Contract Practice - NEC

Question 1

NEC Options

Answer 1

Option A: Priced contract with activity schedule.
Option B: Priced contract with bill of quantities.
Option C: Target contract with activity schedule.
Option D: Target contract with bill of quantities.
Option E: Cost reimbursable contract.
Option F: Management contract.
Option G: Term contract

Question 2

Key updates from NEC3 to NEC4

Answer 2

• Two new contracts - Design Build and Operate Contract - Alliance Contract
• Risk register now names Early warning register
• Employer becomes client
• Works information becomes scope
• Gender neutral

Question 3

When would you recommend NEC to a client?

Answer 3

• Complex projects with clear objectives
• Collab approach (open communication, shared goals, early problem identification)
• Risk management and clarity
• Typically large building or infrastructure projects

Question 4

Why did you choose to use an Option A on the DWP expansion programme?

Answer 4

• The government construction board recommends that public sector organisations use NEC
• Done off a framework, collab, very little time so didn’t want BoQ
• Client wants cost certainty so Option A

Question 5

Which NEC ECC poses most and least risk for employer

Answer 5

Option E - contractor reimbursed for actual loss plus fee

Option A - fixed priced contract

Question 6

How is risk managed in NEC

Answer 6

• Cost Risk Allowances
• Risk registers
• Early warnings meetings
• Early warnings register

Question 7

What is a compensation event

Answer 7

Unforeseen or uncontrollable event that impacts the cost or time needed to complete

Question 8

Does NEC have relevant events and matters?

Answer 8

No, CE deals with these issues

Question 9

What happens if contractor notifies a CE 12 weeks after becming aware of the event

Answer 9

• Contractor not entitled to change in prices, completion date or key date.
• Must notify within 8 weeks of becoming aware

Question 10

What is an Early Warning Notice and when would this be used?

Answer 10

• Mechanism for both parties to identify potential problems to the project.
• Both parties are obliged to notify the other as soon as they become aware of a matter that could affect time, cost or quality

Question 11

What are the events for a CE

Answer 11

• Changes to WI
• No access and use of site
• Something not provided
• Stop or change key date
• Work by employer or others
• Late reply to communication
• Object found on site
• Previous decision change
• Acceptance witheld
• Search but no defect
• Test causes a delay
• Unexpected conditions
• Unexpected weather
• Breach of contract

Question 12

Compensation event timeline

Answer 12

• C to notify PM within 8 weeks of becoming aware
• PM has 1 week to decide from this
• C has 3 weeks to submit quotation from PMs request
• PM 2 weeks to accept

Question 13

Schedule of cost components in NEC

Answer 13

Costs that can be claimed by the contractor
- People
- Equipment
- Materials
- Charges
- Manufacutre and fabrication
- Design
- Insurance and Bonds

Question 14

NEC payment timeline (under Y(UK) 2)

Answer 14

• Assessment date
• Due date for payment - 7 days after assessment date
• Final date for payment - 14 days after due date for payment
• Notice to withold payment - 7 days before final date for payment

Question 15

NEC payment timeline (without Y(UK) 2)

Answer 15

• Assessment date
• PM certifies payment - 1 week after assessment date
• Certified payment is made - 3 weeks or other as stated in CD after assessment date

Clause Y(UK)2 - ensure compliance with UK Housing grants, construction and Regeneration Act 1996
Without Y(UK)2 means payment date is not fixed

Question 16

How is retention dealt with under the NEC?

Answer 16

• Optional retention clause (Option X16)

Question 17

How can early contractor involvement happen on NEC

Answer 17

Secondary option X22

Question 18

How are cost to changes assess on NEC

Answer 18

• Depending on Main option clause
• Defined cost assessed acording to Schedule of cost components (options C,D & E) or Shorter SCC (Options A&B to assess CEs)

E.g. Option A uses pre determined people rates included in tender, rather than building them up

Question 19

Why is NEC favoured by the public sector

Answer 19

Lathem Report
* Client should be core of construction projects
* Industry should move away from its adversarial structure
* NEC uses as its a less advisarial form (Collab) (less disputes)

Question 20

What are XYZ clauses

Answer 20

X - Pre written option clause
Y - Country specifc, relate to jurisdication
Z - Bespoke / customised clauses (Specific payment mechanisms)

Question 21

How is completion defined under NEC

Answer 21

All works in WI done by completion date
and
corrected all defects that would have prevented the employer from using the works