JCT 2024: Understanding the JCT D&B 2024 Fluctuation Provisions
The JCT 2024 suite of contracts has introduced several updates to reflect the evolution of the construction industry.
One specific area of change has been to the fluctuation provisions, which are designed to address economic volatility and price uncertainty in construction projects. These provisions have become more prominent with the current shortage of materials and high inflation in the construction market. Where before these provisions would often be ignored (so much so that the JCT D&B 2016 edition removed two of the three options from the standard form (although still available online)), they are now becoming increasingly important.
The Fluctuation Options
There are three options to incorporate fluctuation provisions in the JCT D&B 2024. Each of these options are applicable to specific project requirements and a link to download the options can be found here (Fluctuations Options A, B & C):
- Option A: Contribution, levy and tax fluctuations. For projects with minimal exposure to cost volatility, this option provides for adjustments to the contract sum for changes in contributions, levies, and taxes. Whilst it does not assist with material cost increases, it does offer a mechanism for managing risks of tariff increases such as those that may be imposed because of Brexit.
- Option B: Labour, material costs and tax fluctuations. This option allows the contract sum to be adjusted for changes in material and labour costs, goods, fuel and electricity and tax fluctuations. If there is a shift in the market price in these materials (increase or decrease) from the market price of the materials at the contract’s base date, the net amount of the shift can be assessed and included in the valuation of the contractor’s application for payment. This option is used where the parties have agreed to allow these costs.
- Option C: Formula adjustment. This option can be used when the parties have agreed, in principle, that costs should be allowed. It provides a formula-based mechanism to calculate the adjustments to the contract sum. It incorporates a wide range of cost indices and is a complex option. It is recommended that the formula rules be carefully reviewed and understood by both parties.
The Fluctuations Hub
To increase its prominence and flexibility, the JCT has moved the fluctuation provisions online, where they can be downloaded from the JCT website for free (see link above). This is a move away from having a printed set of options. Additionally, to ensure they are applied appropriately, a Fluctuations Hub has been created (Fluctuations and JCT Contracts – The Joint Contracts Tribunal), which offers comprehensive guidance via an online resource on how to use the fluctuations provisions correctly. This is all in an effort to increase the understanding and accessibility of these projects for high value projects.
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