NEC - Engineering and Construction Contract (ECC)

Background The ‘traditional’ contract is fully specified and administered by the Engineer or Architect Proportion of ‘traditional’ contracts falling The Latham Report (Constructing the Team, 1994) and the Egan Report (Rethinking Construction, 1998) both reported widespread Client dissatisfaction with construction contracts which were seen as: Too many forms, too adversarial Contracts which were very inflexible Disputes - too many, too long to settle Legal compliance seen as being more important than effective contract management

Contract Procurement The UK Government has embraced the Private Finance Initiative (PFI) Framework and Partnering agreements have become widespread with larger clients The was therefore a radical need to rethink traditional construction contracts This resulted in the introduction of the New Engineering Contract (NEC), which later became the Engineering and Construction Contract (EEC)

Engineering and Construction Contract The objectives for the design of the NEC / ECC were to make improvements under 3 main headings Flexibility Terminology Clarity and simplicity Stimulus to good

Objectives of ECC -1 Flexibility , the ECC is intended to be used for engineering and construction work containing any or all of the traditional disciplines such as civil, electrical, mechanical and building work. to be used whether the Contractor has some design responsibility, full design responsibility or no design responsibility. to provide all the normal current options for types of contract such as competitive tender (where the Contractor is committed to his offered prices), target contracts, cost reimbursable contracts and management contracts. to be used in the United Kingdom and in other countries.

Objectives of ECC -1 Terminology In order to achieve uniformity across these sectors, some changes of terminology have been necessary. One example is that the word `Equipment' is used for what, in the building and civil engineering sectors, has in the past been called `Constructional Plant'. The traditional civil engineering and building term `temporary works' is covered by `Equipment' as defined in ECC Clause 11.2(11) and therefore is not used.

Objectives of ECC - 2 Clarity and simplicity The ECC is written in ordinary language. The actions by the parties which follow from use of the ECC are defined precisely so that there should be few disputes about who is to do what and how. The ECC is based upon flow charts of the procedures to be followed by the parties named in the contract. Almost all circumstances which may give rise to additional payment to the Contractor are identified as compensation events, which must include reviews of both the cost and time implications.

Objectives of ECC - 3 Stimulus to good The ECC is founded upon the proposition that co-operative management of the interactions between the parties can shrink the risks inherent in construction work clear division of function and responsibility helps accountability and motivates people to play their part much reduced risk to the Employer of cost and time overruns and of poor performance of the completed projects. much increased likelihood of achieving a profit for the Contractor, subcontractors and suppliers.

Objectives of ECC - 3 continued Stimulus to good The ECC is founded upon the proposition people will be motivated to play their part in collaborative management if it is in their commercial and professional interest to do so. Reliance need not be placed upon exhortation either within the contract or outside it. the Project Manager, acting on behalf of the Employer and in communication with him, should be presented with options for dealing with the problem from which he can choose, directed by the interests of the Employer. The Contractor should be unaffected by the choice made.

Other changes Standard form of subcontract, very similar to ECC Subcontractors cannot be nominated Must use direct contract with Employer The financial control document in the ECC can be either a traditional bill of quantities or an activity schedule. The activity schedule is a list of items with lump sum prices. The total price for the work to be done is divided between each of the items. Neither document is used in the ECC for any purpose other than assessing payments due to the Contractor.

ECC Documents the core clauses the main option clauses, the secondary option clauses, the Schedules of Cost Components and the Contract Data formats Plus works information site information Accepted programme

                                              

ECC Core Clauses General Contractors responsibility Time Quality Payment Compensation events Property Risks & insurance Disputes and terminations

ECC Main Option Clauses Conventional contract with activity schedule Conventional contract with Bill of Quantities Target contract with activity schedule Target contract with Bill of Quantities Cost reimbursable contract Management contract

ECC Secondary Option Clauses Inflation Retention Delay damages Early completion bonus Low performance damages Sectional completion Advance payments Advance payment bond Performance bond Parent company guarantee Contractors’ liability for his design limited to reasonable skill and care VAT and tax Multiple currencies

A partnering contract, between two Parties only, is achieved by using a standard NEC contract. This Option X12, which puts the NEC Partnering Option into a contract, is used for partnering between more than two parties working on the same project or programme of projects

ECC Cost and Contract forms The Schedule of Cost Components is a complete identification of components of cost which is not varied from one contract to another The Contract Data are selected and completed for each contract. These data identify such things as the completion dates, the contract specific documents (e.g. specifications and drawings), interest rates and price adjustment indices to be used.

ECC Roles & Duties The ECC sets out the responsibilities and roles of the following parties: the Employer, the Project Manager, the Supervisor, the Contractor, the Subcontractor and the Adjudicator Separate functions of Employer's designer and Contractor's designer are assumed but not mentioned in the contract. The role played by the Engineer, Architect or Supervising Officer in other standard forms is divided between the Project Manager, the Supervisor, the Employer's designer and the Adjudicator.

Project Manager Appointed by Employer to manage contract to achieve Employer’s objectives Appointed at feasibility stage, may advise on procurement of design, estimates of time and cost, alternative options, construction procurement He should have Employer’s full authority. Can change/vary work and instruct contractor In compensation events can chose best option for Employer but must act reasonably or face Adjudication

Designers If design & construct is separated then Designers appointed directly by Employer Develop design to a point where tenders can be invited If Design & Construct Employers Designer provides a performance specification Contractors Designer contracted to Contractor Project Manager manages whole design process

Supervisor Appointed by Employer for particular contract The role is to check that works are constructed in accordance with contract Similar to role of Resident Engineer or Architect, but on simple contracts may be a Clerk of Works Disputes between Supervisor and Contractor referred to Adjudicator

Adjudicator Appointed jointly by Employer and Contractor, who share his fee Usually registered Employer can insert his choice in contract data and seek contractor approval, or ask contractor to supply list of names Responsible for deciding any disagreements in the contract If either party does not accept his decision, may proceed to arbitration or court

Conclusion The ECC is intended to provide a framework for all parties to work collaboratively and achieve their own objectives Aim is to satisfy Client Should lead to much reduced risk of cost and time overruns Increased likelihood of achieving profit for contractors & suppliers