The Week That Was – 10 May 2024
Welcome to the week that was, a round-up of key events in the construction sector over the last seven days.
Pain/gain clauses to be a major feature of the JCT's new target costs contract
The drafting subcommittee of the Joint Contracts Tribunal (JCT) has revealed that the Target Cost Contract (TCC 2024) will include so-called "pain/gain" clauses. Such clauses are intended to spread risk between clients, contractors and the supply chain. According to the subcommittee, under the TCC, the contractor would complete the design as well as the works. Unlike the JCT Design and Building Contract form of contract, the TCC is not a lump sum fixed price contract, instead, the contractor would be paid the "allowable" costs and a contract fee. The contract fee may be a fixed sum or a percentage of the allowable costs, as determined during negotiations. In addition a "difference share" may be payable under the contract and this is the pain/gain element of the contract. The difference is determined by deducting from the target cost, the allowable cost plus the contract fee. The difference is then distributed in the proportions set out in the contract particulars. The TCC 2024 is due to be released later this year.
More on the changes can be found here.
Judge unconvinced by adjudication enforcement applications
In Morganstone Ltd v Birkemp Ltd [2024] EWHC 933 (TCC), HHJ Keyser KC declined two applications to enforce an adjudicator's decision in Birkemp's favour regarding deductions in a pay less notice. The case reminds us that the notice of adjudication defines the scope of the dispute and that, while an adjudicator may get an answer wrong, they must not take an erroneously restrictive view of their jurisdiction. HHJ Keyser KC found that the adjudicator had deliberately failed to address the cross-claims which Morganstone had raised in its defence, which was a result of Birkemp's deliberate attempt to limit the scope of the adjudication contrary to the principle that the notice of adjudication defines the scope. As a result, the decision was a breach of natural justice. On Morganstone's Part 8 application for declaratory relief, the Judge found that Birkemp had a contractual right to apply for payment under the contract as the parties had not agreed an alternative payment schedule.
The full judgment can be found here.
National Grid Launches the Great Grid Partnership
In what National Grid is referring to as a 'pioneering enterprise model', seven industry partners have been appointed to deliver 'The Great Grid Upgrade'. Partners appointed on this scheme include two design and consenting service partners (AECOM & Arup (JV); WSP), and five construction partners (Laing O’Rourke; Morgan Sindall Infrastructure; Morrison Energy Services; Murphy; Omexom / Taylor Woodrow (OTW)). The Partnership will initially focus on the network design and construction work required by the end of the decade for nine major infrastructure projects across England and Wales, and forms part of a £9bn supply chain framework which will also support infrastructure projects beyond 2030. The aim is for this partnership model to address the supply chain and skills shortages that the UK has experienced, and foster collaboration across best practice and skills.
You can read more here.
UK construction activity grows at fastest pace for more than a year
Activity in the UK construction market beat expectations in April, growing at its fastest pace for more than a year. The S&P Global UK Construction Purchasing Managers’ Index rose to 53 points in April, up from 50.2 in March and the highest reading since February 2023. Tim Moore, economics director at S&P Global Market Intelligence, credits the higher demand in the construction sector to “greater confidence regarding the broader UK economic outlook” and hopes of interest rate cuts in the second half of the year. Commercial activity outperformed other areas of the construction sector in April, with civil engineering providing a solid contribution to overall growth. Despite this overall increase, the residential building sector continued to slow. Separate data published by Halifax has shown that house prices stagnated in April after contracting in March, reflecting volatility in the mortgage market.
You can read more here.
Work to begin in September on Lord's Cricket Ground revamp
Construction will get underway at the end of this year's cricket season to revamp the Tavern and Allen Stands at Lord's, with completion expected in May 2027. The MCC has awarded the £60 million main contractor contract to Graham, working alongside Gardiner & Theobald, Wilkinson Eyre Architects, and Arcadis. The project will include increasing capacity by 1,100 seats to give a total ground capacity of 32,200, improving the viewing experience for spectators and adding a new hospitality restaurant and suites. In good news for spectators, the stand will continue to be fully operational during the construction process such that the 2025 and 2026 seasons will not be majorly disrupted by the improvement works. The works have been long overdue, given that the Allen Stand was constructed in 1935, which will be demolished and rebuilt, and the Tavern Stand was rebuilt in the 1960s.
More about the project can be found here.
More delays and woes for beleaguered Co-op Live arena
We reported last week on the delayed opening of the Co-op Live arena in Manchester, with artists moving concerts to the rival AO Arena and others being postponed or cancelled outright. The £365 million project continues to suffer further delays, with 14 May now targeted for a delayed opening concert by Elbow. In scenes reminiscent of the delayed opening of the redeveloped Wembley Stadium almost 20 years ago, the site has been flooded with over 800 personnel who are working 24 hours a day to get the venue ready for opening. It is thought that the latest issue is linked to the venue's HVAC system following issues with ductwork that caused delays in April, according to statements from the main contractor, Bam.
More details about the continued delays can be found here.
Disclaimer: The information in this publication is for guidance purposes only and does not constitute legal advice. We attempt to ensure that the content is current as at the date of publication, but we do not guarantee that it remains up to date. You should seek legal or other professional advice before acting or relying on any of the content.
Authors for this week's edition: Kelly Smith, Jess Yates and Tom Butterfield