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NEC3 ECC: Impact of quantities being stated in the Works Information when using an Option C

December 23, 2015, 1:54 am
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Under an ECC3 Option C contract, the Works Information contains a number of schedules which include quantities of work to undertake; an example is ducting and lets say it states there is 4,580KM of 100mm 4-way duct to install.

On review of the drawings and following a take-off of quants for procurement purposes, the Contractor finds that there is in fact 5,000KM of 100mm 4-way duct to install.

Would the Contractor be entitled to a Compensation Event for an additional 420m of ducting?

Potentially the Contractor could raise a notification under Clause 17.1 of an ambiguity or inconsistency between the documents and dependent of the response, any subsequent change to  Works Information to resolve the ambiguity or inconsistency would be a Compensation Event and which further to Clause 63.8 would be assessed most favorable to the Contractor.

This example opens up a wider question on what is the impact of stating quantities within the Works Information albeit clearly an Option C contract is not remeasurable?
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NEC3 ECC: Interpretation of clause 64.2

December 30, 2015, 4:38 am
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Core clause 64.2 provides the Project Manager with the facility to use his own assessment of the effect of a compensation event on the remaining work subject to one of two criteria.

The first criteria being that there is no Accepted Programme. This is understandable in that it encourages the agreement of an Accepted Programme.

The second criteria refers to two situations. These being that the Contractor has not submitted a programme or alterations to a programme for acceptance as required by this contract.

My understanding is that the only programmes that are submitted for acceptance are those submitted under clause 31 and subsequently 32.

The first situation of the second criteria is understandable in that it encourages the ongoing agreement of an Accepted Programme.

The second situation referring to “alterations to a programme” seems to relate to programmes submitted under clause 62.2. However are programmes, or alterations, submitted under clause 62.2 in support of a quotation actually submitted for acceptance?

If so this would imply that when accepted it became the Accepted Programme (11.2(1)).

Can you please clarify what is intended by the second criteria (bullet point).
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NEC3 ECC: option D - The Prices with regards to final assessment

December 30, 2015, 4:39 am
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Under 11.2 (31) of the NEC3 option D the guidance notes states the final assessment needs to take account of CE's and re-measurement of the work done. Does that mean the BoQ is completely re-measured and a new target is set at the end the scheme?
 
This seems to go against target cost contract methodology where the target is fixed and then any difference between the target and Defined Cost is shared between the client and contractor under the pain/gain mechanism. It also would make the original target meaningless.
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Answered: NEC3: Is a programme submitted as part of a quotation submitted for acceptance

January 4, 2016, 1:48 am
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It is not the intent that a programme submitted as part of the quotation ever becomes the Accepted Programme once the quote has been accepted/implemented. If you think about it, it wouldn't make sense if a quotation has taken 12 weeks to become accepted, and in the meantime two further programmes have been issued for acceptance and been accepted - you would not want the quotation programme to superseded these two programmes that contain more up to date information. If you have only submitted part of the programme with the quote then this could never become the Accepted Programme. The fact a whole programme has been submitted does not suddenly change the rules here.   

Any programme issued for acceptance at the intervals stated within contract data part 1 should reflect the effects of compensation events as they occur. The initial effects will be on planned Completion, and once the quotation is implemented may then allow the Completion Date to be moved, if the reason for the movement in planned Completion was due to the effects of the compensation event.   

The acceptance of a quote is implementation. Implementation requires the PM to confirm any changes to the Prices, Completion Date and/or Key Dates. This is independent of the programme acceptance process (which progressively will reflect the effects of compensation events).
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Answered: NEC3 ECC: Failure of fabricated Plant and Materials test and workmanship,

January 6, 2016, 6:20 am
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I assume from the reference to 'Disallow' with a capital initial that you are working under a cost based option i.e. C, D or E in which case the same clause applies for Disallowed Cost.

That clause is 11.2 (25). While other sub-clauses might apply, it is most likely that the 4th and 5th main bullets points (after "and the cost of") may apply as something failing a test will be a Defect.

Taking the 4th bullet first, this only applies if theContractor is correcting a Defect after Completion. From what you say, the Contractor is still constructing the works so this does not apply.

Taking the 5th bullet, in plain English, this is where the Contractor - which would include a Subcontractor as defined in the contract and probably is the case as you say it is "fabricated" for this contract - does not follow a methodology stated in the Works Information and not following this results in a Defect. So you need to check the Works Information for any method related statements and have some evidence that not following this method resulted in the Defect.

Regardless, the Contractor may be able to recover some of the cost under their subcontract.
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Answered: NEC3 ECC: Direct/Subcontractor fee percentages when using Option A

January 8, 2016, 11:53 am
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In main Option A the Defined Cost 11.1(22) is the cost of the components in the SSCC whether work is subcontracted or not excluding the cost of preparing quotations.

What this means is that for the direct work undertaken by the main Contractor you apply the rates and percentages stated in the main Contractors Contract Data and apply the direct fee percentage

If the quotation includes Subcontract work you include the cost component e.g. People from the Subcontractor and apply the main Contractor people percentage. You do not use any of the Subcontractors percentages for people overheads, Equipment adjustment, M&F or Design.

So with Subcontractors you are effectively using the main Contractors percentages for the subcontract works with the exception that you apply the main Contractors subcontracted fee percentage to the subcontract works.

It is best to keep the direct work of the main Contractor and Subcontractor separate
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Answered: NEC3 ECC: Amount Due on termination of the Subcontract

January 8, 2016, 11:57 am
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You are nearly there you also need to look at the reason for termination in the termination table 90.2 - the amount due is A1 and depending on the reason will also include a combination of A2, A3 or A4 e.g. cause 93.2 A4 direct fee percentage applied to Options A, B, C and D
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Answered: NEC3 ECC Additional Damage Costs

January 10, 2016, 2:45 am
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This would seem to be an insurance matter and will depend on at what point you in the contract e.g. before or after Completion and whether in the period upto the defects date and also what insurances are required by the contract. Clause 84.2 sets out the insurance table and one heading is liability for loss or damage to property.
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Answered: NEC3 ECC: How long do you have to react to a PMI?

January 11, 2016, 11:07 pm
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There is no set timescale as to how quickly you should react to a PMI. It really depends what the instruction is for. If you are instructed to do something that is a compensation event, then you just need to remember clause 63.7 that requires the Contractor to react "competently and promptly" to a compensation event.
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Answered: NEC3 ECC: Cl 32.1 - Changes to the Accepted Programme

January 13, 2016, 10:49 am
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Rather than state who is right or wrong I think we just need to bang some heads together! However, the NEC does not promote violence so lets answer this more practically:

Project Manager is within his rights to ask the Contractor to explain the changes that have been made compared to the last Accepted Programme. Seems fair enough that this should be down to which activity id's have been affected. However, I would not expect or need to see a list of EVERY single change that the Contractor has made - as this is time consuming, pointless and you have to give the Contractor some credit that they are doing lots of small changes for good reason that don't really affect the bigger picture.  I would want to know as PM key changes in logic, key duration's changed, sections of programme added or developed, anything that has been deleted. The PM or at least his own planner should be able to do any such interrogation themselves - but much better the Contractor does this to fast track the PM's understanding.

I suspect in this example the Contractor could spend longer why they don't have to do this than it would to actually do what the PM asks. It is equally important to both Parties to have an Accepted Programme, but particularly so for the Contractor. Therefore if I was that Contractor I would do what ever it takes (within reason) to get that programme accepted.
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Answered: NEC3 ECC: Revised programmes

January 15, 2016, 4:27 am
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I would agree with the Project Manager that submitting a programme with the only actual data being two weeks old is far too long. If I was that Contractor I would be expecting to bring everything up to date on the date of submission. This can be done progressively during the month so does not need to be a big update on the day of submission.

I would not accept it for one of two reasons - doesn't reflect the Contractors plans realistically (if progress has not been what the programme shows in past two weeks) or that it doesn't show the information requires. Clause 32.1 requires that the Contractor shows actual progress achieved and the effects upon the remaining works - which the Contractor is unlikely to be doing here for the last two weeks worth of activities (unless everything is going to plan).

Big issue for a Contractor to not have a regularly accepted programme - so they should do what ever it takes to get that programme accepted, and I don't think the PM  is being unreasonable here.

In future you could state in Works Information that the Contractor has to submit a programme with a data date (progress date) the same date as submission which would avoid any misconception on the Contractors part of their obligations/expectations.
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Answered: NEC3 ECC: What is the process for dealing with unexpected ground conditions?

January 15, 2016, 4:45 am
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1) The Contractor should notify that they believe this to be a compensation event stating why. It looks like this would be a CE due to clause 60.1(12) which is ground conditions that would have been unreasonable for the Contractor to have expected.  

2) The Project Manager needs to decide if they agree it s a Compensation Event. They need to consider the Site Information that was available to the Contractor and see if they indeed agree that it is something that the Contractor could not reasonably have foreseen from the information available to them. They also need to consider any Z clause amendments (changes to standard contract) as to whether these change the associated risks for this particular element. They then need to respond to the Contractor (within one week) as to whether they agree it is a CE and therefore request a quote, or that they do not believe it to be a CE (stating why).

3) If PM has agreed then the Contractor goes ahead and produces the quote. If PM states it is not a CE, Contractor has to either accept it and move on, or beef up their argument/evidence, or ultimately consider adjudication to overturn the decision if they believe the PM to be wrong.

May also be worth having a risk reduction meeting here to discuss the fact there is more risk on the end date not being achieved and what the Parties want to do about that (if anything). (Depending on what is instructed as a result of that meeting may or may not be a further compensation event)
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Answered: NEC: ECC Option A - how do I assess Compensation Events when the Shorter Schedule of Cost Components does not include rates for People?

January 16, 2016, 5:55 am
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Cost component 11 in the SSCC would cover all the specific items listed in cost component 1 in the Schedule of Cost Components. So it is worthwhile using the SCC cost components to build up your people costs.

In regard to the future contract, the Parties to the contract could by agreement change the contract to allow for the use of stated rates for different grades of people.

This is no pure Nec as the principle is that you do not use rates or prices stated at tender but use the  actual Defined Cost to the Contractor for the compensation event.

The idea being that a Contractor should be no better nor worse off for a compensation event (an Employer's risk event) occurring.
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Answered: NEC3 ECC: Is Damage to Existing Infrastructure a Disallowed Cost?

January 17, 2016, 6:46 am
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I would have thought this would come under the third insurance in the table in Clause 84.2, which is to be provided by the Contractor.
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Answered: NEC3 ECC: What is the outcome if Clause 60.1(12) has been deleted from the contract? Does this make all ground conditions Contractor risk?

January 17, 2016, 6:48 am
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Answered: NEC3 ECC Option C - Is damage to crew transport a disallowable cost?

January 19, 2016, 4:30 am
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I think Jon has answered the question you have asked - however I smile slightly at the mention of an early warning here. I assume that you don't know who did the theft, and if you could have raised an early warning because you knew who was planning to steal it then the police will have their man!!!
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Answered: NEC3: How can I forecast defined cost of a compenation event if rates are not included in SSCC?

January 19, 2016, 8:43 am
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Compensation events which are Employer risk events under the contract - should put the Contractor back into the same position had the compensation event not occurred. Using Defined Cost in lieu of rates means that a Contractor should be indifferent to the solution as he will be compensated his actual Defined or forecast Cost. This is in lieu of tendered rates and prices which could be high or low and often led to games on the variations issued on traditional contracts.

I tend to think of the calculation of the Prices as resource based estimating with the quotation built up from the principles stated in the SCC or SSCC.

So taking your first paragraph which outlines Clause 63.1 it states that changes to the Prices are assessed as the impact of the compensation event on actual Defined Cost of work done, forecast Defined Cost of work not yet done and the resulting Fee.

Their are no stated rates for People in cost component 1 instead you build up the forecast cost of a person/or grade of person who will be involved with the compensation event at the time when it occurs.
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Answered: NEC3 ECC: If the Employer reduces the scope of the works to be completed, does this automatically adjust the Completion Date?

January 22, 2016, 2:57 am
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No.

This will be a compensation event, which will lower the total of the Prices, and also bring forward planned Completion - but Completion Date does not move. The only real benefit to the Contractor is that they wont be charged Delay Damages until after the original Completion Date.

The only way to bring forward Completion Date is through "acceleration" under clause 36.
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Answered: NEC3 PM DISAGREES WITH CE EVALUATION/QUOTATION

January 22, 2016, 3:06 am
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Project Manager should make their own assessment if they do not believe the quotation to be correct. Assuming these works have already been instructed under 61.1, the works should be proceeding anyway. The process you describe here is a parallel process to see how much the Contractor should be paid, and what effect (if any) there should be on Completion Date.

If the Contractor does not agree with the assessment/implementation by the PM then their recourse is only through adjudication.
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Answered: NEC3 Short contract termination

January 25, 2016, 2:04 am
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I am assuming that it is the Employer terminating for Reason 5 which is "for any other reason".

If this is the case then, as with all terminations, the Contractor is paid an amount in accordance with the 3 bullet points of 92.1.

Because it reason 5 and the Employer is terminating then, under clause 92.3,"the amount due on termination also includes 5% of any excess of a forecast of the amount due at Completion had there been no termination over the amount due on termination assessed as for normal payments.

In other words :
1. Calculate the amount due to termination INCLUDING for both implemented compensation events i.e. added to the Price List, and those in process of being assessed and for where cost has been incurred.
2. Subtract from this all the payments that the Contractor has been paid and will be entitled to e.g. work done but not yet paid for, both it was done early in a month & an assessment date has not been reached to pay them for it AND due to compensation events which have happened and are in process of being assessed. Slightly simplifying this is the forecast end Prices minus the current PWDD.
3. Multiply the figure by 5%.

For most builders this 5% won't cover your overheads + profit but would come close to covering your overheads. Whether it does or does not is contractually irrelevant as the Parties signed a contract with these express provisions detailing how payments on termination were sorted out.
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