Good question but no the second batch of five is NOT dependent upon one of the first three being achieved. The first three are "costs that the Project Manager decides", and the latter five are "costs of ". It would not make any sense if correcting a Defect after Completion was not disallowed if it did not meet the criteria of the first three bullets as most would not.
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Answered: NEC3 ECC: Disallowed cost
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NEC3 SC: Design Liability under a Supply Contract?
Under a supply contract the purchaser has provided drawings to the supplier. Under the supply contract the purchaser has an obligation to review and 'approve' drawings. The supplier is disputing that the purchaser's role is merely advisory with what appears to be an attempt to relieve itself of any design responsibility. Surely however, the supplier must provide his product with a design that is fit for purpose and in accordance with the goods information and even if it is not in accordance with the goods information then the responsibility is with the supplier? Is there not an implied term under the sale of goods act in this regard?
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NEC3 ECC: Whats the significance of "Accept" versus "Approve" in an NEC contract?
I have inherited an Option C contract in which the Works Information is strewn with statements like "....shall submit to the Project Manager for approval" or "...the Contractor shall not proceed until the Project Manager has approved.....", etc.
I know that Clause 14.1 makes it clear that "acceptance" does not relieve the Contractor of his design liability, but if the WI says the PM will "approve" something and then he "accepts" it instead, is this a breach?
Should I, and can I, get these references changed to "acceptance / accepted, if I want liability for the (mainly) design submissions to remain with the Contractor?
I know that Clause 14.1 makes it clear that "acceptance" does not relieve the Contractor of his design liability, but if the WI says the PM will "approve" something and then he "accepts" it instead, is this a breach?
Should I, and can I, get these references changed to "acceptance / accepted, if I want liability for the (mainly) design submissions to remain with the Contractor?
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NEC3 Option B: Assesment of Bill of Quantities Item in order to assess extent of Compensation Event
The Contract Bill of Quantities in accordance with NRM2 had an Item for Structural Steelwork and listed a number of Structural Engineers drawings which the Contractor had to then insert his price against.in lieu of the PQS quantifying the actual tonnage and the Contractor rating this.
There are two main issues with the listed drawings:
a) The length of some members cannot be ascertained by the drawings listed and
b) Some members are not annotated to state what the size is
In addition to the drawings listed against the Bill of Quantities item there are other Works Information drawings and BIM Model that would assist in resolving the issue.
There are also two comments within the Preliminaries document which appear to conflict::
1) “Contractor shall be deemed to have allowed for compliance with all the requirements of these Preliminaries & Works Information which shall apply equally to the whole of the work”
2)''That where 3D models have been issued then the 2D drawings shall take precedence''
The Contractor is stating that only the drawings stated within the Bill Of Quantities item are to be considered and are therefore claiming the additional steel which is now annotated or sections issued to allow the calculation of the length of columns within the revised works information. The PQS on the other hand is only measuring the steel which has changed between all of the Contract Works Information including the BIM Model and the current Works Information.
Any thoughts on who is correct.
There are two main issues with the listed drawings:
a) The length of some members cannot be ascertained by the drawings listed and
b) Some members are not annotated to state what the size is
In addition to the drawings listed against the Bill of Quantities item there are other Works Information drawings and BIM Model that would assist in resolving the issue.
There are also two comments within the Preliminaries document which appear to conflict::
1) “Contractor shall be deemed to have allowed for compliance with all the requirements of these Preliminaries & Works Information which shall apply equally to the whole of the work”
2)''That where 3D models have been issued then the 2D drawings shall take precedence''
The Contractor is stating that only the drawings stated within the Bill Of Quantities item are to be considered and are therefore claiming the additional steel which is now annotated or sections issued to allow the calculation of the length of columns within the revised works information. The PQS on the other hand is only measuring the steel which has changed between all of the Contract Works Information including the BIM Model and the current Works Information.
Any thoughts on who is correct.
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NEC3 ECC: T&S costs relative to the SCC
Under the SCC section 13 a) & b) the Contractor is now claiming just about everything and anything that appears as an "expense" within his accounting system against the contract. By this I mean charges for Wi-Fi cost in hotel rooms, breakfast expense if travelling, casual lunches again if a person on the contract is travelling to and from offices/sub-contractors workshops etc., coffee stops on route, even Burger King on the way home from a day's travel from office to site.
Are these really allowable subsistence charges under the intent of the NEC SCC? These costs do relate to people who work on the contract and provide the Works however I would have thought the WAOH charge (which is considerable) would cover these incidentals.
Are these really allowable subsistence charges under the intent of the NEC SCC? These costs do relate to people who work on the contract and provide the Works however I would have thought the WAOH charge (which is considerable) would cover these incidentals.
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Answered: NEC3 Framework Contract
I have seen ECSC used within a framework, though don't know how successful it has been.
I would suggest that the question of inflation should be within the Framework Information, as it is the framework that is to last several years.
Individual work packages within the framework may be relatively small and simple, in which case the ECSC may well be appropriate. Small and simple packages are also likely to be completed within a relatively short timescale and therefore do not need an inflation clause.
Also bear in mind that the framework could be separated into lots, with different forms of contract being available for work packages with differing degrees of complexity.
I would suggest that the question of inflation should be within the Framework Information, as it is the framework that is to last several years.
Individual work packages within the framework may be relatively small and simple, in which case the ECSC may well be appropriate. Small and simple packages are also likely to be completed within a relatively short timescale and therefore do not need an inflation clause.
Also bear in mind that the framework could be separated into lots, with different forms of contract being available for work packages with differing degrees of complexity.
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NEC3: Option D; In Schedule of Cost Components (SoCC) 1.2 & 1.3, Is it a requisite that these items should be included as entitlements in the Employment Contract or HR policies?
NEC3: Option D; In Schedule of Cost Components (SoCC) 1.2 & 1.3, Is it a requisite that these items should be included as entitlements in the Employment Contract or HR policies? If not included or employees are not entitled to one of the item listed in 1.2 &1.3, can the employer treat the cost as not a defined cost?
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Answered: NEC3 ECC: Early warning raised, event then becomes a problem, several weeks later you notify a CE. When do you assess it from? We are now in month 6 and the last Accepted Programme was month 5.
The way it should work is as follows:
- An early warning is notified as soon as you become aware of the event that COULD affect either time/cost/quality (i.e. month 1) and you jointly try to mitigate or minimize the effects of the item.
- As soon as this thing IS an actual problem that is effecting your works then it should be notified as a compensation event (i.e. month 2) – providing it fits one of the reasons for being one i.e. valid under 60.1. This notification has to be within 8 weeks of becoming aware, otherwise you lose the right for any time/cost UNLESS it is one of the items that the PM is obliged to raise. 12 of the reasons in 60.1 the Contractor is obliged to raise(2/3/5/6/9/11/12/13/14/16/18/19), and the other 7 the Project Manager is obliged to raise. Therefore it depends on which reason you are notifying – and I would question anyway why it took until month 5 to notify that this was now a CE despite it starting to have effect in month 2. If it is one of the 12 that you are obliged to notify and you hadn’t then you may well be time barred to claim anything (and by the way, the fact you raised an early warning does not count as the notification - they are separate things/communications).
- Assuming that you are not time barred and it is agreed that it is a compensation event then then it would be assessed from the time you knew it took effect which sounds like month 2 in your example. It should then be assessed using rules of 63.1 – which states you use actual defined cost and forecast defined cost, the switch point between the two being the time of the Project Managers instruction (if that is what it stemmed from) or in other cases when the Contractor notified the compensation event. Your Accepted Programme should already show the effects of the event upon planned Completion to that point – within the CE you are trying to justify the relative movement in Completion Date to capture entitlement (and also avoid Delay Damages).
- Golden rule here is to get compensation events notified as early as possible so everyone knows where they are and associated liability. However this situation plays out it will now be subjective going back in time to justify entitlement which is never a good situation to be in.
- An early warning is notified as soon as you become aware of the event that COULD affect either time/cost/quality (i.e. month 1) and you jointly try to mitigate or minimize the effects of the item.
- As soon as this thing IS an actual problem that is effecting your works then it should be notified as a compensation event (i.e. month 2) – providing it fits one of the reasons for being one i.e. valid under 60.1. This notification has to be within 8 weeks of becoming aware, otherwise you lose the right for any time/cost UNLESS it is one of the items that the PM is obliged to raise. 12 of the reasons in 60.1 the Contractor is obliged to raise(2/3/5/6/9/11/12/13/14/16/18/19), and the other 7 the Project Manager is obliged to raise. Therefore it depends on which reason you are notifying – and I would question anyway why it took until month 5 to notify that this was now a CE despite it starting to have effect in month 2. If it is one of the 12 that you are obliged to notify and you hadn’t then you may well be time barred to claim anything (and by the way, the fact you raised an early warning does not count as the notification - they are separate things/communications).
- Assuming that you are not time barred and it is agreed that it is a compensation event then then it would be assessed from the time you knew it took effect which sounds like month 2 in your example. It should then be assessed using rules of 63.1 – which states you use actual defined cost and forecast defined cost, the switch point between the two being the time of the Project Managers instruction (if that is what it stemmed from) or in other cases when the Contractor notified the compensation event. Your Accepted Programme should already show the effects of the event upon planned Completion to that point – within the CE you are trying to justify the relative movement in Completion Date to capture entitlement (and also avoid Delay Damages).
- Golden rule here is to get compensation events notified as early as possible so everyone knows where they are and associated liability. However this situation plays out it will now be subjective going back in time to justify entitlement which is never a good situation to be in.
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NEC3 TSC: Is there a standard approach to dealing with reactive repairs under the NEC TSC?
Is there a standard approach to dealing with reactive repairs under the TSC?
This would be high volume minor repair jobs that arise during the course of a month.
I'm not sure as the whether it's better placed in a retrospective monthly Task Order or compensation event (due to the high volume and quick turnaround required). I suppose it would it depend on how the Service Information is drafted.
I feel like there's an obvious solution that I can't quite articulate!
This would be high volume minor repair jobs that arise during the course of a month.
I'm not sure as the whether it's better placed in a retrospective monthly Task Order or compensation event (due to the high volume and quick turnaround required). I suppose it would it depend on how the Service Information is drafted.
I feel like there's an obvious solution that I can't quite articulate!
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Answered: NEC3 ECC: Liability for defects
A very similar question was posted recently which we answered - and (unfortunately) I can only repeat the same answer here to the same question that has been posted a slightly different way. In an un-amended contract you can only disallow a cost for a specific reason within the definition of Disallowed Costs". I can fully understand an Employer saying "why should I pay for correcting a defect when it is their fault" but remember under option C this is a shared risk. You also share the good things - where you benefit from good work and savings that the Contractor made. If the contract intended for all such things to be disallowed then they would have written simply "the cost of correcting defects" and left of the following bit"after Completion".
I understand your frustration, but this is a shared risk contract which includes such items, but equally don't forget under option C the Contractor is losing out on "gain share" or increasing "pain share" so it is NEVER in a Contractors interest to do defects. You (arguably) had a cheaper tender price as well remember as they knew this was a shared risk. You also pay for the Contractor correcting defects under option A - you just don't know it as they will have included an allowance within their fixed price lump sum.
If your Z clauses you believe change these rules then you need to assess and interpret these under their own basis - I cant comment fully without seeing those but from what you describe they MAY change the rules as stated above.
I understand your frustration, but this is a shared risk contract which includes such items, but equally don't forget under option C the Contractor is losing out on "gain share" or increasing "pain share" so it is NEVER in a Contractors interest to do defects. You (arguably) had a cheaper tender price as well remember as they knew this was a shared risk. You also pay for the Contractor correcting defects under option A - you just don't know it as they will have included an allowance within their fixed price lump sum.
If your Z clauses you believe change these rules then you need to assess and interpret these under their own basis - I cant comment fully without seeing those but from what you describe they MAY change the rules as stated above.
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Answered: In NEC3 option D what is the correct treatment of Fringe Benefit Tax, is it a Defined Cost or Included in the Fee?
I'm not familiar with the term fringe benefit tax however I believe in the UK this is what's called benefits in kind? If so then these are amounts deducted by the contractor from payments made to his people for things like company cars, fuel, medical insurance, childcare expenses and the like. Under the Schedule of Cost Components some of these things will be reimbursed to the Contractor as Defined Cost e.g. company cars fall under component 1.13(n) payments made in relation to people for a vehicle. However, for the employee a company car is a taxable benefit so tax at the rate prescribed by the government will be deducted from their wages and as such the contractor does not pay this amount and it cannot be included in Defined Cost. Neither does he allow for it in his Fee as there is no cost burden on him. The amount is deducted from the employee and paid to the government.
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Answered: NEC3 ECC: Whats the significance of "Accept" versus "Approve" in an NEC contract?
If something is submitted to the PM for approval and the PM approves it then there is a risk that liability may have changed from Contractor to Employer. It may be unlikely though as it's clear from clause 14.1 what the intent was, see also clause 12.3 and presumably the Employer has stipulated in the Contract Data that the Contractor has to provide professional indemnity insurance.
Others may be able to give a legal analysis of this issue, which would be interesting but I suspect would result in a similar opinion that the conduct of the parties may cause a problem.
If you are the Contractor finding yourself in this situation then ensure that you submit things for acceptance, not approval, unless you are deliberately attempting to shift risk (see clause 10.1 please!). If you are a PM asked to approve something, do not do it, merely accept or reject or risk being in breach of contract with the Employer (if you are a consultant PM with a reasonable skill and care obligation).
Your suggestion is the best practical solution, firstly this matter should be an early warning matter so you can flag up the problem and resolve it by getting the PM to issue an instruction clarifying that where the WI states "approval" this means "acceptance". Unless of course this wasn't the intent of the Parties, in which case a Z clause should be used to amend clause 14.1 to reflect what the Parties thought they had agreed.
Others may be able to give a legal analysis of this issue, which would be interesting but I suspect would result in a similar opinion that the conduct of the parties may cause a problem.
If you are the Contractor finding yourself in this situation then ensure that you submit things for acceptance, not approval, unless you are deliberately attempting to shift risk (see clause 10.1 please!). If you are a PM asked to approve something, do not do it, merely accept or reject or risk being in breach of contract with the Employer (if you are a consultant PM with a reasonable skill and care obligation).
Your suggestion is the best practical solution, firstly this matter should be an early warning matter so you can flag up the problem and resolve it by getting the PM to issue an instruction clarifying that where the WI states "approval" this means "acceptance". Unless of course this wasn't the intent of the Parties, in which case a Z clause should be used to amend clause 14.1 to reflect what the Parties thought they had agreed.
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NEC3 ECC: If the Employer takes over the Works, is it (subject to a defects list) then certifiable as complete?
We have an upcoming scenario in which the Works are going to be taken over by the Employer but there are outstanding works still to be performed. Under clause 35.3, the Project Manager is obliged to certify this Take over within one week but he is not obliged to certify Completion. That can be a separate Operation according to clause 30.2.
It may well be that one of the defects (albeit not preventing the usage of the Works) will not be able to be rectified for several weeks/months due to the lead time on component delivery. If this is sufficient reason for the Project Manager to delay his decision on the date for Completion?
Certainly due to the Take over, no LDs are due but equally without having the works certified as complete, the Defects Date is being postponed, In old speak this "warranty period" is thus being Extended for what could be a long time.
Can the Project Manager justifiably delay deciding the date for completion on this Basis? This is an NEC Option A contract.
It may well be that one of the defects (albeit not preventing the usage of the Works) will not be able to be rectified for several weeks/months due to the lead time on component delivery. If this is sufficient reason for the Project Manager to delay his decision on the date for Completion?
Certainly due to the Take over, no LDs are due but equally without having the works certified as complete, the Defects Date is being postponed, In old speak this "warranty period" is thus being Extended for what could be a long time.
Can the Project Manager justifiably delay deciding the date for completion on this Basis? This is an NEC Option A contract.
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Answered: NEC3 ECC: Negative Risk in a Negative Compensation Event?
Not quite sure what you mean by "With additional works - as the client did not like the figures the risk register was showing - we have agreed a percentage uplift for risk". However, ignoring that, it can be confirmed that the same way a compensation event should be built up for a "positive" one should be applied to a "negative" one. That means it should include risk, and also any time savings if planned Completion is coming forward, and the saving should also include fee as well, but Completion Date would not come forward.
I do get that a Contractor is not going to go "all out" in maximizing risk within a quote that is going to reduce the Total of the Prices, but the rules are meant to be the same. This is the one type of quote that the Contractor is trying to make as low as possible, and for once the Project Manager is trying to increase!
I do get that a Contractor is not going to go "all out" in maximizing risk within a quote that is going to reduce the Total of the Prices, but the rules are meant to be the same. This is the one type of quote that the Contractor is trying to make as low as possible, and for once the Project Manager is trying to increase!
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Answered: NEC3 ECC: Proof of the Fee, does the Employer have the right to ask for a build up/audit of the fee after signing the contract?
I will keep this brief - No!
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Answered: NEC3 PSC: Under Option E, how is price assessed if actual cost differs significantly from original estimate through consultant down inefficency, i.e. works taken too long?
Under option E the Consultant carries little risk. If the Consultant gave an estimate at tender stage then that does not contractually count for anything. I see no where in the cost reimbursable contracts that allows you to not pay the money the Consultant has spent. Option E contracts do require more effort and involvement on the Employers part to verify that the work being carried out by the Consultant is timely and to the required quality.
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Who is responsible for accepting/confirming close out of a defect
The contract has been written to omit the Supervisor and pass on his duties and responsibilities to the Project Manager.
The Works Information states that the Contractor must follow his own quality management procedures.
The way of working is for the Employer to issue a fault/defect form, the Project Manager confirm’s whether this is a defect under the contract and Notifies as such. The Contractor then remedies the defect. The Project Manager would provide technical and contractual advice throughout the process until the defect is rectified.
In this situation who has the ultimate responsibility for accepting/confirming close out of the Defect. Does the responsibility rest with the Project Manager with him visiting the site and viewing the rectified Defect or can he rely on the Contractors self certification system.
Thanks
The Works Information states that the Contractor must follow his own quality management procedures.
The way of working is for the Employer to issue a fault/defect form, the Project Manager confirm’s whether this is a defect under the contract and Notifies as such. The Contractor then remedies the defect. The Project Manager would provide technical and contractual advice throughout the process until the defect is rectified.
In this situation who has the ultimate responsibility for accepting/confirming close out of the Defect. Does the responsibility rest with the Project Manager with him visiting the site and viewing the rectified Defect or can he rely on the Contractors self certification system.
Thanks
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NEC3 Option B - The affect of Z-Clauses and Contractors Proposals on Compensation Events
Clause 60.1(12), 60.2, 60.3, 60.4 and 60.5 have been removed from an Option B Contract via a Z-Clause. The Works Information requires on site testing of formation following excavation and a construction detail to be modified if test results are below a certain threshold. The Works Information suggests a particular solution but also offers the Contractor the opportunity to propose an alternative in order to deal with the ground conditions. The Bill of Quantities does not include any separate items for change to the construction detail on this basis as the employer has deemed ground conditions to be a physical condition and therefore a Contractors risk item.
On site testing of the formation produces a failed result and the Contractor proposes a revised construction detail. This is accepted by the Project Manager. The Contractor raises a Compensation Event for these works under Clause 61.1 (1) Change to the Works Information.
Is this a Compensation Event?
If yes, why is this a Compensation Event if 60.1(12) has been removed? Are ground conditions not a physical condition?
If no, what is the Contractor entitled to be paid and via what mechanism?
There is no item in the Bill of Quantities for the works as it has been introduced via a Contractors Proposal outside of the Works Information. Does the Contract assume that there is a mistake in the Bill of Quantities and bring Clause 60.6 into effect?
If Clause 60.6 does come into effect, why is the Contractor entitled to a Compensation Event via this route when physical conditions, which led to the discrepancy in the Bill of Quantities, are a Contractors risk item as Clause 60.1(12) is removed?
On site testing of the formation produces a failed result and the Contractor proposes a revised construction detail. This is accepted by the Project Manager. The Contractor raises a Compensation Event for these works under Clause 61.1 (1) Change to the Works Information.
Is this a Compensation Event?
If yes, why is this a Compensation Event if 60.1(12) has been removed? Are ground conditions not a physical condition?
If no, what is the Contractor entitled to be paid and via what mechanism?
There is no item in the Bill of Quantities for the works as it has been introduced via a Contractors Proposal outside of the Works Information. Does the Contract assume that there is a mistake in the Bill of Quantities and bring Clause 60.6 into effect?
If Clause 60.6 does come into effect, why is the Contractor entitled to a Compensation Event via this route when physical conditions, which led to the discrepancy in the Bill of Quantities, are a Contractors risk item as Clause 60.1(12) is removed?
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Can I claim gain achieved whilst within a CE
I have a current project in which the groundworks activity was generous in the time allowed and I expected to finish this item in 10 days rather than the 22 contained in the accepted programme. however after the first day of this activity we discovered unidentified services and a compensation event was raised. the remainder of the job was in delay but the groundworks continued in unaffected areas and only took the expected 10 days not the 20 as per the initial accepted programme.
the CE for diversion of the services ran on for 70 odd days. Do I have to deduct the 22 days I had originally allowed in my accepted programme off the 70 days to work out actual cost of site overheads/prelims or can I use the 10days that the activity actually took? (The contract is the NEC Short Form with activity Schedule.)
The way I am looking at it is the CE negated the gain I would have achieved had the services been as per the works information. Now instead on being on course to finish 12days early and save the cost of my site setup and foreman etc do I loose the 12 days as the client will claim I had allowed 22days in my original programme?
Thanks
Ruairi
the CE for diversion of the services ran on for 70 odd days. Do I have to deduct the 22 days I had originally allowed in my accepted programme off the 70 days to work out actual cost of site overheads/prelims or can I use the 10days that the activity actually took? (The contract is the NEC Short Form with activity Schedule.)
The way I am looking at it is the CE negated the gain I would have achieved had the services been as per the works information. Now instead on being on course to finish 12days early and save the cost of my site setup and foreman etc do I loose the 12 days as the client will claim I had allowed 22days in my original programme?
Thanks
Ruairi
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NEC3 ECC: Rainfall - Weather CE
In a the following scenario, can someone provide guidance if indeed the PM was to make an assessment. Contractor notifies a CE due to rainfall exceeding one in ten year data. The weather centre issues out that the average number of days rainfall at the place stated in the Contract Data > 5mm is 4 days; one in ten is 9 days (>5mm) and the weather data determines that ten days in that month, the rainfall exceeded 5mm. Is is the difference between the 10 days and the average or the 10 days and 9 days that trigger the one in ten?
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