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NEC3 ECC: Lost/Missing Equipment

October 9, 2016, 1:22 pm
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How does NEC Option D deal with lost equipment? Our contract specifies that any monetary benefit from procurement of equipment shall solely be for the Employers account. i.e revenue from selling the equipment less storage and processing fees.
If equipment were lost/missing benefit will no longer be realized. Can the Employer charge the Contractor residual values of missing equipment as his perceived benefits were gone. Security of the Site is the Contractor's responsibility.
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Answered: NEC3 ECC: Can Employer bring the current knowledge into picture to assess the CE's and expect the Contractor to mitigate

October 9, 2016, 1:26 pm
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The first question that springs to mind is how late is the PM in providing his asessment on your CE submittal? Is he indeed assessing the CE in line with the time scale provisions of cl 61.4 ? Did you give him notice of his lateness and agree to an Extension of time for his assessment?

The assessment by the PM has to be made and based on the submittal you made. If it is not, then the PM by all accounts is making his own assessment as per cl. 64.1 . In doing so, he is obliged to explain why he feels obliged to do so. This is very dangerous ground for him to tread for he must justify his Action through one of the four given bullet Points therein. Failure to do so and moreover, if his reasoning is not 100% accurarate, lends him liable to lose in a subsequent adjudication.. An assessment by the PM really only gives you this one option of adjudication - note however, the time Limits for notification.

You mention a resubmittal which presumably the PM may ask for, based on the newer accepted Programme.? This is definately a no-no. The original CE notifiation must have stated particular criteria upon which the contractor's Quotation should be based and the then currect accepted Programme ( or the contractor's submitted Programme) in the CE Quotation) is the valid document.

The "over estimations" you refer to are no doubt meant to reflect the provisions of clause 65.2 where such a forcast, if subsequently shown to be wrong cannot be revised. However if the assumptions on the Programme activities were based on assumptions provided by the PM at the time then he does have the right to notify a correction subsequently through CE 60.1 (17). but this must be a separate exercise, no matter how appealing it may be to lump it into the same one.
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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?

October 9, 2016, 1:26 pm
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If the tender has been accepted then no unless there is an expressed statement that he can.

It would however not be a good start to the contract if you did not assist as reasonably as possible.
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Answered: NEC3 ECC: If the Employer takes over the Works, is it (subject to a defects list) then certifiable as complete?

October 9, 2016, 1:27 pm
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Completion is defined in Clause 11.2(2) as being when the Contractor has done all the work which the Works Information states he is to do by the Completion Date, and corrected notified Defects which would have prevented the Employer from using the works and Others from doing their work.

You say that the defects do not prevent usage of the works, so it would seem to me that the Project Manager should be certifying Completion.
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Answered: NEC3 ECC: Who bears the cost of a value engineering proposal which was accepted but subsequently cancelled due to redesign?

October 9, 2016, 1:28 pm
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The date of implementation is not the main factor. I'm presuming that you have put forward a proposal to change the Works Information and the PM has accepted it (as clause 63.11).

In which case the PM should have issued a CE to change the Works Information when he accepted the proposal.

If the cost incurred under your item 1 was after the notification of the CE then the cost falls as Defined Cost.

Regarding item 2, I'm not clear what you mean by "The cost of the VE proposal". If you mean the physical work and this was carried out without the proposal having been agreed then you may well find it difficult to have it included as PWDD. You will have to convince the PM you were acting in the best interests of the Employer.
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Answered: NEC3 ECC: SSCC - Charge 41 Application

October 9, 2016, 1:29 pm
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I would say that it is definately not the Intention.
The Shorter SCC does not distinguish what the Equipment is being used for, only that it is within the working Areas and is not part of the People Overhead charges as listed in item 41. Thus it is reasonable to assess the compensation Event (there must be a CE for the shorter SCC to be invoked)  using unit rates from a published list or as stated in the contractor's contract Data.

Had the Contractor elected to utilise a mains supply for water and power then clause 41 may well apply. However, the Distribution of the power and water within the working Areas, if it involves any Equipment ( e.g Trafos or indeed the bowser you mention)) and people to do so would also be chargeable.
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Answered: NEC3 ECC: Recovery of monies from Subcontractor

October 9, 2016, 1:44 pm
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You can only recover this from the Subcontractor if indeed it one of the reasons under 60.1 that it is one. I assume from the question this is an option A subcontract.

If the Subcontractor managed to meet the Works Information requirements without providing this material then actually no - this would be their benefit (under option A). If it was an express requirement then this would be a Defect which either has to be corrected or the Contractor can give a quotation for a saving (or you make them provide the materials. If you had instructed them not to provide these materials then this would be assessed as a (negative) compensation event.  

Depends a little but therefore on what exactly these materials were and who/how they were to be provided. Once you have looked at this then follow the rules above.
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Answered: NEC3 ECS: Costs for Unproductive Working

October 9, 2016, 1:53 pm
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It would have been a little more helpful here if you had indeed given them an instruction as to what to do given you are aware of the situation and their predicament. You could have sat down with them to discuss the options available - could they have deployed the guys elsewhere or even released them somehow but then there is no guarantee that you will get the same certified/qualified guys back.

It depends on which option you are working on as to how much actual cost evidence you get but not unreasonable to ask for evidence here that the guys are all being kept on ready for your works to restart. Had they done anything different that may have cost even more if it delayed things further whilst they re-mobilised.

I think the Contractor should have taken the lead here as to what should happen/have happened, and then the Subcontractor needs to provide evidence of the labor cost they are/will incur.
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Answered: NEC3 ECS: How are increased costs dealt with under NEC Engineering and Construction Subcontract

October 9, 2016, 2:00 pm
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There are three ways that this can be dealt with:
1. ask for an extension to the CE quote until the facts are known that can be priced (least favorable option)
2. Project Manager states assumptions on which to base the quotation to cut through any ambiguities/potential unknowns. This allows the CE to be quoted and assessed, and if the assumptions turn out to be incorrect these will form a new CE.
3. Break the CE down into tangible elements that can be agreed progressively - e.g. CE01 is for the detailed design of something, and then once that is firmed up CE02 can be the installation works of what has come out of CE01.  

Clause 63.1 emphasizes that broadly speaking CE's should be a forecast of what have been reasonable to allowed for that event. The whole idea is that neither Party needs to wait to see what it actually cost in terms of money and time. Much better to agree it up front so both Parties understand respective liability.
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Answered: NEC3 ECC: Change to Works Information - how translated to activity schedule?

October 9, 2016, 2:07 pm
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Under clause 54 the Contractor is allowed to submit a revised activity schedule if it no longer reflects how they plan to carry out the works. The only reasons not to accept that revised schedule is that it is not in line with the programme, does not add up to the right number or costs are not "evenly" distributed.

Any compensation event is normally added to the activity schedule - but in this case there probably needs to be an amendment to the original item as that will no longer be carried out (and the Contractor can not claim against it). The Contractor is fairly quiet on specifically how this should be done - but you would hope both Parties would be able to come to a sensible agreement as to how it should look to reflect the implemented compensation event.  

Also worth pointing out that an instruction to change to WI that is a single line on the activity schedule you do not use that activity schedule rate UNLESS both Parties agree. It would be assessed from first principles using Defined Cost.
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Answered: NEC3 ECC: Option A - amending an Activity Schedule

October 10, 2016, 10:23 am
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Yes you can submit a revised activity schedule to reflect the omission of works. Any such omission is assessed using Defined Cost, rather than the identified figure on the activity schedule (where one exists) UNLESS both Parties agree. The Contract is fairly quiet on how specifically this is done in actually physically changing the activity schedule but as long as it adds up to the correct number there is unlikely to be too much issue in accepting the revised one.
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Answered: NEC3 ECC: Why are case laws concerning NEC3 ECC on the rise in recent times?

October 10, 2016, 10:28 am
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I am not actually sure that they are, but IF they are, I think it has gone from zero cases to a few cases. That is a rise - but no doubt an inevitable one given the amount of NEC3 contracts out there and the value of work that these are now being used for within the industry, but still very few.

The good news is that any such rise as still very nominal - and certainly much less than other form of contract that continue to end up in court (in my experience) much more than NEC ones.
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Answered: NEC3 ECC: What are the legal implications of amending standard forms of contract such as NEC3 ECC to suit contractual parties?

October 10, 2016, 10:33 am
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None really any legal implications - as long as they do not breach existing law. That is why amendments to the standard form should be vetted and challenged/checked by "experts". The trouble is that sometimes it is the alleged "experts" that you have gone to for the recommendations in the first place, so they must be right (especially when they have charged you all this money)!! There could be some amendments that could be challenged as "unfair" clauses - but that would be a lottery and I would want to iron those out as a Contractor at tender stage rather than run the lottery of taking that to court in the hope I would win.  

Changing the standard words of NEC3 contracts is not wrong - you just have to make sure you understand what you are doing and the reasons that you are doing it for (and that it does not create other issues or ambiguities)
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Answered: NEC3 ECC: What is Defined Cost under option B

October 10, 2016, 10:41 am
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Any change to the Works Information is assessed by using Defined Cost under any option, unless both Parties agree to use unit rates or bill of quantity rates. Therefore you assess the impact of this compensation event using the SSCC. Any cost or time implications of this instruction will be built up using the seven categories within the SSCC. If this reduction impacts the rates on other items(positive or negative)  then that can all be (and should be) assessed  be this compensation event quotation. Any CE will be the forecast Defined Cost on how it will impact the future works from the point at which the instruction is given.  Obviously you have to go some way to prove any costs within your quotation - as any Project Manager would be naturally suspicious as to any quote a Contractor puts forward.
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Answered: NEC3 ECC - CE cost actually incurred, or forecasted under option A?

October 11, 2016, 11:32 am
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Derek - to answer your second question would be as follows:
1) A notification that the Project Manager agrees it is a compensation event and requests a quote should be in writing (13.1) and separate from any other notification (13.7). There is NO such thing as a verbal instruction. Under 61.1 they should have given the notification and requested the quote AT the time of giving the instruction (and to make it really practical ideally on the same piece of paper!)
2) The eight week time bar is a red herring in this instance. This 8 week time bar is the time in which the Contractor needs to notify a compensation event within (61.3). Don't forget that if the PM does not notify then the Contractor can (again 61.3).
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Answered: NEC3 Option B: Assesment of Bill of Quantities Item in order to assess extent of Compensation Event

October 11, 2016, 10:54 pm
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Contractor provides the works in accordance with the Works Information (20.1) NOT the B of Q. However, the Project Manager corrects mistakes in the B of Q due to ambiguities which would then be a compensation event (60.6). Also may be relevant would be 60.7 that states that a compensation event resulting from an inconsistency between the B of Q and another contract document (i.e. Works Information).

I guess it really depends on how the B of Q has been worded. The Contractor can only price the B of Q, yet they are to provide the works in accordance with the Works Information. There has to be a test of 60.6 and 60.7 to see if a compensation event is valid (noting the hierarchy of 3D over 2D that has been introduced). Worth noting that any compensation event does not use B of Q rates UNLESS both Parties agree to use them. Compensation events will be assessed from first principles using Defined Cost.  

Hard to give an absolute definitive answer in this situation as (as is often the case) the devil will be in the detail here.
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Answered: NEC3 ECC: Direct Fee on BoQ rates

October 14, 2016, 12:47 am
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You are at slight cross purposes here. The contract intends that EITHER you use B of Q rates (which you would assume has fee etc in it as there is not normally a single B of Q item for "overhead/profit"), or you use Defined Cost which is using the elements within the schedule of cost components - to which you then apply Direct Fee.  

Default position is that a change to Works Information is assessed using Defined Cost, unless you BOTH agree that B of Q rates can be used to assess the negative deduction
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NEC3 ECC: Contract Manager or Director costs

October 16, 2016, 12:23 pm
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In an SME environment, a Commercial Director has allocated some of his  costs under an Option C contract as Defined Cost - People. The company only have three commercial personnel and the Employers view is that director costs should be included in the Fee. However, the Contractor states that the job title of director title is unfortunate as the person needs to be hands on in the delivery of projects and actively undertakes the job of contract manager in delivery of the works. Should the Employer accept this cost or demand that this should have been covered by the Fee.
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NEC3 ECC: Can the client change the clauses in the agreement one month after signing the agreement?

August 30, 2016, 9:40 am
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The client changed the advanced payment clause one month after signature of the original contract. The project is a 4 month project.
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Answered: NEC 3 ECS: Contract amendments by Contractor

October 17, 2016, 10:34 am
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Any amendments to standard option B clauses or even additional clauses would need to be identified as Z clauses. In contract data part 1 it will state if there are Z clauses, and if so should in turn state where within your contract documents those amendments are. They will either be a list of amendments to read along side the standard contract, or a complete version of the contract with the changes embedded in  them.
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