NEC3 Engineering and Construction Contract Option A: Price contract with activity schedule

Product Information

there are some potentially surprising approaches taken to recoverable costs, and these need to be worked through in detail - particularly if the same mechanism is stepped down to subcontracts; A regularly accepted programme allows the Parties to understand where they are in terms of liability and to be able to assess future progress and change. It also avoids the inevitable arguments over disruption that would be brought about with alternative retrospective assessments that tend to happen under other forms of contract within the industry. This regularly revised up-to-date and realistic programme maintained by the Contractor is allows joint decision-making between the two Parties.

NEC's history started in 1986 when Martin Barnes was commissioned to start drafting a contract to stimulate good project management. The first edition of NEC was launched in 1993. NEC2 arrived two years later, in 1995. NEC2 was used to build the High Speed 1 railway, between London and the Channel Tunnel. [ citation needed] The Price for Work Done to Date is the total Defined Cost which the Project Manager forecasts will have been paid by the Contractor before the next assessment date plus the Fee. NEC4 was announced in March 2017 and has been available since June 2017. This new edition reflects procurement and project management developments and emerging best practice, with improvements in flexibility, clarity and the ease of administration. It also introduced two new contracts: the NEC4 Design, Build and Operate Contract (DBO) and the NEC4 Alliance Contract (ALC). [14] An NEC4 contract suite covering facilities management was released in 2021. [15] The use of NEC in construction projects is becoming more common, and it is the contract of choice for the 2012 Olympics. In NEC3 ECC, the SSCC can, by agreement, also be used to assess compensation events in options C, D and E.This option contains a priced lump sum contract. The lump sum contract is then linked to a contract programme with an activity schedule. Each activity on the schedule is then allocated a price.

Clause 60.5 impact on programme where quantities increase: It would be possible for every unit rate to increase slightly but not trigger a compensation event under clause 60.4. If that occurred against items on the critical path, the planned Completion may be delayed due to every activity slightly increasing. Clause 60.5 identifies that if this occurs then this would be a compensation event, and that the movement in planned Completion should also lead to an equivalent movement in the Completion Date, to avoid the Contractor being liable for any delay damages (where X7 has been used). If the contractor encounters an event which they deem couldhave an impact on the price of works. They should issue an Early Warning Notification as soon as they become aware of that event. The works are constructed by multiple subcontractors who are directly employed by a management contractor. The management contractor will be responsible for the procurement, coordination, and implementation of works in exchange for a fee. This means the client often takes on the financial risk. This type of contract is for a supplier of supplies or goods to a project, and puts extra contractual requirements on them during their procurement/manufacture period. The Supply Contract is for recommended for large value bespoke designed items of procurement, with the Short Supply Contract potentially being for more run of the mill procurement items on a project. These contracts for example require suppliers to notify early warnings of potential issues, produce and maintain a programme showing how they will deliver on time and also include delay damages for late delivery. Dispute Resolution Service Contract A contractor should look to apportion the price for the design services against specific activities within the Activity Schedule.A Contractor can propose a change to the activity schedule if it no longer reflects how they plan to do the works. This revised activity schedule needs to be accepted by the Project Manager before it becomes the new one. The only reasons to reject it would be 1) it is not in line with the programme, 2) the total does not add up to the Prices, or 3) costs are not evenly distributed.

Disallowed Cost is a cost which the Project Manager decides falls within the categories of Disallowed Cost in the contract. These include, for example, cost not justified by accounts and records, cost that should not have been paid in accordance with the terms of the Contractor’s subcontracts, cost incurred in preparation for and conduct of dispute proceedings and the cost of plant and materials not used to provide the works. Allows the Contractor to sub-let a contract down the line to a Subcontractor on a low risk project, particularly when the Contractor is engaged under an ECSC with their Client. The Professional Services Contract (PSC) The parties agree two separate fee percentages: one for subcontracted work; and one for other work. This reflects the possibility that the risk and profit for (and the work required in managing) direct work as against subcontracted work may well be different. Often the percentages will be agreed at the same figure, but if there is a difference, the percentage for sub-contracted work is likely to be higher.

Client Intelligence

In NEC4 ECC priced options A and B, defined cost is as stated in the short schedule of cost components (SSCC), and in cost-reimbursable options C, D and E, it is as listed in the schedule of cost components (SCC). This is simplified compared with the NEC3 ECC, in which there is the shorter schedule of cost components (also abbreviated here to SSCC) in options A and B and the SCC in options C, D and E. But options C, D and E can also use the SSCC instead of SCC for assessing compensation events, and only by agreement. Defined cost versus fee