managing an engineering and construction contract volume 4 June 2017et ae tae Improvement through collaboration ocurement and project =nec4 emenae eee ans eer ates Engineering and Construction Contract ering and Construction ee Cente ec as ease i CONTRACTS PEK This document provides guidance on the management of an NEC4 Engineering and emcn Sapp Construction Contract Prt) Pore) Pra An NEC document June 2017 A moo a etre) pple tee re fi eres ae (with amendments October 2020) co | Ce) Soran Volume 4 Pree a) Pore a a -& ee Cee ere USER GUIDES eee) The Government Construction Board, Cabinet Office UK The Government Construction Board (formerly Construction Clients’ Board) recommends that public sector organisations use the NEC contracts and in particular the NECA cont where appropriate, when procuring construction, Standardising use of this comprehensive suite of contracts should help to deliver efficiencies across the public sector and promote behaviours inline with the principles of the Government Construction Strategy CoM Saeed eee evra ere Cee aoe ans coos ro Satay caren nee ad The Development Bureau, HKSAR Government The Development Bureau recommends the progressive transition from NEC3 to NECA in public ‘works projects in Hong Kong, With suitable amendments to adapt to the Hong Kong local environment, NECS is expected to further enhance collaborative partnering, unlock innovations ‘and achieve better cast management and value for money in public works projects.Option Y(UK)!: Project Bank Account Option Y(UK)2: The Housing Grants, Construction and Regeneration Act 1996 ‘Option Y(UKI3: The Contract (Rights of Third Parties) Act 1999 Chapter 5 Schedule of Cost Components (SCC) Chapter 6 Short Schedule of Cost Components (SSC) Appendix 1 Contract start-up checklist ‘Appendix 2 Contract close down checklist ‘Appendix 3 Example communication forms Appendix 4 Example joint compensation event tracking schedule Appendix 5 Example quot Wn of a compensation event. 99 99 100 101 105 106 110 1m 120 21 e201 Foreword Continuous improvement in project delivery is required to build confidence in the UK Construction sector so that we can attract more investment. The Infrastructure and Projects ‘Authority (Pa) is the government's centre of expertise for infrastructure and major projects. We sit at the heart of government, reporting to the Cabinet Office and HM Treasury. The application of the right contract is central to the success of the overall project delivery system. The NEC suite of contracts has been in existence for over the 20 years and has linked the projects, people and processes together to create the correct environment for successful delivery, This new and updated NEC4 contract embraces the digital changes that are happening in the construction industry, especially around BIM, which | believe will be central to creating a step change in performance. Whilst looking forward it also builds on the fundamentals required for an effective contract. The use of NEC4 on public sector projects wil help to deliver the Government Construction Strategy as we seek to improve central government's capability as a construction client to deliver further savings in the order of £1.7bn across the Government estate, The IPA looks forward to collaborating with industry to make the delivery of projects more efficient and effective. Tony Megs, Chief Executive, Infrastructure and Projects Authority Fd Infrastructure and Projects Authority Reporting to Cabinet Office and HM TreasurySTNCCH ene Preface NEC was frst published as a new and innovative way of managing construction contracts in 1993 — some 24 years ago. It was designed to facilitate and encourage good management of risks and uncertainties, using clear and simple language. ‘The NEC approach to managing contracts was endorsed in “Constructing the team — The Latham Report’, which was a government/industry review of procurement and contractual arrangements in the UK construction industry. This led to a second edition in 1995 incorporating the further recommendations of that review. This contract was used increasingly in the UK and overseas, and a major revision was made with the third edition in 2005, NEC has played a part in helping the industry do things differently and better. thas done 0 by introducing effective project management procedures into the contract itself. These require pro-active management of risk and change, and the day-to-day use of an up-to-date programme. The range of pricing options has given Clients flexibility in the allocation of risk ‘and the ability to share risk and manage it, collaboratively. ‘The NEC suite has evolved over three decades, embedding consultation responses and user feedback, and reflecting industry development, including new procurement approaches and managernent techniques such as alliances, mantagement of information (BIM) and supply chain engagement. This feedback and the new procurement approaches formed the driver, for the development of the next generation contracts and the launch of NECA. There were three key objectives in drafting NECA: * provide greater stimulus to good management + support new approaches to procurement which improve contract management and ‘+ inspire increased use of NEC in new markets and sectors It was to be evolution, not revolution. Some features of NEC4 include: * anew design build and operate contract to allow flexibility between construction and ‘operational requirements in timing and extent + anew multi-party aliance contract based upon an integrated risk and reward model + new forms of subcontract to improve integration of the supply chain Further enhancements include + finalising cost elements during the contract * incorporating 2 party-ed dispute avoidance process into the adjudication process + increasing standardisation between contracts and * providing enhanced guidance to give greater practical advice to users. NNEC has always been known for its innovative approach to contract management, and this revision continues that approach, No other contract suite has had such a transformative effect ‘on the built environment industry as NEC. It has put the collaborative sharing of risk and reward at the heart of modern procurement, Its also unique in providing a complete, backto- back procurement solution for all works, services and supplies in any sector and any country NECA continues to set the benchmark for best practice procurement worldwide. Peter Higgins BSc (Hons), CEng, FICE Chair of NEC4 Contract Board contract.con ‘Managing an Engineering and Constuction Contract. | i=nec4 EDGEMENTS Acknowledgements The original NEC was designed and drafted by Dr Martin Barnes then of Coopers and Lybrand with the assistance of Professor J. G. Perry then of the University of Birmingham, T. W. Weddell then of Travers Morgan Management, T. H. Nicholson, Consultant to the Institution of Civil Engineers, A. Norman then of the University of Manchester Institute of Science and Technology and P. A. Baird, then Corporate Contracts Consultant, Eskom, South Arica This fourth edition of the NEC suite was produced by the Institution of Civil Engineers through its NEC4 Contract Board, The NECA Contract Board is: P. Higgins, BSc (Hons), CEng, FICE (Chair) .T. Cousins, BEng (Tech), DipArb, CEng, MICE, FCIAr |. Heaphy, BSc (Hons), FICS, FCIArb, MCInstCES, MACOstE J.N, Hughes-D’Aeth, BA (Hons), MA (Cantab) S. Rowsell, BSc, CEng, FCIHT, FICE, MCIPS The NEC4 drafting team consisted of M. Garratt, BSc (Hons), MRICS, FCIArD . Gerrard, BSc (Hons), FRICS, FCVArb, FCInstCES R. Hayes, BSc (Hons), MEng, CEng, MICE, MAPM S. Kings, BSc (Hons), MRICS, MCIPS, PhD T. Knee-Robinson, BEng (Hons), CEng, MICE, MAPM, MCIT 1.4. Lofty, MRICS R. Patterson, BA, MBA, CEng, MICE B, Trebes, BSc (Hons), MSc, FRICS, FinstCES, FAPM B, Walker, BSc (Hons), GMICE, ACIArD Proofreading by. . Waterhouse, BEng (Hons), MBA, CEng, FICE, FCIArb, FCInstCES, FCMI The Institution of Civil Engineers acknowledges the help in preparing the fourth edition civen by the NEC4 Contract Board and NEC4 drafting team and the support ofthe following ‘organisations in releasing their staff: Anthony Collins Solicitors LLP Berwin Leighton Paisner LLP CEMAR Costain ple Mott MacDonald LtdHOW TO USE THE NECA USER GUIDES How to use the NEC4 user guides ‘The NEC4 User Guides have been designed to support users as they select the most appropriate NEC contract strategy, prepare the contract, select a supplier and manage the contract to deliver the Client's or Purchaser's objectives. The guides and the corresponding flow charts are not contract documents, They should not be used for legal interpretation of the meaning of the contracts. They include a step-by-step process for setting up an NEC contract and managing it through to completion. The starting point assumes that the Client has resolved the following: + the business case and contract objectives, + the risk profile has been analysed and an overall management strategy established including, in broad terms, decisions made with regard who is best placed to manage the risks and © a decision has been made to use the NEC, but the contract strategy has not been determined, Users should work through the following sections of guidance in the logical sequence provided. Volume 1 - Establishing a Procurement and Contract Strategy: guides users in identifying the best way of achieving the Client's or Purchaser's objectives through the selection of the most appropriate procurement route, NEC contract and main and secondary Options. This document applies across all contracts. Volume 2 - Preparing an NEC Contract: guides users in preparing the particular NEC contract including Contract Data and other the documents required, ready for supplier selection to commence. There isa version of this document for each contract, except the subcontracts. For the subcontracts, the guidance is included in the relevant main contract version of the document, Volume 3 - Selecting a Supplier: guides users through the supplier selection process including, where necessary, tendering, suing an invitation to tender and subsequent ‘evaluation and assessment. This document applies across all contracts, Volume 4 Managing an NEC Contract: guides users in managing the relevant contract, correctly after it comes into existence. Detailed guidance is provided which explains the content of each NEC contract and its Options and how to operate them to achieve a successful outcome. There isa version of this document for each contract, except the subcontracts. For the subcontracts, the guidance is included in the relevant main contract version of the document. Due to thelr size, Volume 2 and 4 have been combined into one book for both the Dispute Resolution Service Contract and the Framework Contract. rneccontractcom | © nec 20 =nec4 CHAPTER 1 INTRODUCTION Introduction ‘The purpose of this guide is to explain the clauses of the NEC4 Engineering and Construction Contract (ECC) from a practical management perspective. ‘The convention of using italics for terms which are identified in the Contract Data of the ECC and capital initials for terms defined in the ECC has been used in this guide. ‘Good management is important to achieve better outcomes for contracts and reducing rmisunderstandings and disputes. The Client's objectives (refer to Volume 1 - Establishing € Procurement and Contract Strategy) for the contract should be fully understood and reflected in a clear and simple contract document (refer to Volume 2 - Preparing an Engineering and Construction Contract) to promote effective management and delivery of the works (this Volume) In some of the sections of this guidance there ar illustrated typical communications required fon a contract. This is referenced through this guide by phrases ike ‘On our contract...” of “from our fictitious contract... This fictitious contract isthe construction of a bypass based in the UK and the entry examples are taken from the Contract Data worked example in ‘Appendix 1 of Volume 2. It may be useful for the Parties to consider preparing checklists of key duties, certainly for the start-up and close down of a contract. It is sometimes quite surprising how many duties there are to be done, certainly at the start of a contract. The actions may be tabulated and probably advisable to be based on the structure of the ECC. Many of these are best done jointly by the parties and could be included in a works execution plan, if one is required, ‘An example checklist of start-up duties for the Client, Project Manager, Supervisor and Contractor is included in Appendix 1. This covers say the frst month or so after the Contract Date assuming the starting date follows soon after. ‘An example checklist of close down duties for the Client, Project Manager, Supervisor and Contractor's included in Appendix 2. This covers the period from just before the defects date. ENGINEERING AND CONSTRUCTION SUBCONTRACT (ECS) The ECS can be used as a subcontract with the ECC, Term Service Contract, Design Build Operate Contract and Alliance Contract. Detailed guidance for the ECS has not been provided since the principles can be understood from the ECC user guide. However, there are some issues that users will need to be aware of when using the ECS, In the ECS the roles of the Client, Project Manager and Supervisor have all been combined into one (the Contractor), as it was considered that, while different people in the Contractor’s organisation may perform the separate functions, it would be too complicated to have different legal persons for each separate subcontract. This has required some amendments ‘where the ECC text describes actions by the Client, Project Manager and Supervisor. To avoid confusion, the following items have been prefixed ‘subcontract’ + works, © starting date, + Completion Date and + Scope. 9 an Engineering and Construction Contra fa CHAPTERS CHAPTERS CHAPTER 4 ‘CHAPTER 3 APPENDICEScuarren 6 CHAPTERS coarrens carrer 3 conten 2 [APPENDICES =nec4 INTRODUCTION Other changes include + Subsubcontractor for Subcontractor, Subcontract Data for Contract Data, Time periods stated in the ECS have been adjusted to allow for associated actions under the main contract. Time limits in the subcontract for sending information to the Contractor are less than the times stated in the main contract for sending information to the Project ‘Manager to allow time for the Contractor to incorporate or process the information. Time limits in the subcontract for transmitting decisions or payments to the Subcontractor are ‘greater than the equivalent times stated in the main contract, for similar reasons. If there is termination under the main contract, the Contractor will wish to do the same Under the subcontracts and this is provided for as an additional reason for termination in the ECs, ‘A provision has been included to cater for a dispute arising under the main contract which ‘concems the subcontract works, This enables the Contractor to require that such a dispute ‘can be dealt with jointly with the dispute under the main contract by the main contract ‘Adjudicator. This avoids two different adjudicators making different decisions on the same tlispute. Note this will only apply if Options W1 or W2 apply to the main contract. aging an Engineering and Construction Contract neccontract.com | © nec 2017 CH, = nec4 PTER 2 CORE AND MAIN OPTION CLAUSES Core and main Option clauses Actions Identified and defined terms 10 104 10.2 " 4 This clause obliges the Parties (who are the Client and the Contractor, see clause 11.2(13)), the Project Manager and the Supervisor to do everything which the contract states they do. itis the only clause which uses the future tense. It's also the only clause that uses the word ‘shall, whichis quite different to other standard forms of contract and, as written, it means. this word is not required to be used again anywhere else in the contract. For simplicity, everything else isn the present tense, Where actions are permitted but not obligatory, the term ‘may’ is used. ‘The Parties, the Project Manager and the Supervisor are also required to act in a spirit of ‘mutual trust and co-operation. This is particularly needed in managing parts of the contract, such as early warning, payment, programme and compensation events. However, this clause does not change the obligations of the Parties, the Project Manager and the Supervisor, as, set out in the contract. ‘The main definitions used in the contract are given in clause 11.2. Other definitions are given in optional clauses where they are specific to a particular main or secondary Option. Capital initial letters are used in the ECC for the defined terms to distinguish them from undefined terms. ‘Any term that is identified in the Contract Data is written in italics ‘The Project Manager cannot change identified or defined terms. ‘A combination of these two systems is used when the details of a term in italics may need to bee changed during the course of the contract — e.g. the Completion Date, clause 11.2(3). The definition of the defined term (the Completion Date) includes 2 reference to the same term in italics (the completion date) but also refers to the possibilty of changes in accordance with the contract’. This combination therefore provides * basis for tenders and the contract at the Contract Date, at which time the defined term is the same as the italicised term, + the flexibility to change the term, for example as the result of a compensation event, and * the continual use of the defined term throughout the contract, Not all the defined terms in clause 11.2 are commented further on below. Some are obvious enough and others may be further described in the parts of the contract that refer to such terms. Its important to realse that the drafting style of the ECC is such that there are no cross- references within it so users should look cover to cover to see how the clauses relate. An example of ths related to Key Dates is as follows. * The Contractor is obliged to do the work such that the Condition stated for each Key Date is met by the Key Date (clause 30.3) * A Key Date and its Condition are defined terms and stated in clause 11.2(11), * Key Dates are to be shown on each programme the Contractor submits for acceptance (clause 31.2) ing and Construction CHAPTER 6 ‘CHAPTER S| ‘CHAPTER 4 ‘CHAPTER 3 HAPTER cnapten 1 APPENDICESCHAPTER 1 =nec4 11.20) @ 6) ng an Engineering and Construction Contac =nec4 MAIN OPTION CLAUSES +The Project Manager may give an instruction to the Contractor which changes .... Key Date (clause 14.3) which would be a compensation event (60.1(4) + Should the Contractor or Project Manager become aware of a matter which could delay ‘meeting a Key Date, they are obliged to notify the other by giving an early warning (clause 15.1) + ifthe Project Manager decides that the work does not meet the Condition stated for a Key Date by the date stated and, as a result, the Client incurs additional cost... on the same project, the additional cost which the Client has paid or will incur is paid by the Contractor (clause 25.3). + There are also other clauses that deal with Key Dates such as acceleration (clause 36), compensation events (clause 60 to 66) and Contractor's proposals (X22). The point is that users need to learn to navigate around the contract to join up the various provisions to see how they properly work together. A good starting point for appreciating ‘where in the contract each term or phrase will be found is the index to the ECC. Whit it may not cover all terms or phrases, its a good starting point to help map out the provisions. ‘The definition of the Accepted Programme is worded to allow for the two possible situations, ‘where there may or may not be a programme referred to in the Contract Data part two. The Client should have made it clear to tenderers if it intended the tender programme to become the Accepted Programme by this means, and ideally any such tender programme should broadly comply with the requirements of clause 31.2. There is only ever one Accepted Programme and thatis the latest one accepted by the Project Manager. ‘The Contract Date is used to define the date when the contract comes into existence, regardless of the means by which ths is achieved (which could be by means of a counter- offer and its acceptance, sometimes after extended negotiations and discussions) ‘The Parties will need to be aware when the Contract Date is because several other provisions rely upon this date. These include: © Deciding upon Comupt Acts (clause 18 and 11.2(6) + Apart of the test of judging prevention (clause 19.1), the associated compensation event (60.1(19)) and possible termination (clause 91.7) + Determining by when the quality policy statement and quality plan are to be provided (lause 40.2), + Determining by when the first programme is to be submitted for acceptance if no programme was identified in Contract Data part two. = Apart of the test of judging a physical condition compensation event (clause 60.1(12)) and a change in the law (Option X2). + Determining the amount due for certain terminations (cause 93.2). Interpretation and * Apart of the test of judging certain compensation events (clause 60.4, Option Band D), foe © Determining the date by which an ultimate holding company guarantee or 2 performance bond is to be given (Option X4 and X13). * Determining the date by which undertakings to Others are to be provided (Option XB). * Determining the date by when the Project Bank Account is to be established (Option YUKO, The word ‘Defect’ has a restricted definition. This tells us what a ‘Defect’ is and therefore ‘what it isnot. Where a problem arses during the works, the Supervisor and Contractor will need to ask, “is this @ Defect?” and act accordingly. This definition should quickly guide the Parties to how to deal with the matter in accordance with the contract. rreccontractcam | © nec 2017 © (10) (12) (1a) a5) 6) a ) (20) 2 123 ORE AND MAIN OPTION CLAUSES ‘The definition of Equipment is broad and avoids using separate terms for items which are ‘treated in the same way under the contract. It covers, for example, construction plant, vehicles, consumables, tools, temporary works, cabins, temporary access roads and other such facilities. The term Equipment has been used where it has been customary to use ‘plant’ or ‘constructional plant’ in UK building and cull engineering practice. This change is made so that the ECC can be used internationally and for other engineering work where itis ‘customary for ‘the plant’ to mean part of the works to be provided. The Fee includes all the costs of the Contractor that are not included in Defined Cost, together with its profit and any allowance for its risks (See clause 52.1). The Fee is calculated by applying the fee percentage stated in the Contract Data part two to the Defined Cost. ‘The Fee is used in assessing compensation events, calculating amount due on certain terminations (clause 93.2) and, for Options C, D, € and F, in assessing amounts due to the Contractor, The defined term ‘Others’ provides a convenient means af reference to people and ‘organisations not directly involved in the contract. However, there are instances where such 2 general term is not appropriate, e.g. in clause 15.2. In these cases the term ‘other people’ is used to avoid any impression of a typing error which might have been given if ‘others’ were to be used without the capital inital Items temporarily used in the construction but removed at or before Completion are ‘excluded from the definition of Plant and Materials; they are Equipment. ‘The definition of Provide the Works is very widely written to cover all the obligations of the Contractor. This not only includes the physical works thernselves involving, for example, people, Equipment, Plant and Materials but also the supporting activities such as planning, buying, procurement, accounts and so on. The importance of this can be seen in clause 20.1 where “The Contractor Provides the Works in accordance with the Scope.” ‘Scope is information about the works to be provided. Scope can be changed by the Project ‘Manager during the course of the contract (clause 14.3). ‘The purpose of the definition of the Site is to illustrate precisely what is and is not the Site itself. The Client is responsible for providing access to and use of the Site to the Contractor as necessary for the work (clause 33.1). f the Contractor requires further areas to carry out the works, called Working Areas, its responsible for providing them. The boundaries of the site \will normally be shown on a drawing which is identified in the Contract Data part one. There is quite comprehensive drafting of what is (and therefore what is not) a Subcontractor Under the contract, The main purpose isto exclude persons or organisations who are ‘ordinary suppliers of Plant and Materials and Equipment and instead allow the Parties to focus on those persons or organisations providing something particular on the contract who need to be accepted by the Project Manager, according to the provisions of clause 26 Working Areas are important in respect of payments to the Contractor under Options C, O and E (see the Schedule of Cost Component), for assessing compensation events (see the Schedule of Cost Components and the Short Schedule of Cost Components) and in relation to title (ee causes 70 and 717). The working areas proposed by the Contractor inthe Contract Data part two only become the Working Areas if they comply with this definition. \Whilst this provision is not something that the Project Manager is directly responsible for, it may well be the Project Manager that helps the Parties by faciltating discussions to effect a change to the contract to which they have entered into. It is most likely that legal advice ‘would be necessary here too. It could be that economic circumstances change such that both Parties would prefer mutual termination but on different grounds to that provided in the contract. Or that a Subcontractor is potentially going into insolvency and both Parties wish to keep the organisation solvent by paying monies directly into the Subcontractor’s bank account, Or that the Completion Date and Key Dates should be changed to sut the Client's business interests but the Parties (for ‘whatever reason) did not want to use the acceleration or compensation event processes to effect this. These sorts af dificult circumstances may be better dealt with constructively and practically outside of the conditions of contract but this clause brings the resolution back into the contract, giving the resulting protection the Parties will generally desire. Managing an Engineering and Construction Contract. | 5 cunerer 1 CHAPTER 6 CHAPTERS CHAPTER 4 ‘CHAPTER 3 APPENDICESt ‘Communications Managing an Engineer 3 CCORE AND MAIN OPTION CLAUSES Ifthe Parties are considering changes, they should take suitable care and advice to ensure ‘that those changes are drafted to reflect clearly and completely what they have agreed to achieve. In addition, care should be taken to ensure that any ambiguity or inconsistency with the rest of the contract is avoided. The ECC requires various communications to be given. These might include an instruction, an acceptance of a notification, to name a few. These communications are threaded into the ‘contract processes alongside the obligations of the various parties. For example, clause 32.2 of the ECC states: “The Contractor submits a revised programme to the Project Manager for acceptance...” ‘This clause, read together with clause 31.1 obliges the Contractor at different times in the contract to produce a programme, to revise it and submit it for acceptance. The required ‘communication in this clause takes the form of a submission of the revised programme by the Contractor to the Project Manager. In turn, clause 31.3 states “Within two weeks of the Contractor submitting a programme for acceptance, ‘the Project Manager notifies the Contractor of the acceptance of the programme or the reasons for not accepting it. Here, the Project Manager has a certain time period either to accept the programme or to notify reasons for not accepting it. The communications here take the form of the Project ‘Manager either accepting (the programme) or notifying (that the Project Manager does not accept the programme, together with reasons). Clause 13.1 details the communications the contract requires to be given, what form they take and what language the writing should be in. “Each communication which the contract requires is communicated in a form ‘which can be read, copied and recorded. Writing is in the language of the contract.” (On this basis, NEC has produced several simple, basic forms for users to manage their ECC contracts better. These are the minimum number of communication forms that are required, Users can take the forms and adapt them to sult their contract as they see fit. Forms available for the ECC include for: | | | + an instruction + a notification | + asubmission | + an acceptance + apayment certificate + a Completion certificate + ateke over certificate + aDefects Certificate ‘The forms are included in Appendix 3 and are written neutraly. So, the ‘instruction’ form can come from the Supervisor, Project Manager or Contractor, as the contract require. These communication forms, together with the Contract Data for the ECC are available as part of the membership of the NEC Users’ Group (see wwvw.neccontract.com. Construction Contrac eccontract, © nec 2017 CORE AND MAIN OPTION CLAUSES Users should note that its intended that some forms have multiple uses. For example, the notification form can be used to notify matters such as: © a change of address for receiving communications (clause 13.2), * early warnings (clause 15.1), * compensation events (clause 61.1 and 61.3), * failure of Project Manager in respect of compensation events (clause 61.4, 62.6 and 64.4) and + a dispute (clause W1.1(2) or intention to refer to tribunal (lause W2.4(2), Clause 13.7 states, “A notification or certificate which the contract requires is communicated separately from other communications.” Except for notifications and certificates, other communications could potentially be communicated together. Its usual to have a start-up meeting where matters such as communications protocol ‘would likely feature. Who is going to act on behalf of the Contractor and to whom should ‘communications be sent? Is the address in Contract Data part two the one to be used for communications to the Contractor? Ave there any delegates of the Project Manager on this contract? The communication forms to be issued in an ECC can be both various and sometimes quite extensive, Consider an ECC Option A with a well written Scope, minimal instructed change to it and minimal problems that arise through the early warning process. In this case, the ‘number of communications might be quite small. Contrast this with an ECC Option E with 2 developing Scope undergoing constantly instructed change, along with considerable problems that arise through the early warning process. Here, the number af communications could be quite extensive. It is the Scope and the risks surrounding ths that in the main causes the increase in communications, not the underlying contract itself, Users will therefore need to consider several factors when deciding the communication system that is appropriate for their needs. On an ECC, the following should be considered, if rot already addressed in the Scope = Which main Option is it and what would be the communication implications of each? + How clearly defined is the Scope, what degree of change to this is likely? * Does the Client/Contractor/Project Manager already have an appropriate communication system in place? + What extent of risk is ikely to occur during the contract? + What is the geographical spread of the contract? These considerations will help shape the appropriate communication system for the contract, which could range from a manual based system, using the communication forms in this uidance, through to one of several technology based process systems available to users. Many organisations will operate quality management systems and have in place processes {or recording the flow of contractual communications. Simple schedules could be kept for the individual roles under the contract (and collaboratively of course) collecting up the various communications, an example communication schedule for our contract is shown ‘below. This could have further columns included if the Parties require, such as Janaging an Engineering and Corstrction Contract 7 CHAPTER CHAPTERS cHarren 4 CHAPTER Hares APPENDICES= =nec4 Contractor (in and out commu Cana cw 7non7 ewnt mon? ewai2 son? pwn ronan? Submission) 110/17 Paymentcens nin? pu wan? Pune anin7 submission/2 18/7 cnn sane Infor avin. 3 4Bne cn ssnone Tocn ‘snons pen ssnong ing an Engine pura | cone AND MAIN OPTION CLAUSES + date by when reply required and + specific clause number. Additionally + there could be individual sts for each type of communication and + each list could be split according to diferent parts ofthe works and so on. ‘Whilst there is any number of ways to track these communications, the Parties should try and ‘make this useful but as simple as possible. tions): Descnie REPLY COMM. REF. DATE COMMENT 151-problenwihtesngoffeessue beams nt a Ew ised a ri nz sued nf He 1a alepai PUREE Mary tes oa 31. - 1st prone sre acceptors 18107 S11 -poment cefste or i a | 143 proce ues wa is | 611 Pu 6aCEand submit qutaion a id | 623 quotation or PM CE mana ane? 2 -eaopi Defect dann 8 Have We coected om eo ‘this yet? 11.3spenicr cary out tes onimpored nh ra tae 7 St eo sac terbetet 302-Compltoncf he whol of he works nt va Ade ses tie 35.3 Clete works W aa abe tr 443 sue of Detects Crate i me and Contin Contac ecconvacteem | © nee2017 =nec4 CCORE AND MAIN OPTION CLAUSES Project Manager (in and out communications): cnt ewan ewn2 PMN Submision Payment cert pat Pane Submission’2 cen Ton pen faa mnon mon snon7 sonar anon? ww wanin7 nin? tenn snore 1s018 15/1019 Ba Eee REPLY CO 15.1 problem with testing of free-ssue beams nla a EWR issued, a a EWR issued va a 14.2 delegation of PM action to Mary Miles la ra 311 ~ 1st programme submitted Aceptancelt enon ‘51. payment certicate 1 ne ve 14.3 ~ procure wees a a 614 -PMI 2 CE and submit quotation la a 62.3 ~CE quotation for PIN puna aanvi7 30,2-Completion ofthe whole ofthe works w/a oa achioved. 35.3 ~Clent takes over works "va ava 443 sue of Defects Certificate a fa Need todo assessment ‘A more comprehensive schedule might be appropriate to help manage the compensation event process. This could take the form as shown in Appendix 4 Note there is no requirement to number compensation events but itis helpful for ‘management purposes. Ideally the compensation event schedule is jointly accessible to both Contractor and Froject Manager and should always be kept up to date, An event will start the compensation event process off. It will be notified by Contractor or Project Manager and will progress, or not, from there. If there are iterations of the quotation for example, ‘more lines can be taken so eventually a row, or a series of rows, maybe even coloured 10, differentiate, will tell a story from left to right of the journey of each compensation event ‘An alternative approach is perhaps to have a summary sheet for each compensation event ‘which records in date order the communications arising for each When each one concludes, it can be archived in whatever format suits. ‘There are no explicit rules within the contract for these sorts of things, the Parties will need to develop what is right for them to suit their circumstances To finish, below are a few useful tips for users to help comply with the ECC requirements for communications + Follow the processes carefully — use ‘notify, ‘accept; instruct’ etc, as the clause requires. +f not already stated in the Scope, decide if a manual system or technology based system is best for the contract, lf manual system, agree whether the simple ECC communication forms will be used, ‘add to them if needed, create others if needed; fill in the repetitive data; decide on the use of a tracker schedule. If technology based system, which one is best for the Parties on the contract. * Finally, and when completing the communication forms, use the language of the contract (which is stated in the Contract Data), the present tense and write in a simple, straightforward and unambiguous manner. The phrase ‘in a form which can be read, copied and recorded’ includes a docurnent sent by post, telex, cable, electronic mail, facsimile transmission, and on disk, magnetic tape or other electronic means, ‘Managing an Engineering and Construction Contact| 9 ‘CHAPTER 1 CHAPTER s cHapren 4 CHAPTERS cHarren‘Manager and the 13.2 133 and Ba 135 a7 38 4 AND MAIN OPTION CLAUSES Modem contract management practice includes for the use of sophisticated contract management systems which have mapped out the ECC processes and use technology to help the Parties follow the contract provisions quite closely. If the Client requites communications or information to be provided in a particular electronic or paper form, this should be set out in the Scope. ‘These clauses establish the use ofa period for reply wherever the term (identified inthe Contract Data part one) is used in the conditions of contract or wherever no response period is specifically tated for any communication. In some circumstances, it may have been appropriate to specify more than one period for reply in the Contract Data, The obvious example would be for a response by the Project ‘Manager to submissions of the Contractor’s design. Such specific cases should have been described by reference to specific clauses of the contract, and it should have been made clear that the ‘general’ period of reply applies to all other cases. Relying on clause 13.5 for this purpose may not be sufficient, as the Contractor may not agree, and itis better for the Contractor to knaw how lang the Project Manager will need to review design submissions when itis preparing its programme. Failure of the Project Manager or Supervisor to reply within the period for reply, when applicable, may cause a compensation event to occur (see clause 60.1(6). Potentially, if this period is completely unworkable, the Parties could look at changing this through clause 12.3, This may, however, lead the Contractor to seek a change to the Completion Date and Prices. This clause provides for extending the period for reply that is stated in the Contract Data or within the contract by agreement. Note there may be multiple periods for reply stated in ‘the Contract Data. Where other periods for action are stated in the ECC, provisions for their extension (if any) are stated in the relevant clauses. ‘The requirement to notify information or certificates required by the contract separately is included to avoid important things being overlooked. For example, so that delays which could be avoided are not missed, submission of a revised programme which shows a delay does not count as an early warning of the delay. Requiring separate notices or certificates, also makes it much easier to track the procedure follawing the issue of the notice or certificate. Note that giving an early warning of a matter which has already been notified as @ ‘compensation event is not required (see clause 15.1). ‘The ECC contains a number of examples of situations in which the Contractor is required to submit information to the Project Manager. Reasons for not accepting are listed in the ‘contract, and the first exemple is in clause 13.4 As clause 13.8 says, the Project Manager has authority to withhold acceptance of a submission for any reason, although itis clearly not sensible for the Project Manager to ‘withhold acceptance for a reason which has no bearing on the interests of the Client. However, some of these reasons may be quite outside the influence of the Contractor or may arise due to factors which the Contractor had no means of foreseeing, The mechanism described in clause 13.8 fs introduced to limit the Contractor’ risk in ths situation, The Contractor does carry the risk of the Project Manager withholding acceptance for a reason stated in the contract. Withholding acceptance for any other reason is a compensation event (clause 60.109). ‘The Project Manager is the key individual involved in the management of the contract from the Client's point of view. The Project Maniager’s duties and authority are described in the clauses Of the contract. They are not summarised in a single clause. A quick look at the ECC index will highiight just how many provisions of the contract are dealt with by the Project Manager. Its assumed that the Project Manager will confer with the Client as necessary in deciding ‘which of various possible actions to take and in making other decisions which affect the ‘outcome of the contract as far as the Cent is concerned. For example, the Project Manager has full authority to arrange an acceleration of work, although the Client would normally be vitally interested. The fact that the Client is not often mentioned in the contract does ‘Rot mean that the Gent has only a minor role. It does mean that, for the purposes of the Contract, almost all dealings with the Contractor are handled by the Project Manager. ngineering and Construction Contract neecontractcom | © nec 2017 IND MAIN OPTION CLAUSES However, it simportant to understand that when it comes to the Project Manager exercising judgement, such as deciding = whether something is a compensation event, © the assessment of a compensation event or + the amount to be paid to the Contractor, that judgement must be exercised independently and in accordance with the contract. The Client must ensure that the Project Manager has the authority to make these decisions. ‘The Project Manager should advise the Client whenever the Project Manager sees fit, or when the Project Manager's conditions of engagement requite, of any action which the Project Manager is considering. For example, the Project Manager may inform the Client of acceptable quotations for compensation events and consult with the Client on which alternative quotation most suits the Client's requirements, ‘The Contractor will expect that all decisions which the contract envisages wil be taken by the Project Manager will be taken within the time limits stated in the contract. In some ‘organisations, this may require the Project Manager to pass on decisions to the Contractor which have in fact been taken by the Client. This creates no difficulty ifthe internal arrangements between the Client and the Project Manager enable the decisions to be made ‘and communicated to the Contractor through the Project Manager within the contractual time limits. The Supervisor will be appointed by the Client. The Supervisor‘s main function is to check that work is carried out in compliance with the Scope. This may include testing of materials {and workmanship and observing tests which the Contractor carries out. The Supervisor is also concerned with identifying and correcting Defects and, eventually, certifying the remaining Defects, if any, when the Supervisor issues the Defects Certificate. The Supervisor's activities may have financial consequences, but the Supervisor is not directly involved in financial matters ‘The Supervisor can only give the Contractor an instruction to search for a Defect. If for example, the Supervisor considers that the Scope is wrong and should be changed they must rely upon the Project Manager to issue the necessary instructions ‘The actions of the Project Manager and Supervisor are independent of each other. There is. no appeal from the Supervisor to the Project Manager where the actions of the Supervisor are questioned by the Contractor. If the Contractor i dissatisfied with an action of either the Project Manager or the Supervisor, its appeal is to the Adjudicator, However, itis usual on simpler projects for the same person to act in the roles of Project ‘Manager and Supervisor. That is perfectly sensible but the person should make it clear as to \what role they are performing in their discussions and communications with the Contractor, Clause 141s very important forthe Contractor to appreciate the effect of the Project ‘Manager's or the Supervisor's acceptance of various submissions under the contract. Where, for example, the Scope states the Contractor isto design all the works, and the design i, accepted by the Project Manager (under clause 21.1) but found later to be notin accordance with the applicable law, then this will stil be forthe Contractor to put right. It is no excuse that the Project Manager might have done ths or could or should have done that, the Contractor isthe designer. This s reflected in the alternative definitions of a Defect set out in cause 11.206) ‘The ECC therefore could be used in a turnkey type project where there is no submission of design required ~ the Contractor designs, builds and then hands over to the Client, with Potentially minimal actions of the Project Manager. Managing an Engineering and Construction Contract See eeeCHAPTERS: APPENDICES Early warning 142 143 6 p MAIN OPTION CLAUSES (On major contracts, itis normal for both the Project Manager and Supervisor to have staff to help them carry out their duties. This clause enables them to delegate specific authorities and duties under the contract to members of staff or other people. Before delegation is effective, ‘the Contractor must first be notified, Notification to the Contractor should include details of ‘the actions delegated and the person to whom they are delegated. ‘An example of such delegation on our contract is found in Project Manager's notification PMIN/2 shown later. Delegation does not prevent the person who delegates from also acting themselves. In such circumstances, however, care needs to be taken to ensure contradictory communications {are not given to the Contractor. The Project Manager would normally advise the Client and the Supervisor, as well as the Contractor, of any delegation of the Project Manager's actions, but this is entirely a matter for arrangement between these parties. In the samme way the ‘Supervisor would normally inform the Project Manager and the Client of any delegation Of the Supervisor's actions. A Project Manager could delegate actions to the Supervisor, or the other way around. However, in very small contracts, where for example the Supervisor is absent for unavoidable reasons, it may be convenient for the Supervisor to delegate the ‘Supervisor's actions to the Project Manager. Its essential to ensure that there are properly briefed delegates of the Project Manager and ‘the Supervisor in place to manage the situations when the people in those roles are away from work for time to time for holiday and illness absences. Some of the obligations of the Project Manager and Supervisor must be carried out quickly, and they cannot wait until the named people return. ‘The authority to change the Scope belongs exclusively to the Project Manager and any person to whom the Project Manager delegates this authority. Neither the Client nor the Supervisor can change the Scope. The ECC does not limit the ordinary meaning of the word ‘change’ in relation to a change to the Scope or a Key Date. Consequently for changes to the Scope, it includes additions to and deletions from this document, as well as alterations to it. However, itis important to Understand that such changes cannat go outside the definition of the works identified in the Contract Data, For changes to the Key Date, it only includes moving the Key Date itself backwards or forwards; the Condition cannot be changed. The Project Manager should discuss such changes with the Contractor to ensure that they are practicable. Any such changes will be compensation event as set out in clause 60.1(4). If, for example, the Project Manager issues new information which the Project Manager intends merely to clarify a previously issued drawing or specification wording this is as much ‘a change to the Scope as the issue of a new drawing which adds to the work which the Contractor must do. Consequently, all such changes are potentially compensation events as set out in clause 60.1(), Clause 15 deals with early warnings and is designed to be a reciprocal but simple risk management too). t deals with al risks and not just confined to those thatthe Cent is responsible for. If the Contractor or the Project Manager becomes aware of any of the matters stated in clause 15.1 they are obliged to notify the other of an early warning. “The Contractor and the Project Manager give an early warning by not the other as soon as either becomes aware of any matter which could... ‘The early warning process is entirely separate from the compensation event process. Sometimes matters which start out as early warnings may become compensation events, but Others will not. When a compensation event arises, the Project Manager and Contractor are left only to deal with cost and time matters arising due to the event, When an early warning ‘matter arises, the Project Manager and Contractor set about making and considering ‘proposals for how the effects of each matter in the Early Warning Register can be avoided or reduced, amongst other obligations, at early warning meetings. CCORE AND MAIN OPTION CLAUSES Neither the Project Manager nor the Contractor should look at this process as just a precursor to a “claim” for a compensation event, Itis important for both of them to ‘Understand that this imparts obligations on them both. The Project Manager should be just 28 active as the Contractor in notifying early warnings that fall within the definitions in clause 15.1. That will ensure that these matters can be dealt with before they cause problems, rather than afterwards ‘There i litle point and no obligation to notify an early warning of a matter which has happened and has no future consequence. The process is about seeking solutions to problems to do with the future, not the past. fan event has happened it may well be a compensation event or perhaps a Defect, but is not something that requires an early warning 10 be notified, This process continues throughout the contract period, early warnings are notified, captured ‘on the Early Warning Register, early warning meetings are held and hopefully most problems are solved bringing advantage to all those who will be affected. The Early Warning Register is kept up-to-date through the early warning meetings and the Parties can keep the risks in the numbered order in which they occurred, of whether they have been avoided or passed, or bby a most sophisticated likelihood/severity method, if they want to. There is no prescriptive requirement for such in the ECC, the Parties can decide what is best for them, Note that while there is an obligation to notify the early warning as soon as possible, there is no requirement to hold the Early Warning Meeting as soon as possible. The meeting is held ata time which reflects the seriousness of the potential threat or opportunity identified, ‘The purpose of this clause is to make binding the obligation to warn as soon as possible of anything which may affect the cost, timing of Completion or a Key Date, or the quality of the works. The sanction for failure by the Contractor to give early warning is to reduce the payment due for a related compensation event (clause 61.5 and 63.7). Another sanction is that payment might be reduced as a Disallowed Cost arises (for Options C to E, clause 11.2(26), and for Option F (clause 11.2(27). Examples of such problems could be + discovery of unexpected ground conditions, © potential delay in the supply of crucial Plant and Materials, © potential delay caused by the work of public utilities or other contractors, © effects of bad weather, * failure by a Subcontractor to perform, and © design problems. The Project Manager is motivated to give early warning to maximise the time available to consider the problem with the Contractor and thereby to increase the likelihood of finding the best solution to meet the Client’ interests, If an early warning is given by either the Project Manager or the Contractor, the Project ‘Manager is required to make an addition to the Early Warning Register to cover the matter. Getting parties to think about both threats and opportunities in @ collaborative way can only bbe good for the contract and the people and organisations working on it, ‘The Early Warning Register is defined in clause 11.2(8) and is a live document which wil change during the progress of the works. Initially it wil contain those risks identified by the Client and the Contractor in parts one and two respectively of the Contract Data. Risks are then added to the Early Warning Register as part of the early warning process described in clause 15, or removed because of actions taken by the Parties to avoid them or because they did not happen, ‘onapren 1 cHarreR 4 ‘oHaPrER3 charrens ‘CHAPTER APPENDICES 2 struction Contras neccontract.com | ©nec2017 ‘Managing an Engineering and C ructon Contract | 3‘CHAPTER? CHAPTERS ‘CHAPTERS charters APPENDICES Contractor's proposals Managing an Engineering. CCORE AND MAIN OPTION CLAUSES Immediately following contract award, the first Early Warning Register is compiled and issued by the Project Manager. At that stage, it may do no more than lst those matters set out in Contract Data parts one and two. The Project Manager must also set up the first early ‘warning meeting with the Contractor. At the same time the Project Manager and Contractor should arrange for future early warning meetings to be set up for the rest of the duration of ‘the contract at the intervals stated in the Contract Data. ‘The Project Manager or Contractor can and should instruct the other to attend any additional early warning meetings they think are necessary. These are often needed because matters Crop up which need urgent actions, An early warning should make clear whether the matter can be dealt with in the next routine early warning meeting or is urgent and needs to be dealt with in its own early warning meeting The contract specifically allows for Subcontractors to attend early warning meetings if they can help solve the problem. In addition, the Contractor and Project Manager may agree that ‘other people should attend according to the particular circumstances. For example, suppliers, public utilities, local authority representatives or the Client itself may attend, if ts thought ‘that their attendance can help manage any of the matters on the early warning register. 15.3. The intention of the requirement for the Contractor and Project Manager (and any other people attending the meeting) to co-operate is to ensure, as far as possible, that actions are taken and decisions made which avoid or reduce the effects of identified risks on cost, {quality and time. [Note that the intention of the meeting isto solve the problem (the ‘threat’) or exploit the ‘opportunity. It is not to decide responsiblity, or who will pay for actions taken; the relevant provisions of the contract will cover these aspects quite adequately. ‘There isa collective responsibilty of those attending to do all of the things stated in clause 15.3; its not left to just the Project Manager or Contractor to do this. Those attending should be at their creative best in seeking solutions to solving threats and exploiting ‘opportunities; again, a good outcome of a collaborative contract. Itis also important, especially at regular early warning meetings, to review the progress and effectiveness of the various actions recorded in the Early Warning Register and decide if any need changing. At the same time matters which have passed can be agreed to be deleted from the Early Warning Register. 15.4 A required outcome is for the Project Manager to update the Early Warning Register to record any decisions about actions to be taken, stating not only who will take them but also ‘when action will be taken, and to issue the updated register within one week of each early ‘warning meeting 6 16.1 This clause allows the Contractor to propose that the Scope provided by the Client is and changed. This change would only be proposed where the amount the Client pays to the 16.2. Contractor for Providing the Works is reduced. This clause does not cover the situation where the Contractor proposes the Scope provided by the Contractor is changed The sorts of proposals a Contractor might suggest here might be those that historically were ‘called value engineering ideas ~ suggestions for using different types of Plant and Materials, 10 those stated in the Scope; or changing the design life of a part of an asset; or changing a Client design to allow for simpler and safer construction methods. ‘The Project Manager, most likely in dose consultation with the Client, would need to understand the impact such a change might have on operating costs of the asset, before deciding on the best way forward, neccontractcom | © nec 2017 Requirements for instructions ® nec 2017 163 v7 m4 CCORE AND MAIN OPTION CLAUSES ‘Within four weeks of the Contractor making the proposal, one of three routes might be taken by the Project Manager. It might be the proposal has been considered in the past and is of no interest to the Client, So, it would not be accepted. Or that itis of interest but the Client would like to know the effects on the Prices and the Completion Date so the Project, ‘Manager instructs the Contractor through the proposed instruction route (see clause 65) Finally, that the proposal is required and the Project Manager issues an instruction to change the Scope straight away. This then follows the normal compensation event process for valuing (see clauses 60 to 64 and 66). This would include the value engineering percentage assessment in cause 63.12 for Options & and B, and the Prices (the target) remaining the same in Options C and D through clause 63.13 to allow the Parties to potentially share in the Contractor’ share (see clause 54, The Site is defined as the area within the boundaries ofthe site stated in the Contract Data, This area will comprise locations provided by the Client for the works. However, contractors often make use of other areas, sometimes adjacent to the Site, for a variety of purposes, such as batching plant, temporary workshops and steel bending yards ‘On some contracts the Contractor may establish depots which are distant from the Site. It ‘an be an advantage to include them in the contract areas. ‘To achieve this, the concept of Working Areas is introduced. The Working Areas include the Site and other areas. The Contractor should have listed the specific areas by location in the Contract Data part two. Note that itis expected that these areas are specific to the contract and closely associated with Site activity. ‘Sometimes the precise area may not be known at tender or it may be anticipated that the area could change during the contract (for example, where the location of an off-site batching plant will be moved during the construction of a road or where the Contractor is responsible for locating borrow pits). In these cases, a generic description of the purpose or type of area should be listed. The ‘original’ working areas are defined in Contract Data part two. AS its plans develop, the Contractor may find that it needs to add further areas as Working Areas, for example an additional borrow pit, 3 compound for the temporary offices or addtional land to store Plant and Materials on. Ths cause gives the Project Manager discretion to refuse acceptance, in that there are two reasons for not accepting the Contractor's proposal, but the Project ‘Manager is not obliged to refuse. The procedire for tis is set out this clause. This clause is intended to ensure that action is taken as soon as possible to deal with ambiguities and inconsistencies which are noticed in or between the contract documents. ‘There is no stated precedence of documents in the ECC though one can be interpreted for certain of these documents, For example, clause 20.1 states that “The Contractor Provides the Works in accordance with the Scope” and, assuming Option A is used, clause 55.1 states that “Information in the Activity Schedule is not Scope or Site Information”. So in determining what the Contractors to do (the Scope), it cannot reply upon what the Activity Schedule does or does not say. The Project Manager has the responsibilty of trying to resolve an ambiguity or an inconsistency in or between documents. However, in doing so, it must be recognised that the Project ‘Manager has the power to unilaterally change only some parts of the contract to resolve an ambiguity or inconsistency, ie. the Scope and Key Dates (clause 14.3) and, in Options B and D, the Bill of Quantities (clause 60.6). IF the Project Manager does not have the power to resolve ‘the ambiguity or inconsistency al the Project Manager can do is inform the Parties how the ‘contract should be changed. Such a change can however, only be made with the agreement ‘of both Parties (see clause 12.3) and ifthe Parties cannot reach agreement they and the Project Manager will have to live with the ambiguity or inconsistency as best they can. ‘An instruction to change the Scope to resolve an ambiguity or inconsistency is a compensation ‘event, Assessment is based on the rule stated in clause 63.10, However, i an inconsistency becomes apparent between the Scope provided by the Cent and a design which is part of the Scope provided by the Contractor in the Contract Data part two, the instruction would normally be to require the design to comply with the Client’s Scope, Such a change would not bbe a compensation event, because clause 60.1(1) second built states as much, Managing an Engineering and Construction Contract | 15 CHAPTER 6 ‘CHAPTER S ‘CHAPTER 4 HAPTER APPENDICES: & conprens coarTeR a HAPTER CHarTeR 6 APPENDICES =nec4 Corrupt Act Prevention Manasi CCORE AND MAIN OPTION CLAUSES 17.2. Achange to the Scope to resolve illegal or impossible requirements in the Scope is made Under clause 14.3 and is a compensation event (see clause 60.1(1) ts 18 ACorrupt Act is defined in clause 11.2(5). The Contractor does not do a Corrupt Act and takes positive action in respect of Subcontractors and suppliers to stop such acts. Equivalent provisions must be contained in certain subcontracts and if not, might constitute a reason for rot accepting any such proposed subcontract documents. Finally, the Client can terminate for any Corrupt Act (clause 91.8), so the Contractor needs a thorough management plan to address the issue. 9 19.1 Clause 19 deals with what are commonly called ‘force majeure’ situations. These are significant, unexpected events causing major problems to a contract that prevent it from being completed on time, or at all. No specific notification of such an event is required; it wil likely have been notified (as an early warning) under clause 15, and it will be because of the consequent Early Warning Meeting that the event is recognised as falling under the provisions of this clause 19. Once it is so recognised, the Project Manager has authority to manage the consequences in the best interests of the Client, and the event is a compensation event (clause 60.1(19). The event is therefore at the Client's risk for both time and cost. For this reason, clause 91.7 allows the Client to terminate the Contractor's obligations to Provide the Works. ‘An example might be when a bolt of lightning sets fire to a building shortly before Completion. Although the repair work may be covered by insurance, the consequences of delayed Completion are not. Without relief under the contract, the Contractor could have to ppay delay damages for late Completion of the works if Option X7 is incorporated. Provision is made for two cases. The fist is when the event prevents the whole of the works being completed. The second case is when the event prevents the whole of the works being ‘completed by the date for planned Completion shown on the Accepted Programme: this is a strict test ~ it is not simply a matter of delay. The dates must be impossible to meet no ‘matter what resources are used to try to catch up the time. In both cases, the event must be defined in a way which excludes the normal rsks one would ‘expect on a contrac. In addition, the drafting considers essential that the Project Manager ‘controls the situation and makes decisions on how to deal with the event. Clause 19 defines ‘the prevention event by two further tests. ‘The first testis that the event must be one which neither Party could prevent. This is a strict test; there is nothing that could reasonably have been done to prevent the event. For example, in the case of a Subcontractor becoming insolvent, this could have been prevented if the Contractor had not subcontracted the work, or checked more carefully the Subcontractor’ solvency before placing the order. ‘The second test is that it would have been unreasonable for an experienced contractor to have allowed for the event. The wording provides a similar foreseeabilty test to that used for physical conditions. This makes it clear that the matter isa rsk issue. Again, itis doubtful that a Subcontractor’s insolvency would pass this test given that such insolvency is a known risk. ‘An example of a genuine prevention event might be when a ship carrying a transformer to a power station site sinks and a replacement cannot be obtained in time to meet the date for planned Completion shawn on the Accepted Programme. The risk of the loss of the transformer is very small, and it would have been unrealistic to expect an experienced contractor to take - oF the Client to pay for ~ the necessary mitigation measures for the risk. It would have been unreasonable to expect an experienced contractor to have purchased and separately shipped a spare transformer. If a genuine prevention event has occurred, then the Project Manager must first discuss the problems with the Client and can give any instruction that the contract allows. That will Usually be changing the Scope in some way. Equally the Project Manager could decide to ‘accept the delay, Finally, the Cent can terminate the Contractor's obligations if the forecast delay is more than thirteen weeks, see clause 917. .2n Engineering and Construction Contract neccontractcom | © nec 2017 Illustrated use of NEC4 communication forms CCORE AND MAIN OPTION CLAUSES Whatever action the Project Manager takes the event is 2 compensation event. Any change 10 the Scope instructed by the Project Manager could be treated either as a part ofthis compensation event, of a5 a separate compensation event. (On our contract, the Project Manager advised the Contractor that the Project Manager intended to delegate most of the Project Manager's duties, and would notify the details 10 the Contractor immediately following the start-up meeting. This was notified on @ Notification form numbered PMIN/ following discussions with the Client as to the desired extent of delegation responsibilities. Notification To: Mr Builder, Woodstone Address: Construction Lid Woodstone House, Colingbourne Belinger, Wincanton AB3 7TT From ‘Mr k Williams ‘Address: County Hall, Greater Binding, Greenwheatshire GN7 388 Project Name: Much Binding Bypass Project ID: 1234 Notification No: 10th October 2017 PMN Date: Under clause 14.2 I notify you: That Mary Miles is delegated all actions of the Project Manager in the contract except for clauses 51, 90-93. Mary's contact details are XYZ. Copy to: Site team Signed: ‘an Engineering and Construction Contract, ” cuarrens E CHAPTERS ‘oHPrERS CHAPTER APPENDICESCCORE AND MAIN OPTION CLAUSES ‘On our contract, the Contractor met the Supervisor in the car park. The Supervisor had just returned from a manufacturer's yard and said that the off-site testing of the free-issue bridge beams had probably filed. The Contractor considered this was a matter that the Contractor was obliged to notify an early warning to the Project Manager. The communication is a Notification and comes from the Contractor so the ‘Notification’ form is used, as shown, below. Notification To: Mr k williams County Hall, Greater Binding, Greenwheatshire GN? 388 Mr Builder, Woodstone Address: Construction Ltd Woodstone House, Collingbourne Belinger, Wincanton AB3 7TT Project Name: Much Binding Bypass Project ID: 1234 Notification No: CNL Date: 7th October 2017 [Under clause 15.1 | notify you: that we were advised today by Mr H Paddick that there had been a problem with the testing of the free-issue bridge beams which may lead to late delivery of the beams and a delay to Completion. Site Team, Head Office neccontract.com | © nec 2017 | coRE ANO MaiN OPTION cLAU There is no Early Warning Register form produced by NEC, Many organisations have theit ‘own procedures and forms in place for early warnings. This is fine but the Parties need to ensure that the requirements of the contract are followed. The Project Manager included the two things the contract demands, but also added some additional columns to suit the Contract. Tis is good management - regard the contract as a set of minimum obligations, there is nothing stopping the Parties doing more than the minimum required if they feel itis in the interests of the contract. The Project Manager issued the Early Warning Register to the Contractor and instructed the Contractor to attend an early warning meeting to take place the next day. i Early Warning Register| To: Mr Builder, Woodstone Address: Woodstone House, Construction Lid Collingbourne Belinger, Wincanton AB3 7TT From Mr K Willams ‘Address: County Hall, Greater Binding, Greenwheatshire GN7 388 Project Name: Much Binding Bypass Project ID: 1234 Notification No: EWR/T Date: ‘7th October 2017 eran ereee aa iD Source Description of the matter ‘The way in which the effects Of the matter are to be avoided or reduced 1 or The level of the River Binding exceeds 2.6m as measured at the weir at Little Binding 2 co2 Contamination material is found within the boundaries of the site Copy to: Site Team Signed: ” Managing an Engineering and Construction Contact APPENDICES 19=—nec4 =—nec4 CCORE AND MAIN OPTION CLAUSES .ND MAIN OPTION CLAUSES Clause 15.3 requires five basic requirements to work through in any early warning meeting, ‘THE CONTRACTOR'S MAIN RESPONSIBILITIES ‘The meeting could last 5 minutes or 5 hours, there could be 2 people or 10, it could be in person, by teleconference or videoconference; the who, how, where, when aspects of the ees oe 20 meeting ae left tothe Project Manager and Contractor to apply judgement in deciding what Works 20.1. This clause states the Contractor's basic obligation, to “Provide the Works in accordance with ‘CHAPTER is best in the circumstances. (On our contract, the attendees made their decision on CN/I. The Client's designer said that the tests were not conclusive; the fllure was within design tolerances but that the tests |would be repeated this week. This would be reported back as soon as the results were available but the scheduled free-Issue date was not in doubt currently. the Scope". Provide the Work’ is defined in clause 11.2(18) and has quite a wide-ranging ‘meaning. The Scope is defined in clause 11.2(16) and should have stated everything the Contractor's to do including design work and constraints The Project Manager isthe only person able to change the Scope by an instruction, and each instruction will generally lead to a compensation event arising under clause 60.1(1) conapren 1 Option F In a management contract, the core clauses and this clause state how the Contractor isto Early Warning Register| 20.2 Provide the Works by identifying what itis to do itself and what it isto subcontract. Option C _ In cost based contracts, the Project Manager has a greater interest (on behalf the Client) on To: MrB Builder, Woodstone Address: Woodstone House, to F 20.3 the practical implications ofthe design of the works and on subcontracting arrangements, Construction Lid Colingbourne Belinger, which this clause provides for. incanton AB3 TTT ee eee Option C This clause provides for periodic forecasts ofthe total Defined Cost for the whole of the 10 F 20.4 works to be prepared by the Contractor in consultation with the Project Manager. These are From: Mr K Willams a ne submitted to the Project Manager, together with an explanation of the changes made since Binding, Greerwheatstire the previous forecast is submitted GN7 388 c _————___________ - No reply to this is needed (by the Project Manager andi isnot submitted for acceptance. Fe Project Name; Much Binding Bypass ProjectiD: 1234, “There are also no repercussions if the forecasts turn out to be inaccurate, Ths sort of i [_—_—$_$_—$_____ — forecasting has been carried out by contractors for many years and its only right in a cost Notification No: EWRV/1 Date: 8th October 2017 reimbursable type contract to make this available to the Client for management purposes. ‘The Contractor should note that a sensible amount of time is needed for this deliverable; the ription of the 1 way in wii ff ; Source Peso een et eer ee Ones Project Manager and Client should accept thatthe forecasts are only that, and will not be avoided or reduced coe = the River Bin The 2 € . out ane coe ee at Contractor's 21.1 Those parts of the works which the Contractor is required to design should have been z aca ie nana be design stated in the Scope provided by the Client and the interfaces with those parts of the works e the weir at Little Binding designed by the Gient identified. This may have been done by stating ‘everything except the 2 coz Contamination material is found following’ or ‘the following’ bedeilslelceetenlerd sci Where the Contractor is required to design a part of the works, the Client should have stated it criteria to which it requires designs to conform. This may include details of 3 cn Possible late delvery of Re-test to be carried out inthe Scope the criteria t a 2 free-issue beams due to off-site before 12/10/17 the form, geometry and dimensions of the works, specifications, codes of practice, standards : testing fallre and environmental criteria. | Where the Contractors to carry out mest of the design, similar criteria should have been i © stated in the form of a performance specification. Ths will describe the characteristics, nature and performance ofthe finished work and should have included any limitations which the Glient wishes to impose upon appearance, durability, operating and maintenance cost, etc (On contracts where the Contractor has responsibilty for considerable design, Option X15 will . Copy to Site Team Usually have been chosen, which sets out further obligations 2 aa Any change to the allocation of design responsibility or change or addition to the design 6 me criteria in the Scope can be achieved using a Project Manager's instruction under clause 14.3, ‘Again, this change to the Scope results in a compensation event arising under clause 60.1(1), A change to the allocation of design responsibilty can impose significant additional risks on During the meeting, they did not take the opportunity to address any of the other matters the Contractor, particulary if Option X15 has not been incorporated inthe contract. Ether listed on the Early Warning Register. Any meeting could address one such risk or a series, these risks must be properly accounted for inthe assessment of the compensation event, as, 8 cof them, These decisions were recorded; the Early Waring Register was revised and in clause 63.8, or the Parties should agree to incorporate XI in their contract, using clause 3 immediately issued to the Contractor 23 , Srec2017 | neccontact : : ao | Meese Cnc " om | © nec 2017 coniactcom Managing an Engineering and Construction Contract) 24 ‘CHAPTER cHarrens, cHarrens carrera APPENDICES‘CHAPTER CHAPTERS CHAPTERS CHAPTER a ‘CHAPTER APPENDICES =nec4 Design of Equipment 22 213 23 234 gineering and Construction Co CCORE AND MAIN OPTION CLAUSES Just because the Scope states the parts of the works which the Contractor is to design, it does not mean that the Contractor's to submit any or all that design to the Project Manager for acceptance, Ths is completely dependent on a requirement to that effect being stated in the Scope. This allows the Client to be selective on what design is required to comply with the design acceptance process. Once ths is determined, the Contractor must submit such design in time for the (generally iterative design acceptance process to happen in time for the works to be constructed. This should consider the period for reply in the Contract Data, ‘The procedures for submission by the Contractor of design particulars and acceptance by the Project Manager ate set out in this clause. The time limits are those stated in clause 13. They are intended to encourage prompt action by the Parties so that delay can be avoided and the whole process properly managed, Two reasons that the Project Manager has for not accepting the Contractor's design are stated, ‘The Project Manager is not obliged to refuse acceptance of the Contractor's design which does not comply with the Scope but, if the Project Manager does accept such design, the Project ‘Manager should change the Scope accordingly. As stated in clause 60.1(), such a change to the Scope may or may not be a compensation event (see explanatory notes on clause 60.1(1), ‘Sometimes the Project Manager wil see in the design submitted by the Contractor Characteristics which, if they had been foreseen, the Project Manager would earlier have stated to have been unacceptable by including an appropriate constraint in the Scope. In this situation, the Project Manager should add the constraint to the Scope to justify the withholding of acceptance of the Contractor's design. This change to the Scope is a ‘compensation event, This clause in the ECC ensures that the Contractor is protected from ‘the risk of additional constraints on its design being introduced after its commitment to the Prices for the work has been made, Clause 14.1 makes clear that, when the Project Manager accepts the Contractor's design, there is no change of liability for the design. The Client is thus placing reliance on the design skill of the Contractor. The final sentence is an important hold point in the contract and is intended to prevent abortive work which would result if the Contractor began to manufacture or construct to a design which had not been accepted. . Its important to understand that the design issued for acceptance by the Contractor does rnot form part of the Scope, That means the Contractor can change the design later, but must submit the new design to the Project Manager for acceptance before itcan proceed with the ‘work. Once the design is accepted, the Contractor must construct the works in accordance with it, otherwise it will be a Detect (see clause 11.2(6) Its important that submissions by the Contractor are in packages which are capable of being properly assessed, Independent design pieces may be fine when looked at in isolation, but ‘ay not work when all assembled together. This clause allows the Project Manager to accept the Contractor's design of Equipment without affecting the Contractor's responsibilities (clause 14.1). The Contractor is stil iable if, after having made the Equipment to details which have been accepted, it fails because it did ‘not comply with the Scope. The clause gives three criteria for not accepting the design of the Equipment. Failure to comply gives the Project Manager the right, but not the obligation, to, decline to accept the design Unlike clause 21.2, which provides that the Contractor should not proceed until the Project ‘Manager has accepted the Contractor's design of the works, there is no restraint on the Contractor proceeding even ifthe design of an item of Equipment has not been accepted. “The Contractor can proceed even though it has not obtained acceptance ofits design of Equipment, which includes temporary works. The Project Manager should seek details of temporary works well in advance of when the workis going to be done (prompted by what the Project Manager sees on the Contractor's programme) so thatthe Project Manager «an register any dissatisfaction with the proposals in good time. However, responsibility for

You might also like

• The Subtle Art of Not Giving a F*ck: A Counterintuitive Approach to Living a Good Life

  

  From Everand

  The Subtle Art of Not Giving a F*ck: A Counterintuitive Approach to Living a Good Life

  Mark Manson

  Rating: 4 out of 5 stars

  4/5 (5951)
• Principles: Life and Work

  

  From Everand

  Principles: Life and Work

  Ray Dalio

  Rating: 4 out of 5 stars

  4/5 (622)
• Never Split the Difference: Negotiating As If Your Life Depended On It

  

  From Everand

  Never Split the Difference: Negotiating As If Your Life Depended On It

  Chris Voss

  Rating: 4.5 out of 5 stars

  4.5/5 (888)
• The Glass Castle: A Memoir

  

  From Everand

  The Glass Castle: A Memoir

  Jeannette Walls

  Rating: 4.5 out of 5 stars

  4.5/5 (1737)
• Sing, Unburied, Sing: A Novel

  

  From Everand

  Sing, Unburied, Sing: A Novel

  Jesmyn Ward

  Rating: 4 out of 5 stars

  4/5 (1217)
• Hidden Figures: The American Dream and the Untold Story of the Black Women Mathematicians Who Helped Win the Space Race

  

  From Everand

  Hidden Figures: The American Dream and the Untold Story of the Black Women Mathematicians Who Helped Win the Space Race

  Margot Lee Shetterly

  Rating: 4 out of 5 stars

  4/5 (927)
• Grit: The Power of Passion and Perseverance

  

  From Everand

  Grit: The Power of Passion and Perseverance

  Angela Duckworth

  Rating: 4 out of 5 stars

  4/5 (619)
• Shoe Dog: A Memoir by the Creator of Nike

  

  From Everand

  Shoe Dog: A Memoir by the Creator of Nike

  Phil Knight

  Rating: 4.5 out of 5 stars

  4.5/5 (545)
• The Perks of Being a Wallflower

  

  From Everand

  The Perks of Being a Wallflower

  Stephen Chbosky

  Rating: 4.5 out of 5 stars

  4.5/5 (2110)
• Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future

  

  From Everand

  Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future

  Ashlee Vance

  Rating: 4.5 out of 5 stars

  4.5/5 (476)
• Her Body and Other Parties: Stories

  

  From Everand

  Her Body and Other Parties: Stories

  Carmen Maria Machado

  Rating: 4 out of 5 stars

  4/5 (831)
• Bad Feminist: Essays

  

  From Everand

  Bad Feminist: Essays

  Roxane Gay

  Rating: 4 out of 5 stars

  4/5 (1049)
• The Emperor of All Maladies: A Biography of Cancer

  

  From Everand

  The Emperor of All Maladies: A Biography of Cancer

  Siddhartha Mukherjee

  Rating: 4.5 out of 5 stars

  4.5/5 (274)
• The Outsider: A Novel

  

  From Everand

  The Outsider: A Novel

  Stephen King

  Rating: 4 out of 5 stars

  4/5 (1953)
• Angela's Ashes: A Memoir

  

  From Everand

  Angela's Ashes: A Memoir

  Frank McCourt

  Rating: 4.5 out of 5 stars

  4.5/5 (443)
• A Man Called Ove: A Novel

  

  From Everand

  A Man Called Ove: A Novel

  Fredrik Backman

  Rating: 4.5 out of 5 stars

  4.5/5 (4851)
• The Yellow House: A Memoir (2019 National Book Award Winner)

  

  From Everand

  The Yellow House: A Memoir (2019 National Book Award Winner)

  Sarah M. Broom

  Rating: 4 out of 5 stars

  4/5 (99)
• Devil in the Grove: Thurgood Marshall, the Groveland Boys, and the Dawn of a New America

  

  From Everand

  Devil in the Grove: Thurgood Marshall, the Groveland Boys, and the Dawn of a New America

  Gilbert King

  Rating: 4.5 out of 5 stars

  4.5/5 (270)
• The Art of Racing in the Rain: A Novel

  

  From Everand

  The Art of Racing in the Rain: A Novel

  Garth Stein

  Rating: 4 out of 5 stars

  4/5 (4254)
• The Woman in Cabin 10

  

  From Everand

  The Woman in Cabin 10

  Ruth Ware

  Rating: 3.5 out of 5 stars

  3.5/5 (2587)
• A Heartbreaking Work Of Staggering Genius: A Memoir Based on a True Story

  

  From Everand

  A Heartbreaking Work Of Staggering Genius: A Memoir Based on a True Story

  Dave Eggers

  Rating: 3.5 out of 5 stars

  3.5/5 (232)
• On Fire: The (Burning) Case for a Green New Deal

  

  From Everand

  On Fire: The (Burning) Case for a Green New Deal

  Naomi Klein

  Rating: 4 out of 5 stars

  4/5 (75)
• Manhattan Beach: A Novel

  

  From Everand

  Manhattan Beach: A Novel

  Jennifer Egan

  Rating: 3.5 out of 5 stars

  3.5/5 (883)
• The Unwinding: An Inner History of the New America

  

  From Everand

  The Unwinding: An Inner History of the New America

  George Packer

  Rating: 4 out of 5 stars

  4/5 (45)
• The Light Between Oceans: A Novel

  

  From Everand

  The Light Between Oceans: A Novel

  M.L. Stedman

  Rating: 4.5 out of 5 stars

  4.5/5 (789)
• 2023 Updated SMDC Leasing - SPA 2

  

  Document1 page

  2023 Updated SMDC Leasing - SPA 2

  Karen Louise Echavez

  No ratings yet
• Year 2025 Calendar - Hong Kong

  

  Document2 pages

  Year 2025 Calendar - Hong Kong

  Karen Louise Echavez

  No ratings yet
• Coast - House Rules & Regultions Booklet

  

  Document72 pages

  Coast - House Rules & Regultions Booklet

  Karen Louise Echavez

  No ratings yet
• Your Partner For Employee Medical Solutions

  

  Document12 pages

  Your Partner For Employee Medical Solutions

  Karen Louise Echavez

  No ratings yet
• GCC Vs Nec3 Ecc Terms

  

  Document1 page

  GCC Vs Nec3 Ecc Terms

  Karen Louise Echavez

  No ratings yet
• NEC3 Professional-Services-Contract-Guidance-Notes-and-Flow-Charts

  

  Document7 pages

  NEC3 Professional-Services-Contract-Guidance-Notes-and-Flow-Charts

  Karen Louise Echavez

  No ratings yet
• NEC3 Engineering and Construction Contract

  

  Document100 pages

  NEC3 Engineering and Construction Contract

  Karen Louise Echavez

  No ratings yet
• Yes Please

  

  From Everand

  Yes Please

  Amy Poehler

  Rating: 4 out of 5 stars

  4/5 (1941)
• The Little Book of Hygge: Danish Secrets to Happy Living

  

  From Everand

  The Little Book of Hygge: Danish Secrets to Happy Living

  Meik Wiking

  Rating: 3.5 out of 5 stars

  3.5/5 (419)
• Team of Rivals: The Political Genius of Abraham Lincoln

  

  From Everand

  Team of Rivals: The Political Genius of Abraham Lincoln

  Doris Kearns Goodwin

  Rating: 4.5 out of 5 stars

  4.5/5 (235)
• The World Is Flat 3.0: A Brief History of the Twenty-first Century

  

  From Everand

  The World Is Flat 3.0: A Brief History of the Twenty-first Century

  Thomas L. Friedman

  Rating: 3.5 out of 5 stars

  3.5/5 (2272)
• The Gifts of Imperfection: Let Go of Who You Think You're Supposed to Be and Embrace Who You Are

  

  From Everand

  The Gifts of Imperfection: Let Go of Who You Think You're Supposed to Be and Embrace Who You Are

  Brene Brown

  Rating: 4 out of 5 stars

  4/5 (1110)
• Fear: Trump in the White House

  

  From Everand

  Fear: Trump in the White House

  Bob Woodward

  Rating: 3.5 out of 5 stars

  3.5/5 (805)
• The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers

  

  From Everand

  The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers

  Ben Horowitz

  Rating: 4.5 out of 5 stars

  4.5/5 (355)
• Steve Jobs

  

  From Everand

  Steve Jobs

  Walter Isaacson

  Rating: 4.5 out of 5 stars

  4.5/5 (814)
• Rise of ISIS: A Threat We Can't Ignore

  

  From Everand

  Rise of ISIS: A Threat We Can't Ignore

  Jay Sekulow

  Rating: 3.5 out of 5 stars

  3.5/5 (139)
• John Adams

  

  From Everand

  John Adams

  David McCullough

  Rating: 4.5 out of 5 stars

  4.5/5 (2410)
• Brooklyn: A Novel

  

  From Everand

  Brooklyn: A Novel

  Colm Tóibín

  Rating: 3.5 out of 5 stars

  3.5/5 (2029)
• The Sympathizer: A Novel (Pulitzer Prize for Fiction)

  

  From Everand

  The Sympathizer: A Novel (Pulitzer Prize for Fiction)

  Viet Thanh Nguyen

  Rating: 4.5 out of 5 stars

  4.5/5 (124)
• Little Women

  

  From Everand

  Little Women

  Louisa May Alcott

  Rating: 4 out of 5 stars

  4/5 (105)
• Wolf Hall: A Novel

  

  From Everand

  Wolf Hall: A Novel

  Hilary Mantel

  Rating: 4 out of 5 stars

  4/5 (4042)
• A Tree Grows in Brooklyn

  

  From Everand

  A Tree Grows in Brooklyn

  Betty Smith

  Rating: 4.5 out of 5 stars

  4.5/5 (1934)
• The Constant Gardener: A Novel

  

  From Everand

  The Constant Gardener: A Novel

  John le Carré

  Rating: 3.5 out of 5 stars

  3.5/5 (108)