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Engineering and Construction Contract
As a Users’ Group member you will have access to an This contract should be used for the appointment of a contractor for
active caiendar oi events featuring regular forums including engineering and construction work, including any level of
seminars and workshops where you will have the unique design responsibility
opportunity to network with other NEC users to exchange
knowledge, information and experience.

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April 2013
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We offer a range of support services including NEC3
tender document review, Z clause advice and drafting, The Construction Clients’ Board recommends that public sector organisations
dispute avoidance, mentoring and our NEC3 i~lealthCheck, use the NEC3 contracts when procuring construction. Standardising
designed to give you an unparaileled supportive review use of this comprehensive suite of contracts should help to
of any project already underway. Our team of experts are deliver efficiencies across the public sector and promote behaviours
happy to advise on a range of issues regarding the NEC3 in line with the principles of Achieving Excellence in Construction.
suite, whether you are using them tor works, services or
the supply of goods Cabinet Office UK

I: in f .
NEC is a division of Thomas Telford Ltd, which is a wholly owned subsidiary of CONTENTS
the Institution of Civil Engineers (ICE), the owner and developer of the NEC.

The NEC is a family of standard contracts, each of which has these

characteristics:
~ its use stimulates good management of the relationship between the two Foreword vi
parties to the contract and, hence, of the work included in the contract.
Preface vii
Q It can be used in a wide variety of commercial situations, for a wide
variety of types of work and in any location. Acknowledgements viii
¢ It is a clear and simple document — using language and a structure Amendments ix
which are straightfonlvard and easily understood.
This document comprises the guidance notes for the NEC Engineering and Introduction
Construction Contract. Background
Purpose of guidance notes
ISBN (complete box set) 978 0 7277 5867 5
ISBN (this document) 978 0 7277 5903 0 Objectives
ISBN (Engineering and Construction Contract) 978 0 72775865 1 Flexibility
ISBN (Engineering and Construction Contract Flow Charts) 978 O 7277 5905 4 Clarity and simplicity
ISBN (how to write the ECC Works Information) 978 O 7277 5907 8
ISBN (how to use the ECC communication forms) 978 0 7277 5909 2 Stimulus to good management
Subcontracts
Consultative edition 1991 Some other changes
First edition 1993
Second edition November 1995 Application of the ECC
Third edition June 2005 The published documents
Reprinted with amendments June 2006 Arrangement of the ECC
Reprinted September 2006 The complete ECC
Reprinted 2007, 2008 (twice), 2009, 2010 (thrice), 2012
Reprinted with amendments 2013 Flow charts
Reprinted 2015, 2016 Merged versions
Clause numbering
Project organisation
Roles and duties COID-l*\ICDO') 3O1 ‘l(.OI\J—IQ-—\I l-\

The Project Manager 10

Designers 11
The Supervisor 11
The Adjudicator 12

Contract strategy 13
Choosing the strategy 13
British Library Cataloguing in Publication Data for this publication is available The main Options 13
from the British Library. Option A: Priced contract with activity schedule 14
Option B: Priced contract with bill of quantities 14
© Copyright nec 2013 Options C and D: Target contracts (with activity schedule or bill of
quantities) 14
All rights, including translation, reserved. Except as permitted by the
Option E: Cost reimbursable contract 15
Copyright, Designs and Patents Act 1988, no part of this publication may be
reproduced, stored in a retrieval system or transmitted in any form or by any Option F: Management contract 15
means, electronic, mechanical, photocopying, recording or othenrvise, without The dispute resolution procedure Options 16
the prior written permission of the NEC Director, Thomas Telford Ltd, One
The secondary Options 16
Great George Street, Westminster, London SW1P 3AA.
Choice of Options 16

Tender documents 18
Typeset by Academic + Technical, Bristol Preparing the tender documents 18
Printed and bound in Great Britain by Bell & Bain Limited, Glasgow, UK
 I

Deciding the contracts 18 FOREWORD

The tender documents 18
Form of tender 18
Contract Data 13
Activity Schedule 19 I was delighted to be asked to write the Foreword for the NEC3 Contracts.
Bill of Quantities 20 I have followed the outstanding rise and success of NEC contracts for a
Tender document in cost reimbursable contracts 21 number of years now, in particular during my tenure as the 146th President
of the Institution of Civil Engineers, 2010/11.
Works Information 21
In my position as UK Government's Chief Construction Adviser, I am working
Site Information 23
with Government and industry to ensure Britain’s construction sector is
Inviting and preparing tenders 24 equipped with the knowledge, skills and best practice it needs in its transition
Instructions to tenderers 24 to a low carbon economy. I am promoting innovation in the sector, including in
25
particular the use of Building Information Modelling (BIM) in public sector
Part two of the Contract Data construction procurement; and the synergy and fit with the collaborative
Assessing tenders 27 nature of NEC contracts is obvious. The Government's construction strategy is
Award criteria 27 a very significant investment and NEC contracts will play an important role in
Procurement law 27 setting high standards of contract preparation, management and the
desirable behaviour of our industry.
General law 27
In the UK, we are faced with having to deliver a 15-20 per cent reduction in
Assessing target cost tenders 27
the cost to the public sector of construction during the lifetime of this
Assessing design and construct tenders 28 Parliament. Shifting mind—set, attitude and behaviour into best practice NEC
Assessing construct only tenders 28 processes will go a considerable way to achieving this.
Qualified tenders 28 Of course, NEC contracts are used successfully around the world in both
Finalising the contract 29 public and private sector projects; this trend seems set to continue at an
increasing pace. NEC contracts are, according to my good friend and NEC‘s
Creating the contract 29 creator Dr Martin Barnes CBE, about better management of projects. This is
31
quite achievable and I encourage you to understand NEC contracts to the best
Explanatory notes you can and exploit the potential this offers us all.
General 31
The Contractor's main responsibilities 40 Peter Hansford
Time 46 UK Government’s Chief Construction Adviser
Testing and Defects 51 Cabinet Office
Payment 59
Compensation events 68
Title 82
0 *-IG>(J‘I-AOJIOP Risks and insurance 84
9 Termination 88
Dispute resolution Options W1 and W2 92
Secondary Option clauses 101
Schedule of Cost Components 122 F’
P

Engineering and 133

Construction Subcontract

Appendix 1 Clause numbering system 137

Appendix 2 Sample form of tender 143

Appendix 3 Sample form of agreement 144

Appendix 4 Model tender assessment sheet 146

Appendix 5 Contract Data ~ worked example 148

 PREFACE

The NEC contracts are the only suite of standard contracts designed to
facilitate and encourage good management of the projects on which they are
used. The experience of using NEC contracts around the world is that they
really make a difference. Previously, standard contracts were written mainly
as legal documents best left in the desk drawer until costly and delaying
problems had occurred and there were lengthy arguments about who was to
blame.
The language of NEC contracts is clear and simple, and the procedures set
out are all designed to stimulate good management. Foresighted
collaboration between all the contributors to the project is the aim. The
contracts set out how the interfaces between all the organisations involved
will be managed — from the client through the designers and main contractors
to all the many subcontractors and suppliers.
Versions of the NEC contract are specific to the work of professional sen/ice
providers such as project managers and designers, to main contractors, to
subcontractors and to suppliers. The wide range of situations covered by the
contracts means that they do not need to be altered to suit any particular
situation.
The NEC contracts are the first to deal specifically and effectively with
management of the inevitable risks and uncertainties which are encountered
to some extent on all projects. Management of the expected is easy, effective
management of the unexpected draws fully on the collaborative approach
inherent in the NEC contracts.
Most people working on projects using the NEC contracts for the first time
are hugely impressed by the difference between the confrontational
characteristics of traditional contracts and the teamwork engendered by the
NEC. The NEC does not include specific provisions for dispute avoidance. They
are not necessary. Collaborative management itself is designed to avoid
disputes and it really works.
It is common for the final account for the work on a project to be settled at the
time when the work is finished. The traditional long period of expensive
professional work after completion to settle final payments just is not needed.
The NEC contracts are truly a massive change for the better for the industries
in which they are used.

Dr Martin Barnes CBE

Originator of the NEC contracts
'V
.1-

_,i
ACKNOWLEDGEMENTS ‘J AMENDMENTS

For the third edition of the NEC Engineering and Construction Contract these | Full details of all amendments are available en
Guidance Notes were produced by the Institution of Civil Engineers and were l WWW neccontract Com
mainly drafted by Peter Cousins, Colin Reed and Tom Nicholson with the
assistance of members of the NEC Panel.
The original NEC was designed and drafted by Dr Martin Barnes then of
Coopers and Lybrand with the assistance of Professor J. G. Perry then of The
University of Birmingham, T. W. Weddell then of Travers Morgan Management,
T. H. Nicholson, Consultant to the Institution of Civil Engineers, A. Norman
then of the University of Manchester Institute of Science and Technology and
P. A. Baird, then Corporate Contracts Consultant, Eskom, South Africa.
The members of the NEC Panel are:
P. Higgins, BSO, CEng, FICE, FCIArb (Chairman)
P. A. Baird, BSO, CEng, FICE, M(SA)lCE, MAPM
M. Barnes, BSc(Eng), PhD, FREng, FICE, FCIOB, CCMI, ACIArb, MBCS,
FlnstCES, FAPM
A. J. Bates, FRICS, MInstCES
A. J. M. Blackler, BA, LLB(Cantab), MClArb
P. T. Cousins, BEng(TeOh), DipArb, CEng, MICE, MC|Arb, MCMI
L. T. Eames, BSO, FRICS, FCIOB
F. Forward, BA(Hons), DipArch, MSc(Const Law), RIBA, FCIArb
Professor J. G. Perry, MEng, PhD, CEng, FICE, MAPM
N. C. Shaw, FCIPS, CEng, MlMeOhE
T. W. Weddell, BSO, CEng, DIC, FICE, FIStruOtE, AClArb
NEC Consultant:
R. A. Gerrard, BSc(Hons), MRICS, FCIArb, FClnstCES
Secretariat:
e, LLB, LLM, BL
Hawkins, BA(Hons), MSc
7'1!-.> 220Q
" Vernon (Technical Adviser), BSO, CEng, MICE

:.,_ _
 Q 11CC@3 Guidance Notes for Engineering and Construction Contract

INTRODUCTION

Background
The NEC Engineering and Construction Contract (ECC) (Previously the New
Engineering Contract) has been developed to meet the current and future
needs for a form of contract to be used in the engineering, building and
construction industries. It is an improvement on existing standard contracts in
a number of ways.

Purpose of guidance notes

The purpose of these guidance notes is to explain the background to the ECC,
the reasons for some of its provisions and to provide guidance on how to use
it.
Neither these guidance notes nor the flow charts published with the contract
are contract documents, nor are they part of the ECC. They should not be
used for legal interpretation of the meaning of the ECC.
The convention of using italics for terms which are identified in the Contract
Data of the ECC and capital initials for terms defined in the ECC has been
used in these guidance notes.

Objectives

The objectives for the design of the New Engineering Contract (NEC) contracts
were to make improvements to more traditional forms of contract under;three
main headings. ' >

Flexibility The ECC is designed to be as flexible as possible. It can be used

~ for engineering and construction work containing any or all of the
traditional disciplines such as civil, electrical, mechanical and building
work,
v whether the Contractor has full design responsibility, some design
responsibility or no design responsibility,
- to provide all the current options for types of contract such as
competitive tender (where the Contractor is committed to his offered
prices), target contracts, cost reimbursable contracts and management
contracts and
v in the United Kingdom and in other countries.

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¢ Guidance Notes for the NEC Engineering and Construction Contract _ Introduction 3.

All the commonly used standard conditions of contract from the various A fundamental objective of the ECC is that its use should minimise the
sectors of engineering and construction were reviewed in the course of incidence of disputes. Thus words like ‘fair’, ‘reasonable’ and ‘opinion’ have
designing the ECC. Some of their provisions that were peculiar to particular been used as little as possible. This does not mean that the flexibility of
sectors have been omitted where they are better included in the Works lnfor. administering the contract has been reduced. For example, in most instances
mation. Where they are essential, they have been included in the ECC itself, where the Project Manager is required to decide whether or not to accept a
For example, the need to make full provision for off-site manufacture and submission from the Contractor, reasons are given in the contract for a deci-
testing of work which is characteristic of mechanical and electrical contracts sion not to accept.
has been included in the ECC. The Project Manager may still decide to reject the submission for some other
In order to achieve uniformity across the various engineering, construction and reason, but in that case the Contractor may be entitled to compensation. This
building sectors, some changes of terminology from those normally used have will significantly reduce uncertainty about the outcome of the contract. This
been necessary. One example is that the word ‘Equipment’ is used for what, in benefits the Contractor without constraining the freedom of action of the Project
the building and civil engineering sectors, has in the past been called Manager acting on behalf of the Employer.
‘Constructional Plant’. The word ‘Plant’ is used in the ECC as it is customarily
used in all the other engineering sectors. The traditional civil engineering and Stimulus to good This is perhaps the most important characteristic of the ECC. Every procedure
building term ‘temporary works‘ is covered by ‘Equipment’ as defined in ECC management has been designed so that its implementation should contribute to, rather
clause 11.2(7) and therefore is not used. than detract from, the effectiveness of management of the work. This aspect
of ECC is founded upon the proposition that foresighted, co-operative manage-
Clarity and simplicity Although a legal document, the ECC is written in ordinary language. As far as ment of the interactions between the parties can reduce the risks inherent in
possible, it uses only words which are in common use. This makes it easier to construction and engineering work. Developments in project management
understand by people who are not used to using formal contracts and by techniques and their implementation over the past 20 years have moved
people whose first language is not English. It also makes it easier to translate faster than the evolution of forms of contract. With the ECC, it is now possible
into other languages. However, in the areas of insurance, disputes and termi- to build arrangements for the different parties to contribute to the manage-
nation, some phrases or terms which have a specific legal meaning have been ment of a project upon improved practices and to motivate all parties, by
retained. means of the contract, to apply such practices to their work.
As further aids to simplicity and clarity, a great deal of effort has been taken The ECC is therefore intended to provide a modern method for employers,
to reduce the content of the contract conditions to the minimum needed. This designers, contractors and project managers to work collaboratively. It also
has resulted in the following. enables them to achieve their own objectives more consistently than has been
possible using more traditional forms of contract. Use of the ECC is intended
~ The number of clauses used and the amount of text in each are less to lead to a much reduced risk to the Employer of cost and time overruns and
than in many standard forms. of poor performance of the completed projects. It should also lead to a much
Q Sentences are kept as short as possible. increased likelihood of achieving a profit for the Contractor and his subcon-
Q Sentences have been subdivided using bullet points to make them easier tractors and suppliers.
to understand.
~ The various Option clauses are designed so that they only add to the The two principles on which the ECC is based and which impact upon the
core clauses rather than alter or delete them. objective of stimulating good management are:
I The ECC neither requires nor contains cross-references between clauses. ~ foresight applied collboratively mitigates problems and shrinks risk, and
To a person used to using more traditional forms of contract, the simplicity Q clear division of function and responsibility helps accountability and
and clarity of the ECC may not be immediately apparent. This is because it motivates people to play their part.
uses words and grammar that, although common in everyday speech and A secondary but important theme is that people will be motivated to play their
writing, are not usually found in formal contract documents or other legal part in collaborative management if it is in their commercial and professional
papers. The contract also uses a number of newly defined expressions that interest to do so. Reliance need not be placed upon exhortation, either within
the more experienced reader may not be familiar with. the contract or outside it.
The ECC is arranged and organised in a structure which helps the user to gain inevitably on any construction or engineering project there will be uncertainty
familiarity with its contents. More importantly, the actions by the parties which and risks involved in carrying out the works. The ECC allocates the _:_l’lSkS
follow from use of the ECC are defined precisely so that there should be few between the Parties clearly and simply. But it also helps to reduce the likeli-
disputes about who is to do what and how. hood of those risks occurring and their subsequent impact, if they do occur,
The design of the ECC is based upon flow charts of the procedures to be by the application of collaborative foresight and risk reduction procedures. In
followed by the parties named in the contract. One of the benefits of this this way, it aims to improve the outcome of projects generally for parties
approach to drafting has been that opportunities could be taken for simpli- whose interests might seem to be opposed.
fying the structure of the contract as well as ensuring that the procedures A prominent example of the way that the procedures in the ECC are designed
were not open-ended or conflicting. For example, almost all circumstances to stimulate good management is the early warning procedure. This is
which may give rise to additional payment to the Contractor are identified as designed to ensure that the Parties are made aware as soon as possible of
compensation events. The procedure for dealing with these events is mainly any event which may
set out in the core clauses and includes review of both the cost and time
implications. This contrasts with traditional forms of contract in which the v increase the amount that the Employer has to pay,
procedure for compensation is different depending upon the nature of each Q delay Completion of the works,
event. ~ impair the performance of the works, once completed, or
Q affect others working on the project.

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3 Guidance Notes for the NEC Engineering and Construction Contract Introduction <-..Il€C®3
7___;

The Parties are then required to meet, to seek mutually beneficial solutions to Subcontracts
overcome these problems, and to operate a formal Risk Register of notified
events.
The ECC has been designed on the assumption that work may be sub-
A further example is the management of compensation events. These are contracted. The NEC family of contacts includes several contracts that can be
events which are at the risk of the Employer, and which may lead to the used for this subcontracting. They are:
payment to the Contractor changing or the Completion Date, i.e. the date by
which the Contractor is required to complete the works, being extended. A ' the Engineering and Construction Subcontract (ECS),
principle of the ECC is that, when such an event occurs, the Project Managen I Q the Engineering and Construction Short Subcontract (ECSS), and
acting on behalf of the Employer and in communication with him, should, Q the Professional Senrices Contract (PSC).
whenever possible, be presented with options for dealing with the problem These are all based upon similar principles to the ECC and use common
from which he can choose, directed by the interests of the Employer. names and definitions. They have a small number of different provisions
The ECC is designed to ensure that the Contractor will be unaffected finan. designed specifically for the different circumstances for which they should be
Oially by the choice that the Project Manager makes. To achieve this, the used.
Contractor prepares a quotation for the valuation of compensation events that Users of the ECC who will become involved in the setting up of subcontracts
is based upon a forecast of the impact which the change or problem will have are advised to read the guidance notes for the various forms before deciding
upon his cost of carrying out the work — as forecast by him at the time the which they should use.
event is assessed. Where, as is often the case, alternative ways of dealing
with the problem are possible, the Contractor prepares quotations for different Use of the same text in the main contract and the subcontract provides some
ways of tackling the problem. The Project Manager selects one on the basis of back-to-back protection for main contractors using one of the NEC family. It
which will best serve the interests of the Employer. Criteria for such selection also has the convenience that Contractors’ and Subcontractors’ staff do not
can include lowest cost, least delay or best finished quality, or any combina- have to become familiar with two different sets of text and procedure. There is
tion of these. nothing to prevent a subcontract using a different Option from that used in
the main contract. An obvious example of this is where the main contract uses
In Options A and B the change to the amount that the Contractor is paid for a cost reimbursable or target Option (C, D or E) whilst the subcontract uses a
the work is based on the quotation. The Contractor carries the potential risk oi priced Option (A or B). Option F (management contract) has not been included
reward if his forecast of the cost impact is wrong, and the Employer has a firm in the ECS.
commitment. The Contractor’s risk or reward is conceptually similar to the risk
he takes when pricing a tender, but he will have better information on which
to base his estimate. In Options C and D the quotation is used to vary the
target, and so the Parties will share the risk and reward under the share
mechanism.
This arrangement is intended to
Some other changes
~ stimulate foresight,
Q enable the Employer to make rational decisions about changes to the Two other specific changes from conventional construction practice desenre
work with reasonable certainty of their cost and time implications, and mention.
v put a risk on the Contractor which is tolerable and which motivates him Firstly, subcontractors cannot be nominated. This change is made in order to
to manage the new situation efficiently. simplify contract arrangements and to eliminate the clouding of responsibil-
An important by-product is that few issues relating to valuation of the work or ities which nomination causes. Elimination of this clouding should not only
extensions of time are left to be settled after the event. reduce disputes but also strengthen the motivation of the parties to manage
their activities. An Employer who has reasons for using a particular contractor
This approach has pervaded the drafting of the ECC and is the basis for most for part of the works can use the ECC for a direct contract alongside other-
of the procedures which it contains. In designing the ECC, the motivation of contractors. The effective use of Key Dates in the individual contracts will
each party in each action he is to take has been considered against good assist in the management of these different contractors.
management criteria. Because this is motivation-driven, it does not appear in
the words of the ECC itself but it is intended to result directly from the way in Secondly, the financial control document in the ECC can be either a traditional
which the procedures are operated. bill of quantities or an activity schedule. An activity schedule is a list of'items
with lump sum prices. The total price for the work to be done is divided
A typical aspect of this characteristic is the way in which the ECC makes use between each of the items. This is a simpler document to prepare and use
of the programme for design, construction and installation. Many of the than the traditional bill of quantities. The bill of quantities will normally be
detailed procedures rely upon the fact that an up-to-date and realistic produced by or on behalf of the Employer and priced and extended by the
programme maintained by the Contractor is used in joint decision-making tenderers. The activity schedule will normally be produced and priced by each
between him and the Project Manager. The use of the programme is defined of the tenderers. Therefore the use of an activity schedule rather than a bill of
in some detail and in such a way that, again, the Contractor is motivated to quantities will result in a decrease of the tender preparation time and costs
keep it up-to-date and realistic. He is not simply exhorted to do so but rather for the Employer but an increase for that of all of the tenderers.
it is in his, and the Employer’s, best interests to do so.

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Introduction Q’.-.l’l€C®3
3 3 Guidance Notes for the NEC Engineering and Construction Contract 7

The Contract Data are selected and completed for each contract. These data
Application of the ECC identify such things as the completion dates, the contract-specific documents
(such as the Works Information - called the specification and drawings in
other traditional contracts), interest rates and price adjustment indices to be
Although, at first reading, the ECC may appear to be similar in concept, if not used.
in language, to existing standard forms, to rely upon such an impression
would be wrong. In many ways it is radically different. As the flow charts show, The following volumes are published with the third edition (June 2005) of the
most procedures are based on good management practice and often differ ECC
from current practice in some engineering and building disciplines. This is not ~ the complete Engineering and Construction Contract (ECC),
change for the sake of change, little conventional practice remains when lhgi Q the flow charts,
principles of the ECC are applied.
' these guidance notes, and
The user of the ECC must, therefore, study it carefully, as the words are not ' six merged versions of the ECC, one for each main Option.
simply different expressions of familiar practice.
The complete ECC This volume contains all the clauses and schedules comprising the ECC,
The ECC is drafted in a simple and clear style, but its differences from current
practice mean that some explanation and consideration of how it will work is including
necessary when it is first used. These guidance notes are essential reading ~ core clauses — common to all contracts,
for people using the ECC for the first time. They will continue to be useful in Q clauses for each of the main Options A to F — one of which must be
training people coming into the management of projects in how to make best chosen for a particular contract,
use of the ECC as part of the NEC System. The published flow charts should Q clauses for the two alternative dispute resolution, Options W1 and W2,
also be referred to as illustrations of the procedures on which the ECC is one of which must be chosen,
based. Q clauses for each of the secondary Options X1 to X7, X12 to X18, and
X20 — each available, if required, for a particular contract,
v Schedule of Cost Components, applicable to main Options C, D and E,
Q Shorter Schedule of Cost Components, applicable to main Options A to E,
and
v Contract Data formats parts one and two.
The published documents
Flow charts The flow charts show the procedural logic on which the ECC is based. They are
available for reference in conjunction with these guidance notes.
Arrangement of the ECC The ECC includes the following sections of text
~ the core clauses, Merged versions Each merged version includes the clauses for the relevant main Option
~ the main Option clauses, located in their appropriate places among the core clauses. Thus, the condi-
0 the dispute resolution Option clauses, tions for each main Option can be read together. The main Option clauses are
Q the seccndaiy Option clauses, in bold print for easy identification.
Q the Schedule of Cost Components, and The merged versions also include
' the Contract Data formats.
° the dispute resolution Option clauses
Other documents included in a contract when using the ECC will include ' those secondary Option clauses which can be used with each main
¢ the Works Information option,
~ the Site Information, and Q the Contract Data, adapted for each main Option,
~ documents resulting from choosing secondary Options, such as Q either both Schedules of Cost Components (for Options C, D and E) or
Performance Bond (if submitted before the Contract Date). only the Shorter Schedule of Cost Components (for Options A and B) or
neither (for Option F).
The successful tenderer’s tender programme may also be incorporated as the
Accepted Programme by reference in the Contract Data part two. Clause numbering The ECC is arranged in nine sections
Depending on the choice of main Option, the documents may also include: 1 General I
Q an activity schedule or 2 The Contractor’s main responsibilities
~ a bill of quantities. 3 Time
4 Testing and Defects
The Schedule of Cost Components (SCC) or the Shorter SSCC is used. 5 Payment
depending upon which main Option is chosen, to define those components of 6 Compensation events
the Contractor’s costs which are included in Defined Cost for all main Options 7 Title
except Option F. 8 Risks and insurance
Defined Cost is used to assess payments to the Contractor in Options C, D 9 Termination
and E, and for assessing the cost effects of compensation events whichever The first digit of a clause number, whether for a core clause or a main Option
main Option (except Option F) has been chosen. clause, is the number of the section to which the clause belongs. A clause
may be subdivided, for example clause 16 includes four separate parts,
numbered 16.1 to 16.4. Reference in these guidance notes to clause 16 is a
reference to all the parts of the clause; reference to clause 16.2 is to that
part only.

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3 Guidance Notes for the NEC Engineering and Construction Contract |"’l'°d'1¢"°“ —' 3
1*

Where a clause is used in more than one main Option, the same number la
used. The number of a clause, whether core or optional, is unique to the texl
of the paragraph. Ernpm-Yer _" NEC Professional Services Gnmracts
l_ _ ._._ _ _ -.
The two alternative dispute resolution Option clauses are numbered W1 are
W2. |
The secondary Option clauses are numbered separately. The prefix ‘X’ is used L _ _ _ ._.
for secondary Options that can be used in any country. For secondary Options Project Manager
that are specific to the country in which the works are carried out or the
country of the law of the contract, the prefix 'Y’ is used followed by a further
prefix to denote the country; for example Y(UK) denotes a secondary Option
that is applicable to, at least parts of, the United Kingdom. Any additional
secondary clauses that are required for a specific project should be numbered
r_____T_
with the prefix ‘Z’. 1 Supervisor . EWPIPFEFS die“-i9"9'$
The tables in Appendix 1 of these guidance notes illustrate the integration of ___T_ ___TT_
the main Option clauses and paragraphs within the core clauses and list the, NEC Engineering and L955
dispute resolution clauses and the secondary Option clauses. Construction Conlracis DBSlg|-|g1- D2 D3
D1

Project organisation
Contractors

The project organisation assumed in the ECC involves the participants shown Eel Cg (33 N NECAdludicator’s Contract
in Figure 1. I

The ECC is used for the contract between the Employer and the Contractor. l
The Contractor may use the ECS, ECSS or PSC for his subcontracts. The PSC L__ _
may be used for the Employer’s contracts with the Project Manager, the NEC Subcontracts Adjudicator
designers and the Supervisor. The NEC AdjudiOator’s Contract is used for the
contract between the Employer and Contractor (jointly) and the Adjudicator. It I
"_l
may also be used in subcontracts using any NEC form of contract. Subcontractors |
The roles of the Project Manager, Employer's designers and Supervisor may be
combined where the objectives of the Employer are senred by so doing. Simi-
larly, any or all of these three roles may be taken by employees of the - - *-: ;:t SC1/1 SC1/2 SC1/3
Employer. The role of the Adjudlcator should neither be combined with another
role nor taken by an employee of the Employer. ontractual linksI
The obligation of the Project Manager to make rapid decisions means that the
:0 I, II I lI
...I
Employer must give him considerable authority. An understanding of the Notes:
EmpIoyer’s internal procedures is also an advantage. For some employers this Suppliers
will mean that the Project Manager will come from the Employer's organisa- _ cr I, =———-fl - -
___-T-I 1. This diagram shows the Aojudicator appointed in
connection with the contract betweejnfithe Employer
tion, although staff from a consultant can be considered. A solution adopted and Contractor C1. The same or a I eren
by many employers is to appoint one of their staff as the Project Manager, SP1/1 i SP1/2 SP1/3 Aoliudicator might be appointed for contracts with
supported by a consultant's staff to whom the Project Manager delegates T other Contractors or indeed for contracts between
some of his actions. the Employer and his professional advisors or
The Supen/isor’s role is more directly technical, and a consuItant’s staff are between Contractors and their Subcontractors.
frequently appointed as Supervisor. 2. Subcontractors can include the Contractors
designers who might be appointed under an NEC
Roles and duties The ECC sets out the responsibilities and roles of the following parties Professional Services Contract between the
Contractor and the designer rather than the ECC
~ the Employer, Subcontract shown in this diagram.
Q the Project Manager,
' the Supervisor, Figure 1. The NEC System - key players and contractual links.
' the Contractor,
v Subcontractors, and
Q the Adjudicator.
Separate functions of Employer's designer and Contractor's designer are
assumed but not mentioned in the contract.

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1 _ _
-"noel3 Guidance Notes for the NEC Engineering and Construction Contract 7
_ Introduction -"'.11€C®3

The role played by the Engineer, Architect, Contract Administrator or Supe,_ Perhaps the strongest feature of the ECC which stimulates co-operation rather
vising Officer in other standard forms is divided between the Project Manage, than adversarial activity is the fact that the Contractor is little concerned
the Supervisor, the Employer’s designer and the Adjudicator. ’ financially with the way the Project Manager decides to deal with problems
which are the Employer’s responsibility. If the Contractor’s eventual payment
The Project Manager The Project Manager is appointed by the Employer, either from his own staff or is largely secure, he is not encouraged to make the worst of any problems
from outside. His role within the ECC is to manage the contract for that which arise, either as regards their effect upon cost or upon the timing of the
Employer with the intention of achieving the Employer’s objectives for thel‘ work. This feature is strengthened by the flexibility available to the Employer
completed project ' and the Project Manager in their pre-contract choice of main Option for a
The Employer will normally appoint a project manager in the feasibility study,‘ particular contract ranging from price commitment to cost reimbursable. The
stages of a project. His duties may then also include acting on behalf of the. ECC permits this choice of contract strategy without the need to resort to
Employer and advising him on the procurement of design, on estimates ell different standard forms.
costs and time, on the merits of alternative schemes and on choosing the
most appropriate contract strategy. Designers Designers for the Employer’s design are appointed by the Employer. If several
designers are appointed, possibly covering different disciplines, good practice
As contracts are placed for construction work, it is preferable to appoint the requires that a lead designer be appointed.
person or organisation already appointed for the whole project to act as the
Project Manager on a particular contract. However, it is essential that the If the design of the works depends on a process technology, for which the
Project Manager for a particular contract is sufficiently close to the work and Employer has a licence, he will need to provide appropriate access to it as
has the time and authority to carry out his duties effectively. On very large part of his contract with his designer or the Contractor (and also for manage-
projects, especially those including several contracts, it may be necessary to ment purposes in the Project Managers contract).
appoint a different Project Manager for each contract or for the Project The Employer’s designer’s role is to develop the design to meet the Employer’s
Manager to delegate his responsibilities for some of the contracts. objectives to the point where tenders for construction are to be invited. If a
The ECC places considerable authority in the hands of the Project Manager. Ii ‘design and construct’ contract is envisaged, the Employer’s designer's role is
assumes that he has the Employer’s authority to carry out the actions and restricted largely to providing a performance specification together with stan-
make the decisions required of him. If his contract with the Employer dards for design and materials which he may wish to specify for inclusion in
constrains him in any way, as for example in the case of a limit on the amount the Works Information.
which the Project Manager may authorise as a compensation event assess- Under the ECC, the Employer’s designer is not referred to in the contract
ment, it is the responsibility of the Project Manager to ensure that all the between the Employer and the Contractor. However, the Employer should
approvals are given in time to enable him to comply with the time periods set ensure that the Project Manager's brief includes management of the
out in the ECC. If such approvals by the Employer are not given, the Contractor designer’s activities. The Project Manager should have ready access to the
has the right to raise the matter with the Adjudicator. It is not advisable to designer for advice.
state limits on the Project Manager’s authority in the additional conditions of
contract as this will make settlement of disputes difficult. On many civil engineering projects, particularly those involving work at or
below ground level, it is important that the assumptions made by the designer
The Project Manager is free to seek the Employer’s views as much or as little are reviewed against the conditions actually encountered during construction.
as his relationship and contract with the Employer requires. He will normally This is essential in high-risk operations such as tunnelling contracts. On such
maintain close contact with the Employer so that his decisions reflect the projects the role of the designer should not end when the Works Information is
Employer’s business objectives. He has authority to change the work, to complete but should continue during construction in some capacity. This prin-
instruct the Contractor and generally to apply his managerial and engineering ciple applies whether the design has been prepared for the Employer or for
judgement. Positive management from both sides is encouraged. the Contractor.
In the special case of turnkey contracts, for which Option A is the only realistic In priced contracts (Options A and B), changes of the Employer’s design are
main Option, the Project Manager will be expected to take a less active role. dealt with as compensation events. In target contracts (Options C and D) they
He should certainly avoid issuing instructions unless absolutely essential, as are also dealt with as compensation events, but their assessment only affects
to do so is against the turnkey concept. No change is necessary to the the Prices (the target) and hence the Contractor's share, rather than the Price
wording of the conditions of contract but the Employer should be careful in for Work Done to Date. (See explanatory notes on clause 53 for Options C and
describing the limits of what he expects the Project Manager to do in his D). "r
contract with the Project Manager.
The contractual role of the Project Manager is defined in terms of the actions The Supervisor The Supervisor is appointed by the Employer for a particular contract. He can
and decisions he is to take. He is constrained from acting unreasonably in be an in-house person or someone from outside. His role is defined in the ECC
this role by statements of the basis on which he is to make each type of deci- in terms of the actions and decisions he is to take. Essentially, his role is to
sion but not what decisions he is to make. If the Contractor believes that any check that the works are constructed in accordance with the contract. It is
of the Project Manager's actions or decisions is not in accordance with the similar to that of a resident engineer or architect who may be assisted by an
contract, he may refer it to the Adjudicator (Option W1 or W2). inspector of clerk of works. In some circumstances it would be appropriate for
the clerk of works to carry out the role of Supervisor.
The Supervisor does have one significant contractual responsibility. It is his
responsibility to issue the Defects Certificate, which signifies the end of most
of the obligations of the Parties.
A disputed action by the Supenrisor, like that of the Project Manager, can be
referred by the Contractor to the Adjudicator.

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3 3 Guidance Notes for the NEC Engineering and Construction Contract

The Adjuclicator The Acljudicator’s role, under either dispute resolution Option, is to settle a c0NTRACT STRATEGY
disputes that arise between the Parties quickly and efficiently. The intention
that disputes are dealt with quickly and not left to cause ill will amongst th
Parties.
The Parties should therefore not look upon adjudication under the ECC as ju
another form of litigation but rather as an efficient method for referrin choosing the strategy
honestly held differences, between parties working together in a spirit Q
mutual trust and co-operation, to an independent third party to decide. Th The Employer (usually advised by the Project Manager) chooses the contract
Adjudlcator's decision is binding upon the Parties. If either Party does n strategy for the project. He should review his choice later, when he starts
accept that decision they have only a limited period to notify the other Party preparing the tender documents for each contract. Factors taken into account
their intention to refer the matter to the tribunal, after which it becomes fin in deciding what type of contract to use from within the NEC family include
as well as binding. the following.
It should also be noted that all disputes have first to be referred to the Adjudj. Q Who has the necessary design expertise?
cator for his decision before they are referred to the tribunal. ¢ ls there particular pressure to complete quickly’?
The Adjudicator is appointed jointly by the Employer and the Contractor, plefej. - How important is performance of the completed works?
ably before work commences, using the NEC Adjudicator’s Contract. Thei- v ls certainty of final cost more important than lowest final cost?
Employer should insert his choice of Aojuclicator in part one of the Contracll» 0 Where can a risk be best managed?
Data. If the Contractor does not agree with the choice, a suitable person willl ' What total risk is tolerable for contractors?
be the subject of discussion and agreement before the Contract Date. Alterna. - How important is cross-contract co-ordination to achievement of project
tively, the Employer may propose a list of acceptable names, and the. objectives?
successful tenderer may be asked to select one of them to be Adjudicator. v Does the Employer have good reasons for himself selecting specialist
Some employers may prefer the tenderers to propose suitable names. contractors or suppliers for parts of the work?
The Adjudlcator becomes involved only when a dispute is referred to him. Asa The result of these considerations should be a statement of the chosen
person independent of both Employer and Contractor, he is required by the contract strategy comprising the following
contract he has with the Parties to give a decision on the dispute withir- ~ e schedule of the parts of the project which will be let as separate
stated time limits. contracts,
v for each contract - a statement of the stages of work which it will include
covering management, design, manufacture, erection, construction,
installation, testing and commissioning as appropriate, and
I a statement of the NEC contract which will be used for each contract,
and, where relevant, which main Option will be used.
The ECC has six main Options, based on different mechanisms for payment to
the Contractor and offering different basic allocations of risk between the
Employer and the Contractor.
All the main Options can be used with the boundary between design by the
Employer and design by the Contractor set to suit the chosen strategy. lf the
Works Information set down by the Employer is only a performance specifica-
tion, most of the design will be done by the Contractor (effectively a ‘design
and construct’ contract). If the Works information includes detailed drawings
and specifications, little design remains for the Contractor to complete.
An advantage of using the ECC is that, whatever variations in strategy are
adopted, most of the procedures, based upon the core clauses of the EQC, will
be common to all contracts. L

The main Options

There are six types of payment mechanism available in the main Options:
Option A Priced contract with activity schedule
Option B Priced contract with bill of quantities
Option C Target contract with activity schedule
Option DTarget contract with bill of quantities
Option E Cost reimbursable contract
Option F Management contract.

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 Q‘. o
¢ 3 Guidance Notes for the NEC Engineering and Construction Contract Contract Strategy 3.

/
Each Option uses different arrangements for payment to the Contractor as E ~ During the course of the contract, the Contractor is paid Defined Cost
Option allocates risk differently between the Employer and the Contractor. plus the Fee. This is defined as the Price for Work Done to Date (PWDD)
The extreme cases of risk allocation are the priced Options A and B on t (see explanatory notes on Section 5).
one hand and the cost reimbursable Option E on the other hand. In the pric The Prices are adjusted for the effects of compensation events, and for infla-
Options, the Contractor is paid at tendered prices (and rates with Option tion if Option X1 is used; for Option D the Prices are also adjusted as the work
for the work he has done. He carries all risks other than the Employer’s I15 completed by the Contractor is measured.
stated in the contract and the financial and time effects of compensar; At the end of the contract, the Contractor is paid (or pays) his share of the
events. In a cost reimbursable contract, the Contractor is paid the Defin difference between the final total of the Prices and the final PWDD according
Cost, as defined in the chosen main Option. The target Options C and to a formula stated in the Contract Data. if the final PWDD is greater than the
permit the cost risk to be shared between the Employer and the Contractqj
final total of the Prices, the Contractor pays his share of the difference.
The management Option F is essentially cost reimbursable but risk allocati The Contractor's share is paid provisionally at Completion and is corrected in
can be varied by choosing appropriate main Options in the subcontracts.
the final account.
The priced and target Options offer a choice between two types of pricin. (See explanatory notes on clause 53.)
document, namely an activity schedule and a bill of quantities.
This range of choice covers most arrangements used in engineering anj Option E: Cost A cost reimbursable contract should be used when the definition of the work
building construction. Construction management, in which the Contracm reimbursable contract to be done is inadequate even as a basis for a target price and yet an early
provides management services to the Employer but has no responsibility ft start to construction is required. In such circumstances, the Contractor cannot
construction work, is also provided for. In this case, the Employer appoints; be expected to take cost risks other than those which entail control of his
construction management contractor as Project Manager. He then advises tn employees and other resources. He carries minimum risk and is paid Defined
Employer on placing trade or construction contracts using one of the mair Cost plus his tendered Fee, subject only to a small number of constraints
Options for each contract. designed to motivate efficient working.
For a particular contract, one main Option is chosen. The optional clauses air The conditions of contract applied to management contracts are still evolving.
combined with the core clauses to provide a complete contract. The core Option F: Management
contract in practice there are several different approaches used in relation to, for
clauses cannot be used on their own. They are clauses which are common tr example, scope of services, time of appointment and methods of fee payment.
the types of contract covered by the main Options. - The terms under which subcontractors are employed are also changing. The
The following are brief summaries of the main characteristics and uses Cl ECC management contract is basedon the following framework.
each main Option.AFurther notes on the preparation of the various documents The Contractor’s responsibilities for construction work are the same as those
are given under Tender documents’. Further explanation is given in the of a Contractor working under one of the other Options. However, he does only
explanatory notes for Sections 5 and 6. the limited amount of construction work himself as stated in the Contract
Data. The Project Manager has no authority to instruct the Contractor to carry
Option A: Priced contract An activity schedule is a list of activities prepared by the Contractor which hi out further construction work beyond that stated in the Contract Data. Any
with activity schedule expects to carry out in Providing the Works. When it has been priced by the increase in the extent of the construction work to be carried out by the
Contractor, the lump sum for each activity is the Price to be paid by the Contractor must be the subject of negotiation between the Employer and the
Employer for that activity. The total of these Prices is the Contractor's price f0‘ Contractor.
providing the whole of the works, including for all matters which are at the
Contractor's risk. Option A provides for stage payments (see notes unde~ The Contractor's services apply mainly to the construction phase, although he
Tender documents’). would usually be appointed before construction starts. if substantial pre-
construction senrices are required and the Employer wishes to have the option
Option B: Priced contract A bill of quantities comprises a list of work items and quantities. lt is preparer to change the Management Contractor before construction starts, a separate
with bill of quantities by or for the Employer. Standard methods of measurement are publishet contract should be awarded for such pre-construction services, using the NEC
which state the items to be included and how the quantities are to be Professional Services Contract.
measured and calculated.
All subcontracts are direct contracts with the Contractor, who acts as a
Tenderers price the items, taking account of the information in the tender Management Contractor. If the Employer wishes to be a party to the construc-
documents and including for all matters which are at the Contractor's risk tion subcontracts, a management contract is not appropriate. He,’ should
The Employer pays for work done on the basis of actual measurement or instead appoint a construction manager as the Project Manager and use the
those items with quantities. ECC with appropriate main Options for the contracts with package contractors.
The Contractor tenders his Fee and his estimated total of the Prices of the
Options C and D: Target Target contracts are sometimes used where the extent of work to be done I5 subcontracts. The subcontract prices are paid to the Contractor as part of
contracts (with activity not fully defined or where anticipated risks are greater. The financial risk if Defined Cost. The Contractor is responsible for supplying management
schedule or bill of shared between the Employer and the Contractor in the following way: sen/ices, including the management of design if required. If the Contractor
quantities) wishes to be responsible for doing work other than management he must
~ The Contractor tenders a target price in the form of the Prices using state the extent of that work in the Contract Data (see notes on clause 20.2).
either the activity schedule or a bill of quantities. The target price includes
the Contractor's estimate of Defined Cost plus other costs, overheads The Contractor’s Fee will increase if Subcontractors’ prices (part of Defined
and profit to be covered by his Fee. Cost to the Contractor) increase due to compensation events. However, he will
~ The Contractor tenders his Fee in terms of fee percentages to be applied not receive separate payment for his work in dealing with compensation
to Defined Cost. events and he will not receive any additional Fee for work on compensation
events which does not lead to an increase in Subcontractors’ prices.

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 ® Contract Strategy ¢.
3 3 Guidance Notes for the NEC Engineering and Construction Contract

choose
The dispute resolution Options either
A with activity
choose choose choose
X3 multiple X2 changes in the
schedule _ law
or "' currencies "'
There are two Options for dispute resolution. Option W2 is to be usedfor X4 parent company
contracts to which the provisions of the Housing Grants, Construction BQUHUTITIGS
‘”“" Pl” °' ii required X1 price
adjustment
g uarantee
Regeneration Act 1996 as amended by the Local Democracy, Economic X5 sectional
opment and Construction Act 2009 apply. Option W1 is to be used in all Completion
CEISBS.
X5 bonus for early
X16 retention Completion
either
C with activity X7 delay damages
w__,.. schedule E- 7.-
OI’ X12 Partnering
The secondary Options D with bill or
quantities as requiwd
X13 perlormance
bond
After deciding the main Option, the user may choose any of the sec 1“ or ‘ X14 advanced
Options that are available for the chosen main Option. It is not necessaiy payment to the
use any of them. The chosen secondary Options, together with the Contractor
choose
main Option, must be identified in the first statement of part one of X15 limitation of the
Contract Data. The secondary Options are Contractors
i-- Ecost reimbursable - ll-iii-* X16retemi0n design liability
Option X1 Price adjustment for inflation (used only with Options A, B, C conuacr
and D) as required X17 low performance
Changes in the law ,,» damages
Option X2
Option X3 Multiple currencies (used only with Options A and B) X18 limitation
Option X4 Parent company guarantee of liability
Option X5 Sectional Completion ' W2 X20 Key P6I'10l'l'Tl3.|'lCE
Option X6 Bonus for early Completion Indicators
Option X7 Delay damages F. Y(UK)1 Project Bank
Option X12 Pa rtnermg I management l Account
Option X13 Performance bond , contract in F management F Y(UK)2 The Housing
Option X14 Advanced payment to the Contractor Grants, Construction
Option X15 Limitation of the Contractor's liability for his design to _ and Flegeneration
reasonable skill and care Act 1996
Option X16 Retention (not used with Option F) Y(UK)1! The Contracts
Option X17 Low performance damages (Flights of Third Parties)
Act 1999
Option X18 Limitation of liability
Option X20 Key Performance Indicators (not used with Option X12) Z additional conditions
of contract
Option Y(UK)1 Project Bank Account
Option Y(UK)2 The Housing Grants, Construction and Regeneration Act 1996 as required
Option Y(UK)3 The Contract (Rights of Third Parties) Act 1999
Option Z Additional conditions of contract.

I Main Options 1 \ Fiesolutiflfl ‘ ‘ Secondary Options

l"

Choice of Options Figure 2. Options using the NEC Engineering and Construction Contract.
>5

The sequence of decisions to be taken in choosing the main and secondan

Options for a particular contract are illustrated in Figure 2.

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 Tender Documents 5-

This is completed by the Employer for each contract. Worked examples

TENDER DOCUMENTS Part one are given in Appendix 5.
The opening statement in ‘1 General’ identifies the clauses in the condi-
tions of contract for a particular contract.

Preparing the tender documents Pamwo This part contains a list of data to be supplied by tenderers as part of
their offer. Certain information is to be given in all contracts.
Optional statements follow, from which the Employer will have selected
Deciding the contracts Having decided the contract strategy, the Employer is able to den" those he requires. For instance, the statement regarding the completion
which contracts he requires to carry out the project, what types of contra date should be included only if the Employer has not fixed the completion
to use (choosing from the main Options A to F in each case), how th date in the Contract Data part one and wishes tenderers to submit their
relate to each other in time and physically and what secondary Options proposals.
will use for each contract. The tendered total of the Prices must be entered where Option A, B, C or
D is used. This will be transferred from the grand total of the activity
The tender documents lt is not necessary to issue the ECC printed documents to tenderersa schedule or bill of quantities as the case may be. In assessing tenders, it
they are incorporated by reference in the Contract Data. The documentsl is most important that the total entered in the Contract Data is checked
be issued with invitations to tender include the following. h against the total of the activity schedule or bill of quantities.
~ Instructions to tenderers (including any instructions for preparing '
activity schedule under Options A and C). "7 The data for the Schedule of Cost Components comprise information to
' A form of tender. be tendered relating to calculation of Defined Cost. This is required to
~ Contract Data part one. assess compensation events and to calculate payments due to the
- Contract Data part two (pro-forma for completion by tenderers). Contractor in Options C, D and E. The cost component data for use with
~ Bill of quantities (Options B and D). the Shorter Schedule of Cost Components, which are also part of a
~ Works Information. Contractor's tender, can only be used for assessing compensation events.
Q Site Information. The information submitted by tenderers in part two of the Contract Data is
~ A pre-tender health and safety plan is normally required for L". used in assessing tenders. (For works which fall within European Commu-
contracts. nity legislation, the publication of award criteria is a requirement of the
Form of tender No standard form of tender has been included in the ECC as man- procurement directive, and award criteria are normally explained in the
Employers have standard forms containing their own requirements. .- instructions to tenderers.)
suggested form is included in Appendix 2.
Activity schedule Th-is document is prepared and priced by tenderers. Its use varies between
Contract Data In the clauses of the ECC, the term Contract Data refers to the data whicr G eneral use with Options A Options A and C. lt is not part of the Works Information and must not be
exist at the Contract Date. These are not necessarily those originall_ and C used to describe the works.
issued by the Employer (part one) or returned as part of the successft The prices entered by the tenderers for each activity are lump sums, not
tenderer’s offer (part two); they are sometimes changed during negotia unit rates as in a bill of quantities. The tenderer decides how to break up
tions between the Employer and the potential Contractor. The Contrar his work into activities, enters them on the schedule and prices each one.
Data define the details of the agreement which is the contract. The condi lf the Employer wants to specify particular activities which the Contractor
tions of contract make provision for certain changes, such as replacemen is to identify in the activity schedule he may do so, stating his require-
of key people, change of Completion Date or Key Date and replacemento ments in the instructions to tenderers.
the Adjudicator.
For the purpose of comparing tenders it can be useful to define principal
The purpose of the Contract Data is to provide data as required by thl activities (for example individual structures or specific lengths of new
conditions of contract specific to a particular contract. The terms in italic: road) and invite tenderers to subdivide each into activities of their own
in the conditions of contract must be identified in the Contract Data ir choosing.
accordance with clause 11.1. The Contract Data is a key document in ani
contract using the ECC. Tenderers should be reminded that not all activities in an activity schedule
will be direct construction activities; there may be design activities,"admin-
The format for both parts one and two of the Contract Data for a particula istrative activities, testing, etc.
contract enquiry should be assembled by the Employer using the format:
and wording for each statement as set out in the ECC, with space: Use of Options A and C of the ECC does not require a bill of quantities to
adjusted appropriately. As well as the statements to be given in al be issued to tenderers or to be used subsequently. Consequently,
contracts, the selected optional statements should be included (prefer tenderers have to calculate quantities from the Works Information where
ably within the statements for the relevant Section of the ECC) but omit they need to know a quantity in order to estimate the cost of the work. For
ting the explanatory sentences printed in bold type and commencing ‘lf’ many contracts (including process plant, building construction, etc.) this
which are only for the guidance of users. Data for the Shorter Schedule 0' is a significant task.
Cost Components is required for all Options except Option F; data for thr
Schedule of Cost Components is only required for Options C, D and E.
ln order to avoid lengthy entries for certain statements, it may be con
venient to list them in a separate document which is clearly referenced ir
the Contract Data. For example, a schedule of drawings could be referrer
to in the Contract Data rather than reproduced it in full.

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 Tender Documents
t Guidance Notes for the NEC Engineering and Construction Contract
There is no general provision for payment for Equipment or Plant and
in order to reduce the cost and time involved during the tender prepar. Materials within the Working Areas before they are incorporated into the
tion period, Employers may wish to calculate quantities before invitin works, i.e. equivalent to ‘materials on site’. The Contractor may wish to
tenders and then issue a copy of the quantities list to all tenderers. wh' receive earlier payment to improve his cash flow. The required effect can
this is done, it must be made clear that the tenderer will have used rh be obtained under Option B by inserting appropriate items in the method
quantities and relied upon them entirely at his own risk of their inaccura related charges where the method of measurement allows or, alternatively.
or incompleteness. No amendment to the contract or addition to th making allowance in the rates of the bill of quantities for the financing of
contract is necessary to achieve this as the contract is clear that th the Equipment or Plant and Materials until they are incorporated in the
Contractor’s obligation is to carry out the work described in the Work works. The special circumstances under which payment might be made
information. There is no mechanism for this obligation to be qualified for Equipment or Plant and Materials which are outside the Working Areas
modified by the issue of quantities to tenderers. are covered in Section 7.
Some Employers issue quantities and instruct tenderers to base the; it is important that the bill of quantities should be prepared to suit the
activity schedules on these quantities. Once the successful tenderer ha_ position at which the boundary between the Employer’s and the Contrac-
been identified, the parties together agree any changes to those quanti tor's design is set for each contract. All the standard methods of
ties which may be necessary, and any changes to the prices for th measurement which are available assume that the Employer is respon-
relevant activities which may follow. This has the advantage of iettin sible for most of the design. The rules for itemisation and description of
tenderers concentrate on pricing the work and not worrying about possibl the work are set accordingly.
errors in quantities. Once the contract has been formed change in quanti.
ties is one of the Contractor's risks, as normal. Consequently, when using ECC with the Contractor carrying out more
design, the existing methods of measurement must be amended or a
The following or similar text should be included in instructions to tenderers: special method of measurement substituted. in extreme cases, such as
Option A Instructions to when the Contractor is carrying out most of the design, a bill of quantities
tenderers for Option A enquiries. I
is not appropriate and an activity schedule (i.e. Option A or Option C)
Activity schedule should be used.
Tenderers are to submit an activity schedule with their tenders. Thit.
will be a document headed ‘activity schedule’ and will comprise a list of" For example, standard methods of measurement usually require separate
activities with an amount entered against each activity. This amount is items to be given for concrete, reinforcement and formwork in reinforced
the sum due to the Contractor on completion of each activity unless la concrete, with quantities for each. When the Contractor is to design the
is included in a group. if groups of activities are required to be identl reinforced concrete, it is impossible for the Employer to calculate the
fled on the schedule, payment for each group becomes due when al quantities before he is appointed. it is also contractually inappropriate as
the activities in that group are completed. the Contractor takes the risk of quantity variation for items which he has
designed. The principle which must be followed is that the items in the bill
Activity descriptions must be clear and complete so that the wori of quantities must not describe the work using any assumptions about what
included in each can be identified and the completion of each activit, the Contractor may choose to provide or about the quantities of work which
easily recognised. he will choose to provide.
Note also the requirement of clause 31.4 of the conditions of oontrac
about the relationship between the activity schedule and the Tender document in cost if the Contractor for a cost reimbursable contract is selected by competi-
programme. reimbursable contracts tive tendering, the basis on which tenders are selected should be clearly
General use with Options E stated in the invitation to tender. Award criteria will include the level of
The following activities must be included in the schedule but may be and F the fee percentages tendered and the various percentages tendered as
subdivided: cost component data. For this purpose, provisional estimates of Defined
[List of particular activities to be identified.] Cost should be included in a tender document together with provisional
amounts to which the various tendered percentages in the cost compo-
The following groups of activities must be identified in the schedule. nent data are applied. This will provide a notional tender price on which
[List of groups of activities to be identified.] tenders can be assessed.

Works Information The documents containing the Works Information provided by the
Use with Option C With Option C there is little point in requiring groups of activities to be Employer are identified in part one of the Contract Data. Any Works infor-
identified because the activity schedule in Option C is not used directly to mation for the Contractor's design submitted by tenderers wtth their
payment purposes. it is used to adjust the Prices when compensatioi
events occur and subsequently for calculating the Contractor’s share afte tenders is to be identified in part two of the Contract Data.
Completion (see clause 53). Most of this information will be given in a specification and on drawings in
the traditional manner. Where information is provided by non-documentary
Bill of quantities The method of measurement, on which the bill of quantities is based, if means such as models, they should be identified and their availability and
General use with Options identified in part one of the Contract Data. This should also include identi- location stated.
B and D fication of any amendments or additions to the standard method 0?
measurement.
The Works information in part one of the Contract Data should include the
following items. The related contract clause numbers are given in
The bill of quantities is to be priced and extended by tenderers, to product brackets.
the tendered total of the Prices.
Description of works ' A general description of the works, including general arrangement
i and location drawings.

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¢ Guidance Notes for the NEC Engineering and Construction Contract Tender Documents é.

¢ Working/production and other detaiied drawings, specificati On multi-contract projects, it will probably be necessary for the Contractor
models and other means used to describe the parts of the W0, to provide boundary data, foundation design data, ‘hook-up’ data and
designed by the Employer. similar information relating to his design for the use of the Employer and
~ A statement of any constraints on how the Contractor Provides] other contractors. The times when this information is to be submitted
Works, e.g. restrictions on access, sequences of construction. should be stated in accordance with the overall programme for the
project. Alternatively this can be achieved by the use of the Key Dates.
Plant and Materials - Materials and workmanship specifications.
¢ Requirements for delivery and storage before the incorporation Tests [40.1 Descriptions of the tests to be carried out by the Contractor, the Super-
Plant and Materials in the works, provision of spares and the Spec] visor and Others, including those which must be done before Completion.
cation of the vendor data required. This can conveniently be inciud [40.2. Details of materials, facilities and samples to be provided by the
in the specification. Contractor and by the Employer for tests.
Health and safety [27.4] Any particular health and safety requirements, such as the safe l41.1 Details of Plant and Materials which are to be inspected or tested before
regulations for the factory within which the Site is located. Any health a delivery to the Working Areas, including details of the inspection or test.
safety plan for the project, as may be required by statute, should also b [41.1. Definition of tests of Equipment, Plant and Materials outside the Working
included. Areas which have to be passed before marking by the Supervisor.
Contractor's design ]21.1] A statement of those parts of the works which the Contractor is to desigr [7 1.1: Details of the preparation of Equipment, Plant and Materials for marking
The form of this statement will depend on the extent of the Contractor by the Supervisor.
design responsibility. For contracts with little Contractor's design, a list
what is left to be designed by the Contractor should be provided. For mo Title l73.2. Statement of any materials from excavation and demolition to which the
comprehensive design and construct contracts, a list of what has be Contractor will have title.
designed by the Employer should be given, with the Contractor bean.
made responsible for designing the remainder. ‘I Damage to highways, etc. Note that no equivalent to clause 30 of the ICE Conditions of Contract is
included as this is a special case of third party damage which is covered
[21.2] A design brief or performance specification for those parts of the works tr-' in Section 8.
be designed by the Contractor, including
' size or space limitations, if Option C, D, E or F is used
~ design standards and codes of pra_ctice_, _ I Acce tame or [11_2(25) Any acceptance or procurement procedures to be followed by the
P
Q materials and workmanship specifications, including references ll‘, procurement procedures or (26)] Contractor.
relevant standards,
v loading and capacity requirements, and Accounts and records [52.2] Details of records to be kept by the Contractor other than those already
¢ operational performance requirements and design life. stated in clause 52.2.
l21.2] Procedures which the Contractor is to follow in carrying out his design
Particulars of the design which are to be submitted to the Projec If Option X4 is used
Manager, including requirements for certification and/or checking. Parent company guarantee [X4.1] The form of the guarantee.
l22.1l The purposes for which the Employer may require to use and copy the
Contractor's design. If Option X13 is used
Performance bond [X13.1] The form of the performance bond.
Completion [11.2(2)] The work required to be done by the Completion Date for the whole of lh-"
works and, if Option X5 is used, for each of the sections. Alternatively, this If Option X14 is used
could be in the form of a list of work which can remain undone at the
Completion Date. Advanced payment bond [X14.2] The form of the advanced payment bond (if required).

Working with the Employer [25.1] Details of Others who will be occupying the Working Areas during the If Option X17 is used
'5"
and Others contract period indicating which parts they will occupy and for what Performance test [X17.1] Details of any test to be used to measure the performance of the works or
periods. an item of Plant for which low performance damages are specified.
[25.2] The services and other things which the Employer and the Contractor are
to provide to each other and to Others while the Contractor has access tr
and use of the Site.
Subcontracting [26] 0 Lists of acceptable subcontractors for particular tasks.
I Statement of any work which should not be subcontracted.
¢ Statement of any work which is required to be subcontracted.
Programme [31.2] Any information which the Contractor is required to include in the
programme in addition to that already stated in clause 31.2.

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3 Guidance Notes for the NEC Engineering and Construction Contract j Tender Documents ¢.

Site Information The documents in which the Site information is contained are and preparing tenders
part one of the Contract Data. Site information may include the
' Subsoil investigation borehole records and test results.
I Reports obtained by the Employer concerning the physical condit When it is intended that the Contractor will carry out design work, the
within the Site or its surroundings. This may include mapping h| ‘Mgqetlons to tenderers
Employer may wish tendering contractors to submit information about
graphic data and hydrological information. 1 y their proposed design with their tenders. it is then included in part two of
Q References to publicly available information about the Site am] the Contract Data. If they do, the instructions to tenderers must include
surroundings, such as published papers and interpretations of particulars of the information required. It is not essential to ask for any
Geological Survey. The purpose of listing these references is to such information as the provisions of the ECC are designed so that the
a tenderer to prepare his tender, to decide his method of war contract obligations and procedures are unaffected by the amount of pre-
and programme and prepare any designs for which he would tender design carried out by tenderers, but it is important that enough
responsible. Normally only factual information about physical Cg information is provided to allow the Employer to verify that a tenderer’s
tions on the Site and its surroundings is included in the Site lnfor design appears to be sound. in any event, no more pre-tender design than
tion. interpretation is a matter for the Contractor. However, 9 is regarded by the Employer as essential should be asked for because, for
Employers may wish to include interpretative information, such all but one of the tenderers, the work will be abortive and an unrecovered
inferred geological sections. cost. All tenderers will, of course, carry out such pre-tender design work as
0 information about plant and services below the surface of the Site they decide is necessary to calculate their tendered prices.
' information about piped and other services.
' Information about buildings, structures, plant (including machin The instructions to tenderers must also state which management func-
adjacent to and on the Site. tions are to be covered by the people who are to be identified in the
Contract Data as key people.
Some documents may contain both Works Information and Site lnfor
The documents which tenderers will be required to submit will depend on
t'°"' For examme» 3 drawiflg may show a foundation and related boreh which of the main Options A to F and of the secondary Options have been
information. Such a document should be identified in the Contract D
both as a document containing Works information and as a docum incorporated. in all cases, a complete form of tender will be required
containing Site information. together with part two of the Contract Data. A suggested form of tender is
included in Appendix 2.
Because of the definition of Works Information and Site information
should not be necessary to detail which parts of such a document fall l Part two of the The statements to be given by the tenderer in all contracts are as follows.
each category. Contract Data
¢ Name and address of the Contractor.
0 The fee percentages (clause 11.2(8)).
These are tendered figures and will be taken into account in tender
assessment (see later notes).
~ Working Areas
The tenderer is invited to specify areas other than the Site that he
wishes to be included as working areas. However these working
areas will not be considered to be Working Areas unless they comply
with the definition in clause 11.2(18).
~ Key people
A list of names, job descriptions, responsibilities, qualifications and
experience of key people is required. The Employer should indicate in
the instructions to tenderers for whom in the tenderer’s organisation
these details are required. The Contractor has no incentive to insert
details of more than the minimum number of key people since each
stated name and position constrains him. Sometimes these details
are finalised during pre-contract negotiations between Employer and
Contractor.
~ The Works information for the Contractor's design.
if the Contractor is not required to carry out any design or if the
Employer does not wish the Contractor to submit any pre-tender
design, there will be no entry under this heading. Where the
Contractor is required to submit a large part of the design, the entry
will comprise a list of drawings and specifications accompanying the
tender.
it is neither necessary nor desirable to require full working drawings
in most cases, but the submission should be sufficient to enable the
Employer to assess the design which each tenderer is offering.

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3 3 Guidance Notes for the NEC Engineering and Construction Contract Tender Documents 3.

Further statements will depend on which Options apply to the conir Leaving the responsibility entirely with the tenderers is the easiest option
and what information the Employer requires to be submitted with from the Employer’s point of view. His role is then limited to arranging
tenders. These may include the following. access to the site for the various site investigation contractors used by
the tenderers. it may be a sensible option if widely differing design solu-
Programme The programme reference number or title should be given and tions are anticipated, but othenrvise it is clearly inefficient and overall
programme submitted as a separate document. The main purpose wastes money.
requiring submission of a programme with each tender is to inform, Organising an investigation by the Employer to satisfy the reasonable
Employer of how the tenderer proposes to carry out the work and ho requirements of the tenderers is a more efficient option. The site investi-
affects the Employer’s other contracts and activities. gation contractor can be appointed in advance, with only the details of the
Completion date investigation to be confirmed, so there is no delay. (The basic outlines of
if a completion date is to be proposed by the tenderer this Should the investigation can be reasonably estimated in advance, and this infor-
stated in the Contract Data part two, having been calculated from mation is normally offered to the tenderers as a basis from which they will
starting date and taking account of the access dates stated by ask for additional work.)
Employer in the Contract Data part one. '
Leaving detailed site investigation until the contract has been formed is a
Activity schedule A reference number or title should be given and the activity schea viable option in some circumstances. Where it would be difficult to carry
(Options A and C) submitted as a separate document. The Employer should state in out site investigation during the tender period, it may be the_o_nly choice.
instructions to tenderers any activities or groups of activities he requi This might arise where for example there are difficulties in gaining access
to be included. to the Site in advance of the contract, or where marine investigations
cannot be carried out because of the time of year. Normally in these
Bill of quantities The Contractor enters a reference to the priced bill of quantities which circumstances the Employer carries out some work and instructs
(Options B and D) being included in his tender. tenderers to base their tenders on it. This can be done by the use of
reference conditions — effectively stating boundary values for certain
Tendered total For priced and target contracts (Options A, B, C and D), the tendered toll geotechnical parameters which the Employer guarantees’. The Contractor
of the Prices should be entered. This will comprise the total of the bill of quantities] carries out site investigation work as part of the contract, and if these
activity schedule as the case may be. The total of a bill of quantities iii demonstrate that the conditions lie outside the reference condition bound-
be subject to remeasurement and correction in accordance with ii; aries the Contractor notifies a compensation event.
method of measurement. incorporating the results of such site investigation works into the contract
The instructions to tenderers should include details of how the Employ is discussed under the heading ‘Creating the contract’; see below.
will deal with any discrepancy between the total of the bill of quantities
Employers and contractors are reminded that while it is generally possible
the activity schedule and the total entered in the Contract Data, and hr- to identify soil or rock parameters that influence or control design, it is
any arithmetical errors in tenders will be corrected. more difficult to identify those that influence construction methods and
Data for the Schedule of For main Options C, D and E, the details under this heading are enteri cost. For example, rock strength may govern foundation design but does
Cost Components by the tenderers. The percentages entered are not equivalent to ti not necessarily indicate how difficult excavation will be.
dayworks percentages in a conventional contract. (See explanatory note
on the Schedule of Cost Components).
Data for the Shorter Details under this heading are entered by tenderers for all main Optior
Schedule of Cost except Option F.
Components
Site investigations by if the Contractor will be responsible for the design of the works, or
tenderers significant part of the works, tenderers may need or wish to carry out the
own site investigation work. The Employer should consider how this can t
done most efficiently and effectively.
F’
in general terms, there are three possible different approaches. ll-

1 Leave it to the tenderers, so that each carries out whatever invest

gations he thinks necessary. (Sometimes tenderers will combinei
these circumstances to reduce their costs.)
2 At an early stage in the tender period, ask the tenderers to specil
what site investigation work they require, and then arrange for a singl
site investigation to be carried out by or on behalf of the Employerl
cover (within reason) the requirements of all the tenderers.
3 Leave any supplementary site investigation until after the contra:
has been formed.

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3 Guidance . . and Construction Contract
Notes for the NEC Engineering Tender Documents : ®3

Assessing tenders ' Can it be built in time and safely?

~ Has the tenderer taken realistic account of the risks inherent in the
project and developed robust solutions?
Award criteria To ensure equal treatment of all tenderers and to assist in their ¢ is the forecast cost (the tender total) a reasonable estimate?
standing of the Employer’s requirements, the criteria upon which te ~ What is the likely cost of future maintenance?
are to be assessed, and the weight given to the various tend it is important to give tenderers some criteria for the assessment of main-
elements, should be clearly stated in the instructions to tenderers T tenance cost; it should really form part of the design requirements. it is
criteria can be in the form of a ‘Tender Assessment Sheet’. An exar-n important that the assessment made in the tender evaluation is, as far as
such a sheet suitable for use with Options A and B is given in Appeng; possible, objective and numerical.
Procurement law if the contract is subject to procurement legislation there may The tenderer whose aggregate construction cost + maintenance cost is
requirement to assess tenders on the basis of objective criteria n lowest should be selected, provided the answers to the first four questions
available to all tenderers. All relevant criteria should therefore‘ are positive.
published, as it may infringe the law if other criteria, however com it is not unusual for the answers to be ‘yes - but’. The tender submissions
cially or technically desirable, are used to select the Contractor. may have design shortcomings or what appear to be unrealistically opti-
mistic programmes. There is no hard and fast rule for dealing with such
General law in some jurisdictions, publication of assessment criteria may create problems, but most approaches involve pricing what is necessary to make
implied requirement that the published criteria must be followed by the tender compliant and using an adjusted tender price for tender
Employer. Thus even if specific procurement legislation does not apply comparison purposes. This is done by the tender evaluation team without
relevant factors should be stated, including those not readily quantifi involving tenderers, who would otherwise have a second opportunity to
such as aesthetic considerations. improve their submission.
Assessing target cost As with any tender assessment process, the aim is to identify the tend Assessing construct only Tender evaluation will have two components — technical and commercial.
tenders most likely to be able to assist the Employer to realise his aims for tenders
project. These are usually completion of the work on time, within The technical assessment will attempt to verify that the tenderer’s propo-
budget, safely and to the quality required by the Employer. Targetr sals are realistic and practical. in target cost tenders the commercial
gggitracts pose particular problems to assessors in respect of final pro review will concentrate on the Fee and other percentages submitted by
the different tenderers.
Payments to the Contractor in Option C or Option D contracts are ' The Working Areas overheads percentage may vary widely between
based on tendered rates and prices for elements of work completed if tenderers, one reason being the treatment of subcontractors. The percen-
are based on the costs incurred by the Contractor in doing the work. ‘|' tage is applied to the cost of people. A tenderer having a high proportion
“mt °°_5t§ 0] the basic YQSOUFCES (People. Equipment, materials) will‘ of subcontracted work will have a low people cost, and a correspondingly
very similar whichever tenderer becomes the Contractor. if they‘ high percentage figure for Working Areas overheads.
building the Em!-'il0y6f’S design, differences in the final cost of the prd'
will depend on the efficiency with which the Contractor selects and ut- Qualified tenders There is no difference between the treatment of tender qualifications in
the resources and his Fee. However, if the Contractor is also responsii target cost contracts and their treatment in conventional contracts. Any
for the design, there will be significant differences between the resourr" qualifications, be they technical or commercial, are effectively uninvited
needed to implement the various design solutions offered. tender offers. They are normally treated by assessing the cost of removing
ltlflolflows that in fdesign and construct’ contracts the tender assessm- the qualifications to produce a fully compliant tender. The cost is added to
the tendered price to produce a corrected price which is then used for
W‘ °°U5 Primarily on the tenderers’ designs, while in ‘construct or tender comparison purposes.
contracts the tenderers’ method statements, Fee and other percentag-
quoted by tenderers will be the key elements to be compared. In b-
Although design shortcomings and/or qualifications are costed and a
93595 any qualifications made by tenderers must also be taken l Finalising the °°"t"a°t revised tender price used in the evaluation, once a tenderer has been
account
selected the contract must be finalised prior to award. This means that
it is essential that_the instructions to tenderers include requirements any design problems and qualifications have to be addressed. I
tenderers to submit the information necessary for there to be a mer
ingful assessment and comparison of the tenders received. it may also One method of doing this is to treat each as an option; the tenderer has
a requirement of applicable procurement rules that only criteria that r offered what he thinks the Employer might accept, but the Employer has
stated in the instructions to tenderers may be taken into account inl an option to purchase what he actually requires by adding to the tendered
tender evaluation. price. Accepting all the options would mean that all the qualifications
were removed. However, before finalising the contract it would be neces-
In requiringtenderers to submit information for tender evaluati sary to change the Employer’s Works information to comply with the
DUFDOSQS, it IS important to retain a sense of scale and not to requ Contractor's design since the Employer's Works information has priority
extensive details of method statements. cost breakdowns etc. ' over the Contractor's Works information.
comparatively small projects.
if this approach is adopted, the selected tenderer must be invited to price
Assessing design and The key questions to be answered in the tender evaluation are as follow the options which until now have only been costed by the tender evalua-
construct tenders tion team. No price higher than that used in arriving at the adjusted
~ Does the tenderer’s design satisfy the requirements set out in i tender total should be accepted, because that would invalidate the basis
tender document? of the selection of the tenderer.

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P 3 Guidance Notes for the NEC Engineering and Construction Contract

Creating the contract NOTES

Frequently, negotiations with one or more tenderers are
Clarify Intentions. to agree amendments, to eliminate qualifications
are_not acceptable to the Employer and to discuss the
design._lt is important to minimise these negotiations since
discussions can result in abuse of the tendering process. This can
achieved by careful preparation of tender documents and iii'ouuuLlOn$
tenderers and by stating award criteria in objective terms.
The creation of a contract can be by means of acceptance of a tender re clauses
a revised tender or by means of acceptance by the Contractor of .a

counter-offer prepared by or on behalf of the Employer. A binding conir

is thus created, although some Employers may require such aooepia Actions 10
being subject to a formal agreement. A suitable form of agreemeni 10.1 This clause obliges the Employer, the Contractor, the Project Manager and the
included in Appendix 3, but Employers often have their own stand Supervisor to do everything which the contract states they do. it is the only
forms. Essentially they record the agreement between the two Parties clause which uses the future tense. For simplicity, everything else is in the
identify the documents which make up the contract, present tense.
The Contract Data makes provision for the Contractor’s tender design The requirement for the principal contributors to the operation of an ECC
be incorporated into the contract as Works information (see Contact D contract to do so in a spirit of mutual trust and co-operation was added on
part two, first optional statement). There is no equivalent provision for a the recommendation of the Latham Report (‘Constructing the Team’). This
Contractor's Site information’, but if the Contractor has based his ten report, published in July 1994, was the final report of an investigation by Sir
proposals on new site investigation work he will, with reason, wantt Michael Latham into procurement and contractual arrangements in the UK
results of the investigations included in the contract. How this is done construction industry. The ECC takes account of all the recommendations of
depend on how the site investigation work was organised. the Latham Report.
If tenderers were left to their own devices, the Employer will want to sati. Where actions are permitted but not obligatory, the term ‘may’ is used.
himself that the site investigations were properly carried out bef
agreeing to any results being included as part of the contract. Once th. Identified and defined 11
are Dart of the contract they will in effect define the risk he is taking terms 11.1 The main definitions used in the contract are given in clause 11.2. Other
ground conditions. if the Employer accepts that the site investigation w" definitions are given in optional clauses where they are specific to a particular
properly carried out and is genuinely representative, he could agree" Option. Capital initial letters are used in the ECC for the defined terms to
adding the results to the Site information defined in the Contract Dar distinguish them from undefined terms.
part one. 1
Any term that is identified in the Contract Data is written in italics; the Project
if the Employer carried out the site investigation work on behalf of tlrl Manager cannot change such identified terms.
tenderers during the tender period, the results are simply included in iii
it; ||'ll“:Ol'l‘l'l8’[lOl’l.. and no change is necessary to any clause of th A combination of these two systems is used when the details of a term in
rac . italics may need to be changed during the course of the contract - e.g. the
Completion Date, clause 11.2(3). The definition of the defined term (the
if the site investigation work is carried out as part of the contract, all the Completion Date) includes a reference to the same term in italics (the
is necessary is a clear definition of the reference conditions, and confirml completion date) but also refers to the possibility of changes ‘in accordance
tion that conditions outside the reference condition boundaries constitul with this contract’. This combination therefore provides
a compensation event. it is sensible to define, in the contract, criteria ft
recognising that ‘conditions found in the new investigation are outside th ~ a basis for tenders and the contract at the Contract Date, at which time
reference condition boundaries, so that, for example, one ‘rogue’ resu the defined term is the same as the italicised term
does not outweigh five consistent results obtained earlier by the Employer ~ the flexibility to change the term, for example as the result of a compen-
sation event, and L
0 the continual use of the defined term throughout the contract.
11.2
(1) The definition of the Accepted Programme is worded to allow for the two
possible situations, where there may or may not be a programme referred to
in the Contract Data part two. The Employer should make it clear to tenderers
if he intends the tender programme to become the Accepted Programme by
this means, and ideally any such tender programme should broadly comply
with the requirements of clause 31.2.
Note that the requirements of clause 31.2 do not actually apply to any tender
programme even if it does become the Accepted Programme. Clause 31.2
refers to programmes submitted by the Contractor for acceptance.

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Q ® 3 Guidance
- . . and Construction Contract
Notes for the NEC Engineering Explanatory Notes

The Works information should state what work is to be done before Com i - A Key Date is different from a Sectional Completion Date (see Option X5) in
disputes can arise if this is not done clearly and unambiguously This pine- that it does not require the completion of all of the work in a defined area of
flexibility for the Employer to specify Completion at the level he require W the site or the taking over of that area by the Employer once achieved. Further
largely avoids the uncertainty associated with terms such as ‘substantial coin explanation of Sectional Completion is given in the explanatory notes for
tion or partial completion’. Where normal practice is to equate Completion Option X5.
absolute completion, as in some Middle Eastern countries the Works lnforrna
will be written so that work must be free of Defects before Completion. For each Key Date it is necessary to define what work has to be done by that
date; the contract refers to this as the Condition. For example, the Employer
Note that Completion is a state, not a date; some people confuse the on a project to construct a new industrial or water treatment facility may
Completion may actually occur before, on or after the Completion Date ' employ one contractor to construct the building and another to supply and
The completion date stated in the Contract Data may be changed in van install the plant inside. However, some of the plant may need to be placed on
Ways, for example as a consequence of a compensation event or of an agr its foundations in the building before the outer skin of the building is complete
ment to accelerate. because it may not be possible to install it afterwards. A Key Date can be set
out in the Contract Data described as
Contracts come into existence by various means — sometimes by means or
counter-offer and its acceptance, sometimes after extended negotiations a condition to be met key date
discussions. The Contract Date is used to define the date when the contr Foundations for the plant in the Press Room shall be complete Week 27
comes into existence, regardless of the means by which this is achieved. and ready to allow the plant to be installed in its final position.
It is very important to establish and document the means by which ii Further examples of conditions and key dates could include the following.
contract came into existence and the date on which it came into existence,
this is not done. there IS a significant risk of later difficulties if a dispu ' The Contractor's design reaching a defined stage to enable information
to be passed to Others so that their design can proceed.
about the Cphtfapt afi$B$- (See also earlier notes on ‘Creating the contract‘) ' A wall being built to a certain level so that Others can start to fix their
The word ‘Defect’ has a restricted definition. it is intended to include uni plant to it.
ished or omitted parts of the works. - The completion of some, but not all, of the works on a floor of a multi-
issue of the Defects Certificate signifies the end of most of the obligations storey building to a stage that will enable another contractor to start his
the Parties. Uncorrected Defects listed in the Defects Certificate are dealt wi work, which is to be carried out at the same time as the remainder of the
using the procedure set out in clause 45. The list should include unfinishedi works on that floor.
Omitted part? pf The W0l’KS. implying that an inspection by the Supervisor‘ it is not necessary to use the Key Date provisions in the ECC. If the entries for
necessary prior to the defects date. completion of Key Dates in the Contract Data is left blank there will be no Key
The definition of Equipment is broad and avoids using separate terms for iteri Dates in the contract.
which are treated in the same way under the contract. It covers for exampl Throughout the contract, Key Dates are managed in the same way as
construction plant, vehicles, consumables, tools, temporary works, cabin: Completion (or Sectional Completion if Option X5 is used). They must be
temporary access roads and other site facilities. The term ‘Equipment’ has beer shown on all of the programmes that the Contractor produces - see clause
Eselgiwhere it has been customary to use_‘plant’ or ‘constructional plant’ in ill, 31.2. They can be changed if they are affected by a compensation event. The
All ing and (until recently) civil engineering practice. This change is madesl Project Manager can change them (see clause 14.3), but such change may,
t at the ECC can be used ‘internationally and for other engineering work wherei in itself, be a compensation event — see clause 60.1(4). They are also subject
is customary for the plant to mean part of the works to be provided. l to the acceleration quotation (clause 36) and Early Warning (clause 16)
hlphhfllly Equipment is eventually removed from the Site but there is provisiof procedures.
in Clause 72 f°|' the Pfplect Manager to give approval for certain items to bi (10) The defined term ‘Others’ provides a convenient means of reference to people
eft. For example, the Contractor may request that temporary piling should ii and organisations not directly involved in the contract. However, there are
left in, to save. the cost of extraction. Also, the Project Manager may tr instances where such a general term is not appropriate, e.g. in clause 16.2.
content to permit sacrificial’ formwork to be left in place. in these cases the term ‘other people’ is used to avoid any impression of a
The Fee includes all the costs of the Contractor that are not included l typing error which might have been given if ‘others’ were to be used without
Dlehhed C081. Ipgetherwith his profit and any allowance for his risks (set the capital initial. "r
c ause 52.1). The Fee is calculated by applying the fee percentages stated i: (12) items temporarily used in the construction but removed at or before Com=ple-
the Contract Data part two to the relevant parts of the Defined Cost, tion are excluded from Plant and Materials; they are Equipment.
The Fee is used in assessing compensation events and, for Options C, D,; (14) The Risk Register is a new addition to the third edition of the ECC, and
and F, in assessing amounts due to the Contractor. develops one of the aims of the contract — that of encouraging good project
Key Dates can be used on projects where two or more contractors arr management. it is a live document and will change during the progress of the
employed to carry out work on the same project under separate contracts witl work. initially it will contain those risks identified by the Employer and the
a common Employer and, usually, the same Project Manager. The overal Contractor in parts one and two respectively of the Contract Data. Risks are
project programme will usually require that the work being carried out by eacl then added to the Risk Register as part of the early warning process
of the contractors is dependent upon the actions of the others. The setting 0 described in clause 16, or removed because of actions taken by the Parties to
Key Datels) can be used by the Project Manager to ensure that the Contracto avoid them or because they did not happen.
completes a defined activity or part of the works (which of itself is noti Large contracts already use risk registers or similar risk identification and
5_eCIl0n) to a precise programmed timescale and to achieve a stated Condi management techniques. This contract now makes a Risk Register a neces-
tion, so that the other contractors, or the Employer, can proceed with thei sary part of the contract management procedures of the Parties.
work in accordance with the overall project programme.

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The first objective of the Risk Register is to identify the risks inherent (18) Working Areas are important in respect of payments to the Contractor under
project. Some of these risks are generic, and will apply to whatever W0 Options C, D and E (see the Schedule of Cost Components), for assessing
carried out. Other risks will be specific to a particular operation An exam [| compensation events (see the Schedule of Cost Components and the Shorter
the risk of foundation failure due to ground conditions being worsen Schedule of Cost Components) and in relation to Title (see Section 7). The
expected. U working areas proposed by the Contractor in the Contract Data part two only
become the Working Areas if they comply with this definition.
The second objective of the Risk Register is to set out how the risks Sh0u|d
managed. It describes who will take what action to manage the risk or to m The Contractor may wish to extend the Working Areas to cover areas of land
mise the likelihood of the risk event happening. The Risk Register may refe that he proposes to use temporarily for the purposes of the contract. Examples
other, more detailed documents setting out specific procedures to be im| are a borrow pit or a compound that is outside the Site. The procedure for this
mented. These procedures will include the Contraotor’s quality managem is set out in clause 15.
system. Works Information is information about the works to be provided. Detailed
(19)
The third objective of the Risk Register is to identify the time and cost can guidance on assembling the Works Information is given under ‘Preparing the
quences to the Parties and Others if the risk event occurs. Whilst the R} tender documents’. Works Information can be changed by the Project Manager
Register allocates the actions needed to manage the risk, the rest or during the course of the contract (clause 14.3).
conditions of contract deal with the allocation of the cost and time can
quences of that risk. Communications 13
13.1 The phrase ‘in a form which can be read, copied and recorded’ includes a
For contracts based on Options A or B, the allocation is straightforward - document sent by post, telex, cable, electronic mail, facsimile transmission,
total cost and time resulting from the event is borne by the Contractor unle and on disk, magnetic tape or other electronic means.
it is covered by a compensation event or is an Employer’s risk listed in clau;
80.1. If it is covered by either of these, the total cost is borne by the Emplo 13.3 These clauses establish the use of a period for reply wherever the term
through the operation of the compensation event procedures. & 13.4 (identified in the Contract Data part one) is used in the conditions of contract.
For target contracts, Options C or D, if the_risk is a compensation event or In some circumstances it may be appropriate to specify more than one period
an lfmployers risk listed in clause 80.1, its cost and time implications for reply in the Contract Data. The obvious example is for a response by the
again borne by the Employer. If the event is not one of these, the costs Project Manager to submissions of the Contractors design. Such specific
'"|t|<'=l||y P9 b0fn<-‘ by the Employer but will eventually be shared through cases should be described by reference to specific clauses of the contract,
application of the Contractor’s share mechanism in clause 53. However, and it should be made clear that the ‘general’ period of reply applies to all
definition of Disallowed Cost in clause 11.2(25) should be noted. If a r‘ other cases. Relying on clause 13.5 for this purpose may not be sufficient, as
event results from a failure identified in this definition, the resulting cost w the Contractor may not agree, and it is better for the Contractor to know how
be disallowed, and the risk will be the Contractors. long the Project Manager will need to review design submissions when he is
preparing his programme.
Eor cost reimbursable contracts, Options E or F, all of the risks will usuallyq
Orhe _by the Employer unless the event results from a failure identified in th 13.5 This clause provides for extending the period for reply by agreement. Where
definition of Disallowed Cost in clause 11.2(25) or 11.2(26). - other periods for action are stated in the ECC, provisions for their extension (if
any) are stated in the relevant clauses.
The key objective of the Risk Register is to_apply pre-assessed and doc,
mented risk management procedures to specific, identified hazards. 13.7 The requirement to notify information required by the contract separately is
included to avoid important things being overlooked. For example, so that
The Employer lists the risks that he wants to be included in the Risk Registe delays which could be avoided are not missed, submission of a revised
in the Contract Data part one; the tenderer adds other risks in the COl’l’[l’3L programme which shows a delay does not count as an early warning of the
Data part two. delay. Requiring separate notices also makes it much easier to track the pro-
Immediately following contract award the Project Manager and Contractc cedure following the issue of the notice.
should meet and agree the management of the risks set out in the Contrac Note that giving an early warning of a matter which has already been notified
Data. The Project Manager then collates this information into the Risk Registe as a compensation event is not required (see clause 16.1).
and 'lSSU€S it to the Contractor. However the Risk Register is meant to be;
continually evolving document, with new risks added as they are discoverei 13.8 The ECC contains a number of examples of situations in which a Project
and old risks removed when they ate passed. This is put into effect by the us Manager must either accept or reject a document which contains "Proposals
of the early warning processes - see clause 16. submitted by the Contractor. The first example is in clause 13.4. As clause
13.8 says, the Project Manager has authority to withhold acceptance of a
(15) The boundaries of the site will normally be shown on a drawing which is identl submission for any reason, although it is clearly not sensible for him to with-
fied in part one of the Contract Data. hold acceptance for a reason which has no bearing on the interests of the
(16 Site Information includes information about the Site and its surroundings. It i Employer. However, some of these reasons may be quite outside the influence
not specific to the work that is to be carried out on the Site; it is simply factua of the Contractor or may arise due to factors which the Contractor had no
information. Guidance on assembling the Site Information is given unde means of foreseeing. The mechanism described in clause 13.8 is introduced
Preparing the tender documents’. to limit the Contractors risk in this situation. He does carry the risk of the
Project Manager withholding acceptance for a reason stated in the contract.
(17 This definition of a Subcontractor does not include a supplier to the Contracto. Withholding acceptance for any other reason is a compensation event (clause
except as stated in the clause. ‘Labour-only’ subcontractors are not Subcon 60.1(9)).
tractors under this defini’Ei0fi; a designer, who provides the ‘service’ 0'
designing all or parts of the works for the Contractor, is a Subcontractor.

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The Project Manager and 14 14.3 The authority to change the Works Information belongs exclusively to the
the Supervisor 14.1 The Project Manager is the key person involved in the management Q1, Project Manager and any person to whom he delegates this authority. Neither
contract from the Employer’s point of view. His duties and authority the Employer nor the Supervisor can change the Works Information. The Adju-
described in the clauses of the contract. They are not summarised in a Si dicator cannot change the Works Information. The ECC does not limit the
clause. ordinary meaning of the word ‘change’ in relation to a change to the Works
Information. Consequently, it includes additions to and deletions from the
It is assumed that the Project Manager will confer with the Employer as ne" Works Information as well as alterations to it. If, for example, the Project
sary in deciding which of various possible actions to take and in making gf Manager issues new information which he intends merely to clarify a
decisions which affect the outcome of the project as far as the Employer previously issued drawing or specification clause this is as much a change to
concerned. For example, the Project Manager has full authority to arrange the Works information as the issue of a new drawing which adds to the work
acceleration of work, although the Employer would normally be vitally int which the Contractor has to do. Consequently, all such changes are potentially
ested. The fact that the Employer is not often mentioned in the contract ii compensation events as set out in clause 60.1(1).
not mean that the Employer has only a minor role. It does mean that, for
purposes of the contract, almost all dealings with the Contractor are hanqi
by the Project Manager. Adding to the Working 15
Areas 15.1 The ‘original’ working areas are defined in Contract Data Part two. As his
The Project Manager should advise the Employer whenever he sees fit plans develop, the Contractor may find that he needs to add further areas as
when his conditions of engagement require, of any action which the Pm} Working Areas, for example an additional borrow pit. This clause gives the
Manager is considering. For example, the Project Manager may inform Project Manager discretion to refuse acceptance, in that there are two reasons
Employer of acceptable quotations for compensation events, and also consi for not accepting the Contractor's proposal, but he is not obliged to refuse.
with him on which alternative quotation most suits the Employer’s requii
ments. ' Early warning 16
16.1 The purpose of this clause is to make binding the obligation to warn as soon
The Contractor will expect that all decisions which the contract envisages ii as possible of anything which may affect the cost, timing of Completion or a
be taken by the Project Manager will be taken by him within the time lim' Key Date, or the quality of the works. The sanction for failure by the Contractor
stated in the contract. In some organisations, this may require the Proj to give early warning is to reduce the payment due to him for a related
Manager to pass on decisions to the Contractor which have in fact been tak compensation event (clause 63.5).
by the Employer. This may happen, for example, when an Employer hasr.
delegated the authority to make a particular type of decision to his Proje The Project Manager is motivated to give early warning in order to maximise
Manager. This creates no difficulty provided that the internal arrangemen the time available to consider the problem with the Contractor and thereby to
between the Employer and the Project Manager enable the decisions to increase the likelihood of finding the best solution to meet the Employer’s
m_ad_e and communicated to the Contractor through the Project Managi interests.
within the contractual time limits. | If an early warning is given by either the Project Manager or the Contractor,
The Supervisor will normally be appointed by the Employer. His main functid, the Project Manager is required to make an addition to the Risk Register to
is to check that work is carried out in compliance with the Works lnformatioii cover the matter.
This may include testing of materials and workmanship and observing test, 16.2 This clause authorises the Project Manager or the Contractor to call a risk
which the Contractor carries out. He is also concerned with identifying ari reduction meeting at any time to discuss any problems or potential problems.
correcting Defects and, eventually, certifying the remaining Defects when i- These are matters that will be included in the Risk Register. As the Contract
issues the Defects Certificate. His activities may have financial consequence. Data includes a list of risks that are to be included in the Risk Register, it
but he is not directly involved in financial matters. The actions of the Proje would be sensible to call a risk reduction meeting at an early stage in the
Manager and Supervisor are independent of each other. There is no appei contract to discuss them. Then, as problems or potential problems are identi-
from the Supen/isor to the Project Manager where the actions of the Supe fied that give rise to early warnings, further meetings can be called to deal
visor are questioned by the Contractor. If the Contractor is dissatisfied with a with these ‘new’ matters.
action of either the Project Manager or the Supervisor, his appeal is to th
Adjudicator. (See also notes in ‘lntroduction‘.) Examples of such problems are
14.2 On major contracts, it is normal for both the Project Manager and Supervisi ~ discovery of unexpected ground conditions,
to have staff to help them carry out their duties. This clause enables theml ~ potential delay in the supply of crucial materials or plant, ._,
delegate specific authorities and duties under the contract to particuli ~ potential delay caused by the work of public utilities or other contractors,
members of staff or other people. Before delegation is effective, th ~ effects of bad weather,
Contractor must first be notified. Notification to the Contractor should includ ~ failure by a Subcontractor to perform, and
details of the actions delegated and the person to whom they are delegated. ~ design problems.
Delegation does not prevent the person who delegates from also actin It may be agreed that other people should attend according to the particular
himself. The Project Manager would normally advise the Employer and th circumstances. For example, Subcontractors, suppliers, public utilities, local
Supervisor, as well as the Contractor, of any delegation of his actions, but thi authority representatives or the Employer himself may need to attend. (This
is entirely a matter for arrangement between these parties. In the same wa is an example of where the defined term ‘Others’ would not have been
the Supen/isor would normally inform the Project Manager and the Employers appropriate.)
any delegation of his actions. A Project Manager will not normally delegat
actions to the Supervisor, or the other way round. However, in very sma
contracts, where for example the Supen/isor is absent for unavoidabli
reasons, it may be convenient for him to delegate his actions to the Projec
Manager.

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t -' @ 3 Guidance Notes for the NEC Engineering and Construction Contract _ N t -="nec@3
Expianatory O es

16.3 The intention of the requirement for the Contractor and Project Manage, O tion c|a|_|5e5
any other people attending the meeting) to co-operate is to ensure, as p
possible, that actions are taken and decisions made which avoid or
the effects of identified risks on cost, quality and time.
"" d and defined 11 _ _ . . .
NOW that The ihiehiiflh Of the meeting is ‘E0 50i\/9 the l1>i°hiem- it i8 mmflfia terms 11.2 All the main Option clauses in Section 1 are definitions concerning Payment
decide responsibility, or who will pay for actions taken; the relevant and cost. Guidance on these is included in the explanatory notes on Section 5.
of the contract will cover these aspects quite adequately.
16.4 It is useful for the Project Manager to record any decisions about
be taken, stating not only who will take them but also when action
taken.
Ambiguities and 17
inconsistencies 17.1 This clause is intended to ensure that action is taken as soon as
deal with ambiguities and inconsistencies which are noticed in the
documents. There is no stated precedence of documents. The Project
has the responsibility of instructing resolution of an ambiguity problem or
inconsistency in or between documents. An instruction to change the
Information in order to resolve an ambiguity or inconsistency is a
tion event. Assessment is based on the ‘contra proferentem’ rule as
in clause 63.8.
If an inconsistency becomes apparent between the Works
provided by the Employer and a design which is part of the Works
provided by the Contractor and included in part two of the Contract Data,
instruction would normally be to require the design to comply with
Employer’s Works Information. Such a change would not be a compensat
event (clause 60.1(1)).
Illegal and impossible 18
requirements 18.1 A change to the Works Information in order to resolve illegal or impossi
requirements in the Works Information is a compensation event (clau
60.1(1)).
Prevention 19
19.1 This is in effect a ‘force majeure’ clause. It covers events that either stop
Contractor completing the works or make it impossible for him to complete
time, whatever measures he might take. No specific notification of such
event is required; it will have been notified under clause 16, and it will be as
result of the consequent risk reduction meeting that the event is recognis
as falling under the provisions of this clause 19. Once it is so recognised, ti
Project Manager has authority to manage the consequences in the best inte
ests of the Employer, and the event is a compensation event (60.1(19)). Tl
event is therefore at the Employer's risk for both time and cost.
A delay to planned Completion which can (as opposed to will) be recoveredl
acceleration, by increased resources, or by adjusting the programme does Ni ,,
stop the Contractor from completing on time. The Contractor must delTl0l1 >
strate that there is no reasonable means by which he can complete the wori’
on time for the event to be recognised under the second bullet point.
ln certain circumstances the event may lead to termination by the Employer
see clause 91.7.

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3 Guidance Notes for the NEC Engineering and Construction Contract Explanatoiy Notes 6.

2 THE CONTRACTOR’S MAIN RESPONSIBILITIES Two reasons for not accepting the Contractor's design are stated. The Project
Manager is not obliged to refuse acceptance of the Contractor's design which
does not comply with the Works Information but, if he does accept such
glgiasl satiation sets out the Contractor's main responsibilities. Other 59,; design, he should change the Works Information accordingly. As stated in
WI particular responsibilities appropriate to the section heading, clause 60.1(1), such a change to the Works Information may or may not be a
compensation event (see explanatory notes on clause 60.1(1)).
Sometimes the Project Manager will see in the design submitted by the
Contractor characteristics which, if they had been foreseen, he would earlier
have stated to have been unacceptable by including an appropriate constraint
Core clauses in the Works Information. In this situation, the Project Manager should add the
constraint to the Works information in order to justify his withholding of
acceptance of the Contractor's design. This change to the Works information
Providing the Works 20 is a compensation event. This clause in the ECC ensures that the Contractor
20.1 This clause states the Contractor's basic obligation. ‘Provide the Work‘ is protected from the risk of additional constraints on his design being intro-
duced after his commitment to the Prices for the work has been made.
defined ih Ciaiise 11-2(13). The Works Information is defined in oi:
i1.2(19). The Works Information providedby the Employer should state ev Clause 14.1 makes clear that, when the Project Manager accepts the Contrac-
ing the Contractor is to do, including design work. tor’s design, there is no change of liability for the design. The Employer is
thus placing reliance on the design skill of the Contractor.
The Contractor's design 21 The ECC is suitable for use both in traditional civil engineering contra
lg/here all permanent work is designed by or on behalf of the Employer and The final sentence is intended to prevent abortive work which would result if
ontractors obligation is limited to constructing the works and in pack the Contractor began to manufacture or construct to a design which had not
deal contracts, where the Contractor designs and builds the whole ofi been accepted.
l
gswgiis iii accordance with criteria specified by the Employer. Between in 21.3 it is important that submissions by the Contractor are in packages which are
imi s, contracts will includesome design done by the Employer and so capable of being properly assessed. For instance, a foundation design cannot
by the Contractor. For instance, it is common for civil engineering and buildi be properly assessed without some details of the superstructure and any
works to be fully designed by or on behalf of the Employer, with mechani Plant to be supported.
?nlC:1tZi%?t{|i1Ce3Lrlgglllgi/e(Z:'6Sigrled by the Contractor to the performance requi
Design of Equipment 23
l Using Option F, the ECC is suitable for a design and management contract 23.1 This clause allows the Project Manager to accept the Contractor's design of
well as for a design and construct contract. Equipment without affecting the Contractor's responsibilities (clause 14.1).
The Contractor is still liable if, after having made the Equipment to details
21.1 Those parts of the works which the Contractor is required to design shouldi which have been accepted, it fails because it did not comply with the Works
‘S/I%?;8€Ih(l)I;etI'lea§;I)l'KfStHlfOI‘lTla’ElOl'l provided by the Employer andthe interfacz Information. The clause gives three criteria for design of the Equipment.
be done b iétatino ‘e e Vl;(r)]l_'KS designed by the _El'l‘l'plOj/‘el’ identified. This m Failure to comply gives the Project Manager the right, but not the obligation,
recommenlt/jed thgt very mfg except the following or the following’. It isr to decline to accept the design.
different parties as flpa s o an element of work should be designed l Unlike clause 21.2, which provides that the Contractor should not proceed
is may confuse liability in the event of Defects occurrin1
until the Project Manager has accepted the Contractor's design of the works,
gain; Isllgtgimtfictag ii raqpired to design Ia part of the works, the Employi, there is no restraint on the Contractor proceeding even if the design of an
to Conform This na or a 2 ormation the criteria to which he requires design item of Equipment has not been accepted.
the works ecifi ay inc u e details of the form, geometiy and dimensions
mafion ( .mp|d ca ions, codes of practice, standards, reference to Site Info The Contractor can proceed even though he has not obtained acceptance of
his design of Equipment, which includes temporary works. The Project
P Vi efi by the Employer) and environmental criteria. (See earli Manager should seek details of temporaiy works well in advance of when the
notes on Preparing the tender documents’.)
work is going to be done (prompted by what he sees on the Contractor's
mhilzggg i(;“or[i':rai?tor is to carry out most of theldesign, similar criteria snou. programme) so that he can register any dissatisfaction with the proposals in
h _ _ e orm of a performance specification. This will describe ti good time. However, responsibility for producing Equipment genprally
c al'<'5lCtE!l‘lStlCS,.l1<'5l’_[Lll‘e and performance of the finished work and shou» (including temporary works) that permits the works themselves to be
include any limitations which the Employer wishes to impose upon appea completed properly lies with the Contractor.
ance, durability, operating and maintenance cost, etc,
Any change to the allocation of design responsibility or change or additionl People 24
Ehe cietsign criteria in the Works information in part one of the Contract Dai 24.1 This clause gives reasons for not accepting a proposed replacement for a key
ons I utes a change to the Works Information and is a compensation event. person. It does not preclude the Project Manager accepting a person with
1'
qualifications or experience which are inferior to the listed person, if he is
i 21.2 The procedures for submission by the Contractor of design particulars an satisfied that such a person will be suitable for the position.
acceptance by the Project Manager are set out in this clause. The time limit
are t ose stated in clause 13. They are intended to encourage prompt actio
I
l by the parties so that delay can be avoided and the whole process properl
managed.

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 3 3 Guidance Notes for the NEC Engineering and Construction Contract Explanatory Notes

This clause provides the authority for the Project Manager, on behalf Failure by the Employer to provide the sen/ices and other things stated in the
Employer, to have a Contractor's employee removed from work on the Works Information is a compensation event under clause 60.1(3). Failure by
Possible reasons for asserting this authority include the Contractor to provide the services and other things stated in the Works
¢ security, Information results in his having to pay any cost incurred by the Employer
v health and safety (communicable diseases), and under clause 25.2.
Q disorderly behaviour prejudicing the Employer’s operations. ‘Providing senrices and other things’ is not to be confused with the Employer's
However, the Project Manager may do it for any reason, provided he .-_=,r" use of the works. The Works Information should include details of the sen/ices
what it is. ~ and other things which the Employer requires during the construction opera-
tions. This particularly applies where the Contractor is required to work in an
Working with the Employer 25 area where the Employer needs to continue working, or when he requires an
and Others 25 1 On many projects there are several contractors and other organisations. existing facility to be maintained. For example, in road construction projects,
may include public utilities who are to divert their services or provide traffic must continue to flow, either on temporary diversions or on the partially
services and plant. Sometimes a public utility employs its own contractor constructed works. Details of the programming and how the Contractor
the utility supervises the work. The duty of the Contractor to co-operate ti, provides for this traffic are usually left to the Contractor. In complex traffic
Others has been expressed in general terms only as the detailed requireme- management schemes, it may be necessary for the Employer to prepare full
will depend on the particular project and Site and should be fully describ details in advance and include these in the Works Information.
and explained in the Works Information. Failure to do so may lead to See explanatory notes on clauses 11.2(9) and 31.2. This clause establishes
compensation event (e.g. clause 60.1(5)). a procedure for the Employer to recover from the Contractor any additional
The Contractor is not responsible for the failure of Others to carry out tri costs he incurs due to the Contractor failing to meet the Condition required by
work in accordance with the Works Information unless the failure is caused the Key Date.
the Contractor not co-operating. The exchange of information on health a
safety matters is particularly important in order to comply with the law as w_ Subcontracting 26
as with the contract, see notes on clause 27.4. These clauses provide that the Contractor may subcontract parts of the works,
provided the Project Manager accepts the proposed Subcontractors. In the
Where more than one contractor has access to the Site, it is important th case of proposals for subcontracts for small amounts of technically simple
the interfaces are defined in the Works information. Any sen/ices to work, acceptance by the Project Manager may be a formality.
provided by one contractor to another, or by or to the Employer, should alsoi
stated. Responsibility for the provision and maintenance of facilities sho No provision is included in the ECC for nomination of Subcontractors. This is
also be stated. Examples of these facilities are because of the legal and practical problems of accountability which frequently
ensue. The principle of the ECC is that the Contractor is fully responsible for
' access roads, every aspect of managing the work he has contracted for (hence clause
~ scaffolding, 26.1). Nominating Subcontractors conflicts with this principle and causes
' cranes and hoists, many practical problems. Alternatives to nominating Subcontractors whilst
~ welfare, achieving similar objectives are
- security arrangements,
' storage, (a) making the Contractor responsible for all work; he may then subcon-
- power supplies, tract parts and the Project Manager retains some control over the
0 water, identity of the Subcontractors provided any withholding of acceptance
~ compressed air, and is for the reason stated,
' telephone. (b) providing for separate contracts, with the Project Manager managing
the time and physical interfaces between them,
The interface between the contractors and other bodies is often complex. ll (c) including lists of acceptable Subcontractors for particular tasks in the
important that this work is planned and programmed as far as possible befoi Works Information.
—..i-_.
the start of the contract. The start dates for work should be agreed togethrg
with details of the work, its likely duration and facilities required to l;{ Where national or international law requires, the Works Information should
provided by and for the Contractor. Details of the obligations of the parties r-\ include a statement of award criteria for subcontracts.
each interface and the timing and programming arrangements should b- Acceptance of a Subcontractor cannot be withdrawn later, providing: his
agreed. This information may conveniently be provided in the form of interfaci appointment complies with these clauses.
schedules in the Works Information to ensure that arrangements in ti"-
different contracts are ‘back-to-back’. It should also be stated which partyl The NEC Engineering and Construction Subcontract (or the NEC Professional
to supply and maintain access (e.g. scaffolding, lifting equipment for plant Services Contract for design work) is expected to be used as recommended in
resources (for testing, etc.) and other sen/ices (such as power supply an the Latham Report (July 1994). The NEC Engineering and Construction Short
water supply). Subcontract is also available for straightforward, low risk subcontracts.
However, in overseas contracts or where the requirements of a particular
If precise dates are not available, approximate dates should be given in th- industry make the NEC subcontracts inappropriate, the Project Manager may
Works Information. The Contractor should then be required to meet the otht accept other subcontract conditions being used (see also explanatory notes
parties soon after the starting date, agree detailed programmes with ther on clauses 13.8 and 60.1(9)).
and incorporate the information in his own programme.
_‘Jgrl
In addition, the health and safety requirements, with which each contractor i1
required to comply, should be stated in the Works Information. This is particr
larly important for sites occupied by several contractors (see explanator
notes on clause 27.4).

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 3 Guidance Notes for the NEC Engineering and Construction Contract _ Explanatory Notes

Other responsibilities 27 When Option C, D or E is used in a partnering arrangement it is common for

2 7.1 This clause requires the Contractor to obtain the requisite approvals fry- the Project Manager to want more influence over the selection of a subcon-
design from planning authorities, nuclear inspectorates and Others who tractor. This can be achieved by setting down the processes to be followed in
have the duty or authority to approve his design. The contract is silent a an Option Z clause.
the Contractor obtaining approval from outside bodies to other aspects of Especially under Option F, detailed procurement procedures should be stated
work such as road closures or access for major items of Equipment. clearly, preferably in a Z clause. These should include such matters as
27.2 It is important that the Project Manager, Others notified by the Proj- 0 minimum number of competitive tenders,
Manager and the Supervisor have the right to visit places where work is bei ~ criteria on how a subcontractor is appointed, and
carried out. This includes right of access to suppliers‘ and Subcontract ~ involvement of the Project Manager in the procurement process and
premises to permit them to inspect and test work as necessary and to ch acceptance of Subcontractors.
progress.
27.3 Various clauses in the contract give the Project Manager and the Superyj
authority to issue instructions to the Contractor. it is important that th option F: Management contract
instructions are given within the limits and for the reasons expressly stated,
for any reason, the Contractor disagrees with an instruction, his remedy isr Providing the Works 20
to refuse to obey the instruction, but to follow the dispute resolution proced 20.2 in a management contract, the core clauses and this clause state how the
chosen for the contract (Option W1 or Option W2). Contractor is to Provide the Works by identifying what he is to do himself and
what he is to subcontract.
27.4 In many countries there are laws which place considerable responsibiliti,
upon employers, employees and others in relation to health and safety. The effects are shown in the table below. This also shows how the Contractor
most European countries there is considerable legislation relating to hea is paid by relating the different categories of work to the Defined Cost, the Fee
and safety on construction sites. This legislation is regularly being increas and the prices stated in the Contract Data.
in scope. Generally, the sanctions for non-compliance are criminal in natu
as opposed to civil. It is not appropriate or necessary to reproduce or Providing the Works
summarise this legislation in contract documents. The various parties ea.
have their obligations under statute and the general law. Contractor does not subcontract Contractor must subcontract
It is necessary, however, to include in the contract any particular requireme Work stated in - The Contractor’s design
Management of
which the Employer has. These requirements are stated in the Works lnfor Q the Contractor’s Contract Data part 0 Provision of Site services
tion since they affect how the Contractor is to Provide the Works and are design two to be done by ~ Construction and
parallel with statutory obligations. These requirements may include the Contractor installation of the works
' provision of Site
matters as services except work which the
I
I ~ the safety regulations of the factory within which the Site is located, 0 construction and Contract Data states he
‘l
' a health and safety plan for the whole Site and the project, installation of the will do himself
Q submission of safety policies for information, and works I
0 which party is responsible for maintaining areas used by several contra
tors in a safe condition. Covered by the Fee Prices stated in the included in Defined Cost
Contract Data
In 1995, the Construction (Design and Management) Regulations 19
came in to force in the United Kingdom. They require construction projects‘
adopt a regime of health and safety management which includes ma It is important that tenderers for an Option F management contract state and
matters which might formerly have been covered by specific Employer price any work the Contractor would want to do himself in the Contract Data
requirements. The principal contractor and the planning supenrisor shouldli part two. if this is not done, the work would have to be subcontracted or its
identified in the Works Information. price covered by the Fee.
20.5 This clause provides a co-operative procedure to deal with compensation
events affecting the work stated in the Contract Data that the Contractor Is to
do himself.
Main Option clauses

Options C, D, E and F
20
20.3 These clauses illustrate the collaborative nature of these main Options
20.4
Subcontracting 26.4 See explanatory notes on clause 26.3 for available NEC Subcontracts. Th
clause gives the Project Manager more information about a proposed subco
tract than is available under Options A and B, but it does not permit tt
Project Manager to control or influence the choice of subcontractor.
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3 3 Guidance Notes for the NEC Engineering and Construction Contract Explanatory Notes 3.

3 TIME Acceptance of a programme, unlike acceptance of the Contractor’s design, is

not a condition precedent to the Contractor proceeding with the work. Failure
to accept a revised programme does not require the Contractor to stop work.
31.2 This clause lists the information which the Contractor is required to show on
each programme submitted for acceptance. The following notes are broadly in
Core clauses the same order as the bullets in the clause.
- The dates stated in the Contract Data or changed in accordance with the
contract (see explanatory notes on clauses 11.2(3), 112(9), 30 and
Starting, Completion and 30 The period of time within which the Contractor is required to Provide the W 33). The Completion Date (and Sectional Completion Date if X5 is used)
Key Dates is not stated. instead, the starting date and the completion date are give can only be moved in the programme because of an implemented
the Contract Data. The starting date is the date when the Contractor can compensation event (clause 65.1) or an agreed acceleration (clause
work, but not on Site (see clause 30.1). The starting date is also use 36).
initiate the fixing of some dates and intervals throughout a contract, 0 The Contractor's updated planned Completion (and Sectional Completion
payment assessment dates (clause 50.1) and interval for rev; if Option X5 is used) as the work progresses. It is important to under-
programmes (clause 32.2). Both starting date and completion date may stand that planned Completion is not the same as the Completion Date.
adjusted by agreement before the Contract Date. The former is the date that the Contractor is forecasting that Completion
For many contracts, the period between the starting date and the COlTlple (clause 11.2(2)) will be achieved, and will be linked to the critical path
date is decided by the Employer, enabling the completion date to be inse of the programme; the latter is the date by which the contract requires
in the Contract Data before inviting tenders. the Contractor to have achieved Completion (clause 30.1).
- The order and timing of the Contractor's own work, updated (ref. clause
Alternatively, the completion date may be decided by the tenderers ~ 32.1).
submitted as part of their offers. If this is done, Employers should make cl ' The work of the Employer and Others. The reference to ‘last agreed’
how tenders are to be assessed, indicating the value to be placed on an e allows for changes to be made to the interfaces, in accordance with the
completion date. contract.
Sometimes, the completion date is decided by the Employer but alternai v The dates when the Contractor plans to complete work for which Key
tenders are also invited on the basis of an earlier tendered completion 0' Dates apply (see explanatory notes on clause 112(9)) and work needed
Again in such a case, the basis of assessing tenders should be made clear to allow the Employer and Others to do their work.
the tenderers. v Separate references to ‘float’ and to ‘time risk allowances‘ are included
in clause 31.2. ltis important that they are each clearly identifiable on
it is essential for completion dates to be stated (by one of the above metho the programme.
in a construction contract. Even if the extent of the work is uncertain, wh
may be the case in a cost reimbursable contract, a time should be stat The Contractor’s time risk allowances are to be shown on his programme
based on a stated assumed amount of work. If this is not done, extension as allowances attached to the duration of each activity or to the duration
time and delay damages provisions cannot be applied. of parts of the works. These ailowances are owned by the Contractor as
part of his realistic planning to cover his risks. They should be either
30.1 The Contractor cannot start work on Site until the first access date. The acce clearly identified as such in the programme or included in the time
dates are stated in the Contract Data. in contracts for the manufacturea periods allocated to specific activities. It foilows that they should be
installation of plant, or when the Contractor has to do significant pre-planni retained in the assessment of any delay to planned Completion due to
or design, the first access date may be some time after the starting date. the effect of a compensation event.
30.2 The Project Manager is responsible for certifying Completion, as defined Float is any spare time within the programme after the time risk allow-
clause 11.2(2), within one week of Completion. Normally, the Contractor ances have been included. It is normally available to accommodate the
ask for the certificate as soon as he considers he is entitled to it, but sucl: time effects of a compensation event in order to mitigate or avoid any
request is not essential. delay to planned Completion. However, in accordance with clause 63.3,
30.3 See notes on clauses 11.2(9), 25.3 and 31.2. float attached to the whole programme (i.e. any float between planned
Completion and the Completion Date) is not available. Any delay to
The programme 31 planned Completion due to a compensation event therefore results in the
31.1 Provision is made in the Contract Data for a programme either to be identifii" same delay to the Completion Date. (See further explanatory notes on
in the Contract Data part two at the Contract Date or to be submitted by ti‘-' clause 63.3.)
Contractor within a period stated in the Contract Data part one. It is important that the time risk allowances included by the Contractor in
The programme is an important document for administering the contract. a programme submitted for acceptance are realistic. If they are not, the
enables the Project Manager and Contractor to monitor progress and Project Manager may refer to the third bullet of clause 31.3 and refuse
assess the time effects of compensation events, including changes to t?-' acceptance.
Completion Date. ¢ The provision for health and safety matters should allow for any
Employers may wish to have programmes submitted with tenders in order statutory procedures, as well as those specifically mentioned in the
judge whether a tenderer has fully understood his obligations and whetherl Works information.
is likely to be able to carry out the work within the stated time, using ti ~ The programme is to show the dates when the Contractor will need
methods and resources he proposes. Any doubts on these matters can thi access and other things to be provided to him by the Employer and also
be resolved after submission of tenders. information from Others.

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 3 Guidance Notes for the NEC Engineering and Construction Contract Explanatory Notes

v The penultimate bullet of clause 31.2 covers the general to stop or not 34
about resources the Contractor plans to use for each operation, |n to start work 34.1 This clause gives the Project Manager authority to control the stopping and re-
early stages of the contract the Contractor's statement will probabry starting of work for any reason, for example where there is risk of injury to
detail and reflect the methods and Equipment proposed in his people or damage to property. An instruction given constitutes a compensa-
the work progresses, the statement may be revised to show more tion event (clause 60.1(4)), but if it arises from a fault of the Contractor, the
and any changes he proposes for acceptance by the Project ...,,,, Prices, Completion Date and Key Dates are not changed (clauses 61.1 and
(see explanatory notes on clause 32). '- 61.4). in certain circumstances, if the Project Manager fails to instruct the re-
0 The Employer should ensure that the Works information states the Q start of work within thirteen weeks of instructing work to stop, either Party
tions for which he requires detailed method statements. This requirenj may be entitled to terminate the contract under clause 91.6.
should be limited to operations where the method of construction
the design of the Equipment to be used are crucial if the design or Take over 35
works is not to be put at undue risk. Where there is a large amount The Employer may have good reasons for not wishing to take over the works
Contractor design, it may be appropriate for the Works Information before the Completion Date. If so, this should be stated in the Contract Data.
require an increasing amount of detail to be shown on the programme For example, the work in this contract may be part of a larger scheme such
the design is developed. that there is no advantage to the Employer in its early completion. If the
Contract Data is silent on this, the Employer is required to take over the works
This clause lists reasons why a Project Manager may decide not to accep; within two weeks of Completion.
programme or a revised programme. Any failure by the Project Manager
accept a programme for reasons other than those noted is a compensat If Option X5 is included in the contract and the works are divided into
event (clause 60.1(9)). The Project Manager is required to respond within sections, Completion of a section results in the Employer having to take over
weeks, but if the reply is non-acceptance the Contractor is required to the section within two weeks of its Completion.
submit, within the period for reply. Under this clause, if the Employer uses part of the works before Completion
has been certified, he takes over that part on the date that he uses it and a
Revising the programme 32 compensation event occurs unless the take over is for a reason stated in the
This clause lists the matters which are to be shown on a revised programrr Works Information or to suit the Contractor’s method of working (see explana-
It should record the actual progress achieved on each operation and the re tory notes on clause 60.1(15)). The Employer is then responsible for
gramming of future operations including any proposals for dealing with del providing access so that the Contractor can correct Defects, which will include
and Defects, as well as any other changes the Contractor wishes to make. completing outstanding work (clause 43.4).
should allow for the effects of any future events that the Contractor is aw-
of, whether they are compensation events or not. This may change the date Acceleration 36 Acceleration means bringing the Completion Date or a Key Date forward. This
planned Completion. However the Completion Date will not change unless differs from usage in many contracts where ‘acceleration’ means speeding up
compensation event has been implemented or an acceleration has be the work to ensure that the Completion Date or Key Date is achieved. if the
agreed (see explanatory notes on the first two bullets of clause 31.2). Project Manager is concerned that delay which has already occurred may
Failure by the Contractor to submit revised programmes is of considerat result in the Completion Date or a Key Date not being achieved, he can
disadvantage to the Contractor in that if a compensation event occurs,ti instruct the Contractor to produce a revised programme under clause 32.1
Project Manager may assess it based upon his own assessment of what t. showing how he intends to recover the time he has lost.
programme should be. Thus it is in the Contractor’s interests to keep tr These clauses allow the Project Manager (often at the request of the
programme up to date and maintain the existence of an Accepted Program, Employer) to obtain a quotation for acceleration from the Contractor. There is
(clause 64.2). no remedy if it is not produced or if the Contractors quotation is unacceptable.
The Project Manager should note, in reviewing a submitted revise Acceleration cannot be imposed on the Contractor without his agreement.
programme, any changes to the dates by which the Employer is required An Employer who foresees the possibility of requiring acceleration should
provide information, facilities, possession, etc. consider using Options C, D or E when deciding contract strategy, since
acceleration agreements are more likely to be achieved under these Options
Access to and use of 33 than under Options A or B.
the Site 33 1 The dates on which the Contractor may have access to the various parts
the Site are stated in the Contract Data. In many cases it may be possible l.
give access to the whole Site on the starting date. in other cases, particulail‘
where there are several contractors on the Site, this may not be possible. Tl‘
Contractor must then programme his activities according to the dates whi‘
he can have access.
The Contractor may not require access on the dates stated in the Contra?‘
Data, in which case he should show on his programme the later dates. Thei;
then supersede those in the Contract Data and become obligatory on ill‘
Employer.

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t 3 Guidance Notes for the NEC Engineering and Construction Contract Explanatory Notes ¢.

Main Option clauses AND DEFECTS

Options A and C
The programme 31 c|au5e5
31.4 The activities on the Activity Schedule and the operations on the
should be compatible in order to make assessment of compensation The Contractor's responsibility for quality is part of his duty to Provide the
and financial forecasting easier. However, the programme may contain Works (clause 20.1) as defined in clause 11.2(13).
operations than the Activity Schedule has activities. The quality standards to be achieved by the Contractor should be specified in
It is also possible that the Activity Schedule contains more activities the Works Information in part one of the Contract Data. These standards
provide the basis on which the existence of a Defect is judged (clause
numbef 01° 0Derations in the programme. There should always be 112(5)). The Supervisor acts on the Employer's behalf to check the Contrac-
between the programme and the Activity Schedule, whether the
Programme is in the Contract Data (i.e. as part of an accepted tor’s attainment of the specified standards.
prepared after the Contract Date. This correlation should be kept up to
as the job proceeds. Correlation is best achieved by adding to the Quality systems if quality systems are required in a project, they should be initiated by the
Schedule the relevant programme operation references. Employer at an early stage, such as at the early design stages.
Example of good correlation: each activity is made up of whole Requirements in the ECC for quality systems can be accommodated in two
part of one operation. ways
Activity Activity description Price £ Programme operation (a) The Employer specifies requirements for quality management procedures
number in the Works Information in part one of the Contract Data.
1 Excavate for west 20,000 Part of 23 (b) The Employer requires the Contractor to provide details of his quality
abutment plan for inclusion in the Works Information at the Contract Date.
2 Excavate for central pier 18,000 24
3 Excavate for east 23,000 Parr of 23 Tests and inspections 40
abutment 40.1 Clause 40 does not apply to tests and inspections done by the Contractor at
his own discretion and for his own purposes.
Example of poor correlation: to be avoided.
40.2 Tests should be specified in the Works Information with respect to
Activity Activity description Price £ Programme operation
number v the nature of the tests,
0 when they are to be done,
6 Shuttering for west 15,000 Part of 28 and part of v where they are to be done,
abutment v who does the test,
7 Shuttering for central 19,000 26 and part of 31 ~ who provides materials, facilities and samples,
pier ~ their objectives and procedures, and
8 Shuttering for east 17,000 27, 32 and part of 33 v whether or not payment or authorisation to proceed to the next stage of
abutment the work depends on the test results.
Additional tests may be instructed by the Project Manager by changing the
Works information. This is a compensation event under clause 60.1(1) unless
the test is either required to check for a Defect and one is found (clause
Options A, B, C and D 60.1(10)) or it is a repeat test. Such instructions should specify details of
the test.
Acceleration 36 Significant stages include the following.
. _ When tests are to be done
3 6 .3 This clause states the actions to be taken by the Project Manager when
has accepted a quotationfor an acceleration. The actions are the same’ ~ Before payment for or marking of Equipment or Plant and Materials
when the Project Manager implements a compensation event (clause 65.4). (clause 71.1).
~ Before delivery to the Working Areas (clause 41.1).
~ Before Completion. The Works Information should state which tests have
to be passed before Completion.
Options E and F I - Before Key Dates or dates shown on the Accepted Programme for the
start of work by the Employer or Others. The Works Information should
state the tests to be passed before these dates.
Acceleration 36
36.4 This clause states the actions to be taken by the Project Manager when it
has accepted a quotation for an acceleration. The actions are the same ii,
when the Project Manager implements a compensation event (clause 65.3).

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Q 116C 3 Guidance Notes for the NEC Engineering and Constrtretign contract Explanatory Notes

' After take over but before the defects date. Tests required procedures, The objectives, procedures and the standards to be satisfied should be speci-
period will usually be part of the Employer’s commissioning. in etc. fled in the Works information. Types of tests may include the following.
of process plants, they may involve production materials ~ Checking setting out, line, level, verticality.
Employer may need to have under his direct control. Such tests 0 Measuring movements, settlement and soil characteristics in earthworks.
carried out by the Supervisor on the Employer’s behalf Qf
~ Testing the properties of materials to be incorporated in the works for
Contractor. It is possible that the completed parts of the works strength, durability, appearance, brittleness, flexibility, corrosion resistance,
put into operation by the Employer before completing his own etc.
Sunset’ clause (40.5) is included to avoid the possibility of 1 Testing the structural, mechanical or pressure resisting strength of Plant,
conditional on the successful completion of a Supervisor's test piping systems, structures or other parts of the works.
withheld if the test has not been carried out by the defects - Testing the performance, accuracy and reliability of control systems and
provision does not apply to tests which have to be repeated associated instruments and sen/o-mechanisms incorporated in the
discovery of a Defect. works.
Failure by the Supervisor to carry out his tests promptly is a I Testing the reliability, safety and effectiveness of electrical, mechanical
event (clause 60.1(11)) if it causes unnecessary delay to the Contractor and other systems incorporated in the works.
~ Testing the performance of the works including the performance of items
Where tests are to be The Works Information should state the location of each test if it is nott of Plant to prove that they perform as specified in the Works Information.
done carried out within the Working Areas. Items which may come into this Cate
include heavy structural units, mechanical and electrical plant, Computet 40.3 This clause deals with four matters
other proprietary equipment. ~ the procedure for notifying when testing is to be done,
' the requirement to notify test results,
Who does the test The Works Information should specify who is responsible for carrying out ~ the timing of notifying the Supervisor of testing or inspection, and
test or for arranging for it to be carried out. The choice will be between‘ ~ the right of the Supervisor to observe the Contractor’s tests.
following. I The Contractor and Supervisor are each required to give the other advance
' The Contractor, including his Subcontractors and suppliers. Where notice of tests which each is to carry out. This enables both parties to be fully
Contractor is to arrange for a test to be carried out by an independent informed and to take any action they wish to take. If, for example, testing
public authority, the Works Information should include the name of reveals that some work does not comply with the Works information, early
authority, the tests and the form in which the results are to be suppli ' discussion of the consequences is likely to be required. Notification of tests
' The Supervisor. and their results is required before further testing or inspection is rendered
impossible or impracticable. For example, the results of a drain test should be
Who provides materials, The Works information should state who provides the materials and appara notified before the drain is covered up, or the result of a test of reinforcing
facilities and samples necessary for each test. The required items may include the following. steel should be notified before concrete is placed around the reinforcement.
Failure by the Contractor to notify the Supervisor of a test or inspection may
~ Samples of materials to be tested. These are normally provided by‘. deprive the Contractor of compensation for a search, even if no Defect is
Contractor, his Subcontractors or suppliers. found (clause 60.1(10)).
v Testing apparatus, test loads, measuring instruments. These could
provided by the Employer, the Supervisor or the Contractor (includingi 40.4 A Defect is defined in clause 11.2(5). Any repeat test or inspection of work
Subcontractors or suppliers) or hired from an independent or pu after a Defect has been corrected is not a compensation event.
authority.
A Defect may make it impossible to reconstruct the work affected in accordance
~ Testing facilities such. as a Site laboratory (normally provided by with the Works Information. For example, piles which have been installed
Contractor but sometimes by the Employer) or laboratories off- outside the specified tolerances may have disturbed the original ground such
(normally those of an independent company or authority). that the construction of the foundation as shown on the drawings has become
~ Sen/ices for the tests (water, electricity, air, steam, etc.) which are impossible. The early warning procedure (clause 16) requires early discussion
~ off-Site — normally provided by the testing authority being used, of the matter. Possible solutions include changing the Works information after
~ on-Site, before take over - normally provided by the Contractor redesign or accepting the Defect (clause 44).
the seiyices available on Site but sometimes augmented by t Under this clause, the Supervisor is required to carry out testing and inspec-
40.5
Employer when special services are required, or tion for which he is responsible so that unnecessary delay to the work is
' on-Site, after take over — normally provided by the Employer. avoided. if unnecessary delay occurs a compensation event results (clause
' Materials for use in the tests (including performance tests) - norma 60.1(11)). Some payments to the Contractor may be conditional upon doing
provided by the Employer or by a specialist Subcontractor or supplier. particular tests to show that the work has been carried out satisfactorily. If
' Fuel for The tests (gas, coal, oil, etc.) — normally provided byl the Supervisor causes unnecessary delay, such payments may become due
Employer after the defects date whether or not the tests are carried out.
v Provision and disposal of production materials — normally providedl
40.6 if a test has to be repeated following the discovery of a Defect, the Contractor
disposed of by the Employer. pays the Project Manager’s assessment of the cost incurred by the Employer.
If the cost reimbursable Options C, D or E are used, the Project Manager's
assessment does not include any costs the Contractor incurs for the repeat
test (clause 40.7).

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3 Guidance Notes for the NEC Engineering and Construction Contract _ Explanatoiy Notes

Performance testing
Process of
Plant 0 prove that process Plant meets reliability, performance and other gearching for and 42
eters, it is often necessary to test Plant after take over when regular notifying Defects 42.1 The Contractor is responsible for correcting a Defect as defined in clause
sen,-ices are available and full loads can be applied. For some processes 112(5). A fault in a design provided by the Employer is not a Defect.
term soak tests can be required.
If a search is instructed and a defect is found which is due to a fault in the
The ECC test and inspection provisions allow for any combination or Employer's design (i.e. no Defect as defined is found), the instruction to
be carried out before and after take over and/or Completion There i search is a compensation event (clause 60.1(10)) and responsibility for
fore no need to have separate clauses in the conditions of contract (ofi th further action belongs to the Project Manager. He may decide to change the
clauses) to deal with different types of test. ad design and instruct the Contractor accordingly. This would constitute a
Many combinations of tests may be required for process Plant and it I5. change to the Works Information, which would be a further compensation
practical for the conditions of contract to prescribe particular tests z event (clause 60.1(1)).
Employer must state in the Works Information what tests are require.-o'( lf the defect is due to non-compliance with the Works Information, it is a
notes on clause 40.2). in a similar way to drafting a detailed traditional 5 Defect and does not result in a compensation event. It is then the Contractor's
fication. D- responsibility to correct the Defect so that the work complies with the Works
For a typical ECC contracted process Plant the testing regime would L1 " information.
follows. B The clause also includes extra tests and inspections not specified in the
' Manufacture Works Information within the meaning of ‘searching’. Whether or not such
During manufacture various tests would be carried out in the facto tests are compensation events is determined using clause 60.1(10).
the Works Information identifies specific tests to be carried out big‘ 42.2 The intention of this clause is to enable Defects to be identified as soon as
Areas?/Claue5igP2Lis1).e
delive , th t b passed before the Plant is
' brought to the Worki. possible so that they can be dealt with promptly.
The periods for the notification and correction of Defects are illustrated in
~ Erection on site Figure 3.
Following erection on site, static alignment electrical and mechan'
and basic process automation tests stated in the Works Information ' The defects date is defined in the Contract Data as a date which is a stated
be performed (clause 40). period of time after Completion. Normal practice for most civil engineering
and construction contracts in the United Kingdom would be a period of 12
~ If the Pl_ant_ passes the tests and all other work required to achie. months. For process plant, longer periods, commonly 3 years but up to 7 or
Completion is done, then take over may proceed, even 10 years in special circumstances, may be appropriate.
' If the Plant fails then a Defect exists and is corrected (clause 43)
Defects may be notified for correction by the Contractor at any time before the
v After take over defects date. The defects date is the earliest date when the Contractor ceases
After take over, performance tests are carried out (also under clau to be liable under the contract for the correction of Defects. However, the
40). The Employer and Contractor provide facilities, etc. (this would oft Contractor’s liability to correct Defects under the contract may continue after
include the services of operations staff) as stated in the Works inform: the defects date for the defect correction period if a Defect is notified just
tion (clause 40.2). before the defects date (see Figure 3).
' if the Plant (335565, the Contractor has met his obligations in ti The Supervisor, Project Manager or Employer may inform the Contractor of
respect. Defects after the defects date but the Contractor’s responsibility for them may
' |f Option X17 (low performance damages) is used and the perfui be limited according to the law governing the contract or by the operation of
mance is low, but within the levels stated in the Contract Data, I Option X18, if used.
performance damages are paid by the Contractor.
0 If the performance is low and either X17 has not been used or tt" Correcting Defects 43
failure is outside the limits of X17, a Defect exists and is correct 4 3 .1 The Contractor is responsible for correcting all Defects, whether notified or
(clause 44). not.
' ll‘ the Emi0i‘0l/er is willing to accept the Defect, a price reduction ma Before completion, the Contractor is responsible for correcting all Defects
be agreed (clause 44).
which would prevent him fulfilling his obligation to Provide the Works in accor—
' |f the Employer is unwilling to accept the Defect and the Contract dance with the Works Information (clause 20.1). He therefore needs to correct
‘[3)a?n°t COFFQCI It the PTOJBCI Manager assesses the cost of having th Defects in time to avoid delaying
4; fit Corrected by Others, which is paid by the Contractor (clausi
~ Completion, as defined in clause 11.2(2).
ltfishuseful to include in the Works Information a schedule tabulating detail. ~ if Option X5 is used, the Completion of any section of the works,
o e tests to be done at different stages of the works with cross-reference- 0 the achievement of the stated Conditions by their Key Dates (clause
to the relevant sections of the Works Information containing the detailei 112(9) and
procedures. ~ dates on the Accepted Programme for the Employer or Others to start
work (clause 25.1).
Testing and inspection 41 I in effect, the Contractor is free to decide when he should correct Defects to
b 9f°"=‘ dellvefy
' 41.1 The purpose of this- clause is
- to avoid- expense in_ having
. to transport Plan‘ avoid delaying these dates (refer to Figure 3).
and Materials
revea} Defects‘ back to the place of manufa c ure I es t‘ing and ‘inspectiof‘
t ‘f t '

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i-iii L _J
 ®
3 Guidanc e Nt
0 es for the NEC Engineering
- - and Construction
. Com; t
1'80 Explanatory Notes ¢.

43.2 After Completion, the Contractor is required to correct any remaining notified
'0d
-.
Defects, which would not have delayed Completion, before the end of the
e defect correction period. The defect correction periods, stated in part one of
ate befctore the Contract Data, only affect the timing of correcting Defects after Comple-
a ‘c ctperion tion. Provision is made in the Contract Data format for different lengths of
1_- defect correction period appropriate for different types of Defect. The length of
Def
ct the defect correction period for each type of Defect to be given in the Contract
.___ corre _ ,
C
to
cost
of
-—
ci‘M ervsor 45.above2] Data depends on
ntraoi Cerecti'sf
Dat dby
C[
SPa45.2]
Employer Contractor Pmfanagere Sup Co Def to f
Defnot
coer ctected asabove
— [45.
1] v the kind of Defects likely to be outstanding after Completion and the
posedby time needed for their correction,
DC
used I the urgency of the Employer's need for their correction, and
Key E C PM S CD DC DCP
Defect cessas— epends
- the ease with which access can be given to correct them.
01 nss Th'amosunt |—|
ues
sDCP,
ncw'or etchte'dn
sesbyOth
cost
of
cors; 45."ii=a'1c]i PM
r ect'on be
lobyc reas es
f
Defnot
coer ectcted asabove An example of a high degree of urgency for a Defect to be corrected would be
- — ,_45.1 Sss 'ty
dab one found after Completion which prevents the Employer from using the
OpfX18
‘fon works. The defect correction period for such a Defect should be stated in the
Defctect
-—| Cs
fDefPM
ectasses th'amous fC
not
gve
accecorere defdaeactss corng.rect Contract Data part one to be short. If the Contractor is then unable to comply,
sues I—Q—~
awand
ts
onmrn
43.1 fCgven
acnot the Employer is allowed to have the Defect corrected by other people and
DC |-_|

----l
recover the incurred cost from the Contractor (see explanatory notes on
S's to
corre +on clause 45.1).
S
'sDC
sues C Defect found
date dat
Defects S1
e) 43.3 At the defects date, or the end of the last defect correction period if later, the
Fl
DCP [43.
1] Defect noted'f Supervisor issues a Defects Certificate. This will be used by the Project
(
ate Manager in assessing the final amount due to the Contractor (clause 50.1).
CD The certificate is defined in clause 11.2(6). The purpose of the last sentence
_ 43.4- C
tDefcoorectct
Extoens is to preserve the liability of the Contractor for undiscovered Defects.
43.4 The procedure in this clause allows the Contractor access to complete
Defect noted'f
outstanding work and correct other Defects after the Employer has ta ken over.
‘n
odstated Normally, this work can only be done at the Employer’s convenience as, after
Completion, the Employer is obliged to take over the works. The clause also
sper \_¢
states that the defect correction period does not start until access and use
Th have been provided.
DCP
CD)
as

4g 44
works Accepting Defects
pet
onof of er I 44.1 Although a Defect may be minor, its correction may be costly to the Contractor
and may delay Completion by a considerable time. its correction may also
Com who
e cause inconvenience to the Employer out of all proportion to the benefits
gained. This clause gives a procedure within the contract for accepting a
have 0% Defect in these circumstances. Either the Contractor or the Project Manager
ton may propose a change to the Works information solely to avoid the need to
22)
-4.,
correct a Defect. The other is not obliged to accept the proposal.
44.2 The Contractor’s quotation for the proposed change will show a reduction in
either time or price or both. in some cases the reduction may be nominal. For
example, a nominal price reduction may be acceptable if the effect of the
change to the Works Information is not detrimental and if the alternative of
correcting the Defect will reduce the likelihood of prompt Completion.
defnoectsf. If the quotation is not acceptable, no further action is necessary. if the quota-
byS
befComp
edeore tion is accepted by the Project Manager, the Works information, the Prices
CDefc[oto4r e3.hcters1]
and the Completion Date are changed accordingly. Such a change to the
Works Information is not a compensation event (clause 60.1(1)).
E
ptheWor
[11
us
rng
evented ks In terms of liability, the consequences are the same as for other changes to
CDefcnotorwh'wouecl
'cftescdh nand
coor ect the Works Information. In other words, when the Project Manager accepts a
Defect and the reduced Prices and earlier Completion Date are agreed, the
.__ cat
o Contractor cannot continue to be held liable for the specific Defect, as if the
fbyC
oundor
noff .1 Defect had still to be corrected under clause 43.1.
date as
C‘“°t'afier
befdefet-and
dat'"oe'"fctrPned
ees tsf
defdatafetcteeosrund
Stng
an‘
Defe Defec
Defects

F
3.
Notgure'f'

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 3 Guidance Notes for the NEC Engineering and Construction Contract Ex P lanatory Notes_ ‘_ 3

Uncorrected Defects 45
45.1 This clause states the procedure if the Contractor fails to correct a
having been given the necessary access. The assessment of the
having a Defect corrected by other people does not trigger an
under clause 50.1. This means that most of such amounts accumulate
the defects date unless there has been Completion of a section of tho , - ' ‘ Options are based on the
and a defect correction period ends before Completion of the whole mechanisms for The different payment mechanisms for the SIX nlaln
works. When the Project Manager is carrying out the assessment the main options use of three key defined terms
issue of the Defects Certificate, he will offset the cost of these . . the Prices (plus, .in Option
- ' '
D, an addgignagtérm ‘
Total oft h e P rices
I ,)!

Defects against the release of the second half of the retention I the Price for Work Done to Date (PW ,
Option X16 is included. This emphasises the need to make the retention O Defined Cost.
cient to cover the likely cost of uncorrected Defects at the defects date.
one of the reasons for the retention arrangement. Quite a high Each term is defined for each main ' ' OD’1l0n in Clause 112 as summarised
retention should be set in these circumstances because its main briefly .in the following
- table. Abbreviations used 'in th e table are
to cover the cost of dealing with uncorrected Defects after Completion AS Activity Schedule
retention free amount should be set as a significant proportion of the BQ Bill of Quantities
price so that the retention does not start to accumulate until towards the DC Defined Cost
of the contract period. it should then produce a significant fund which
in the Employer’s hands until the defects date when the extent of the Option The Prices The Price for Work Defi ned
uncorrected Defects is known. Done to Date Cost
45.2 This clause states the procedure if the Defect has not been corr
the lack of access. The criteria the Project Manager uses toected assessdue A AS prices for activities Total of the Prices for 11.2(22)
amount to be paid is an assessment of the Contractor’s cost for cariyingi; 11.2(30) completed activities
the correction. This may be lower than that assessed in clause 45.1. It 11.2(27)
rarely, if ever, be higher, given that the Contractor could also employ Others"
correct the Defect in 45.1. g I BQ rates and lump sums Quantities of completed 11.2(22)
11.2(31) work at BQ rates and
proportions of lump
sums 11.2(28)

Main Option clauses C AS prices for activities DC forecast to be Paid 11.2(23)

11.2(30) before next assessment
date + Fee
Options C, D and E 11.2(29)
D BQ rates and lump Sums DC forecast to be Paid 11.2(23)
Tests and Inspections 40 11.2(s1) before next assessment
40.7 See explanatory notes on clause 40.6. Total of the Prices = BQ date + F99
rates and lump Sums for 11.2(29)
completed work
| 11.2(33)
E DC + Fee DC forecast to be Paid 11.2(23)
11.2(32) before next assessment
date + Fee
11.2(29)

|: DC + Fee DC forecast to be Daid 11.2(24)

11.2(32) before next assessment
date + Fee
11.2(29)

- - ' r’
These ’(6lr'T'lS)ElWhd€Tlfl?5(;C:flir;[h§0rI;|;lB'l‘i;l:t%].;J1l?Vl?t1S lauses (see
the Core furtherinexplanatenl
Ciauses Section 5
notes be ow. . en U ' h ' O tion.
they establish the payment lne<=na"'5'“ f°’ ea° "“""" p
. - t due to the Contractor (see
The PWDD '8 the mam component of the amoun f the Prices varies between
eXp|aflaT0l‘y notes on clause 50)- The U59 made °
the main Options.

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L _ __Z____.i
 - 11CC®3 G uidance
- - - and Construction Contract
Notes for the NEC Engineering
Explanatory Notes
Identified and defined 11
terms Option D 11.2 The Prices, using the Bill of Quantities (clause 11.2(21)), are not used to
Option A 11.2 (31) determine the PWDD.
agfiwtgwoo '§ the Activity Schedule prices for those activities or The target to be used in the calculation of the Contractor's share (at
(27) ies which have been completed according to the criteria
Ctauee 11-2(27) (See further explanatory notes on clause 54). Completion and in the final assessment) needs to take account of not only
compensation events and other changes under the contract, but also any re-
(30 The Prices are the basis of th PWDD ' measurement of work done. In order to ensure a fair target, another defined
the total of the Prices of tlfe complettetlhewtllgllal ftsfigsfgengt the PWD term ‘Total of the Prices‘ (clause 11.2(33)) is therefore used in the calcula-
Contractor,
f . .
when compiling
.
the_ 8C1“fl/l'ty schedule_i defines
I
a¢ti5§te§n§n§ha"
gr tion of the Contractor’s share (see explanatory notes on clauses 53.5 to
O ac iVitie$, eempletion of which can be recognised without controversy 53.8). The Prices continue to be the basis of the target and the term is used
The effect of a compensation event b t - I in other clauses of an Option D contract.
activity (or group of activities) so thatn cgmgleettotfiniqs hhefiadgdat-an of.
may Yeeutt ih e detay t0 Payment if the activity completion 03:/cuts ta U Options C, D and E 11.2 The basis of the definition of Defined Cost in these Options, before the
assessment date by which the activity was originally expected to haavtety l 23 ) deduction of Disallowed Cost, has two components
eemp I 6't ed . Where the delay would oth_en/vise
- cause a seriously
. adverseE Q ' ~ the amount of payments due to Subcontractors for work which is subcon-
on the Contractors cash flow, the Project Manager ma a t " - tracted without taking account of certain types of deductions, and
activity into two 3° that De)/ment can be made for the fife l0’tSpMtmg' 0 the cost of components in the Schedule of Cost Components for other work.
dectdthg Whether te agree to this the Project Manager shouldntratieegcgvom
the extent to which - the Contractor’ IS
. collaboratin
_ throu ount The excluded deductions in the first component are listed in the clause in five
procedure and by keeping the Accepted Progranfigme upgtt0t'IiZtZa'B’eW§,§ sub-bullets. The reason for these exclusions is that these amounts are
alsofault
takeofaccount of any delays to th e act‘ivi‘ty or overall programme
' which
- I normally deducted from, or not paid to, the Contractor by other provisions of
the the Contractor‘ the contract. In turn, the Contractor may wish to deduct them from his Subcon-
tractors. lf they were deducted again when calculating the Defined Cost, they
(22) The only use of Defined Cost in Option A is as the basis of the assessment would be deducted twice from the Contractor.
g?1'2))rt€:p2@::t|'1%i:jLe|\gefg’;$b(l3:€lige)clnCgs1t Ii the cost of the components listed inl Defined Cost is used in calculating the PWDD and in assessing compensation
done by the Contractor and hi:SL:=.-tn s (see later explanatory notes) for w events. It excludes Disallowed Cost as defined separately in clause 11.2(25)
tions for compensation events is s gt?‘ raltlttorsl I1-he Cost of preparmg qua (see below). The cost of preparing quotations for compensation events is
on clause 62.1) - Further eXPai1<'=iti0ri
I P “Ca y em uded (See e"p'?"at°"/."° allowable as Defined Cost if the people preparing them are in the Working
of the payments made in relation Areas.
Subcontractor's costs can be fou d ' th
Schedules of Cost Components. n in e later explanatory notes oht
The main Contractofs Fee relates to his own overheads, insurance and profit
with little risk (e.g. Disallowed Cost) and will be spread over all the work in the
Option B 11.2
(28) th:t.t;??e1i..::':z::tr*::.:tt “rt of
Th P
. .
'
_ °l_
' - --
ed
I y 0 work‘ completed according to the definiti-
3 (25)
contract. Such Fees should be lower than Fees for Options A and B.
In the second edition of the ECC, Disallowed Cost included ‘a cost which the
i1d2(€r2'tf)r'E:Nfi'Fa'§ed 'n_th'5 °'a“5e- The Bi" Of Quantities’ is defined in claus Project Manager decides results from paying a Subcontractor more for a
- 1 ie Provides for changes under the contract.
compensation event than is included in the accepted quotation or assessment
(31) The Prices are the basis of the PWDD I th f‘ - for the compensation event’. This has been omitted from the third edition. The
total of the Prices of the final quantitynof v$or|l:la<:|o?ir(i:cl(:aLt2E:t t:qet:t./“DD '5“ reason is that it is inequitable to the main Contractor in those cases where
Contractor is paid for the actual quantities of work filone tngt thlgstelaithtl the subcontract is also under Option C, D or E as the main Contractor must
' ' I I . . _ _ 1
ggfiigg ut;ié(:'d0]fo¢:LgJaIn|t(gties. Option B is therefore a re-measurement contract. pay the cost incurred plus the Fee, which could be more (or less) than the
ing contracts where re-measurement is not traditional. quotation.
(22) The ehty use of Defined Cost in Option B is as the basis of the assessment In the fifth main bullet of this clause the words ‘requirement for’ are now
giiggghgitlggfigegtsbgetfiged Cost is the cost of the components listed in ‘lit changed to ‘constraint on’ to link this particular Disallowed Cost directly to the
Contractor and his SusbC0gi;i§£tnentsT(see later notes) for work done by ti_ definition of Works Information in clause 11.2(19).
compensation events is specific first the Cost of preparing quotations fit The correction of Defects before Completion is only intended to be a Dis-
62.1). Further explanation of tlfieypizxc uded (See allowed Cost if the Defect is caused by the Contractor not complying with a
yments madeex-planatqry
in relation notes on Claw)
to Subcontra constraint on how he is to do the work, for example a prescribed method of
tor's costs can be found in the later l t
Cost Components. exp aria ory notes on the Schedulesl working or a constraint on timing of work.
Options C and D 112 In the sixth main bullet of this clause a rider has been added because some
Th PWD
dai:-e ' '
p|uSDti';setl::<;eDefined - before the next assesgmel
Cost forecast to be paid Project Managers have been disallowing the cost of Plant and Materials which
I 29 ) the ECC 3 d d_ _ as in the cost reimbursable Option E. This is a changei the Contractor bought in good faith but then became surplus as the result of
t 9 't'°h to ii"fiDf0ve the Contractor’s cash flow. a compensation event.
Option C 11.2 The Prices in the Activity Schedule (clause 112(20)) are not used* The PWDD is Defined Cost forecast to be paid before the next assessment
Option E 11.2
(30) fiaeggiiggttgli) but tt(;e_total of the Prices is used as the target in dete (29) date plus the Fee. This is a change in the ECC third edition to improve the
(See ex D on an in the final assessment) the Contractor’s shai Contractor's cash flow.
planatory notes on clause 53.1 to 53.4). At the times when tl
ggglfiltqettegfeafigaégréieaégggtaged, the Activity Schedule total will have take (32) The PWDD becomes the total of the Prices in the final assessment.

and will therefore be a fairta rget.

events and other Chan-ge§
No re-measurement under the contra‘
IS involved.

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_ P
 _neC®3 Guidance Notes for the NEC E ngl' “eel"'18
' and Construction Contract Explanatory Notes 3.

Option F 11.2 The PWDD

date mus theis Fee‘
Def'n
[Wisd isgséhfgrrgcgaiiittfio
C .
be Daidbefore the next If a programme is not identified in the Contract Data it is of vital importance
(29) to the management of a contract that a programme complying with clause 31
Cash fl0W_ e ECC edition to improve the is submitted within the period stated in the Contract Data. lf a programme is
not submitted, the stated retention amount can be withheld.
(32) The PWDD becomes the total of the Prices in the final assessment,
The test for withholding this retention is one of submission of a programme by
(24) Defined Cost compr' th the Contractor not acceptance by the Project Manager. This avoids retention
and the prices quotes? th: €(?r):t?ae<p’rti):tLaef<§i? vifdrficgntragtors and being imposed1 as a result of a delay by the Project Manager in deciding
is used to calculat th P . _ One y the whether or not to accept the programme.
excludes DisallowedeCos’(te asV:llglEi)nead1 gem assessng °°mDensation subse uent revision of an Accepted
guidance notes on Option F under ‘Cont'?:o?s?r)atngCla;JSe
e y’. 11296). ( Clause 50.3 does not apply to any q
Programme. A different incentive exists on the Contractor to keep the
Accepted Programme up to date (see clause 64.2).
50. 4 Althou g h assessments of the amount due are the responsibility of the Project
Manager (clause 50.1), he takes account of any submissions by the
Core clauses '
Contractor and provides ‘ of his
details ' assessment. However th e onus remains
on the Pro'ect
J Manager to assess the amount due even if he has not received
a submission from the Contractor.
Assessing the amount due 50
50.1 This clause defines ‘assessment dat ’ . Payment 51
tion and a men 88 . from which the dates of both c 51.1 The latest dates b y w hi c h the Project Manager certifies payments are fixed
the Pm]-est 5;wan;g:'f ggggggglilli-a'g1; first assessment date is determggg throughout a contract as each is related to an assessment date. in the
view to satisfying the internal pr0ced|SCUSSl0H with the Contractor, with majority of cases, certification will be of payment to the Contractor.
but the latest dates by
Contractor. Thereafter assessment dures of both the Employer and 51.2 The Employer can ask for the Contractor's invoice,
interval until four weeks after the Supervgtgfisgfiggrthafigrf eachCertificate,
e e ects W hi C h D aY ments are due to be made are also fixed throughout a contract as
each is related to an assessment date. Interest is due to the receiving party,
An additional assessment oceu rs at Completion of the whole of the works. either Employer or Contractor, 'if a certified'' payment ‘is not ma d e w ithin the
Subject to a final deci ‘ f - - stated P eriod after the assessment date or if a payment is late because the
date Wm be four Weekjlgagr ttll": Sjggfiagwifig tsrrbunal, the final
Project Manager has not certi'f'ie d ‘tI a s he should. The Project Manager should
Certificate (the Period of four weeks allows time for theissues
“pen”-sor Pro'ect
the ' certify payment as early as possible within the week after the assess-
to assess the c t r - . J ment date, and
(clause 45)). OS 0 Conecung Defects listed on the Defects 0 before the Contract Date, check that the Employer is able to pay within
50.2 The core of the amou t d - the stated period after the assessment date.
except advanced paypnenltlg E: ;hi@€O§itraCt°’ Is the PWDD‘ A“ other
Areas, retention, repayments adva antdand Materials outside the The principle that interest is due from the latest date that payment should
added to or deducted from the Pwggetopggfifiigi dfhmages and tax) have been made is applied throughout the contract.
content of PWDD varies accordin t ' ~ e- e amount due" 51.3 The same principles on interes u
t d e a ppy
l to later corrections to certified
explanatory notes oh payment meghajngmtsl) mam Option IS used (see earn” amounts (including any due to compensation events) made by the Project
Under the _ UK VAT re gulations,
' M an ager or decided by the Acljudicator or the tribunal. The last sentence of
Contractor is made in response tc?2,yFU§¥tin<\>LVAT by the Emplgyer to thi this clause refers to interest b ei‘n g calculated from the date when the
The Project Manager and the Contractor h Ice prowded by the Contract“ 'increased amount would have been certified " if
' there ha db een no dis p uteor
to ensure that s ould therefore make arrangement; mistake.
eliable
' the correct levels of VAT are inc luded in' the amount due and 51.4 The interest rate stated in part one of the Contract Data should be a r
annu al b as e rate applicable to the territory in which the work is to be done
° the Contractor’s VAT invoice ' - plus a percentage to represent the current commercial rates. Currently
Manager's certificate. is pmwded W atta°""“e"" T0 the Project ' din the
to
United Kingdom, the additional percentage should be substantial in or er '1"
.\-
'f the EmPl0)/er does not in cl d ' ' - comp I y w'th
I the Late Payment of Commercial Debts (Interest) Act 1998.
correct amount of sales tax or ll!/A?l r Vt/rliiglgogtsracptayment
or shouldt0-inform
the Contractor the
the Employer Simple interest at the interest rate applies for periods less than one year.
of the error with a CQp
_ »becomes a debt
y to th P .
VAT unpam Of(‘ihel’(3g'f?nC!;(l;l:l/Zglagef. The amount of sales tax oi
Defined Cost 52
52.1 ' explanatory notes on th e definitions of Defined
See earlier ' Cost for Options
.2 24)) A
S e also
if the Emi0l0)/er uses a self bill‘ 8 System a Cont ' ' - - - and B (11.2(22)), C, D and E (11.2(23)) and Option F (11 ( e
and the Employer's remitt ahce Indocument ’ becomesfactor S mvmce
the VAT '5 not "Bede"
invoice. ex D lanato W notes on the Schedule of Cost Components regarding other costs
50.3 This clause
. is designed to rov ' d - - treated as included in the Fee.
Submit a programme whichpconta?n: tOl$eN?r:1fu] mopvatlon on the Contractor to
The clause imposes a t est to determine
. °rmat'°n reqUll’(-Ed b the contract
Should be retained, whether a quarter yof the PWDD.

|f
. '3 Dmgramme
__ _ was required to b ' -
:§l€l"l'[lfl6d in the Contract Data at tag g§tZtT§tt§“°?{’ H29 Pfogfamme is
rogramme akeady exists and no amount can be retained
- _ is under
si ua ion
thisanC|a|,|3e_
Accepted

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1
 "nec 3 Guidance Notes for the NEC_Engineering and Construction Contract Explanatory Notes 3.

Main Option clauses 54.3 This clause states the criteria by which changes to the Activity Schedule are
b 'ud ed For instance the changed
i°eJe- - --Prices are not reasonably distributed
‘tdlded
between the activitieson the revised Activity Schedule and are ins ea oa t
- t l fthe Prices must not be changed excep
Option A against C81?ilfn aa(i:Eo\iii[pee?isTt'=‘ijtiii)nOeFi|ieii?it or an acceleration. The criteria do not
The Activity Schedule 54 Zfitsmiitisro restrict changes to cash flow resulting from revisions to the Activity
The Activity Schedule is defined in clause 11.2(20). A contract which
Option A is a lump sum contract with the activity schedule showing a Schedule.
down of the total lump sum at the Contract Date.
The total of the Prices of the items in the activity schedule is the
offer for Providing the Works. The cost of any items the Contractor ma
omitted is deemed to be included in the Prices for the other items. Y
provision in the conditions for adjusting the Activity Schedule for
tion events and for changes in a planned method of working (see
63.12 and 54.2). The only other way of changing the Activity Schedule
the Project Manager accepts a quotation for acceleration (clause 36.3).
The Bill of Quantities 55
55.1
ment It Cannot
build; but only to be
.

useq to payment
determine determine
-
“ - - -

to ‘tVh BaC0 ntractor for what he designs or

nt docu-
..
The Activity Schedule should include activities such as design tasks builds.
providing Equipment, including temporaiy works.
There is no automatic provision for payment for Plant and Materials
llllorking Areas before they are incorporated into the works, i.e. C and D
materials on site’. The Contractor may wish to receive earlier
improve his cash flow. The required effect can be obtained under Option
including appropriate items in the Activity Schedule. The special the amount due 50 - ' h E l er in the same currency as the
stances under which payment might be made for Equipment or Plant 50.6
Materials which are outside the Working Areas are covered in Section 7. Themcgriitgaingdelfitiyiiiiiiiqwbuiilse?/grtiiiyeliesi
a
P 5' '
!
this lie/e
- and the Contractor’s share are
t ‘den-
paid in. the currency-
of the contract. Calculations
'
use the exchange
rt
ra es é th 9
If no grouping of activities is included, the Contractor is paid for each tified in the optional statement for Options C, D, E 0|’ F In D3 °ne °
when it IS completed (see clause 11.2(27)). Contract Data.
Milestone payments using if a group of activities is defined in the activity schedule, the Contractor is p’
Option A for the activities included in it when the whole group is completed. This ish Defined Cost 52 . . tor is required to
52.2 This clause lists the accounts and records. which the Contrac t if f “her
the ECC provides for milestone or stage payments. At each payment asse. keep and which are essential for calculating tl][fieDV<fiI)l:l<<?;1|r(;3;:)$"‘r;]atii=‘)r':i/ U
ment date the state of completion of each group of activities is assess records are required, details should be given in
Only the prices of completed groups are included in the amount due (:
further explanatory notes on clause 50). The purpose of. the Contractor’s share is to encourage effeetive management
The Contractor's share 53 ' I th F i
The groups of activities should correspond with easily identified stages of ti Option C 53.1 and 53.2 °°"i'°'
work, e.g. for a building: site preparation, excavation, piling, foundatior Option D 53.5 and 53.6 relative °ftothe
thefinal PWDD
target (ma. Defined
(in Option C, tn? Costl
tote ((i=lathieP:iii'>i=i
0 I t ((€?a)iisie
notesuf1.2e(:-£3)
on ciause
structural frame (by floors), floors, cladding, partitions, roof, finishes. and in Option D the Total of the Prices (S89 BXP ene ("Yr a S a Share of
11.2(33)). The Contractor receives a share of any savlngdn lie; for compen_
if stage ‘payments are intended for a manufacturer’s design, manufacture ai ss when the final PWDD is compared Te tne target (3 W3
installation of a large item of Plant, the instructions to tenderers could sta. :)a€t>iE:)n events under clause 63 and for Option Di eieo for 'e'mea5'""ement)'
that the activity schedule should include the groups of activities necessary - - ‘ f th Contractor’s share
complete stages such as The Employer will normally wish to vary the size 0 e th tar BL
depending on the extent of the saving below or Vt excess_ above_d de b 8the
he
- confirm acceptance of order by manufacturer, The mechanism for calculating the Contractors slgare is ihe fgrmat
0 acceptance of design, Employer in his preparation of the tender documents y Comp
~ stages in the shop assembly of components, in part one of the Contract Data.
' deliveiy to Site,
~ provision of vendor data, and Each range is defined by levels of the ratio PwDDh/Pgcejrcifigaréséssgr Z202
' acceptance of performance tests by the Supervisor. percentaga
range to giveThe
the Empioyer decide?
appropriate the Contraittghg
motivation to sui o;b'aectl\i.3es
J of the contract.
54.1 This clause emphasises that the Activity Schedule is only a payment doc
ment. It cannot be used to determine what the Contractor is to designl
only to determine payments to the Contractor for what he designs
ui s.
54.2 An Aetivity Schedule which contains items that do not represent the Contra!
tor’s proposed activities and methods of working will create difficulties iii
determining Dayments due. Thus it is important that the Activity Schedulil
should relate directly to the programme and always be compatible with it (seii
explanatory notes on clause 31.4). |

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 ¢"'.n ® 3 Guidance
.
__ Notes for the NEC Engineering and Construction Contract Explanatory Notes

For examme ' in an Option C contract, assume that the C t " n.C 53.3 and 53.4 Payment of the target share is made in two stages. Firstly, in the payment due
' The Contractor's share percentages and th 9 5 h are ranges
on ract Data 5lBteg_ '-“gn D 53.7 and 53.8 following Completion of the whole of the works, and secondly, in the final
are payment made after the issue of the Defects Certificate. in calculating the
final Contractor’s share, the Project Manager should take account of costs
S
hare range Contractor’s share percentage incurred which the Contractor has not been able to pay (for example because
less than 80% 15% an invoice has not been submitted).
Tl'0lTl 80% TO 90% 30% Interim payments of the Contractor’s share are not provided. The Prices
from 90% to 110% 50% tendered by a Contractor have the main purpose of establishing the target. It is
greater than 110% 20% not intended that their build-up should provide a realistic forecast of cash flow
and they are unlikely to be comparable with the PWDD at any interim stage. Any
if at Completion of the whole of delays in assessing compensation events would further distort the calculation.
.
adjusted for Com e . the_ works , the tot a l of the Prices
- .
(havin
in effect p nsation events) IS £1OOK, the Contract Data table baa). This danger of serious under or over payment of an interim Contractor’s share
before Completion has led to the policy of an estimated payment at Comple-
Final PWDD Contractor's share percentage tion which is corrected in the assessment of the final amount due.
less than 80K 15%
from 80K to 90K 30%
from 90K to 110K 50%
greater than 110K 20%
option C
Examples Of Possible outcomes are The Activity Schedule 54
54.1 This clause emphasises the fact that the Activity Schedule is only a payment
a) Final PWDD = £75K document. It cannot be used to determine what the Contractor is to design or
53‘/"18. Under
. total of the Price = £ 25 build; only to determine the Contractor's share.
Comprising three increments; S K
54.2 It is important that the Activity Schedule should relate directly to the
programme and always be compatible with it (see explanatory notes on
sox to 90K 2 M42 $33: :3-$3“ clause 31.4).
90K to 110K = 10K@ 50% ; aoofi
54.3 This clause states the criteria by which changes to the Activity Schedule are
Contractor’s share _ 5% to be judged. For instance, the changed Prices are not reasonably distributed
(paid by Empfoyer) _ £8.75K between the activities on the revised Activity Schedule and are instead loaded
b) Final PWDD = £95K against certain activities. The total of the Prices must not be changed except
3a\’i"€ under total of the Prices = £5K as a result of a compensation event or an acceleration.
C°mpfl$i"8 one increment:

Contractor's share _
Option D
(paid by Employer) T £25“
The Bill of Quantities 55
cl Final PWDD : 5115K 55.1 This clause emphasises that the Bill of Quantities is only a payment docu-
Excess over total of the Prices = £15K ment. lt cannot be used to determine what the Contractor is to design or
C°mDl'iSifig two increments; build; only to determine the Contractor's share.
9014 to 110K Z 10 _
Greater than 110K 1 “Kg ;
Contractor’s share _ Options E and F
(paid to Employer) 5 £6'OK
The above example also a I‘ t - Assessing the amount due 50
. . . _ 50.7 The Contractor is reimbursed by the Employer in the same currency as the
'5 F9-‘Placed by ‘Total of theplgrifzsio an OPTION D contract if total of the Prices payments made by him. Nevertheless, the Fee is paid in the currency of
The, other Potential source of profit' for the Contra t ' the contract. Calculations use the exchange rates identified in the optional
tors Share pemema e h _ cor is the Fee. The Contrac- statement for options C, D, E or F in part one of the Contract Data.
8 s s ould be determined in a particula to
provide the
final PWDD. élppfopriat e evel of_ incentive to the Contractor to rminimise
| - . contractthe
The extent of f Defined Cost 52
PWDD exceeding the total ()|?‘t:1lrl1tf2-:lg:'i(r:\§:;gHt|.l?)ee Patties m the event
varied between of the final
two extremes 52.2 This clause lists the accounts and records which the Contractor is required to
keep and which are essential for calculating the Defined Cost. lf any further
' aEvents)
g“a’a“teed
to the maximum
Emma 9 price (excl u d‘ing the effects of Cflmpgnsa-[ion records are required, details should be given in the Works Information.
share percentage to be/1r03€6nalb5v:?haetVg?ic2,y Stating the Contractofls
' a minimum Fee to the (2on tractor can be encouraged by stating the
Contractor’s share percentage is
' to be 0% above a stated '
price.

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 —..neC®3 Guidanc e Notes for the NEC Engineering and Construction Contract Explanatory Notes

6 COMPENSATION EVENTS
changing the Works
information 60.1 Variations to the works are made by a Project Manager’s instruction to change
(1) the Works information. The authority given to the Project Manager for this
purpose is in clause 14.3. A variation may comprise deletion or addition of
work or alteration to work. It may include changes to the Employer’s design, to
introduction design criteria or to performance requirements for the Contractor's design.
issue of a revised drawing or specification is a compensation event. Clarifica-
This section consists of six main Clauses tions of previously issued drawings or specifications are only made by changing
the Works information. Consequently, all such clarifications are compensation
' claus e 60 defines
" - events.
Compensation events although not all of them will lead to additional time or monies (see
' clause 61 deals with not'f ‘ - . clause 61.4). There may be many reasons for changing the Works information.
Contractor’ that a Compenggfiiggegbeiat/t figlger the Project Manager or '
Ciause 62 Covers the Submission of occurred. l They include changes made in order to eliminate an illegality or impossibility
“ause 63 Sets out the rules for assguotations for compensation event (clause 18) or to resolve an ambiguity or inconsistency (clause 17).
event (time and money). Seing the effects of a compensati; | The clause states two exceptions to a change to the Works information being
clause 64 covers as sessments made by the Project
. Manage, l a compensation event.
clause 65 explains ho . - ~ The procedure for accepting a Defect is stated in clause 44. An instruc-
into the contract. W any Changed pnces °' dates are ineprporat tion to change the Works information after acceptance of the Contrac-
tor's quotation under clause 44.2 is not a compensation event.
Core clauses v A change to the Contractor’s design made at his own request is not a
compensation event. The clause also gives precedence to the Works
information in part one of the Contract Data over the Works Information
cernpensation events 60 in part two of the Contract Data. Thus the Contractor should ensure that
Cernpensation events are even ts which ' the Works information he prepares and submits with his tender as part
if they occur and do n 0t ar ' two of the Contract Data complies with the requirements of the Works
the Contractor's fault t't| ’ i ise fruit
the event has on the egriiagstgftcfqthgagpom Kl) ecolgnpensated for any effeii information in part one of the Contract Data. (See also explanatory notes
assessment of a compensatio n event 'is always p e of
l0n-its ate or on
effect a Key Dam int
the Price tit on clause 21.2.)
Completion Date and an s i ii- The Employer's obligations to give the Contractor access to and use of a part
. - y K D
entlfle the Contract t d ey ate affected by the event. Any event may Access to and use of (2)
or o a ditional payment and | - - . of the Site are stated in clause 33.
case of some events‘ the result b a so to additional time. In the the Site
5 may e reduced payment to the Contraoto,
(Further
. _notes on the principles
' ' of com pensation " events are included
- . the" _ . by the Employer (3) The Works information should give details of anything, such as Plant and
mtroducuon to these guidance notes‘) in Provision Materials, which the Employer is to provide and of any restrictions on when it
Cempensation event ' - is to be provided. The Contractor is required to include this information on the
Contract Dat 8 . Th e Smain
are liiisteq
t ‘P the Core Ciauseei the Options and the programme under clause 31.2.
Compensation
are events (1)
stated in Clauses 60 to
4 6 . "5':/emes applicable
Cpre clause 60:1, Options
to main which includes
B andll . . (4) Clause 34.1 gives the Project Manager the authority to instruct the Contractor
stated in secondary Optima é|al?ég>Sa(ri2d160(.i5. Other compensation events are Stopping Work or changing to stop or not to start work. There are several reasons why the Project Manager
- i 4-2. X15.2 and Y(UK)2 4 a Key are may give such an instruction, e.g. for reasons of safety. He may also vary a
Option Z may be used b th E - - I I Key Date (clause 14.3), for example to suit actual progress on other works
events. if he does so, the it/effegt isnic£c)ikiJ.;‘ii<ieEt(i)1ielri'i5s:ekrt faddltional Compensation related to the contract.
from the event from the Con tractor. The event must be 0 COS 5 and precisely.
described deiey arising
Clau se 60, 1 does not include
- an -industrial
. dispute
_ as a com en t" Work of the Employer or (5) The Works information should give details of the order and timing of work to
Unless it is a dispute | , , p sa ion event be done by the Employer or Others. The Contractor is required to include this
case it b ecomes 3 Compensation
C assed ts anevent
Empiol/ere risk by clause 80.1. in sucha Others information on the programme under clause 31.2.
throu h
vaiy as to the policy they wish to ado g Clause 60-1(14). Employers
. the United_ KI d pt towards the risk . of industrial dis p utes- Various periods are given in particular clauses for reply by the Project
Remy t° '3 °°mmu“'Cat'°“ (6)
Outside . .
affect policy. ing om the legal, cultural or religious climate can also Manager and Supervisor and a general period for reply is given in the Contract "
Data. The obligation to reply within the relevant period IS stated in clause
The following are exam pee| 0 f possible
- - -
additional .
compensation events for 13.3.
specific contracts. None are applicable generally
' The cycel time
' .
for tunnel excavation exceeds eight working hours for I .
Oblects °f ‘(aiue (7) The procedure for dealing with objects of value or of historical or other interest
more than four consecutive - found within the Site is stated in clause 73.1.
Contractor. cycles for reasons outside the control of the
' The water level in the e t - - Changing a decision (8) The Project Manager and Supervisor are able to change decisions made under
above ordnance datum.S uaw at Point A rises to more than 26.00 metres the authority given to them in the contract, in the same way as they made
'. The mini mum wage ordered by the Government of X exceeds £Y per now, their original decisions.
amount of water flowin t
per hour before concreting Ogtiliecinié/ilit zgaéignttiineidtigdexceeds 5000 litres i Withholding an acceptance (9) Various clauses state reasons why the Project Manager is entitled not to
accept a submission or proposal from the Contractor. if he withholds accep-
‘ W°ri< is Stopped to all - tance for any other reason, as he is entitled to do under clause 13.8, it is a
given period. ow a smp to pass on more than 24 occasions in a
compensation event.

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 ti. S3
_ Guidance Notes for the NEC E ' ‘ . Explanatory Notes 5.
ngmeellng and Construction Contract
Searching (10) The Supervisor can instruct th Contractor t
Adverse weather 60.1 Rather than rely on the subjective generalisations about ‘exceptionally
manufacture Suspected.are in
421- Usuallyis Searches ‘e st Igated
' 0 Search
where a .Defect un der
faultyfordesign. (13) inclement weather’ sometimes included in standard forms of contract, the
ECC includes a more objective and measurable approach. The purpose is to
make available for each contract weather data, referred to in the Contract
Delayed tests and (11) The
_ tesring -
and inspection - work to be carried Data, normally compiled by an independent authority, establishing the levels
inspections in the Works inform t‘ out by the Supervisor -
this Work Without ca3s'i‘;"é- 3::;:e<::;;ed4I0.5. the Supervisor is requirgq, of selected relevant weather conditions for the Site for each calendar month
e ay. mi which have had a period of return of more than ten years. if weather condi-
Wherever possible the Works l n formation ' should include
- .
GSUITTBIB5 f tions more adverse than these levels occur it is a compensation event.
that the Supervisor n d - 0 t - Weather which the weather data show is likely to occur within a ten year
What Constitutes .unn€::e:g;ya$1é/I gshis tests. This will avoid argumentgi . period is the Contractor’s risk in relation to both cost and time.
Physical conditions 60_1 For ma The time of occurrence of all compensation events is when the action or lack
"V years, it- has been the practice in construction co tr of action describing the event in clause 60.1 takes place. ln the case of
( 1 2) Emflloyer to as
such terms take.th0se . of physical o d- -
the risk
which on itions which_ have beenn acts
deg for . weather it is the day when the stated test shows that weather conditions are
. co Id Cflbe recorded as having occurred within a calendar month which ‘do not occur on
gperienced contractor’. The i§terQ$t;§2§Og?bgti:i?Vei been foreseen bye average less frequently than once in ten years‘. The test is the comparison of
urce of many disputes, maimy because a dim U‘ c auses has been the weather measurements with the weather data. The compensation event
The ECC includes an overha u l e C1 b ut not radically
- C. t Judgement
different is 'Invol'v.‘
procedure. can then be notified under clause 61.3 and its effect can be assessed at the
Th''5 -
Compensation . llmlted
event IS . . t end of the month when the extent of the weather exceeding the ten year
encountered WI‘thi n the St- 0 those Dhysical conditions which " return weather data is known. The process starts again at the beginning of
Since mo st claims
' Ie and not
for unforeseen any other
conditions are Parts
in re of the Work‘mg Arefit-- each month.
tions,
able tothetende
more info rgna t"ion C0l'lC9l'l'lIl'lg
. ground conditions Spect
whichof is
ground
madeczgvzg- if the weather measurements are recorded at an independent weather station
rers y the Em Doyer, I the greater the certaint with and not on Site, the figures will not normally be available until a few days
appropriate allowances ca b - . Y wh‘ after the end of each month.
ground information provides isebtgzlficgiégcgfigdgflflg. It is important that fr:
may .dbe advisable als 0 to Drepare and provide _ " _"e|e\/ant to theof risks faced] This compensation event is concerned with weather occurring only at the
interpretation factual <1
Drovi ed this is prepared by a speci. l . . place stated in the Contract Data. if weather occurring at some distance from
tender on a common basis. a ist In this way tenderers are ableail;ii
'
the Site could produce some risk, such as flooding on the Site, the allocation
of risk should be dealt with by special compensation events, such as the
One method
boundary fineofbetW:g:1n¢t%'hglS_Pl’.:[6S
red ' - . topic
on this . is_ to define in the contract the second example in the introductory notes on clause 60 (page 68).
state what t enderers should “S allow
S °a”'ed_
fo by the Employer and Contractor- i.e.to Weather characteristics for extended construction sites, such as cross country
example, in tunnel works Or ext r_'" their tenders. This can be done to pipelines, may vary considerably along the length of the Site. In such cases
boundary Commons
. . This should b eh sive foundation ' works by stating
. ’ the the Site can be divided into areas, each chosen to have reasonably uniform
- - _ - ed - - weather characteristics throughout the area. Appropriate weather measure-
Condmons °°"e""8 such matters as one by using Option Z to state b°“"dfiFi ments and weather data can then be used for each area, with the Contract
: Foil characteristics, an Data suitably amended.
_ e"e'5 °f r°°k/soil interface, The provisions for weather in the ECC were developed in consultation with the
groundwater levels, g
° Permeability limits, and United Kingdom’s Meteorological Office (the Met Office) which can provide
' overbreak in rock excavation advice and information about the availability of recorded weather data. There
is a charge for providing data.
Tenderers will then be able
must ahow .In their pricm g fortothe
tender on a c ommon basis,
0c currence of physical
-
- knowing
. .
. that th -,.
_ er in most of the more populous parts of the United Kingdom, there is sufficient
Stated boundary Conditions‘ conditions within the coverage of Met Office weather stations to be able to relate to any particular
site. The Met Office is also able to advise on methods of recording the actual
Theanlast
of Daragra D h 0 f c I ause SO.1(_12) clarifies
assess . . the position about the basis weather measurements. In many cases, measurements taken at a neigh-
ment of any valid h , _ bouring weather station will be sufficiently representative of the weather on
Note that under som e circumsta- p ysmal °°"d't'°"$ Compensation
. _ event. the Site, and there are obvious advantages in having weather data and
of unforeseen ground conditions ggilfd anuaelf/fem which auses as a result weather measurements recorded at the same place. =-
which case the Project Manager ass q ‘Y as a_ ‘clause 19 event’, ir
The Met Office can also advise on expected weather conditions on sites
consequences. “mes "3$p0"SIbIlI’Ey for managing the outside the United Kingdom and, if necessary, recommend a meteorological
authority to provide the weather data. Many countries have authorities similar
to the Met Office where similar data is available. In other countries there may
be little established data but it may still be possible, with the advice of the
appropriate weather authority, to agree limiting values approximating to the
‘once in ten years’ average. This would provide an adequate basis for an
adverse weather compensation event. Where no recorded data are available,
the assumed weather data are entered in the Contract Data.

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 --"near3 Guidance Notes for the NEC
_
E ' '
ng'nee"l"8 and Construction Contract
Explanatory Notes

ln some countries the ' ' ' - Emproyers use of 60.1 The Employer may use a part of the works before Completion and, unless the
a reasonable ba|anceCg¥e:Ilgal{lhthlS_C|8US6 may not be appropriate to
the works (15) use is for the reasons stated in clause 35.2, he takes over the part. if take
i[rPi1olent but short lived storm ma§rd2€:s?:t:V:ien.tth€ Pame5- ForT n0t over occurs before the Completion Date, it is a compensation event. lt is
e once in ten years retu rri period
" for the particular
.s' e or We?-‘K8,
month An bu th e refore important that the Works information should state the reasons why
this clause should b - - - the Employer may require to use parts of the works before Completion.
60_1(19). e considered in such cases, possibly using
For instance, he may require access across parts of the works for his own
'
purposes. Alternatively, the Contractor may request the Employer to use pa rt
Weather parameters The choice of weather mea surements depends upon the types of of the works to suit the Contractor’s method of working.
.
Operation to be carried out and th 8 Weather characteristics of the area
Under clause 35.2, take over would not occur in either of these circumstances
Claus 6()_ and there would be no compensation event.
e Data
Contract 1(1.3) refe'5four
includes T9 measurements
the weather measurements.
for which t Part. o "9
rn
statistics’ for each calendar m en year ffice
ret
(‘nth may be required Met 0 ' U facilities, et c. 60 . 1 Under clause 40 . 2 , the Employer is required to provide materials, facilities
recorded by calendar month '
- -the rnlnirnurn
be"-|g . wea . These m 66lSUr6'lT!E.'n11S have been for tests (16) and samples for tests as stated in the Works information.
ther aspects which can h ave a si- nifi t
construction work 'n th ' - 8 can
they are ' e Umted Klngdom and countries with similar AssurT1p’£iO|’lS about 60.1 Under clause 61.6 (see later notes), the Project Manager may state assump-
QQmp€l'lSafl0lT events (17) tions to be used in the assessment of a compensation event. If he later
' the cumulative rainfall ( - - notifies corrections to such assumptions, the notification is a separate
compensation event.
' tSlfbnding Y0 falls
enumberof da ofs snowqlm)
'th " (this Includes the equivalent rainfall These Project Manager's assumptions should not be confused with any
when outside work mmgy b:§|i2£:L|rLT;,:L% tg;lPa?n;flm (a measure of the fO recast or estimates made by the Contractor in his assessment of a compen-
' the number
Cmsius, and of da Y s WI'th minimum
- - air. temperature less than 0 sation event If the Contractor's forecast is later shown to have been wrong,
lause
' the numbe r of d a - . _ - - _
neither
65.2). the -Contractor nor the Project
_ Manager can change it_ (see c
Kingdom, Met Offiiemrggdfihgg I-,,y,'Qgt alt a stated time GMT (in the Um.
may Vary in Othemountries). a en at 09:00 hours GMT; the ti_
Employer's breach of 60.1 This is an ‘umbrella’ clause to include breaches of contract by the Employer
Space is left in the Contract Data part one f dd contract ( 18) within the compensation event procedure. Without this clause, in most juris-
'
pertinent to the S't ' - Or a in g oth er measure dictionst h e Co ntractor’s only remedy for a breach of contract by the Employer
. t _ ie in question or the operations to be carried ouTe'. would be under the law. However, because of the effects of this clause and
"'5 ance, if tower cranes are to be used . a refe rence to the number of workiii'"
hours 0" days in a month in Wh ‘C
' ll th e Wlnd clause 63.4, the Contractor's only remedy is under the contract.
- speed attheSpeed exceeds a crit ai ie
. ' . .
be appl'0pr|ate. Th e actual wind
th Site would need to ICbe rellaetelrqg
9 Speed at the reference weather station The Met Office or locai weatii Other events 60.1 This is a ‘force majeure’ event. The event must be such that it either stops the
' ' fr
authority should be ' . (19) Contractor from completing the works (an absolute test) or stops him om
ment5_ consumed about the practicality of additional measur: completing by the time shown on the Accepted Programme.
The final sentenc . A dela Y to planned Completion which can (as opposed to will) be recovered by
weather
_ is t b e of the Ciause makes
0 e taken into account m 't °"?a" that Only the ‘extra’ advert! acceleration, by increased resources, or by adjusting the programme does not
stop the Contractor from completing ' '
on time. The Contractor must d emo n-
Eon event. For example, if the number :1?iii?/sgrlfithhe gffects of the Compem
ebruary IS stated in the weather data to be 6 arihnftzhu more than 5mm“ strate that there is no reasonable means by which he can complete the works
ments record a total f - i 6 wea th er measure, on time for the event to be recognised under the second bullet point.
days_ O 8' a"Y delay is assessed on the basis of the 2 ‘extra’
60.2, The 'in for rnation which the Contractor is assumed to have taken account of in
Weather records during 60.3 60(12) is listed in clause 60.2. Clause 60.3 states the ‘contra proferentem
The ddata routinely re cord ed at a weather station close to the Site COL||d be rule regarding inconsistencies in the Site information, for which the Employer
the contract use as an alternative to reco d‘ . is responsible.
station nearby, the weather meaisthtjrngpitstheh Site‘ If there is not a weathw
equipment installed at the place stated in tfléoéjéfitbe
racTlgdeata.using gauges and
Notifying compensation 61
Note that under some circum
adverse wea th er could
'
_ stances‘an -
event which .
arises as a result oi events 61.1 This p rocedure would normally apply to compensation events 1, 4, 7, 8, 10, _r
qualify a s a cla "59 . 15 and 17 each of which is due to an action by the Project Manager or Super- 5
19 event, in which case the visor. When the event occurs, the Project Manager notifies the Contractor and
Project Manager assumes l'98p0nsib'l
. t f - the consequences
' ' Y °r managing instructs him to submit quotations. Where the compensation event results
Employer’s risk events 60.1 from the Contractors fault or where quotations have already been submitted,
The
- Empl0yer’s risks are st -in clause 80.1 A
(14) risks should be stated _in partated
one of '-
the Contract Dat? addmonal Emplol/9"- '
quotations are not instructed. ' order to avoid
However, in ' doubt 'in suc h c ase s,
it is advisable that when the Project Manager notifies the compensation event,
Note that under some Circumstan - - he should give his reason for not instructing quotations. The Contractor is
event could qualify as a ‘clause 19C:€e:’?’ tiehlevchichhlch '5 rim Employerys risk required to act on the instruction or changed decision.
assumes responsibil'tI y for managing
. the consequences.
i case t e Project Ma n a8er
It is important that the Project Manager notifies such compensation events,
without waiting for the Contractor to do so. if he does not do so he may leave
the Employer open to late claims from the Contractor, because the time-bar in
clause 61.3 does not apply to these types of events.

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 -"nec 3 Guidance Notes for, the NEC E nglneering
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' ' and Construction

. Contract Explanatory Notes

61. 2 '
Thisclausedeals . the situation where the Pr0.e t M
with
issuing an instruct - . . J C anager is Quotations for 62
effect this would he?/2 Err] gggweincg a decision but first requires to kno There may be several ways of adjusting plans for the work to deal with a
cor|1pB|‘ISflliO|1 events 62.1
change to the Works lnformatiorn (tcJigi,se0r6eOh?LT1);? “I,-lhen he is W compensation event and its consequences. The procedure in this clause
instruct the Contractor to submi . e as the enables the Project Manager to consider different options. For instance, it may
tquotations as a first ste p. be more beneficial to the Employer to achieve earlier Completion at a greater
61.3 This procedure would normall a I t h cost than an alternative of later Completion at a lower cost. The clause also
by those in clause 61.1. These aft?ii/V6(l?1ttS agigwngfiigiafflon events "Qt c provides for the Contractor to submit quotations using methods other than
' a failure by the Em ; - Om H those assumed in the Project Manager's instruction. For instance, the
their obligations (colfijigiggaliigrfict Manager, Supervisor or Others to . Contractor may be able to use a specialised item of Equipment, which the
O the Project Manager WiThhOidinge\g_;ntS 2, 3. 5, 6, 11, 16 and 18), . Project Manager did not realise was available.
m the Contract (Compensation event éagzceptance for a reason not st
The Project Manager is required to discuss possible ways of dealing with the
' and
a happening
19)_ not ’°'
Caused by any party (compensation events 12, 13-. ~ event with the Contractor before instructing him to submit quotations. This is
intended to avoid wasting the Contractor's resources in preparing quotations
it would also apply to - , for methods which are not practicable.
ehnder clause 61.1, bjtndidegétwgocgtihfnZgfiwciclaiinagir shourd have no I in Options C, D, E and F, the Contractor’s cost of preparing quotations for
e procedure by notifying the -Project Manager. S, t e Contractor imtie. compensation events will usually be included in Defined Cost (assuming that
To avoid havin t (1 - . quotations are prepared by people working in the Working Areas), as defined
th ere .is a time
_ 3 limt
_o _ eai with _a compensation event long after it has occ . for the main Option being used, and thus in the PWDD.
this time “me .time'_bg?Sn3tgl£éetion by the Contractor. Failure to col"np|yLlr.
in the priced Options A and B, the cost of preparing quotations for compensa-
unless the event is one which tfintractor from any compensation for the eve‘ tion events is specifically excluded from Defined Cost (clause 11.2(22)).
clause 61.1. e Pr01901” Manager should have notified unuii Tenderers should therefore allow in their tendered fee percentages for such
61.4 This cla use lists the four tests which the ' Manager 3 costs as they are not reimbursed directly.
Project
notified by the Cont " . Db H es t o an I
This policy has been adopted in Options A and B in order to retain the
Contractor to submitrifiltggaggrgtiger to decide whether or not to instrucivfi certainty of the Prices relative to the work done. However, some Employer's
that the event fails any one of t?1'e'tt5ésetffe}et. If the Project Manager deciriq make special arrangements to reimburse costs of preparing quotations in
further action is required U s e notifies the Contracto -. particular circumstances, for example
refers .H to the Adjudicatoh nless th e Contractor disputes
_ randand;
the decision n-1
0 when the effect is veiy large, or
1" many
Within circumsta
e Week -
f thncesr the P"f>Ject Manager will be able to give his decision ~ W hen the Em PloYer is askin € for multiple quotations for significant design
_ 0 e Contractors notificat . changes, especially when alternative solutions are being considered.
lglgggiezjperiod will be desirable to ensure 1-§,’.§‘.:..,.“l';';L“2i‘i.2i‘.i‘.§““""°'i"e° events”
ecision. Provision is mad _ ' a Properly consid- 62.2 Quotations comprise a ‘package’ of time and money as, in most situations, it
Contractor‘s agreement e for Such longer periods subject to the is impossible to consider either in isolation. The use of the term ‘quotation’ is
not the same as the normal use in commerce, i.e. the free submission of an
The final para ra n f - offer. Quotations are based on an assessment of forecast or recorded Defined
the Project
' Manager
g p 9in responding
ms °'aP‘se to'°'°*e°t$ the Contractor
the Contracto I t f against a delflil bi Cost (clause 63.1) and time (clause 63.3) arising from the compensation
61.5 The .
Project rs no i ication ' event. A build-up of each quotation is required to be submitted by the
decision on Mana er ir0ll:1i:)Cl
whetfier h 'itrihcéugeriénr
~ are instruction
- to submit l quotations
' his Contractor. if re-programming of remaining work is affected, the quotation
eXl9erienced contractor could h av " ac or gave - an e*'="|Y Warning which an should include a revised programme, showing, amongst other things, any
ment of the event (see clause 63.(l3i).gWen' Th'S hafi an effect on the assess- change to planned Completion or a Key Date.
61.6 in If several minor compensation events occur within a short period, it can be
. some cases = the nature fth - counter-productive to produce a revised programme for each one — particularly
Impossible to prepare a sufficie
O eti compensauon event may be such that it is
Where unexpected physical n_y accurate quotation. One example of this is as the status of quotations for earlier ones will not yet be finalised. Some
12) but their extent is unkngfi/IndIfnotsegeecggcountered (Compensation event project managers have adopted a procedure where all the compensation
the basis of assum pI|Q|'|3
' stated' b th . BS, quotations_ are
' ISU lo mitted
' Oi‘: events notified in one month are considered in one revised programme. ,1,
>
the Contractor. if the assumption/s lgtgojeft Manager In his Instruction to 62.3 The time limits are intended to promote efficient management of the contract
Managers notification of their correction ' D We to be Wrong’ the Project procedures. The time limits for submission and for the Project Managers reply
(ciause 6O_1(17)>_ is a separate compensation event
may, however, be extended under certain conditions, as stated in clause 62.5.
Apart from this situation , the assessment of com An example of the need for this flexibility is when a weather compensation
' event
pensation b
revised (clause 65 . 2) . Since eac h S cannot e event (clause 60.1(13)) occurs very early in a calendar month. The effect of
_ - .
hex (clause 63.5) and the early "p§ilJ“°'“di
due anowance f°' the event cannot be assessed until the end of the month when the extent of
e ects of unexpected problems .th e need for later review
We- s is the weather exceeding the ten year return weather data becomes known. if
- ould. minimise
minimal
. the
d the
benefits to both Parti es o f fixed
need. ' -
time an such
and cost effects far outweigh any the event is notified by both the Contractor and the Project Manager immedi-
ately, the time remaining to the end of the month may be more than the three
weeks allowed for the Contractor to quote. An extension of the time to quote
would then be necessary.

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 3 Guidance Notes for the NEC En ' ' Explanatory Notes ¢.
gmeeflng and Construction Contract

The four possible cate ' lf some or all the work arising from a compensation event has already been
. g0l'l8S of reply b_y th e Pmject
-
with acategory
third maghgigiet
proposed | tgometlzfi Project Manager Manager are to
deciding not done, Defined Cost should be readily assessable from records. Forecasting
future Defined Cost is less straightfonivard. Estimates of resources are
when the cost of the change is togrh?ghnfOrThatI?ln' This is likely to requ ired and productivity rates for Equipment and labour. For Options C, D
-
Manager has absolute discretion - such a °'
in caseeon 9'35! too to
whether great.
p Th e and E pricing of the various components of Defined Cost is normally based on
T0Ceed the Schedule of Cost Components (SCC) with the associated percentages
This procedure permits rev ‘ ' A .
follow . _ ision of quotations. ln practice, this w|. tendered in the Contract Data part two, although the Shorter SCC may be
detans discussion
fth beween
t .
the_Project Manager and the Contract; used in some circumstances (see clause 63.15). The Shorter SCC iscl used
0 e submitted t
Project Manager may al’?elf0oé;tla?gg- 't\gh§1l'gstr“°t'“g a revised with Options A and B. The Fee is calculated in accordance with ause
ssumptions made unq 11.2(8).
61.6. Again, time limits for submission of the revised quotaf er
IOH are
Clause 63.1 pinpoints the date when there is a switch from recorded costs to
This Clause Provides for the ex t ension
" of the time
- limits
- - stated in oi
forecast costs included in a quotation. This ensures that whoever is making
which may be necessa ry with ' the more major or far-reaching . events
ause the assessment of the compensation event, that asses sment is based upon
Project
. Manager and the Con t t . the same principles. Therefore neither the Contractor nor Project Manager
QXDIW Of the times stated. rac or must agree to the extension
can choose the switch date in order to suit their own purposes. Similarly the
'1 is irnnoitant
_ that th e Project
- Manager does not delay the Aojudicator is also required to use this switch date when assessing compensa-
°°mPBnsation
le events . lo3/. for a example, waiting
.. until the changed Work tion events.
°0ml9 te before decidin h th
gm-S Ciause protects thegcvgngacgrworrgfit ginalccdeept thebC0ntractor's For compensation events which the Project Manager should notify under
clause 61.1, the switch date will be the date of the communication which led
Cl nee the quotarion -IS treated as accepted it_ is
_ _a3/5 ythe Project
implemented (third to the compensation event, not the date when the compensation event was
ause 65-1). The
- the quotation only remed
. is adjudication.
y the Emnlvyer then has if- he does not notified by either the Contractor or Project Manager. For all other compensav
with
tion events the switch date will be the date when the compensation event is
Assessmg °°mPensation notified. This supports the intention of the NEC that assessments will usually
events 63 1 Assessment of com pensation ' ev t . . be forecasts of the cost of work yet to be done. Where work has had to start
effect on Defined Cost Plus theenFee. S as they affect Prices IS based on
This is different fro m some
before the quotation has been submitted or even before the instruction to
forms of contract whe re variations
' ' submit was given it is inevitable that the forecast component of quotation will
h are valued using the rates and prices be influenced by the cost already incurred. Nevertheless, for most cases, the
t e contract as a basis The re
. a quotation
event for which - is asqn for- this poi‘Icy '5 ' that n° °°"lP9n$fiIIllI inclusion in the clause of a switch date set early in the assessment process
relates to a matte h _ h‘ required
- - is due to the fault of the Cflfifract reinforces the point that compensation events are not cost-reimbursable but
flat t FW I0 is at his risk under the contract. It is therefore agigrii are assessed on forecasts with the Contractor taking some risk.
P 8 0 reimburse the Cont if ' .. -
additional costs in certain clfcagspaficeglecgst‘addftlonal Costs (Or actuil These rules also apply to the situation where there is an instruction to submit
Sing rom the com ensat
event Disputes arising from th e app I -icability
- ~ of contract rates are avoided.
P icr a revised quotation under clauses 62.3 and 62.4. In that case the revised
quotation will use the same switch date as the original quotation.
There is 6. .Provision for rate -
& D), Activity Schedule (00502 dCptgcglg <1°$s$§hB"'
~ (()f Quantities
. . (Options is
Only certain compensation events can reduce the Prices. These are listed in
in the assessment instead f D f' - ere an Optbns)
- t° be U59‘!- the main options as follows:
C°””a°‘°’ag'e@i° do so. andoagreeelgfejrctost’ 'f th? ‘°’°1e°i Manager am.- ~ Option A: 63.10
Where the work to be d one ' - a- es
- and prices to be uSed' ~ Option B: 60.4, 60.6 and 63.10
based upon the change in rQ?eig1?§dié2§§1e'3‘t§)¢-ant that the assessment 5: ~ Option C: 63.11
no authority for the price for the origlnall s ‘f? med Cost. The clause gives Q Option D; 60.4, 60.6 and 63.11
the forecast Y peer. ied work to be deleted or fo
a new price. Defined Co St 0 f all work now required to be used as the basis for‘ ¢ Options E and F: none
In addition, the Prices can be reduced by the application of Option X2.
If the Works Information ori ginall
‘ " | - _ , All other compensation events listed . in clause
. . 60.1 and
. in the optional
f. d
be replaced by 3 Piece of work wcthhctied- a piece of Work
COmp9l'lS€IUOFl (3) is
event Whlch 18 l10WllJ
assessed a= clauses cannot lead to reduced Prices, even if their effect is to reduce De ine
the . difference between the rO
Defined Cost of recast Defined
' Cost of (b) and the forecast" Cost plus Fee.
total _ (a). Th e Fee 'is then added to this . difference and the resulting
amount is used to chan e th There is provision, however, for additional compensation events to be included
enter the assessment. 8 e Prices. The original price for (a) does not
in the Contract Data. Such an additional compensation event can only lead to
Similarly if the effect of a c increased or unchanged Prices unless an additional condition, using Option Z,
states specifically that it can also lead to reduced Prices.
I O ' _

the assessment is b 0| mpensanon event . '5 °"|y to delete future work.

Fee. not sim D I y a delatse on the
e ion of th f-Orecast Defined C°St °f that Work plus the No compensation event can result in a reduction in the time for carrying out
no obstruction to the Project lljaihggixogroelgted work. There is, of course. the works, i.e. an earlier Completion Date or Key Date. Only an acceleration as
the Price if both are satisfied that it ade e omractor agreeing to dame agreed under clause 36 can result in an earlier Completion Date or Key Date.
forecast Defined Cost plus the Fee. quately represents the reduction m

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 _ Guidance Notes for the NEC Engineering
' " and Construction Contract j Explanatory Notes

The first Stage in assessing wheth lf the Accepted Programme is non-existent or has not been revised as required
should be del Bl‘ the Completion Date or in clause 32, the Project Manager is required to carry out his own assessment
Accepted Progfe/Endmgstoa teiiugicg, a compensation event is toa Key
of the programme for the remaining work. This is a major incentive on the
appropriate adjustments to time rislkm llfi the compemetion event Contractor to keep his programme up to date.
the programme before planned Com latpwapces (-Clause 63'6)- Any
any consequential delay to planned Fggriflon I? available to mitigate or The Project Manager will be motivated to make a fair and reasonable
between planned Completion and the Cp et|0n'.H°We"e' any terminal assessment in the knowledge that the Contractor may refer the matter to the
achievement of the Condition required b ompletion Date and the pla Aojudicator, who may change the assessment.
available (see explanatory notes on Cl y a Key Date and that Key Date i-S
delayed, the Completion Date is d l ause 31.2). If planned comma“- 64.3 This clause provides for the Project Manager to have the same time to make
Completion is not delayed, the Com lee’?-Ve¢iDby the same period, |f ma, his assessment as the Contractor was allowed for his.
programme shows that achievemenft) of“t)l?e I2? S unchanged’ lf the afllu 64.4 This clause (like clause 62.6) protects the Contractor against delay by the
Date is delayed by the same period, y ate will be delayed, the. Project Manager in finalising and implementing quotations for compensation
63.4 events. O nce the q uotation is treated as accepted it is implemented (clause
lf any of the compensation events occurs the Parties’ sole rem ' 65.1). The only remedy the Employer then has if he does not agree with the
the compensation event procedure Therefore if the Em lo er bedy is t0|
contract the Contractor must use ' p y Feaphe quotation is adjudication.
than pursuing dama ' ms mute (See clause 60 . 1 (18)) rat S
-
nme . . In
|,m,,[S _ the Contract.
gee. This prevents th e Contractor trying
- to circumvent.
. i . Implementing 65
compensation events 65.1 This clause should be read in conjunction with clause 65.4 for Options A, B, C
63.5 The Contractor’s duty to iv ' - -is stated in . clause 16 and D and clause 65.3 for Options E and F.
sanction if the Contractor3fails e anto early
'
glve
warning
- . _ _ - 1.
Thi s c lause emphasises the finality of the assessment of compensation
is possible that early warnin 8 could have Yallo Warning is stated in this clause,
oi '
65,2
events. if the. records of resources on . work actually carried out . showd that
would have reduced
__ costs a n d saved time. _ ItWeis actions
importantto that be taken
the Pwh.- . . d.
Manager notifie th - . . achieved Defined Cost and timing are different from the forecasts inclu e in
b _ s e Contractor of his decision that early warning should’? the accepted quotation or in the Project Manager’s assessment, the assess-
een 8“/eh (clause 61 5) so tn 1; th ment is not changed.
his assess ment and the' nature of e the9early Contractor
warning, knows the corre C t b asis'
63.6 Allowances for risk must be in "
- - Cluded in forecasts of Defined Cost and C
tpletion
nd I Th in the sa me way that the Contractor allows for risks when priclngorg, ._
9 er e value of the allowan
there is. 8 . high chance of a ContCe racistors ' risk
greater happening.
" When the lt .ISisleast
- work when all
uncertain tip‘'
uncertainties
on Site Whoseare O t small
t an <1 when the work .is to be done by resources alreai?
'-Main Option clauses
U pu re ee can be predicted relatively accurately
If there is considerable uncerta' '
.
the Project Manager can decide int oi/l$r(E2l?iSe1lfeC-ts of ? compensation _ event . Option A: Priced contract with activity schedule
appropriate, to limit this uncertainty by statinguthaelon with Contractor when
is to base his quotation on (clan se 61. 6} . in effectassumptions
he is - ~ - the
- limiting theContract“
Comma -"Assessing compensation 63
t0r’s risk
. ' but_ not necessaril y rem ' ' - - events 63.10 See explanatory notes on core clause 63.2.
are still permitted in the assessme‘i)1\,t|ng It R'sk e"°Wances for cost and time 63.12 The changed Activity Schedule (clause 11.2(20)) which takes account of the
63.7 This clause protects the E effect of the compensation event is used for subsequent assessments of the
Conuacton The ref mp loyer_ again st inefficiency
' ' ' on the part of the PWDD.
th t_ _ erence to changing the Accepted Programme is made st-
a it is clear that the
necessary. . Contractor is expected to alter his arrangements when 63.14 Lum P sums from the Activity Schedule, or from any other source, may be used
to assess compensation events instead of Defined Cost plus Fee, if the Project
63.8 ' '
Manager and Contractor agree to both the principle and the sums t0 b e us ed.
This “ause
. _ eXpresses the ‘co ntra f I . .
conteining an ambiguity or incongigtghintzim ‘rule, which Interprets a Clause lf they are unable to agree then Defined Cost plus Fee is used. This may apply
draftmg the document in which it Occurs y gainst the party responsible fir particularly to smaller compensation events, where calculations based upon
Defined Cost may be unduly lengthy in relation to the value 0fth e c om p ensa>"'>
The P"°J'ect Managers 64 tion event.
assessments 64,1 The four circumstances in whi -
implementing 65
The second results from the Contractor n tram Selfne failure of the Contractor, compensation events 65.4 See explanatory notes on core clause 65.1.
c0_rrectly in accordance with the contractoTl?'SSeSSmg the Compensation event
Prices have not been correctly assessed Iin accordance
'5 means that
withthe changes
clause 63 1 toand]
the
or the change
_ to the Com '
pletion D t '
assessed in accordance with clausea6g.gi a Key Date has not been correctly Option B: Priced contract with bill of quantities
The third and fourth circum sta noes are derived - from the need to base an
assessment on an Acne t . Compensation events 60
by clause 32. p ed Programme Wm“ has bee" revised as required 60.4 A change 'in quantity
' 'is not, 'in 'its elf , a comp ensation event. A compensation
event is triggered only by the changed quantity satisfying the two tests stated
in the clause.

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 ¢..neC®3 .
Guidance Notes for the NEC E ‘ ' @
ngmeehhg ahd Construction Contract Explanatory Notes 5. 3

This clause only applies to C h anges .In quantities

_ _ which do not D; Target contract with bill of quantities
changes
601(1), to hthe W k - .
0|’ S Information. Subject to the exceptions in
a C ahge to the Works info
regardless of tn 8 effect on qUam't'e5-
- - "“at'°“ '5 a'Wal/S a Cflmnen Sam“~ cnmpflflfiflliflfl events 60 ' uantit is not, in itself, a compensation event. A compensation
6O.5 '
difference . .
between original and final quantities in a Bill of . _ 60.4 A change in q y
in itself El compensation event T Quantities event is triggered only by the changed quantity satisfying the two tests stated
'
the PWDD which is based on - he amou t d
H ue to the contractor in the clause.
difference ’ of quantities wh‘ the
n actual quantities of work d one. This clause only applies to changes in quantities which do not result from
60 6 achievin
There mg ab Key Date is' a compensation
‘C Ca“s_‘-95 event.
Completion to be dela Yed or changes to the Works Information. Subject to the exceptions in clause
. ay e mistakes in the Bill of Quantiti 60 1(1) a change to the Works information is always a compensation event
- b . - 1 . 1
wllh the method of measurement or becausgsofzcifiihigugqigsbzgrdoes not regardiess of the effect on quantmeS'
This may occur h . A diff nce between original and final quantities in a Bill of Quantities is not,
should be deletgdtgfaarggeéndhas been omitted from the bill or an item in 60.5 ere
' one of the c ompensation
is e t ° Comp
- events _ |ymay
which withresult
the minetn
a od of measu
reduction ofqhgent in itself
the PWDD,1 a which
compensation
is based event.
on the The amount
actual due of
quantities to work
the Contractor includes
done. However, any
difference of quantities which causes Completion to be delayed or delays
Assessing Wmpensation 63 achieving a Key Date is a compensation event.
events 63.10 See explanatory notes on corecleu
63-13 or
Therevision
Bill or of
Quantities WmorreHeeunire
quantities . amendment
Se 632' in the form of deletion, 60.6 There may
with the be mistakes
method in the Bill of
of measurement or Quantities
because ofbecause the bill
ambiguities or does not comply
inconsistencies.
Bi“ f _ _ s or rates and lump sums. The changes to This may
should beoccur where
deleted an item has
or amended been omitted
to comply from
with the the billoformeasurement.
method an item in theThis
bill
0 Quantities
(clause sho‘shichetg:$il'l§(;(:€Li'l:tfiC)$d£hTh9
11.2(21)), ld lo changed Bill of Quantih . . . . . .
event, is used for subsequent assessments of thi $23855-of the compensate is one of the compensation events which may result in a reduction of the Prices.
Rates and lump sums from the Bill " of Q U an t-t~
I ies, or from any other Assessing
' compensation
events 63 11 See explanatory notes on core clause 63.2. The proviso in the first bullet is to
may - be used . to assess com Densation
- eve t ' - so U‘ -
Fe e’ 'f th e Prole“ Manager and Contra ctor n S Instead of Def'_he_d COST bl encourage the Contractor to apply value engineering principles to the Works
rates to be used. If they are unable to agiseefhgh b§§'?i§2§ gggfilplle amt‘ mf0rmamn'
used. This - p Us Fee ' .
Calculationsgggeglfiignpggicufirly to smaller compensation events wile‘! 63.13 T h e Bill of Quantities will require amendment in the form of deletion, addition or
Val f h _ ine Cost may be unduly lengthy in relation mug revision of quantities or items or rates and lump sums. The changed Bill of
“e ° t 9 COmpGl"lSEItlOI'l event - Quantities (clause 11.2(21)), which takes account of the effect of the compen-
sation event, is used for the subsequent calculation of the Contractor s share.
|"1lJ|ementing 65
com ensa '
D tion events 65'4 See explahatoly notes on core clause 65 ' 1 ' Rates
may and lump to sums from the Bill of Quantities, or from Defined
any other source,
Fee, ifbetheused
Project assess
Managercompensation events
and Contractor agreeinstead
to both of
the principleCost
andplus
the
rates to be used If they are unable to agree then Defined Cost plus Fee is
Option C: T afget contract with
- activity
. . schedule use d. This may _ apply particularly to smaller compensation events, where
calculations based upon Defined Cost may be unduly lengthy in relation to the
Assessing compensation 33 value of the compensation event.
events 63.11 See explanat t
encourage my
the
Information. no
Cont es
racon
tor core clause
to apply 63 - 2engineering
Vawe - The
_ p_F0viso
' principles
' the first
in to bullet lslil
the Works 63 - 15 The Shorter SCC
compensation should be useful where there is a large number of small
events.

63-12 The Changed Activity Schedule (cla use 1 1-2(20)), Which

_
takes account of the
Implementing
'
compensation events
65
65.4 See explanatory notes on core clause 65.1.
effect Of the compensation event, ' _
the Contractor’s share. IS used for the Subsequent calculation of
63-14 |-"mp Sums from the Activi tyS ° n e <1 He,
I or from any other sourc ma b am . E: Cost reimbursable
Option . contract
assess compensat'ion events instead
M - .
of Defined 6‘. ify the
Cost plus Fee, euse
Project
ahager and Contractor agree to b
they are una bl e to agree then Defined
_ OthCostthe plus
D"hCIlI>le
Fee isand theThis
used sumrfieoa
t lo e F562;“ll Assessing compensation 63
Culafly ‘E0 small - - - 63.15 The Shorter SCC should be useful where there is a large number of small
Cost may be unghlfiglgihsitlonl events
y n re ation to where calculations
the value based uypogpgefilinea
of the Compengatfon event evehts _ events.
compensation
63.15 The Shorter SOC should be
.
compensation events. useT U I where there '5
-
"3 large number of small Implementing
compensation events 65
65.3 See explanatory notes on core clause 65.1.
Implementing 65
°°mPensation events 65 . 4 gee ex planatoiy notes on core clause 65 1
' Option F: Management contract
implementing 65
compensation events 65.3 See explanatory notes on core clause 65.1.

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 —..neC®3 Guidance Notes
_ for the NEC E ngineering
' " and Construction
. Contract Explanatoiy Notes
7 TITLE
if the Project Manager gives his permission for the removal of Plant and
Materials, title in them reverts to the Contractor. This may cause problems if
Plant and Materials which have been paid for are removed from the Working
Areas for work to be done on them elsewhere, such as being returned to the
Core clauses manufacturer for modifications. If this is known to be likely to happen at
tender stage, the Employer may wish to include a suitable Z clause to safe-
guard their title. If no such clause is included and the need to remove Plant or
Materials happens for an unforeseen reason, the Project Manager should
For large eXpEflSive or im
an -“ems ensure that he agrees suitable arrangements with the Contractor to safeguard
1 t .
are bein g manu factured or p stored _ of Equipment
outside the Workin. Plant
A or Mate rials the Employer's position before he gives permission for the Plant and Materials
advised
C to secur -
e ownership and at the same time make 8 Yeas. payment
the to be removed from Site.
ontractor. Under clause 711
con t ract -identifies
.. them for payment - . the and
Superi/is or mark S suc i1 -Itegls t°.if
the Contract
for marking as re quired. ' There a Fe, "in consequence, or Several
as pre p red Equipment, Plant 7:1.
Materials outside the 7 1.1 The procedures necessary prior to marking having been completed to the
procedural steps that need to be taken Supervisor's satisfaction, he has a duty to mark any Equipment, Plant and
Working Areas
The Works information must i dentify ' the items as bein . Materials outside the Working Areas which are stated in the contract to be
under this Section and other doc 8 5Ubl9Ct to paid for before being delivered to Working Areas. The contract (i.e. the Works
' uments Such as the bills of
activity Ie
sched Schedule
_ sh ou lci show them_individually
- - - and separately. When anie
Cluantit information, activity schedule or bill of quantities) must identify the items for
U is used, suitable instruction which payment may become due.
tenderers because it is the ten s must be included in the iflstru .
tie rel Wm Prepares the activity
. . scm-;-Q'uie_ ctions
Removing Equipment 72
whe"
is mated Option C, D or
to What theE C0nt?:Ct;lie1i'aeSis3:l_1Ce(ardde;l
is u d - complication that 72.1 This clause requires the Contractor to remove Equipment from the Site when it
has done. Careful draftin of - '5 °'e°as*T° par. not what is no longer needed. It may, however, be permitted to remain on the Site
either temporarily or permanently if the Project Manager allows. Examples are
Employer’s position in suchgcaseiultable Clauses '8 essential to protectti temporary storage of items of Equipment pending transfer to another site and
The Contractor m t - . temporary sheet piling or formwork which the Contractor may not wish to
|m<ormation and tag’ S5$*§$:O£h;uigei2§sfLor mharking as required by the World recover. items such as the latter, however, remain as Equipment left in the
re 'a th ..
The Supervisor is obliged to mark th . _ ese requirements are mel- works and do not become part of the works.
mation have been met. e Items If the Criteria Of the W°Tl<$ lnfor- On termination, the Contractor is not automatically entitled to remove the
The Equipment from Site if it is still needed to Provide the Works. Under certain
art requirements
f in th e Works Information - for marking should state that ea.
circumstances the Employer is entitled on termination to use Equipment
P 0 preparing
demonstration the ‘tg{pes,WtinemC€‘0i&tractor has to show title and only am;
of Suchl , ~ owned by the Contractor in order to complete the works —- see clause 92.2 P3.
Once this Equipment is no longer needed by the Employer to Provide the
must check the title before marking.r mg and payment f°“°W- The Sunewisoi Works the Contractor removes it from the Site.
Under
to EquiUKment compan
th ty_ l aw ‘t’ ' -
I is difficult for the Employer to successfully Claim title
to be made to the Contractor the
F3 a is owned by f Con tractor. If it- -IS -intended that payment is Objects and materials 73
or E quipment outside - of the Working
. Areas, within the Site 73.1 This clause establishes that the Contractor has no title to objects of value or
then SUCl'1 a pa
. _ _ l/men t 'is best safeguarded by the use f O of historical or other interest within the Site. Title to such objects may belong
C0l’ljLlnCtlOl'l
ef with a sutI a bl e advanced payment bond or by requiring O ptiona suitabie
X14 in to the Employer or some other party. Any instructions to deal with such objects
p Fprmance bond using Optjg X13 . issued by the Project Manager, such as removal to the Employer’s store, is a
n - lf These options are not suitable then compensation event under clause 60.1(T).
the Employer should t k i -
Secure We to an E Ufa e e§a| advice on the steps that need to be taken to
Y Ci lpmen that is paid for in advance 73.2 The Works information should state which materials from excavation and
In order to simplify matt - . demolition are to be the property of the Contractor and any conditions
facility t0 mark ECIUI‘ me erg tt In ?“°" Wcumstances, the Supervisor has the regarding their removal from the Site. Note that this clause reverses the ‘tradi-
lnfofmation requlrespit. l~rl1owtg\f:rlSti:t)l:t?iif'l::la noftthe Working Areas if the Works tional’ approach which is that the Contractor owns the materials that arise
!

Equipment by marking alone. ’ ° pa‘-58 to the Employer for such from demolition and site clearance. ,,
>

The Employers title to 70 The Works Information should state also how the Contractor is to deal with
Plant and Materials 70,1 known items of value in property to be demolished or elsewhere on the Site and
Upon
. _ the
Idemmed’_ marking of the
We passes - i -
partggbgggqiztem
to the .
of Plant or Materials, as separately appropriate items included in the activity schedule or bill of quantities (if any).
70.2 Before
Iu the Contractor re moves any items - of Plant or Materials (including
Surp ses and unusable or d f t‘
Mani-1ger’s written permission tjgiffefcfsfiggds) he must Obtain the Project
items may remain in the title of the Emplo erl'BlT(‘l1O|t]/Ell. Not to do so means the
able complications for the Contractor es/pecelglly fins? Comd Cause Consider‘
returned to suppliers It ’ _ ant and Materials are
would normally
the Project Manager to a gree - be advisable for th e Contractor an d
a Simple procedure in - order to facilitate
.. normal
movement of re sources 'in and out . Areas_
of the Working

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i
 Guidance Notes forth NE ' - . Expianatory Notes
~ e C Engineering and Construction Contract '_,.-—

s RISKS AND INSURANCE The fifth category of Employer’s risk is that of loss of or damage to the works
and any Equipment, Plant and Materials retained on the Site after termination.
The last cate go ry of the Employer's risks provides for him to carry additional
risks. These must be clearly stated in the Contract Data. An important
Core clauses example of where the Employer might wish to carry an additional risk or limit
the Contractor's risk is when the works are within an existing plant or facility
of the Employer.
It i s important
' - the distinction
to recognise . _ between the various ty 9 _-" For exam p le, in a refinery it is quite usual for the Employer to retain all or most
0and fwhich party_ bears them. Risksof
- loss of or physical damage top 2:); of the risk of loss or damage to his property which surrounds the works being
F 0 personal injury or death . which are . carried out. In this case the Contractor would see from the Contract Data part
separate from general, legal or financial riskgsually msurabie risks’ are ii one to what extent the Employer has retained this risk and hence what residual
risk he has to insure under the third item in the insurance Table. If the
Section 8 deals with th Contractor and the Employer in effect share a risk then the Contractor must
damage. inivry or death ¢':1$ldg\i':2$;aii',lS|egal and the "iSurab'e risks °i lo ensure that his insurances are adequate, at least up to the limit of his risk.
risks which could result in loss dam;é:n?$:|§r%rr%qu'.$d.;f° Cover them. J
’ ' ea , I they happen Another example would be for equipment made available to the Contractor by
a“°°ated T0 either the Employer or the Contractor.
the Employer for which the Employer preferred to retain direct control and
Financial risks are dealt with in‘ I
hence risk. A vital distinction must then be recognised between the equipment
compensation. event procedure inotherSect"parts of the C ontracti 5iJCh as under '
ion 6 For example, the Em lo which concerns the Employer and the Equipment (note the capital ‘E’ for
the financial risk for additional work 'instructed
- under clause 60 '01(1)
yer bcaiii .. Equipment in the second classification of insurance in the Insurance Table) as
priced Options A and B th ' ' - - . ' ut . ig-
defined in clause 11.2(7). Thus the risk of loss of or damage to equipment
under this example is an Employer's risk but loss of or damage to defined
risk occur — see clause 60.1(14). a risk If any events that are at iii Equipment is a Contractor's risk.
On the other hand under O ‘
~ of doing
risk . work which
i ptionpriceii
he has A a dinBtli:ect?i$ii'far<?tCtl?nd3:rrr(|)e%t'the
- .
fénanci‘ . . . . . ifi d .
The Contractor's risks 81
most of this financial risk is ' 't' - . . D ions aniil 81.1 The Contractor’s risks are defined as all the risks which are not ident e in
m' 'a"Y the Empiflyers
shared with the Contractor under the Contractors Shar but is subsequen iil. clause 80.1 as being carried by the Employer. The Contractor’s risks include
clause 53. U n d er O ptions
' E and F the Employer carries most e arrangement
of the finaiii:' those as stated in the insurance clauses even when such risk is covered by
insurance procured by the Employer. This aspect is explained more fully in the
risk °f Cafii/iiig out the works. explanatory notes for clause 87.2.
Employers risks 80
80.1 TheEmployers
EmDi'0yer’srisks.
risks are s 1 a 1ed in
- clause 80.1. There are six main categories Repairs 82 . . . . D f
of 82.1 The Contractor is re q uired to carry out all works of repair until the e ects
Certificate has been issued. Consequently, unless othenivise instructed by the
The first is the Employer's risk l - ' - Project Manager, this will include repairs arising from an Employers risk
ovain hgeneral or legal responsil;liiieztlgfidtcialgfitsufi fiigtge .S'te CF” Works’ his event, such as damage to the works after take over but before the Defects
w ic might arise from desi n f | e5ig_h. or liabilities Certificate. The carrying out of such work will be a compensation event — see
risk by a Professional indemnéty pi)‘-lljrtgfi i§=h,§I§'gpiPYer_ should either insure the clause 60.1(14).
gnsme that it is Covered (6% under the NEC islgfll is_by his own resources or
if an external consultant is engaged to do the degigssloni? The Project Manager must therefore decide how to deal with loss or damage
n wor _ semces Contract] caused by an Employer’s risk event. it is possible that, in certain circum-
The second category relatin t ' t
- of the Employer =up to thi lgoinirgi ' stances, he decides the damage should not be repaired, or should be repaired
risk titipplhed to the Contractor’ .IS at the by the Employer or others employed by him. in such a case he would issue
Subcontractor. Any insurance cover for tlir andover to the-Contractor Ora instructions to the Contractor, who will then neither be obliged to carry out
Employer's own 1055 or damage P0|iCy
_ Or thee_5e Should of
insurances beOthers
either (as
under the
defined such repair work nor be entitled to receive any compensation.
i“ °'a"$@ 11-2(10)) unt'l tn
accepted the Plant and Mateifiaisogolnalccgnegi Subcontractor has received and indemnity 83
83.1 Under this clause each Party indemnifies the other for events which are at his~
The third Category of Em l ' ' -
Plant and Materials causegygysoulfiskdls the loss of 0" damage to the works. risk.
Parties. This risk is limited to what cla? g7flU6-rices beyond the control of the 83.2 Provision is made for the liability of a Party to be reduced on a proportional
E,-ty_ The Contractor Carries the risk of Igsgegoatrieddas the Em/Jlol/er's Droll. basis if events at the risk of the other Party contributed to the event.
inc u ing Lquipment from any of these causes.
'ld'=' iamath' E9 0 is Dropertii.
The fourth category of E I . . . _ j Insurance cover 84
84.1 This clause requires the Contractor to take out insurance cover. Major multi-
responsibility for (i.e. takgiijgii/tfrrjntdgr that arising once he has assumed discipline employers may prefer to arrange all or some of this insurance them-
happening, the Employer takes on the Esfisegfigniétémplgted work. Upon this selves in view of the large number and size of contracts in which they invest
including wear and tea _ S 0 normal ownership. In such cases, insurers are likely to take a much greater interest in the
Way if he so wishes. Theringrehgoifizrg Should lnwre ms. asset i“ the usuai running of the contract as the Contractor is no longer motivated to minimise
0‘/Bi’. remain with the Contra t 'mp°rtam .risks Which. even after take
claims. If the Employer wishes to effect his own insurance, the details should
pear with the issue of the Defegis ggitiiiggfeare “Rely to be Smau and disap- be given in the Contract Data. Otherwise, the events and extent of cover to be
effected by the Contractor are as shown in the Insurance Table and detailed
in the Contract Data.

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i
--"neat3 Guidance
-
Notes for the NEC E ' '
ngineering and Construction Contr Z:'lCt Explanatory Notes ¢.
r=

Th_e works and {Equipment

- would normally be insured under C a 1- involving the insured in retaining some liability by sharing the risks and
Rlsks (CAR) policy Since the v al ue of the works constructed3 willOntinc l’ thus encouraging him to take more care in avoiding loss or damage, and
the contract progresses eithe ‘
vas| or the policy . should
i recognise r the insured such increasesum shouldas bbeeigpclated v reducing the risk assumed by the insurer to a limit which he can bear.
covered. Insurance of the works and " 8 outoi
risks. It is for the Em l - Eqlllpment covers only the CoI1 ,5 contractor does not 86
insurance Cover for hispoqi/firriglkgeeigei whether or not he wishes to insure 86.1 A This clause enables the Employer to take out the relevant insurances in the
terms of any standard policy c0|1»;p|y Witwfifigfigédprflll cetges event that the Contractor Tails to do so at the time and for the periods stated
I emen s of to
thecheck
cont in the contract. Appropriate adjustments are then made to the amounts certi-
insurance of the work E " fied by the Project Manager.
indemnity basisl This ii» paqrltlil'cl‘:9ul‘:1al?rl|13}.r(<;;I'i;tl/ Pltant and Materials is on
means that cover is for replaceme t V an to insurance of Equipmr
tion rather than on a .neW_f0r_O|d, lglastgvsith equipment of similar age an 7 mice by the Employer 87
87.1 ln certain circumstances it may be more appropriate and convenient for the
Employer to effect some of the joint name insurances which, under the stan-
With regard
.
eeuntnes aretoretheuired
fourth
b event 'in_ th e. | nsurance Table, employers in m.I dard conditions of contract, are to be taken out by the Contractor. The
death. q y 'a“’ ‘° lnsule employees for personal iniurr Contractor is required to accept the policies and certificates, in the same way
that the Employer is required to do so for insurances effected by the
The Contractor carries the ris Contractor.
and he will often Carry P f k‘ for - any dl’-'5l€n. that he_ is re quired
' to car
either directl ro esS'O"a' lndemlllty (Pl) insurance for su h W0 The Employer sets out details of the insurances that he is going to effect,
h _ Y_ r rough the designers he employs. However, under (then?-
0 th -
including the deductibles applicable. lf in doubt, the Employer should discuss
e is not required to take out Pl lnsu
nameS_ The Empmyer may d _d rance, either in his own name or in jot‘ the level of deductibles with potential tenderers before completing the
eci e that in the event of the Contra t -J Contract Data.
unable
of or
h _ unwillin t b ' _ co
8_ o ear the costs caused by his defective dflsign, tge 2-‘llb '
suc insurance IS a Entering ‘nil’ or very low amounts against the deductibles in the Contract Data
Should inciude in the gomigaeeggeble risk to carry. ln that case the Employ.“
will normally not be in the Employer's bestinterests because the premiums
out Suitame PI insurance. a a requirement for the Contractor to takil will be very high. Conversely, high levels of deductibles may lead tenderers to
84.2 seek to insure all or part of the deductible amount, and either increasing their
The Pmfect Manager
certificates ar _ ha n_d ‘he
t Contractor must ensure that the policies an; bid to cover additional premiums or qualifying their tender if they are unable
. Cl 9 in t e Joint names of the Employer and the COHIFGCHI.-‘ to obtain suitable additional cover.
in uding
the for those
Contractors '
riskihsurances procured by the Employer for those matters at
Tenderers will do this because the insured risks are Contractor’s risks and
It is important
' . therefore the Contractor will bear the cost of the deductibles regardless of
to note that the insurances in the Insurance Tabl nl who effects the policies.
for events which are at th i - e o y cove
unti.| the Defects C e rrr e r Contractors
i icate is -
issued,
risk. Thus, whilst the insurances Fur:
the Employer assumes most of the risks 87.2 Whilst the Contractor is entitled to rely upon the Employer providing the insur-
for the works
covered by thisonce th
insurafg/eare taken over and therefore the works will not be ances as stated in the Contract Data, it is important that the Contractor recog-
'
nises ‘ risks
that his ' ‘
include those shown 'in the insurance Table. Consequently,
even if such insurances are effected by the Employer, the Contractor should
Insurance policies 85 satisfy himself as to the adequacy of the policy and cover. The Contractor
85.1 The Project Mana h - . should inform the Project Manager of any discrepancy between the Employer-
oncie t- f ger S °u'd Satlsfy himself that the terms of the insurance provided insurances as stated in the Contract Data and the Employer-provided
p adequately
are S 53 ls V protected.
the contract requirements
' and that the Employer-5 interests
insurances as actually given and ask for a policy amendment.
lf the Project Mana e '
an insurance expengollrlgfgrrgleé ?rl]']a$tXI3€l'|I .in .insurances he may need to consult 87.3 If the Employer
er to the Employer’s insurance department, - fails to effect the insurances which the Contract Data states he is to
85.2 The. Plllppse provide, or
_ of waiver . of su b rogation
- rights
" IS
l to prevent ins . t k.
aptlpn against the EmploJ/er- s personnel, for example after having . urers
paid a mg
_ money ~ provides insurances which do not comply with the Contract Data,
to the Contractor in settlement of a cla. b h
lm y im. the Contractor may procure additional insurance to top up any shortfall he 'r'
85.3 The Parties must com ply with ' th t - . . considers exists in these insurances. The Employer will then either pay the e
dp may make the insurance paert 'lalll’ erms of the '"5uran°e - policies
. as not so to
pl fully void and incur the Parties in
insurers directly or the Contractor will be reimbursed.
substantial
an t risk. It is th f ‘
ere ore important that the Project Manager is aware of
y erms that may affect or be affected b
' Y. the actions of the Em,-J10yer.
85.4 This clause ,
is referrln E ll‘!' art - l ‘ - Y .
knoW_n as excesses’. represlient"?h'eaan:(ougta€>:‘Klmg?§l Dequctlbles’ Often also
By this means, the insured shares the eXposure|?0|£!t)i<re¥l?l1|ned by the insured‘
IS wi the insurer,
The amount of the deductibl e ff - .
must pay. Reason f - a ects the 'e_"e! °f Plemlum _W_hich the insured
, decrease in I
S °l applying_ deductibl es m 'nSura'"'¢e policies include
evel of premiums,
' elimination
_ of adminis tration ' costs -
claims, of pmcesslllg a large number of small

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 -
I
- ®
- _
3 Guidance Notes for the NEC En gine
' ' - Contract ®3
ermg and Construction Explanatory Notes 9

9 TERMINATION 91.2 The four week period of grace is provided so that the Contractor has the oppor-
tunity to correct the default. Notification should be issued to the Contractor and
usually copied to the Employer. If after four weeks the Contractor has not
corrected the default, the Project Manager would, by implication, need to advise
the Employer of the position so that the Employer can exercise his right if he
Core clauses wishes. The Contractor may have started to make amends but not fully
corrected the default after the four week period. In this case, the Employer
needs to decide whether or not he wishes to proceed to termination.
This section describes the circumstances
' und - . Reason R11 applies only to a substantial breach of the Contractor’s obligations.
n a t e t he contract and the subsequent procedures.
Bl’ Wl'llCh th 9 P arties may . - Minor breaches are insufficient grounds for the serious step of termination, as a
Termination 90 matter of policy.
90.1 Both the The bond in Option X13 and the guarantee in Option X4 are both to be
Ob‘, _ Employer and Contractor have rights . to terminate the contr - provided within stated times. This clause effectively extends those periods by
terminate the C0ntral;:€lCit;‘l';|fC6Tl'klfilF'lD circumstances. This termination do‘:.. i
‘gations the cont t
four weeks. No time limits are given for providing an advanced payment bond
cedure by notifying the Pmkect Marty wishing to terminate initiates ihe- ' under Option X14. However, since this bond is provided as security against
nating. If satisfied that the Party 8i\figggert'andh gn/mg his reasons f°l' L“ the advanced payment, delay in providing the bond merely delays the
valid under the contra ct . th e Project
' “O ‘Ce as Drovided reasons wh‘ I advanced payment to the Contractor, which is sufficient sanction.
promptly‘ Manager -issues a termination Ce,-E20. _-
Subcontracting of work before acceptance by the Project Manager (R13) is a
It is important to note that t breach of clause 26.2. However, the right to termination only arises when
. not mandatory that those hese
is -
rightsclauses confer ri g hfs on tO the Pames.
are exercised. ' but- _. substantial work is subcontracted before acceptance of the Subcontractor.
90.2 only the Employer has a right of t ermination
' " -
entirely . discretion
at his . It is important to note that, whilst the Project Manager should bring to the
without one of the reasons listed ' Employer’s attention a default that the Contractor has not put right within four
-
can terminate only for one of thein reaso |' as R1 to R21 - Tn e Comrac
Clause 91 ' ‘ ' weeks, it is for the Employer to decide if he wishes to terminate the Contrac-
Reasons are given -d ff. _ ns isted in the Termination T . tor’s employment because of this default. For example, in the case of a
are fully describedIinelgfigéloglrefjerences (R1 to R21) for .¢0m,emenCea" ' | breach of clause 26.2, the Employer may decide, after consultation with the
reason other than those in R1 t. R2the Employer wishes to terminate for Project Manager, that the Subcontractor is capable of carrying out the works.
P'°je°tM3"a8er under clause 9001 1' he Should State this in “°tifYl"€ iii 91.3 Both of these reasons include the word ‘substantially’ for the reason that
The Procedures minor defaults of this nature would not be sufficient grounds for termination.
genera" f _ to b e followed and the amount due to the Contractor a3 The right to termination for a breach of a health or safety regulation is in addi-
pendentyof unctions of tn 6 reasons for terminating, although some are lrubl
the reasons. tion to any sanctions under the applicable law.
90.3 The Procedures to be follow 91.4 Late payment entitles the payee to interest under clause 51.2. The right to
e on term'"at'°"' are given in clause 92. termination, however, only arises if payment by the Employer of an amount
90.4 Details of the amounts t b ' due to the Contractor is delayed beyond 11 weeks after the date it was due to
given in clause 93 in €O|'|J€U?"l?3;I(ljOf'lo or Ihythe Conuiactt-Jr aftertermination 3“ be paid. This right can only be exercised by the Contractor.
ll:/lanagerfis required to carry out his av:sess|n?eI§oTlt?1Zt:n Tabl? The Proj”
an certi y the final payment w-th- . mount ue so that hi 91.5 Rights to terminate under the law (R17) may be a result, in some jurisdic-
tions, of force majeure or frustration.
°°”"a°F°’
them being a"Y Sums
certifi certified bi- thnetgrgii?
9 d-. ‘f t h J l‘*e“S-
anagerThe. Employer
within pays iiiiii
three Weeks These reasons apply to instructions which relate to substantial or all work.
91.6
same time limit applies. e Sum IS due to the Employer from the Contractor the Again, judgement is needed to interpret what constitutes substantial work.
Reasons for termination 91 Procedures and payment depend on which Party was responsible for the
default which led to the instruction. R20 provides for an instruction which
91.1 The reasons set out in 91 . 1 d l ' . resulted from the default of neither Party.
terminology of bankm ptcy law var ea. wnh the bankruptcy 01‘ either Party. The
. _ f 91.7 This reason is in effect recognition of a possible effect of force majeure. The
in this clause are those current in|elESngr(i)sT1 lzountry to Countm The terms Used
equivalent ' Qt h erlurisdiction
- - - . _ _ 8W, but the clause allows for their event will have been notified under clause 16 and, once recognised as satis-
. S ‘n . T fying the criteria set out in clause 19, it will have been managed by the
01‘ either the Contractor or the Efrifllgpenrlnatlon mall’ follow the bankruptcy, etc.
Project Manager. The Employer now has the option to terminate if the event
The exercise of the ri ght to t - - -
. _ efrrilnation when either Party .is faced ‘tn the will prevent completion of the works or is forecast to delay it by more than
banklupwy _ - receivershi
example, It is oft _ h p or ad ministration of the other .is not mandatory
- - W‘ For thirteen weeks.
the appointment? égogigcitigrerests of the Employer when first hearing oi A delay to planned Completion which can (as opposed to will) be recovered by
acceleration, by increased resources, or by adjusting the programme does not
°“s.°“S5 with them the possibility gr iii§eZe'"e" adm'm5"at9’ °' “quidaioi i°
being able to novate the contract to a thirdomractor Completing the Works or stop the Contractor from completing on time. The Contractor must demon-
with ,3 minimum of disruption Party such that work can continue strate that there is no reasonable means by which he can complete the works
on time for the event to be recognised under the second bullet point.
Note that initially the event may have been notified as a compensation event
under clause 60.1(12), (13) or (14), and only recognised as a ‘force
majeure’ event when the Project Manager and the Contractor considered how
to deal with it.

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i
 3-’ ®
Guidance Notes for the NEC Engineering and Construction Contract Explanatory Notes 9 3

_ . - -
'1' rules defining how to assess the Price
Procedures on termination 92
92.1 This clause provides flexibility to the Employer on termination to '
and if the works are to be completed. It applies irrespective of the
F°'i i"or?‘§"%%'
for o ?E%‘ai2Z'§dif’ei2i§i‘ iii the PTiC9$-
party or the reasons for the termination.
Once the termination procedures are completed, the Contractor’s D Target contract with bill of quantities
terminated and he is no longer allowed access to or use of the works or _ . - h for the work he has
93.5 On termination the Contractor is paid or Days his s are armg the Price for
92.2 Under procedure P2, the Employer’s right to enforce assignment of thg carried out before termination. This is calculated by comp _ b fore
fits of a subcontract will be subject to the terms of the subcontract. in Work Dgne t0 Date With ' the Total of the Prices for work Carrie d out 6
cases, a new contract (novation) may be necessary. termination. _ _ ess the Price
Procedure P3 is particularly useful to an Employer where there is _‘_| _ - 'f'c rules defining how to ass
For this calculation there are speci I
falsework or other major temporary works. However it can only apply to 5 for Work Done to Date.
ment that the Contractor has title to. Equipment which is being hired by
Contractor or which is owned by a subcontractor cannot be dealt with in
way unless the Contractor has obtained title of it. In that case the
could use Procedure P2, if available. Otherwise he will be
negotiate with the Equipment’s owner for its continued use.
Title to any Equipment retained by the Employer remains with the
The Employer is only allowed to use the Equipment to provide the work
cannot retain it for other use or to sell or dispose of it once he no
needs it. The Contractor is required to remove from Site any
retained by Employer once it is no longer required to complete the works.
Payment on termination 93
93.1 The amounts listed in this clause (A1) are due whatever the reason
termination.
When paying the Defined Cost for Plant and Materials care must be taken .,
ensure that there is no duplication with any amount that is assessed as be‘.
due for normal payments. "
Defined Cost that the Contractor has reasonably incurred in expectation ol
completing the work should include costs which the Contractor can show have
not been recovered within the normal amount due. For example, for Option All
would include amounts for the work done to the date of termination on
activities which were not completed at that time.
Amounts retained by the Employer that should be repaid to the Contractororl
termination are only those amounts that are to be temporarily retained under
the contract. They would include, for example, retention (if Option X16 is
used) or the amount retained under clause 50.3 because the Contractor has
not submitted his first programme. They do not, however, include amounts
that are meant to be permanently paid by the Contractor to the Employer, for
example the amount payable under clauses 25.3 or 45.1, which would be
deducted as part of the assessment of the amount due for normal payments.
93.2 The applicability of these amounts (A2 to A4) depend on the particular grounds
of termination (see Termination Table). Generally, where termination occurE 1"’

because of the Contractor's default, the Contractor is not reimbursed the cost 0? #-

removing his Equipment . He must also pay the Employer’s additional costs f0'-
completing the works, representing at least some of the damages which 1."!-
Employer suffers arising from the Contractor’s breach of contract.

Main Option clauses

Options C: Target contract with activity schedule

93.4 On termination the Contractor is paid or pays his share for the work he has
carried out before termination. This is calculated by comparing the Price for Work
Done to Date with the total of the Prices for work carried out before termination.

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 _¢ Guidance Notes for the NEC Enginee;-i hg and Construction
. Contract f _ Explanatory Notes

DISPUTE RESOLUTION — OPTIONS W1 AND W2 Under the ECC it is intended that the Adjudicator is named bythe Employer in
The Adjudicator
part one ofth e Contract Data and appointed before the starting date. However,
he takes no part in the project unless a Party refers a dispute to him. Checks
should be made for any conflicts of interest before naming the Adjudicator or
proposing a replacement. The Adjudicator should always be a named person
Dispute resolution The ECC has two forms of dig Dute resolution Options W1 an and not an organisation of firm.
Employer
Wishes to should
use. ch oose and list in the Contract Data part one the Opt,‘ The Parties appoint the Adjudicator using the NEC Adjudicator’s Contract,
which is one of the standard forms 'in the NEC family ' of contracts. This
' sets
The standard ECC O t‘ ' - out matters such as the terms of payment of the Adjudicator for his services
to be used only whenpth): C'§n\Qgét0.pt'°n .W2 has been Specifically introd- and his duties, liabilities, etc.
a ‘Construction contract’ within theliigfimgd ou"t In the: United Kingdwfl a The contract w ith the Adjudicator should be entered into before the starting
Housing Grants. Construction and Rege'::eTalt§ lnfiicigns 104 to 106 °f‘ date. This allows any dispute to be referred to the Adjudicator quickly, without
in any
he doubt
Should takeasfunhefleggiogdnvttitétheir
to wh th - contract
'0“comes
° within
96- h‘those
the Emmi
defihh? having to go through the procedure of appointing him. Where the Adjudicator
is not named in the Contract Data, has not been appointed, or is unable, for
It is important whatever reason, to deal with the dispute, each Option sets out the procedure
processes Shouldfo Yogi: bF‘;aiLti§-ated
- tgfigpdgéstand that both dispute resclui
for appointing a replacement adjudicator. who can then decide any existing
They should not be Seen as an altemat. empts at negotiations have fa,-. disputes that his predecessor had not dealt with.
on their disputes, either through inform ll/E to the Pames Teaching a€l'eem" Th e r elevant experience, qualifications and general ability of any prospective
nonbinding processes Such as media? hegoilatlon, or via other more for.. adjudicator must be carefully considered. The qualities of the Adjudicator
will usually need to take place Within '0" or_ conciliation. Such negotiati should, as a minimum, include
because of the limited time availabl atshort “me pemd if Option W1 is us
‘Sgt Optiocv However the Parties aree frgeetloeragrgsggtzxtgmgetlfdléidicator - knowledge of the procedures in the ECC,
_ ou in 1, in accorda ' . 9 Imeli , ~ a full understanding of the roles of the‘Project Manager and the Supervisor,
is needed for resolving thIeC?iivsI|§iEtg|a:1E€é§tp]’V1'3Q)’ “C. they. fee' that more ti ' ~ a full understanding of how construction costs arise and how they are
not made within the time stated or ext‘ der the notification or the referraip affected by changes to plan,
no longer dispute the matter. Option W2e2i|l§:isbg girgjtzigtbthe 0 knowledge of construction planning and of how plans are affected by
e re fpames
erred tomi
til‘ changes,
Acfiudicator at any tim . ,
- the ability to obtain technical assistance when his own technical knowl-
to attempt to reach agiégpndemerefore the Pames may take the time they wish’ edge does not cover the matter in dispute,
These explanato t - - . ' the ability to obtain up to date information about construction costs
resomion in the"€C'2:° sVi'1i:lk'1||at|(;3::O£I!:€1lo\Il]Vl:h ghttahoa/erall principles of diSDUil when he does not have access to relevant cost data, and
with and comment - O 0 Ph°"9- They will then dea Q an appreciation of construction risks and how allowances for them
further repetition of ?r?o1st;ear(:1rair€)pl?r(i)i:]ci(;>rlea fiauseuby-Clause basis’ With“ should be set.
clauses in _ the two Options will s h S‘ comparison of many . .
of the
some are ldemicauy worded. Howe?/vgrthcgt éigfly have common provisions an!
The adjudication Each Option sets out when and how a dispute may be referred to the Adjudi-
common between the Options they will be repe:?g3n;3:£hwht;;l2e comments are cator, and the period that he has to reach his decision. The Aojudicator can
ring the reader t ° th 9 explanatory notes for the other Op’[i0n_ er an merely refer- only decide the di spu te referred to him . He cannot, without the agreement of
the Parties, decide other disputes that he may be aware of but which have not
The Ohly means of dis t - - yet been referred to him by a Party.
arbitration or litigatiofitl ?!V|h?:|$|L?i’:Orl'e|C1el:lar)]()éE:?;mr? E; gontract used to DB l manage the
consuming and expensive. Wh'l tth a - ecome both tin“ The Aoljudicator has wide powers to ensure that he can propery
an ultimate means for such [final ieiiiigystem recognises the need to have proces s of adjudication and resolve the dispute referred to him. He is also
5’ta€e of independent dispute resolution ‘On, ht Introduces a-n intermediate free to carry out whatever investigations he considers necessary to enable
intention is that all disputes are first refermdt ' ' ' the results 0 f
Fe T0,e and formdecided
ah adJ“di°aU°h- The
b the Ad'udi him to make his decision. However, he should tell the Parties
Cami, who isjointly a ' t Y, J ' those investigations and invite them to comment before making his decision.
to act independently gfpfihgn? by the Employer and the Contractor and is am“
The Ad'udicator
J may review any action or inaction of the Project Manager or
Following
to the sui$]Cfi15§>S?ff§'Or:1L;C|:)(%8él0l'l
adjudication - - - -in previous
. versions of the ECC the right Supervisor, and decide what action should have been taken ' in' accordancie
t late for
with the contract. lf he decides in the Contractor's favour but it is oo
the United Klhgdom with the Housfihstglctlon Contracts Pecame mahdatow ih the action or inaction to be implemented, he will deal with the matter by
Act 1996. This Act has subsequent‘ gberants, Construction and Regeneration deciding the effect on the Prices and Completion Date using the same
Economic Development and COHSTFBI/Ct‘ en amended by the Local’ Democracy‘ assessment procedure that is used for compensation events.
the requirements of this legislate [On Act 2009' Unfortunately, 30""? °f
adjudication set out in the ECC lhgnit trhzt Corrdpatlble with the principles of The decision of the Adjudicator may simply be that the Project Manager or
for those contracts governed by these Acts. nee for a Separate Option (W2) Supervisor should have acted or should not have acted, but in certain circum-
stances h e m ay also decide what action should have been taken. ln the cases
in which he decides that the Project Manager or Supervisor acted or did not
act in accordance with the contract or in any other matter which he decides in
the Contractor’s favour, he assesses both financial and time effects if he has
been given the power to do so by the Party who referred the dispute.
In other circumstances, it may be appropriate for the Adjudicator to change
the disputed action or inaction. For instance, where the Contractor disputes
_.--
-._

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4_J
 3 Guidance Notes for the NEC E ' ' Explanatory Notes 3.
_ hg'heel’ln€ and Construction Contract
7

the di
Ad_ existence of a _D e fect, which
' has been notified by the Superwsl The tribunal makes a final and binding decision on the dispute, subject only to
J” Cater may decide in the C any appeals procedure allowed under the applicable law. lt is important to
be reneved of any ob" gation. to ontractors favour. if so
correct if corrective the Contttttttor
wo rk note that a dispute cannot be referred to the tribunal unless it has first been
the alleged Defect h ‘ .’ . has not
financiai d . as been corrected, the Adyudicator would deciztgt referred to (and in the case of Option W2 decided by) the Adjudicator.
Manager anSH" time effects
require add; _Howeve r, as in other instances should An important feature of the ECC is that the Employer is given a choice of
tional or remedial work then het may instr
. the
work as a change to the Works information Thi u tribunal and hence is required in the Contract Data to insert his choice, e.g.
sation event. - s would be a norma| ct; arbitration, expert determination, a disputes resolution panel or the courts.
However if arbitration is available under the law of the contract (clause 12.2)
lf the Adjuolicator disa ' it is stron g l y recommended that arbitration is chosen as the tribunal. The
greet’ W'th the Prflject ll/lanagers
’ assessment Q1
to the Completion Date - he w‘ill overrule the Project Managefs deciei c rationale for arbitration remains important particularly for disputes upon tech-
the Completion D E1 1 e Wl||
decides. - be set in . accordance with what the Adju nical matters for which an arbitrator experienced in the technical context of
i..
the dispute is preferable to the courts.
The
H Adjudicato r is ' required- to give . the Parties reasons for his decisi" The tribunal has wide powers to settle the dispute and is not tied to any deci-
ewel/er, no details are given in th O sion or action of the Project Manager or Supervisor. The referral of the dispute
ciated reas ons are to be drafted The e essential
pt'°hS of how this decision
requirement ' es.
is thatttt-[t|t1'tS to the tribunal should not be seen as an appeal of the Adjudicator's original
can understand wh th ' ' t P . decision. Therefore, either Party may rely upon new evidence and submissions
ment .t . di Y e Adjudicator has reached his decision and Catt“ ienrt.
I Imme ately. lt may aiso be at the tribunal that were not put before the Adjudicator.
p _ _ _ _ subject to caref I .
'3 any Who may be dissatisfied with the decision. tt ttttttttttt/' pamculellli
If the tribunal is arbitration, the arbitration procedure is that stated in the
ln his decision the Ad‘Judrcator
' should state the Precise ' nature of the d- . Contract Data. Such procedure generally deals with appointment of arbitrators
referred to him. The dec'ision ' might - comprise . the Acljudicatofs Q - - ,3 D“._ and replacement arbitrators and time limits. A number of countries have their
example,
d _ what the Prolect
' Managers - decision. . should have been pinion in 2%,, own standard arbitration procedures.
ance with the contract - It mi ght include assessment of a
event, what money is a bl b e°l'"l3ensat‘ lf the chosen arbitration procedure does not provide for the appointment and
Ptegramme are requirgdtttt tt y one Patty to the other or What Changes to replacement of the arbitrator, the Employer should include the necessary pro-
cedures in the Contract Data.
The latter_ point may cause d’ fficulty ' -
since ‘t '5
' likely
'
been revised since the eventt In defining those procedures, the following aspects of arbitration should be
.instance. there may have bee s which gave 'rise
' to thethat the program me hat
dis Pute took place. Fg included.
n conc urrent delays and subsequent dei
ThusDthe
no t decis‘ion s h ould be the effect of the relevant event upon the Corntltltitgt. ' On matters of procedure the power of decision should be given to the
h e e. assessed at the time of h arbitrator and not the Parties or their legal representatives once
take account of this doc‘ision ' 'in further t e revisions
eV‘.th.t' Theof Parties will then be able ta
the programme appointed.
Other matters which f t ~ The arbitrator should have certain qualifications which should include
decision are I Or completeness, should be included in the Adjudicatoirs
~ appropriate training,
' details of the contract, ~ the ability to manage an arbitration,
o details of the appointment of the Adjud' t ~ qualification in the area of the dispute,

Wh
.
I C~ . ica or,
, information upon Whvilieh by the Adjudicator. and
th C the decision is base-d_
~ qualification in the law of arbitration,
- available time for the arbitration, and
~ the ability to take an active role in the process.
ere e Parties submit contradct v As far as possible, the exchange of written statements, including experts’
f - - . . reports, should apply.
cator should summarise the arguhwethttts Zfihsmtttttetilgat tttttttttttttttttntt ttttt Attjttttt
decision clearlyreachegd l e t0 him , and then state his
givin |~,-is reasons. These reasons ' The arbitrator must ensure that experts know that their primary duty is to
to the decision should show how they led the arbitrator. and not to the Parties. . . . al
~ A limited timetable should be defined for oral hearings, with equ
Submission of a dis Dute under e - tn - _ sharin g of time between the Parties .
to cease activities. The Aggud,-Cattortt; gtegggqptlons does not entitle any Parr). ~ Case-management conferences at specified stages of the arbitration
mented. lt can 0 n | y b e changed by a subsequent'5 decisionhlhdmg of andthemust be imple-
tribunal, or by should be arranged in order to monitor time and expenditure.
I-

agfeernent between
action or in t_ th P ' - .
e arties. Should the AdjUCl'lC6tOftS decision change an ' The arbitration needs to take into account any other specific require-
_ ac ion and the Pro‘e t M . . ments peculiar to the particular project or its expected disputes.
Supemsws origmai action or {ngCt|oa]naegne|gis of the opinion that his or the
of the works then r subject to it b ' ‘ ' ms heeeesafil .
for the completion in the United Kingdom, the Institution of Civil Engineers and the Joint
‘lien. he is free to further instru emgt th
hmhed to e change in the
-
Works infor ma- Contracts Tribunal publish standard arbitration procedures. Please check with
mation under these circ umstan tt e Contractoh
' a compensation A Change In the
- event, as are Works lnfor- the relevant body tor the latest version.
changeS_ ces is all such the United
Arbitration procedures frequently used both inside and outside
Kingdom are
Revlew by the tribunal Once the Aefudicator has re a c h e d his " decision
' - the Parties
. put it, into
_ effect If
both are satisfied with the d ' " . . v Rules of Conciliation and Arbitration of the International Chamber of
eC’S'°h» that '8 the end of the matter. If either Commerce,
Pelt)!
to new is not
th satisfied
th wi‘t h_the_ Adj!-l'dl'CatCl’S
- - , decision.
. . they have a short period
_y e o er of their diss t f v United Nations sponsored UNCITRAL rules, and
dealt with, at any time in the futjret ttttttstt ttttt mttttttt can tttt ' The ACP/EEC Conciliation and Arbitration Rules, covering contracts
funded by the European Development Fund.

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 I ® |

t 3 Guida hee Notes for the NEC Engineerin g and Construction Contract Explanatory Notes 3

Option W1 T In the event of a dispute on an action or lack of action, the dispute may be,
This is the standard ECC 0 ption
' and should be used for an o for example
ontraots
those in the United K‘ - ~ an action which should not have been taken,
C°hSt'“°tl°" and Resertiggtttititth mtittoget ttgtttttted by the H°“Sing 0 the lack of an action which should have been taken,
- an action taken outside the specified time limits,
The Adjudrcator W1 2 The NEC Adjudicators ()0 t ' . . ' an action which is incomplete or ill-judged,
expenses are Spm equally bgtrstgténrfiqeuggiiggat the AOljUC|'lCafOj"3 fees .
v an action which is an assessment improperly made or incorrectly calcu-
_ _ , un ess less Otherwi lated,
The obligation of impartialit ' ttt agte
- . y IS fundamental to the role of Ad ' ' 0 an action taken without authority.
tluty is repeated in th N ' " » judi
different from that of in ggifirtgpodicator s Contract. The Adjudicator-rgtttstttittf .
For a general matter in dispute, either Party may submit it to the Adjudicator.
For matters concerning an action or lack of action by the Project Manager or
Wheh . the Adltudicator has n t been named ' Supervisor only the Contractor is permitted to submit it to the Adjudicator.
describ es t he procedures and
O time
. _
limits In 8pDOiI'iUr|g
for the Contract D - cla .
0ne8trEc1,etl’ilS
a I so applies where a replacement adjudicator is needed in tht ptttced . Thi S is because at all times the Project Manager and Supervisor are acting on
named Adjudicator is unable to a e event th behalf of the Employer. The only exception to this is the third item in the table,
d
°t- ThepartEmployer
nominating body in the Contract‘ Data one. should name th eAdjuorathat.' concerning a dispute about a Contractor's quotation that has been treate as
being accepted because of the default of the Project Manager, in which case
In accordance with the Parti es ' basic
' obligations under core clause 10 it only the Employer may refer the dispute.
are required to try to a gree the Adjudicator
. . _if one is not n _ h
contract, or a r The initial period of two weeks after the Contractor's notification gives the
th ep acement if the Aoyudicator is unable or unwilling to -'26,‘.
| - _ _ I, amed
Project Manager or Supervisor ' ' to take or amen d the action.
the opportunity
ey are unable to agree a choice tn I This p eriod of grace is intended to prevent the Adjudicator becoming involved
nominating body to choose and th at choiceeh_ either Party the
becomes mayAdjudicator.
ask the Adjudicatttt.
with matters which may have been overlooked.
The Aelfudicator
. nominatin8 body named in the Contract Data would Time st‘ipu I a tions are clearly set out in the Adjudication Table in order to avoid
be a professional - t - ' - - . n --
able person to act ms 't“-t'°h °' °'g?"lSat'°" _wlth the ability to Hppointoatnettiltt protracted exchanges and argument and to achieve prompt resolution of
as adjudicator witnjn the timescales set out in tn e contra¢t_I| disputes. However, some disputes can be complex and the times stated may
An existing dispute n" - - . b e 'in a pp ro p riate. In that case, and in other cases where the Parties are
ls automatically refetittetd ttehthteergtiltegztmen
Adtttdtgatot has hot
a judicator It ismade a decision
important tn continuing to negotiate a settlement of the dispute, they should agree to
the Parties
mation. Theensure
Hm th 8 tt he replacement adjudicator
. . -
receives all relevant infottt extend the periods set out in the table.
_ _es stated in the contra t f The final sentence of this clause makes the time periods set out in the Adjudi-
'hah'headjudicator.
ment thetlecisions then runs from tn; tithe titttappointment
tuhhll’ °t 'ht°im@tIon an-'5
of the replace- cation Table, or subsequently extended, time-barring. If they are not met, the
Parties loose the right to refer the disputed matter to the Adjudicator, and
Thls - Clause . protects th e Ao"judicator
' - employees and also, because of clause W1.4(1), to the tribunal.
possible claims fro ‘h t he Parties
' and his agents r
tors Contract it repeats a provision in the NEC Adjudtgétlt It is important that the Adjudicator has all the relevant information to enable
him to reach his decision. The Party referring the dispute is required to include
The Eld]l.|dlCEltlO|"I W1 3 This clause sets out ' tn e Adjudication
~ - . Table the procedure and timetable for full information about the dispute. The other Parties are required to submit all
th f _ in of their information within a further four weeks, or such other longer period as
e re erral of var ious types of dispute to the Adjudicator.
ma y be decided by the Adjudicator.
The first item
. in the table d ls with ' a dis t d - .
Or Supervisor and the _ secotitittttl it PU e their actionlack of the Project The
Mana Where a dispute which affects work which has been subcontracted arises, and
-item deals with_ the t ' em d ea I s with' - of action.
. third
get which may constitute a dispute between the Contractor and a Subcontractor
Whereb f _|U si uation that may occur under clauses 62_6 or 64_4 as well as between the Contractor and the Employer, there is provision for
y at re oh the pert of the Pro t M the matter to be resolved between the three parties by the main contract
attsessmeht of e eoihpensation eventtttitn I’ ance
actttcttctittittt with theehlmlhletei
to pthpehy contract may
the Adjudicator. This saves time and expense and prevents a dispute being dealt
lead to a Contractor’s - being
quotation . treated as aooe pted Und th' it ‘f with by different adjudicators who may make different decisions.
the
b t Employer _ _ disa grees with
' the quotation, . he may refer it - to the er Adjudicator
is em I
u only within the t . This proce d u re is onl y possible if the terms of the subcontract permit theF
disputes. tme hhthts eteteti The fourth item deals with all other Contractor to submit the subcontract dispute to the main contract Adjudicator»
The action in dispute under th - . The Adjudicator has wide powers to manage the adjudication and ensure that
e htst ltelh they be » for exam ple he has all of the information he needs to reach a fair decision on the dispute
' an instruction,
within the time limits set out in the contract. The Adjudicator must ensure that
° an acceptance
.. _ - non - aoo eptance or ' ' he uses these powers fairly and reasonably.
' a certification, teht‘tct'°h'
' an assessment, (8) This clause sets out the period in which the Adjudicator may reach his deci-
' a notification, sion, and the circumstances under which it can be extended.
' a decision. In complex disputes, and for other valid reasons, the Adjudicator may require
Each lhettuetlehi acceptanc e , no nacce
- ptanc e, rejection,
' - certification,
-- . assess. a period greater than the four weeks stated. For example, the Adjudicator may
ment - notice or decision
' ‘ is- a separate act|on_
. require time to visit the Site and may need to consult with other people to
help him in arriving at his decision. Consequently, whilst the extension of this
p eriod reOI uires the agreement of the Parties, it is recommended that any
extra time sought by the Adjudicator should be allowed.

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 Guidance Notes for the NEC En in Explanatory Notes
Q eerlng and Construction Contract
,_.—

(10) The Aoy'udicator's decision is b‘ ' When the Adjudicator has not been named in the Contract Data, this clause
-
wally obliged to act upon it - If ding u on tn P - ahd they a
ey fail-Dto do eso itames
can usuall ll be re describes the procedures and time limits for appointing one. The procedure
the courts, in the sa ' where a replacement adjudicator
also applies ' ' 'is nee d e d in the event that the
Obngation me Way. and to the same extent, as any other
named Adjudicator is unable to act. The Employer should name the Adjudicator
The. Aojudi'cator’s decision b ecomes final as well as bindi nomina t‘ing body in the Contract Data part one . In the United Kingdom there
neither of them notifies the 0ther within
- - the time set out"8' On th e are several adjudicator nominating bodies who are able to appoint a suitable
that he is dissatisfied ' ' - in clause person as Adjudicator, including the institution of Civil Engineers, which keeps
timescale Omy applieslgtihqita anrzgifigtends to refer it to the tribunal a list of suitably qualified persons for this role.
referral itself which can and normafi; '0?‘ Otf intention to refer and not to In accordance with the Parties’ basic obligations under core clause 10.1 it
I ’ W| 7 ake place later
(11) Once the Aojudicato h - - - ' will always be better for the parties to agree the Adjudicator, if one is not
role in the dispute woui? igfigziwsbgecisioqfind notified it to the Parties named in the contract, or a replacement if the Adjudicator is unable or
Subsequently correct an y cler ' l Over" '5 Clause unwilling to act. However, the Act requires that the contract has a procedure
. - gives
. . him
_ th <9 to ensure that an Adjudicator is appointed within seven days. This clause,
Period.
- . However 1 'it does not e ‘Cableerrorshim' toor hany ambiguities
-
within
a
decision or the reasons and i t na C C ange any Ilnpofiant_ Darts along with clause W2.3(1), ensures that that timetable can, in all circum-
annot be used to ie*0l3en the decision, stances, be met by a party wishing to refer a dispute to adjudication.
Review by the tribunal W1 4 A dispute cannot be referre d t '
° the tribunal unless it- has first
. been Any existing disputes on which the original Adjudicator has not made a decision
(1) the Afifiudicator. if tn - = are automatically referred to the replacement adjudicator. it is important that
with th . 9 _AdJUC7lCaI0l' does not decide the dispute, either at
In e timescales in clause W1 - 3 (3) the remedy for either P the Parties ensure that the replacement adjudicator receives all relevant infor-
_the tribunal
Clause to dec'd e tn e dispute,
W1_4(3)I1 " ’ only have a limited period
but they any is'toto mation. The time stated in the contract for the supply of information and
making the decision then runs from the time of appointment of the replacement
(2) The effect of this cla use is
' time-barring
- . _
If either Part is dis t. f adjudicator.
Adjudicatofs
di _ _ d ecision
' ' they have a short
' period to notify
y sa IS
the ied ‘mi.
other - This clause protects the Adjudicator and his employees and agents from
ssatisfaction. If neither Party does so within that period tn - " possible claims from the Parties. it repeats a provision in the NEC Adjudica-
decision becomes f‘Ina | as well as binding
the tribunal‘ , ebe
. . and it_ can no longer Adlhidicato
referrec|"I tor's Contract. it is also a requirement of the Act.
The bstated
can a d per'io d is
' only for the notification
.. _ of dissatisfaction. The dlSpul] The fldludicamh W2-3 The Party wishing to refer the dispute for adjudication initiates the procedure
6', n normally is, f ‘ (1) by giving a notice to the other Party, with a copy to the Adjudicator. The pro-
(3) The cedure also confirms or otherwise whether the Adjudicator is able to proceed
. effect of this claus e r-e e_rred_ t° the
- tribunal at. a later
. date.
with the adjudication
d|;5D'utt]e within the time pestigdnzettaoqiltnii Lfigsiiijoes not decidetm
a u er four weeks (from the date tn at the decision ' shouldenhave
either
b Party" he lS If the Adjudicator is, for whatever reason, unable to decide the dispute within
to notify the om th . een the time period in the contract then he should resign. if the Adjudicator does
neith er P arty doe er at they intend to refer the dispute to the tribug:;Tnll'
not notify the Parties within three days that he is able to decide the dispute,
mbunay S so w'th'n that Penpd, the dispute cannot be referred to the either Party may act as if he has resigned. In either event the Parties can
The stated period is onl y for the either agree a replacement adjudicator or either Party can ask the Adjudicator
"°ff -
' lcailfln - .
of the intention to refer iht_ nominating body to appoint one in accordance with clause W2.2(3).
dispute to the tr'b -
tribunal at a late: digit. The dispute can be, and normally is, referred to that
The time periods in this clause and clause 2.2(3) are, when aggregated,
designed to ensure that a Party can, in any event, have an adjudicator
appointed within seven days, as is required by the Act.
Option W2 This clause sets out the timetable for referral of the dispute to the Adjudicator,
which is a requirement of the Act. it also sets out the timetable for any further
This Qntion should only be use d in
' the United Kingdom and t h ' f he submission by the other Parties to the dispute.
contract
106 is a ‘construct
_ ion contract I within
. . the definitions
_ - in Sections
en only104
I l to
of the Housing Grants 1 C Ons i ruction and Regeneration Act 1996 as It is important that the Adjudicator has all the relevant information to enable
amended by the Local Democ racy, Economic- Development and C ct. him to reach his decision. The Party referring the dispute is required to include
ACT 2009 (the ‘Act’) if th . . onstru ion full information about the dispute. The other Parties are required to submit tall
con tr act comes within' those definit'ions
e Employer I8 he
In any doubt
should asfurther
take to whether
legal or not their
advice of their information within a further fourteen days, or such other longer perlbd
as may be decided by the Adjudicator. These periods are stipulated to assist
Dispute resolution W2.1 The phrase the Adjudicator in reaching his decision within the time limits set out in clause
this t_ I ‘at an y_In_1e
t‘ * is ' a requirement
- of the Act. The only practical limit to
(1) _'me I8 any limitation er Ci W2.3(8).
requirement of the law of thepcofitragpgrclfybrhetgpg?ica?i(')ntraCt' eitherX18.5.
ion of clause as a
This means that dis t ' ' Where a dispute which affects work which has been subcontracted arises, and
Completed hisw k pu es arising several years after the Contractor has which may constitute a dispute between the Contractor and
or may be submitted to the Adjudicator, ‘ a Subcontractor
' ' f rthe
as well as between the Contractor and the Employer, there is provision o
(2) In Option W2 and the Act I ti m e periods ' for adjudication
' ' ' are in
. days, which matter to be resolved between the three parties by the main contract Adjudi-
means that ‘day’ must be def‘ d - . . cator. This saves time and expense and prevents a dispute being dealt with by
Act 't is imP0rtant to note th a t me d ays' The
-
include Saturdays
def'"'t'°h andclause
in this is a s 'in the
Suhday5_ different adjudicators who may make different decisions.
The Adjudicator W2_2 The obligation of impartiality is
' fundamental to the role of Adjudicator The
. .
(2) duty is repeated
_
dlfferent from thatin of
theanNEC Ad ~ d -
arbitréiuoricator I s Contract. The Adjudicatofs
_ _ .
status is

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JL
 --"nest3 Guidance Notes for the NEC E . '
hgtheehng .
and Construction Contract

This procedure is onl Y possible - if th t

Contractorto submit thes ubcontract dispute tt etms ot the
to the ' Stthceht
m ain
OPTION CLAUSES
addition ' because of the tim e I ' ' contracttact
-
tmtts tetitttted by the Act it. .is not prac '
a subcontract dispute at the same "
time as a dispute under the tical
without the co-operation or main
reqwres. the agreement Ofthethe SubSubcontr actbefore
or. Foritthese
contractor can bereasons t tt
(4) tt X1: Price adjustm ent for inflation (used only with Options A, B, C and D)
the Adiiudicator has wide
-
he_thihas all of the 'In formation
pttwets to manage
he needs the aedjudicatio
to reach n and
fair decision on the
WI n the time limits set out ' th - . in the case of Options A, B, C and D, the. Employer should decide . how
. the. risk
elf
he uses these powers fairly ahtii retéietctjhrtitittttrtt the Attttttttctttot must of in flation is to be allocated . if he decides to accept all of this risk hims ,
he should include Option X1. . Without
. Option
. . X1, the allocation
I of the risk of
(5) it iS impgrtant that any dela ca inflation depends upon which main Option is used, as fol ows.
attogethet ’ the adjudication
with any instructions t yTherefore
‘ - used 'the
of the Ad.IiJdlCatOl’ bywhere either does
°he Party a rty notd d etty’
I 0 For Options A and B the contract is firm price and the Contractor carries
adjudicati onp continues - o es not
also apply if a p arty refused to take any part in the adjudication. t This . all of the risk of inflationary increases in the costs of labour, plant,
materials, etc.
(8) This clause sets out th ' - - . . ~ For Options C and D the risk of inflation is initially borne by the Employer
and the circumstanceseupggpamcighlch i canthis eAdjudicator
ext en d ed. itmust reach
complies his
. deci
- with the . as he pays recorded Defined Costs, which are effectively ‘current costs’.
In complex disputes . and for oth er valid ' reasons, the Adiudicator . . m The risk is subsequently shared with the Contractor through the applica-
period greater than the twenty~ei§ht days stated For example th aiii tttttttt tion of the calculation for Contractor's share, clause 53.
may require time to visit the S‘ ' i e riiudict For cost reimbursable and management contracts (Options
heip him in arrivin 8 at his - decision.
'te_ ahdCmay need to
onsequently, whilstconsult w'th
- the' extension other p90pl'r ts areE and F), the
of recorded
Employer already carries all of this risk since paymen
period
th t requires _ the agreement of one or both of the Parties, it is recommtgn. Defined Cost. These are ‘current costs‘ and automatically include for price
T a anyetI xira t ime sought by theAdjudicatorshould be allowed. - increases occurring since the contract was signed. Option X1 is therefore
he Adjudicator has the power to d .d irrelevant to Options E and F.
expenses between the Parties . 1'-‘OI e how to allocate his fees
- T his
. clause which is required ' by the ' '
means that the Partie h . r The source of the published priced indices to be used should be identified in
AdJtudiCatorYs contr t5A“eVe_ agreed to implement the provision in the " Defined terms X1.l
part one of the Contract Data together with the proportions of the ‘ totalade
value
for
ac °W'"g the Parties to a gree that these fees of the works to be linked to the index for each category. Allowance is m
expenses will not be shared equally
(10) If th B Adjudicator fails to make hi S decision a non-a d’jUSt a ble p ortion which represents the portion for which the Contractor
' and notify it to th e Parties ' witi carries the risk of inflation. The total of the proportions should be one.
the ti”‘ee°e'eS required
the Parties ln that case
in cl ause W2 t 3(8) he is in breach of his
' co tr ct ' ' Also entered in the Contract Data is the base date, which should normally be
- - the Partie - . . h a four to six weeks before the latest date for submitting tenders.
t tmeScate'
- '
Attethetiveiy '
i either S Ycan
P art agree
may treatwiththetheAdjudicator
A_dJ'UClilC8f0!'
. asa revitst:
havirf
testghed by Drocu' t - One of the effects of the calculation is that the non-adjustable elementdin the
Clause W2.2(3). ttttg he appttmtment Qt a tepieeemerit adjudicator uniiut ' ' f
formu la affects the amount of payment for price adjustment ma e or
(11) Ti19Adjuo'icator’s decision is bindin u 0 th P compensation events. For example, if a compensation event is assessed some
obliged to act upon it . If they fail' to gdo spo ttI‘t can
e usually
antes and theY ere in ‘ done, the Contractor does not recover the non-
. be enforced the couri=_.'
contractuall time before the work is
"t the eerrie Way - and to the sa me extent, as ehy other contractual Obilga[|()n_ _ _ adjustable element on the increased costs for the period between the assess-
ment and when th e work is eventually paid for. This is similar in principle to
The /iCiiudicator’s decision become ' the effect of the non-adjustable element on originally tendered rt‘work,from
namely
‘ the
ithtatttrtite Qt that the Contractor does not recover the non-adjustable propo ion
tim is Them ttptifieswith
dissatisfied the itother, ttvitttltitiht ttit1ttetttithtiteastt
and intends to refer itettttndtttg on the W2-4i2i
out tn htause Patttett
time when e th tenders were prepared until the work is paid for. The effect is
escale only applies to the notification of ‘ ' O the tttbunat Note tth not penal provided the non-adjustable element is kept to a small proportion of
referral itself which . can a intention to refer and not to tilt
i Y nd normally will i take place later. the total factor. A maximum of 10% is reasonable.
(12) Once the Adjudicator has m a d e his ' decision - - and notified .. it_ to the P rties his If a compensation event reduces the amount of work to be done, the effect is
tote in the dispute would n ormall b - . _ e Opp osite and the deduction from the Prices is less than the full amount;
st‘ b eeqllently correct a clerica i Or V e over. This clause gives him the right ii-
typographical error which ' has arisen tit according to the proportion of the non-adjustable element.
accident or by omission ! as required . by the Act
Qui‘te ofte n, p rovisional index figures are published which are corrected to final
Review by the tribunal W2 '4 A dispute
(1) . cannotIfbe
the Adjudicator thereferred. to thed tri‘lb una! unless
AdJud/Cato it- has_ first b efin
. Price Ad‘just men t F act or X1 . 2 figures at a later date. The first part of this clause requires re-calculation
- . d8Cld€Ci I7! '
using final figures '
where these are different ' ' nalfi g ures.
from provisio
within the timescales in cla t Des not dechte the dispute, either at all or
.
a hp Olrlt - -use W2.3
a rep la Cement adjudicator . is)’
using the remedy
clauses
.
W2 3 for either Party is ti; The second part of this clause has the effect of freezing the Price Adjustment
Factor at the Completion Date for the whole of the works, thus requiring the
(2) The effect of thi
. . 5 Clause
' (10) ahd W2-2(3) Contractor to carry the risk of inflation of the cost of work done after this date.
,qq,ud,,?at0r.S decision theyishave
time-b ' éfeither
a slrgrptg. - . dissatisfied
Party is . witht the
It should be noted that the Completion Date is the date by which the
tisfaction. If neither Party does so withinptélod to notify the other of their dissa. |
Contractor should finish the works, not the date when he actually finishes it.
becomes final as well as binding and it c at period’ the Acfiudicatofs decision
ah ho teiiéier be referred to the tribunal.
The stated period is om y for th e notification
' ' - of dissatisfaction.
- . _ The dispute
ea" be. and normally is ! refe rred to the tribunal
. at a later date_

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 Secondary Option Clauses 6-
— Gui dance Notes for the NEC E ng'"ee""8
' ' and Construction Contract
--— 7

' t s in clause X1 . 5 determines the inflationary

The first of the two bullet poin
If there are section - .
if earlier sections :rleCflr:i§hZtdOl::t(Obpt|on X5)’ the effect of this component of the increase in the Price for Work Done to Date since the last
Contractor Wm be paid price adjusetm ut before the last Completion GSSGSSFTIBHT.
System in order to avoid the difficfilntt on late work. This is part of
section has been completed and subd' I‘? of subdividing payments Example Assume the increase in the Price for Work Done to Date for the assessment is
Contributing to Various Sectional Comivgi ing the calculation as between £5,000 and the Price Adjustment Factor is 0.05 (i.e. 5% inflation since the
contentious calculation. petlona Tms mum be a —----i»-ex base date). The calculation for the first bullet point in clause X1.5 is
1 PWDD X PAF
In theafter
We“ extrem .
theerfigfiqe tcgdi; l;Jef|Elt’EZBl3(VOSl;l6l|| amount of work having to be"
exposed to inflation payments if later ,_ the main body of the work beco"
PWDD (1 tim) f WW?
of work to be done men The ECC h Slmply because there is a small vol! .i.e. 5_,o0o><o.05:238_10
1.05
Shomd be borne in mind when was almeans of avoiding this Droblemw

filil fi2L°i’2‘b§‘;”°'“ pdelifiil ?n°?i

lf, ?$'l ’$;kl“‘.?1ii§.§,‘;t‘?‘°'“ °l The sum of £238.10, plus any correcting amount resulting from the second
one - . .
ee . °l ion bullet point, is the price adjustment amount for the assessment and is added
to the total (or Total) of the Prices. The result of this calculation at each
assessment is added to the total (or Total) of the Prices to maintain compar-
Cflmpensation events x1_3 Underofclause
Cost Work 63.1 c - events are assessed on the basis of
a|reaay0S;[I?|gl'lgfiEl0]l'l '
ability with the final Payment for Work Done to Date.
Cost is assessed using the Shortgreggsét (Defiged Cost for future work.
the payments to Sub - °r '°“°“S A arid B) or the Scc
C°“t""‘°t DamWmWherecggrgggfigi
Defined Cost (f19h Opmnsp
be in current grmseaelsult am D)
is that, in COHi'unction
in the general casewith X2: Changes in the law
base date terms - wh may O the day) and Some will b
Contract Data. This cl:$seaiF:§uE:seofi|?(:yt%§ 1? nd Equipment are Stated me Changes in the law X2
that changes to the P " "_ 6 Ined Cost to base date le | X2.1 This clause removes from the Contractor the risk of changes in the law which
base date term s. When"ces for Compensation
assessments events due
of the amount (clause 63.1)
a re ma a re Ve
d 9. The occur after the Contract Date. in certain countries,hi such changes
ability canprogress
to make have a
Price fry" dramatic effect on the Contractor's costs and on s
Work Done to D t ' - . .
X1_5_ a e Wm be adlusted for inflation under clause X1.4 or to complete the works o n time . Only changes which affect the Contractor’s
costs are included. Thus changes of law affecting the following examples are
lf Option X1 is not 1 . not compensation events
Defined Cost, which %Z:?5at|9lrl1
hm/ems are Sm assessed “Si”! Q income tax or any other tax paid by employees,
base date
. costs Tenderers wi ll need t ' WI -e a mixture of current C0$5 a"~l'
_ - rate
for the mfiat|On that they Wish ts i<;1(‘;r|1Ls(ijder the amount of contingenq v corp oration tax or any other charges on profits.
Shorter SCC stated in the Contract Data e In the rates for the Sec °' l Changesof law affecting the following examples would be compensation
events
Price adjustment x1_4 ‘Each amount _ _ due’ is the mt al to dat . 0 employment tax paid by the Contractor,
options A and B due are certified after each assessmegt edra(':eo(n(:|ll the Changes In the amoum
~ import duties,
the three bullet points listed in clause X1 4 ause 51.1% Thus the total of
respect of price adjustment up to the date of eghrzsents the total amount in ¢ customs payments.
ssessment.
For the purposes of this clause, law would include a national or state statute,
Example Assume the increase in the P ric
‘ f W . ordinance, decree, regulation (including building or safety regulations) and
;£h5,%0O and the Price Adjustmefit ggC'[(?FnEPl?\(:;';€);oQ[€)al:‘:e('ln tge assessment ie- a by-law of a local or other duly constituted authority or other delegated
E ase date). The calculation for th e first
- bullet point f _in i.e. % inflation
clause x1_4 is since legislation.
£5,000 >< 0.05 2,5250 I The Contractor may notify the Project Manager of a compensation event under
The sum_ of £250 ,plus the tot I f h this Option, using the procedure in core clause 61.3. He is most likely to do
.In previous assessments pm: gnt (e sums resulting - from the same calculation this when a change in the law has the effect of increasing the cost to him of
bullet point, is the amount for Driceyadfiunrftctlng amount resulting from due
the third Providing the Works. However, the clause is reciprocal in the sense that the
S ment included in the amount Employer gains the benefit of a change in the law which reduces costs. i~
Price adjustment X15 Adjustment for in ‘ .
Options C and D the total of the i‘E’L»§§Eg‘E‘>°§l“¥"f‘f
'8 ne°eS?a“/ ff” the Calculation of
only used to camumte the ContraCt0r,s0E| of the Prices (Option D). which IS
thelamoum due This arises because ti age. and not the Periodic payment of
Defined Cost plus the Fee. Defined C et 'nCe for Work Done to Date is the
includes any inflation occurring sinceosthls Current Cost and automaticauy
Contractor's share is calculated from th dif base date‘ However’ since the
C) or Tow (Option D) of the Prices andethl erence between the total (Option
two must be Compatible in terms of all e Price for Work Done to Date, the
Prices for Option C is derived from tn Owanp? for '"flatl°"- The total of the l
the Prices for Option D is derived from 31 Activity Sched.u.'e' and the Total °f
must be adjusted for inflation. e BI“ of QuantmeS' It is these which

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it
 _ 3 Guidance Notes for the NE C En ' ' . Secondary Option Clauses t
s gmeeflng and Construction Contract
Option X3 Multiple curren '
mes (used °"|Y with Options A and B) X4: Parent company guarantee
Mtlltlllle currencies X3 Provision for mu|t[ Ple currencies in 0 ptions
" C and D is made in '
and in Options E and F ' Parent company X4
Options
. A and B. in c l ause 50.7. Therefore this
. clause is cn|y guarantee X4.1 Where a parent company guarantee is required by the Employer, it should be
provided by the Contract Date. if that is not achieved, a four week limit is
This Optioninis morgl
use mnaenn gni:
- - .intended that payment to the Contract provided as a fall-back. Failure to provide the guarantee within this period
be made i’ entitles the Project Manager to notify the default under clause 91.2. if the
changes should be carried b tl':iur§nCy and that the "Sh 01‘ 0 Contractor does not provide the guarantee within a further four weeks, the
by the Worm Bank on devgo 9 mivloyer. it is based on the proced Employer is entitled to terminate. The form of the guarantee should be
Contractor is protected from tfiment funded projects. The effect is ure included in the Works Information in part one of the Contract Data. if the
take place after a fixed date as ihteyrglltgyt ilxchange rate Changes which Employer wishes specific provision for the Contractor to price the guarantee
C eslgnaied Parts of the wort, separately in his tender, an appropriate item should be included in the activity
ll‘ an item is to be paid' for b tn E - " schedule or the bill of quantities (if any).
the Contractor chooses to gay €fornliPk2:~eL;1t|Z; Qturlency Of the
Contractor carries
' the ~ k ' . I . in another Current;
Contractor is not affectelj. of Changes In the exchange rate" Payment
If, however, the total . X5: Sectional Completion
expressed in the currencgy hzethzrlfes at the Contlafi Date, Which will
payd by the Employer to the C ontract,I includes items identified as»,
Sectional Completion X5 This Option should be included when the Employer requires parts of the works
takes the risk of any moveme ffltfector in another currency, the 0.
putblished exchange rates statgd |l1ntl1l$eeC(gh?nge rate after the date °l' to be completed before the whole of the works. The parts are called sections,
is ing the ite ' Fl tact Data. Thi ' - each of which should be identified in the Contract Data part one, with require-
for each Currellxylzletgfivgotrgrgct Data and fixing the exchang: rljrstglfiied ments for the work to be done by the completion date of each stated in the
Contractor is paid the amounte currency of the contract. This ensures th Works information.
the item of the other currency which he has quotgtti
Once Completion of a section is achieved the Employer takes over that section,
see core clauses 35.1 and 35.3. The Employer then assumes the risk for
option X3 with Option X1 When Option X3 is used in a . loss, wear, or damage to that section of the works, with the exception ‘of
index used in the formula fOlP€3|l'?(:gc;(;lA'/Slch also includes Option X1 and ii~ certain events, see core clause 80.1. The Employer is required to give access
'
;2atL1?:(;orl1Jtntry _
of the Site,_and s
covers nlatelliqzflrstnlhictlwcglreo . ’ publlshlfi
the Sue.’ OI
to the Contractor to any section that he has taken over if it is needed to
between thy, the index Will take account of currency ex hflormally imported 4. correct a Defect, see core clause 43.4.
Should te Suppfymg Count“, and the importing Cou to ahge rate variatiom. E lo er wants the Contractor to
Sectional Completion is best used where the mp y
X3 ,0tn etwtse
n0. also be covered
a double by the multiple
compensation curre ncyn arrangement
forexchan W‘ Any Such material"
in Optiriai complete a defined p h ysi‘cal p art of the works so that he or another contractor
ge rate variation will result can take over that section entirely. Once a section is completed and taken
If an index used in the fo ' over the Contractor would not be expected to carry out any other work to that
. _ _ rmula is an inde " -
section, other than the correction of any Defects.
’?hg°lT)modity it will _“0t reflect changes lnpggllselhizd In the country or origin G
. un'E'7_ of origin and the country to ' y exchange rates betwee"
supplied. it is then appropriate if Option X3 - Which the commodity is being Examples of sections could include the following.
in the list of items for payment
, in
- a Se dls used’ to include
_ UTis commodity
' - ~ Completion of a major Plant item for commissioning for the Employer's
Contractor from currency exchange rate vglpatighlgency in order to protect the use ahead of the rest of the works.
~ Completion of a floor of a multi-storey building so that fitting out by
The Employer should state in the can Others can commence.
gjxlelfgr in currencies ‘other than thga§;r?§»l:yWgrCPh'temS of Work are to be
rates t ies are, the maximum amounts payable in e he Contract’ What those ~ Completion of a new ac cess route into the Employer's facilities to enable
o be used in calculating the payment s andactheir ‘?"l'Fe"Cy, the existing access route on which part of the works are sited to be
date ofthe exchange
publication. closed.
Exchange rates are usu
. _ of tenders.
for submission ally those publ'IS h ed some two Weeks befoi?-3 the date
On a multi-contract project, the Project Manager or Employer will often require
The limits to the amounts a able . the Contractor's work to have achieved a defined Condition by a certain date,
without necessarily being complete. in that case it will be better to define that
llghgact Data Any
than e'pa'yments duelimit shgulli be sretegtfflfictlelhtjnlwy
to compensation events re yuirlglwhould be Stated
to allow for any inaddl
the Condition by using a Key Date. Examples of where Key Dates, rather than
sectional Completion, should be used include the following.
relevantvisaged
currency.at‘the Contract
no limit’ Date.
should if there is hlO |''m't
be entered ng more
Oh theofamount
any Currency
of the ~ The Contractor’s design having reached a defined stage to enable infor-
mation to be passed to Others so that their design can proceed.
- A wall having been built to a certain level so that Others can start to fix
their plant to it.
~ Completion of some, but not all, of the works on a floor of a multi-storey
building so that Others can commence their work, which is to be carried
out at the same time as the remainder of the Contractor's work on that
floor.

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 -"nec 3 Guidance Notes for the NEC Eng'n9ellllg
'
and Constructio n Contract
Secondary Option Clauses 3.
—"".=.

Further explanatio f . Appropriate entries for delay damages should be made in the Contract Data.
notes to Section 1"“ ° Key Dates. with examples, is given in the Eltpii They may comprise loss of rent, loss of profit from a manufacturing facility,
costs due to delayed start of another contract, or simply interest on the
Cflmpletion of the section S ''3 fouowed by C0rTlpIetion of the wh0| capital invested in the project for the period during which the Employer has
works. However it is not n .
works Any pang of the Workzcessalll to define been deprived of its benefit. The Employer is advised to keep a record of the
- a within
th a t are not defined section for all DarteS
. . a sectio calculation. Damages greater than a genuine pre-estimate constitute a
to be complete when the whole of the works is complete. n are re
penalty and are not generally enforceable under English law.
When
h definin g sect"ions to be completed earlier than the whole of the
lf Option X7 is used and no entry or a ‘nil’ entry is made in the Contract Data,
t Wght
- must be given ‘[0 h it i s likely that the Employer will be unable to recover any damages if the
section. If access is neededotnhrthe Emp loye r or Others can gain
. ac
- w . ll
taken over, this - W8" Darts of the works that have not
cess l Contractor fails to complete the works by the Completion Date.
tion l lequlre careful and full explanation in the Worksfi it is also emphasised that. if Option X7 is included, the deduction of delay
Each section has a com l ' . damages once they become clue is part of the assessment made and certified
by the Contractor Dela l9 etion date, either stated by the Em I by the Project Manager (clause 50.2). They are not deducted by the Employer
- Y damages and bonus for earl V Completion
P 0)/er
canorbetendI from the Project ii/lanager‘s certified amount due.
to the sectional Completion Dates by using Options X7 and X6 _ re f tional Completion, an
Completion of a section of the works does not aff t th V respectwelyl lf Option X7 is used in conjunction with Option X5 or sec
. of the whole of
d efined by reference to Completion 90 the eworks
defectsLike
date. wh-lCr estimate of delay damages should be stated in the Contract Data against the
w Completion Date for each section. A separate entry should be included for
Qption
I X16 is used . tn e dates when retention is released are. not atisctgg delay damages for the whole of the works.
ealy Completion of '
Completion of the wfiolsgbfiftfleongfisworlgsflas
an they are
e issue defined
of the by reference
Defects Ce rtificatg
-~ Since delay damages are amounts to be paid by the Contractor, appropriate
deductions are made in the first assessment of the amount due occurring
after the Completion Date, and in subsequent assessments up to the earlier
Option X6: Bonus for early Completion of Completion and the date on which the Employer takes over the works.
if the Parties wish t0 l‘im it the total delay damages for the whole of the works,
the entry in the Contract Data should be amended by adding ‘with a dmaximum t the
B°"‘"5 l°l early Completion xs total amount payable of...'. Similar amendments should be ma e o
X5-1 Where Completion as earl Y a s possible
' would benefit. the Em lo r h . Contract Data if it is intended to place a cap on the damages for particular
the works or of a sectio f P YB , w eth ;' sections of the works where Options X5 and X7 are used together.
motivate the Contractor to” °achi
the “’°”‘$- the Employer can use this optioirzi
accordance with. this, clause - eve early Completion - The bonus c alculated in' This clause protects the Contractor when he has paid delay damages and a
will be lnclud 9 d 'll'l the assessment occurrin erl X7.2
Completion. or Workse
at tn rirst assessment date after the date when the Emplfiveri later assessment of a compensation event results in a delay to the Comple-
takes Over the tion Date. This could occur when a compensation event arises at a late stage
in the work or if an Adjudicator or the tribunal changes the assessment of a
compensation event and their decision is made after delay damages have
been paid. The Employer is required to repay any overpayment of delay
option X7: Delay damages damages with interest.
f h ks before Comple-
X7 .3 Under core clause 35.2, if the Employer uses part o t e wor
Delay damages x7 tion is certified he is deemed to have taken over that part when he starts
X7.1
Dewy damages are li quidated ' dama - _ using it, unless the take over is for a reason stated in the Works information
or to suit the Contractor's method of working. ln that case, the Employer has
com.p|e’FF»‘
Opflon the works
,3 mcmded by theContract
in most ComplegggU be‘?a e.byIt the Contractor If hethat
is recommended fansthis
H
had the benefit of using part of the works and it would be unfair to levy the
Systems. if itEmpioyer
is not included de|a§"da"r2egE"glIsh‘law and some other delay damages in the contract applicable to all of the works if the Contractor
Open to the if thefcon a ' es are at large,
tractor falls and the remlegal
d subsequently completed the rest of the works late. The delay damages are
Completion Date is to brin éi an action fOf 0| Elmages T0 Qfimplete the works by 9the5' therefore reduced in the proportion that the benefit of the taken over part of
for the Contractor’s breach
of contract in this event ' the works has to the benefit of the whole of the works. it is important to note
Employer is required. em ence Of the actual damages suffered by the that when calculating this proportion the actual (or assessed) benefits knovyn
. I I d

at the time of the calculation should be used, not those assumed when the
The amount of dela
I Y damages sho Id .
the damage which the Employer \/all sll.i(l’tte‘?X(aeed delay damages were originally calculated. This proportion is then applied to
S a aresult
genuine preestimate
of the of
Contractors the original delay damages. This can best be illustrated by the following
breach. They are described as dela Y <31 amages in - the NEC famil_ of tracts example.
as these are not the onl y liquidated
' ' d amages. Others are lowY performance
°°"
damages (Option X17 ) and intere
" t f . The contract is for the construction of a factory to build two types of
51-2. S 0" delayed payments in core clause widgets, types A and B. This has separate buildings with production
lines for each type of widget and the Employer calculates that he will
make £5 , O00 p er day profit out of type A and £3,000 out of type B.
He decides that he wants Completion of both buildings to occur
£8 000 However
together and therefore sets the delay damages at , . ,
the Employer takes over one of the buildings first and starts making
the type A w id g ets . Meanwhile, the market price of both widgets
has changed so that the Employer assesses he will make O0). £4,000
out of type A and £5,000 out of type B (total now £9,0

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L
 -="'noci3 Guidance Notes for the NEC E ngineeringjand
' - Construction Contract
=-—
Secondary Option Clauses t

The Proportion of th - There are many scenarios in settin g up a project . The NEC family of contracts
t€a€;<%n03ver to the nzvyelggzresfiiiegf iii“; Fhaeflv?;,Ege.W°rks SH“ to with the Option X12 is sufficiently flexible to deal with them. For example, an
- .i.e. five ninth .Th' - - .'S "°W £5.00 initial contract may be a Professional Services Contract with a Contractor for a
level of the delay darfiage: tgogrgvtilgg Efiléhfqlappiled to the 0 feasibility study. Subsequently that Contractor may do later work using the
for the remain""18 Dart of the works not yet taken
0 owing ECC. The Contractor may be a Partner during both stages of his contribution
aver delay to the project.
£8,000 X 5/9 : £4,444
|f 9D’£ion X6 is used with Option
' X7 tn - - Contract Data The Client is the Pa rty fo rwhom the projects are being carried out. He may or
Ci amages that are applicable
_ . e of
to a section sam - to The
tn: v€$'.2_p'e apphes for Option X12 may not be the Employer depending upon how far down the supply chain the
contract is. The Client is named in the Contract Data.
' for the ‘programme of projects‘ if more
The Client's objective is the objective
' ' '
than one or for ‘the project’ if only one. The Client's ' ' s h o uld be
objective
Option X12: Partnering expressed quantitatively if possible (the business case). It should also include
Partnering X12 the partnering objectives.
Adarq
Partnering contract
NEC contract Om b - only. is achieved by using a
sPea(ijrt]ies Partnering information includes any requirements for
parties working on the same project of grroDgflrtnering
ramme ofbetween
projectsmore than
Option X12 should b - |r| iha t v use of common information systems,
which each party hasewlfifdhzsbgdsecowndiary Option common to the cont " v sharing of offices,
who havetothis Opt'Lzntilclgsjegcgnpglgtejr
' - y “Y ‘Ccontracts
'3 Paying ~ attendance at Partners’ and Core Group meetings.
intended make are for
all its
thework. Th .
bodieSeW[l)i?,"=. ' P articipation in partnering workshops,
- X12 does not create a lTlU|ti-DagFtye(?OrT]1tlgCEfi]0uId
that Option erin t _ be noted howe ~ arrangements for joint design development,
v value engineering and value management,
The content
nermg, of 0 t" X1Cgngstrdetrived
pub"Shed[L}lIOtl'll1e - - from the ‘Guide to Project Team pai; ' risk management, and
~ other matters that the Core Group manages.
of the CIC document that are t|0al‘1Ir|é1dcl1JS1l_TY
Council (cic). The requiiemerti
clauses are covered .in Option X12_ a Y in the NEC core and main
. Optiq This informatio n should not duplicate requirements in the Works information
or other sections of the Contract Data.
The purpose
contract basisof forDrlr§>JI|ti>_(;la2rt
O t‘ -is to establish
. the NEC family as an effectiiiii The additional Contract Data for the Option, like other Contract Data in the
intended that the range of ya l0aFrtnering. As with all NEC documents ith NEC contracts, does not change. The Schedule of Partners and the Schedule
Option X12 can be used for pp ication of this document should be wide. of Core Group Members, like the Activity Schedule and other schedules
referred t0 'in Contract Data, do change from time to time. The following are
' partnering for any number of ' - samples of the typical information required in these schedules.
° international projects, -prvievti.
' prolects °f any technical composition and Date of last revision: . . . . . . . . . . . . . . . . . . . . . . . . . . . .
° organisations as far down the Supply 'chain
. as requireq_ The Core Group members are the Client and the following.
Parties must recognise ma t by enter‘mg Into
' . includes
.
l l
a contract which Option
X12 they will be undert k‘ . .. . Name of l Address and contact details Joining date Leaving date
NEC contract. a mg re5p°n5|bl|liZl8S additional to those in the basic Partner J -
Ii -L

A dispute (or difference) be-iw l .

between themselves is resolvedeg; tzingers Gmo do not. have a °°"tFa°i .l _ l

l l'_
mailages the conduct of the Partners in a ore mull _This is the Group that
mation. lf the Core Group is unable to remirdance with the Partnering lnfor I L
| I.
“Pderihe procedure of the Partners’ Own CS0 Ve the '.Ssue then it is fe$0|vBd
with the Client, who will always be involv dontracts, either direcuy or indirecuy
chain. The Client ma e . at some Stage in the contractual i'—

simu|taneously- y Seek to have the ‘SW65 On all contracts dealt with J Z ‘

'— ,-
Because Option
_ X12 does n ot ore t '- .
direct remedies between non-conirscgnrgugaigany Contract It does not include i'_ -‘ i
by one of them caused by a failure of the oth Her; to reCOVer- Iosses suffered
to each Party to the contract (i.e_ the Em I0 er. uch remedies are available
giro andfmain Option clauses but only fgr {fie (binge i?°fitra°t°') Within the
lures Q a Partner who is ‘OW’er d own the Contractor sr suppiy a y’s chain
failures or the Example of Schedule of Core Group Members
The final
_ sanction a gainst
' an Part - _
X12 is for the Partner who ern/ployerdetrhvenmonfgtlts0t9invite
apt as Stated In the again.
Option Identified and defined X12.1 The Contractor becomes a Partner when his contract with Option X12 comes
them to partner terms (1) into existence. Other participants, including at least the Employer and the
Client (if they are not the same), will already be Partners. Other parties
b eco me Partners when their Own Contract (which includes Option X12) comes
into existence. They should then be named in the Schedule of Partners and
their representative identified.

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it
 ® |

3 Guidance Notes forthe NEC En g ine ering and Construction Contract Secondary OPti°" (“auses t 5

(3) Not every Partner is a member of the Core Group. I- l_ T7“

(5) There are two options for subcontractor Partners with regar d s to the 0
of bonus/cost associated with a Key Performance indicator (KP|)_
amount payable cascades down if the schedule allocates the same 6
cost to the main contractor and subcontractor, or the main contractor targetsorach'eve*d
the bonus/cost and does not pass it on. f
Amount
thepayment d
UPO"
mprov
I ‘Misti 2"
__‘ —| Q _1

An example of a KPI is set out in the explanatoiy notes for clause

which follows.
Working together X12.3 Th e C ore Group organises and holds meetings It produces a d
. n
(5) records of each meeting, which include agreed actions. instructions
Core Group are 'issue d in
' accordance with
' the Partner’s Own Contract
case of the ECC incorporating Option X12 they are issued by the Measurement ar angement .L|_ -
Manager to the Contractor. The Core Group may invite other ii I D |—
people to a meeting of the Core Group.
(8) The Partners should give advice and assistance when asked, and in
whenever they identify somet hi ng that would be helpful to another Partner
(9) A Subcontractor or consultant that the Contractor intends to employ for Target
project may be a Partner, but the general policy on this should be _] . i l
_l
I _l
the beginning of the Project. The Core Group should advise the TFFEZWY
the outset if a Subcontractor or consultant is to be asked to be a Partner
Contractor. should not appoint a Subcontractor
G . . . or
. consultant who the
roup decides should be a Partner if he is not willing to be a Partner.
Paof
rtners
Incentives X12.4 if one Partner lets the others down for a particular target by poor
(also X12 2 (1) and (1) then all lo se th eir' bonus for that target. Therefore, all must work togeth nd'cator
X12 3(3) ) ' to achieve
partnership ' the targets. Targets are not achieved by coercion. er PKey
erformance L_ l1
J _- —| | -
If the Employer tries to prevent a target being met, he is in breach of sq
clause 10.1.
There can be more than one KPI for each Partner. KP|s may apply to
Partner, to several Partners or to all Partners. Leav
n8
date
| L ‘_
,_..1i.
I T‘ ‘ Bschedu
Examp
oef
An example of a KPI V6.
KPI Number of days to complete each floor of th e b ui I ding date
framework Jo
HnE. | _] I — F i‘ ‘
Target 14 days
Measurement Number of days between removal of falsework from the ncent
ey
entire slab and from the slab below
Amount Main contractor — £5,000 each floor
Formwork and concrete sub-contractor - £2,000 each floor
Structural designer -£750 each floor
ContOnfbut Veobjandect be
ino
to
"n0fl
(2) The Client should consult with the other Partners before adding a KPI. The 144,.-‘
effect on subcontracted work should be noted ; addin g a KPI to work which is
subcontracted can involve a change to the relevant KPI for the Subcontractor V

and/or Subconsultant. t5here

detStacta
and
addres OH '1‘t
umn
co
ve’Representat c ,_ _,| 1 I -‘ ) )

the
asn
__
-_

oS
FGV
8811
n
Pareof
tner
am J J l I *Ennter
fo
"E-
othe
Paarehe
wrtners N
Datofe T

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1
-
 F Secondary Option Clauses ‘-' Llww .1
_ Guidance Notes for the N EC Engine e""8
- and Construction
_ Contract
—-

If the Employer wishes to make specific provision for the Contractor to price
Option X13: Performance bond the bond in his tender, appropriate items should be included in the activity
schedule or bill of quantities (if any).
Performance bond X13
if the Employer is late in making the advanced payment, the financial conse-
X13-1 Option X13 shou Id be used where a performance b d . _ t quences for the Contractor may be significant. For example, he may be unable
Employer.
D t I If hThe_ 0on tractor should, ideally, prov-tde theonbong Siqtiitge to purchase or mobilise the Equipment he needs, which could delay the works
<3 6 t at is not achieved and lead to him incurring additional costs. Therefore, the normal provision for
-
Fatllute _
. the bond Withézn friiur week limit_is provided
to prowde as a r
hottty the default under I IS period entitles the Project interest due on late payments (core clause 51.2) could be inappropriate and
bond Within a further fourcwaetgte If the Contractor does not Ira it is replaced by the assessment of the effects of the delay in making the
5’ 9 Employer is e " . m advanced payment as a compensation event.
The
tion form of tnar$]ol:2'I0c;'fn't%nCe
and the “Wedint°the
bond should be included teiminate
W X14.3 The Contract Data should include the minimum number of weeks after the
Contract Date after which the first instalment of the repayment of the
Data. e bond Should be stated in part one ofotrrlt advanced payment is included in the assessment. if the instalment is an
For ECC contracts usin 5 mam " Options A or B the C ontractor should ' amount, it should be a simple fraction of the amount of the advanced
cost o f this bond within his tendered total of th P m payment.
wishes
flat _tthe C0n tractorI toI price the bond separatelye in r'mistefidfge aErnlfi| CH a_ ' The advanced payment will normally be made before the first assessment of
p 9 I em should be include d ll’) ' e activity schedule or the bill or
' ' 1
- the amount due by the Project Manager (clause 50.1). Repayment of the
For all other O p t‘ions the cost‘ of this
his Fee. . bond to the Contractor is inc|ug:gnt- advanced payment takes place gradually as part of the certified payments of
the amount due. A consequence of this is that the total of the certified
payments made to the Contractor under the normal assessment procedure
will always be less than the total payment (including the advanced payment)
Option X14-' Advanced Payment to the Contractor made to the Contractor when Option X14 is being used. This must always be
b o rne in mind when including payments under the contract in the internal
Advanced payment X14 financial statements of the Employer and the Contractor.
X14. 1 The option of makin 8 an advanced - -
t he Contractor has to make a heavyD8in(ve:tli:1t;itna[tartl(1jedbfOr'
m contracts in
to buy or mobilise mabr - t . e e " ,r
ginnin
The st rt t' J ' ems Oi‘ Equipment before constructioéi vt?t;|»|< X15: Limitation of t he Contractor's liability for his design to reasonable
a are‘mestated
amounts i‘°Y repayment of @rin1dc?>Tit§:etp?>yTenl
in part one tn skill and care
3 8 t and
is adthe
these data so th t . .
construction peflogl the advance is fully repaid within the firs/tlsfiglt? glgilll
The Contractor's design X15
X15.1 Without this Option the Contractor’s liability for his design is strict; that is, it
To ensure that an ad vanc d i _ must be in accordance with the Works information. in English law therefore
tenderers s h o uld k ' e payment '5 n°t_ duplicated, instructions“. the Contractor would be responsible for ensuring that his design is fit for the
activity schedule oTi'n:Ji'fi gfcztfigiiitt-|Q.‘3t. wlhen there is an advanced payment thg purpose stated in or reasonably implied from the Works information.
a d vanced Payment For example. lies ther:
s o Idshnotldbe priced
- .
to produce anotha
purchase of Equiphtent - _ _ Ou not be provis' Option X15 reduces the Contractor’s liability for his design to ‘reasonable skill
tn e b-'” 0f quantities
-- for equipment
'" File activity sched ‘fel 0" method related'°"charges
f°' eai!iii '
and care’. in any dispute ' on th e Contractor to demon-
the burden of proof is
made under this Option Durchase if an advanced payment is to M strate that he used reasonable skill and care, not upon the Employer to show
that the Contractor did not.
In entering the amou fit of the advanced Payment in the Contr t D t '
should be made clear wheth - - . ac 3, X 1 5 .2 When a Defect in the Contractor's design is found he is required under core
other Sales tax If h er the amount is inclusive or exclusive of \?AT clause 43.1 to correct it. Without Option X15 the Contractor is liable for such
p . - suc tax is a Defect and therefore corrects it. However using Option X15, if the Contractor
Troject Manager. .it would also Payable
be due ononti?;n§§;:fiet§ab§eCefl'f'ed
. . Iater by the
can s h ow that he used reasonable skill and care when designing that part of
he advanced pa yments. . . for the Defect.. He is t‘still required to correct the
the works, he is not liable
. d by mt; project
ttie . yment doesInstead
Manager. not require
it' iman assessment to be made or cert}. Defect, but that correction is a compensation even 1"
0 Day within the periods set o '. W565 an Obligation on the Employer >

I?/lgenCies' Procedures require theubrmni

Mafiager before any p a yment can be mad
X1-4'2
° “CF00 30""-1‘ Employer's or funding
. of a. certificate b y the Protect
-
rezfiliifient
may
of need to assess and certify |SfLlE(l;l?t Payment,
the contract. ls the case
butthen
thattheisProject
not B Option X16: Retention (not used with Option F)
X14.2 This clause allows for Retention X16 The purpose of retention is to enable the Employer to retain a proportion of
. for the ad thedpl'0VlSlOl'l
secunty ' ' of a bond, .if required by the Employer, as the Price for Work Done to Date as security and as an additional motivation
t, t Vance payment. Th b for the Contractor to complete the works. it does have an effect on the
cgnobee ggalacggtfact Contractor’s cash flow, which he will make allowances for in his tendered
Y until Date, butthan
not later if this
fouris weeks
fiatO;edniZ:§§'dtnnOrma"y be paymen;
after the E9 aflvanced provided
Prices (for Options A and B), or his Fee (for the other Options). However, the
the bond ' The form of th e bond Shoutd b . .
by the Em P loYer’. T he value of
_ mp 0)/er has receive
9 Included in the Works Information procedure use d in
' the ECC has no effect on this cash flow until the Price for
th B advanced payment. the bond d 9Ci'88$es as the Contractor repays Work Done to Date exceeds the retention free amount (see Figure 4).

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 t Guidance Notes for the NEC E ' Secondary Option Clauses 3
' n gmeeilng
' and Construction
. Contract
The effecr of Option
~ X16 on the Contractor’s cash flow will aiso X16.2 Half of the retention being held is released either at Completion of the whole
the . amount of work he 5 ub contracts. The Contractor will _ nor of the works or when the Employer takes over the whole of the works, which-
equivalent retention on his so bcontractors » thus im proving
- hismany
cash ever is earlier. The amount of retention held after this release does not
order to ensure thatthe ' increase or decrease in later assessments until the Defects Certificate is
Costs for Options C to re is no double-deduction of rete t‘
F are calculated usin n Ion’ the issued.
Eubcontractors
and (24)). ' b efore deduction
, i.e. 8 the gross
. of their retention (seepaclguggés
m
Four weeks after the date of issue of the Defects Certificate is an assessment
date (core clause 50.1). in this assessment, retention is reduced to zero.
Option X16 is n t .
used. O normany reqmred Where OPYFOFI X13 (performance

X17: Low performance damages

d d work (a Defect such as low quality
Low performance X17 If the Contractor produces substan ar
ii damages brickwork, reinforced concrete or electrical insulation) the Employer can
l
' ' that the Contractor corrects the Defec t to p rovide the quality speci-
- insist
Com I t' fled in the Works information (clause 43.1),
~ recover the cost of having it corrected by other people t‘ nif the Contractor
eriod (clause
or take over ggulggte fails to correct the Defect within the defect correc io p
45.1), or
~ accept the Defect and also a q uotation from the Contractor for reduced
Prices, an earlier Completion Date, or both, in return for a change to the
Works information (clause 44).
Where the performance of the works in use fails to reach a specified level due
1 .
to a design or other fault of the Contractor and the Defect is not corrected so
that it is listed in the Defects Certificate, the Employer should be able to
Retention _,,._/2 Retemlon recover the damages he suffers in consequence. This Option provides for
due
am ount percentage
Portion of these damages to be recovered as liquidated damages.
PWDD in The required performance should be specified in the Works information, e.g.
amount due
PWDD
'n o ~ the output of an electricity generating station,
QsQ ' a standard of water quality to be produced by a water treatment plant.
The low performance damages included in the Contract Data should be a
genuine pre-estimate of the actual damages that the Employer will suffer as
Retention a resu it of the Contractor’s breach . Under English law, damages greater than
free amount a genuine pre-estimate constitute a penalty and are not generally enforce-
able.
A convenient method of calculating damages for low performance is the
assessment of a lump sum to compensate for the loss of performance over
the lifetime of the asset. The forecast net present value of the lost perfor-
Time " mance over the forecast life of the asset is an appropriate amount.
Figure 4. Option X16 - Retention The amounts of damages are entered in the Contract Data part one against
different ranges of low performance. Certification of performance by the
'
Supervisor would follow a specified performance test to be carried out
between Completion and the defects date.
X16.1 The retention free amgun t and the rete t’ For example, for a specified performance of an electricity generating statioij in
gait one of the Contract Data. The amlim ft)§rt(;entag? Shomd be entered in the Works Information of 100 MW, the entries in the Contract Data could be
ue is related to the Price for Work Done to Date retained from the amount
sums. e only and not to any other v £XOOO for performance less than 100 MW but not less than 98 MW
- £Y0O0 for performance less than 98 MW but not less than 96 MW
If the EmP"9YeF Prefers to use the mo re conventional
- method for retention, this con tinuin g down to a ‘threshold’ performance below which t he works will be
can be effected by enterin '
. ., g in the C .
Percentage and nil for the retention freeogiggifmtoata the required retention unacceptable to the Employer and he would wish to reject them and seek
compensation under the general law.
If the Parties wish to limi t the maxim . d mages are made in the assessment
Contract Data should be amended b;lr2dilm0Upt_of retention, the entry in the Any deductions of low performance a
payame 0f___._ This figure can be mg with a maximum total amount made at the date of issue of the Defects Certificate.
percentage of the tendered total of §h(gr§§$ed
rices. either as a lump Sum or as a

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A. i
 Secondary Option Clauses
--"nec? Guidance Notes for the NEC E ngmeellng
' ' and Construction Contract
:_.-—

This clause also con f'ir ms that the limits apply irrespective of whether the
Option X18: Limitation of liability Employer is ' making
' the claim ' un d er the contract, in tort (or delict in some
X18 jurisdictions) or in terms of any other right the Employer might have under the
This Option place
the Empioyer l' " - _ .. . that the Contractor may
ans?"grnoyaiioiposniiabiiities law of the contract.
rmevant to ECC a i_ I ec ion with the contract. it is Amounts paya bl e b y the Contractor for the listed excluded matters are not
Construct Contractgpggiiiéegfiyinitthifii Process plant sector and
included within this limit. However, although loss and damage to the
contracts because of the uncertain ay-also D? required TQF Employer's property is listed as an exclusion, this can, nevertheless, be limited
some jurisdictions regarding their l'aFb9|§itlOn which contractors Could
‘ overall' ca' ' '95-
liabilities. It_ can also Drovide The 0Ption addresse s under X18 .2.
' - X185 in law th e Contractor’s liability to the Employer may not end when the Defects
hich
beyond which the Contractor has no further pg’ mliabilit
termsY ’E0ofthe
both “me am‘
Employey; ''
Certificate '
has been issue d , p articulariy for a Defect or other matter w
Flexibilit has b - -

are
it cit? .Ti?l'.ilf‘;2?."V2’ ‘if is it
Preparedof tothisaccept.
only becomes apparent some time after the
o ften referred to as latent defects. Many, u
cut-off periods after which the dContractor
b t defects
not ail, date.
is no Clause
legal Such
longer X18.5
Defectshave
jurisdictions are
bi f r such latent
iia e cano be used to
provisions OptionIf the
he Emgiomm mi toto Whatever
can iii/Bfryilants use some,a'“°i~'"i
but notthe
,3|| defects or any other matters un er
the contract.
matters that he does not wish to CElp_se the Word unlimited, againsi either reduce the cut-off period set by law or, if none exists, add such a cut-off
Users are advised to k . period.
Contract is to be mad??? Oilggpltoaciiigce
a relating to the law under
. . which The Contractor is not liable to the Employer for any matter, which would
amounts used may be applied under tha‘f\l?a€i.Of how these pmwsmns include any Defect, which is notified to him after the end of liability date.
X18.1 This clause limits the Con tractor’s exposu t
as consequential or indirect Iosse s 'incurredre byO the
WhatEmpigygr
are Commonili‘
X18.2 1" Projects where the ContrEl I ' ' . .
gmpioyeps existing iaciiity ghgf aépgiziéerdiéo work Vigthlfl or adjacent to X20: Key Performa nce indicators (not used with Option X12)
amase he may cofiiiieiig
ca ' __ The BXDOSG to costs
risks aris' The performance of the Contractor can be monitored and measured against
Such an incident rsiigcih J? faci|ity- Emplol/er’s arisliyig Key Performance X20 Key Performance indicators (KPis) using this Option. Their aim is to offer an
indicators
or of the insurance which eithy lgles greater than the Venue of the incentive to the Contractor to achieve the Employer's objectives by setting
contract or otherwise. This claiise ?rt¥ may ham? arranged either under clear measurable targets. These can be related to the Employer’s business
against the Contractor for his Costs imits the claim the Employer may main wide or project specific objectives.
The amount stated in Contract Data wo Id t ' . The Employer can specify a detailed incentive Schedule in the tender Contract
the amount of cover provided by the inlsura3nFc|e:ai|fl)tl:)e get to Something With“ Data. Alternatively he can set out in the instructions to tenderers the business
igjipigajncetior closer to the deductible if the Empjoyei pifgn-'£iaCtOrhpr°Vide$ the and project specific objectives that are important to him and invite the
Bi’, eEmi /3 oyer should check with
. their__insurers first in case
vieste' tenderers to propose suitable KPls. Such proposals can then be included in
advises the Em i
submgation. poyer to set the amount at a higher level to retain rights rt the Employer's tender appraisal. in that case the Employer and successful
tenderer should agree the incentive Schedule before the Contract Date.
X18.3 The Contractor's liability for his d ' The intention of KPis is to encourage, rather than coerce, the Contractor to
the Contract Da _ . . , I eslgfl Carl be limited to an amount '~ ' '
meet the Employer’s objectives. Therefore they s hould only be used as an
c_are'_ by inc|usiohaofTg§tig2b>wg>.CV£i‘l'Hh?-E’?ObeyIimited to ‘reasonable incentive and not as a penalty. The Contractor will be paid a bonus if the
tion is to design smctiy in Compliance Withptiion X15, the Contractor’s obliga- target for the KPI is achieved but should not be penalised if it is not
law, for example, the Contractor would be responsiblee Works Information‘
for ensuringln that
Engnsn
his achieved.
design is fit fo th .
information’ T 8 purpose stated in or reasonably implied from the Works The principle behind every KPl is that both Parties should benefit when it is
met. Therefore, if the KPis have been correctly chosen, it will be in both
Clause 45 - 1 covers the c ost of co t’ Parties’ interests to ensure that they are achieved. if the Employer tries to
the Defects Certificate. The iimitodriigoiii ariy utncorrected Defefis "Sm if prevent a target being met, he will be in breach of clause 10.1.
effect only for Defects notified after th Dy or he ‘.7‘?”"<'i'°i°r'$ design has
(clause 43.3). e efe°i$ Certificate has been issued Option X20 with
Option X12 (Partnering) includes KPis in muiti-party arrangements, where the
Option X12 Employer wishes to offer incentives to members of the project team. Option
The term ‘design’ in the co t - - ' ‘ ' 0 ti n X12 is not used. The
geneiaiiy inter rete _ n ext of engineering and construction cont is X20 can be used to provide incentives when p o
turai Cal i P d In the broadest sense It may includ t racts 'incentive
' sharing
' arrangeme nts in Option X12 are sufficiently flexible to cover
cu ations and the dimen ' ' . e "° merely SWIG" the payment of different incentives to different Partners, such that Option
a_'$Q the choice of particular Planfigggywlgfiep? land Iocanon of the Work’ but X20 is unnecessaiy in contracts when Option X12 is used.
similarly. the choice of particular work procesggsé for particular functions and'
X18.4 This clause limits the ()0ntracto ' - --
amount stated in the Contract D'§a0\:ir€_lé itlélblilty to the Employer to an
amount stated should be equal to oryhighjercthto the eXC|us'.°n5 stated- The

ihatgd elsewhere
8 mployer frominother
this rights
Optionhto allowhave
e may for amoaunntmihother
under the at maylimiting
S applicable law. amounts
become due to

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J; i
 Secondary Option Clauses
3 Guidance Notes for the NEC E "g'“ee""€
‘ ' and Construction Contract

Identified and defined

terms X20 1 The Incentive Schedule sho uld provide details of the performance than
is intended to measure i how it 'is to be measured the tat get tn
achieved and the amount to be paid to th (3 t ' at
should be_ chosen such that they can be objectivel
e on Factor if is it a
V measured I thus ' v
Chle
.
both Parties to know when they have been achieved Th 6 use of si1 1on Y(UK) 1: Pro'ect Bank Account
Judgements, for exa | ' , -
J
Shomd be avoided. mp 9 Usmg phrases such as reasonable satisfact Y(UK)1 A secondary Option and associated Contract Data entries are provided for
implemen t ation
' of a Project Bank Account (PBA) . The clause deals with
An example of a it"- - . _ payments into and out of the account, and its effect on other contract
Structural Engineeritllljwaldplfittlae E1Pou|'tSir%toerl:ie2tit|!iqgetllji0t(i?S
e argetfor and
Option X11
if the obligations.
tractor was, not a Partner , it could e k n as ‘Named Suppliers‘ can
contractors bonus Specified‘ (W8 || y be used -in Option - X20, with Y1.1 Suppliers and Subcontractors at any level, now ,
(2) be included in the PBA arrangements. The Contractor will initially identify
It would then be the - -- those to be included at tender (named suppliers), but SLlbj6C'£ to the accep»
his Subcontractors hraeifiirinkislbalrey I2; the Contractor to Offer any incei tance of the Project Manager, the Contractor can add further Suppliers during
achieve his target - In O ptions
. A and BCessary to encourage
those incentives them
would t 0 help -
be irrei the contract.
the
mo Employer.
t_ W'th
I tn e other,Options. the Employer will share the costettié-:i2t_ The Employer should set out in the Works Information any stipulations or
en ives,
Clause 52-1'but 0 ny
I t 0 the extent that they meet the requirements of Cd‘
restrictions on establishing the list of suppliers who can participate in
"i payments from the PBA.
The Contractor is re quired
' to .report at regular ime“,als his . actual pagt s of Named Suppliers need to be listed in
forecast future performance with regards to the KPis The interval h BM; If Option Y(UK)3 is used, the right
sufficiently short such that future performance can be ' a ssessed sand the Contract Data.
co" - .
S Oumtl
tive action taken under clause X20.3. flit Y1.1 The forms to be used for the Trust Deed and the Joining Deed are included in
This clause ensures that Problems that will prevent a tar (5) the ECC. These forms must be included in the contract, placed after the entry
. __ '
get being met, am- and (6) in the Contract Data for Y1.1.
methods to overcome them , are identified as early as possible
- Thi
enable the Contractor and Pro‘ject Manager to work together to ensure
' thats i-til
trg Y1.2, The PBA is established and maintained by the Contractor, who pays any bank
t argets are met wherever possible.
. 1.3 charges and retains any interest earned on the account, unless the Employer
states in the Contract Data that these will be paid and received by the
However the Pro'ect
J Manager can neither
- accept nor reject the Contractor; Employer. At tender, the Contractor must identify a suitable bank able to offer
Proposals, and the f
target at any Cost. re ore he cannot coerce the Contractor into achieving ti arrangements which comply with the requirements for payment in this Option.

The Y1.4 The banking arrangements must make provision for payments to be made in
dateContractor
h s h ou l d be paid
- the bonus .in the next assessment followingtrte accordance with the contract. This must be, at the latest, the date for
e meets his tar et payment set out in clause 51.2, and must take account of the times for
Payments should not be lgefliusfifoglrgpiieiegnd bullet of core clause 50.2.
submission of the Authorisation and the timing of payments into the account.
Payments made to the C
Cost or the for
price Y1.5 Contract arrangements with Named Suppliers must include the relevant parts
Calculation th fo I‘ Workontractor ‘mdeiTherefore
Done to Date. Option X20
theyare
are not
not part of de
includ D f'me“~ of this Option in the subcontract.
' '
The ' NEC3 ' Engineering and Constructiont.
e Contractors share under clause 53 in 0 Dt"ions C and e D.In the Subcontract includes these revisions in Option Y(UK)1 for that contrac
Guidance is given in the section of these notes dealing with subcontracting.
The Emmoyer mail wish to add furth ' '
to meet other objectives. However hgrcgfifigtlfiiwto encourage the Contractor
a ready offered. whether or not _it has yet been achieifegf
ov reduce any Incentive
- - Y1.7 The Contractor is required to submit an application for payment, showing the
amounts due to each Named Supplier, following which the Project Manager
issues a certificate as normal.
d b'ect to any withheld
V1.8 The Employer pays to the PBA the amount certifie , su _]
sums notified to the Contractor. lf the Employer withholds payment from the
Contractor which results in the Contractor’s payment being negative, the
'
Contractor is required to pay 'into to the account any amount nee ded to make
payment in full to Named Suppliers. ”
Y1.9 The Contractor prepares the Authorisation, confirming the payments to Named
Suppliers, and forwards it to the Project Manager for the Employer’s counter-
signature. The Authorisation is for the amount of payment to be made by the
Employer; that is the certified amount less any notified withholding. The
' '
Authorisation ‘is th en forwarded to the bank it is envisaged that electronic
means of authorisation will be used to simplify this process. The Employer
' ' has
should not attempt to establish whether payments to Named Suppliers
been calculated correctly that it the Contractor’s responsibility.
nt to the Contractor and Named Suppliers from
Y1.1O The project bank makes payme
the sums deposited.

© copyright nec 2013 119

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' '._.neC®3
_ Guidan ce N otes for the NEC E ng'm‘-‘enng
' ' and Construction
. Contract Secondary Option Clauses 9.
____‘ i

Y1.14 The Trust D ee ti"is 'intended to allow payment to Named Suppliers to

in the event of the in so l vency of the Contractor The deed is ex Y(UK)2: Payments under the Housing Grants, Construction and
Employer, Contractor and‘'n'‘t''6 | named s°'PP"e'S-
on Act 1996
|
Where an additional Su pplier ' 'is t0 be joined
- -
. ' ecuted Regenerati
-into th d d Y(uK)2 This O Ption should only be used for projects carried out in the United Kingdom
needs to be executed by tn E 9 96 , a Joinin that are subject to the Housing Grants, Construction and Regeneration Act
| A Copy of the initial Trust Deed Sh °U|d beContractor
6' mivloyer, and
annexed to eachthe Joinin
Additional
E Deedg 1996 as amended by the Local Democracy, Economic Development and
Construction Act 2009 (the ‘Act’).
The Payment arrangements a
I are Shown in the following chag. OW these fit with other contract lf the contract is subject to the Act, this Option is incorporated by reference in
the Contract Data. It is used to supplement the core clause payment provi-
Timescales for asse sions in order to ensure that they comply with the Act. The effect of incorpor-
ssmem and PaYl‘l"lent under P"°J90t
' Bank Account arrangements
ating this secondary Option is to keep all the payment terms expressly within
Clause 51 dates C|auSe 51 actions
. the contract (see Figure 5) and avoid additional terms being implied by this
pro-l9¢T Bank Account actions Y (UK)2 actions Act.
Y
— (UK)2 dates
The adjudication provisions of the Act are incorporated into the contract by
Contracto . _
assessment date submit applggggn CC;'lf!‘3Cfi0l' submits application for using Option W2 of the disputes resolution procedure.
for payment p ym$<?l\i?r§w,',"g amounts due
8 uppliers Y2.1 in the NEC family of contracts, periods of time are usually measured in weeks
(2) to avoid complications of rest days and statutory holidays. However, to comply
with the Act, in this Option time periods are stated in days, using the same
‘
F, . definition as in the Act.
a$'§éZ§L§.”Z.’i§’§F.?.’i in order to comply with Section 110 of the Act, this clause defines when the
+ 1 week due and rm date on which payment becomes due and the final date for payment. lt also confirms that
- -- paynseemi es paymerguebecomes assesgnaem
+ aysdate | Y2.2
the Project Manager’s certificate, issued under core clause 51.1, is the notice
of payment required by Section 110A of the Act. This certificate needs to
show the basis upon which the payment has been calculated.
Latest date for Y2 3 in order to comply with Section 111 of the Act this sets out the requirement
"Oil?!/log lnlention assessment date ' that, if the paying Party wishes to pay less than the sum set out in the Project
-i - (0 Pay less + 14 days Manager’s certificate, they must give a notice setting out the amount they
Contractor re ares ' intend to pay and the basis upon which it has been calculated. This notice
A AUll'l0IiS8fitO|E, fomirirgsslgns must be given at least 7 days before the final date for payment set out in
P-">166? Manager. Contractor makes Y2.2. Without such notice the paying Party is required to pay the sum in the
Payment to Project Bank Account of
am} amount withheld by Empjoye, Project Manager’s certificate.
Under Section 112 of the Act the Contractor has the right to suspend perfor-
i Y2.4 mance of all or any part of the works if
Employ?! Signs Authorisatio I he is not paid the amount set out in the Project Manager's certificate by
t° Project bank and makes the final date for payment, unless a notice to pay a lesser sum has been
to Pro;ect Bank Account given in accordance with Y2.3, or
~ if a notice to pay a lesser sum has been given in accordance with Y2.3,
and that lesser sum has not been paid by the final date for payment.

assessme to t I Employer or If the Contractor exercises this right it is a compensation event.

l +3 Contractor makes Paymfigtnnlggtg "° Qflntracrorand .
i l certified payment I Project Bgtgfiliaers from
ccount fFll'Ifl1 date
or payment assessment
+ 21 daysdate

Note- Y(UK ) 2 Sever‘ day periods

.
0 tion Y(UK)3: The Contract (Rights of Third Parties) Act 1999 F
could be Ion er tn P This Option should be used for all projects carried out in England, Wales or
Good Friday and bank hmidays from count of gays. an clause 51 Week periods, as former excludes Christmas Day, Y3 1 Northern Ireland of where the law of the contract is the law of England, Wales,
or Northern Ireland.
The Contracts (Rights of Third Parties) Act 1999 allows a third party to a
contract, i.e. not the Employer or the Contractor, to enforce a term of that
contract in certain circumstances. This Option will ensure that only those
terms that are clearly set out in Part one of the Contract Data can be enforced
by those persons, or class of persons, that are named. This will ensure that
third party rights cannot be implied from any of the other terms of the contract
or Works Information
If the Employer wishes to provide such a right to a third party he should take
legal advice on the full implications and the words to be used in the Contract
Data before doing so.

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 Schedule of Cost Components ¢.

SCHEDULE OF COST COMPONENTS in order to achieve this the concept of Working Areas is introduced. The
Working Areas include the Site and other areas. It is preferable for the
Contractor to list in the Contract Data part two specific areas by location.
Sometimes the precise area may not be known at tender or it may be antici-
pated that the area could change during the contract (for example, where the
General notes location of an off-site batching plant will be moved during the construction of
a road or where the Contractor is responsible for locating borrow pits). In
these cases a generic description of the purpose or type of area should be
The ECC contains a S h d | listed. In addition, further areas may be added to the Working Areas if the
This section of generalCn§iteJsea(|;1pl(i:e):toCl(;2?tl£i)(i/Ielislitii (scfttii arscéa Shorter 30¢}; Contractor's proposals are accepted under the procedure in clause 15.1.
firstly by notes which are specific t the full scc ns andO th e bC' It is f°"°‘MI
Shorter soc. The term ‘r ll s ' - O - en Y "mes on th'-
these notes to distinguishuit clggrlyfirgiztth:eSjhorrtg;?5-tigntract but is used ii
=|)efined Cost: treatment of Subcontractors
Compilation Matters wh'I0 h h ave been considered
- - compiling
in . . the 30¢ are1 The definitions of Defined Cost vary between main Options to reflect different
treatments of the costs of Subcontractors.
° the treatment of compensation events in
' terms of their im a t
. fi?§‘E@'2°32???J1¥.§’“§i‘i‘iTZ.lt°L‘3.'§"i‘*'°““"
f
- .

. tL‘;mp:i|:3fi§|;0;lhlgC1 -icilggozst traditional

.. a contracts.
"° °“
e"a'5 arid Equipment’. which <1"‘fie! .
Options A and B The only use of the Shorter SCC is in the assessment of compensation events,
which are assessed as the effect they are forecast to have upon Defined Cost
(clause 63.1). In Options A and B this assessment is made using the Shorter
om o ' - - SCC, whether the work is subcontracted or not (clause 11.2(22)). Therefore,
be °°\/Bred
“sted, and by the Fee, for §B‘ii“°t medare
ponents In the
not SCC are t°
separately the assessment of work which is subcontracted is based upon what Defined
Cost is forecast to be paid by the Subcontractor, rather than what the
' the needreimbursed,
directly for greaterasacc -
inugagtyoavsitecn Ssgizsjsigg . are to be
costs which Contractor if forecast to pay the Subcontractor. This assessment is also made
using the various percentages and rates in the Contract Data part two of the
mate normally required for a compensation eveiinflompared with the esii. main contract, including the percentage for people overheads, which will be
Use of the SCC
added to the people element of the Subcontractor's costs.
The full SCC is part fth . _
SCC 0 e Contract Only When Option C, D or E is used. The The effect of this is that the Contractor will not be paid the same amount
as he pays his Subcontractor. The Contractor should therefore bear this in
¢ defines the and
reimbursed cost com Donents for which
- . be directi-.1.
the Contractor will mind when considering the subcontracted fee percentage he should insert at
tender stage in Contract Data part two and the subcontract arrangements he
0 defines the cost com ponents which - are included
- in an subsequently makes with his Subcontractors.
changed costs arising from a compensation event. assessment of
The Shorter SCC is used t d f‘ Options C and D in these Options, compensation events result in an adjustment of the target
compensation event. it iscalvifayrsetiggdcifi ($12;g"%ei][_ass:ssinE;g a and the argument used for Options A and B could be applied to target
chosen. If Option C, [) 0 E - p '0“ 0" is contracts. However, these are contracts with low risk to the Contractor and it
assessing a compensationrevelrft ifhgwseerlkr the Shorter SCC may be used in is intended that the Contractor should be protected from payment risks with
or by the Project Manager when m a k‘ing his‘Clem
own Manager and Contractor agree
aSSeSsment5_ respect to Subcontractors. Thus payments to Subcontractors are included in
Defined Cost for both the assessment of the compensation events and for the
The SCC does not a I t 0 ‘ calculation of the Price for Work Done to Date. it follows that the Employer
tion of Defined Coslilpg r<LStfit:i:>endFt£)management contract) where the defini-
suppners and to the prices for Work don|éag£'lfi1l‘;tE‘E: dute tp Siubcontractors and pays both the Contractor's Fee and the Subcontractors Fee.
on rac or imself.
For Options A and B tn 9 Sh Otter SCC "IS a complete statement of the cost Option E Cost reimbursable contracts place a very low level of risk on the Contractor. As
components with target contracts the Contractor is intended to be protected from payment
"acted or notunder the d ef"inition
" '
of Defined Cost, whether work is subcon- risks with respect to Subcontractors and payments to Subcontractors are
included in the Defined Cost. The Employer pays both the Contractor’s Fee and
For Options C, D a H d E th e Defined
' -
Cost includes payments due to Subcon- the Subcontractor's Fee. 1
tractors in addition
subcontracted’ to th .
e cost components in the SCC for work which is not
In these contracts there is no tendered price to adjust for compensation
events. However, the compensation event procedure is in core and therefore
Working Areas The Site is defined applies to Option E. This is to ensure that Employers receive forecasts of the
Contract Data. This aasreaewaflecaomitlgigtethe
th - - . of the site stated in the
boundaries effects of compensation events for budgeting and planning purposes. It also
the works. Contractors often make) use giggthons provided by the Emmoyer for provides a basis for decisions such as whether to proceed with a proposed
1 the Site, for a Variet f er al'e_<'=l$, sometimes adjacent to change to the Works Information.
Shops and steel hens/infig yPalil;1DS0sg§,sS)L:q32 is-nggtghinrg tgant, temporary work.
"Sh depots which a re d.ist ant from
' the Site
_ WhereS thesee ontractor
areas aremay estab-
s ecific to Option F The management Contractor is intended to be insulated from the cost risk of
l. the contract and closel ' - '- - - . p those subcontracts which he is required to place. This is achieved both in
included in the SCC rathyeffisgglgéegrgyitgyigg gecétivityi their costs should be calculating the Price for Work Done to Date and in assessing compensation
events by stating that the Defined Cost is the payments due to Subcontractors
plus the prices for work done by the Contractor himself.

i
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i i
 Schedule of Cost Components
6-. 3 Guidanc e Nt
oes for th e NEC Engineering
' - and Construction
. Contract

In stating that for Option F- as weii as for Options C. D and E the The secon d category deals with Contractor's staff and labour who are required
protected from payment ' k - to work temporarily within the Working Areas. This may, for example, be on
that the Employer has hL'5e§h)gg|ne:?;Dfighe0fSubeeantractors, it could work which was unplanned at tender but has arisen due to a compensation
the case as other clauses give ' the Project
- event.
ll/lamm ubcontractors
- Th '5
form of subcontract and the sl t ‘ nager the fight to Exam P ies of items under items 12 (0) and (d) include payments made by the
hayments fer eemheheeheh eveleteceeoreucefeithiagghietracters and to
e Contractor to their employees for
eiin Properly
when prehehheassessed in accord ance with
the teheer - the terms is W of
erethe
these hair ¢ working at height,
docu
~ working in exposed conditions,
geieieloyerf or his Project Manager lnnntzilytimistlnr ti ihnssagemgpé gnntract
res or the selection 0| etailed ' trades supplements,
Stated ih the Weeks lhhehhefiiighe control of Subcontractors. These shoiiid v plus rates,
~ shift allowances,
Where the En'iPl0J/er is directl Y 'e"“bl"$ins
' ' Defined Cost he is entit led to ~ tool allowances,
~ local allowances, and
' benefit from all discounts rec ' d ~ food allowances.
purchase discounts heeeived eiliheeeglhehf Contractor, including any
‘ Day prices for subcontracted and su l‘ ($7 and . Payments made under item 13(i) will depend upon what the specific law
fair prices obtaining in the Opeh ml3Dki€ goods and services which requires as a consequence of employing people. it is not limited to the law of
entitled to protection from paying a;?Jfi§ite|Fgr- exa;nple' the Emplnl/er the contract, and covers all payments made by the Contractor because a law
. rices or I t '
Stone products Supplied by Contractor-owned subsidiarljegn hire or requires it. Examples for UK based employees may include
Cla use 5 2.1 is
- intended
- to achieve
. these aimS_ " ' National insurance contributions
~ employer's liability insurance, and
Disallowed Costs The inclusion of a cost eleme t ' he SCC do - . - levies for industrial training.
Contractor
. to payment of ah Cons “fl t es not necessarily entitle
ts incurred ' The definitions of Disa llowed Coéi' '
‘M
in Options C D and E (clause 11 2 . item 13(n) will include the cost of items such as fuel, road tax, breakdown
-identify
~ the circum
‘. t " - - (25)) and . in Option F (clause 11 -2(26ll| recovery and motor insurances paid by the Employer for the relevant vehicle.
These (“auses are sinigfiggeirite;/Vmglelivieiistihwlll be excluded from Defined Cost For people on the Contractor’s payroll, wages and salaries will be included. For
to enabie him to be reimbursed fer e<|‘-I hi: gongracttor to work efficiently and people not on the payroll, the amount paid by the Contractor will be included.
does. If he does
_ not work efficien tl , r Os S I emised
- in the .SCC ll l‘it l In dealing with a third party who supplies labour only (often known in the
the level required to cover loss anld an-i::§gn;p'§hby °'de"“§ mate"a'5 abflilfi United Kingdom as the ‘gangmaster’) it is difficult or impossible to gain
disallowed by the Project Manager. ’ e appropnate Costs can be access to the sort of records or accounts needed to justify the wages and any
other payments made to the labour force. As a result the r.Contractor has only
The cost components to justify the amount he has paid the supplier of the labou
-itlf the Employer
for a specific
believes that an ' tem 'in the SCC '
. _ contract Howevg I " .'S not relevant he can delete
costs arise in relation to it. ry an Item can Sn“ be left m the "St even if ni? Equipment 2 Equipment covers Contractor’s materials, fuels and other consumables, scaf-
If there are particular costs w hich
' the Contract ' - folding, machinery, testing equipment, transport, construction plant, temporary
not covered (which mieht he eh or will have to pay which are works, and all types of accommodation including cabins, workshops and
Employer can add items to the l?stcE\:\?l*? on Somg overseas Contracts)’ the laboratories, etc. lt may also include accommodation for the Employer which
Occasionally it may be appfflpfiate t gm prepafing the tender documents. the Contractor is required to provide. However, for simplicity, the full SCC
covered in the Fee. o include in the SCC items presently treats s ome ‘Equipment’ , such as tools, survey instruments, computers and
laboratory equipment, as an overhead under the ‘Charges’ section.
In part two of the Contra
the soc. The first grdiii: r(e[q5i?:, lfiiriealie four group-S of entries re'e"a"t ‘° The full SCC covers the following.
SCC when Ohtioh A or B is used The h“ erer to Provide data for the Shoiter Equipment hired from sources external to the Contractor or his parent
when Option C, D eh E ie heed eh-e eeve ree<tata
three groups
for the are todesign
full SCC, be completed
data for company.
both schedules
63-14). a ti cl (1 _
ata for the Shorter SCC in case it is used (clause Equipment owned by the Contractor, i.e. purchased from external sources
either new or second hand, or purchased from a subsidiary or a member
company of the Contractor's parent group. e
Equipment purchased by the Contractor under a hire purchase or lease agree-
ment. This category is included because the question of ‘ownership’ is legally
NOTES ON THE FULL SCC complex and treated differently under the laws of different countries.
Equipment hired by the Contractor from a subsidiary or from a member
company of the Contractor’s parent group.
d erators if the item of
Two categories of people a re -d
I entified
- - whose specific
. _ costs can be ii-ieiiiried For 21 the Defined Cost is the hire cost and inclu es op
as Defined Cost. it 11 - Equipment is charged by the hirer on an all inclusive basis. if the operators of
inchldeeh ems , 12 and 13 list the cost components which can be
hired Equipment are shown as a separate charge by hirers then these operators
The first category of peo le 1 should be costed under the people item, as required by item 28 of the SCC.
example, at head office Theiafgggsefnggfggcgfigs ijterff who are Working’ for
- . ' we or with‘
'" t h 9 Fee,
.
normal practice on reimbursable contracts. as -is

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 Schedule of Cost Components
6-.n6C®3 G uidance
" Notes for th e N EC ' - and Construction
Engineering . Contract

For . Equipment covered by the three bullets of 22 ' The effect on the Employer differs. if the cost had been disallowed, the cost to
' the contract would be £9,000. lf the cost had not been disallowed, the cost to
Defined Cost to be the ' t - it '_s not
whether internal rates arelrfallf ggmgnaewxciafihfiaiagei gfkh It IS difficult to the contract would be £9,500.
is needed and the options are provided as follows, Us a Surrogate ‘hire The change is equitable to the Contractor irrespective of whether the cost is
initially disallowed or not. The effect on the Employer is narrowed as under the
Equipment not listed b th c - second edition the cost to the contract was £8,500 if the cost had been
dealt with under 22 by es?tab(l:rsth?r?;0gF;grfJ‘:;ta§\L1Vgtfighe Ceontract
items of Equipment fo h‘ h ' ' . 95- eiierally disallowed and £9,500 if it had not been.
not be listed in the Codti:ictCDaias easy to establish market rates
The Contractor may ha E - I - - Jgharges: Percentage for 44 On reimbursable contracts the items listed under item 44 are usually paid as
rates are difficult to es\tZbli:h|p?ti?l: ‘lglgufigminntoggstalgdgrd and Areas overheads Defined Cost, although in some contracts they have been treated as over-
Contract Data so that ‘t t '- , Oil e listed in heads and covered by a pre-defined percentage. The percentage is usually
The change in value s;,;f;Cigii;g§ rieglt wigh under 23. applied to the Defined Cost of people, i.e. staff and labour. The latter is admin-
some Equipment, such as an old btFi)teeffe::tiv3 may not be Suitable it istratively simpler and places a little more risk on the Contractor, including, for
example, the risk of excessive wastage of tools. When the full SCC is used in
‘”°”‘- Special Equipment should be li t d " e Crane barge f°r “Shem
rates to be charged in accordance wit; S4 In the Contract Data with iii assessing compensation events the effect on the cost of the items under item
44 would have to be forecast as if they were treated as direct costs. The
Some items of Equipment Wm be - . effort required to do this would be totally disproportionate to their value and
include fueis lubricants shutterinconsumed in carrying out the works. Th ""
' - g materials, welding rods and other sim'|
' em"' there would be a high likelihood of dispute. Consequently they remain as
items. For Equipment h‘ h ' - Defined Cost but are treated in a pre-defined way which is common to both
p,,ce_ W '° '8 Consumed. the oerihed Cost is the pu,,,,,',; target and cost reimbursable contracts and compensation events. The
Contractor inserts the percentage for Working Areas overheads in part two of
This 9°‘/ets
- Payments to others fo K done on E u‘ . the Contract Data when preparing his tender.
a batching plant or a worksho P. Ifr wor
the Contractor qdoes this work
'pT"@i1t, such h‘
asimself
erectmg
his
Equipment and Peo D I e costs are covered through the relevant section of the
SCC
Manufacture and 5 The use of cost reimbursable contracts is not recommended where manufac-
fabrication ture and fabrication outside Working Areas forms a major part of a contract.
Again if the Contractor uses his own Equipment and pe()p| e t o for e When they have been used in the past, e.g. for defence procurement
secure the store's compound mater‘ l ’ Xample. contracts, they have tended to cause difficulties in the control and identifica-
are Covered by this clause’ 1 la 5 Duffihased Separately for this purpose tion of Defined Cost.
Plant and Materials The definition . of Plant and Mate,-iais (clause 11 ' 2(12)) makes it clear that a The SCC is also used for the assessment of compensation events where
charge to Defined Cost . quotations are based on the effects of the compensation event on Defined
to be moulded in the Wogfiisli °Fi|)' be made for those items which are intended Cost. For manufacture and fabrication contracts this creates difficulties which
often result in negotiated price changes in the form of lump sums. One of the
The Disallowed Cost clause in O ' reasons for the difficulty is that fabrication shop overheads can be several
. tionsC DandE(| -
designed to deter
Materials and permitthe
theCggsiéagtogugogg
t p ' - Cause 11'2(25))
§|);Cr?tSglIt‘I$|%IV|O1\:lel:-()|TdJ(gZ*Tll’1g Plant and'5 hundred percent of the labour costs.
after anowing for reasonabi e wastage. This _ should a be erias taken o be intodisallowed
account The use of a percentage for manufacture and fabrication overheads should
when assessing Defin d C - simplify the administration in both these cases. It is tendered in competition
payments for rem . epl 0St under items 31. However,_31 does allow and can be used in assessing tenders in a similar way to the percentage for
.mcmded in DefinedOvlng Cost Anantexam
and Materials from t h e Working Areas to be Equipment depreciation and maintenance.
-item of Plant and Mater‘ - l ' Die -of the need for this would be when an- item 2 of the full SCC is restricted to Equipment used within Working Areas
mation. ia s IS not required due to a change in the Works lnfor-
and therefore equipment, machinery, tools, etc. used in fabrication shops
The Disallowed Cost cla ' ' outside the Working Areas must be allowed for in the overheads percentage.
11-296)) also Permitsucsoestig t(t)>pi>|gn§i CYIID and. E 3"“ '" Option F (clause Item 5 excludes the costs of manufacture and fabrication of Plant and
stated in the Works Information has n tsg Owed If a procurement procedure Materials which are ‘off the shelf’. These are covered by item 3 of the full SCC.
larly relevant to the procurement of Platiit a?:1nl\£oiiOVYeld-
a eria s. This Could be particu- For Options C, D and E the definitions of Defined Cost, together with the
The change to this cla use deals with - an unintended
- outcome of clause preamble to the SCC, mean that manufacture and fabrication done by the
11-2(25)
or workin g 'in C0l'ljUl'ICTIOf1
E are used. “ - with
- this
- section
. of SCC when Options C, D Contractor, either within or outside the Working Areas, is paid for at Defined
Cost, using the appropriate part of the SCC. However, for manufacture and
Assume the Contract , fabrication done by Subcontractors in these Options, the SCC does not apply
Ovemrderedl The Pr0j<(:;r:ts5’e3n]c(i2‘sée1fij(i3,O|(|)O on materials but has significantly irrespective of where the work is done.
£9,000. He theh disposes of the Sa Olws £1000 5° the.C°””a°*°" is Paid Components of design costs need to be included in the SCC so that compen-
edition was Credited to cost thereby9;lé:1Du:?ngo;0S£t5tOOéswgbch in the second Design 6
would be penalised by £1 - 500 for a mistake whose real O cost
' 0' The£509
Contractor sation events which affect design costs result in compensation for the
was Contractor. Item 6 is restricted to design done outside the Working Areas. This
With the change to th th' ' " - could have been omitted from the SCC with the effect that such costs are
is paid £9,000 as a fesu|l[tdo(fdt|h:)nDi:§iPg the same scenario the Contractor covered in the Fee. However, this would have been unfair on two counts. Firstly
obtained for the Saie of the Surplus‘ owed Cost but he retains the £500
because the ECC envisages that a significant amount of design could be done
The effect on the C t 1 - . by the Contractor, and secondly because consultants’ agreements usually
provide compensation to consultants for design charges incurred for reasons
reducing his payment to £9 500 1 u cost would now be credited £500, outside their control.

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A
:.neC®3 Guidance
. Notes_ for th e N EC Engineering
' - and Construction
. Contract Schedule of Cost Components

The costs ofdesi;

desi nin E ‘ - The Shorter SCC has been developed from the full SCC and many of the expla-
reimbursed cogstsqyéprrgmpaeaesgncludeol. As a result the differences from full natory notes and principles for the full SCC will apply to the Shorter SCC. The
SCC
impact on the design of temporary works Ion events which have a following notes explain the main differences between the two schedules.
The
and policy adopted
fabrication‘ r d -
C0n;3;qullSr:fi3 - similar
oygrlgiads ]is - . to that for People 1 The first two bullet points are identical to the full SCC but a third one has
been added, drawing in text from item 14 of the full SCC. This enables item
facilities, etc., is covered by the percenfagg fgompulter facilities,
r over eads. 11 of the Shorter SCC to require the Contractor to justify only the amounts
paid for people, which simplifies the process.
Insurance 7 The first of these deductions av '
. the Contractor should haveoilnds the Em p loyer h avmg
which ' to pay f°r The intention is that amounts paid in the Shorter SCC would cover all the
sured against. If the Contractor d0es
insure as required b th t _ speci'f'ic items listed in the full SCC . It is recommended that the Project
See Clause 85.4.) y e con ract then such costs are at his own risk Manager and Contractor agree early in the contract how these amounts are to
be built up.
The second deduction ensures that th .
payment as '3 result, for example of ins(TirgE'eer6iil$rti?ohdl$:?1 not rlecewe Equipment 2 As with the full SCC, all accommodation is treated as Equipment.
or from insuring for a greater cover
' than required
. as V0 Hfitarily
by the (jQfi‘[|faCt_
The cost components for Equipment
. in the Shorter SCC make . use of .published
. al
If the Employer’s insure lists and rates, such as the CECA Schedule of Dayworks carried out incident
Contractor (because the efiemaigeanp?,;:£;?($Zr.:fri:E{her COSES incurred by to contract works‘, published in the United Kingdom. items of Equipment likely
-
would be appropriate to allow the Contractor's costs—to see c
stanaduse 8'04) "it" to be used, but which are not included in a particular published list, can be
Cost but the Emplo er ‘ll
from his insurers. Y wi be able to meet those costs from the paymegt against DEf'||'* listed separately in part two of the Contract Data when the Contractor submits
his tender.
The Fee All costs521)’
not included in D gll;'l§(g|lg\\I')VS;0?L€0;irt6aI6d
f‘ As the definition of Equipment includes scaffolding, temporary sheet piling
(clause which Shouid as included in the Fgjj. etc., tenderers should ensure that rates for these are included in item 22 of
the Shorter SCC if they are likely to represent a significant cost and are not
The boundary between th included in the published lists referred to in item 21. A possible alternative is
contracts. However, it ha: Essa edgfigeraiglyncfi
gidgprtropgiate for an for the tenderer to allow for their costs in the percentage for people over-
move the boundary for a particula r C0“ 1 ract requires
. F _0 eor clear.
a deduction To
addition heads, but this would incur some risk.
to the SCC. If this is b '
mended‘ '
elng considered, reference to CIRIA Report 85 is recom- Occasionally Equipment may be required as a result of a compensation event
which is not in the published list and not listed in the Contract Data. This is
The
SCCfollowing
_ list gives_ some examples of cost components not ' I d ' covered by item 27, using either competitively tendered or open market rates.
It is not exhaustive and therefore does not form a schedul<len<():futh(edF|z-939
The Equipment rates stated in the published lists will require adjustment by
' Head office charges and overheads (unless s ecified for desi the ‘percentage adjustment for listed Equipment’ referred to in item 21 and
facture
msuranceortgireriggiésltgrogi
b ' ' '\EA|1:§;UhE|;tgencéyerhead percentages).
p En. mane tendered in part two of the Contract Data. This adjustment is required
because, for example, the rates in the FCEC Schedule of Dayworks includes
SCC (see examples given in the u‘d reco‘/ereq as direct Cost under M an element for overheads and profit. in the ECC, these are included in the Fee.
. Corporation tam 8 I ance for item 13) '
Hence the rates should be adjusted downward s . Al so, in some cases the
' Advertising and recruitment costs D ublished rates may not be appropriate to local circumstances, and may need
I Sureties and guara t -I adjusting upwards or downwards.
bonds!‘ required for glfigiiygiiuulfig Ifigihctltéel cténtract including ‘fidelit?
may be the EmpIOyerIS mone es _ at _e Sums of money which A combination of these and other relevant factors will need to be taken into
some indirect payment t Y- pecifliiy _0i1 a reimbursable contract. account to produce the particular percentage adjustment required.
exampie School fees T; ostaff, espeelarry On overseas contracts, for
-
tive ’
convenience ' ere' ' '5 "0thatprinciple involved here, only administra- ' See notes for the full SCC as the clauses are identical in both schedules.
, reco
towards the payment ofgnisin
Such stems. -
contractors have different . .
policies
Plant and Materials 3
Charges 4 in the Shorter SCC a percentage is applied to the total cost of people (item
The Contractor’s proft ' | 11). Such a procedure is adopted to ease the calculation of payments to
allowed for in the Fee|_ is a so excluded from the SCC am must therefore be Others. The percentage for people overheads, therefore, using the Shorter
'
SCC covers the charges as listed. '
The percentage for Working A reas ever-
heads is not used with the Shorter SCC.
Note that under the third bullet of 41, whilst accommodation itself is treated
as E quip
' ment , supplies and services for accommodation are covered by the
NOTES ON THE SHORTER scc percentage for people overheads. However, the word ‘services’ does not
include the services of people as they can only be included in one cost compo-
nent, which will be People.
Pl-"Pose and use The Shorter SCC will alwa b
events Under Options A andyslg lfinggfg erTr-the_
ain circumstances
assessmem or clause 6 1 it
Cpmpensatiori
may be
and E. used for the ' - (
assessment of compensation events under Options 3- 5}
C, D' l

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at ail
¢.'.n6C®3 Guidance
. Notes fo F th 6 NE C Engineering
' - and Construction
. Contract

Manufacturing and 5 Under '

. ,
fa b rication
Options A and B the Sh ° rt er SCC applies
- to both the Contract
and Subcontractors costs. The Contractor cannot predict at tendors and Construction Subcontract
7
whether a COmpen5 r" ..
outsiderthe Working 2%‘; \:m@2§fe§quiring_ manufacturing and d Subcontractor is printed in
For this section of the guidance notes the wor
own fabrication Shop’ consequent] ta Particular Subcontractor or italics if it 'is used in reference to the NEC Engineering and Construction
the Contractor, which is aiso adaimgtcotst component is amounts Subcontract (ECS). The ECS is based on the ECC in order to achieve identical
adopted in the full scc. fa New S'”"°'e'" than the working for similar contract situations. The reason for this is that the relation-
s h'ip between the Contractor and the Subcontractor is similar to that between
Design and insurance 67 and Se e notes for tn e full SCC as the clauses are identical
_ _ in both schecluies the Employer and Contractor. There are, however, certain additions and
amendments required ' 'in the subcontract w hi c h arise from the main contract.
The ECC includes (amongst others) the following parties
Q the Employer
~ the Project Manager, and
~ the Supervisor.
The EC S equ ivalents have been combined into one (the Contractor) as it was
considered that, while different people in the Contractor’s organisation may
'
perform the separate functions, 'it would be too comp l‘ica te d to have different
leg al persons for each separate subcontract. This has required some amend-
ments where the ECC text describes actions by the Employer, Project Manager
and Supervisor.
All the ECC Options have been retained for the subcontract except'thOption F.
bill of
Th us, for example, the main contract may be a priced contract wi a
quantities, and the subcontract may be based on an activity schedule, or on a
cost reimbursement option.
To avoid confusion, the following items have been prefixed ‘subcontract’
v works,
' starting date,
~ Completion Date, and
' Workslnformation.
Other changes are
0 Subsubcontractor for Subcontractor,
~ Subcontract Data for Contract Data,
Q ECC is referred to as the main contract.
s of the main
The main additions and amendments arising from provision
contract are described below.

Subcontract documents In preparing the subcontract the Contractor must be precise in detailing the
documentation which comprises both the Subcontract Works information and
the subcontract Site Information. lt is not sufficient for the Contractor to
merely generalise by, for example, stating ‘The Main Contract Works lnfor-
mation and Site Information shall be incorporated into this subcontract’. A
properly drafted su b con tr a ct must state what these documents are, especially
if the Contractor decides upon a different main Option for the subcontract to
that under the main contract.
for the sub-
lt is recommended that the Contractor chooses a main Option
contract consis ‘t e nt with that of the main contract. However, in some
circumstances the Contractor will engage a subcontractor ' under
' alu different
sum
main Option; for example, where the Subcontractor is offering a mp
price (Option A) but the Contractor is under an Option B contract.
lt is usual for the Subcontract Works Information to be based upon and
comprise documentation such as specification and drawings. Similarly,
subcontract Site information will most probably be that from the main contract
' ht be, added to by the Contractor if , for example, he has carried out
but mig
further site investigation work prior to seeking to sublet a part of the works.

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 _ 3 Guidance Notesfor tn 9 N EC Engineering
' - and Construction
. Contract Engineering and Construction Subcontract ¢.

Hence where the Contra C tor '5

' ''"°°rl°0i'a1ll"g
- main
- contract data int Under the ECS the risks carried by the Contractor for the works subcontracted
tract, precise schedules should be Dre 8 Cl - O3
r. are passed to the Subcontractor for the period from the subcontract starting
Subcontract Data part One‘ P re and expressly identified in date until the subcontract Defects Certificate has been issued. Outside of this
period, with the exception of continuing liabilities, the Contractor or Employer
It may be desirable
_ for the subc t
(depending upon other main contract criteria) carries the risk for the
general main contract documentaggnrifiotrhah l'k|1t:\(qe a khhhhedge of the subcontract works. Thus if the subcontract completion date and defects date
case thehSubcontractor should be given a copy or gs; i1sohr(i::r:futhem' In are earlier than those of the main contract then the Contractor must recognise
inspect t em and extract co ' ’ . Sual. he
mended that the general mahhecsohhrggtfdgtiivifiightgetiswn Ejttlher Why it is two important factors.
it is incorporated in the subcontract b V reference -in the Subcontract
e re evahtD nan ' The Contractor will carry the risk of and should ensure that his insurance
ata. cover is continuing for the subcontract works.
Because of the inevitable difference 'in obligations
' - between the main ¢ The Contractor will carry the risk of Defects in the subcontract works from
and subcontract there are ' - - . the conclusion of the Subcontractor’s liability for correcting his Defects
the Subcontract shouid be aizijlgoicpecial considerations which the Parties
upon the issue of the subcontract Defects Certificate.
A lI>l’0vision has been "n I d cl - . . Should it be important, for example, that the Subcontractor continues to
contract which concernlscthle iulatgohiihsotfihgrhr dfihute arising under the maid correct Defects right up to Completion of the whole of the works (or even to
require that such a dispute. can be dealt witsh ' '|i|ena!OleS the contractor thi the issue of the main contract Defects Certificate) then the Subcontract Data
the main contract by the main contract Acfud‘ Jim y hhth the dispute undei‘ part one must properly reflect and include this intention of the Parties by
adjudicators making different decisions on theusirhte ghéguilolds two differ“: incorporating appropriate subcontract completion date and defects date.
The. subcontract
_ _ Adjudicator ma y be - - . Notwithstanding the subcontract insurance provisions, the Contractor still
Adjudicator. His function is to deal whnpziggfitglffeif-“L fro-m the mam contrac‘? carries responsibility for the performance of the Subcontractor in the ECC and
Contractor and Subcontractor and which do notiw ‘C ifise
oncern omy between the
e Empl'0yer_ the Subcontractor is always responsible for insuring his own Equipment and
his employees.
|f any
. . 01° the three parties to a ‘oi t dispute
' "
disa re ' - .
decision he may refer it to the trig I, ‘ g es with the AdJud'cat°"5 When considering delay damages under Options X5 and X6 it is not sufficient
only two IContracting parties. una as in the case of a dispute
_
between Delay damages
for the Contractor to insert in the Subcontract Data optional statements
Termination If the main contract is terminated , the Contractor will ‘ h general wording such as ‘delay damages as main contract’. The damages
- must be a genuine pre-estimate at the time when the subcontract is made of
subcontracts. The payment conse WIS to termmate the the likely losses that the Contractor will suffer if there is a delay by the
- IS
t ion - due to the Subcontractor, s default
quencesordepend
not. u pon whether th e termma
- .
Subcontractor.
Time periods Time lf the subcontractworks are critical or the subcontract completion date is
actionsPeriods
under stated in the
the main ECS h _<;:_li'i:$|eb?i§1l';taiIiJUSLed
Contract ' to allow for associated coincidental with that of the main contract then it may be that the delay
infogmation to the Contractor are less than? c§gti§§ti;°;hsehd"!B damages under the subcontract will be as those for the main contract. In
con ract for sending inform t‘ - - e mam circumstances where the subcontract is not critical or concerns only minor
for the Contractor to incorpgractg E? g:§c'e)g(thtea,‘iflri6f’g?i€ie’t'ln ohqer to auow time works, the delay damages must reflect this on the basis of a genuine pre-
subcontract for transmittin g d ecisions
' ' or payments toa the Ion Subcontractor
Ime hmhs ih the
are estimate of the loss the Contractor would suffer.
greater than the equivale t t‘ . _
,-easona h ‘mes Stated In the main contract, for similar
Some time periods are not t t d ' - Option Y(UK)2: Project Bank Account
to be inserted in the Subconhtrgclt D|a1t.:thExECS but’ like the main Contract’ are
tion or the submission of a revised progranhihnnges are a reply to a communica- Y(UK)1 A secondary Option and associated Contract Data entries are provided for
implementation of a Project Bank Account (PBA). The clause deals with
The Contra t - . . payments into and out of the account, and its effect on other contract
C orproper
adequate for must ensure thatnotthe hme 'Periods in the Subcontract Data are
reply but obligations.
from S d- - - eX°e55_"’e 3° as to Dre-vent the Contractor
eh mg a S'h"'|"=" reply under the main contract. The Option is used when the Subcontractor is included as a Named Suppliers
Design Defects It may be that, as part f h‘ in the Contractor's contract with the Employer. The Subcontractor cou[d be
all of the Contractor’s dhesigh ibbhitggtighctotvglfisihhf §nLi$C;mraCif°’ is Ca"'Y]l"8 named at tender by the Contractor, or added in during the contract.
whatever obngation is passed to the Subcontractor
i Depending on which applied, the Subcontractor would either sign the Trust
_ _ should sma portionin0 the
be reflected it.
Deed or Joining Deed. Alternative clauses are included to cover both options.
limit of the Subcontract ’ |' - - .
the Subcontract Data. ors labmty for demgn Defects ehteled in Part One 07 Suppliers and Subcontractors at any level, known as ‘Subcontract Named
Suppliers’, can be included in the PBA arrangements, subject to acceptance
Risks and insurance The Empio er’s risk ' by the Project Manager at main contract level. The Subcontractor will initially
under the lhl/'l6lll'l contiagrfi 'i'h'eas1t?b§2§trg:?;;aCh0r passes those of his risks identify those to be included at tender (named suppliers), but subject to the
tract works. Double insurance is largely avoid \dV ere they hppiy to the subcon- acceptance of the Contractor, the Subcontractor can add further Suppliers
payame by the Contractor under the main Cone; since the insurance premiums
during the contract.
the works which are subcontracted. ract WI" reflect the proportion of
The Contractor should set out in the Subcontract Works Information any stipu-
lations or restrictions on establishing the list of Suppliers who can participate
in payments from the PBA; this will reflect the requirements in his own
contract with the Employer.

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 It ®
3 Guidance Notes for the NEC Engineering and Construction Contract

If Option Y(UK)3 is used, the ri hts f S b t -

be listed in the Contract Data. g O U Con ract Named supphers
Y1.1 The PBA is established and maintained by the C0l'itracfQr_
(3)
Y1.2 Contract arrangements with Subcontract Na d S ‘ -
relevant parts of this Option in the subcontracrtie upphers must mciude numbering system
Y1.4 The Subcontractor is required to submit an application for payment
the amounts due to each Subcontract Named S l' ' -
Contractor issues a certificate as normal. upp Ier, following which and main Options
Y1.5 The Contractor prepares the Authorisat'on c f‘ '
PBA. and notifies the Subcontractor of the ai?nrour|'1"rtsn%ncEiiJedepda!i‘?;entS to General
contract Named Supplier and for the Subcontractor The Contractor efich
attempt t0 establish Whether Payments
. to Subcontract Named Sijpsplicéuld rs Options
been calculated correctly that ls the Subcontractor's responsibility, Core
Para. Applicable
Y1.7 The project bank makes payments to tn 3 b E "rifle Para. Cl. Titte HO. options
Named Suppliers from the sums depositede U contractor and Subcontr“. ' no. J no. L
4

Y1.9 The Trust Deed is intended to allo a t t _l I

Subcontract Named Suppliers to contihvuepirintiienevetiwttcli'feth$eui?goT\f:i]1ct0r ami- 10.1
.-in Actions
Contractor or Subcontractor. The deed is executed by the Empioi/tgfiffiie 11.1
Contractor, the Subcontractor and initial named suppliers. ' B .11 identified and defined
terms 11.2 (1)
Where an additional Supplier is to be ' ' d ' t th ' " - to (19)
needs to be executed by the Employer, the-1eCor"i2'z:i)ctore tg:e§b;¢§§i?§T§oP:§§
theAcld‘t‘ IS - . A Copy of the --- Activity Schedule 11.2(2o)
eaChJOi'n'i%gaDeé1dlItD|IeF initial Trust Deed should be annexed to
Bill of Quantities 11.2(21)
Defined Cost 11.2(22i
Guidance notes Detailed guidance notes for the ECS have not been r d ' ' - Defined Cost 11.2(2s)
ples can be understood from the ECC guidance note: epare Since the princi- Defined Cost 11.2(24)
Disallowed Cost 11.2(25)
Flow charts Flow charts for the subcontract have not been prepared sinc th I ' f Disallowed Cost 11.2(2a)
procedures can be understood from the ECC flow charts. e e Ogle O the Price for Work Done to Date 11.2(27)
Price for Work Done to Date 11.2(2s)
Price for Work Done to Date 11.2(29) 1-ri
rril'|'l “Fl

Pnces 11.2(3o)
Pnces 11.2(31)
Pnces 11.2(32) Hbob
pp
woo
Total of the Prices 11.2(a3) Urno:_J>c‘:UJ1>"'l,<>"_O.>FD?>

12 interpretation and the 12.1 to

law 12.4
13 Communications 13.1 to
13.8
14 The Project Manager 14.1 to 2*
D
and the Supervisor 14.4

15 Adding to the Working

15.1
Areas
16 Early warning 16.1
to 16.4
17 Ambiguities and 17.1
inconsistencies
18 illegal and impossible
18.1
requirements
19.1
19 I Prevention J

137
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 3 3 Guidance Notes fonthe NEC Engineering and Construction Contract Appendices -‘nests
2 The Contractor's main responsibilities and Defects
Core Options
Core

Title 1-me Para. Applicable

Para. Cl. Title Para. Title Para. HO. Options
I10. I10. no no.

Providing the Works 20.1 Tests and inspections 40.1 to

40.6
20.2 40-7 C! D! E

20.3 Testing and inspection 41.1

20.4 pp .'".""' T!-.'-‘J before delivery
20.5 -ri_<->_o-ri 42.1
Searching for and
The Contractor's design 21.1 notifying Defects 42.2
to 21.3 43.1 to
Correcting Defects
Using the Contractor’s 22.1 43.4
design
Accepting Defects 44.1
Design of Equipment 23.1 44.2
Uncorrected Defects 45.1
People 24.1 45.2
I .
24.2
Working with the 25.1 ‘(O
Employer and Others 25.3
26.4 C, D, E, F
Subcontracting 26.1 to ‘=5 Payment
26.3
Options
Other responsibilities 27.1 to Core
27.4 ,.
Cl Title Para. Applicable
_ _ g|_ Title Para. Options
no. no \ no.
i _
I l‘l0.
I

3 Tlme '50 Assessing the amount 50.1 to

due 50.5
50.6
50.7 I""F7‘ "no
0°"! Options
51 Payment 51.1 to
Title Para. Cl. Title Para. Applicable t 51.4
no. no. H0.
omens 52 Defined Cost 52.1
Starting, Completion 30.1 to 52.2
and Key Dates 52.3 PP Pp P1!" 'l’l"l'l
30.3
The programme The Contractor’s share 53.1 to C
3.1.1 to
31.3
53.4 1’
D D

Revising the programme 31.4 53.5 to

32.1
32.2
53.8
The Activity Schedule 54.1 t0 A,C
Access to and use of 33.1
the Site 54.3
The Bill of Quantities 55.1 B,D
Instructions to stop or 34.1
not to start work
Take over 35.1 110
35.3
Acceleration 36.1
36.2
36.3 .<'>U
36.4 11> " 11"

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5
 ®
Appendices Q 3
— 3 Guidance Notes for the NEC Engineering and Construction Contract

6 Compensation events and insurance

Options
Core Options 1 7 Core
| - Para. Applicable
Title Para. Title Para.
no . J Cl.
no Title no, Options
Cl. Title Para.
no. I10.

Compensation events 60.1(1) Employer’s risks 80.1

to (19) The Contractor’s risks 81.1
60.2
60.3 Repairs 82.1
60.4 to indemnity 83.1
60.7 83.2
insurance cover 84.1
Notifying compensation 61.1’t0 84.2
events 61.7
insurance policies 85.1 to
Quotations for 62.1 to 85.4
compensation events 62.6
If the Contractor does 86.1
Assessing 63.1 to not insure
compensation events 63.9 63.10 A,B ' 87.1 to
63.11 QD PM Insurance by the
87.3 i
63.12 A,C Employer
63.13 B,D
63.14 -n
63.15 .0?’Gr) l"‘|l""

The Project Manager’s 64.1 to Termination

assessments 64.4
Options
Implementing 65.1 Core
compensation events 65.2 Title Para
Title Para.
65.3 no.
no. HO.
65.4 _>l"" _UJ'l'l .0G 5'
Termination 90.1 to
90.5

Reasons for termination 91.1 to

91.7
Procedures on 92.1
Core 92.2
termination
Title Para. Cl. Title Para. 93.1
Applicable 93 Payment on termination 93 3
no. no. no. Options 93 ' 2 93'4
The Employer's title to 93.5
70.1
Plant and Materials 70.2 93.6 pUo> 0
Marking Equipment, 71.1
Plant and Materials
outside the Working
Areas
Removing Equipment 72.1
Objects and materials 73.1
within the Site 73.2

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 ¢ Guidance Notes for the NEC Engineering and Construction Contract

Secondary Options
Option Ref. Title Clause. Can be use
no. these main
DISPUTE RES OLUTION form of tender
W1 Dispute Resolution W1.1 t0 W1.4 AtoF Theworks . . . . . . . . . .. . . . . . . . . . .. . .. -- - -- -- - - - - - - ' ' ' ' ' ' ' ''"
W2 Dispute Resolution W2.1 t0 W2.4 AtoF

SECONDARY
To . . . . . . . . . . . . . . . . . . . . - - - - - - - - - - ~ * - - . . . . . . . . . . . . . . . .(the Employer)

Address . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
X1 Price adjustment for inflation X1.1 to X1.5 AtoD
I _ ‘ _ ‘ _ _ _ . . . . - . . - - - I - . - - - - I --' . . . . . Q | . - . . . . . - - - - - ‘ - - ¢ - 1 -'
X2 Changes in the law X2.1 AtoF
X3 Multiple currencies X3.1 A,B 4 - . . . . - . . . - 1 - - - > I I "
_
*
_ , _ , , , , . - . - . - - - I . ‘ v ‘- , _ _ _ . . . - - - > Ill

X3.2
_ _ , , , . . . - - . - - . . . - -- . . - - . - - 1 ‘ .-
X4 Parent company guarantee X4.1 AtoF
_ , , , , . . . - - - -- . - - - ‘.».-...-.--'----

X5 Sectional Completion . - ' h C ntract Data partbne

X5.1 AtoF We offer to Provide the Works in accordance with t 6 '3 . .
X6 Bonus for early Completion and the attached Contract Data Dart tW° f°" a sum to be determined in accor-
X6.1 AtoF dance with the conditions Of C0fitFaCt-
X7 Delay damages X7.1 to X7.3 AtoF
X8 to X1 1 Not used in ECC Y ou m a y accept this offer on or before [date °t Iast day f°r acceptance]
X12 Partnering X12.1 t0 X12.4 AtoF Yours faithfully.
X13 Performance bond X13.1 AtoF
X14 Advanced payment to the Contractor X14.1 to X14.3 AtoF
X15 Limitation of the Contractor’s liability for his X15.1
design to reasonable skill and care X15.2 AtoF
X16 Retention X16.1
Signed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
X16.2 A’tOE
Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - ~
X17 Low performance damages X17.1 A’tOF
X18 Limitation of liability X18.1 to X18.5
Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
X19 Not used in ECC On behalf of. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - - - .(the Contractor)
X20 Key Performance Indicators X20.1 to X20.5 AtoF Address . . . . . . . . . . . . . . . . . . . . , . . . . _ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OPTIONS DEALING WITH NATIONAL LEGISLATION , _ , . . . . . . --
_ ' _ _ ‘ _ V _ , . . . . . . . .- | - . - . - . . - - - . . . < - - - - . i -r

Y(UK)1 Project Bank Account Y1.1 to Y1.14 AtoF . 1 . ‘ . . ¢ - - . . - . - . - - - .- - . - . . | - > - - - - I "

. . . - . . - | - - - . . |-
~1-
Y(UK)2 The Housing Grants, Construction and D
Y2.1 to Y2.4 AtoF
Regeneration Act 1996 - . . > . . | . . - - - - - I ' ' - ‘ ' " > < - - - . . - . - - . - . . . - . . - . . - - - - - - v . - - - - - - ' “ ‘ "

Y(UK)3 The Contracts (Rights of Third Parties) Act 1999 Y3.1 AtoF Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ADDITIONAL CONDITIONS
T1
Z1 etc. Additional conditions of contract Z1.1 etc. AtoF
(as required for a specific contract)

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is
- — T
 Appendices '-" 11\..1\..-r .3
,_..-—

and
APPENDIX 3
Signed by
Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sample form of agreement
On behalf of (Contractor)
This agreement is made on the . . . . . . . . . day of . . . . . . . . . 20 , . . - - ¢ - . . - - ~-
_____| _ _ _ _ , , . . . , - - . . - . . | | - --

. . . . - - . . . - . . . i - - - . .- 1

ER ENGLISH LAW
ALTERNATIVE lF AGREEMENT IF EXEc(:21l_Jg§ll;£€ golaiaatfitga
AND BOTH EMPLOYER AND CONTRA
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (the Employer)
. Executed as a deed by the EmDI0Ya"
I . - - - - . - - . . - . . - . . . . -.|.-----.......-.---..-..4-----.---..,_ -van
or * by (name of Director)
of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . _ _ ‘ _ _ _ _ _ _ _ _ _ _ _ , . . . . .(signature of Director)
I4 - . - . - . . . . - - . i - . . . - - - - - . --

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (the Contracting) . . . . . . . .(name of Director or Company Secretary)

The Employer wishes to have the following works provided . . . . (signature of Director or Company Secretary)
- - - - V . , - - - . . | . , - . . . . - . - - - - |-<.>--....--...-----1--.-.----._|---,

O and as a deed by the Contractor

- A - . . > - - . . - . . . . . . . - - - - 1 . . . - . - | 1 - - - - - . . . . - - - - . . . . . . . . - . - - - . . . - |¢,
. (name of Director)
_ I , I _ _ , , 1 - ¢ - - - - - I 1 . ' . . - - . . - - i - . > . . _ . . . . ‘ - - -
. . . . . - - - . . . . ..1-.-----..-.-p-.-.-----..-..1-..,...---..-v-v-...-

1. The Contractor will Provide the Works in accordance with the conditions of
................... . .(signature or D=re@r@r>
contract identified in the Contract Data. . . . . . . .(name of Director or Company Satttetawt
2. The Employer will pay the Contractor the amount due and carry out his . . (signature of Director or Company Secretary)
duties in accordance with the conditions of contract identified in the
Contract Data.
3. The documents forming part of this agreement are
' the Contractor’s tender
' the Employer’s letter of acceptance
' the Contract Data part one
v the Contract Data part two
v the following documents
. . . . . . . . . . . - . - . . . . . . | | | - . - - - . . - - - . - - . - | . . - . . . - - - - . . . . . . . ‘ - . . ¢ - --

. - - . . . . . . - . . - - . . . . . . . < - . - . . . . . . . . . . - ~ 1 . . . . - . . . - - . . - . . . - . - - . . .-

I"

- . . . . . . . - - . - - . . . . - . I - . - - . . . - . . . - - - - - . , . . . . - . . . . . - - - - . - - . . . . . - - -- B-

. . . . - . . . - . . - - . - - . . - - . . - . . - - - . - - . . . . . . . . I . - - . - t - . . - . - . . - . . . . . - - .-

Signed by
Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P
On behalf of (Employer) '
_ _ . , . , , , . . . . . 1 . . - - . . . - - - . - - - . . - . . . . - - - - . - .->i------..,---.--.---

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 Appendices ¢.

APPENDIX 4 Re Source
direct fee percentage G 8% Contract Data
pan two
Difference between tender and H 12% Employer’s
outturn cost (excluding esti m ate
Model tender assessment sheet (to be used only for Options A and B) percentage additions)
People element of this increase J 25% Employer’s
estimate
People overheads K 45% Contract Data
part two
introduction Equipment element of increase L 35% Employers
estimate
Percentagefor adjustment of M 410% Contract Data
Two categories of adjustment to the tendered total of the Prices are c<iq5jq_ Equipment in the published list part two
ered. The first relates only to those tenders where the tenderer has been Subcontract element of increase N 25% Employer’s
asked to propose the Completion Date. The second covers the likely cost or estimate
changes resulting from compensation events. ' P 11% Contract Data
subcontracted fee neffiefitaga
Where the tenderer has been asked to propose the Completion Date, an part two
adjustment should be made to reflect the value to the Employer of having the Design time required Q 25 hours Employer's
works completed as soon as possible. ideally this is based on the delay estimate
damages stated in the Contract Data part one, but if delay damages are nut
used the Employer should make an assessment of the value of completion - Adjustment sheet - example
or the cost of late completion, which should amount to the same thing. £17,200
Time adjustment (B — C) >< D (35 - 32) >< £4300
Almost every contract will have some compensation events, resulting in an (if required)
outturn cost higher than the tendered total of the Prices. This assessment £17,830
assumes that the cost of most of the basic resources involved in compensa- Charges for People A >< H X1 X K £1,320,800 >< 12% >< 25% >< 45%
tion events will be the same for all tenderers and so only examines elements overheads
where there will be differences. £1,320,800 >< 12% >< 35% >< (-10%) —£5.547
Equipment A x H >< L >< M
The Employer must first make an estimate of the likely difference between 25 x 48 £1,200
tender and outturn prices; this will vary depending on various factors such as Design cost Q >< E
£1,200 >< 35% £420
the nature of the work to be carried out, the nature of the site and the degree Design overheads Design cost >< F
of site investigation work carried out. The difference is expressed as a percen-
Fee:
tage of the tendered total of the Prices. Fee on additional A X (100 — N) >< H >< G £1,320,800 x 75% >< 12% >< 8%
£9,510
This difference must then be subdivided into cost elements — people, Equip- direct cost
8% X (£17330 +£1,20O +£4.20)
ment, Subcontractors, design and the Contractor's Fee - Note that desi 8 n maY
be required for temporary works even if the Contractor is not responsible for Fee on additional A >< N >< H >< P £1,320,800 >< 25% >< 12% >< 11% _
£4,359
—
the design of any of the works. subcontracted work £13,869
£13,869
Note that the two elements making up the Fee (the direct fee percentage and the Total Fee
subcontracted fee percentage) are applied to different parts of the adjustments.
£44,972
The figure derived from these adjustments is not an estimate of the final Total adjustment
outturn cost as it only takes into account those elements which will differ £1,320,800
between tenderers. Tendered total of
the Prices (A)
in the example that follows, the following figures will be used to illustrate the
Notional total for
£1,355,172
procedure.
assessment
Ref. Source purposes
Tendered total of the Prices A £1,320,800 Contract Data
part two
Tendered completion date B 36 weeks after Contract Data
the starting date part two
Employer's estimate of earliest C 32 weeks after Employer’s
practical completion date the starting date estimate
Delay damages for the whole of D £4,300/week Contract Data
the works (Option X7) part one
Weighted average of the cost of E £48 / hour Contract Data
design staff part two
Design overhead F 35% Contract Data
part two

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 Appendices ¢.

APPENDIX 5 __-an one — Data provided by the Employer

-cmpierion of the data in full, according to the Options chosen, is essential to create a complete contract.

Contract Data — worked example gtatements given in all contracts

1 General ~ The conditions of contract are the core clauses and the clauses for main Choose one main Option (A to F) and one
I Option A, dispute resolution Option W1 and secondary Options _Xfi, dispute resolution Option (Wl or W2). in
addition choose any of the secondary
X7?.?$1..3.=.??.!§~..¥(El1Q?i.¥tPT!€)§.?! 4.% we NEC3 Engineering and
Construction Contract April 2013.
Options appropriate to the chosen
contract strategy, ensudng that these are
compatible with the chosen main Opuori
Introduction
I The works are Describe the works clearly but briefly
the construction of the Much Binding bypass, including the design of the The description should enable the works
to be identified but should not go into
The following pages show the Contract Data completed for a fict' ' bridge starring "Ir. .1.*i.‘t<;>r.l%*?!=.'.*.i.'s.- .............. details; details will be included in the
contract. The purpose of this example is to help those unfamiliar with the!-ti\(i)us "Works Information. It may be helpful
to include the location of the works if
system to complete the tender documents. lt should be read in conjunct-EC this is not clear from the dcscripnon
with the notes included under the chapter ‘Tender Documents’. Ion
it is sensible to use a shorter title in
- c Employefs legal name and usual ' The Empioyer is
The following points should be noted. .d,(|l'¢S$ are given hcrc. The address need correspondence — in this case, for
Name G1-cenwheat County Council_________________________________________ _ _ example, ‘The Much Binding Bypass’
not be the registered office unless the would be an obvious choxcc
' The ECC text of the Contract Data formats is reproduced as printed appl-lC8bl€ law so requires
| together with the explanatory sentences which are in bold type. The explanai Address €~T#'.\!!i*.¥.H~r.l.1.............
Greater Binding
tory_ sentences (e.g. Statements given in all contracts’ and sentences
| beginning ‘If. . .') are only for the guidance of users and should not be repm. §.'9?!‘.‘.Y'.'.‘?“.‘?‘.*.iF.‘? . . . .
duced on an actual Contract Data. ¥?.1?‘.'.’.§!?'.*.:......... .
v F_or clarity, quantitieslhave been inserted in the appropriate places. The
'1: is essential that the person chosen as ' The Pm-fest Manage’ is
figures given are imaginary and should not be taken as typical and certainly Project Manager is sufficia-ntly close to Mr K‘ ‘ Williams
dp not have the status of ‘recommended by the NEC Panel’. The examples the work and have the time to carry out Nanle ‘ ,,, , . . . . . . i i i i . , , . . , , , , , , . | | | | | . . . . . . - - - i i II

0 entries are not necessarily consistent throughout. ‘his duties effectively. He must also have
sufficicnt authority to exercise the Address County Hall
v Most optional statements have been completed so that users can see what |autl1ority given to him under the
iiiriiiiiti
Fitters? l.'éi.'ii1.i.'.'a......
should be written if that Option is chosen. In a real enquiry only those state- G'°°.'.‘.‘?.'¥‘.*¥!F?!!‘.‘.f=. , ,
Ifice the guidance notes (CiNs) on the Fi1?iT'.§.1?P.-........
ments relevant to the Options chosen should be completed. |Pro,iect Manager
' If anoptional statement is required it should be inserted in an appropriate v The Supervisor is The Siipervi.mr‘s role is essentially to
position in the actual Contract Data, within the statements for the relevant Name Mr H Paddick
check that the works are constructed in
accordance with the drawings and
section of the ECC. specification
Q The statements in the boxes only provide a very abbreviated commentary Address P9iir!r.!1=i!l........ If there is manufacture off site, the
%n ctoigipletinjg the Contract _Data and should not be relied on. Reference Gr=a*s==. iiiiriliiis . . . .. . Supervisor may be represented by, for
eitample. resident inspectors to whom he
us e ma e to the conditions themselves and to the relevant guidance §.'.?.°.'.'.".’.'!?.‘???l‘.i.".‘?. . . . . . would delegate powers under clause 14.2.
notes for a fuller treatment of topics. ??l‘.‘.'.'.§!*.!?: .................... ii
The Supervisor does have the vital
responsibility of issuing the Defects
' The EmPl°J/er must decide actual details based on the nature of the Certificate - see clause 43.2.
contract and the allocation of risk required. The Adjitditrator proposed by the ' T“"= A°'1'“““°a‘°' is
Employer can be named here, or a list of Name Mr I Judge
° Those drawing up tender documents are advised to take care when suggested names could be proposed, ----------------------------------------------------------------------- --
g<;:1tl:;t;hrg file gggtract Data that excessive Irisks are not passed to the herc or in the instructions to Tenderers
CO t 0 .d e system is much more flexible than any other published The most important aspect is that the Addless T?,s.§,!',',‘?l'§e. . . . . . . . . . . . . . . . . . . ...... . . . . .. '2'
Adjudicator must be acceptable to both Michelmersit _ :>
n ract an allows a wide range of Employer’s choice of allocation of risks
on the Contractor, which would be limited in other documents. Common PM 'i ;...;;,1;i;i.t.
i‘.~i<::;eo;1ttait.-IedsEto :76 applied otherwise bids will reflect the unrealistic aspira- ' The Works Information is in
extended gefggpsoé/eg. In ‘particular combinations including tight programmes, Pars 2, 3 and 4 of the enquiry document. _____________ __
damages Should one 6;», arge bonds, fixed prices, large retentions and heavy
y e used if the Employers key strategy demands them.
' Tine words of the ECC Contract Data formats should be reproduced without I The Site Information is in
3 ange. tlsers of the ECC are granted a limited licence by the Institution of Part 5 of the enquiry document.
I iv_il_ Engineersto reproduce the text in tenders solely for the purpose of
inviting, assessing and managing contracts.
' The boundaries of the site are shown on drawing _______ __ 1115 genem1;y gable; lo Show (hf,
boundaries of the site on a drawing than
0 The language of this contract is English. _ to define them in words

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' -I _
 I ®
- 1166 3 G u|'d ance Notes for the NEC Engineering
- - and Construgtion Contract Appendices 6-

gglgepgsgllgieilgolréli-if law of one country I The law of the contract is the law of Englland and Wales, 6 Compensation events I The place where weather is to be recorded is
The period for reply (gee QNS
See GN on clause 60. l(l 3]
°"“"“ °‘ "“‘°““’“
Thus the place oljunsdiction should be .s.‘.'!3i.‘??,‘.FF?.?ll?l!‘Ii§‘l 9Yi9!l.'?§ .*.*!¢.r=.<r"r¢.§. R¥.l?!!¥!?P!!.%l'l ': :‘:’l %l55-A I I ' I3) must be suffieiem for the
respond, but should be ¥r!1¢"="“.~..W*lF§li'§-..................... ........................ ..
slated here as well as the law that is to
apply to the contract. lo maintain the principle of I The weather measurements to be recorded for each calendar month are See GN on clause 60_l‘(l3)
The Périfld f0l' reply lS problems before lhey arise
I the cumulative rainfall (mm) It is important not to add wearher
The Afllivdicator nominating body is the Institution of Civil Engincgrg I the number of days with rainfall more than 5 mm measurements that cannot be readily and
Care should be taken when I the number of days with minimum air temperature less than regularly recorded Only the larger sites
Ajudicamr - see notes on ave likely to install their own weather
Resolution options for their 0 degrees Celsius
I the number of days with snow lying ___ “hours GMT station‘ Additional weather measurements
experience. qualifications ..... should suit the risks associated with the
I and these measurements: works, For example, for a project
The Institution of Civil Engine TS
dependent upon tower cranes it may be
mamtauns a list of suitably
experienced people lo am as
appropriate to include the number of (lays
adjudicators. Several I The weather measurements are supplied by that winds exceeded the maximum wind
speeds at which the cranes can work
The choice IS usually between I The tribunal is arbitration.
maintain similar 11515 "1s.Ms* Qflim B'.1.ilrli.'.'s.!?1>.-.=§'.'lP=.'.'!=.1.r. €=.r.s*.'!i2-. —.'.*'.‘.'.12?r%!l. I19.1!.*=2=.I.~.'.’.‘lf‘.‘?.‘! R921.-..
arbitration and litigation l

R: :<i=»lLovt;]in;gflr:1altt-are will be included in the Risk Register I The weather data are the records of past weather measurements for each For consistency it is generally an
.. . . . S .
. 9 . .*.¥,£1..*.'%°. . . . The .Empl‘0_rer lists here the risks rim advantage to have the weulfler data and
??.'Y?F
.'?.*!!£l.'!!s .*%¥.“.s*s'i5.?¢§.Y& .='2?i&§r.',',=.*'.i=.*i*H'.'@= . requires to be included in the Risk '
calendar month which were recorded at l§y_uehsm._Ylf‘iltshi_re and which are
weather mensuremenzs recorded at the
elf Little Binding. llegsster. This alerts the tenderer to 111 available from _tlie_ Qvl:l.ic_e_e: same place in most circumstances.
nsks. and encourages the Plfljggf
Manager and the Contractor to dimm- Where no recorded data are available
bow best to avoid or minimise their I
effects I Assumed values for the ten year return weather data for each weather This section is only used if there are no
measurement for each calendar month are suitable weather dam - for example
3 Time I The starting date|l§.§_$?'(Etvi€|vIjv|'e'|'v _;i]_y3_ when there IS no available weather
Wed =-sive" of the §i*e.!r!fP'm=!l*.P" in P.=!!1.?i.*>f "!!=..=1"1"i.'.¥. .'i*.1¢.l'.'?!*.=! ¥-.. . statlon

The access dates are

8 Risks and insurance I The minimum limit of indemnity for insurance in respect of loss of or
Part of the Site Date
damage to property (except the works, Plant and Materials and
.l..€¥.1!.?I?fi?.lf°?.¥.9§FFl?.Ki!f?E?§l'!!ll'?$ ....§.9fil9!2&'..Z91f=l. 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
?~5“,‘,'??¥i.‘.'F'F.'. 9T.?11°.§l!*?................... ,,§1_Q9;9lng_;0_1s. <=°""a<=t f°' any We event ‘S, €?i!lll‘?lll‘?!l.ll!‘:<,', .'.‘?‘.'.1.i!?!‘.
' The Contractor submits revised programmes at intervals no longer than Making the period five weeks maximum.
allows for a ‘normal’ site admjnlgimmn I The minimum limit of indemnity for insurance in respect of death of or Unless the Employer has T115 own
§ __________________ __ weeks. bodily injury to employees of the Contractor arising out of and in the 1l'151ll.’3fiCB department or access to
P1’Ovedure, which is to have monthly 1flSLll'3.l'lO€ specialists, it is sensible to get
revisions of a programme course of their employment in connection with this contract for any one
advice on the figures to be inserted here
evel“ is 4i,l!?i9l!ll~!!9'l lFF.'.',?',1,i,1,',il’,‘,‘. .ll'.’.‘.‘!‘.'l$.).-.............................................. ..
4 Testing and Defects I Th d f . This will be especially true when
9 e ects date '55} ___l_N6eks after Completion of the whole This is the period wlllun which the workmg outside the UK
of the works, Contractor is liable to correct Del‘ects

There is little point in having an I The defect correction period l5 3 weeks except that In some circumstances it may be Optional statements If the tribunal is arbitration See GN on clause W1 4 or W24
sensible lo have different defects dates
'-"'"’°a5°"3b1Y §l10l‘l defect correction for d1fferent parts of the works .. ggfl I The arbitration procedure IS the latest version of the Institution of
I'¢’"'f1l1'l ll makes for inefficient working I The defect correction period for landscaping is a typical example — but Civil Engineers Arbitration Procedure in force when the arbitrator is
On lhe of the Conrracmr
_lf'_lant in the School Undcrpass is 12 weeks unnecessary cornplicalion should be appointed.
Thi? Employer might require shorter avoided
I The place where arbitration is to be held is
PeTl0dS for Defects that prevent his
llslflg the works and/or allow longer I The person or organisation who will choose an arbitrator
periods for parts of the works that I if the Parties cannot agree a choice or
req one dismantling and repmr or I if the arbitration procedure does not state who selects an arbitrator is
replacernent if they are faulty The Institution of Civil Engineers.

5 Payment I The currency of this contract is Tl"lB|]|1I.(ll..I.|I'IlIl_!lT£!I'|iI1g. If the Employer has decided the completion date for the whole of the works

I Th e assessment interval
' 1S I _weeks (not more than five). See GN on clause 30 I The completion date for the whole of the Works is ________ __ 5"
>
Thfl llmlt Of five weeks is 10 ensure 3
reasonable cash flow for the Com,-“cm, If the Employer is not willing to take over the works before the Completion
The Employer should select a bank to I The interest rate is 2 5 18 P"*°"°° m°5t Payment procedures See GN on clause 352
reflect the currency oflltc contract, not theh - t ' """"L"%'per annum (mt less than 2) above will be based on calendar months Date
~ the country where the ,,,0,.ks
necessarily 1?. 9 .19. .f!%¥'.=.'*..'?*."$>.'??.F+*!'r=;3?.Pil s9!.l!'9.1?i*!!lé.'2£F¥sl==='1 - the Employer is not willing to take over the works before the Completion
are being carried om Date.

lf no programme is identified in part two of the Contract Data

See GN on clause 3! 1
I The Contractor is to submit a first programme for acceptance within
ll _ _ _ _ _ _ ‘ _ _ __weeks of the Contract Date.

If the Employer has identified work which is to meet a stated condition by a Sec GN on clause 30.3. This could also
key date be derail with by using Sectional
Completion (XS)
I The key dates and conditions to be met are
condition to be met key date
1 Western Roundabout open to traffil: __

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¢ 3 Guidance Notes for the NEC Engineering and Construction Contract Appendices 9.

If the period in which payments are made is not three weeks and Y(UK)2 is If Option C, D or E is used The frequency will in most cases
not used coincide with the monthly cycle Of
I The Contractor prepares forecasts of Defined Cost for the works at assessments. monthly meetings. rnonfiily
I The period within which payments are made is 2 weeks. See GN on clause 51.1
intenrals no longer than§________________ “Weeks- reports etc , so 2| five week 1'oBXi-l"fl\11I11§
Sec GN on clause 51 1 sensible
If Y(UK)2 is used and the final date for payment is not 14 days after the
date when payment is due
- The exchange are are time Published "1 tl1.*?.tfi.'i i1i.¢.i=.=.'.Ti!!-,e........
on 24 Augu_$t__2_(_l_1_§_§-__________________________________________________________________________ .-
I The period for payment is. ... .... , , , _ _ _ _ _ _ , . ,,
It may not be economical for the If there are additional Employers risks lf Option X1 is used
Contractor to assume a pZll'UGt.l|a1' risk.
especially a risk that has a tow I These are additional Employers risks I The proportions used to calculate the Price Adjustment FHCTOF fife
probability ol" occurrence but a very 0.25 linked to the index for _l_-2112295 ,=,*!1_<_l_ .='.i.',I><;>!?Ii.§.i.'.>.'¥ ........... .. See ON on Option Xi
1 Planning_permissiou for the work in the vicinity of the school (marked ‘C’
serious consequence
2!! .-lreiY‘ee.§I?/19+. .'Fo*iii2'.'.‘9 is. .'.'!?¥.'?.'.’F?‘.i.‘?.°.'?.!’.¥. 1'9. .Q.¢*.=.=!!" 2'19-..... 0.30 "'=""*"“'"“¥l?°!!i?l?§.........
0.10 RM‘ "ml
If the Employer is to provide Plant and Materials 0 15 Coated utacadam and bituminous products
I The insurance against loss of or damage to the works, Plant and (L05 DERV fuel
Insert the value or replacement cost of
any ‘free issue’ Plant or Materials to be Materials is to include cover for Plant and Materials provided by the |}_[|5 Steel for reinforcement
incorporated in the works Employer for an amount of £25,000.
l].ltl_ non-adjustable

If the Employer is to provide any of the insurances stated in the Insurance 1.00
ll‘ the Employer has decided to provide-
Table
any of the insurances. details should be - The base date for indices is _1_ _»}i-_ii 1§¥H1!?41_$;....................................... ..
I The Employer provides these insurances from the Insurance Table entered here
Sec GN on clause 37 l
- the indices are those Prepared W ¥!!t.l.*.¢i>.=i.=.i.*!i¢.'i Ii'.i..Tti=,*.'£ .*;1!i*.'. I.li!1.*.'.§.txi'.-.
1 '"§"'B"°'= agate‘ L2s.9f.2i.lewee%.t2.tts.*2'21'§e.!?!i&!'t
If Option X3 is used
Cover/indemnity is §I_§,00l},000
. The Employef will pay for the items or activities listed below in the
The deductibles are currencies stated
items and activities other currency mm‘ maXimum
If additional insurances are to be provided payment in the
State any additional insurances to be
provided by the Engnlnyer. This may currency See GN on Option X3
I The Employer provides these additional insurances
include single site policies and other
1 Insurance against,,,,,,,,,,,,,,,,,,,,,,, __________ H special arrangments .1ir2ii§.i2e.ei.i2!ie!i=.i.i!i.iieilsiiiie. 2!?i!!!1.tt.?si'.'.».-
Cover/indemnity .................................................................. .. See GN on Section 8 I The exchange rates are those published in the Financial Times on 24
August 2012.
The deductibles are,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, H

I The Contractor provides these additional insurances if Option X5 is used

I The completion date for each section of the works is
1 "‘=‘-“me agar“ .*§=.*i!l*§.i'.1.i!*.=.§.i.s!=. .i1.’.i1if.e§ii!i'el.!rii':i'.'.=i+it..1'
3' -s"i="1' =e> ..
................. See GN on Option X5. This could also
Cover/indemnity is £2,000,000. be dealt with by using a Key Date section description completion date
_ _ 1 Western Roundabout 5 Jlllle 2914-
The edition used should also be stated If Option B or D is used
I The method of measurement is l;_|igiiyei;1:i|_1_g__1t3tethod of
§'_l_e:_|_su_r_ei_1_ient fourtl_1_ edition i If Options X5 and X6 are used together

amended as follows no amendments ' The bonus for each section of the works is
section description amount per day There is no point in giving a bonus For
early Completion unless it has a definite
1 Western Roundabout £250. value to the Employer. In this case it
If Option C or D is used
developer is prepared to pay for early
I The Contractor’s share percentages and the share ranges are access to his Silt v
See GN on clause 53 before completing
share range Contractors this section If Options X5 and X7 are used together F-

share percentage
less thanm_______ 96 15 96 O Delay damages for each section of the works are
Section description amount Per day
from 80 96 to 90 % 30 %
1 Western Roundabout £499-
from 90 % to Ill] % 50 95
lf Option X6 is used (but not if Option X5 is also used)
greaterthan 1|) %
I The bonus for the whole of the works is ................... .. .. per day.

If option X7 is used (but not ll Ontivn X5 is a|5° "5""

I Delay damages for Completion of the whole of the works are
£4,320 per week.
See GN on Option X7

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 Guidance Notes for the NEC Engineering and Construction Contract Appendices 6-
l
I If Option x12 is used If Options Y(UK)1 and Y(UK)3 are both used
I The Client is . term person or organisation
See GN on Option X12
Name .(.*.'.'.°.‘f'.‘.‘.l.‘??’=.*¥.‘.?7‘?‘!'?F!.§!?!'F!???........ The provisions of Option Y(UK)1 Named suppners
Addie“ .¢.'.*.1.l%'1.‘1'.H%',1l,. ,. If Option Z ls used The additional conditions oj contract will
become part of the contract. and so
.‘?t'f?!¥?£.]?.i.'?!1*F.'§ I The additional conditions of contract are _s_e_t_o_nt_ir1_ p_flift__2_ _q_f_§!1_-_ fil!fl_'_1§_')]______ should be easily identified and logically
Greenwheatshire
documents; ________________________________________________________________________ - - located. Most people attach them to 1h:
UN7 3BB. Contract Data part one

' The Client’s objective is

.‘9.i.'.'!P'°“° "'5? !?‘.'.‘I"°‘?!‘.‘.'”.!‘F. .'?.f.l‘.’!"°" ]§i'.‘.'?i.“B F!'.'.FF§i."‘*“‘-“ a"“.??'F“°"-.
I The Partnering Information is in
Pt" 6 "F. I19? °“‘l!'.i.‘.¥.'.!‘.'?.".!"""“*- ................................ ..
If Option X13 is used Sec GN on Option X13
' The amount of the performance bond is £100,000.

ll Option X14 is used

1 The amount of the advanced payment is £75,lI00.
See GN on Option XI4
I The Contractor repays the instalments in assessments starting not less
than_2_0 _____ _ weeks after the Contract Date.
0 The instalments are 10% of the payment otherwise due.
I An advanced payment bond is__1tot_ required.
If Option X16 is used
v The retention free amount is £250,000. See GN on Option XI6

0 The retention percentage is 5%.

lf Option X17 is used

See GN on Option X17 If used these
Q The amounts for low performance damages are should be a genuine pre-estimate of the
| amount performance lcunl likely costs the Employer will incur

int . .
Hill

.................... .. for
................... .. For

If Option X18 is used

Q The Contractor's liability to the Employer for indirect or consequential
"185 is limited to .5.*.'.% 9" "ii. .*.<2t@'.1. '?.i.t!'.¢. 1?.'i§e 2" ¥t1§$?1>.-.=!.'.=.'.=F .12?.*.=:;
~ For any one event, the Contractor's liability to the Employer for loss of or
damage to the Employer's property is limited to_£l§l_]?00_li._
0 The Contractors liability for Defects due to his design which are not
listed on the Defects Certificate is limited to See GN on Option X18
~ The Contractor’s total liability to the Employer for all matters arising
under or in connection with this contract, other than excluded matters, is

0 The end of liability date is years after the Completion of the whole of I’
I
the works.
If Option X20 is used (but not if Option X12 is also used)
r The incentive schedule for Key Performance Indicators is in _1tttacl_1_rnen_t__l
to this Contract Data.
0 A report of performance against each Key Performance Indicator is
provided at intenials of 3 months.
if Option Y(UK)1 is used and the Employer is to pay any charges made and
is paid any interest paid by the project bank
- The Employer is to pay any charges made and is pair: any interest paid
by the project bank.
If Option Y(UK)3 is used
Ste GN on Option Y(UK)3
' term person or organisation
Design of the river training works Environment Agency.
set out in clause 1704 of the Works
Information

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¢ 3 Guidance Notes for the NEC Engineering and Construction Contract Appendices
'-7

Pa rt two — Data provided by the Contractor If Option A or C is used

_ , . -
The dctrrily schedule is normally
prepared by the tenderer, with the
' The activity Schedule '5 .PPEl'.'F!?.'!¥.F.°.‘.‘?!'°.'.‘.°f.YYFF!1lé§iF!!:.... .. £n1pI0)iE]-Selung ,,.,, -,.,1es- [0, how h,
wants it set out. Any such rules will be
in the instructions to tenderers
C0mlJ|6ti0FI 01’ the data in full, according to the Options chosen, is essential to create a complete contract.

Statements given in all contracts Q The Contractor iu If Option B or D is used

Full legal name of Contractor I The bill’ of quantities will be drawn up
Na me Woodstone Construction Ltd
I by the Employer and filled in by the
tenderer
- The bi" Oi‘ quantities is .'.1.i*.¢.i'.'.'.1*.'it.rst?rsis¢.i?tF2I<i!?99i91=.......
Address _\\/‘ontlstone House Usc the address from which the If Option A, B, C or D is used If the Employer has asked tenderers to
CD!lfI'flL‘l'0l' intends to manage the insert this figure in the Fomo oi‘ Tender
.‘.3.‘?l i.‘.‘?é'E'.‘?!'.'.‘.'.‘? ].3"l“"g" contract. This need not be the Q The tendered total of the Prices is (_one_:_n_1_il]iu_1_1,_tl1_ro§ _l_1}ll_1_tll'_B_1_l____ there may be no need to repeat it here
Wincanton company’s registered flddfggg and twenty thousand, eight hundred pounds stei-_ling_)_.______ ____________________ H
€F.1?'.3.?TT- .................. .. Include the postcode
if Option F is used
Q The direct fee percentage is
" See GN on Option F in Contract
-Strategy section 0 work which the Contractor will do himself is ...........................
Sec GN on clause ll.2(8) ' The subcontracted fee percentage is 11%, agtivity price (lump sum or
unit rate)
Q The working areas are the Site and These warkirig areas should satisfy the
critcria set out in clause 15.1
!.*.-2!.-'.'?!i.i*.i.t. =.*l1.1'.=i'.“.*.>!'.*. F9. iii? liar. eai. .i!t.*?'!=.i .'?r.=.=?. .!?. .t. 9'1 . . . .. If Option Y(UK)1 is used
.(§‘?f’. FlF?‘.‘Ti.'?§ .WF?.I:/.'.l1‘?F!'.1.I'.'.’l'.?.).-. . .. Sec GNS on clause ll 2(I8):\r1d 15.1
u The prgjegt bank i5 ........................................................................... .-

Frequently the Employer’ will have listed Q The key people are u The named gupplierg are ................................................................... ..
in the Instructions to Tenderers the jobs
for which he wants to see key people (1) Name D Cameron If Option A or B is used
nomi -ted Q The percentage for people overheads is H gm GN on shone, schedule Of Cost
M Job §tt_e_n_;eiit___ _ Data for the Shorter Schedule of _ _y . y Components
SoeGN onclnuse24 C051; components Q The published list of Equipment 15 the last edition of the list published by
Responsibilities Overall responsibility for the contract
T|!?_Q21!_EI!l=;i'?E?Fi!!§_Q?!!i¥§E¥F!!€‘?,{§§§'3'%l?F§2!E-....................................... ..
Quaiiicaiioe .......... Q The percentage for adjustment for Equipment in the published list is
—20 % (state plus or minus).
E*°@"@"°@ 1.5. res. it .?iiil.rnsiesrii's.P2e""=fi~'~ — we =¢i=-thei CV- Q The rates for other Equipment are
Include here any equipment that is not
covered by the selected published list — Equipment size or capacity rate
such as dredgers or special cranes
Eire..li.i9_='1!is!!.!!a¥l$"irs .1.-.5. .!>.=.=.¢1$s2t §;l.§'.>.i!r.-
lzi "ems Wises............ .. Q The hourly rates for Defined Cost of design outside the Working Areas are
1°“ §9!'§‘I!‘.°.F%?.'!.lY'!?!!‘?¥¥°.!................ category of employee hourly rate
Senior engineer £60
"<*=P°"s‘bi"*i@$ ¥?'.1.'i!r.*r!.i.>£.=!!l.¢91!F!Ii5%i?!!.ie"""e
Qualifications No formal qualifications
i iéééliéi i .-Ié?i1IIi1IlI ikiiliiill
l).!'.‘.‘.'!§?!?§l?.‘.*?is.!‘.!!........
Tracer £20-
E*P@"@"'=e it‘. .>f$’?¥F?..i!'. .'?l ?l.?P?%l'!?F'Fi¥t$.?!?!!§!"'°'i°"’ 8 is General
Q The percentage for design overheads is
Foreman or Construction Manager — see attached CV.
Q The categories of design employees whose travelling expenses to and
Q Th e fo ll owing
' matters will' be 'included -in the Risk
~ Register
- See GN on clauses H K14) and (16) from the Working Areas are included in Defined Cost are _:_il _o_f_ t_he_______

Fir. .*.i.*=.'.*. *.'n*. EP.'?F.=i *1.i.'1=i*.*.‘?. .'?'.*.'.’.*.€i?.'. it .‘."""*' "W" "ii florid“-is if"-8 irr- °*“°g°"i??..1.i§t.°.ll “l’.'.’.‘l‘?: ....................................................................... ..
If Option C, D or E is used
The Employer should insert the Data for Schedule of Q The listed items of Equipment purchased for work on this contract, with Sac GN on Schedule of CO5;
appropriate optional statements for Cost Components an on cost charge, are Components
completion by tenderers before issuing
the enquiry documents, Equipment time-related charge per time period
per
Optional statements if the Contractor is to provide Works Information for his design per >

¢ The Works Information for the Contractor's design is in If the Contractor is required to carry out Q The rates for special Equipment are
design of all or part of the vi-orlis and to Sec GN on Schedule of Cost
§9FFi.'.‘.'.1.f'. 9?". F¥'.‘?. T.";'.‘.'lF‘. §'.‘!'.‘.'.'?l§?.i!‘.'.‘.i. l‘.‘?.‘!‘.'E‘.1. .‘1.3°?‘.i ='i‘.‘. .‘?l.¥l‘.°..l?ll’.":¥.??l!‘.‘l.l¥“.€..... .. submit some details as part of his lender Components Equipment size or capacity rate
Bridge’. subniission, his calculations and any
drawings should be referenced here
Q Fhe percentage for Working Areas overheads is 10 %.
if a programme is to he Identified in the Contract Data Soc GN on Schedule of Cost
Components. The percentage is applied
Q The programme identified in the Contract Data is to the direct cost of people; see the Q The hourly rates for Defined Cost of manufacture and fabrication outside Include sui-fioiem categories of employee
Schedule of Cost Components for a list the Working Areas are to allow the cost to be identified readily
Programme reference WCL/Frog/Tl. of the items it is intended to cover °aTe€°rY °f employee hoully "tie Overhead costs should not be included
If the Contractor is to decide the completion date for the wl-|p|g of the W0,-ks This statement is used if the Employer §."‘.‘.‘.°.!1..................... ?F.1.%-.§'.l.......
Q The completion date for the whole of the works is W1Sl1€$ tenderers to offer :1 conipirlian §F*'?'.i?.'.‘.‘.'.'.*??!.............. §1?:f5.‘.'........
dare. l-le should set out his requirements
'w_ee_lfs’after the starting date.
in the Instructions to Tenderers, and say . . It may be necessary to stipulate different
how. if at all, different dates will be Q The D ercentage for manufacture and fabrication overheads is pememages for different facmfles or
taken into account in assessing tenders 225.?‘/i.a¥.%12s.§lrait2r:.r:?£1§s.%§‘i%.2t ¢1.'.°.,l.‘ri.=.'i@'.i.I.'§. r.'ir.1e;........................ different types of work

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 -"neat 3 Guidance l\lotes for the NEC Engineering and Construction Contract
If Option C, D or E is used
Data for both schedules of cost I The hourly rates for Defined Cost of design outside the Working Areas are
components
category of employee hourly rate

§.e!is*.t. '.*~.!-.r.='.i.i'.'.=s==i. . . .
§!i!i !=.!..?!1.1.4.i'.=.*.*§t........
!?e.=!sl!!§r2ts.2i!........
Tracer §§Q'............
I The percentage for design overheads is 35
I The categories of design employees whose travelling expenses to and
from the Working Areas are included as a cost of design of the works and
Equipment done outside the Working Areas are all of the
.“.i.‘F$‘:$f-!Fl?.s..l.i5..*.°.'.1..‘?!!'.’?'i‘?:...... .
If Option C, D or E is used
Data for the Shorter Schedule of I The percentage for people overheads is 45
Cost Components
I The published list of Equipment is the last edition of the list published by
T??? §3“'i'. .'.5.'.'E‘.'.'E‘.’.'.‘!‘.!.1. ..C.'?.'+¥??‘.?F!2!§.%“.\§§‘.'.‘Ii.‘.'.“°"
I The percentage for adjustment for Equipment in the published list is
(state plus or minus).
I The rates for other Equipment are
Equipment size or capacity ra e

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