Whilst many projects are a single building constructed in one hit, there are times when a phased approach is essential. It may be a question of land availability, or building to suit an incoming tenant, or it may be that the facility needs to remain operational, but whatever the reason there are two contractual ways of doing it.
If the client knows beforehand exactly what each part will comprise, then sectional completion is the way forward. The contract will be drafted so that each section has a defined scope, its own date for possession, programme and completion, and liquidated damages for failure to deliver on time.
If it’s more of a moveable feast, then partial possession could be the answer. In that scenario the client and the contractor can agree during the construction phase that the client can take over and use parts of the works.
Partial possession is the more flexible option, in that the parties can react to situations easily. For example, if the client is building a speculative development, and a tenant or purchaser comes on board then the relevant part can be taken over by partial possession; similarly, if a processing facility is being extended and the contractor is running late then the client can take over part of the works to get it into production.
The problem with partial possession is that, not being planned, more work must go into unstitching the commercial position than it does with sectional completion. Prelims, retention, defects liability period and LADs all must be considered, and on a practical level access, safety and insurance will also need to be addressed. If the possession is reacting to the contractor’s delay, then the client’s need to take over part of a facility may mean that difficult or impractical arrangements have to be made to work.
Sectional completion, being agreed is advance, is much more organised. The parties can consider site layout, ordering of materials and labour, access, and funding arrangements. The downside is the lack of flexibility. Reacting to delays, or changes in the market is more difficult simply because the sections will each be at different stages, so it is more difficult to re-arrange resources.
All the standard and model forms of building and engineering contracts allow for some form of completion and possession in parts. Details of the terms vary: for example, in JCTs partial possession is subject to the approval of the contractor, whereas in the MF/1 and IChemE contracts the “he who pays the piper” approach prevails.
Commercial drivers will always take priority, so the parties need to make sure that their contractual arrangements will fit their needs. The best position is for the client to have the maximum amount of flexibility that doesn’t mean that the contractor will need to price for unexpected disruption or inefficient working.
If you have any questions, our Construction and Engineering team will be happy to help.