One year on: Observations and insights into JCT Design & Build contract negotiations following the introduction of the 2024 suite

This month marks the one-year anniversary of the publication of the long-awaited JCT Design and Build 2024 (JCT DB 2024) form. In a series of articles we will provide a summary of the market's response to this new form, along with commentary on our experiences to date acting for both Employers and Contractors in negotiating the JCTDB 2024.

Rather than explain the differences between the 2016 and 2024 forms of JCT DB, this article highlights our observations on where contract negotiations have so far been tending to settle.

Whilst the JCT DB 2024 introduced several changes to bring the standard form more in line with a post-pandemic market, parties continue to seek additional amendments to the JCT DB 2024. Primarily (and as expected), these amendments are Employer led and seek to shift additional contractual risk onto the Contractor.

This series will provide examples of negotiation positions in relation to the following clauses and provide guidance on how to draft amendments that are project specific and, therefore, likely to minimise negotiation time and cost as opposed to exacerbate it:

• 2.1.5 and 2.2.2 Sustainability and Environmental considerations
• 2.17 Design Liability
• 2.24.2 and 2.25.2 Notification of Delay
• 2.26.7 and 2.26.8 Relevant Events
• 3.15 Antiquities, asbestos and contaminated land

Sustainability and Environmental Considerations

Clause 2.1.5 now "encourages" the Contractor to suggest "economically viable" amendments to the Works which would result in "an improvement in environmental performance and sustainability". As drafted within the standard form, any such amendments suggested by the Contractor would, if instructed, be considered a Change (i.e. giving rise to a time and cost entitlement) and do not extend to the Contractor's design obligations. Given the tendency for Employer's to seek to pass all design risk onto the Contractor under design and build procurement, it follows that Employers are seeking to amend this to cover the Contractor's design also. Some parties are also discussing the principle of the Contractor's role encompassing suggesting "improvement" in the Works more generally and debating whether or not this is already part of the Contractor's remit during design development on Contractor-designed projects, such that it should not give rise to a Change entitlement.

Clause 2.2.2 now requires the Contractor to provide the Employer with all information reasonably requested in relation to the environmental impact on the supply of goods and materials. This is a particularly welcome provision for those Employers that are required to demonstrate achievement of sustainability requirements to wider stakeholders, such as board members of funders.

Given the current awareness around sustainability (with many entities on their own net zero journeys) and the impact the construction industry, along with others, has on the environment, these amendments are welcomed. However, the Contractor is often also asked to bear in mind cost savings and efficiencies, whether via Supplemental Provision Part 2, Provision 6 or stricter bespoke obligations introduced by the Employer's own schedule of amendments. This can lead to a balancing act between a desire to achieve sustainability excellence and what the parties can shoulder financially. Either way, it is important to consider the scenario where the Contractor's cost saving obligations may conflict with its sustainability obligations and be sure the drafting covers this off.

Article 2: Design Liability

Clause 2.17 has been amended to fall more in line with the market accepted standard of care provisions, pursuant to which the Contractor shall carry out the design to the standard of care of an architect/appropriate designer carrying our similar works on a similar project. Further, the clause now contains an express fitness for purpose exclusion.

Employers are continuing to amend new clause 2.17 much in the way they amended the 2016 contract, in that all design risk is being passed to the Contractor. Often, however, the template drafting seems to delete the JCT wording in its entirety, replacing this with bespoke provisions, which are then subject to negotiation where perhaps none is necessary. For example, we are seeing some examples where the new JCT standard of care is being replaced with broadly similar provisions and the fitness for purpose exclusion is deleted, only for the Contractor to insist on an alternative fitness for purpose exclusion being added back in. Given the market acceptance that generally Contractors will not have insurance cover for (i) a standard of care beyond that now captured in the 2024 wording; nor (ii)  fitness for purpose, this results in a round of negotiation that could easily be avoided.

Further, whilst the shift of design risk onto Contractors has been common practise on design and build projects, the narrowing margins and increased insurance costs are adding supply chain pressures that are pinching in places that they perhaps did not even a handful of years ago, resulting in Contractors pushing back here. The solution we often find sits in the preparation of the contractual/technical documents rather than the legal terms, particularly as many Employer-friendly amendments to the JCT form will cross-reference the Employer's Requirements. If the Contractor has sufficient time to review the detail, analyse this and propose practical amendments to the Employer's Requirements before they are incorporated into a completed construction contract, then the risk should be minimal and both parties' main concerns alleviated. In our experience, front-ending this process pays dividends and ensures that both parties are clear on what is being delivered. It is also common for different teams to be separately progressing the legal terms and the technical documents – having time to ensure that the two achieve the same end is key.

The JCT did not go as far as to update clause 2.17.3 to contain a total limit on liability for design and the standard form cap, if applicable, shall continue to be more narrowly applied to claims for loss of use, loss of profit or consequential loss. However, without an express fitness for purpose provision (if it was missed in the schedule of amendments prepared by the Employer) and without adequate reconciliations or agreement over the content of/responsibility for the Employer's Requirements pre-contract, we are seeing Contractors increasingly rely on the JCT cap on liability as the compromise position. If this is to be avoided, open, transparent and technically accurate commercial discussions are required pre-contract to iron out risks in the legal drafting.

Get in touch

Understanding where negotiation trends are settling – and how best to address them – is critical for both Employers and Contractors. Please get in touch if you would like to speak to our experts about the JCT Design and Build 2024 form.