1 About IC16

1.1 The Intermediate Form of Building Contract is published in two versions. The first, referred to in this guide as IC16, is the equivalent of the original Intermediate Form of Contract, first published in 1984, and the second (ICD16) is a variant that incorporates provisions for contractor’s design of part or parts of the works. Except for the design provisions, both versions are identical, therefore although this guide generally refers to IC16, the points made will be applicable to both versions. The form is based on the same key rights and obligations that existed in IC11 (for the key differences see Table 1.3) and will therefore be familiar to users of that contract. IC16 and ICD16 are for use by both private clients and local authorities.

1.2 The Joint Contracts Tribunal (JCT) publishes several ancillary documents for use with IC16. These include a sub-contract agreement and conditions for use where a domestic subcontractor is to carry out design (ICSub/D/A and ICSub/D/C) and one for use where it is not (ICSub/A and ICSub/C). A complete suite of forms is also published for use with named sub-contractors. This suite comprises a form of tender and agreement (ICSub/ NAM) with three sections (an invitation to tender ICSub/NAM/IT, a tender form ICSub/ NAM/T and an agreement ICSub/NAM/A), sub-contract conditions (ICSub/NAM/C) and a warranty for use between the employer and the named sub-contractor (ICSub/NAM/E). There is also an Intermediate Building Contract Guide (IC/G) and a Guide relating to the sub-contracts (ICSub/G). The JCT publishes collateral warranties to a funder (CWa/F) and purchaser or tenant (CWa/P&T) which may be used with IC16, as can the sub-contract collateral warranties to the same (SCWa/F and SCWa/P&T) and the sub-contractor warranty to the employer (SCWa/E). The JCT Adjudication Agreements, to be used when appointing an adjudicator, are also published separately.

Key features

1.3 IC16 is intended for use in a traditional procurement route context, where the contractor is required to carry out the work described briefly in the first recital and shown in the contract documents for the contract sum entered in Article 2, and to complete the work by the date or dates entered in the contract particulars. The contract makes reference throughout to an ‘Architect/Contract Administrator’ who is named in Article 3, and given various powers and duties under the contract, including the obligation to supply the contractor with all information reasonably necessary for carrying out the works (for simplicity, this Guide refers only to ‘contract administrator’ throughout). The contract contains provisions for varying the work, and for adjusting the contract sum and the date for completion on the occurrence of certain events.

1.4 The quality and quantity of work to be carried out is that shown in the contract documents, therefore it is extremely important that the description of the works is accurate and comprehensive. The contract allows for a variety of combinations of contract documents, which may include drawings, a bill of quantities, specifications, schedules of work and schedules of rates. At tender stage the contractor prices either a bill of quantities, or specification, or schedule of works, or submits a contract sum analysis or schedule of rates as required.

1.5 ICD16 is also essentially a form for traditional procurement. However, it makes provision for the contractor to be required to design an identified part or parts of the works. If this version is selected, in addition to the documents mentioned above, the contractor will have been sent the employer’s requirements for the project at the time of tender, and will have submitted its proposals for the design at tender stage. The employer’s requirements and the contractor’s proposals will form part of the contract documents. The contractor is also required to submit information regarding the developing design during the course of the project. ICD16, however, is not a design and build contract, and assumes that the majority of the project will be designed by the employer’s consultants.

1.6 IC16 and ICD16 are both lump sum contracts, which means the works shown in the contract documents must be carried out for the contract sum ‘or such other sum as becomes payable’ under the contract (Article 2). Payment to the contractor is made at monthly intervals following the issue of contract administrator’s certificates. In general terms, the certificates will reflect the amount of work that has been properly completed up to the point of valuation in accordance with the terms of the contract. All the requirements of the Housing Grants, Construction and Regeneration Act (HGCRA) 1996 Part II (as amended) regarding payment and notices are incorporated into IC16, and the provisions regarding contractor’s price statements, contractor’s applications for payment, listed items, activity schedules and advance payments, which were first introduced into JCT98 alongside the 1996 Act’s requirements, are also stepped down into IC16.

1.7 As with other JCT traditional forms, the contractor may sub-contract the work to domestic sub-contractors with the written approval of the contract administrator. The key distinguishing feature of IC16, however, is the provisions allowing for the naming of subcontractors, using the Intermediate Named Sub-Contract Tender & Agreement ICSub/ NAM (note this does not apply to the execution of part of the works by a statutory undertaker acting in that capacity (Schedule 2:12)).

1.8 Under these provisions the contractor can be required to sub-contract to a specific contractor or supplier, who may be named either in the tender documents or, after the contract is let, in an instruction for the expenditure of a provisional sum. This allows the employer a great deal of flexibility and a high degree of control over who carries out the work and the terms on which it is done. The employer, however, takes some risk where, for example, the contractor may have the right to an extension of time for delays resulting from instructions relating to named sub-contractors (see Table 1.1).

1.9 An additional flexibility is that the named sub-contractor provisions also allow for the subcontractor to carry out design. If this is required it is essential that a direct warranty is arranged between the employer and the sub-contractor, as IC16 excludes any liability of the contractor for the design by named sub-contractors.

1.10 The named sub-contractor provisions are also included in ICD16 but, as indicated by a footnote in the contract, if the named sub-contractor has design responsibilities, the naming procedure should only be used for discrete parts of the works where the named sub-contractor is solely responsible for design. The naming provisions should not be used for any element of the works within the part or parts for which the contractor has design responsibility. Essentially, a named sub-contractor should not be required to carry out work within the contractor’s designed portion (CDP). This is because of the conflict that will arise regarding design liability, as the main contractor would be simultaneously liable for such work under the designed portion provisions, but exempt from liability under the named sub-contract provisions.

Table 1.1 Distribution of risk associated with named sub-contractors

1.11 In theory, a named sub-contractor could be required to carry out work which forms part of the contractor’s designed portion in cases where the named sub-contractor is not to take on any design liability, but is merely to construct work designed by the contractor. In practice, though, the boundaries may not be that clear, and it may be best to avoid naming sub-contractors for any part of the designed portion work.

Deciding on IC16

1.12 The introduction to the Intermediate Building Contract Guide (IC/G) (and the inside front cover of the form) state that IC16 is primarily intended for use:

• ‘where the proposed building works are of simple content involving the normal, recognised basic trades and skills of the industry, without building service installations of a complex nature or other complex specialist work;
• where the works are designed by or on behalf of the Employer, fairly detailed contract provisions are necessary and the Employer is to provide the Contractor with drawings and bills of quantities, a specification or work schedules to define adequately the quantity and quality of the work; and
• where an Architect/Contract Administrator and Quantity Surveyor are to administer the conditions.’

1.13 In practice, IC16 is suitable for a very wide range of project types and sizes. The JCT no longer suggests financial limits on where it might be appropriate to use the form, and it would be suitable for a wide range of contract values. There are, however, some situations where the form would not be suitable. Care should be taken where the client is a consumer, particularly where carrying out work to a dwelling which the client intends to occupy. The HGCRA 1996 Part II does not apply in this situation, and some of the 1998 revisions may be considered unfair under the Consumer Rights Act 2015 if not individually negotiated with the client prior to entering into the contract (Domsalla v Dyason). The contract may also be unsuitable where the quantity or type of work is largely unknown, or where the work is extremely complex.

1.14 Where the contractor is to design discrete part(s) of the works, even though all the other criteria are met, the parties should use the Intermediate Building Contract with Contractor’s Design (ICD16). The Guide makes it clear that this form is not, however, to be used for a ‘design and build’ procurement route, where a form such as the JCT DB16 would be more suitable.

1.15 The provisions for naming of sub-contractors may be particularly useful where design is required by known specialist firms. This is a common requirement in practice with specialist design items such as mechanical services or prefabricated elements. Under this arrangement it is possible for the employer to enter into a warranty with the specialist (ICSub/NAM/E) at an early stage, so that the design can be integrated into the project as a whole, with the safeguard for the specialist that, if it is not awarded the sub-contract, it will be paid for any design work carried out. Even where design is not an issue, there may be circumstances in which the employer wishes part of the work to be carried out by a particular firm.

1.16 There are, however, some risks to the employer in naming sub-contractors, although these are not so extensive as had been the case with the nominated sub-contractor provisions in JCT98. Generally, the contractor takes full responsibility for the performance of named sub-contractors, including for their progress on site, except that delays in the naming process, such as in issuing instructions naming the sub-contractor, would be the employer’s risk, as would delays resulting from a termination of the sub-contract due to the sub-contractor’s default. The main contractor is also entirely responsible for payment – there is no requirement to specify amounts due to named sub-contractors in certificates, nor any obligation on the employer to make direct payments to the sub-contractor should the contractor fail to do so. In addition, the procedures associated with naming the subcontractor are slightly simpler than those for nomination, although they are still by no means straightforward. On balance, the naming provisions have proved popular with construction professionals, and are often one of the main reasons for selecting this form.

1.17 The form is laid out in a ‘section headed’ format, which by and large groups the clauses in a logical fashion. The 2005 version had streamlined much of the drafting and removed some of the overly complex passages that were problematic in the 1998 version and had seemed out of proportion to the form as a whole. Overall, it is a simpler document than SBC16 for relatively straightforward projects of the scale envisaged, and avoids many of the gaps and pitfalls of MW16 (see Table 1.2). It is therefore a popular choice for medium to large-scale projects.

Table 1.2 Comparison of JCT contract provisions

Changes in the 2016 edition

1.18 Prior to the 2016 edition, the JCT had published one adjustment to IC11, Amendment 1 (March 2015), relating to the CDM Regulations 2015. The JCT had also published a Public Sector Supplement in 2011, for use by local or public authorities. These changes are now all incorporated in the 2016 edition.

1.19 The key 2016 changes are set out in Table 1.3 and can be summarised as follows:

• incorporation and updating of provisions from the JCT Public Sector Supplement;
• changes relating to Fair Payment principles, transparency and BIM;
• amendments relating to the CDM Regulations 2015;
• reference made to various provisions of the Public Contracts Regulations 2015;
• changes in respect of payment, designed to reflect Fair Payment principles and to simplify and consolidate the payment provisions;
• payment is monthly, including during the rectification period;
• addition of a procedure for submission of contractor design documents (Schedule 6, ICD only);
• tightening up of the arrangements to secure provision of third party rights/warranties from sub-contractors;
• simplification and rationalisation of drafting in many areas; for example, calculation of amounts due and provisions for rectification following damage covered by insurance.

Table 1.3 Key changes