A REPORT ON THE SIMILARITIES AND DIFFERENCES BETWEEN THE STANDARD FORMS OF BUILDING CONTRACTS IN HONG KONG
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A REPORT ON THE SIMILARITIES AND DIFFERENCES BETWEEN THE STANDARD FORMS OF BUILDING CONTRACTS IN HONG KONG
Williams, as a construction company, has been consistently involved in the development of local residential projects in the Hong Kong private sector for many years now. The company has complied with the Agreement and Schedule of Conditions of Building Contract for Use in Hong Kong 1986 Edition established by RICS-HK Branch during these fruitful years. Recently however, the Hong Kong Housing Authority recognized Williams’ active business operations and provided the company a place in the Authority’s list of Building Contractors. This accession makes the company eligible to submit building tender using the Government of Hong Kong General Conditions of Contract for Building Works 1993 Edition. The shift in the choice of building contract merits a study and analysis of the two forms of contracts so as to ensure that the company is making the right decision.
This report is an attempt to analyze some of the similarities and differences between the Agreement and Schedule of Conditions of Building Contract for Use in Hong Kong 1986 Edition and the Government of Hong Kong General Conditions of Contract for Building Works 1993 Edition.
THE AGREEMENT AND SCHEDULE OF CONDITIONS OF BUILDING CONTRACT FOR USE IN HONG KONG 1986 EDITION BY RICS AND THE GOVERNMENT OF HONG KONG GENERAL CONDITIONS OF CONTRACT FOR BUILDING WORKS: A COMPARISON
The Agreement and Schedule of Conditions of Building Contract 1986 Edition and General Conditions of Contract for Building Works 1993 Edition both begin with the statement of obligations of the major players in construction projects – Architect, Architect’s Representative, Surveyor, Surveyor’s Representative, and Main Contractor. The 1993 Edition separately discusses the responsibilities of the architect, architect’s representative, surveyor, and surveyor’s representative while the 1986 Edition enumerates the obligations only of the main contractor and the architect. Both forms of contract stipulate that the contractor and the architect have a collaborative relationship in any construction undertaking wherein the Architect is obliged to perform his duties specified in the Contract and the Main Contractor is required to carry out the Architect’s instructions promptly and effectively. Both also narrate that any changes such as delegation of some of the Architect’s tasks to a representative or issues in instructions and tasks to be performed such as failure of the Main Contractor to comply with Architect’s instructions shall be communicated and formalized in writing.
The two forms of contract both provide related discussions on the following areas: Assignment and Sub-letting; Contract Documents; Variations, Prime Cost, Provisional and Contingency Sum; Safety and Security of the Construction Site; and Completion of the Works. The Assignment and Sub-Letting section in the two contracts stipulates the innate responsibility of the Employer and Main Contractor to ensure that the Contract’s requirements are assigned and carried out upon a written consent of either party. Both forms of contracts emphasize the expectation given to the Main Contractor not to assign or sub-let any part of the Contract to a sub-contractor unless the action is approved in writing by the Architect and only on a piece-work basis. Both contracts also clearly express that the Main Contractor who decides to sub-let a part of the works would shoulder the liability relative to the acts, neglects, or faults committed by any sub-contractor or his workers. Secondly, the two forms of contracts discuss the Contract Documents involved in construction undertakings. This section states that the Contract Drawings, Bills of Quantities and any other documents necessary for the construction works to be facilitated shall be held in strict custody so as to ensure that it can be accessed on the site for review or inspection. However, the two contracts differ in the statement as who is the custodian of the documents. The 1993 Edition states that the contractor should keep one copy of the Contract Drawings on the site for inspection and use of the Architect, Architect’s Representative, Surveyor, Surveyor’s Representative or any other person authorized by the Architect in writing. The 1986 Edition, on the other hand, stipulates that the Architect and the Quantity Surveyor are the appropriate custodians of both the Contract Drawings and the Bills of Quantities and are tasked with the obligation to make these documents accessible at all times for the review of the Employer or the Main Contractor. There is also a difference in the number of copies and the kinds of documents that should be furnished. Both contracts instruct that the copies should be furnished free of charge to other entities but the 1993 Edition states that four copies of the Contract Drawings and two copies of the Bills of Quantities should be provided by the Architect to the Contractor while the 1986 Edition declares that the Architect has to provide the Contractor one copy of the Articles of Agreement, two copies of the Contract Drawings and two copies of the unpriced Bills of Quantities. The 1986 Edition regards the Articles of Agreement as an important contract document while the 1993 Edition only focuses on the Contract Drawings and the Bills of Quantities. Furthermore, the 1993 Edition has a section under the Contract Documents clause discussing the possibility of discrepancies between the Contract Drawings and the Bills of Quantities which is not found in the 1986 Edition. Discrepancies can take the form of errors in the firm or work quantities demonstrated in the Contract Drawings but are not correspondingly measured in the Bills of Quantities. The issue of discrepancy is in accordance with clause 59 of the 1993 Contract Edition which states that contracts that include Bills of Quantities should show the quality and quantity of work in the Contract Sum to be consistent with what is enumerated in the Bills of Quantities unless there is a statement that a discrepancy exists. The section on discrepancies states that the Main Contractor can submit a request for clarification of the discrepancies to the Architect and the latter has to issue written instructions to the Main Contractor explaining the discrepancies within 14 days upon receipt of the said request. The Contract Documents clause of the 1993 Edition also sets out parameters by which the Surveyor can address expenses incurred in the new instructions correcting the discrepancies. If the Surveyor sees that implementation of any piece of work expressed in the new instructions of the Architect can incur expenses for the Main Contractor, he shall be obliged to determine the amount to be added to the Contract Sum based on the corresponding rate of the piece of work stated in the Contract as well as certify the cost incurred within 21 days. The Surveyor can also determine if any additional piece of work based on the new instructions can provide the Main Contractor any amount of saving and shall value the amount of saving and deduct it from the total rate shown in the Contract Sum.
The two forms of contracts include a parallel discussion regarding Variations, Prime Cost, Provisional Sum and Contingency Sum. The 1993 Edition includes these subjects in the Measurement, Variations, Valuations and Claims clause and the Prime Cost, Provisional and Contingency Sum while the 1986 Edition incorporates them in the Variations, Provisional and Prime Cost Sums. The three clauses all recognize the possibility that the people responsible for the construction would feel the need to modify certain aspects of the work such as the design, quantity or quality of work while in the course of implementing the specifications of the Contract. These modifications are termed “variations” and may include additions, eliminations, replacements, alterations, changes in quality, form, character, kind, position, dimension, level or line; changes in the process, procedures or timing of construction; and changes to the Site of the construction of the entrance to and exit from the Site as stated in clause 60 of the 1993 Edition. The 1986 Edition adds the alteration or removal of any materials or goods used for the construction work to be another form of variation. Both forms of contracts agree on the roles of the Architect and Surveyor in case of variations. Both contracts state that the Architect has the sole authority to approve and order any kind of variation that is deemed necessary for the completion of the work and issue instructions accordingly. Both contracts also stipulate that the Surveyor is the person responsible for determining the value of all variation works based on the rate of each item of work previously set forth in the Contract. However, the 1986 Edition has an additional provision that all kinds of work performed by the Main Contractor that involve provisional sum shall also be measured with the cost of the variation work. Furthermore, both contracts include a statement of the policy of transparency as the surveyor is obliged to conduct the valuation and measurement of all variation work and work performed by the Contractor with provisional sum in the presence of the Main Contractor or his representative. The Main Contractor is allowed to observe in the valuation activity and take down notes. If the Main Contractor or his representative fails to attend in the scheduled date of valuation, the measurement decided and approved by the Surveyor would stand. The 1993 Edition has a more detailed explanation on variations by including the activities involved after the Architect orders the variations and the Surveyor measures the costs involved. First, the 1993 Edition states that the Architect should issue a written order for the implementation of work resulting from variations on a daywork basis. Secondly, the Contractor has the responsibility to provide quotations of materials to be used in the variation work as well as receipts or vouchers to prove the payment made for the materials. Lastly, the Contractor’s responsibilities during variation work would include monthly reporting of the statement of labor with corresponding prices, list of materials, and Constructional Plan used on a daywork basis.
Furthermore, one important aspect of any construction project is the safety, security and stability of the entire construction process. The two contracts include this topic in the General Obligations clause of the 1993 Edition and Clauses 18 to 20 of the 1986 Edition. Both contracts state that the Main Contractor possesses the primary obligation to secure the stability and safety of all constructions operations, and the indemnity to the Employer against any damage, injury or loss on the Site. The 1993 Edition requires the Contractor to establish and maintain lights, guards, fences, and warming signs, and assign watchmen in appropriate areas of the Site for the safety of everyone. Similarly, the 1986 Edition declares the responsibility of the Contractor to maintain necessary insurances that would respond to liabilities in case of injury or death to persons, damage to property, and collaborate with the Employer for insurances relative to fires, lightning, explosion, typhoon and so forth while the construction process is going on. This contract also obliges the Main Contractor to encourage his sub-contractors to secure a documentary copy of the insurances for inspection of the Architect. However, unlike the 1986 Edition which has more focus on the safety of the construction site, the 1993 Edition also guarantees safety of the public by stating that all construction operations shall be facilitated without interfering with the convenience of the public or access to public or private roads, foot paths or properties.
The completion of the work still merits some obligations in the two contracts. Both contracts agree that the Contractor should complete the work on or before the date of completion set forth in the Contract. However, certain incidents like unfavorable weather conditions, variations, significant increase in the quantity of work, and other kinds of disturbances warrant the delay of the completion. In this case both the contracts state the vital roles of the Architect and Main Contractor. Both contracts state that the Contractor shall notify the Architect in writing relative to the cause, extent and effect of delay. The 1993 Edition states that if the Architect grants extension of time, the Contractor should take the essential steps to expedite the work so as to limit additional expenses and even injuries. The 1986 Edition articulates that the fundamental norm in any construction project is for the Main Contractor to render his best performance so as to satisfy the Architect’s requirements and meet the contract deadline.