Clause 90.1 of the NEC 3 ECC Contact allows an Employer to terminate for any reason. Are there any requirements that they must do so in good faith etc? Or can it be at will for for any reason at all even if it is unfair to the Contractor?
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NEC ECC: Termination for any reason
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Answered: NEC ECC: Can the client limit payment to agreed target value only on option C.
The standard form operates on the basis that, in simple terms, the Contractor is paid PWDD less disallowed cost until Completion when an initial assessment of the Contractor’s share is carried out and included in the amount due (either as gain or as pain).
To move away from this principle would require a Z clause, so that is where you need to look. You obviously need to be comfortable that the contract you sign up to is in line with that you priced.
To move away from this principle would require a Z clause, so that is where you need to look. You obviously need to be comfortable that the contract you sign up to is in line with that you priced.
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Answered: NEC ECC: If an area of the Site physically changes post award of the contract who's risk is it?
Very clearly the intent of the Client/Employer to transfer this risk to the Contractor. By deleting these clauses the Contractor has no way of notifying this as a compensation event and therefore this would be their (Contractor) risk.
The Contractor has to carefully read Z clauses at tender stage to understand what risk transfer they are doing - and decide if you wish to withdraw, price risk accordingly or exclude that amendment from the price (which may or may not make their bid non-compliant and discarded)
The Contractor has to carefully read Z clauses at tender stage to understand what risk transfer they are doing - and decide if you wish to withdraw, price risk accordingly or exclude that amendment from the price (which may or may not make their bid non-compliant and discarded)
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NEC ECC: Can the client limit payment to agreed target value only on option C.
We are working on an NEC3 Option C with numerous CEQ's submitted but most not agreed. The Client have implied that they are behind but equally, they have been advised by us that they are 'out of time'. We have not signed the Contract as yet, due to it arriving after the works had commenced and there being many queries raised against it. They finally responded but now I have joined the company and am looking at it.
They have hinted that the contract states, they will not pay over the agreed target for defined cost plus fee but assure us that they would not do that. I am unable to find the clause in their contract but they refer to Z clauses that are nowhere to be seen. Should I assume it's in the missing Z clauses they refer to, or is it hidden elsewhere and I just can't see it. There are a lot of amendments to the main contract and it's taking a lengthy amount of time to go through them. Now under pressure to get this signed and back to them.
They have hinted that the contract states, they will not pay over the agreed target for defined cost plus fee but assure us that they would not do that. I am unable to find the clause in their contract but they refer to Z clauses that are nowhere to be seen. Should I assume it's in the missing Z clauses they refer to, or is it hidden elsewhere and I just can't see it. There are a lot of amendments to the main contract and it's taking a lengthy amount of time to go through them. Now under pressure to get this signed and back to them.
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NEC ECC: If an area of the Site physically changes post award of the contract who's risk is it?
If an area of the Site physically changes post award of the contract who carries the risk? Cl. 60.1(12), 60.2 & 60.3 are all removed from the contract.
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Answered: NEC ECS: Risk allocation with Contractor provided service
It doesn't help that there is no definition of what 'setting out' means in your contract, but I would suggest that it refers to providing a marked reference of the design on Site to facilitate the actual construction. For a reinforced concrete wall I wouldn't expect you to set out the positional locations of every item of steel rebar, for instance, but to provide reference points which enable the wall to be constructed in the correct place, as per the latest version of the design drawing.
The subcontractor's obligation under clause 20.1 does not change and I would suggest that the subcontractor is obliged to co-operate by agreeing the setting out points with you to ensure that they can fulfil this obligation.
The subcontractor's obligation under clause 20.1 does not change and I would suggest that the subcontractor is obliged to co-operate by agreeing the setting out points with you to ensure that they can fulfil this obligation.
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Answered: NEC ECC: Does the Supervisor role need to be independent to the Design consultant?
It can be one and the same or different. The choice is personal preference.
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Answered: NEC ECC: Is a quotation still required following agreement on a cl. 63.11 change?
Thanks Jon(and thanks for pointing out) - yes I need to caveat my answer which I slightly rushed. It also depends now if you are on NEC3 or NEC4.
NEC3 first of all. It depends if this is an Employer designed scheme or Contractor design. My answer assumed it was an employer designed scheme, and if so then the total of the Prices CAN reduce. If it was a Contractor designed scheme, then as Jon pointed out the Prices can't be changed and under option A that would be their Contractor benefit and under option C it would be shared benefit.
NEC4 now changes the rules. It allows the Contractor to suggest value engineering even if it is an Client designed scheme and the total of the Prices under option A would be decreased by an agreed value engineering ratio, and under option C sorted out in the gain/painshare.
What cant change under NEC3 or NEC4 is the Completion date moving forward. That can only be done through acceleration - and that has to be by agreement.
NEC3 first of all. It depends if this is an Employer designed scheme or Contractor design. My answer assumed it was an employer designed scheme, and if so then the total of the Prices CAN reduce. If it was a Contractor designed scheme, then as Jon pointed out the Prices can't be changed and under option A that would be their Contractor benefit and under option C it would be shared benefit.
NEC4 now changes the rules. It allows the Contractor to suggest value engineering even if it is an Client designed scheme and the total of the Prices under option A would be decreased by an agreed value engineering ratio, and under option C sorted out in the gain/painshare.
What cant change under NEC3 or NEC4 is the Completion date moving forward. That can only be done through acceleration - and that has to be by agreement.
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Answered: NEC ECC: Works Information and assumptions made at tender
Usually if the Contractor submits any form of proposal with their tender it would be entered in Contract Data Part 2 as Works Information for the Contractor's design. Any contract condition amendments would hopefully be agreed and reflected in the actual conditions of contract. In this case, however, it seems like there is a mix of condition requirements and specification requirements mixed together and added as an appendix. This makes the status a little unclear, however, I am assuming that it becomes part of the conditions of contract and scope requirements.
There seems to be 2 separate issues here, the depth of excavation and the condition of the existing asset. You don't say whether the Contractor has any design responsibility so I assume that they don't. Consequently if they are to construct in accordance with the specified design, then their obligation would be to comply with the contract requirements, which include their assumptions. Provided there was no ambiguity or inconsistency then I can only assume that they were to excavate to the depth in their assumption. You don't say why they excavated 30% deeper, but this would be beyond the requirements of the scope and likely be a compensation event, possibly a change that should have been instructed by the PM.
The 'existing asset' issue is possibly more straightforward, especially if the Contractor has no design responsibility, as they are obliged to excavate to a required depth. If the additional depth is the resultant cause of the damage and this is a compensation event, then any such damage would not have been a reasonable consideration at the contract date, If it was known at the outset that the Contractor would have to excavate 30% deeper then that would most likely have changed the methodology and the consequent protection measures for the existing asset. If it was only known during excavating, due to soft spots in the ground for example, then the decision to excavate deeper would have led to the deterioration of the asset but only in combination with the original excavation, so you can't say it was entirely due to the additional 30% depth. Under NEC4 this would likely be a liability issue but it is not so clear under NEC3, except for the Contractor's clarification which seems to address this matter.
Ideally, the clarifications and assumptions should have been allocated to the correct place in the contract, whether that was a change to the conditions, in Contract Data or the Works Information. However it seems that the intention was clear and that the assumptions were included as part of the contract documentation, so notwithstanding any ambiguity or inconsistency I see no reason why they should not be accepted.
There seems to be 2 separate issues here, the depth of excavation and the condition of the existing asset. You don't say whether the Contractor has any design responsibility so I assume that they don't. Consequently if they are to construct in accordance with the specified design, then their obligation would be to comply with the contract requirements, which include their assumptions. Provided there was no ambiguity or inconsistency then I can only assume that they were to excavate to the depth in their assumption. You don't say why they excavated 30% deeper, but this would be beyond the requirements of the scope and likely be a compensation event, possibly a change that should have been instructed by the PM.
The 'existing asset' issue is possibly more straightforward, especially if the Contractor has no design responsibility, as they are obliged to excavate to a required depth. If the additional depth is the resultant cause of the damage and this is a compensation event, then any such damage would not have been a reasonable consideration at the contract date, If it was known at the outset that the Contractor would have to excavate 30% deeper then that would most likely have changed the methodology and the consequent protection measures for the existing asset. If it was only known during excavating, due to soft spots in the ground for example, then the decision to excavate deeper would have led to the deterioration of the asset but only in combination with the original excavation, so you can't say it was entirely due to the additional 30% depth. Under NEC4 this would likely be a liability issue but it is not so clear under NEC3, except for the Contractor's clarification which seems to address this matter.
Ideally, the clarifications and assumptions should have been allocated to the correct place in the contract, whether that was a change to the conditions, in Contract Data or the Works Information. However it seems that the intention was clear and that the assumptions were included as part of the contract documentation, so notwithstanding any ambiguity or inconsistency I see no reason why they should not be accepted.
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Answered: NEC ECS: Subcontract vs Purchase Order
Unless the Purchase Order has been issued as, and is stated as, a supplementary agreement to the subcontract then it does not supersede the contract and has no bearing on the subcontract terms and conditions.
I presume that the PO has been issued to comply with your internal procedures, and as you say to facilitate payment, and nothing more.
I presume that the PO has been issued to comply with your internal procedures, and as you say to facilitate payment, and nothing more.
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Answered: NEC ECS: The PC cannot provide safe access/egress to the site due to high winds, is this a CE to the Sub-Contractor?
This is often a disputed issue as wind is not considered as one of the 'standard' weather measurements for most projects. That said, however, the likely reason why you didn't work was due to not being able to access the Site. The 'access' CE, clause 60.1 (2), might not actually apply though as it specifically references the subcontract access date. Clause 60.1 (3) relates to not providing something or 60.1 (5) which relates to the Contractor or Employer not working to certain conditions, that is providing access to the Site, so either of these would most likely be appropriate.
From the Contractor's perspective, they may feel aggrieved because if access was actually provided, how much work could have been completed on a day of high winds, which would most likely be a subcontractor's risk. If the matter is a CE, however, then I would suggest that the argument is largely academic, unless the contract has been specifically amended; re: North Midland Building Ltd v Cyden Homes Ltd (2017)
From the Contractor's perspective, they may feel aggrieved because if access was actually provided, how much work could have been completed on a day of high winds, which would most likely be a subcontractor's risk. If the matter is a CE, however, then I would suggest that the argument is largely academic, unless the contract has been specifically amended; re: North Midland Building Ltd v Cyden Homes Ltd (2017)
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Answered: NEC ECC: In a CE, is the full cost of the material recoverable or is the quantity above what is required a Disallowed Cost
Disallowed cost does not apply under Option B. It is more relevant to the definition of Defined Cost under target cost contracts.
Under Option B, Defined Cost is the cost of the components in the Shorter Schedule of Cost Components. In the SSCC, the Defined cost of materials is
Payments for
• purchasing Plant and Materials,
• delivery to and removal from the Working Areas,
• providing and removing packaging and
• samples and tests.
If you are therefore required to pay for a minimum order quantity that is the Defined Cost for inclusion within the quotation - it is the payment that you will be required/have to pay.
Under Option B, Defined Cost is the cost of the components in the Shorter Schedule of Cost Components. In the SSCC, the Defined cost of materials is
Payments for
• purchasing Plant and Materials,
• delivery to and removal from the Working Areas,
• providing and removing packaging and
• samples and tests.
If you are therefore required to pay for a minimum order quantity that is the Defined Cost for inclusion within the quotation - it is the payment that you will be required/have to pay.
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Answered: NEC ECSC: Is there such thing as loss of profit?
To answer your query, the Defined Cost is a defined term and defined in 11.2 (5). The definition has no heading for 'Defined Cost of loss of Profit', so this is not an allowable cost.
However, the definition does allow for "people employed by the Contractor," so under the definition, they fall within Defined Cost and, what is more, these words are replicated in clause 63.2. So the people costs in your second paragraph, unless I am missing a nuance in your question, are allowable as Defined Cost.
However, the definition does allow for "people employed by the Contractor," so under the definition, they fall within Defined Cost and, what is more, these words are replicated in clause 63.2. So the people costs in your second paragraph, unless I am missing a nuance in your question, are allowable as Defined Cost.
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NEC ECC: conflict in Works Information
There is a minor conflict for an item in the Works Information where one document states a completely different (and lower quality) product than all the rest of the Works Information. The Bill references the correct specifications and it it has been priced accordingly by the Contractor.
The discrepancy has come to light and the Contractor is now claiming that they priced the lower specification item based on the rogue description.
Additionally, it is the lower quality item that has been installed.
I have sympathy with the Contractor as the ambiguity is the designer’s responsibility, however, the Architect is quoting clause 60.7 (this is an NEC3, Option B contract) and saying that as the lower quality item has been installed, although suitable, they expect a saving.
Contractor is referencing their opinion that under the contract, any errors or ambiguity in the Works Information is the Designers risk.
The discrepancy has come to light and the Contractor is now claiming that they priced the lower specification item based on the rogue description.
Additionally, it is the lower quality item that has been installed.
I have sympathy with the Contractor as the ambiguity is the designer’s responsibility, however, the Architect is quoting clause 60.7 (this is an NEC3, Option B contract) and saying that as the lower quality item has been installed, although suitable, they expect a saving.
Contractor is referencing their opinion that under the contract, any errors or ambiguity in the Works Information is the Designers risk.
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Answered: NEC ECC: Who is culpable for the programme delay where free issue plant is damaged by the Contractor when offloaded?
I assume this is NEC4 because of the use of the word 'Client'.
The 'preferred' reference is a red-herring as the answer is it would depend upon what is in the subcontract between the Contractor and Subcontractor for liability.
Under the main contract, as far as the Client is concerned, this is a Contractor's risk - see clause 81.1, 2nd bullet of the NEC4 ECC.
The 'preferred' reference is a red-herring as the answer is it would depend upon what is in the subcontract between the Contractor and Subcontractor for liability.
Under the main contract, as far as the Client is concerned, this is a Contractor's risk - see clause 81.1, 2nd bullet of the NEC4 ECC.
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Answered: NEC ECC: Quality Management 40.2
Not sure if it would be wise to do this just because the Contractor has no Quality Management plan, but certainly would think it is justified if the Contractor is doing poor quality work (partly) as a result :
Instruct the Contractor to stop work. This is a compensation event, but it would arise from the fault of the Contractor so would have zero effect on the Prices.
BUT before you do this, notify an early warning to discuss concerns and make Contractor aware of potential consequences.
Instruct the Contractor to stop work. This is a compensation event, but it would arise from the fault of the Contractor so would have zero effect on the Prices.
BUT before you do this, notify an early warning to discuss concerns and make Contractor aware of potential consequences.
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Answered: NEC ECC: Temporary change to the working area
Neil, it may be worth considering capture the agreement in a supplemental agreement (or a DoV) since I presume the Client may want to impose some form of damage if the area is not handed back when required.
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Answered: NEC ECC: Option B - Deleted BOQ Item Valuation
If the new road xing is a revised detail for the original xing then yes in principle the PM is right that the CE should be for the change in Defined Cost + Fee. On that basis if you would have lost money on the original detail you are no better or worse off. You will of course have to remeasure the original work as if it has been done or factor that in to the quotation.
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Answered: NEC ECC - Referencing other documents from Contract Data Part One
My view is that if the 'boundaries of the site' were defined by reference to a drawing, then regardless of whether that drawing was subsequently changed by the PM as an instruction changing the Works Information, then the ORIGINAL drawing would still stand as defining the boundaries. As the PM has no power to change Site Information, this situation contractually could not occur.
For sectional Completion Dates and access dates, I see no reason why you would reference another document, but the same principle would apply if the contract compiler had done so.
For sectional Completion Dates and access dates, I see no reason why you would reference another document, but the same principle would apply if the contract compiler had done so.
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Answered: NEC ECC: Payment for Deposit Charges
The answer would depend on whether you were using NEC3 or NEC4 although the principle would stay the same.
Under NEC3, Subcontractors are not a listed cost in the Schedule of Cost Components, but the Contractor is paid, as a Defined Cost, what he incurs in accordance with the subcontract + subcontract fee percentage.
Under NEC4, Subcontractor costs have been moved into the Schedule of Cost Components so, again, the Contractor is paid, as a Defined Cost, what he incurs in accordance with the subcontract + fee percentage*
* In NEC4, there is only one fee percentage which applies to both direct and indirect costs..
Under NEC3, Subcontractors are not a listed cost in the Schedule of Cost Components, but the Contractor is paid, as a Defined Cost, what he incurs in accordance with the subcontract + subcontract fee percentage.
Under NEC4, Subcontractor costs have been moved into the Schedule of Cost Components so, again, the Contractor is paid, as a Defined Cost, what he incurs in accordance with the subcontract + fee percentage*
* In NEC4, there is only one fee percentage which applies to both direct and indirect costs..
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