Question

Kmart is a medium scale local retailer of clothing in your country who is currently the Employer (Client) of an on-going construction of a medium scale retail store in a prominent location in the Capital of the country. Having finalised the design development stages of the project, the Employer was in a hurry to start work. Hence it was keen to issue a Letter of Intent to the successful Contractor to commence the work rather than entering into a Contract with the Contractor. However, later on the Employer decided to execute a Contract with the Contractor. Currently, the development is underway. The traditional procurement route is used to acquire the project. The project uses the “JCT Standard Building Contract with Quantities 2011” for contract administration purposes. The project includes construction of two interconnected buildings which is estimated at £7 million in total. Liquidated damages are set at £ 40,000 per day. Half way through the construction process of the plinth beams of the buildings, the Contractor realises some structural deficiencies in the beam sizes. The Contractor informed the Contract Administrator of this unexpected situation in writing and copied in the Clerk of Work. Having consulted the Contract Administrator, the Clerk of Work issued a Direction to break some of the plinth beams and replace them with new ones. The Contractor instructed its employees to proceed according to the Direction to break the beams and replace them. It now wishes to make an application for loss and expenses incurred in breaking and replacing the beams and request a time extension for the standing time on site when the problem was discovered. The Contractor, when pricing the Oak stair handrails in the contract, has made an error and included a rate which is far too low. When work is completed, due to variations issued by the Contract Administrator, the quantity of the Oak stair handrails substantially increased. The Contractor now wishes to make an application for loss and expenses incurred for the excess quantity. The Contractor also wishes to request a time extension for the additional work involved, but has not submitted a delay notice which the contract states must be sent as a condition precedent to an extension of time entitlement. So far the Contractor has made ten applications for interim payments, but the Employer has only approved and paid six of them on time. On the other four occasions, the Employer has failed to pay by the final date for the relevant interim payments as agreed in the Contract.

2. 2 Requirements of task

You are required to prepare a report to address the following pre and post contract administration issues of the above development:

a) If you were the Contract Administrator, prepare a report to advice the Employer on the possible problems associated with issue of a Letter of Intent rather than establishing a contract.

b) Critically evaluate the validity of Clerk of Work’s Direction to break the plinth beams and replace them with new ones and the Contractor’s response to the Direction.

c) Detail the legitimate applications for payment of loss and expenses (claims) that the Contractor can make with respect to the given scenario, the main facts that can be included in the application and the contractual provisions available to substantiate the application according to the JCT SBC/Q 2011. You also have to detail and discuss the instances where contractor wishes to submit applications for payment of loss and expenses, but still not legitimate according to JCT SBC/Q 2011, with appropriate justification with respect to the given scenario; and what other alternative contractual means available to cover the cost incurred (if cost is recoverable) in those instances.

d) Detail the legitimate time extension requests that the Contractor can make with respect to the given scenario, the information required to support these requests and the contractual provisions available to substantiate the requests according to JCT SBC/Q 2011. You also have to detail and discuss the instances where the Contractor wishes to submit time extension requests, but not legitimate according to JCT SBC/Q 2011, with appropriate justification with respect to the given scenario.

e) Discuss the contractual provisions in relation to the late interim payments by the Employer. You should support the answers with the relevant clauses in the JCT Standard Building Contract With Quantities 2011 Edition.

 

Summary

The question belongs to Architectural Engineering and it discusses about developing a construction contract report for a chain store that wants to build a store.

Total Word Count 1734

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