5626 BESG Construction Contracts Faculty of Engineering and Technology Department of Built Environment 5626 BESG Construction Contracts

Lecture NEC – An introduction

In this session… NEC Contract Main features of NEC Contract Why is it popular?

Learning outcomes At the end of this session you should be able to: Understand the Basic Features of NEC contract

1. NEC Flexibility - primary options give choice of pricing mechanism (lump sum to cost plus) - secondary options allow specific employer policies to be addressed Clarity - conditions expressed more simply and clearly; non-legalistic language Good Management - emphasis on communications, co-operation and programming – from outset.

Different types Engineering and Construction Contract (ECC) Engineering and Construction Subcontract (ECS) Engineering and Construction Short Contract (ECSC) Engineering and Construction Short Sub-contract (ECSS) Professional Services Contract (PSC) • Adjudicator’s Contract (AC) Term Service Contract (TSC) Framework Contract (FC)

Engineering and Construction Contract (ECC) Suitable for any construction based contract between an Employer and a Contractor. It is intended to be suitable for any sector of the industry, including civil, building, nuclear, oil & gas, etc.

Engineering and Construction Subcontract Contract (ECS) Very similar in detail and complexity of contractual requirements to the ECC contract above, but allows the contractor to sub-let the project to a subcontractor imposing most of the clauses that he has within his headline contract. There is very little difference between the ECC and the ECS, other than the names of the parties are changed (contractor and subcontractor) and some of the timescales for contractual responses are altered to take into account the timescales required in the ECC contract.

Engineering and Construction Short Contract (ECSC) This is an abbreviated version of the ECC contract and most suitable when there is considered “low risk” (not necessarily low value) on a project with little change expected. This contract is still between the employer and contractor but does not use all of the processes of the ECC making it simpler and easier to manage and administer.

Engineering and Construction Short Subcontract (ECSS) Allows the contractor to sub-let a contract down the line to a subcontractor on a low risk project when his contract with the employer is an ECSC.

Professional Services Contract (PSC) This contract is for anyone providing a service, rather than doing any physical construction works. Designers are the most obvious party that fit into this category. Whilst they are producing a design for an employer or contractor, they would sign up and follow the clauses within the PSC. Most of the clauses within this contract are the same as that in the main ECC contract, so that all contractors, designers and subcontractors have pretty much the same obligations and processes to follow as each other.

Adjudicator’s Contract (AC) If there is a dispute between the parties on a project then the Adjudicator will follow the clauses within this contract in order to come to a decision.

Term Service Contract (TSC) For parties on a project that is operational or maintenance based, e.g. maintaining highway signage, where the contract is to ensure that a certain standard is maintained. This contract is not generally used for constructing new works, but can include some amount of betterment. There is also a “Term Service Short Contract” where the project is a relatively low risk project and is an abbreviated version of the main TSC.

Framework Contract (FC) Parties enter into a “framework” of which work packages will then be let during the life of that framework. Any individual projects will then be awarded using one of the other contracts within the suite, meaning that the parties follow the headline clauses within the framework contract (which is a fairly slim contract) and then the individual clauses within the chosen contract for that package. Different work packages can be let using different contracts during the life of the framework.

Main Options A – Lump Sum with Activity Schedule B – Lump Sum with Bill of Quantities C – Target Cost with Activity Schedules D – Target Cost with Bill of Quantities E – Cost Reimbursable Contract F – Management Contract

Main Clauses 1.General 2. Contractor’s main responsibilities 3. Time 4. Testing and Defects 5. Payment 6. Compensation events 7. Title 8. Risks and insurance 9. Termination

Optional Clauses changes in the law sectional completion bonus for early completion delay damages advance payment to Contractor limitation of Contractor’s design liability retention low performance damages HGCRA 1996 / LDEDCA 2009 amendments to contract.

Who are involved? Employer & Contractor Project Manager & Supervisor Subcontractor(s) , Supplier(s) , Adjudicator , Others (anyone except the above)

What is Unique ? Project Manager Role: Collaborative way of working. Impartial – Employer’s agent but impartial Amount due, compensation event, Issue of Termination certificate. Employer has no contractual right to challenge the decision of project manager Early Warning Collaborative way of working.

Early Warning Clause 16 : Acknowledgement of the prevalence of risk. Spot, discuss, mitigate/avoid Notify Risk Reduction meeting Action plan Risk register update Review regularly

Early Warning The early warning process is a mechanism for both parties to identify potential problems to the project. The contract emphasises that both parties are obliged to notify the other as soon as they become aware of a matter that could affect time, cost or quality. Traditionally it is the Contractor that tends to raise more early warnings, largely because they are the ones doing the work and more likely to identify the issues first. However, the Project Manager should be equally motivated to give early warnings in order to maximise the time available to consider the problem with the Contractor, to increase the likelihood of finding the best solution to meet the Employers interests in a given situation.

Early Warning The Project Manager could for example raise an early warning if he feels the subcontractor is not performing in some specific way. Once notified, these are discussed at a “risk reduction” meeting, and the matters recorded onto a Risk Register. These matters are then subsequently discussed at each Risk Reduction meeting until they are closed out, with each meeting recording the current action/progress regarding each matter.

Compensation Event Compensation Event, Process and Time scale Fault based system tied with Comp. event.

Compensation Event If events occur during the course of the works that cause the completion of the works to be delayed then these may be compensation events. Compensation events will normally result in additional payment being made to the contractor and may result in adjustment of the completion date or key dates.

Compensation Event Specific identified compensation events include: Instructions to change the service Failure to provide access. Failure of the client to provide equipment, plant or materials. An instruction to halt, or delay the works. Work done by others. Conditions that could not reasonably have been foreseen. Exceptionally adverse weather (beyond one in ten year frequency). Force majeure (such as an epidemic or an 'act of God').

Further Reading https://www.fenwickelliott.com/sites/default/files/scl_d177_gould_jan15.pdf