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Answered: NEC4 PSSC: Defined Cost and Fee Application

February 8, 2019, 3:40 am
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Absolutely no need to apologise Emma, that's what we're here for, plus I think you've identified an ambiguity in the PSSC.

The Price List isn't intended to be used where work is to be carried out on a time charge basis using People Rate x time spent. When the Price List refers to rates multiplied by quantities it should be used for things like surveys which a consultant might quote an amount per property, it shouldn't be used for inserting categories / names of people who are to be paid for based on the number of hours / days they work.

When the work is not going to be paid for as either a lump sum or rate x quantity, it is paid for based on time charge which is People Rate x time spent.

The problem is, as you describe, People Rates can be used for both the work defined in the Scope and compensation events however compensation events attract Fee whereas the other work does not.

If the work is being done on a time charge basis, compensation events are technically irrelevant, as the Consultant is paid for the amount of time spent regardless as to what they are doing. For example if an architect is appointed to manage a project on a time charge basis, the Client pays for all their time in doing this regardless as to how long it takes. So what would a compensation event be in this case?

It would be good if the contract had some words in it to cover this - there is a risk of one party taking advantage of the other the way it is currently drafted. This wasn't a problem in NEC3 PSSC as didn't use Defined Cost plus Fee!
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NEC ECC: Can Contractor proceed at risk if design not accepted?

February 9, 2019, 3:28 am
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If a Contractor submits a design for acceptance, asking for permission to commence straight away with procuring it, if they are prepared to take all risk of the design being wrong - could the Contractor proceed? What should a Project Manager do?
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Answered: NEC ECC: How do the X7 Delay Damages operate where you have multiple Section Completion dates?

February 9, 2019, 3:41 am
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They will each be assessed on their own merits and do not move automatically if the first one is missed. It will be up to the Contractor to recover the programme back on other milestones, or incur the delay damage cost for those as well (i.e. cumulatively). The only way you can move any of the milestones is through a compensation event. An individual compensation event could obviously affect multiple sectional completion dates.
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Answered: NEC ECC: Can Contractor proceed at risk if design not accepted?

February 10, 2019, 4:21 am
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The Contractor can proceed but it will be completely at their risk. Depends which option they are under - option A will be their risk entirely. Option C would probably result in a disallowed cost, so you would have to question why they would want to. If the design is accepted then they will have had a head start on time and could save them money. If the design is rejected for a valid reason then any cost they have incurred will be all down to Contractor.

It would have to be a very calculated risk from the Contractor done for good reason and where they are very confident the design will be accepted.

Project Manager could instruct them not to proceed without acceptance, but they are unlikely to give an instruction for something they do not need to give (and at the end of the day instruction or no instruction you can't physically stop the Contractor from going ahead at their own risk).

Best advise I can offer is to talk to each other. See if you can't get through the design acceptance jointly when there is a potential benefit to one or both Parties to do so.
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Answered: NEC ECC: Use of Secondary Option X18

February 13, 2019, 9:05 am
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From a bidder's perspective the answer is 'Yes' because otherwise they have liability both up to their excess/deductible when the insurance kicks in (as normal) and, as you point out, above the limit of their insurance.
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Answered: NEC ECS: Option A Subcontract - Key Dates

February 13, 2019, 9:09 am
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I assume you are the main Contractor. The delays caused by Subcontractor B are a compensation event under subcontract for A : this could, for example, be under 60.1 (2), (3) or (5) and are consequently put back by the time effected: see the second sentence of clause 63.3.

Subcontractor A then has the obligation to hit these revised Key Dates.
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NEC ECC: Contractor's master programme showing all items on Critical path?

February 14, 2019, 10:17 am
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Hi, we have a Contractor who is designating all items in their Master Programme as critical and placing them all on the critical path.  The programme has already been rejected twice, but they are unwilling to change this.  Can a contractor do this?  They are also showing the critical path doubling back on itself on multiple instances, should the path generally only move in one direction?  They are also showing the critical path splitting into more than one path at several points in the programme, again they are saying they can do this.  They are designating all items as critical to remove float from the programme.   We cannot accept it as it stands but is there any way we get to a conclusion with it?  Our client does not have a criteria foe assessing programmes in their Z clauses or other works information.
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NEC ECC: Can Contractor proceed at risk if design not accepted?

February 9, 2019, 3:28 am
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If a Contractor submits a design for acceptance, asking for permission to commence straight away with procuring it, if they are prepared to take all risk of the design being wrong - could the Contractor proceed? What should a Project Manager do?
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NEC ECC: Use of Secondary Option X18

February 13, 2019, 8:56 am
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NEC3 ECC Contract - Employer has not included X18 in the contract documentation where part of the works includes a contractor designed element (design and construction of canopy structure).

A bidder is stating X18 must be included otherwise they have unlimited liability and if X18 was inserted they would also look to cap the liability.

Contract Data Part One states under 'Risks and Insurance': -

 "The minimum limit of indemnity for insurance in respect of loss of or damage to property (except the works, Plant and Materials and Equipment) and liability for bodily injury to or death of a person (not an employee of the Contractor) caused by activity in connection with this Contract for any one event is £10,000,000.00 (ten million pounds).

The minimum limit of indemnity for insurance in respect of death of or bodily injury to employees of the Contractor arising out of and in the course of their employment in connection with this contract for shall comply with statutory requirements."

and under 'Option Statements': -

"The Contractor provides these additional insurances - Insurance against faults in design (Professional Indemnity Insurance) Cover/ indemnity is £10,000,000"

The construction estimate for the whole works is approx. £1M. Insurance of the Works required is stated as the "Full Reinstatement Value".

In effect, if the contractor held £10M insurance and no more, they are complying with the contract. Would this not then be a 'cap'?

In the example - if the contractor was to hold £10M insurance (and no more) and a claim resulted in say £15M worth of loss/damage (contractor fully liable!), the insurance company would pay out £10M and then, I assume, the Employer would need to take legal action to recover the additional £5m?

Therefore, is X18 needed?
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Answered: NEC ECC: Contractor's master programme showing all items on Critical path?

February 14, 2019, 10:21 pm
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As Jon says - you reject this programme and you can make your own assessment of all compensation events going forward which will not be in their favour. Still this is very difficult for you to do and if this is the very first programme particularly difficult as you do not even have a first baseline to start from.

I think in this instance you need to sit down with the Contractor and explain why it is in their interest to have an Accepted Programme, and what will happen if they don't so there can be some common ground of understanding.

It also emphasises the importance of making programme a significant proportion of the tender score so they put the effort in the first place and you could have had some of these discussions BEFORE the contract was signed.    

Their programme should be a good representation of their planned activities and a logical realist flow of the order they are planned to do. If they are all linked correctly and sensibly then the critical path will be what it will be, and the float will be what it will be.

Only logical action plan would be a meeting/workshop to try to get to a conclusion. It may help having an external facilitator like Jon or myself to help run that session for you if it is likely to remain two entrenched camps of view points. Get in touch with us if that might be of assistance.
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Answered: NEC ECC: Works Information Abuse?

February 15, 2019, 4:25 am
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They should be very careful putting what is intended to be Site Information as Works Information, as any instructed change to the Works Information would then be a compensation event. Ambiguities within Works Information and Site Information the Contractor is deemed to have allowed for the one less onerous or less expensive - so again important for the Employer/Client to make sure there are as few ambiguities as possible. If you spot these at tender stage - point them out as TQ 's and get them resolved or clarified at tender stage (for all tenderer's).
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Answered: NEC ECC: Discrepancy between Bill of Quantities and Works Information in Option B

February 16, 2019, 8:12 am
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All compensation events in the unamended NEC include for the assessment of time and cost ... or more precisely, an Increase in the Prices or delay to the Completion Date ... with the proviso that the (Sub)contractor has to be able to demonstrate the changes.
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Answered: NEC ECS: When assessing a retrospective Compensation Event under an Option B Subcontract how do you assess Actual Cost?

February 16, 2019, 9:19 am
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Just because neither party has followed the timescales does NOT mean you revert to "actual cost". Clause 63.1 states that the switch point between actual/forecast cost is either when the instruction was given, or for all other events when the compensation event was notified. It has nothing to do with when either party finally got round to doing what the contract expected.

Therefore it will be forecast costs using the Shorter Schedule of Cost Components which will all be at open market rates in line with the schedule.

Beware as well - one specific legal case does not change the rules of the contract. That case was around a specific amended contract with a specific set of circumstances so don't think that would overwrite contract clauses.
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Answered: NEC ECS: Data for Shorter Schedule of Cost Components

February 19, 2019, 12:24 am
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This is something that is commonly argued after the event and should have been clarified prior to the contract being entered.

The Contractor has assumed that direct fee has been applied to the rates, although what the Subcontractor has written 'plus fee of 0%', doesn't say whether the 'people overhead' is also included.

Such differences frequently arise where terminology is used that is not recognised by NEC ('daywork', 'all inclusive'} and I think a sensible discussion is needed to confirm what the people rates include for..
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NEC ECC: Which accepted programme is used to measure a CE impact?

February 19, 2019, 4:54 am
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I have an event occurred where there is extra work which can impact the planned Completion. At the time the event arose we have an Accepted Programme from the previous period. However by the time the instruction was issued by the Employer, we have another Accepted Programme with a new planned Completion. The latter does not include for the impact of the work.

I'm aware that Clause 63.3 denotes the impact on the planned Completion vs the Contract Completion date.

Which programme do we measure the extra work against? The one at the time it arose, or the one at the time of the instruction from the Employer?
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Answered: NEC ECC: Collateral warranty

February 19, 2019, 5:17 am
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These are quite different and serve different purposes.

A Parent Company Guarantee (PCG) is used in relation to performance under the contract, as provided by secondary option X4, and is where the parent or holding company indemnifies, that is protect from the consequences, the Employer (Client) of the Contractor not performing as obligated under the contract.

A Collateral Warranty is where you provide assurance to a third party, or beneficiary, that specific facts or conditions are true, usually that the constructed building will meet certain performance requirements.  As an alternative to a collateral warranty, a 3rd party agreement, such as Y(UK)3 under NEC, may be used which essentially does the same thing.

Note that the PCG will name the parties but a collateral warranty may identify the beneficiary by type, or class, such as; future building tenant or occupier.
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Answered: NEC ECC: Can the Project Manager after issuing an Instruction to "Stop Works" and the 13 weeks have lapsed , mutually agree on and extension for the stop instruction to continue?

February 19, 2019, 6:08 am
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Termination is a right not an obligation, so there would be nothing to stop you from agreeing to extend the period of suspension of the works.  The right to terminate also only actually applies, under clause 91.6, where the suspension relates to 'substantial' work, whatever that means.

As the matter is a compensation event under clause 60.1 (4), unless due to a fault of the Contractor, then it is advisable to discuss with the PM what measures you are required to take in relation to the suspended portion and for a PM assumption stating how long the suspension is to continue for, which you can then use to base the corresponding quotation on.

Under clause 34 the PM should instruct you to either re-start work or remove the work from the Scope, although in your situation the PM instruction would essentially confirm the length of time that the suspension is to remain in place for.
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NEC ECC Option E: De-scope of work and dead time due to Access

February 20, 2019, 8:01 am
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Scenario:

Contractor A’s scope of work in Area 1 is due to be complete in March.

Commencing works in Area 2 (planned for March) is driven by Contractor A’s receipt of key design information by Contractor B (another of the Employers Contractors). As a result of a delay to the availability of this design information by Contractor B, the Project Manager is exploring the option of transferring Contractor A’s scope (in Area 2 only) to Contractor B so to not extend Contractor A’s planned completion.

Contractor A’s access to Area 3 is not planned until June, accordingly, if the Project Manager pursues this scope transfer of works for Area 2, there will be a 2-3 month gap whereby no works can be carried out by Contractor A until Area 3 is available.

Under an NEC Option E ECC, what is the extent of the saving the Employer would expect ? Can the Employer expect a reduction in prelims ? What is (if anything) recoverable by the Contractor ?
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NEC ECS: Is payment on termination due 13 weeks after notice of termination or 13 weeks after issue of the certificate of termination

February 20, 2019, 8:01 am
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The Contractor gave notice of termination to his Subcontractor, but delayed the certificate of termination by several weeks. In essence, is termination effected for purposes of the final payment, on date of notice or date of issue of the termination certificate? The issue of procedures is clear, the matter of payment not so clear.
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NEC ECC: Contract not paid suppliers and lost plant/equipment

February 20, 2019, 8:01 am
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The Contractor has not paid its suppliers and a plant which was being used to complete the works has gone missing and the Contractor could not explain where its gone.

What am I able to do regarding the Contractor becoming insolvent/bankrupt although currently he isn't but may be. Also, what options can I take regarding the item the Contractors lost?

This is under NEC4 ECC.
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