions for measured workare included.

4.5 The tendered lump sum is usually adjusted annuallyby use of indices. In addition, the labour rates in the caseof specialist equipment are also adjusted annually by useof indices.

Supplementary measured work

element

4.6 The contractor is paid for work carried out undersupplementary conditions (where they are included in thecontract conditions) in any one of the following ways orany combination thereof:

a. for measured work(the measured amount of work carried out × pricequoted in appropriate schedule of rates) +contractor’s percentage + updating percentage;

b. for work carried out as daywork(hourly labour rate + overheads) × hours worked +(cost of materials + overheads) + (cost of plant +overheads);

c. for work carried out on a firm price basisthe sum agreed prior to commencement of thework.

Suitable schedules of rates for use with suchsupplementary conditions are referred to in Appendix 2.The contractor’s percentage is the percentage variationfrom the schedule of rates required by the contractor andentered by him in his tender.

Use of lump sum term contracts by NHS

bodies

4.7 To operate this type of contract, the plant,equipment and installations must be in an acceptablecondition (Estatecode condition B or C), requiring noabnormal maintenance. At the start of the contract, thecontractor should be allowed a suitable period (usually 30days) in which to negotiate a price for any work it isagreed was outstanding at the commencement of thecontract, and which would fall within the maximum costof any one job under the contract. Failure of the NHSbody to allow this or to have the above work carried out,may enable the contractor to reduce his liability in anysituation that arises thereafter.

8

4.0 Lump sum term contract and supplementarymeasured work element

General

5.1 This type of contract is normally used formaintenance of plant, specialist equipment, groundsmaintenance and the carrying out of routine maintenancetasks.

5.2 The contract is designed so that the contractor willcarry out specific maintenance tasks (which must beclearly defined in the specification), either at givenintervals or when otherwise ordered to be done and itmay contain the facility for carrying out:

a. planned maintenance work;

b. repairs, replacement, alterations and special tests;

c. emergency maintenance;

d. routine maintenance tasks;

e. grounds maintenance;

as required by the specification. Under this type ofcontract, the contractor is responsible only for carrying outthe work specified or ordered and there is no incentive forhim to improve the maintenance or operational efficiencyof plant.

Contract period

5.3 The contract operates for a minimum period of oneyear and a maximum period of five years but can beterminated by either party at the end of a minimumperiod or any time thereafter provided that the requirednotice has been given.

Payment

5.4 Payment is usually made against a schedule ofprices agreed in the tender. The schedule of prices willalways include a price per visit for carrying out definedtasks, but for other work the prices quoted will be anhourly rate for labour and a percentage addition to theinvoiced cost of materials.

5.5 The prices quoted in the schedule of prices willremain fixed for a period of twelve months, after whichone of the following alternatives will normally beavailable:

a. the rates will be updated annually by the use ofindices;

b. the rates may be re-negotiated at periods of notless than twelve months.

Use of specialist term contracts by NHS

bodies

5.6 This type of contract is best suited for plant andequipment maintenance where:

a. abnormal maintenance is required due to age;

b. specific local requirements or conditions apply;

c. the contract value is so small that no other form ofcontract is economic; or

d. it is not possible otherwise to persuade contractorsto tender.

9

5.0 Specialist term contracts

General

6.1 These are standard forms of contract for use inconnection with works of small value, for example lessthan £10,000. They should not be used for contracts of arepetitive nature as there are more suitable arrangements,such as measured term contracts.

6.2 Such standard forms of contract usually have thefollowing characteristics:

a. they provide for a single payment for the work;

b. they rely on a works order being issued which willinclude:

(i) a description of the works or drawings and/or aspecification;

(ii) the agreed price for the works;

(iii) the date of commencement of the works;

(iv) the date of completion of the works;

(v) the defects liability period;

(vi) the minimum indemnity for public liabilityinsurance;

c. there is no provision for an architect or contractadministrator;

d. there is usually provision for the employer to issueverbal instructions which must be confirmed inwriting (such verbal instructions should contain theinformation that should be provided on a worksorder).

Use of jobbing contracts by NHS bodies

6.3 Jobbing contracts should only be used for works ofsmall value and where there is no other form ofmaintenance contract considered suitable for carrying outthe work required. If repetitive items of work areencountered when using jobbing contracts thenconsideration should be given to awarding a term contractto obtain better value for money.

10

6.0 Jobbing contracts

General

7.1 Schedules of rates are document(s) that contain thefollowing information:

a. a list of work items;

b. a specification of materials and workmanship;

c. rates for labour, materials and plant for each itemof work therein.

7.2 Schedules of rates permit the measurement andvaluation of items of work added by NHS bodies using thepre-agreed rates as a basis. They also assist the valuationof items of work not included in the schedules of ratesusing the cost information provided for similar items ofwork.

7.3 They can either be bespoke, that is drafted by theNHS body for the specific maintenance contract, orstandard that is,. published by various bodies for use bythose letting maintenance contracts.

Standard schedules of rates

7.4 Standard schedules of rates are used in most caseswhen letting term-type maintenance contracts. Theycontain a majority of items that are likely to beencountered in respect of building, mechanical/electricalemergency installations, roads and ground maintenance.Appendix 2 has the most commonly-used standardschedules of rates.

Bespoke schedules of rates

7.5 Bespoke schedules of rates are usually prepared inrespect of specialist installations or items of equipment forwhich no standard schedule of rates exist. They usuallyinvolve the NHS body in preparing a list of work itemstogether with a specification of materials andworkmanship and the contractor then inserts rates againstthe items as part of the tendering process.

Contractor’s percentage

7.6 Where schedules of rates contain rates for items ofwork they usually permit contractors to submit percentageadjustment to the rates to allow for the effect of theirown overheads, profit, labour rates, etc on the ratestherein.

7.7 NHS bodies may wish to consider the use ofdifferent value bands for work in the tender documents as, the lower the value of work ordered, the higher theproportion of overheads, etc it may attract.

Fluctuations

7.8 Schedules of rates permit the increase of ratestherein, either by re-issue of the schedule of rates atpredetermined periods (for example the National scheduleof rates), or by the use of indices (such as the TBVschedule of rates).

11

7.0 Schedules of rates

General

8.1 As a result of the large number of standard formsof contract available, it is not intended to provide detailedguidance on the use of all standard forms of contractherein. This section of the guidance, together with theappendices, provide guidance on some of the importantcontractual issues. Appendix 1 lists the standard forms ofcontract currently available for use on maintenancecontracts, and Appendices 3and 5 provide guidance onthe JCT measured term contract.

Government and departmental policy

8.2 Amendments to contracts are required whereappropriate to give effect to government anddepartmental policy; some of the more important issuesfor which such amendments are required are:

• prompt payment;

• racial discrimination;

• indemnity in respect of the the Data Protection Act1984;

• insurance clauses where NHS bodies are required bygovernment policy to take the risk without takingout insurance. Although NHS trusts are free tomake their own decisions on insurance matters,other NHS bodies may still be subject to thegovernment policy which requires that they take therisk without taking out insurance.

Appendices 3, 4, 5 and 7 incorporate guidance on suchamendments to those maintenance contracts currentlyproduced by the Joint Contracts Tribunal, together withother guidance on these contracts.

8.3 NHS bodies should obtain appropriate professionaladvice before amending standard forms of contract.

Conditions of contract generally

8.4 There are many standard conditions of contractavailable and there are a number of important points forNHS bodies to note.

8.5 The points are as follows:

a. NHS bodies will be required to prioritise the items ofwork, an example being:

priority 1 – urgent, response within 30 minutes;

priority 2 – important, response within oneworking day;

priority 3 – important, but not urgent, responsewithin three working days;

priority 4 – desirable, response within sevenworking days;

priority 5 – low, response greater than sevenworking days;

b. there is no provision for retention of monies as withstandard forms of building and engineeringcontracts;

c. consideration will need to be given to therequirement for defects liability periods (6 monthsfor building works and 12 months for mechanicaland electrical engineering works – if both types ofwork are included in a single contract then a singledefects liability period of 12 months should beadopted) The defects liability period runs from thecompletion of the work identified in the worksorder;

d. NHS bodies will need to decide whether:

(i) they want to measure and value the worksthemselves; or

(ii) they require the contractor to do this, with theNHS body checking the works prior topayment. (If this option is selected, NHS bodiesshould ensure they have procedures in place tocheck that the works have been carried outand accurately priced. It may be that only asample of priced work orders is checked due tothe large number of work orders that may havebeen issued by an NHS body);

e. there will need to be a decision on the method ofupdating the rates/prices to allow for fluctuations;

f. there will need to be a decision on what action theNHS body will take in the event of a contractor’sfailure to perform through his own fault (there areno provisions for liquidated and ascertained damageor loss and expense. However, some standard formsof contract permit the recovery of costs from theoriginal contractor associated with getting othercontractors to complete the work);

g. there is usually a break provision applicable after aspecified period (usually 6 months) on provision of anotice: this enables either party to terminate thecontract after provision of a notice;

12

8.0 Conditions of contract

j. there is usually a provision for insertion of anannual/total contract to provide an indication of thework, but this is not binding on either party;

j. there will need to be provisions for providinginformation for/contributing to the health andsafety file as well as ensuring compliance with theother requirements of the Construction (Design andManagement) Regulations 1994 where they areapplicable.

13

8.0 Conditions of contract

General

9.1 NHS bodies may use a works order with standardconditions thereon to obtain quotations for individualitems of work of a small value. Their use is notrecommended where there is a regular requirement forthe items of work being ordered, better value for moneycould be achieved by using an alternative contractualarrangement in such circumstances, for example ameasured term contract.

9.2 NHS bodies should obtain appropriate professionaladvice to ensure that the standard conditions on the orderare suitable for use in connection with estatesmaintenance. This is particularly important if the standardconditions were drafted for use in matters not related toestates maintenance, for example for the purchase ofsupplies.

9.3 If NHS bodies draft bespoke standard conditionsthen they should obtain appropriate professional advice.

Standard contract conditions generally

9.4 Several important points for NHS bodies to note areas follows:

a. consideration will need to be given to therequirement for defects liability periods (6 monthsfor building works and 12 months for mechanicaland electrical engineering works – if both types ofwork are included in a single works order then asingle defects liability period of 12 months shouldbe adopted). The defects liability period runs fromthe completion of the work identified in the worksorder;

b. there should be provision for inspection of theworks prior to payment being made to ensure thatthey comply with that specified in the works order;

c. there should be payment provisions that complywith the Government policy in respect of promptpayment;

d. there should be provisions relating to what actionthe NHS body will take in the event of acontractor’s failure to perform through his ownfault (some standard forms of contract permit therecovery of costs from the original contractorassociated with getting other contractors tocomplete the work);

e. there will need to be provisions for providinginformation for/contributing to the health andsafety file as well as ensuring compliance with theother requirements of the Construction (Design andManagement) Regulations 1994 where they areapplicable;

f. if there is any reference to dispute resolutionprocedures, for example arbitration, thenconsideration should be given to the use ofadjudication.

14

9.0 Works order with standard contract conditions

General

10.1 An alternative method available to NHS bodies inrespect of managing their estate is that of appointing afacilities manager. The facilities manager will beresponsible for the management of an NHS body’s estateto ensure that value for money is obtained.

10.2 The duties of the facilities manager will normallyinclude services outside the scope of this guidance.

10.3 The facilities manager usually has to manage anNHS body’s estate in accordance with a performancespecification which will include information in respect ofbuilding, engineering and grounds maintenance.

10.4 The facilities manager may use one or acombination of the contractual arrangements mentionedwithin this guidance to provide building, engineering andgrounds maintenance services.

10.5 Further guidance on facilities management can befound in HFN 16 – ‘Re-engineering the facilitiesmanagement system’.

Appointment of facilities manager

10.6 NHS bodies should obtain appropriate professionaladvice when selecting and appointing a facilitiesmanagement firm. Such advice is important whenpreparing the contract documents and evaluating thetenders received.

10.7 In addition it is important that NHS bodieseffectively monitor compliance with the contractdocuments.

Conditions of contract generally

10.8 Some important points for NHS bodies to note inrespect of the building, engineering and groundsmaintenance elements of a facilities management contractare:

• NHS bodies will be required to prioritise items ofwork, an example being:

priority 1 – urgent, response within 30 minutes;

priority 2 – important, response within oneworking day;

priority 3 – important, but not urgent, responsewithin three working days;

priority 4 – desirable, response within sevenworking days;

priority 5 – low, response greater than sevenworking days;

• there should be provision for penalising the facilitiesmanager for failure to perform. Examples of failureto perform could be: quality of service not being asspecified, specified response times to requests forwork orders not being achieved, non-availability offacilities;

• there should be a break provision applicable after aspecified period (usually 6 months) on provision of anotice: this enables either party to terminate thecontract after provision of a notice;

• there should be a provision for insertion of anannual/total budget to provide an indication of thework but this should not be binding on either party;

• the performance specification will need to specifythe condition in which the facilities will have to bemaintained;

• there will need to be provisions for maintaining thehealth and safety file as well as ensuring compliancewith the other requirements of the Construction(Design and Management) Regulations 1994.

The above list is not meant to be comprehensive.

15

10.0 Facilities management

General

11.1 Under the provisions of the Private Finance Initiativeit is likely that the proposals received by NHS bodies willinclude the management of the facility for the period ofthe contract, this will include building, engineering andgrounds maintenance.

11.2 It is likely that there will be a facilities managementfirm responsible for this element of the proposals.

11.3 Detailed guidance is available elsewhere on this,however, it is important that NHS bodies establishperformance criteria in respect of facilities management aspart of the contract documentation and monitorcompliance with the specified performance criteria.

11.4 NHS bodies should also carefully consider theeffects of any failure to perform and may wish toincorporate a means of penalising the contractor shouldhe fail to meet the NHS bodies specified requirements.Examples of failure to perform could be:

• quality of service not being as specified; or

• specified response times to requests for work ordersnot being achieved; or

• non-availability of facilities.

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11.0 Private Finance Initiative

Appendix 1

Forms of contract

The following forms of contract have been specificallyproduced for use on maintenance contracts:

a. General Conditions of Contract for Building andCivil Engineering – minor works, lump sum andprime cost, standard forms of contract:

• C1001 – General building and M & E smallworks;

• C1010 – Demolition works;

• GC/Works/2 – B & CE minor works;

• C1102 – Prime cost.

b. General Conditions of Contract for Building andCivil Engineering – mechanical and electrical worksand services, standard forms of contract:

• C910 – Operation, repair and maintenance ofmechanical and electrical plant;

• C1020 – Lump sum contract for minor (up to£150,000 estimated value) mechanical andelectrical services and plant;

• C1030 – Lump sum contract for minor (over£150,000 estimated value) mechanical andelectrical services and plant;

• C1301 – For use when specified work isrequired and can be costed per task;

• C1304 – Repair of plant.

The above contracts are produced by Department of theEnvironment Property Holdings and are available from The Stationery Office.

Other forms of contract that may be suitable formaintenance works as produced by the Joint ContractsTribunal (JCT) include:

• Agreement for Minor Works includingSupplementary Memorandum;

• Measured Term Contract (MTC 89);

• Conditions of Contract for Building Works of aJobbing Character (a Standard Form of Tender andAgreement for Building Works of a JobbingCharacter is also available).

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Appendix 2

Schedule of rates

The following schedules of rates have been specificallyproduced for use on maintenance contracts:

• National Schedule of Rates.(available from: National Schedule of Rates,18 Mansfield Street, London W1M 8FG);

• Schedule of Rates prepared by TVB Consult:

Schedule 1: Building works

Schedule 2: Decoration works

Schedule 3: Grounds maintenance

Schedule 4: Minor works and maintenance ofroads and pavings

Schedule 5: Electrical services

Schedule 6: Mechanical services(available from: The Stationery Office).

The updating pamphlet for these schedules of rates ispublished by: Construction Research Publications Ltd onbehalf of the Building Research Establishment.

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Appendix 3

JCT Standard Form of Measured Term Contract (1989 edition) (as amended)

A3.1 The contract is examined and guidance is given onits completion and amendment. The tender documentsmust state:

a. the form of contract to be used will be the JCTStandard Form, Measured Term Contract, 1989Edition;

b. the JCT amendments to be incorporated; and

c. set out all amendments that the employer willmake to the printed form when preparing thedocument for execution by the employer and thecontractor.

A3.2 It should be noted that the “NHS body” is describedas “the employer”.

A3.3 Amendments are occasionally made to JCT forms ofcontract and are usually incorporated into the text of thecontract at the next reprint. Meanwhile the separatelyissued amendments can be incorporated into the contract,by either:

a. amending the printed wording of the contract inblack ink before it is signed by the parties. Eachseparate amendment must be initialled by, or onbehalf of, each of the parties; or

b. firmly attaching to the form of contract, therelevant printed sheets carrying the amendments.Each page must be initialled by, or on behalf of,each of the parties.

A3.4 The Department recommends the use of the secondoption, that is, attaching the printed sheets carrying theamendments.

A3.5 A summary of the contents of each JCT amendmentand correction included in a reprint are printed at the endof the contract document.

A3.6 All employer amendments to the contract must bein accordance with those stated in the tender documents.As with JCT amendments (paragraphs A3.3 and A3.4above) each amendment made by the employer must beinitialled by, or on behalf of, each of the parties.

A3.7 Where the wording of a printed clause is varied, it isrecommended that the printed clause is deleted entirelyand a typed amendment slip is attached with the revised

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Introduction Notes/amendments

wording. Additional clauses should be incorporated in asimilar way.

A3.8 It is good practice for each amendment to beidentified for initialling by all the parties.

A3.9 All contract documents must be suitably identifiedand signed by, or on behalf of, the parties.

A3.10 The originals of the contract documents (theexecuted contract, contract drawings and schedules ofrates) must be retained by the employer in safe keepingand a certified true copy of the originals should beprovided by the employer to the contractor, free ofcharge.

A3.11 Any parent company guarantee required relatingto the main contract should normally be executed as adeed before the main contract is executed. The original is retained by the employer in safe keeping with theoriginals of the contract documents. Further guidance onparent company guarantees is contained in Appendix 6.

Articles of agreement

A3.12 The contract date will normally be entered afterboth parties have executed the contract and should bebefore the date of commencement stated in the appendixto the contract.

A3.13 The names and addresses of the parties should be entered. The addresses will normally be the addressesto which certificates, instructions, notices, etc should be sent. If either party wishes to have documents,communications, etc delivered to addresses other thanthose entered in the articles of agreement, then thisshould be clearly stated here.

A3.14 The contract date and the names and addresses ofthe parties should also be entered on the back cover ofthe contract (see paragraphs A3.12 and A3.13).

Recitals

A3.15 The recitals are statements which explain and setout the purpose of the contract and the facts upon whichthe contract is based.

First recital

A3.16 Insert an adequate description to identify thelocation of the “contract area”. More detailed informationon the “contract area” can be inserted in item 1 of the

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Commentary Notes/amendments

contract appendix. The contract title and reference shouldbe typed on the front cover of the contract.

Second recital

A3.17 The second recital refers to the contractor’s offerand the employer’s acceptance thereof.

Articles

A3.18 The articles incorporate the conditions and othercontract documents by reference.

Article 3

A3.19 Insert the discipline, name and address of thepractice or department administrating the contract onbehalf of the employer. It is generally preferable to givethe name of the organisation or title of an official ratherthan the name of an individual.

Article 4

A3.20 This article notes that the detailed provisionsregarding disputes referred to arbitration are contained insection 9 of the contract.

Article 5

A3.21 When the printed form is modified by a JCTamendment not yet included in the reprinted form and itis desirable to incorporate the JCT amendment in theexecuted contract, the Department recommends anadditional Article 5 is inserted. This article should beinserted after Article 4. The relevant printed sheetsspecified in the instructions on use of the JCT amendmentshould be firmly attached to the executed contract afterthe attestation and before the conditions.

Attestation

A3.22 Page 5 of the contract is the attestation to becompleted, as appropriate, whether the contract is to beexecuted as a simple contract (“under hand”) or as a deed(formerly “under seal”).

A3.23 The Department normally expects all contractsentered into using the JCT Standard Form of MeasuredTerm Contract to be executed as a deed.

A3.24 The contractor should complete the appropriatesection of the attestation before the employer. The

Insert the following additional article to incorporate aJCT amendment not yet included in the reprinted formbeing used.

“Article 5

Amendment – The Conditions shall have effect asmodified by the amendments set out in Amendments*attached hereto.”

* insert number(s) of JCT amendment(s)

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Commentary Notes/amendments

contract should be dated when the employer completesthe appropriate section attestation.

Section 1: Intentions of the parties

Clauses 1.2 to 1.5: Contractor’s obligations

A3.25 Clause 1.2 should be retained without alterations.The terms of the contractor’s obligations should be noted.The obligation does not require the contractor toundertake or be responsible for:

a. design;

b. specifying materials or goods.

A3.26 All these matters must be fully determined by thecontract administrator and be set out in the contractdocuments (or orders, or in any drawing or specificationissued as part of an order). The contractor should not berequired to prepare and submit drawings. Every drawingnecessary for executing the works (other than any “shopdrawings” that the contractor may choose to prepare forhis/her own convenience) must be provided by thecontract administrator.

Clauses 1.6 to 1.11: Right of employer to supplymaterials and plant

A3.27 The employer is entitled under the provisions ofthe clause to provide materials, plant or equipmentnecessary for the carrying out of any order. However, it isimportant to note that the contractor will not beresponsible for the failure of such materials to complywith clause 1.12.

A3.28 Where the employer provides materials thecontractor is entitled to be paid a 5% handling charge onthe current value of the materials, however, thecontractor’s percentage addition/deduction shall not beapplied to the value of materials supplied by theemployer.

Clause 1.13: Value of work to be carried out underthe contract

A3.29 Whilst the employer must insert the anticipatedvalue of work to be completed in item 3 of the contractappendix, this clause informs the contractor that theactual value of work may vary from that inserted and noadjustment to the percentage adjustment to schedule ofrates will be permitted.

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Commentary Notes/amendments

A3.30 It should be noted that under clause 1.14 nothingcontained in the schedule of rates or in any drawing orspecification issued as part of an order can override ormodify the application or the interpretation of that whichis contained in:

a. the articles of agreement;

b. the conditions;

c. the appendix of the executed form of contract.

Clause 1.15: Programme

A3.31 The contract administrator can request thecontractor to provide a programme for the ordersidentified in the request. An amended programme shall beprovided within a reasonable time after any variation hasbeen issued.

Section 2: Commencement and

completion

Clause 2.1: Orders to be executed within thecontract period

A3.32 The contract administrator should only issue orderswhich are capable of being completed during the contractperiod, unless the contract administrator and thecontractor agree otherwise.

Clause 2.2: Orders – completion

A3.33 Unless orders are subject to any priority coding (asidentified in item 4 of the contract appendix) they shallstate a commencement and completion date. NHS bodiesmust allow the contractor reasonable time to completethe works.

Clause 2.3: Matters causing delay – fixing later datesfor completion

A3.34 The contractor must give notice to the contractadministrator of any matter which is likely to cause, or iscausing, delay in the completion of an order under theprovisions of clause 2.3.2.

A3.35 The NHS bodies must ensure that the contractadministrator operates the provisions of clause 2.3.2.effectively because if the contractor is unable to completethe work in an order by the date specified “for reasonsbeyond the contractor’s control” a failure to fix a latercompletion date would result in time becoming at large,

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Commentary Notes/amendments

thereby entitling the contractor to complete the work inan order within a reasonable time.

Clause 2.4: Defects

A3.36 This clause allows for a defects liability period of 6 months which is acceptable for building works.However, NHS bodies may require a longer defects liabilityperiod for mechanical and electrical engineering work inwhich case an amendment will be required to this clause.

Section 3: Control of work or supply

comprised in orders

Clause 3.1: Assignment

A3.37 To provide for possible future transfer of thecontract by the employer to another NHS body withoutthe consent of the contractor, a sentence should be addedat the end of clause 3.1.

Clause 3.2: Sub-contracting by the contractor

A3.38 NHS bodies should note that there are noprovisions in the contract for naming or nominating sub-contractors.

Clause 3.3: Contractor’s representative

A3.39 The contractor is required to employ a “competentcontractor’s representative” with whom the contractadministrator should liaise in all matters in respect of thecontract.

Clause 3.9: Exclusions from the site

A3.40 NHS bodies should remind contractors that theprovisions of this clause will be applied by the contractadministrator in cases of breach of health, safety andwelfare requirements.

Section 4: Payment

A3.41 This section contains provisions regarding:

a. valuation – measurement;

b. valuation – daywork;

c. overtime works;

d. interruption of work – unproductive costs;

Insert the following additional sentence at the end ofclause 3.1:

“However, the Contractor’s consent shall not berequired to the assignment of this Contract by theEmployer to another NHS body.”

Insert the Clause 3 amendments contained in Appendix 5.

The following amendment to clause 2.5:

Line 1, delete “6 months” insert “12 months”

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Commentary Notes/amendments

e. progress/final payments – orders;

f. payment of certificates.

A3.42 General guidance on the prompt settlement ofaccounts and the provision of facilities for auditingaccounts by NHS bodies’ finance departments is given inparagraph 3.30 of ‘Contracts and commissions for theNHS estate – Policy’. No amendments should be made tothe clause to make the completion of auditing a conditionfor the issue of the “Final Payment”. This is, in any case,largely unnecessary, as clause 4.13.4 allows the amount ofan account to be amended if it is subsequently found thatthere has been any error in the contractor’s favour inexcess of the amount that should have been included.

A3.43 There is no provision for retention in this standardform of contract.

A3.44 The following paragraphs draw attention toparticular points of detail on payment clauses.

Clauses 4.8 to 4.10: Responsibility for measurementand valuation

A3.45 There are two alternatives provided for in thecontract:

a. the contract administrator measures and valuesthe work and the contractor is provided with anopportunity to attend when this is undertaken; or

b. the contractor measures and values the work andsubmits accounts to the contract administrator forchecking and payment.

Clause 4.11: Progress payments – orders

Clauses 4.12 to 4.14: Final payment – orders

A3.46 These clauses contain provisions relating topayment for orders. There are timescales within theseclauses that are conditions precedent to payments beingmade.

A3.47 In order to provide additional safeguards for NHSbodies in the event of a contractor becoming insolventafter having received payment for unfixed materials andgoods on-site,the Department recommends that clause4.16 be inserted after clause 4.15.

Insert the following additional clause 4.16 after clause4.15:

“4.16 Prior to payment of any progress payment or finalpayment the Contractor shall, if required by theContract Administrator, satisfy him that any amount dueto a sub-contractor or supplier of materials or goods forincorporation into the Works included in any previousprogress, payment has been made.”

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Appendix 3

Commentary Notes/amendments

Prompt payment to suppliers and sub-contractors

A3.48 To comply with Government policy designed toencourage prompt payment to sub-contractors, NHSbodies must incorporate amendments in new contracts forbuilding and maintenance. These require the maincontractor to pay its sub-contractors within 30 days ofreceipt of a valid demand for payment as defined by thecontract.

Section 5: Statutory obligations

Clause 5: Statutory obligations, notices, fees andcharges

A3.49 NHS bodies should note the requirement of theConstruction (Design & Management) Regulations 1994and ensure that they comply with the provisions of thoseregulations. More detailed guidance on this is provided in the ‘Guide to the requirements of the Construction(Design & Management) Regulations 1994’, published by NHS Estates.

A3.50 NHS bodies are subject to the legislation on racialdiscrimination (including the penalties for contravention).They are required to remind contractors of the need to comply with the provisions of the RaceRelations Act 1976 or any statutory modification or re-enactment thereof relating to discrimination inemployment. Whilst the onus on complying with therequirements of the legislation rests with the contractor,clause 5.4 should be included in the contract.

Section 6: Injury, damage or insurance

A3.51 Clause 6.2 shall be amended where clauses 6.5Aand 6.5B apply.

Where clauses 6.5A and 6.5B apply, amend clause 6.2as follows:

Line 1 after “shall” insert “subject to clauses 6.5A and6.5B”

Line 4 after “real or personal” insert “including loss ordamage by fire, lightning, explosion, storm, tempest,flood, bursting or overflowing of water tanks, apparatusor pipes, earthquake, aircraft and other aerial devices orarticles dropped therefrom, riot and civil commotion.”

Insert the following additional clause after clause 5.3:

“Race Relations

5.4 The Contractor shall not unlawfully discriminatewithin the meaning and scope of the provisions of theRace Relations Act 1976 or any statutory re-enactmentthereof relating to discrimination in employment.

The Contractor shall take all reasonable steps to ensureobservance of the provisions of the preceding paragraphby all servants, employees or agents of the Contractorand all Sub-Contractors.”

Insert the Clause 4 amendments contained in Appendix 5.

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Commentary Notes/amendments

Data Protection Act 1984

A3.52 NHS bodies are subject to the legislation on dataprotection (including the penalties for contraventionthereof). They must ensure any contractors they employindemnify them against any contravention of theprovisions of the Data Protection Act 1984 or anystatutory modification or re-enactment thereof relating todata protection. NHS bodies should, therefore, include anadditional clause in the contract after clause 6.4.

Clause 6.4: Insurance against injury to persons orproperty

Contractor’s insurance

A3.53 The appendix contains an item referring to clause6.4.2 where the employer must state the sum ofinsurance cover for any one occurrence, or series ofoccurrences, arising out of one event in respect of claimsto which clause 6.4.1 applies (other than claims under theEmployer’s Liability (Compulsory Insurance) Act 1969 etc).The sum stated by the employer is the minimum sum ofcover, as the clause provides for the contractor to insurefor a greater sum if he so chooses.

A3.54 The sum that the employer should state mustdepend on the particulars of each contract for example,value, location, extent of risk, etc. While it is, therefore,not possible for the Department to recommend a sumthat has general applicability, it is recommended that aminimum sum of £4 million at 1994 prices be inserted.

A3.55 Before a contract is executed, an insurer’scertificate of insurance cover in respect of injury topersons and/or damage (clause 6.4.1) must be obtainedfrom the proposed contractor. NHS bodies mustsubsequently monitor that the insurance is maintained bythe contractor for the duration of the contract.

Clause 6.5: Insurance of existing structures

A3.56 In order to ensure that contracts awarded by theNHS correctly implement Government policy, NHS bodiesshould observe the following guidance and make thestated amendments to the contract (see paragraphs 6.1 to6.5 of ‘Contracts and commissions for the NHS estate –Policy’).

Insert the following side heading and clause after clause6.4:

“Data Protection Act: Indemnity to Employer

6.4A If during the subsistence of this contract theContractor or any Sub-Contractor, or any employeeservant or agent of them, is furnished by the Employerupon any medium with, or otherwise obtains (with orwithout the knowledge or consent of the Employer),access to confidential or personal or commercial dataowned or held by the Employer either in relation to theEmployer’s own affairs or those of others and at anytime either directly or indirectly discloses or copies ormakes improper use of any such data to a third party orallow a third party unauthorised access to them or if theContractor or any Sub-Contractor, or any employee,servant or agent of them, is responsible for or causes theloss, damage or destruction of all or any such data, theContractor shall be liable in damages for any loss ordamage suffered by the Employer and shall indemnifythe Employer against all or any claims proceedings costsor expenses to which the Employer may be or becomeliable at the suit of any third party in respect thereof.”

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Commentary Notes/amendments

A3.57 The insurance options available to NHS bodies areshown in table 1.

Table 1 Insurance options available to NHS bodies

Insurance by Risk taken byemployer employer

NHS authorities No YesNHS trust Yes Yes

A3.58 Particular attention is drawn to guidance oninsurance matters contained in ‘JCT Practice Note MTC/1and guide’.

A3.59 Where NHS trusts have insurance in respect ofclause 6.5 they are required to inform their insurers thatthere will be work undertaken by a contractor in specifiedproperties.

A3.60 In respect of insurance cover for fire or explosionsresulting from acts of terrorism, NHS trusts and authoritiesshould insert the additional clauses included in Appendix7. NHS bodies should also refer to the ‘JCT Guide toTerrorism Cover’. Appendix 7 also contains details of thename and address of the reinsurance company providingthe terrorism cover.

A3.61 Where an NHS body has an existing contract onwhich terrorism cover has been withdrawn the modelform of agreement at Appendix 7 with these amendmentsappended thereto may be used to amend the contract toensure that terrorism cover is provided.

Clause 6.5AExistingstructures –contents – riskof loss ordamage

Clause 6.5Insurance ofexistingstructure

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Commentary Notes/amendments

Clause 6.5A: Existing structures – contents – risk ofloss or damage

Clause 6.5B: Loss or damage caused by negligence

A3.62 Where the risk of loss or damage to existingstructures and their content is to be taken by an NHSbody, amendments to clauses should be made. Clauses6.5 to 6.7 should be deleted in their entirety and theadditional heading and clauses 6.5A and 6.5B included.

Delete existing clauses 6.5 to 6.7

Insert new headings and clauses 6.5A and 6.5B

“Existing structures – contents – risk of loss ordamage

6.5A 1. The existing structures in respect of whichOrders under this Contract may be issuedtogether with the contents thereof owned byhim or for which he is responsible shall be atthe risk of the Employer in respect of the fullcost of reinstatement, repair or replacement ofloss or damage due to one or more of the perilsreferred to in clause 6.5A.2.

6.5A 2. The perils referred to in clause 6.5A.1 are fire,lightning, explosion, storm, tempest, flood,bursting or overflowing of water tanks,apparatus or pipes, earthquake, aircraft, andother aerial devices or articles droppedtherefrom, riot and civil commotion, butexcluding the risks referred to in clause 6.4.5.

Loss or damage caused by negligence

6.5B Notwithstanding the matters set out in clause6.5A and for which the Employer bears the riskunder these clauses the Employer may haverecourse against the Contractor if the loss ordamage to the existing structures and theircontents owned by the Employer or for whichhe is responsible is caused by the negligence ofthe Contractor, his servants or agents or of anySub-Contractor, his servants or agentsemployed upon or in connection with theWorks or any part thereof including their failureto take precautions to prevent loss or damageto the existing structures or extensions, tominimise any such loss or damage or to actupon instructions issued by the ContractAdministrator in relation to these matters.”

Where clauses 6.5A and 6.5B are used the followingconsequential amendments are needed:

Clause 6.2: delete “clauses 6.5 and 6.6” and insert“clause 6.5A”.

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Commentary Notes/amendments

Clause 6.9: All risks insurance of work or supplycomprised in orders

A3.63 The insurance for loss or damage to the work orsupply comprised in orders is the responsibility of thecontractor who is required to take out a joint namespolicy.

A3.64 Clause 6.9 requires all policies must be a “JointNames Policy”: a policy of insurance which includes thecontractor and the employer as the insured.

A3.65 The appendix to the contract contains an itemreferring to clause 6.9 as applicable which requires anentry in the executed contract stating the percentage ofthe value of the works to cover professional fees. NHSbodies must make an assessment of the percentage andstate it in the tender documents. In assessing thepercentage, NHS bodies must take into account the rangeof professional design consultants and clerks of works(both NHS bodies’ own officers and private consultants)engaged on the contract. The cost of their services,together with allowances for expenses and VAT, shouldbe expressed as a percentage applied to the pre-tenderestimated cost of the works.

A3.66 It is essential that NHS bodies regularly review thatthe insured sum of single policy insurance is adequate.Recognition should be taken of the cost of anyinstructions of the contract administrator and theincreased costs that will be incurred when restorationtakes place, including that resulting from inflation.

A3.67 Where a single policy for the contract is taken out,its duration will normally be expressed as ending at thedate for the end of the term contract. However if the enddate of the term contract is fixed, it is essential that thesingle policy is extended so as to expire on the date ofissue of the certificate of practical completion. NHS bodiesmust regularly review the end date of the term contract toensure that policies are kept in force. Should it becomeapparent that the end date of the term contract willexceed the duration of the policy, NHS bodies must takesteps to ensure:

a. the issue of necessary extension endorsements;and

b. payment of additional premiums by thecontractor.

A3.68 The term “full reinstatement value” is used in thecontract to emphasise that the sum insured must reflectthe actual cost of reinstatement at the time ofreinstatement, whenever that may be. The term, however,is only intended to cover:

NHS bodies should ensure that the contractor has takenout such a policy (see clause 6.10).

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Commentary Notes/amendments

a. the actual cost the contractor incurs in reinstatingthe works;

b. site materials lost or damaged;

c. the cost of removing debris in order to prepare forreconstruction;

d. any additional sum prescribed in the contract forprofessional fees.

A3.69 The term is not intended to include consequentialloss such as:

a. the increased cost of carrying out work notundertaken at the time of the damage anddelayed in its completion by reason of thatdamage;

b. loss suffered by the employer (the NHS body) dueto the delay in securing the completed works.

Damage due to theft of site materials and vandalism

A3.70 Where the NHS bodies are self-insuring, it isrecommended that they make the contractor responsiblefor the theft of site materials and vandalism. Accordinglythese amendments should be made to the agreement.

Section 7: Determination

Clause 7.3: Completion – determination by employer

A3.71 As the reference to the Local Government Act1972 in clause 7.3 is irrelevant in the NHS, this should bedeleted.

Section 8: Break provisions – employer

or contractor

Clauses 8.1 to 8.3: Break provisions – employer orcontractor

A3.72 These clauses provide for either party to determinethe contract after 6 months, provided that the requirednotice has been given (13 weeks or the lesser periodstated in the appendix to the contract).

Delete “shall have given any fee or reward the receipt ofwhich is an offence under sub-section (2) of Section 117of the Local Government Act 1972 or any amendmentor re-enactment thereof.”

Clause 6.2, line 3, after “whatsoever” insert “includingtheft of site materials or vandalism”

Clause 6.3, line 2, after “ Site Materials” insert “exceptthat which is lost or damaged as a result of theft orvandalism”

Clause 6.5B, line 11, see paragraph A3.62 of thisguidance – after “thereof” insert: “or is due to theft ofsite materials or vandalism”.

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Section 9: Settlement of disputes –

arbitration

Clauses 9.1 to 9.7: Settlement of disputes – arbitration

A3.73 Attention is drawn to the guidance contained inparagraphs 3.38 and 3.39 of ‘Contracts and commissionsfor the NHS estate – Policy’ regarding arbitration.

A3.74 Clause 9.6 states that the proper law of thecontract is to be the law of England. Where theworks are situated in Scotland, then the formsissued by the Scottish Building Contract Committeewhich contain proper law and arbitration provisionare the appropriate documents. It should be notedthat the provisions of the Arbitration Acts 1950 to1979 do not extend to Scotland.

A3.75 If arbitration is unavoidable, NHS bodies should beaware that the ‘JCT Arbitration Rules’ (clause 9.7) containstricter time limits than those prescribed by somearbitration rules or those frequently observed in practice.NHS bodies must note that failure by them or an agent oftheirs to comply with the time limits incorporated in theserules may affect their situation adversely. TheDepartment’s view is that clause 9.7 should be retained. It is in the interest of all parties that any dispute should besettled as soon as possible.

Supplementary conditions A: Statutory

tax deduction scheme – Finance (No. 2)

Act 1975

Clause 31 Finance (No. 2) Act 1975 – statutory taxdeductions scheme

A3.76 As an NHS body is not a “contractor” for thepurpose of the construction industry tax deductionscheme, this clause does not apply to NHS contracts, anda deletion from the appropriate item in the appendix tothe contract should be made.

A3.77 Although not legally bound by the Act, NHS bodiesmust observe the spirit of the Act and ensure that theprocedures set out in paragraphs 7.10 to 7.13 of‘Contracts and commissions for the NHS estate – Policy’are fully complied with.

Appendix

A3.78 The appendix is an integral and important part ofthe executed contract. This sets out the information

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required to be established for each contract by the variousclauses of the conditions and must be completed withcare.

A3.79 The information to be provided in the tenderdocuments regarding the completion of the appendix issummarised as follows. Other information will need to beagreed with the successful tenderer.

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Commentary Notes/amendments

Item Clause etc

1(a) List of properties in the contract area First recital Insert details of contract area

1(b) List types of work “ Insert details of types of work

2 Minimum/maximum value “ Insert values in numerals and words

3 Estimated value of work “ Insert values in numerals and words1.13

4 Contract period Insert number of years and date of commencement

5 Priority codings 2.2 Insert priority codings (see footnote [l] of the StandardForm of Measured Term Contract and paragraph 8.5 ofthis document)

6 Schedule of rule 1.1 Delete alternative not required, if option (b) selectedinsert details of appropriate schedule of rates

6(a) Schedules of rates 1.1 Delete alternative not required, insert name ofschedule of rates if (a) has been deleted6(b)

7&8 Fluctuations/Fixed Price 4.1 Delete alternative not required, term contract in excessof 2 years duration will be on a fluctuating basis

9(a) Valuation of dayworks items 4.4 Delete clause that does not apply

9(b) Valuation of dayworks items 4.4.1.1 Delete if clause 4.4.2 appliesInsert percentages if clause 4.4.1 applies

9(c) Valuation of dayworks items 4.4.1.2 Delete if clause 4.4.2 appliesInsert appropriate labour rate and date of annualrevision if clause 4.4.1 applies

9(d) Valuation of dayworks items Delete if clause 4.4.1 appliesInsert appropriate labour notes and dates of annualrevision if clause 4.4.2 applies

9(e) Valuation of dayworks items 4.4.2.3 Delete if clause 4.4.1 appliesInsert appropriate percentages if clause 4.4.2 applies

9(f) Overtime work 4.6 Insert appropriate percentage for overheads and profit

10(a) If an NHS body requires to measure and value allorders then ‘Nil’ should be inserted, otherwise a valueshould be inserted above which the NHS body willmeasure and value orders

10(b) Progress payments for orders 4.11.1 If values other than £1500 to apply, insert differentestimated value

11 Contractor’s safety policy Ensure that copy is attached to contract documents

12 Statutory tax deduction scheme 5.2 Delete “is not a Contractor”(paragraph A3.76)

4.84.9

Responsibilities formeasurements and valuation

4.4.2.14.4.2.2

First recital2.1 8.1

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Item Clause etc

13 6.4.2 The NHS body must decide cover required (paragraphsA3.53 and A3.54)

13 6.9 Insert appropriate percentage(paragraph A3.65)

13 6.10 Insert date

14 8.1 Insert period in weeks if a shorter period of notice isrequired (paragraph A3.72)

15 9.1 Delete appointers that are not to applySettlement of disputes – arbitration;appointer (if no appointer is selectedthe appointer shall be the President orthe Vice President, Royal Institute ofChartered Surveyors)

Break provisions; employer orcontractor

Annual renewal date of insurance assupplied by contractor

Percentage to cover professional fees

Insurance cover for any oneoccurrence or series of occurrencesarising out of one event

Appendix 4

JCT Conditions of Contract for Building Works of a Jobbing Character

Section 1: Intention of the parties

Clause 1.1: Contract documents

A4.1 There is provision for the contract documents toconsist of either:

a. the accepted tender and agreement (JCT StandardForm of Tender and Agreement for BuildingWorks of a Jobbing Character); or

b. a works order and any other documents.

Clause 2.2: Defects liability

A4.2 NHS bodies should note that this clause provides fora 6 week defects liability period, this will need changing ifa different defects liability period is required.

Section 4.0: Payment

Clause 4.1: Invoice

A4.3 NHS bodies should note that there is only provisionfor a single invoice.

Clause: Prompt payment

Clauses 4.3 and 4.4: Prompt payment

A4.4 In order to comply with Government policy on theprompt payment of sub-contractors, NHS trusts andauthorities must amend the agreement.

Insert the following additional clauses 4.3 and 4.4 onpage 6 of the agreement:

“Prompt payment

4.3 Where the Contractor enters into a sub-contractwith a Sub-Contractor or supplier for the purpose ofperforming the contract, he shall cause a term to beincluded in such sub-contract which requires payment tobe made to the supplier or Sub-Contractor within aperiod not exceeding 30 days from receipt of a validinvoice as defined by the sub-contract conditions.

4.4 If the Contractor fails to make payment inaccordance with clause 4.3 then, without prejudice toany other right and remedies which the Sub-Contractoror supplier may have in accordance with the sub-contract or contract of sale, the Contractor shall pay to

See page 2; item 5 of Standard Form of Tender andAgreement for Building Works of a Jobbing Character

36

Commentary Notes/amendments

Section 5.0: Statutory obligation

Clause 5.3: Race relations

A4.5 NHS bodies are subject to the legislation on racialdiscrimination (including the penalties for contravention).They are required to remind contractors of the need tocomply with the provisions of the Race Relations Act 1976or any statutory modification or re-enactment thereofrelating to discrimination in employment. While the onuson complying with the requirements of the legislation restswith the contractor, clause 5.3 should be included in thecontract.

Section 6.0: Prevention of corruption

A4.6 As the reference to the Local Government Act 1972in clause 6.1 is irrelevant in the NHS, this should be deleted.

Section 7.0: Injury to persons and

property – indemnity to employer –

insurance

Data Protection Act 1984

A4.7 NHS bodies are subject to the legislation on dataprotection (including the penalties for contraventionthereof). They must ensure that any contractors theyemploy indemnify them against any contravention of theprovisions of the Data Protection Act 1984 or anystatutory modification or re-enactment thereof relating todata protection. NHS bodies should, therefore, include anadditional clause in the contract after clause 7.1.2.

Insert the following side heading and clause after clause7.1.2:

“Data Protection Act: Indemnity to Employer

7.1.3 If during the subsistence of this contract theContractor or any Sub-Contractor, or any employeeservant or agent of them, is furnished by the Employerupon any medium with, or otherwise obtains (with orwithout the knowledge or consent of the Employer),access to confidential or personal or commercial dataowned or held by the Employer either in relation to theEmployer’s own affairs or those of others and at anytime either directly or indirectly discloses or copies ormakes improper use of any such data to a third party orallows a third party unauthorised access to them or ifthe Contractor or any Sub-Contractor, or any employeeservant or agent of them, is responsible for or causes theloss, damage or destruction of all or any such data, the

Delete “shall have given any fee or reward the receipt ofwhich is an offence under sub-section (2) of section 117of the Local Government Act 1972 or any enactmentthereof”

Insert the following additional clause after clause 5.2:

“Race Relations

5.3 The Contractor shall not unlawfully discriminatewithin the meaning and scope of the provisions of theRace Relations Act 1976 or any statutory re-enactmentthereof relating to discrimination in employment.The Contractor shall take all reasonable steps to ensurethe observance of the provisions of the precedingparagraph by all servants, employees or agents of theContractor and all Sub-Contractors.”

the Sub-Contractor or supplier interest for the periodbetween the date when payment should have beenmade to theSub-Contractor or supplier. The rate to beused in the calculation of interest is the statutory rate ofinterest on a judgement debt in the High Court as variedby statutory instrument from time to time calculated ona daily basis.”

37

Appendix 4

Commentary Notes/amendments

Clause 7.1.2: Liability of contractor – injury ordamage to property – indemnity to employer

A4.8 See notes/amendments opposite if the NHS bodyintends to take the risk of damage to existing structureswithout insuring.

Insurance of the existing structures and the works –fire etc – loss or damage

A4.9 In order to ensure that contracts awarded by theNHS correctly implement government policy NHS bodiesshould observe the following guidance and make thestated amendments to the contract (see paragraphs 6.1 to6.5 of ‘Contracts and commissions for the NHS estate –Policy’.

A4.10 The insurance options available to NHS bodies areshown in table 1.

Table 1 Insurance options available to NHS bodies

Insurance by Risk taken byemployer employer

NHS authorities No YesNHS trust Yes Yes

A4.11 In respect of insurance cover for fire or explosionsresulting from acts of terrorism, NHS trusts and authoritiesshould insert the additional clauses included in Appendix7. NHS bodies should also refer to the ‘JCT Guide toTerrorism Cover’. Appendix 7 also contains details of thename and address of the reinsurance company providingthe terrorism cover.

Clause 7.2.1AExistingstructures –contents – riskof loss ordamage

Clause 7.2.1Insurance ofexistingstructure

Where clauses 7.2.1A and 7.2.1B apply amend clause7.1.2 as follows:

Line 1 after “shall” insert “subject to clause 7.2.1A and7.2.1B”

Line 5 after “real or personal” insert ”including loss ordamage by fire, lightning, explosion, storm, tempest,flood, bursting or overflowing of water tanks, apparatusor pipes, earthquake, aircraft and other aerial devices orarticles dropped therefrom, riot and civil commotion.”

Contractor shall be liable in damages for any loss ordamages suffered by the Employre and shall indemnifythe Employer against all or any claims proceedings costor expenses to which to Employer may be or becomeliable at the suit of any third party in respect thereof.”

38

Appendix 4

Commentary Notes/amendments

A4.12 Where an NHS body has an existing contract onwhich terrorism cover has been withdrawn the modelform of agreement at Appendix 7 with these amendmentsappended thereto may be used to amend the contract toensure that terrorism cover is provided.

Clauses 7.2.1A/7.2.1B: Self-insurance of the existingstructures and the works by the employer – fire etc

A4.13 Works in/to existing structures – employer self-insures; this option is available to NHS trusts andauthorities and involves them in carrying the riskthemselves without taking out insurance. It was originallyintroduced for use by the NHS to comply withGovernment policy on insurance of existing buildings;however, NHS trusts must now make their own decisionson whether to insure or not.

A4.14 As the employer is self-insuring without taking outinsurance, the employer is carrying the risk of damageresulting from fire or explosion resulting from an act ofterrorism except where the contractor’s negligence mayhave contributed to such loss or damage, in which casethe provisions of clause 7.2.1B apply.

Delete clause 7.2.1 entirely

Insert the following clause 7.2.1A:

“7.2.1A Subject to the provisions of clause 7.2.1B, theexisting structures (together with the contents thereofowned by the Employer and for which he is responsible)and the works and all unfixed materials and goodsintended for, delivered to, placed on or adjacent to theworks and intended therefor (except temporarybuildings, plant, tools and equipment owned or hired bythe Contractor or any Sub-Contractor) shall be at therisk of the Employer as regards loss or damage by fire,lightning, explosion, storm, tempest, flood, bursting oroverflowing of water tanks, apparatus or pipes,earthquake, aircraft and other aerial devices or articlesdropped therefrom, riot and civil commotion except inrespect of any loss or damage for which the Contractoris liable under 7.1.2 and 7.1.3.”

Insert after clause 7.2.1A on page 7 of the conditions ofcosts the following additional clause 7.2.1B:

“Loss or damage caused by negligence

7.2.1B Notwithstanding the matters set out in clause7.2.1A for which the Employer bears the risk, under thisclause the Employer may have recourse against theContractor if the loss or damage to the works or unfixedmaterials and goods or to the existing structures andtheir contents owned by the Employer or for which he isresponsible is caused by the negligence of theContractor, his servants or agents or of any Sub-Contractor, his servants or agents employed upon or inconnection with the works or any part thereof, includingtheir failure to take precautions to prevent such loss ordamage to the works or existing structures orextensions, to minimise any such loss or damage or toact upon instructions issued by the Architect/ContractAdministrator in relation to these matters.”

Delete the last sentence of clause 7.3 “Except where ...at all material times”.

39

Appendix 4

Commentary Notes/amendments

Damage due to theft of site materials and vandalism

A4.15 Where the NHS bodies are self-insuring, it isrecommended that they make the contractor responsiblefor the theft of site materials and vandalism. Accordinglythese amendments should be made to the agreement.

Clause 7.1.2, line 5, after “whatsoever” insert“including theft of site materials or vandalism”

Clause 7.2.1B, line 10, see paragraph A4.14 of thisguidance – after “thereof” insert: “or is due to theft ofsite materials or vandalism”.

40

Appendix 4

Commentary Notes/amendments

41

Prompt payment

The following amendments should be made to the JCTStandard Form of Measured Term Contract in order tocomply with Government requirements regarding promptpayment of sub-contractors.

Clause 3.2: Sub-contracting by the contractor

Clause 3.2: Subletting Sub-Contractors – ContractAdministrator’s consent.

Insert the following additional sentence at the end ofclause 3.2:

“As a condition of obtaining consent to any sub-lettingunder clause 3.2, the Contractor shall provide satisfactoryevidence in writing that he has included provisions withinthe sub-contract in accordance with clauses 4.17, 4.18and 4.19.”

Insert the following additional heading and clauses afteradditional clause 4.16:

“Prompt payment of Sub-Contractors

4.17 Sub-contracts shall provide:

.1 That the amount properly due to the Sub-Contractorshall be determined each month in accordance withthe terms of the sub-contract.

.2 That the Contractor will pay the amount properlydue to the Sub-Contractor within 17 days of thedate of issue of the next certificate pursuant toclause 4 and that the Contractor shall be obliged toinform the Sub-Contractor of the date of issue ofthe first payment under clauses 4.11 and 4.12 priorto the date when the first payment to the Sub-Contractor should be made.

.3 That if the Contractor fails to make payment inaccordance with clause 4.1.2, then, withoutprejudice to any other rights and remedies whichthe Sub-Contractor may have in accordance withthe terms of the sub-contract or for breach of it, theContractor shall pay to the Sub-Contractor interestat the rate stated in clause 4.20 for the periodbetween the date when the payment should havebeen made and the date when payment was madeto the Sub-Contractor.

.4 That the Contractor shall not be entitled to deduct

from or to set-off against any money otherwise dueto the Sub-Contractor in accordance with the sub-contract any amount in respect of any loss and/orexpense incurred by the Contractor unless:

4.1 the amount of the deduction or set-off hasbeen quantified in detail and with reasonableaccuracy by the Contractor, and

4.2 the Contractor has given the Sub-Contractornotice in writing specifying his intention todeduct or to set-off the amount quantified inaccordance with clause 4.17.1 and the groundon which such deduction or set-off is claimedto be made, such written notice shall be givennot less than 3 days before the date of issue ofany certificate which includes in the amountstated as due an amount from which theContractor intends to make the deduction orset-off.

Provided that such written notice shall not bebinding insofar as the Contractor may amend it inpreparing his pleadings or statements for anyarbitration or litigation proceedings related to thesub-contract.

4.18 The sub-contract shall provide that the Sub-Contractor will include in any contract he subsequentlyenters into provisions imposing on the Sub-Contractor, thelike duties and obligations as are imposed on theContractor by clause 4.17.

Prompt payment of suppliers

4.19 When the Contractor enters into any contract forthe supply of any material or goods including those to beincorporated into the Works, he shall incorporate in tosuch a contract a term which requires payment to bemade to the supplier within not more than 30 days, unlesssome other period is expressly agreed with the supplier,from either the end of the month in which delivery isaccepted or from receipt of statements of accounts ofsuch deliveries in the preceding month.

Interest on late payments to Sub-Contractors andsuppliers

4.20 If the Contractor fails to make payment inaccordance with clause 4.17 and 4.19, then, withoutprejudice to any other rights and remedies which the Sub-Contractor or supplier may have in accordance with thesub-contract or contract of sale or breach of it, the

Appendix 5

Contractor shall pay to the Sub-Contractor or supplierinterest for the period between the date when paymentshould have been made and the date when payment wasmade to the Sub-Contractor or supplier. The rate to beused in the calculation of interest is the statutory rate ofinterest on a judgement debt in the High Court, as variedby statutory instrument from time to time, calculated on adaily basis.”

42

Appendix 5

43

Parent company guarantees

1. This form of guarantee is given by a parent company(or holding company) to guarantee the properperformance of a contract by one of its subsidiaries (thecontractor), and can only be given where the contractor isowned by a parent company or is the subsidiary of a largergroup. Such a guarantee is free of cost to the client, butmay give less certainty of redress than a bond because it isnot supplied by an independent third party. However,whilst accepting less independence, parent companyguarantees for the proper performance of the contract canbe more advantageous than bonds. Rather than receivinga fixed amount in compensation, the parent company isobliged to complete the contract (see 3 below). Costs forcompletion are borne by the parent company – and thesecosts may be significantly more than compensationprovided for in a bond. In addition, further recompensecan be sought for time delays in completion through thenormal clauses incorporated in the contract.

2. The conditions of a parent company guarantee willusually give the parent company the opportunity toremedy any default within a period of notice before theguarantee is called. The liability can take several forms,including a financial guarantee of completion of theproject itself or the employment of another contractor tocomplete the project.

3. Where problems arise under the contract, this formof guarantee should discourage the parent company fromputting the contractor into liquidation solely to avoidlosses in completing the project or in paying damages forlate or non-completion. Provided that the parent companyis financially sound and the guarantee is properly worded,the performance and the completion of the contract canbe safeguarded, but the way in which the project iscompleted if the contractor defaults can, to some extent,be at the discretion of the parent company.

4. Because the financial strength of the parentcompany may be linked to that of the contractor, a parentcompany guarantee will be acceptable only if the parentcompany (or holding company) is financially strong and itsfinancial resources are largely independent of those of thecontractor.

5. NOTE – NHS bodies should be aware whenvetting the contractor that a parent companyguarantee is only as good as the parent company (orholding company) itself. If the financial position ofthe holding company is inadequate, then theguarantee should be given by the ultimate parentcompany, if this is justified by its own financialstanding.

Appendix 6

Insurances – terrorism cover

A7.1 The JCT published TC/94 to cater for terrorismcover. NHS bodies must ensure that they have adequateprotection against the risk of damage resulting fromterrorism and should therefore note the following:

a. on new contracts using JCT standard forms theyshould incorporate the amendments in thisappendix, other forms of contract should havesimilar amendments made thereto if they do notalready contain the necessary amendments;

b. on existing contacts a model supplementaryagreement has been included in this appendix forincorporation of the amendments in respect ofterrorism cover. This has been produced with thepermission of the copyright holder:

RIBA Publications Ltd.Finsbury Mission,34 Moreland Street,London EC1V 8BB.

A7.2 Name and address of the reinsurance companyproviding terrorism cover:

Pool Reinsurance Company Ltd,51 Gresham Street,London, EC2V 7HQ

Tel: 0171 216 7534

44

Appendix 7

A7.3 In respect of insurance cover for fire or explosionsresulting from acts of terrorism, NHS bodies should insertthese additional clauses in the contract. NHS bodiesshould refer to the ‘JCT Guide on Terrorism Cover’. Thisappendix contains details of the name and address of thereinsurance company providing the terrorism cover.

A7.4 Where an NHS body has an existing contract onwhich terrorism cover has been withdrawn, the modelform of agreement later in this appendix, with theseamendments appended thereto, may be used to amendthe contract to ensure that terrorism cover is provided.

Insert at the end of Clause 6.13 on page 24 of theconditions of contract:

“Terrorism cover – works or supply comprised inOrders – non-availability – Employer’s options

6.14 If the insurers named in the Joint Names Policynotify the Employer or the Contractor (the “Insurer’sNotification”) that, with effect from a date stated by theinsurers (the “Effective Date”), terrorism cover under thePolicy will cease and will no longer be available, theEmployer shall immediately so inform the Contractor orthe Contractor shall immediately so inform theEmployer. The Employer, after receipt of the Insurer’sNotification but before the Effective Date, shall givenotice to the Contractor in writing:

either

.1 that on and from the Effective Date clause 6.15 shallapply if loss or damage occurs to the structuresand/or the contents due to fire or explosion caused byterrorism;

or

.2 that on a date stated by the Employer in his notice(which date shall be after the date of the Insurer’sNotification and on or before the Effective Date) theemployment of the Contractor under this contractshall be and is determined.

6.15 Where clause 6.14.1 applies, the Employer shallcontinue to require the Works to be carried outnotwithstanding that the existing structures and/or thecontents thereof owned by him or for which theEmployer is responsible suffer loss or damage due to fireor explosion caused by terrorism; provided that clause6.14.2 shall not be construed so as to impose anobligation on the Employer to reinstate the existingstructure after such loss or damage caused by terrorism.

Terrorism cover – non-availability

6.15 If the insurers named in the Joint Names Policynotify the Employer or the Contractor (the “Insurer’sNotification”) that, with effect from a date stated by theinsurers (the “Effective Date”) terrorism cover will ceaseand will no longer be available, the Employer shallimmediately so inform the Contractor or the Contractorshall immediately so inform the Employer.

45

JCT Standard Form of Measured Term Contract (1989 Edition)

Commentary Notes/amendments

A7.5 To enable an NHS body to check that the contractorhas taken out the terrorism cover, clause 6.10 should beamended as shown.

Clause 6.10 line 4 – after “maintained” insert:

“(including the provision of a copy of the covercertificate in respect of terrorism cover)”

Employer’s options

6.16 The Employer, after receipt of the Insurer’sNotification but before the Effective Date, shall givenotice to the Contractor in writing:

either

.1 that on and from the Effective Date clause 6.17 shallapply in respect of physical loss or damage to workexecuted and site materials due to fire or explosioncaused by terrorism;

or

.2 that on a date stated by the Employer in his notice(which date shall be after the date of the Insurer’sNotification and on or before the Effective Date) theemployment of the Contractor shall be and isdetermined; and that upon such determination theprovisions of this Contract which require any furtherpayment to the Contractor shall not apply, and theContractor shall only be entitled to payment of anydirect loss/or damage caused by the determination.

6.17 Where clause 6.16.1 applies, if work executedand/or site materials suffer physical loss or damage dueto fire or explosion caused by terrorism, the Contractorshall with due diligence restore such work damaged,replace or repair any such site materials which havebeen lost or damaged, remove and dispose of any debrisand proceed with the carrying out of the Works; and therestoration, replacement or repair of such loss ordamage and (when required) the removal and disposalof any debris shall be treated as if they were a Variationrequired by an instruction from the Employer underclause 3.6. The Employer shall not reduce any amountpayable to the Contractor pursuant to clause 6.17 byreason of any act or neglect of the Contractor or anySub-Contractor which may have, or is alleged by theEmployer to have, contributed to the physical loss ordamage which this clause refers.”

46

Appendix 7

Commentary Notes/amendments

A7.6 In respect of insurance cover for fire or explosionsresulting from acts of terrorism, NHS bodies should insertthese additional clauses in the contract. NHS bodiesshould refer to the ‘JCT Guide on Terrorism Cover’. Thisappendix contains details of the name and address of thereinsurance company providing the terrorism cover.

A7.7 Where an NHS body has an existing contract onwhich terrorism cover has been withdrawn the modelform of agreement later in this appendix, with theseamendments appended thereto, may be used to amendthe contract, to ensure that terrorism cover is provided.

Insert at the end of Clause 7.2.2 on page 7 of theconditions of contract:

“Terrorism cover – existing structures and contents– non-availability – Employer’s options

7.2.3 If the insurers named in the Joint Names Policynotify the Employer or the Contractor (the “Insurer’sNotification”) that, with effect from a date stated by theinsurers (the “Effective Date”), terrorism cover under thePolicy will cease and will no longer be available, theEmployer shall immediately so inform the Contractor orthe Contractor shall immediately so inform theEmployer. The Employer, after receipt of the Insurer’sNotification but before the Effective Date, shall givenotice to the Contractor in writing:

either

.1 that on and from the Effective Date clause 7.2.4 shallapply if loss or damage occurs to the structuresand/or the contents due to fire or explosion caused byterrorism;

or

.2 that on a date stated by the Employer in his notice(which date shall be after the date of the Insurer’sNotification and on or before the Effective Date) theemployment of the Contractor under this contractshall be and is determined.

7.2.4 Where clause 7.2.3.1 applies, the Employer shallcontinue to require the Works to be carried outnotwithstanding that the existing structures and/or thecontents thereof owned by him or for which theEmployer is responsible suffer loss or damage due to fireor explosion caused by terrorism; provided that clause7.2.3.2 shall not be construed so as to impose anobligation on the Employer to reinstate the existingstructure after such loss or damage caused by terrorism.

Terrorism cover – non-availability

7.2.5 If the insurers named in the Joint Names Policynotify the Employer or the Contractor (the “Insurer’sNotification”) that, with effect from a date stated by theinsurers (the “Effective Date”) terrorism cover will ceaseand will no longer be available, the Employer shallimmediately so inform the Contractor or the Contractorshall immediately so inform the Employer.

47

Appendix 7

JCT Conditions of Contract for Building Works of a Jobbing Character

Commentary Notes/amendments

A7.8 To enable an NHS body to check that the contractorhas taken out the terrorism cover, clause 7.3 should beamended as shown.

Clause 7.3 line 4 – after “out” insert:

“(including the provision of a copy of the covercertificate in respect of terrorism cover).”

Employer’s options

7.2.6 The Employer, after receipt of the Insurer’sNotification but before the Effective Date, shall givenotice to the Contractor in writing:

either:

.1 that on and from the Effective Date clause 7.2.7 shallapply in respect of physical loss or damage to workexecuted and site materials due to fire or explosioncaused by terrorism;

or

.2 that on a date stated by the Employer in his notice(which date shall be after the date of the Insurer’sNotification and on or before the Effective Date) theemployment of the Contractor shall be and isdetermined; and that upon such determination theprovisions of this Contract which require any furtherpayment to the Contractor shall not apply, and theContractor shall only be entitled to payment of anydirect loss/or damage caused by the determination.

7.2.7 Where clause 7.2.6.1 applies, if work executedand/or site materials suffer physical loss or damage dueto fire or explosion caused by terrorism, the Contractorshall with due diligence restore such work damaged,replace or repair any such site materials which havebeen lost or damaged, remove and dispose of any debrisand proceed with the carrying out of the Works; and therestoration, replacement or repair of such loss ordamage and (when required) the removal and disposalof any debris shall be treated as if they were a Variationrequired by an instruction from the Employer underclause 3.2. The Employer shall not reduce any amountpayable to the Contractor pursuant to clause 7.2.7 byreason of any act or neglect of the Contractor or anySub-Contractor which may have, or is alleged by theEmployer to have, contributed to the physical loss ordamage which this clause refers.”

48

Appendix 7

References

Acts, Regulations and EC Directives

Data Protection Act 1984. HMSO, 1984.

Employers Liability (Compulsory Insurance) Act 1969. HMSO, 1969.

Finance Act 1975. HMSO, 1975.

Local Government Act 1972. HMSO, 1972.

Race Relations Act 1976. HMSO, 1976.

SI 3140: 1994 The Construction (Design and Management) Regulations. HMSO, 1994.

SI 1081: 1983 The Race Relations Code of Practice Order. HMSO, 1983.

NHS Estates and Department of Health publications

Concode: Contracts and commissions for the NHS estate

Contracts and commissions for the NHS estate – Policy. NHS Estates, HMSO 1993. (new edition in preparation)

Contracts and commissions for the NHS estate – Contract procedures. NHS Estates, HMSO 1996.

Guide to procedures for commissioning building and engineering consultants. NHS Estates, HMSO 1994.

Guide to the requirements of European community public procurement directives. NHS Estates, HMSO 1995.

Guide to the requirements of the Construction (Design and Management) Regulations 1994.NHS Estates, HMSO 1996.

Guide to contract procedures. NHS Estates, HMSO 1996.

Health building and estate management: model contract documents for estate maintenance and minor works(HC(88)57). Department of Health, 1988.

Re-engineering the facilities management system (Health Facilities Note 16). NHS Estates, HMSO 1996.

Department of Environment publications

General conditions of contract for building and civil engineering: minor works, lump sum and prime cost,standard forms of contract. Property Holdings, Department of the Environment, HMSO 1990.

General conditions of contract for building and civil engineering: minor works, measured term and call-off,standard forms of contract. Property Holdings, Department of the Environment, HMSO 1990 (Revised 1993).

General conditions of contract for building and civil engineering: mechanical and electrical works andservices, standard forms of contract. Property Holdings, Department of the Environment, HMSO 1990.

49

Royal Institute of British Architects (RIBA) publications

Code of procedure for single-stage selective tendering. National Joint Consultative Committee for Building (NJCC),Second edition 1989. Revised 1994.

Guidance Note 9: Charges for admission to approved and select lists and for tender documents. National JointConsultative Committee for Building (NJCC), 1995.

Code of procedure for selective tendering for design and build. National Joint Consultative Committee for Building(NJCC), 1985.

Standard Form of Building Contract (SFBC) and Joint Contracts Tribunal (JCT)

Measured term contract (MTC 89). 1989.

Amendment 1 to MTC 89: January 1994. 1994.

Practice note MTC/1 and guide. 1989.

JCT Agreement for Minor Works 1980. 1980. Latest printing with amendments 1994. (7 Amendments issued).

JCT Arbitration rules. 1981. Revised 1989.

JCT Practice note MTC/1 and guide. 1989.

JCT Guide to terrorism cover. 1994.

Jobbing agreement tender (JA/T). 1990.

Jobbing agreement conditions (JA/C). 1990.

50

References

51

Given below are details of other documents in theConcode series which are either published by TheStationery Office or in preparation. Information is correctat the time of publication of this document.

Contracts and commissions for the NHS estate: Policy,1993

Agreement for the appointment of project managers forcommissions for construction projects in the NationalHealth Service, 1995

Guide to the Agreement for the appointment ofarchitects, surveyors and engineers for commissions in theNational Health Service, 1995

Guide to the Agreement for the appointment of projectmanagers for commissions for construction projects in theNational Health Service, 1995

Agreement for the appointment of architects, surveyorsand engineers for commissions in the NHS.

Vol 1: Scheme particulars, memorandum ofagreement, conditions of appointment, provisionfor fees and expenses, specimen certificates,definitions, 1995

Vol 2: Supplementary annexure, 1995

Vol 3: Duties under the Construction (Design andManagement) Regulations 1994, 1996

Contracts and commissions for the NHS estate: Contractprocedures, 1994

Guide to procedures for commissioning building andengineering consultants, 1994

Guide to the requirements of European Community publicprocurement directives, 1995

Guide to contract strategies for construction projects inthe NHS, 1995

Guide to the JCT Standard Form of Building Contract,1980 Edition, Local Authorities (as amended), 1995

Guide to the JCT Standard Form of Building ContractWith Contractor’s Design 1981 Edition (as amended),1996

Agreement for the appointment of architects, surveyorsand engineers for commissions for minor works in theNHS, 1996

Guide to the JCT Agreement for minor building works,1994 (new edition in preparation)

Guide to the JCT Intermediate Form of Building Contractfor works of simple content 1984 Edition (as amended),1996

Guide to contract procedures, 1996

Documents published by The Stationery Office can bepurchased from Stationery Office Bookshops in London(post orders to PO Box 276, SW8 5DT), Edinburgh,Belfast, Manchester, Birmingham, Bristol and Cardiff, orthrough good booksellers.

Enquiries (but not orders) should be addressed to:NHS Estates, Department of Health, 1 Trevelyan Square,Boar Lane, Leeds LS1 6AE.

NHS Estates is a non-profit-making Executive Agency ofthe Department of Health.

The price of this publication has been set to make somecontribution to the costs incurred by NHS Estates in itsproduction.

Other publications in this series

52

About NHS Estates

NHS Estates is an Executive Agency of the Department ofHealth and is involved with all aspects of health estatemanagement, development and maintenance. The Agencyhas a dynamic fund of knowledge which it has acquiredduring 30 years of working in the field. Using thisknowledge NHS Estates has developed products which areunique in range and depth. These are described below.NHS Estates also makes its experience available to the fieldthrough its consultancy services.

Enquiries about NHS Estates should be addressed to:NHS Estates, Publications Unit, Department of Health, 1 Trevelyan Square, Boar Lane, Leeds LS1 6AE.Telephone 0113 254 7000.http://www.open.govt.uk/nhsest/hpage.htm

Some NHS Estates products

Activity DataBase – a computerised briefing and designsystem for use in health buildings, applicable to both newbuild and refurbishment schemes. NHS Estates

Design Guides – complementary to Health BuildingNotes, Design Guides provide advice for planners anddesigners about subjects not appropriate to the HealthBuilding Notes series. SO

Estatecode – user manual for managing a health estate.Includes a recommended methodology for propertyappraisal and provides a basis for integration of the estateinto corporate business planning. SO

Concode – outlines proven methods of selecting contractsand commissioning consultants. Reflects official policy oncontract procedures. SO

Works Information Management System – a computerised information system for estatemanagement tasks, enabling tangible assets to be put intothe context of servicing requirements. NHS Estates

Health Building Notes – advice for project teamsprocuring new buildings and adapting or extendingexisting buildings. SO

Health Guidance Notes – an occasional series ofpublications which respond to changes in Department ofHealth policy or reflect changing NHS operationalmanagement. Each deals with a specific topic and iscomplementary to a related HTM. SO

Health Technical Memoranda – guidance on thedesign, installation and running of specialised buildingservice systems, and on specialised building components.SO

Health Facilities Notes – debate current and topicalissues of concern across all areas of healthcare provision.SO

Encode – shows how to plan and implement a policy ofenergy efficiency in a building. SO

Firecode – for policy, technical guidance and specialistaspects of fire precautions. SO

Capital Investment Manual Database – softwaresupport for managing the capital programme. Compatiblewith Capital Investment Manual. NHS Estates

Model Engineering Specifications – comprehensiveadvice used in briefing consultants, contractors andsuppliers of healthcare engineering services to meetDepartmental policy and best practice guidance.NHS Estates

Quarterly Briefing – gives a regular overview on theconstruction industry and an outlook on how this mayaffect building projects in the health sector, in particularthe impact on business prices. Also provides informationon new and revised cost allowances for health buildings.Published four times a year; available on subscriptiondirect from NHS Estates. NHS Estates

Items noted “SO” can be purchased from The StationeryOffice Bookshops in London (post orders to PO Box 276,SW8 5DT), Edinburgh, Belfast, Cardiff, Manchester,Birmingham and Bristol or through good booksellers.

NHS Estates consultancy service

Designed to meet a range of needs from advice on theoversight of estates management functions to a muchfuller collaboration for particularly innovative or exemplaryprojects.

Enquiries should be addressed to: NHS EstatesConsultancy Service (address as above).