Speaker 1 00:00:00 Hi all Jacob Austin here from QS.Zone. And welcome to episode 86 of The Subcontracted Blueprint, the show where subcontractors will learn how to ensure profitability, improve cash flow and grow their business. And for today's episode, number 86, I wanted to dip into the JCT 2024 suite of contracts and to highlight some of the differences between that and the JCT 16. So stick around and we'll talk about what's changed, why it matters, and how you can adapt to it. So I thought I'd cover this today because for the first time I've been asked what the difference was and it gave me the excuse to start looking into it. And this contract is pretty new, pretty fresh. Most of the work out there is still being done under the 2016 subcontract. And of course the main contract. But it is starting to show its head in current tenders. And because the changes are relatively minor, really the resistance to using it will probably be fairly small. So you could probably expect it to be taken up quite quickly.
Speaker 1 00:01:23 There is some updated terminology in the JCT 24. And there are some procedural changes as well, including notice requirements and extension of time rules. Risk allocation has potentially shifted as well. And finally, for those of you who design subcontract work, the design liability has been changed to finally reflect reality. So let's start there with design liability. So it's a bit of a headline change, especially crucial for those of you who do design as subcontractors. And this is how the definition for design liability is handled by the JCT. 24. So we used to have the default position where the subcontractor or the contractor had to deliver a design that was fit for purpose versus just using reasonable skill and care. And many contracts ended up being amended to clarify that. So eventually the JCT have listened. So the JCT 24 edition now explicitly says that the contractors design liability is limited to the use of the reasonable skill and care expected of a professional person. So we're now no longer guaranteeing perfection when we sign up to the subcontract. And as long as you're performing your design services diligently and to a professional standard, then you shouldn't be on the hook.
Speaker 1 00:02:48 If you've done your job properly and with proper care. So you're no longer needing to play superhero and promise an absolutely fault free design. And what this means is it should align now with what your insurance policy will say. And that insurance will cover negligence not guaranteeing a particular outcome. And that actually means that you can rely on that insurance more, and they're less likely to be able to turn on you as the designer if there's a serious issue. And as I said before, this is largely where the market was in terms of the standard amendments that people would make anyway. So the risk of being sued for a design flaw is now more clearly limited. Just make sure that that ends up in your subcontract. Next, there's reference to modern communication methods. The construction industry isn't exactly known for its lightning fast adoption of new technology, but act 24 does try and drag us a little further into the 21st century. So there's some modernization highlights. Email is finally in. So in NJC 16 formal notices often had to be on paper, and there would be an identified place, an unidentified person to deliver that notice to.
Speaker 1 00:04:08 But now in the G20, for the majority of notices are able to be sent by email. So no more chasing the postman unless you've got a big dog. Because even those all important notices about termination or subcontract default can now be issued by email. But this is the case if both parties sign up to it. So you've got to to trigger this working. Agree in the subcontractor that that is how notices are submitted. And you have to make clear what your designated email address is to receive the notices. It appears in the contract particulars, and you have to fill it in if you want to use it. If not, then you're back to the snail mail days. Next we have electronic signatures. So act 24 actually acknowledges that signing is a thing and it's relatively normal now. So it explicitly permits contracts and deeds to be signed electronically. So you can formally execute a subcontract via DocuSign or a similar process. And there are good benefits for doing that as well. So you're actually able to scan through and search for terms in a document that you've signed, rather than leafing through pages and pages to do it longhand.
Speaker 1 00:05:29 And you can't lose those all important documents in the post either. So this relatively small change can make a lot of difference and save you a fair bit of hassle, particularly when you get main contractors who insist on executed contracts prior to you being paid. You can now get your two directors in the same room. Both click a couple of buttons and you've solved the job instantly. You'll also be glad to hear that there are gender neutral terms used throughout the contract. So there's no more he and him, because that was really confusing before. And now we have statutory providers instead of statutory undertakers as the definition. So that at least does sound like plain English now. So you're expecting a utility company to turn up, not the people that just buried your grandmother. So let's move on. The industry moves fast, and some of the processes have been quite long winded, particularly when it comes to dealing with extensions of time. If you've ever waited and waited and maybe waited a bit more for a decision on your extension of time claim, then this contract brings a tiny bit better news.
Speaker 1 00:06:41 Anyway. Under the JCT 2016, a contractor should hear within 12 weeks for their employers decision on an interim EOT, and at the subcontract level it would be 16 weeks and happily in JCT Inject 24. Those turnaround times have been shortened. So the employer now must get back to the contractor within eight weeks. And correspondingly, a main contractor now has ten weeks to get back to you as the subcontractor. That speeds up the process by over a month or the whole summer holidays for the subcontractor, the JCT. 24 also expects a bit more from you if you want that extension of time in the contractor. Once a bit more information to justify it. Then once that information is asked for, you now have two weeks to turn around your response to that request. So the idea being that this keeps the process moving without too much lengthy silence and in practice is good. You are going to get your extension of time quicker, but be prepared to work for it, because two weeks can be a pretty short period of time when there's a lot to get done.
Speaker 1 00:07:50 We also have early warning of disputes. So in JCT 2016 there was an optional negotiation of disputes provision. Guess how many people actually opted into it? Well, in the 2024 version it's actually baked in, so no longer optional. And the contract now requires a prompt notice of anything that could escalate into a dispute. The idea that then good faith negotiations are held between a couple of senior executives within the two organizations to try and resolve that amicably. So in practice, this is a formal clause for the directors to meet and talk it out between the two of them. So for subcontractors, that means if you sense that there is conflict brewing, then by all means get your facts in order, but notify it and sit down with the contractors higher ups to try and get an amicable resolution. This is your chance to have a frank conversation with people that can do something for you, rather than running straight off to adjudication, saving hopefully everybody money and putting a bit more certainty for both parties around the actual decision.
Speaker 1 00:09:00 Payment provisions under JCT 24 aren't really much different. You still have the regular applications, due dates, payment notices, pay less notices, and so on, all in line with the Construction Act. But there is a little bit more clarity in the scenario of termination. If the contract ends early, whether you are terminated or it's you terminating the subcontract. The form now defines a termination payment with a clear due date and a final date for payment, and it spells out that the required notices for that payment have to be issued with the final payment made. It doesn't change the way that that payment is calculated, but it should gain you some more clarity about how much you get and when you get it. So all of these changes add up in a small way to the contract becoming a little bit more efficient. You've got less waiting around for extension decisions. You've got less waiting around if the project ends up in the divorce procedure. You've also got the potential for emailed notices. Just remember to keep on top of your emails if that gets triggered.
Speaker 1 00:10:12 Some of the key risks under the contract have changed as well. Albeit the JCT says that the 2024 updates don't drastically shift risk allocation in an unamended contract. So, in other words, the basic balance before the clients lawyers have got their hands onto it is pretty much the same. Having said that, there are a few new clauses that give relief in specific scenarios and key ones to note. Epidemics and pandemics as a relevant event. So clearly after Covid 19, this was expected and JCT 2024 adds epidemics as a relevant event. So if there's a major shortage of materials or labour or clear delays to the work, then there is a legitimate ground for an extension of time under the 2016 contract. This could well have fallen under the force majeure or act of God relevant event, but now there is something explicitly there to cover it. Not that that means you'll be getting paid for any of that, because we only have a relevant event and not a relevant matter. There is an optional relevant matter in the main contract, which I doubt will get implemented very often, because this is basically saying the employer will start taking risk when they're the most likely to want the fixed price.
Speaker 1 00:11:30 There's a bit more clarity over unexploded ordnance and contamination as well, as these are now stated properly under the Antiquities definition that typically would have applied to archaeological findings, whereas this clause now makes it clear that there's a potential extension of time. If you discover an old World War Two destructive surprise whilst you're digging the second foundation. We also have the collaboration and good faith clauses. One of the clear trends, probably trying to win some of the market share back from the NEC contract and influenced by the government's construction playbook, perhaps, is the introduction of some collaborative working as a requirement now, rather than one of the bolt on provisions that could be activated under the old contract. So parties now need to work in a cooperative and collaborative manner, in good faith and in a spirit of trust and respect. It is a little bit aspirational. You can't easily sue somebody for not being collaborative enough, but it sets the tone that the contractor and subcontractor should be working together with each other, acting fairly rather than ripping each other off.
Speaker 1 00:12:42 And I did touch on this before when I spoke about notices. But to reiterate, the JCT 24 makes early dispute notification and senior management Negotiation a requirement. So if that dispute arises, say, over a variation value or a potential extension of time, then the higher ups from both parties must meet quickly and try to resolve it before escalating. This is in line with the government playbook, and it means that you now have a true means to escalate a problem with the contractors leadership. If something serious starts to loom, this could also work really well with the cap process that I mentioned a couple of episodes ago. Another new clause worth mentioning is one added about sustainability. The JCT 24 encourages the contractor and by extension, the subcontractors, to suggest economically viable changes that could improve environmental performance of the work. And actually, the employer can now ask for environmental information about materials that are chosen. So this is now a forced part of the material selection process. So if you have a clever idea to make a design greener and it won't break the bank, then the contract now supports bringing that up to the client's team as a formal change proposal.
Speaker 1 00:14:07 And likewise, be prepared to supply data on things like carbon footprint or sustainability of your materials if required. That might be a new frontier for some, but if anybody's been involved in a project with Brian Requirements before then, this is just part of what you're used to. We also have large additions on the Building Safety Act. So going back to what last week's episode was all about, the contract is adding in specific clauses to define the roles required by the new legislation. So this is in terms of the principal designer, the principal contractor now for building control as well as CDM regs. And to confirm the duty holder requirements to ensure that the whole building and therefore the building contract. Achieves current building regulations. The contract doesn't quite spell everything out in terms of the new building regs, and particularly not for high risk buildings. But the new legislation is fairly prescriptive as it is on these buildings. Don't be surprised if this is in an area where the clients are now amending their contracts to add in extra provisions that make it clear all of those responsibilities are either down to you or the contractor.
Speaker 1 00:15:25 As I've said before, clients are getting particularly risk averse. And the reality is, if they're not holding the risk, somebody else is. And whilst the main contract has got anything to do with it, they'll be damned if it's going to be them. I haven't seen a lot of this in action because the contract is pretty new, but don't be surprised if that is a fairly common amendment made. In reality, this is just the JCT reacting to new legislation. The important thing that you need to do here is to ensure that your team understands what the legislation is, and what you need to do to comply with it. Now, I haven't read through every single little change in the conditions, so I do recommend that you have a read through yourself. Many changes are welcome tweaks, but you might have your own interpretation on them when you read them yourself. If you've got in your office a set of contract templates and checklists that you use to negotiate jobs, then now is the time to start revising them.
Speaker 1 00:16:25 Add in the relevant bits that you either like or don't like about JCT 24, so that you're picking up what's important to you. Be prepared for digital notices. You might consider setting up a special contractual notice email address so that you can monitor that without fail. It's no good notices going to one person who's going, that person is on holiday. Then the inevitable will happen and you'll miss out on important time or important money. Perhaps contract notices at. I'm a subcontractor. Co.Uk could be simply set up. It's a simple catch all. Give everybody access to it who need it and then notices. Can't be missed. You also need to be ready to respond to the shorter timescales for efforts. A 14 day deadline means you're going to have to put some effort in to back up your Iate requests if the contractor asks for it. In reality, the best thing that you can do here is to collate records as proactively as you can throughout the course of the job. This is the same advice that I give time and time again on this podcast.
Speaker 1 00:17:37 You can't create records retrospectively, so the best time to record anything is now. The next idea might be a little bit adventurous, shall we say, but there has been a collaboration clause added to the contract, and that might sound a bit fluffy, but you might well be able to use that to set the tone. A gentle reminder that under the contract, were both committed to work together and trust and respect each other. You've almost got a contractual argument for diplomacy and reasonableness. Keep your eye out for new amendments. Inevitably, clients are trying to tighten the loop and shut out as much risk as possible. And given how tight the contractors margins are, they inevitably are pushing this down the food chain. Remember that different clients will have their own take on the various clauses, and different contractors will try and change things in their favour on top of that. So in spite of having a JCT 2024 subcontract, you could end up with the same conditions amended two very different ways on two different sites. So the devil is in the detail.
Speaker 1 00:18:48 Read the amendments and whilst the standard JCT 24 is a fairly balanced subcontract, what you end up working under might not be. So as I always point out, at least do yourself the favour of reading what you're signing up to. Okay, well, that might not be everyone's favourite bedtime reading, but I hope that this bit of a breakdown today has been insightful for you and accessible. If you've taken some value away from today's episode, I'd love it if you'd share the show and pass that value on to somebody else who'd benefit from hearing it. And thanks again for tuning in. For more information, you can find us at www.QS.Zone or on all your favourite socials. Again @QS.Zone, thanks for tuning in. I've been Jacob Austin and you've been awesome.
