APC Contract Practice

Question 1

What is a contract?

Answer 1

A legally binding agreement (between two parties) to provide goods and services within a specified timeframe.

Question 2

What is necessary to form a contract?

Answer 2

Offer

Acceptance (or counter offer)

Consideration

Intention (to be legally bound)

Capacity (to make agreement) (e.g. power of attorney on behalf of a company)

Question 3

How is a contract executed?

Answer 3

Under hand, signed by both parties, 6 year limitation period. Means that a party must bring about any claim for breach of contract within 6 years of the breach taking place. Any later and the claim will be time-barred.

Under Seal (as a deed), signed and witnessed, 12 year limitation period. Valuable consideration not required,

Question 4

What are common contract documents?

Answer 4

• The Contract (with any amendments)
• Preliminaries
• Contract sum analysis/Pricing Schedule
• Drawings
• Works information
• Planning conditions/agreements
• Contractors Proposals

Question 5

What are the main contract suites?

Answer 5

• JCT (Joint Contract Tribunal)
• NEC (New engineering contract)
• FIDIC (International federation of Consulting engineers)
• ICE (Institution of Civil Engineers)

Question 6

Why use standard forms of contract?

Answer 6

• They are cheaper than getting a bespoke contract drawn up
• Offer a level of familiarity between the parties
• Tried and tested contracts in court, therefore you should be able to predict the outcome in the courts.

Question 7

What should you consider when selecting the contract?

Answer 7

• The criteria of the client
• The procurement method you are going to use
• Nature of the works
• Timings, are the works required to start quickly or do you have time to produce robust set of docs

Question 8

Can you name the NEC ECC standard contract forms?

Answer 8

• Option A, Priced contract w/ Activity Schedule
• Option B, Priced contract w/ BoQ
• Option C, Target contract w/ Activity Schedule
• Option D, Target contract w/ BoQ
• Option E, Cost reimbursable
• Option F, Management contract

Question 9

Can you provide more information on the NEC Option A contract?

Answer 9

Priced Contract with an Activity Schedule

• For all types of clients, the balance of risk is mainly with the contractor
• It comes with/requires an activity schedule, containing a list of activities the contract expects is required to complete construction.
• Lump sum

Question 10

Can you provide further information on the NEC Option B contract?

Answer 10

Priced Contract with a Bill of Quantities

• For all types of clients, the risk is mainly with the contractor
• Comes with a detailed BoQ, which can either be produced by the client or Contractor, which is a detailed statement of all the works that will be undertaken.
• Lump sum

Question 11

Can you provide further information on NEC Option C contract?

Answer 11

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Question 12

Can you provide further information on NEC Option D contract?

Answer 12

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Question 13

Can you provide further information on NEC Option E contract?

Answer 13

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Question 14

Can you provide further information on NEC Option F contract?

Answer 14

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Question 15

What are the perceived problems with NEC3 Contracts?

Answer 15

• Very admin heavy
• Requires alot of expertise to operate effectively
• Focuses too much on Project Management
• Cost information in relation to compensation events can take a long time. PM regularly has to decide how to proceed based on a cost estimate from the QS, which then gets replaced by the actual costs.

Question 16

What are the specialities with NEC?

Answer 16

• No Contract Administrator required, replaced by a Project Manager
• Compensation Events as opposed to variations, extensions of time, loss and expense etc.

Question 17

What is a compensation event?

Answer 17

Compensation events are NEC3 terminology for variations, loss and expense and extensions of time; a single assessment that deals with the entire effect of an event on time and money

Compensation events tend to be those events that impact on the completion date, but are not the contractor’s fault.

NEC3 does not treat compensation events as an allocation of blame, but rather an allocation of risk.