Guidance

Annex B: Works Contract requirements

Updated 2 April 2024

Applies to England

Requirement	Notes
A Principal Designer for the purposes of the Construction Design and Management Regulations 2015 (CDM Regs) must be named in the works contract and must meet the level of competence required by the regulations.	Evidence will need to be available on request that the Principal Designer meets the required competency standards.
A Contract Administrator (CA), Employer’s Agent (EA) or Architect must be named in the works contract and be responsible for administering the contract for the duration for the works.  The CA, EA or Architect must be a member of a chartered professional body (i.e. RICS, RIBA, CIOB etc.) and have appropriate experience for the scale of the proposed works.	Evidence will need to be available on request provided that the CA, EA or Architect meets the required competency standards.
The main contractor named within the works contract must be appointed as the Principal Contractor under the Construction Design and Management Regulations 2015 (CDM Regs). The Principal Contractor must meet the level of competence required by the regulations.	Evidence will need to be available on request that the Principal Contractor meets the required competency standards.
For works contract values over £1,000,000 a Quantity Surveyor or Cost Consultant must be named within the contract and be responsible for contract valuations and cost monitoring. The Quantity Surveyor or Cost Consultant must be a member of a relevant chartered professional body (I.e. RICS).	Evidence will need to be available on request that the Quantity Surveyor or Cost Consultant meets the required competency standards.
A defects rectification period of a minimum of 12 months must be included in the contract and a minimum of 2.5% of the overall works contract value must be held as retention for this period.	Evidence will need to be available on request that the works contract includes these terms.
A provision must be included in the works contract for a minimum of 5% of the overall works contract value to be held as retention from commencement to Practical Completion of the works.	Evidence will need to be available on request that the works contract includes these terms.
Adequate professional indemnity insurance must be stipulated in the works contract where the contractor has a responsibility for any design work. Cover must cover the nature of the remedial actions and must not exclude cladding.	Evidence of the level of insurance will need to be provided and must reflect the scale of the works.
There must be an arbitration and / or adjudication procedure for dispute resolution included within the contract.	Evidence will need to be available on request that the works contract includes these terms.
The works contract must be executed as a deed.	Evidence will need to be available on request that the construction contract has been executed in this way which provides the maximum latent defects liability period.
Applicants should take care to ensure that any Works Contract (as defined by the GFA and being a contract for the supply of either construction services or professional services) does not contain provisions that compromise the position of an Applicant by being inequitably in favour of the other party or parties to it.	Evidence will need to be available on request that the works contract includes these terms.
The Applicant should seek a clear written assurance from the service provider and satisfy themselves in this regard that the service provider is of sound financial standing, has sufficient capacity and technical ability within their business to conduct the works required under the Works Contract, and that there is no business risk that will or is likely to impact the works to be carried out under the Works Contract.	Evidence will need to be available on request that the works contract includes these terms.
The works contract (whether a contract for the supply of constructions services or professional services) must not contain provisions requiring the Applicant to make any advance payments of funds and work must be paid for in arrears at milestone points.	If such provisions are needed in order to make the works contract work, such monies should be provided on a conditional basis with a requirement for them to be paid back to the Applicant within a certain period of time if the works in which they were intended for are not carried out to a satisfactory standard by the relevant party (for example, the Principle Contractor). Evidence will need to be available on request that the works contract includes these terms.