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Answered: NEC ECC: Contractor refuses to accept Project Managers decision

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Ultimately - yes! (although they can carry on talking)

That is exactly what adjudication is intended to be for - for an independent person to make a contractual judgement on who they think is correct.

Answered: NEC ECS: Using X18 to limit X7 delay damages?

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Delay damages will be capped at 10% but the amount will not form part of the cap on total liabilities.

X18.4 states that the total liability for all matters other than the excluded matters is limited to the amount stated in the Subcontract Data. As you state, if X7 applies delay damages are an excluded matter.

Delay damages would therefore not be caught in the total liability but because of the additional wording the damages under X7 (themselves) would be capped at 10% of the total of Prices. They would not be accounted for in the total liability.

eg

Prices £10M, liability excluding X7 = £500K, X7 = £600K, total liability limited to £900k (say).

Liability = £500K + £600K = £1.1M

X7 = £1.2M: Liability = £500 + £1M (10% cap) = £1.5M

Liability excluding X7 = £1M, X7 = £500K

Liability = £900K (cap) + £500k = £1.4M

NEC ECC: Rejecting PMI's under Option C

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Working under an NEC3 ECC Option C contract as the Contractor, we have received a PMI that we do not want to take ownership of. Under NEC3 is there a way for the Contractor to reject a PMI and how does the Contractor go about rejecting this PMI or CE?

NEC ECC: Parameters to determine key person clause 24.1?

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What parameters should be used when determining who the key persons should be in Contract Data.?
We can never guarantee someone's availability through the duration of a Contract and should a key person leave we need to identify and accept a replacement. That is fine as long as the keys persons named are limited in some way to a manageable list or set of criteria. Any guidance appreciated.

Answered: NEC ECC: Are durations of Employer’s activities shown in the Contractor 1st Programme for Acceptance submitted as part of Contract Data Part 2 considered as Agreed, and supersede durations stated in the Works Information?

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No - revised durations in programme that have been accepted does NOT change the Works Information. If they have shown one week for Employer design acceptance on the programme but the Works Information says four weeks then if they take four weeks that will NOT be a compensation event. Clause 14.1 explains what liability they are taking on which is basically I am accepting assuming it complies with the Works Information, and if it doesn't that is still Contractor liability if it has been (incorrectly) accepted.

If these activities have already occurred, even if it was a compensation event for not providing something by the date shown in the programme you can assess it on the basis of the time stated in Works Information and assess lower or at zero accordingly.

Having said all that it does beg the question why this was not flagged up before accepting the programme which would have saved a lot of heartache, but never the less it does not mean the Employer is now liable. There would have needed to have been an instruction from the PM changing the Works Information in line with the programme for this to then become a compensation event - which I assume would not have happened!

Answered: NEC ECC: Rejecting PMI's under Option C

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You are required to comply with an instruction if it is valid under the contract and relates to the works you have contracted to provide (as defined in Contract Data Part 1) unless to do so would mean you were to commit an illegal act.

If you have concerns over the instruction you should discuss them with the PM and see if a solution could be found.

Answered: NEC ECC: Parameters to determine key person clause 24.1?

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Sometimes the Client/Employer (NEC4/NEC3) will dictate what roles/how many Key People they want to see listed, otherwise it is down to the Contractor to determine what roles.people they want to list.  As a Contractor I would want to list fewer rather than many people, but enough that gets the message across to the Client that I have a good team ready to run this job for them.

If you cant provide the person that you said you would, that is fine and not totally unexpected, but you do have to provide an alternative person of equal (or better) experience and qualifications for them to accept as an alternative.

At the end of the day, this is just so the Client can see the quality of the team they are getting, knowing that if a specific person becomes unavailable someone equally good will be offered otherwise they will not be accepted.

NEC3 ECC Option A: Ambiguity - We are trying to define whether the Works Information provided and/or with reference to the Bid Submission clarifies whether there has been an inconsistency and/or ambiguity in accordance with Clause 63.8

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The Employer's Works Information provides area tables (m2) for the differing room requirements, however there is a generic comment at the bottom of these tables that the 'area per room requirement' should be read in conjunction with relevant standards and the areas of the relevant standards will prevail.

The relevant standards were not provided with the Tender, however could be searched online.

Within the Bid submission (that has now been entered into Contact) is a qualification that the areas used are those provided within the tender document.

1 - Does the Works Information alone constitute ambiguity in accordance with Clause 63.8 ?
2 - if answered 'yes' above should this be a PM responsibility to notify the discrepancy and issue the relevant Compensation Event.?


Lastly, A Z-Clause has been introduced under 'Notifying Compensation Events' and listed under the excluded time barred events is: Relevant Standards

NEC ECC: Can Percentage Fee Uplifts be applied to Lump Sums under NEC3 PSC Clause X1

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A number of years back we were successful in a Primary Competition to get a place on a Government Framework and following the award of a Secondary Competition in 2013 were are providing the service defined in the Scope. Both the primary and secondary contracts are NEC PSC with Clause X1 included and the Price Adjustment Factor is calculated using the RPI. The Contract Data of the Secondary Competition notes that "The index for adjustment of hourly rates on the 2nd and subsequent anniversaries of the date of award of the Framework Agreement is the Retail Price index".

We have been successful in agreeing the percentage uplift or Staff Rates for CEs however,  given that lump sum activities (ie RIBA Stage 3) priced in the tender for the secondary competition are , and will be, undertaken several years from the award of the framework can you advise if we would be entitled to a percentage fee increase on the lump sum values used the the tender for the secondary competition in a similar fashion to the Staff Rates?

Answered: NEC ECC: Does Certification bring forward Completion Date?

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Providing there is nothing in the Works Information that says otherwise(that you have to provide it for 100 weeks), you would be entitled to price the 83 weeks rather than the 100 weeks - exactly the same as your own prelims. the risk is yours, as if you over run yourself then you will still incur prelims and still have to provide their accommodation.

Answered: NEC3 ECC Option A: Ambiguity - We are trying to define whether the Works Information provided and/or with reference to the Bid Submission clarifies whether there has been an inconsistency and/or ambiguity in accordance with Clause 63.8

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It is common for standards to be referenced in a scope document, such as Works Information, which could lead to ambiguity if it is not clear how the standard actually applies to the works.  For example it may relate to more than one possible option, so in this instance you would price the cheapest one and any change would be a CE.

As the Works Information states that the 'relevant standards will prevail' then it is suggesting that these areas take priority over what is stated in the WI.   An 'ambiguity' could arise where what is actually required is a mix of both what is in the standards and what is in the WI.  This is made a little more complicated by the inclusion of your bid qualification as part of the contract documentation.

There is no standard 'order of priority' within NEC contracts, although this is frequently added, usually within a 'Form of Agreement' document, which should be the first thing to consider.

 Jon Broome wrote an excellent article on this subject which can be found here https://www.jonbroome.com/getattachment/44704d3b-547d-4bd9-a278-b40389ffcc58/Is-there-a-hierarchy-of-documents-under-the-ECC.aspx

 It looks like you are responsible for design, so I would suggest clarifying this requirement at an early stage, by notifying the matter under clause 17 and considering whether any consequent PM instruction constitutes a CE.

NEC ECC: Option B - Change Management and B of Q

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Contract: Option B Amended (nothing amended to 6 - Compensation Events)
Works: Civil - Earthworks/drainage/ducting/founds

Query:

We have had a scheme where an original design had been priced under a BOQ prepared by the Contractor to the Subcontractor. The issue i have is that there has been multiple design changes which constitute a CE under 60.1.1 as the original drawings were included within the Works Information.

Before I came on this scheme the CE's were being managed for example by a change in drainage (spec & volume) the BOQ items were fully removed and then priced on a forecast basis of defined cost.

There has been various other changes with this approach so now we have a mixture of CE pricing and original BOQ pricing. One issue which has been raised by our Subcontractor is now that we have a number of changes across the job some of the original rates are now not fit for purpose mainly due to the method of pricing for BOQ i.e. as we are now carrying out works over a longer period the recover of plant within the BOQ items is insufficient as their productivity rates have been effected.

I can understand this argument as the bill items would have been priced on a number of plant items over the works required under their planned works. Now we have changed some elements of this the recovery of plant costs could be effected.

I apologise for the vagueness however there is too much detail to get in to. I am aware of the Contract and its mechanisms however this feels like a grey area and I am reviewing this from a reasonable point of view especially as I have came on to the project at a stage when most of this change has already occurred.

My queries are:

- Contractually this has been caused by a group of CE's rather than one original event and how this effects entitlement if it has not been raised as an issue till the last CE.
- Has anyone had experience of plant recovery from a mixture of CE and BOQ items?
- The type of demonstration that one would expect for this? I was looking to request a plant resource with utilisation rates profiled for a before and after taking in to account and demonstrating the effect of the CE's

Answered: NEC ECC: Option B - Change Management and B of Q

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This is effectively a 'loss and expense' type claim, which under other forms of contract would be dealt with separately from the variation entitlement, although under NEC is required to be included within a CE quotation.

It seems that what you have identified is the consequential effect of previous compensation events on the contracted scope of works, whereby the rates in the BoQ no longer represent what is actually occurring on Site.

What usually occurs is that the cumulative effect of CE's means that you now require additional resources, either People or Equipment, to manage the works, although this in itself is not a CE.  It is often caused by the disrupting influence of previous CEs although is difficult to conclusively prove as there will usually be other such events which are a (Sub) contractor's risk, such as (non CE) weather, Equipment breakdowns or availability etc.

An analysis of the programme for each CE is essential to assess the possible impact of each event and to make an appropriate allowance, even if included as a risk allowance for disruption.  This will almost certainly not be accepted by the PM / Contractor as it is not an 'obvious' effect, even though disruption is a very real issue (see the Society of Construction Law's Delay and Disruption Protocol for details).

Assessing the value of disruption is difficult after the event so even more so beforehand, although does fit better with the requirements of a CE quotation as it complies with the 'significant chance of occurring' and are 'not compensation event' tests.  This creates a further problem with how you price such risks as a quotation is required to be priced on the basis of Defined Cost, so an arbitrary percentage addition almost certainly wouldn't comply with this requirement, unless agreed.

Each time you are pricing a CE you are assessing the combined disrupting affect of every CE and apportioning an amount within the quotation.  Not an easy principle to 'prove' although it is based on the 'balance of probabilities' so a programme assessment should be a good starting point and highlights the importance of managing the programme under an NEC contract.

If you can agree, an instruction to change the Works Information (as suggested by Jon Broome) to add additional resources (People or Equipment) would be a simple way to deal with this matter.

NEC ECC: Parent company guarantee without option clause

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This is based on an NEC 4 ECC contract with main option A.

The Contractor has not provided the collateral warranties and it were made an obligation under the Z clause  to provide this (the collateral warranty included provisions for the client to step-in as the contractor if the contractor becomes insolvent).  However, the contractor provided a parent company guarantee when there was no option clause in place for this and the contractor wanted to provide this as an alternative.

I was wondering if the parent company guarantee could still be accepted by us (but the Contractor is made aware that this cannot be used as an alternative to the collateral warranties but we are happy to accept this anyway if he is ok with it) and notifying the default to still get the collateral warranties? This would mean if the contractor becomes insolvent, the parent company can step in, also, if the parent company became insolvent too, then we could exercise the step in right under the collateral warranties?

I wanted to know if this is possible in this scenario.

Answered: NEC3 ECC: Option A - Works Information

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In answer to '1', it really depends how they are referred to and what the nature of the referred document is. If, for instance, it said workmanship has to be in accordance with a BS/ISO standard for (off the top of my head) guttering, then they would be.

For '2' it would depend upon where your exclusion was stated as the order of precedence of documents would count. If it was stated in the Works Information for the Contractor's design, the answer would be 'No' as the Employer's WI has precedence. If it was in the form of agreement, then the answer would almost certainly be 'Yes'.

NEC PSC: What is the risk to Consultants under option E for defects i.e. can costs be disallowed?

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NEC3: Under option A, having to do work twice or correct a defect would be a Consultant risk. Under option C, presumably this would be a shared risk under the pain gain mechanism.

My specific question however is how this is dealt with under option E. Consultant is under a cost reimbursable basis, and there are no "disallowed cost provisions" under the PSC or not at least under NEC3 (they have been now introduced along with SCC in NEC4).

If the Consultant has to do a piece of design twice for a reason that is not a compensation event, will they get paid twice for doing it? Very specifically, what contract clause do you believe allows the Employer NOT to pay for the second design?

Answered: NEC ECS: In an Option C subcontract, when is the Pain/Gain assessment made & paid?

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The assessment of the share amount should be 'informally' carried out from day 1, by the Contractor, as they would need to monitor the financial performance to include these amounts in project forecast reports.

This 'informal' calculation would not be included in any payment assessment, however, until Completion of the whole of the works when a 'formal' preliminary assessment is made and included in the subsequent payment certificate (notice),

The share calculation is a 'global' assessment that is unrelated to specific activities but based upon the difference between the PWDD and the TotP, as you have said.

A final assessment is subsequently made using the final PWDD and final TotP, with any 'balancing amount' included in a final payment assessment.

Answered: NEC ECC: What items should be included / allowed for when calculating percentage for peoples overheads?

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Strictly speaking by the contract, it is what is listed in Charges 41.

The issues come when interpreting that. As a real life example - and there are others - when it says in the 3rd bullet "payments for ... services for ... security" does this mean for the hire costs of security infrastructure e.g. movement detectors, security lights etc or does it also include the cost of  security person (or are they paid for directly as a Subcontractor or under People).

Even if you arrive at a definitive view on this, there is then  the question of where you pitch it. At one extreme, do you assume all compensation events have a time-related aspect and therefore the people percentage needs to take account of this (but that might make you un-competitive at tender) or, at the other extreme, no time-related effects, which means you might well lose money on compensation events which have an affect.

Although not the official reason given, this is probably the main driver for removing it from the fourth edition with things just being paid for at cost.

Answered: NEC ECC: Can Percentage Fee Uplifts be applied to Lump Sums under NEC3 PSC Clause X1

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The simple answer is 'yes'.

The adjustment under Option X1 for Main Option A would be applied to the difference between the charge for Price for Services Provided to Date from year to year, taking the anniversary of the Contract Date as the assessment point.

The percentage uplift agreement in relation to staff rates in Contract Data Part 2 would apply to compensation events only, which these rates would be used for, and 'backdated' under Option X1 to the applicable base date.  This implemented CE is added to the Prices and would be included in the X1 adjustment above,

The 'lump sum values' or activity values form part of the Price for Services Provided to Date so would be subject to an Option X1 adjustment at each anniversary of the Contract Date using the stated indices, which in your case would be RPI.

Answered: NEC ECC: (Option C) - In accordance with the SOCC would a 'taxable site based travel allowance' be classified as 13 (b) 'subsistence and lodging'?

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This sounds like a general amount paid to staff who need to regularly travel to Site, such as being paid a 'car allowance' per year of £X,XXX.  The fact it is categorised as 'taxable' means that it is likely to be a general payment (classed as income) rather than a reimbursement of specific travel expenses.

 If your contract stipulates a different fee percentage for items 13 (a) travel and 13 (b) subsistence and lodging, then it could be included under 13 (a), and so be subject to the lower fee percentage.

The only issue, especially from the Contractor's point of view, is that as the payment is 'general' (not specific to a particular project) and further classed as income (taxable), then it should be included as part of a person's salary under item 11.

Like most discussions, it depends on what the value of the outcome is which determines how much time and effort you spend trying to 'get it right'.

If there is an element of ambiguity created by the amendments (different fee percentages) then you should interpret this in the Contractor's favour.
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