Making Good Defects Assessment

Section 1

Purpose

Note on JCT editions: JCT has published the 2024 Edition. This guidance cites JCT SBC/Q 2016 clause references; the commercial and payment mechanisms are substantively unchanged in the 2024 edition, but specific clause references should be verified against the contract edition in use on any given project.

Making Good Defects Assessment is the process of financially assessing the cost of defects — both for the purposes of evaluating whether the contractor's proposed remediation approach is reasonable, and for calculating the deduction from the Final Account where the contractor fails to rectify and the employer must engage others. The QS must be able to produce an independent cost assessment for defect remediation that is defensible, based on market rates or competitive quotations, and clearly documented.

RICS Defects and Rectification (2nd ed.) establishes that defect cost assessment must be objective: the QS cannot simply accept the contractor's proposed cost or inflate an assessment to apply commercial pressure. The assessment must reflect the reasonable cost of making good the defect to the standard required by the contract — no more, no less.

Making Good Defects Assessment is also relevant where the employer elects to accept a cash deduction in lieu of physical rectification (JCT SBC/Q 2016 Clause 2.39). In this case, the QS must assess the diminution in value or the reasonable cost of remediation as the basis for the deduction — whichever the contract and the parties agree.

Section 2

Key Principles

RICS Defects and Rectification (2nd ed.): the cost of making good should reflect the reasonable cost of remediation to contract standard; betterment (improvement above contract standard) is not recoverable from the contractor.
JCT SBC/Q 2016 Clause 2.39: the employer may instruct that defects are not made good, with a deduction from the contract sum; the deduction should represent the cost of making good or the diminution in value, whichever is applicable.
JCT SBC/Q 2016 Clause 2.38: where the CA instructs making good and the contractor fails to comply, the employer may have the work done by others and deduct the reasonable cost from the contractor.
Betterment principle: where remediation requires like-for-like replacement of a defective element, the cost is fully recoverable; where remediation results in an improved specification, only the cost of a like-for-like replacement is recoverable from the contractor.
Specialist investigation: where a defect is systemic or its extent is uncertain (e.g. water ingress from a defective flat roof), the QS should recommend specialist investigation before committing to a cost assessment — hidden extent can materially affect the cost.

Section 3

Practical Application

Step 1

For each defect requiring cost assessment, prepare a detailed scope of remediation works — describe exactly what needs to be done to restore the element to contract standard.

Step 2

Obtain competitive quotations from at least two specialist contractors for the remediation works; alternatively, use market rates from BCIS or the RICS Schedule of Rates for standard remediation items.

Step 3

Check each quotation against the scope — ensure it covers all required remediation works; reject quotations that are either incomplete or that specify improvements above contract standard.

Step 4

Prepare the cost assessment document: defect description; location; scope of remediation; basis of assessment (quotation/market rates); assessed cost; basis and date of assessment. This document is the formal deduction notice.

Step 5

Where specialist investigation is required before the full cost can be assessed, prepare an opening-up cost estimate first; once investigation is complete, revise the cost assessment based on actual scope.

Step 6

Issue the cost assessment to the contractor with a covering letter confirming: the defect has not been rectified within the time allowed; the employer is exercising the right to employ others; the cost assessment will be deducted from the Final Account.

Step 7

Record all cost assessments in the defects financial register and cross-reference to the Final Account close-out so that all deductions are reflected in the Final Valuation.

Section 4

Common Mistakes to Avoid

Accepting the employer's own quotation without any competitive process — a single inflated quotation for remediation work that is then deducted from the contractor without justification is a professional failure that the contractor can challenge.
Claiming betterment as a deduction — if the employer replaces a defective element with a higher specification, only the like-for-like replacement cost is recoverable from the contractor.
Failing to document the basis of the cost assessment — without contemporaneous documentation, cost assessments are very difficult to defend in adjudication or litigation.
Deducting estimated costs before the remediation works are actually completed — the deduction should reflect actual costs (evidenced by invoices) unless the parties agree an estimated deduction in advance.
Not seeking specialist investigation for systemic defects — underestimating the extent of a systemic defect (e.g. flat roof failure across multiple bays) leads to inadequate deductions and ongoing building performance problems.

Section 5

APC Competency & Quick Reference

Contract Practice Level 3 — defect cost assessment, deduction from Final Account, betterment principle
Quantity Surveying & Construction Level 3 — cost assessment methodology, competitive quotations, market rates

What is the betterment principle and how does it affect defect cost recovery?

Betterment arises when remediation of a defect results in an improvement above the original contract standard. The contractor is liable only for the cost of restoring the works to contract standard — not for the additional cost of betterment. For example, if a defective roof covering must be replaced and the employer selects a higher-specification replacement, only the cost of a like-for-like replacement is recoverable from the contractor.

What documentation should the QS prepare to support a defect cost deduction?

A formal cost assessment document: defect description and location; scope of remediation works to contract standard; competitive quotations or market rate basis; assessed cost; date of assessment; confirmation that the contractor was given the opportunity to rectify and failed to do so. Supporting evidence should include the defect notification, the contractor's non-response, the CA's instruction to employ others, and the contractors' invoices for the actual remediation cost.

What should the QS recommend when the extent of a defect is uncertain?

Recommend specialist investigation before committing to a cost assessment. Open-up works should be costed separately; once the full extent of the defect is known, a revised cost assessment is prepared. The QS should advise the client that committing to a cost-capped remediation contract before the extent is known creates financial risk. Record the recommendation in writing.

Section 6

Defects Liability & Post-Occupancy Checklist

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Task

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Scope of remediation prepared for each defect requiring cost assessment

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Competitive quotations obtained (minimum 2) or market rates used

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Betterment principle applied — only like-for-like recovery claimed

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Cost assessment document prepared with full basis and evidence

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Specialist investigation recommended where defect extent is uncertain

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Formal deduction notice issued to contractor with cost assessment

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Defects financial register updated and cross-referenced to Final Account

Section 7

CPD Learning Outcomes

Prepare defensible defect cost assessments based on competitive quotations or market rates, applying the betterment principle to ensure only the cost of restoring works to contract standard is claimed.
Issue formal cost deduction notices to contractors with full documentary support, ensuring the basis of assessment is sufficiently documented to withstand challenge in adjudication or litigation.
Advise clients on the risk of committing to remediation costs before the extent of systemic defects is fully investigated, recommending specialist investigation where appropriate.

Section 8