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Answered: NEC ECC: (Option C) - What defined costs can the Contractor apply for?

February 20, 2019, 9:25 am
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Whatever was included in the Contractor's activity schedule does not define the scope of works, which is essentially defined by the Works Information.  Under a main option C the activity schedule gives a total of the Prices, which is the 'target', with payments made using Defined Cost.

Any Defined Cost is incurred in order to Provide the Works, including Equipment, although it seems that what you are actually referring to is Plant (Equipment is used to Provide the Works whereas Plant is included in the works).  If that is the case, then you could treat this as a Disallowed Cost under 11.2 (25) 6th bullet.

If the Employer only specified one item in the Works Information then this is what should have been provided, regardless of what was stated in the activity schedule.  Although NEC doesn't have an 'order of priority' provision, clause 54 states that the activity schedule is not Works Information, which is the document that specifies and describes the works.

See also the case of Leander Construction Ltd v Mulalley and Co Ltd 2011, which dealt with the situation where requirements described in the activity schedule conflicted with the contract conditions.
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Answered: NEC ECC: specification from Works Information or Bill item

February 20, 2019, 9:59 am
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Couple of things here.

Firstly the Contractor's obligation is to Provide the Works in accordance with the Works Information (clause 20.1) not in accordance with the BoQ, therefore you are contractually bound to supply the basic carpet tiles. In NEC contracts the pricing documents, in your case the BoQ does not specify the standards or materials that are to be used, clause 55.1 makes it clear that information in the BoQ is not Works Information or Site Information.

If the PM wanted you to supply the higher spec tiles then they would need to instruct you to do so under clause 14.3. Which would lead to a compensation event under clause 60.1(1). In assessing the compensation event clause 63.8 would come into play: "A compensation event which is an instruction to change the Works Information in order to resolve an ambiguity or inconsistency is assessed as if the Prices ... were for the interpretation more favourable to the Party which did not provide the Works Information. " i.e. the Contractor has priced for the basic carpet tiles.

If the PM decides to correct the BoQ to state basic tiles instead of the higher spec ones then they would need to do this under clause 60.6: "The PM corrects mistakes in the BoQ which ... are due to ambiguities or inconsistencies." and this could "... lead to reduced Prices." Clause 60.7 also comes into play as there is an inconsistency between the BoQ and the Works Information and it is assumed that you have taken the BoQ as correct i.e. priced the higher spec tiles. Therefore yes I would expect the rate to decrease as a result of this correction.
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Answered: NEC ECC: Which accepted programme is used to measure a CE impact?

February 21, 2019, 12:17 am
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This is an area I wrote an article on back in 2013 which you can find in the "guidance/publications" section of my "GMH Planning" website. What I concluded in the article was that NEC3 implies the following, but no where near clear enough and that NEC4 needed to specifically address this to make it more transparent. NEC4 came out and failed to make it transparent, until that is they brought out "NEC4 ECC practice note 1" which you can again download from the "guidance/downloads". I have it on good authority the NEC4 contracts will be amended this year to reflect specifically the principles of the guidance note. In the meantime, the principles I suggest you should apply equally to NEC3 as that is what they always intended. The guidance note is a clarification of intent rather than a new rule. Process should be as follows:

1. new CE has been notified
2. take the last Accepted Programme at the point it was notified as a CE or instructed by the PM (if it is a change to Works Information)
3. update it with progress and other CE's that have already occurred, and reschedule to see where you were in terms of planned Completion before the CE had occurred.
4. save that programme as an interim baseline, and then feed in the new CE, logic link it accordingly and reschedule the programme again. If planned Completion moves this time, that is the effect directly due to that compensation event. You can run a filter on anything that has changed compared to the baseline you stored and that can be the programme that can go with that quotation.
5. repeat process for any other CE's that occur that period.

In terms of your question - I guess you did not know you were doing that extra work until you had been instructed, so it should be that programme at the time of the instruction you would be basing this assessment on.
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Answered: NEC3 ECC - Standing down the Contractor.

February 21, 2019, 12:40 am
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Termination is a possibility and under NEC3 the Employer has the right to terminate for any reason.  As the Contractor has performed well so far, however, one of the risks is that the works may have to be completed by an alternative Contractor.  You would not know how they are going to perform and ultimately you would have to pay for termination (amount due A1, A2 and A4) so not necessarily a 'cheaper' option.

I would suggest notifying an Early Warning and making sure all 'internal resources' are also in attendance at the risk reduction meeting.  That way you can fully understand the impact and whether there are any measures you can take to re-sequence the works or undertake works at different times etc to mitigate the programme and cost.

If you need to go down the route of instructing suspension of the works under clause 34, then I would suggest discussing this with the Contractor beforehand to resolve any potential issues, such as use of resources etc.
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Answered: NEC ECC: Termination & Pain Gain calculation

February 21, 2019, 12:46 am
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Yes.  Main Option C adds clauses 93.4 and 93.6 which detail how the share amount is assessed, which is then added (or deducted as the case may be) to the calculated total.
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Answered: NEC ECC Option E: De-scope of work and dead time due to Access

February 21, 2019, 1:02 am
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Under option E a Contractor can only claim the costs that they are incurring. If you add work or take work away they should do so as efficiently as possible knowing that disallowed costs could be incurred if they incur a cost that could have been avoided.

This is the very nature of option E. The Contractor has no certainty of the amount of work they will be instructed to do. All they cam claim is their fixed fee for any work they do.
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Answered: NEC ECS: Is payment on termination due 13 weeks after notice of termination or 13 weeks after issue of the certificate of termination

February 21, 2019, 7:41 am
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It must be when the termination certificate has been issued, as various actions, including the Subcontractor being obliged to stop work, commence when this has occurred.  Note that the ECS contract states 14 weeks to certify payment (NEC3 and NEC4 under Final Assessment), with 13 weeks in the ECC.

The Contractor should have issued a termination certificate 'promptly', following notification.  There is no timescale stated for 'promptly', although this would, presumably, depend upon how quickly the necessary actions could be taken, that is to check that the reason complies with the contract and that there is a right to terminate.  In your case it would appear that the matter is fairly straightforward, especially as termination by the Contractor can be for any reason under NEC3, although the reason itself would influence the amount of payment certified.

Although the delay in issuing the termination certificate could extend the final payment date (note the time period stated is a maximum amount of time), the contract continues during this period of 'deliberation' so the payment procedure under core clause 5 should continue in the interim.  If the Contractor has not compliantly administered this, then the Subcontractor has particular rights under the Construction Act accordingly.
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NEC ECS: Disclosure requirement of subcontractor costs for compensation events under NEC3, Option A

February 22, 2019, 1:26 am
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We have a NEC3 ECC Option A contract (or a NEC3 based contract because of many amendments),

My question is: Are we obliged to show the employer our subcontractor offers (unit rates) in case the employer requests a change to the scope?

From my point of view, we are not obliged to show our subcontractors unit rates because we have a lump sum contract. This fact should also be applicable for compensation events (unless otherwise agreed). Furthermore, our subcontracts are not NEC subcontracts and we have also standard nondisclosure agreements with our subcontractors.
Nevertheless, all offers must be reasonable and in line with the market.

I assume the employer's expectation will be that we have to show the subcontractor offer and we can only add the subcontractor fee.

Under Contract Data Part 2 the following is agreed:
The subcontracted fee percentage is the percentage to be added to the total cost, excluding tax, of any additional cost incurred by the Contractor from any subcontractor for additional items due to be paid for by the Employer. The subcontracted fee percentage is 12.5%.

-> The meaning of "from any subcontractor for additional items" is not clear for me (maybe only applicable for a specific CE -  see below ***)

We have also to consider contract clause 63.7 and 63.14 (amended).
63.7 Assessments are based upon the assumptions that the Contractor reacts competently and promptly to the compensation event, that any Defined Cost and time due to the event are reasonably incurred and that the Accepted Programme can be changed.

-> costs must be reasonably, but no obligation to show the subcontractor offer

63.14 If the Project Manager and the Contractor agree, rates and lump sums may be used to assess a compensation event. If rates or lump sum fixed prices are used, then no fee, direct or subcontracted, applies to these rates or lump sum fixed prices.

-> What happens, if we cannot agree on lump sum for a compensation event? Do we have to show our subcontractor unit rates?

***Furthermore, under contract clause 61.1 (xx) we have one compensation event item (contractor encounters physical condition (e.g. buried foundations, hazardous substances, …)) where is clearly stated that the price has to be calculated by the provision of the subcontractor quotation plus the subcontractor fee. At all other compensation events there is no such agreement.

-> This means, that the disclosure of the subcontractor offer is not a general requirement. It is only applicable for a specific compensation event. Otherwise it has to be agreed in general.

I would appreciate you feedback very much.

With best regards,
Peter (from Germany)
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FIDIC - Red Book: Dispute Board as a Agency - FIDIC MDB 2010

February 22, 2019, 1:26 am
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For FIDIC MDB 2010 - Instead of appointing single member or 3 members for a DB (Sub-Clause 20.2) can the Employer choose to directly employ an agency rather than an Individual who does all those DB works. So, this so called member(s) will ultimately represent the Agency and he gets all the technical support required from the Agency to carry his duties as a member. In this way, the Employer can solve the issues initially and effectively preventing any further disputes. It might be expensive but considering long run it might be effective too.

If so, does any one have such real time projects to refer; if an enquiry need to be floated to carry such operations - what should a pre-qualification document requirements look like.

Any thoughts on this please.
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Answered: ECC Main Option A and Inflation under Compensation Events

February 22, 2019, 1:44 am
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In short 'Yes', as the compensation event will have affected Defined Costs. Consequently, the Contractor is entitled to those changes in Defined Costs which are due to "the effect of the compensation event" as per clause 63.1. i.e. the 4 month delay.
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Answered: NEC ECC: how does PM assess a late CE

February 22, 2019, 2:17 am
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When you say submit, it depends on what part of the CE process you are talking about. They should notify the CE within 8 weeks otherwise they are time-barred - assuming it is one of the ones they are obligated to notify (where a PM has instructed a change to the Works Information these are not time-barred).

If it is the quotation process that has been delayed then they should assess it in accordance with 63.1 which would be forecast Defined Cost at the point the event was instructed, or for all other events when the compensation event was notified.
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NEC ECC: Option C - Off Site Fabrication - Sub-Contract Fee or Direct Fee?

February 22, 2019, 11:30 am
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If a Contractor under an Option C issues an NEC3 Supply Contract for some off site fabrication does this attract the sub-contract fee % or the direct fee % in their applications?
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Answered: NEC ECC: Contract not paid suppliers and lost plant/equipment

February 24, 2019, 11:48 pm
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In your question you state plant by which I assume you mean Equipment.

You don't say if your concerns extend to the Contractor not performing on site progressing the works.

I suggest that if the Contractor is not performing you notify an early warning and have an open discussion.
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Answered: NEC ECC: Non-payment for Subcontract within the working area

February 25, 2019, 8:08 am
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Under a Main Option E, costs are either 'disallowed' because they do not comply with the category requirements in the Schedule of Cost Components, the definition of Defined Cost or they are a Disallowed Cost because they comply with the SCC but were incurred for one of the reasons stated in the corresponding definition.

It is the Project Manager who decides the above and if the Employer wishes to pay less than an amount certified they need to comply with the requirements of Y(UK) 2 in regard to the giving of a timely and compliant pay less notice, otherwise you are entitled to be paid the certified amount.

The fact you have not submitted the required records specified in the Works Information is essentially a breach of your contractual obligations.   The problem is addressing this 'breach' as the apparent remedy under the contract seems to be clause 25.2, which relates to any cost incurred by the Employer, which doesn't appear to apply in your case.
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Answered: NEC ECS: What is the procedure if the Contractor has neither accepted or rejected a compensation event notification and has not instructed a quote to be submitted for the delay?

February 25, 2019, 12:35 pm
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You have to notify the fact that they have not responded to your notification (in writing, separately from other communications) in accordance with clause 61.4. If they are silent for a further three weeks, then it is deemed accepted that it is a CE and you can go ahead and submit the quotation.
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Answered: NEC ECC: Payment for Attendance at Subcontractor Works

February 26, 2019, 12:08 am
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Under NEC3, to be treated as a 'genuine' cost, People costs are required to be incurred in order to Provide the Works and also be within the Working Areas.  In this instance the premises was not in the Working Areas so the PM is actually correct in their action, although this may seem harsh.  NEC4 has been amended so that the 'Working Areas' test is not definitive, although I appreciate this doesn't assist you.

To overcome this situation in NEC3 you would need to extend the Working Areas accordingly with a request under clause 15.  There doesn't appear to be any reason why the PM shouldn't accept this, although the People costs were still incurred outside the Working Areas at the point in time when they were 'incurred', so you may need further 'discussions' to accommodate their inclusion,
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NEC ECC - can terminal float be purchased from a Contractor for Target Cost agreement?

February 26, 2019, 5:21 am
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The Employer instructs additional work before agreement of the Target Cost and asks the Contractor to provide an accelerated programme to retain the original Completion Date (the Contractor advises that the programme is increased by 14 weeks). The Contractor has provided this by increasing his hours on site, resources on site, i.e. increased site prelims and labour etc. and has increased his prelim (50%) to cover the cost of this but has also omitted his Terminal Float (originally 11.6 weeks) to achieve this Completion Date and has valued the Terminal Float at the accelerated/enhanced weekly prelim charge for the duration of his Terminal Float. Should the accelerated prelim not be the only additional cost?
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Answered: NEC ECC - can terminal float be purchased from a Contractor for Target Cost agreement?

February 26, 2019, 11:33 am
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Anything goes before the contract is signed!

If this is the Contractor's offer that they will increase the Prices (target) by X in order to maintain the original Completion Date and that is accepted/signed then that is the Target. There are no rules on how they should have assessed it - although assess it too high and they might just lose the job altogether. At this stage it kind of depends on who needs it most as to who will back down, and also how bothered the Contractor is about relationships as it will not go down well if the Client feels they have been backed into a corner right at the start!
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Answered: FIDIC - Red Book: Dispute Board as a Agency - FIDIC MDB 2010

February 27, 2019, 12:54 am
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What you are outlining is not a DAB process (or now a DAAB process under FIDIC). You are suggesting something more like adjudication the UK where a nominating body picks an appropriate decision maker for a particular dispute and the parties just choose the nominating body.

There is certainly a role for that type of approach (though there needs to be some cautions as some jurisdictions will not recognise any answer so produced) but it is not a DAB. The main advantage of a DAB is that it grows with and learns the project as it is built where you have a standing Board, using an agency would detract from that accumulation of knowledge. If you had an ad hoc board (ie one appointed only once a dispute arose) then you do effectively have the agency format but you have lost many of the advantages of the DAB.
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Answered: FIDIC Red Book: Clause 20.1 and Determination

February 27, 2019, 3:37 am
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Clause 3.5 is the process of making a determination to be followed whenever the contact requires a determination to be made.

The disapproval of the Engineer under the 1999 or 2017 versions should have been in accordance with clause 3.5. There is no longer, as there was under older FIDIC forms, the requirement for an Engineer's Decision, you simply move on to DAB, Amicable Settlement and/or Arbitration
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